U.
S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q








[X]
            
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30, 2008[  ]
            
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
the transition period from ___________ to _____________





AVT,
INC.





Nevada
            
            000-53372
            
            11-3828743(State
      or other jurisdiction
            
            (Commission
      File Number)
            
            (IRS
      Employerof
      Incorporation)
            
            
            
            Identification
      Number)341
      Bonnie Circle, Suite 102Corona,
      CA 92880(Address
      of principal executive offices)(951)
      737-1057(Issuer’s
      Telephone Number)





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.  Yes X No
___





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange
Act.





Large
      accelerated filer  [   ]
            
            Accelerated
      filer    [    ]Non-accelerated
      filer    [   ] (Do not check if smaller
      reporting company)
            
            Smaller
      reporting company    [X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
[  ] No [ X
]







APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS





Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of
securities under a plan confirmed by a court. Yes ___ No ____





APPLICABLE
ONLY TO CORPORATE ISSUERS





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  As of September 30, 2008, there
were 18,375,067 shares of our common stock were issued and
outstanding.










PART
I





ITEM 1.FINANCIAL
STATEMENTS





AVT,
      INC.PageCondensed
      and Unaudited Balance Sheet for Sept 30, 2008 and Audited for period
      ending December 31, 2007
              
              F-2Condensed
      and Unaudited Statements of Operations for the three months ended Sept 30,
      2008 and for the period ending Sept 30, 2007
              
              F-3Condensed
      and Unaudited Statement of Changes in Shareholders' Deficit for the period
      ended September 30, 2008
              
              F-4Condensed
      and Unaudited Statements of Cash Flows for the three months ended Sept 30,
      2008 and for the period ending Sept 30, 2007
              
              F-5Notes
      to Financial Statements
              
              F-6F-1
  
   AVT,
      INC.BALANCE SHEETAS
      OF SEPTEMBER 30, 2008UNAUDITEDFor
      the
              
              
              For
      TheASSETS
              
              Quarter
      Ended
              
              
              Year
      EndedSeptember
      30, 2008
              
              
              December
      30, 2007Current
      assets:Cash
              
              $
              216,276
              
              
              $
              145,012Accounts
      receivable
              
              
              742,692
              
              
              
              376,597Inventory
              
              
              508,078
              
              
              
              1,260,893Prepaid
      expenses
              
              
              77,767
              
              
              
              77,767Total
      current assets
              
              
              1,544,813
              
              
              
              1,860,269Property
      and equipment, net of accumulated depreciation.
              
              
              2,039,523
              
              
              
              1,032,499Other
      assets
              
              
              12,462,703
              
              
              
              11,705,042TOTAL
      ASSETS
              
              $
              16,047,039
              
              
              $
              14,597,810LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Accounts
      payable
              
              $
              101,798
              
              
              $
              76,224Total
      current liabilities
              
              
              101,798
              
              
              
              76,224Long-term
      Liabilities:Notes
      payable
              
              
              2,752,085
              
              
              
              1,471,580TOTAL
      LIABILITIES
              
              
              2,853,883
              
              
              
              1,547,804STOCKHOLDERS'
      DEFICITCommon
      stock, 100,000,000 shares authorized, $.001 par value,18,375,067
      shares issued and outstanding
              
              
              43,465
              
              
              
              40,166Preferred
      Stock, 3,000,000 authorized, $.001 par value1,200,000
      shares of Series A Convertible Preferred Stock issued and
      outstanding
              
              
              2,200
              
              
              
              1,200Notes
      issued that can be converted to common stock
              
              
              2,444Dividends
      Paid
              
              
              (326,743
              )Additional
      paid in capital
              
              
              17,371,609
              
              
              
              26,170,341Retained
      deficit
              
              
              (3,932,145
              )
              
              
              (13,401,997
              )Net
      Income (Loss)
              
              
              32,325
              
              
              
              240,296TOTAL
      STOCKHOLDERS' DEFICIT
              
              
              13,193,155
              
              
              
              13,050,006TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              16,047,039
              
              
              $
              14,597,810See
      notes to the financial statementsF-2
  
   AVT,
      INC.STATEMENTS
      OF OPERATIONSUNAUDITEDFor
      The
              
              
              For
      Thethree
      months ended
              
              
              Year
      EndedSeptember
      30, 2008
              
              
              December
      31, 2007Revenues:Sales
              
              $
              872,687
              
              
              $
              559,657Total
      revenues
              
              
              872,687
              
              
              
              559,657Expenses:Cost
      of Goods Sold
              
              
              270,213
              
              
              
              116,464General
      and administrative
              
              
              474,310
              
              
              
              325,087Total
      operating expenses
              
              
              744,523
              
              
              
              441,551Operating
      Income (Loss)
              
              
              128,164
              
              
              
              118,106Provision
      for Income Taxes
              
              
              71,841
              
              
              
              19,714Other
      income & expensesGarnishments
              
              
              6,487
              
              
              
              (1,607
              )Interest
      expense
              
              
              0
              
              
              
              0Loss
      on disposal of assets
              
              
              0
              
              
              
              06,487
              
              
              
              (1,607
              )NET
      INCOME (LOSS)
              
              $
              62,810
              
              
              $
              96,785Basic
      loss per common share
              
              $
              0.00
              
              
              $
              0.00Diluted
      loss per common share
              
              $
              0.00
              
              
              $
              0.00Weighted
      average common shares outstanding - Basic
              
              
              18,375,067
              
              
              
              37,549,473Weighted
      average common shares outstanding - Diluted
              
              
              65,875,067
              
              
              
              85,049,473See
      notes to the financial statementsF-3
  
   AVT,
      INC.STATEMENT
      OF CHANGES IN STOCKHOLDERS' DEFICITUNAUDITEDTotalPreferred
      Stock
              
              Common
      Stock
              
              Additional
              
              Retained
              
              Stock
              
              Contract
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Paid
      In Capital
              
              Deficit
              
              for
      Asset
              
              Equity
              
              DeficitBalance
      at December 31, 2004
              *
              
              $
              
              $
              1,667,726
              $
              500
              $
              6,606,803
              $
              (5,373,022)
              $
              
              $
              
              $
              1,234,281Common
      shares issued upon conversion of notes
              *
              
              
              
              
              6,610,192
              
              1,983
              
              3,795,736
              
              —
              
              
              
              
              
              3,797,719Net
      loss for the year ended December 31,2005
              
              
              
              
              
              —
              
              —
              
              
              
              (1,807,705)
              
              
              
              
              
              (1,807,705)Balance
      at December  31, 2005
              *
              
              
              
              
              8,277,918
              
              2,483
              
              10,402,539
              
              (7,180,727)
              
              
              
              
              
              3,224,297Common
      shares issued upon conversion of notes
              
              
              
              
              
              1,319,322
              
              26,309
              
              6,107,838
              
              (7,054,502)
              
              5,000,000
              
              625,000
              
              4,704,645Net
      loss for the year ended December 31, 2006
              
              
              
              
              
              
              
              
              
              
              
              833,234
              
              
              
              
              
              833,234Balance
      at December  31, 2006
              *
              
              $
              
              $
              9,597,240
              $
              28,792
              $
              16,510,377
              $
              (13,401,995)
              $
              5,000,000
              $
              625,000
              $
              8,762,176Common
      shares issued
              
              
              
              
              
              3,291,191
              
              9,873
              
              4,034,964
              
              
              
              
              
              
              
              4,044,853Preferred
      shares issued
              
              1,200,000
              
              1,200
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,200Common
      shares issued upon conversion of notes
              
              
              
              
              
              454,707
              
              1,364
              
              
              
              
              
              
              
              
              
              1,364Net
      income for the year ended December 31, 2007
              
              
              
              
              
              
              
              
              
              
              
              240,296
              
              
              
              
              
              240,296Balance
      at December  31, 2007
              *
              1,200,000
              $
              1,200
              $
              13,343,138
              $
              40,029
              $
              20,545,341
              $
              (13,161,699)
              $
              5,000,000
              $
              625,000
              $
              13,049,889Common
      shares issued
              *
              
              
              
              
              1,807,908
              
              120
              
              (2,814,097)
              
              
              
              
              
              
              
              (2,815,195)Preferred
      shares issued
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0Dividends
      Paid
              
              
              
              
              
              
              
              
              
              
              
              (84,012)
              
              
              
              
              
              (84,012)Common
      shares issued upon conversion of notes
              *
              
              
              
              
              46,667
              
              140
              
              
              
              
              
              
              
              
              
              140Net
      income for the period ended  March 31, 2008
              
              
              
              
              
              
              
              
              
              
              
              (126,638)
              
              
              
              
              
              (126,638)Balance
      at March  31, 2008
              *
              1,200,000
              $
              1,200
              $
              15,197,713
              $
              40,289
              $
              17,731,244
              $
              (13,372,349)
              $
              5,000,000
              $
              625,000
              $
              10,024,184Common
      shares issued
              *
              
              
              
              
              1,423,414
              
              1,423
              
              (6,519,645)
              
              9,440,204
              
              
              
              
              
              2,922,139Preferred
      shares converted
              
              (166,667)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0Perferred
      shares issues
              
              1,000,000
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,000Dividends
      Paid
              
              
              
              
              
              
              
              
              
              
              
              (158,740)
              
              
              
              
              
              (158,740)Common
      shares issued upon conversion of notes
              *
              
              
              
              
              175,400
              
              175
              
              
              
              
              
              
              
              
              
              175Net
      income for the period ended June 30, 2008
              
              
              
              
              
              
              
              
              
              
              
              (92,156)
              
              
              
              
              
              (92,156)Balance
      at June 30, 2008
              *
              2,033,333
              $
              2,200
              $
              16,796,527
              $
              41,887
              $
              11,211,599
              $
              (4,183,041)
              $
              5,000,000
              $
              625,000
              $
              12,696,602Common
      shares issued
              *
              
              
              
              
              712,329
              
              712
              
              537,496
              
              251,895
              
              
              
              
              
              790,104Preferred
      shares converted
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0Preferred
      shares issued
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0Dividends
      Paid
              
              
              
              
              
              
              
              
              
              
              
              (326,743)
              
              
              
              
              
              (326,743)Common
      shares issued upon conversion of notes
              *
              
              
              
              
              866,212
              
              866
              
              
              
              
              
              
              
              
              
              866Net
      income for the period ended Sept 30, 2008
              
              
              
              
              
              
              
              
              
              
              
              32,326
              
              
              
              
              
              32,326Balance
      at September 30, 2008
              *
              2,033,333
              $
              2,200
              $
              18,375,067
              $
              43,465
              $
              11,749,095
              $
              (4,225,563)
              $
              5,000,000
              $
              625,000
              $
              13,193,155*
      Shares restated to reflect 3 for 1 common stock splitSee
      notes to the financial statementsF-4
  
   AVT,
      INC.STATEMENTS
      OF CASH FLOWSUNAUDITEDFor
      The
              
              
              For
      TheThree
      months ended
              
              
              Three
      months endedSeptember
      30, 2008
              
              
              September
      30, 2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income  (loss)
              
              $
              62,810
              
              
              $
              46,971Adjustments
      to reconcile net income tonet
      cash provided by operating activities:Changes
      in operating assets and liabilities:Accounts
      Receivable
              
              
              (87,344
              )
              
              
              (29,041
              )Inventory
              
              
              19,960
              
              
              
              (299,354
              )Deposits
              
              
              0
              
              
              
              0Accounts
      payable and accrued expenses
              
              
              (2,767
              )
              
              
              (37,547
              )NET
      CASH PROVIDED BY OPERATING ACTIVITIES
              
              
              (7,341
              )
              
              
              (318,971
              )CASH
      FLOWS FROM INVESTING ACTIVITIES
              
              
              (221,845
              )
              
              
              (291,530
              )NET
      CASH USED IN FINANCING ACTIVITIES
              
              
              413,113
              
              
              
              595,087NET
      CHANGE IN CASH
              
              
              183,928
              
              
              
              (17,414
              )CASH
      BALANCESBeginning
      of period
              
              
              32,348
              
              
              
              51,557End
      of period
              
              $
              216,276
              
              
              $
              34,143SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:CASH
      PAID DURING THE PERIOD FOR:Interest
              
              $
              -
              
              
              $
              -Income
      taxes
              
              $
              -
              
              
              $
              -NON-CASH
      INVESTING AND FINANCING TRANSACTIONS:Debt
      converted to common stock
              
              $
              -
              
              
              $
              -Inventory
      acquired for debt
              
              $
              -
              
              
              $
              -See
      notes to the financial statementsF-5






AVT,
INC.
 Notes
to Financial Statements
 
 NOTE
1.                      SUMMARY
OF ACCOUNTING POLICIES
  a.           Organization
  The
Company was originally organized under the laws of the State of Delaware on
February 26, 1969, as Infodex, Inc. At that time, the Company was engaged in the
development, manufacturing and selling of various electronic devices, especially
in the preparation various types of oscilloscopes known as “CRT” display
modules.  In March 2005, the Company was renamed to Midwest Venture
Group, Inc. and In September 2005, the Company again changed its name to
Automated Vending Technologies, Inc. to better reflect the Company’s current
operations as a vending machine manufacturer and vending route
operator.  In January, 2008, the Company changed its state of domicile
to Nevada, changed its name to AVT, Inc. and completed a 1 for 3 reverse split
of its common stock.
  The
Company has not paid significant dividends and any dividends that may be paid in
the future will depend upon the financial requirements of the Company and other
relevant factors.
  b.  Accounting
Method
  The
Company’s policy is to use the accrual method of accounting to prepare and
present financial statements, which conform to generally accepted accounting
principles (“GAAP”). The company has elected a December 31,
year-end.
  c.  Cash
and Cash Equivalents
  The
Company considers all highly liquid investments with maturities of three months
or less when purchased, to be cash equivalents.
  d.  Use
of Estimates in Financial Statement Preparation
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The Company's financial statements include amounts that are
based on management's best estimates and judgments. Actual results could differ
from those estimates.
  e.  Fixed
Assets
  In
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets, the Company evaluates the carrying value of long-lived assets for
impairment whenever events or change in circumstances indicate that such
carrying values may be recoverable. The Company estimates the future cash flows
derived from an asset to assess whether or not a potential impairment exists
when events or circumstances indicate the carrying value of a long- lived asset
may be recoverable. An impairment loss is recognized when the undiscounted
future cash flows are less than its carrying amount. If assets are considered to
be impaired the impairment to be recognized is measured by the amount by which
the carrying amount exceeds the fair value of assets. There can be no assurance,
however, that market conditions will not change or demand for the Company’s
products or services will continue, which could result in additional future
impairment of long-lived assets.  The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the classification of liabilities
that might result from the outcome of these uncertainties.
  f.  Other
Assets
  Contract
Equity
  Pursuant
to contracts with Coca-Cola Company and Pepsi-Cola North America, we utilize
approximately 141 vending machines in our operations.  We are not
required to pay lease or rent payments for the use of the vending
machines.  We have valued the use of these machines at an average
value of $4,500 per machine.  The vending machines are owned by
Coca-Cola Company and Pepsi-Cola North America.
  Vending
Route Purchases
  Our
existing vending routes were originally purchased by SWI Trading, Inc. from Let
Me Know, LCC, dba Champion Vending Service.  We acquired the vending
routes from SWI Trading, Inc. via a Transfer Agreement effective December 31,
2006.  As compensation for the routes, we issued SWI Trading, Inc.
1,000,000 restricted shares of our common stock.  We have valued the
vending routes based upon the approximate annual revenues generated from the
vending route operations.  Our largest vending route is with the
County of Orange, State of California.  Our current contract expires
in April, 2009.  There is no assurance that we will be able to extend
our contract with the County.  In the event we are unable to extend
our County contract, we will no other option but to remove our vending machines
from the County locations and attempt to either relocate the vending machines to
new or existing route or attempt to sell the vending machines to third parties
at substantially discounted prices.
  Restaurant
Asset Purchase
  In
April 2008, we purchased the assets of AC Mexican Food, Inc. dba Jalapenos
Mexican Food, for a purchase price of 1,000,000 restricted shares of our Series
A Convertible Preferred stock.  The asset was valued at the value of
fixtures in the restaurant.
  Technology
Research and Development  and Intellectual
Property
  Our
technology and intellectual property assets are valued and expensed at fair
market prices in accordance FSAB Statement No.2 (FAS-2)
Accounting for
Research and Development Costs.  These assets include AVT
developed proprietary software, product dispensing systems and multiple designed
or developed products which are currently in the state of “patent
pending.”   Our developed products include inventory control
software, progress monitors, service logs, purchase order, data base management,
generators, touch screen vending, cashless payment systems, and digital
signage.  Hardware assets include our 24 hour Vend Mart, Tech Store,
Automated Express Market, Ivend and Vend Sensor System.  These
technology and Intellectual Property assets have been developed by the Company
and valued at labor costs and wholesale value of the asset.
  Inventory
  The
year ended December 31, 2007 referenced a change in inventory which contributed
$946,901 to positive operating cash flows. The revenues reported for the three
months ended March 31, 2008 were $394,365. On January 01, 2008 notes payable
from SWI matured and became payable. In the three months ended March 31, 2008, a
reclassification to Inventory was made. SWI notes were offset by inventory
contributed to SWI. Pursuant to FSAB Technical Bulletiin No. 88-2, Definition of
a Right of
Offset, Inventories are stated at fair market value.
  g.  Inventories
  Inventories
are stated at the lower cost or market with cost determined using the first-in,
first-out method. Inventories consist of primarily of the food products that are
sold in the vending machines.  The current value of machine inventory
has been adjusted to reflect market value.
  h.  Property
and Equipment
  Property
and equipment are stated at cost, net of accumulated depreciation and
amortization.  Depreciation and amortization are provided using the
straight-line method over the estimated useful lives or the term of the lease of
the related assets, whichever is shorter. Estimated useful lives generally range
from 5 to 7 years.
  Maintenance
      and repairs are charged to expense as incurred.  Renewals and
      improvements of a major nature are capitalized. At the time of the
      retirement or other disposition of property and equipment, the cost and
      accumulated depreciation and amortization are removed from the accounts
      and any resulting gains or losses are reflected in
  income.
  i.
      Expenses
  The
Company expenses the cost of advertising as incurred.  Costs incurred
for research and development activities are expensed as incurred.
  j.  Earnings
per share
  Basic
earnings per share is computed by dividing income available to common
shareholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if potentially dilutive common shares had been issued.
  k.  Income
Taxes
  The
Company accounts for income taxes under the provisions of SFAS No. 109,
“Accounting for Income Taxes”.  SFAS 109 requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax
returns.  Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
  l.  Recent
Accounting Pronouncements
  In December 2004,
the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No. 123 (R)
revises SFAS No. 123, “Accounting for Stock-Based Compensation” and
supersedes  APB Opinion No. 25, “Accounting for Stock Issued to
Employees”. SFAS No. 123 (R) focuses primarily on the accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123 (R) requires companies to recognize in the statement
of operations the cost of employee services received in exchange for awards of
equity instruments based on the grant-date fair value of those awards (with
limited exceptions). SFAS No. 123 (R) is effective as of the first interim or
annual reporting period that begins after June 15, 2005 for non-small business
issuers and after December 15, 2005 for small business
issuers.  Accordingly, the Company has adopted SFAS No. 123 (R)
effective January 1, 2006. The Company has determined that the provisions of
SFAS No. 123 (R) did not have any significant impact on its financial statement
presentation or disclosures.
  In
May 2005, the FASB issued SFAS No. 154 that establishes new standards on
accounting for changes in accounting principals.  Pursuant to the new
rules, all such changes must be accounted for by retrospective application to
the financial statements of prior periods unless it is impracticable to do
so.  SFAS No. 154 completely replaces Accounting Principles Bulletin
(APB) Opinion 20 and SFAS 3, though it carries forward the guidance in those
pronouncements with respect to accounting for changes in estimates, changes in
the reporting entity, and the correction of errors.  This statement is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 31, 2005.
  The
adoption of these pronouncements has not made a material effect on the Company’s
financial position or results of operations.  The Company has not
recorded any Compensations expense, as there have been no options issues to
employees as of September 30, 2008.
  NOTE
      2.
              GOING
      CONCERN
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company’s success is dependent upon
numerous items, among which are the Company’s successful growth of revenues from
its products and services, its ability to obtain new customers in order to
achieve levels of revenues adequate to support the Company’s current and future
cost structure, and its success in obtaining financing for equipment and
operations, for which there is no assurance. Unanticipated problems, expenses,
and delays are frequently encountered in establishing and maintaining profitable
operations. These include, but are not limited to, competition, the need to
develop customer support capabilities and market expertise, setbacks in product
development, technical difficulties, market acceptance and sales and marketing.
The failure of the Company to meet any of these conditions could have a
materially adverse effect on the Company and may force the Company to reduce or
curtail operations.  No assurance can be given that the Company can
achieve or maintain profitable operations.
  The
      Company believes it will have adequate cash to sustain operations until it
      achieves sustained profitability. However, until the Company has a history
      of maintaining revenue levels sufficient to support its operations and
      repay its working capital deficit, the Company may require additional
      financing. Sources of financing could include additional equity financing
      or debt offerings. The Company currently has a line of credit for
      $1,000,000 dollars with SWI Trading,
Inc.
  NOTE
3.       COMMITMENTS AND
CONTINGENCIES
  a.  Indemnities
and Guarantees:
  During
      the normal course of business, the Company has made certain indemnities
      and guarantees under which it may be required to make payments in relation
      to certain transactions. These indemnities include certain agreements with
      the Company’s officers, under which the Company may be required to
      indemnify such person for liabilities arising out of their employment
      relationship, agreements with financial institutions in connections with
      certain of the Company’s notes payable, and agreements with leasing of
      office space for certain actions arising during the Company
      tenancy.  The duration of these indemnities and guarantees do
      not provide for any limitation of the maximum potential future payments
      the Company could be obligated to make. Historically, the Company has not
      been obligated to make significant payments for these obligations and no
      liabilities have been recorded for these indemnities and guarantees in the
      accompanying balance sheet.
  b.  Leases:
  The
      Company has various operating lease commitments in connection with its
      office space and certain equipment.
  c.  Legal:
  The
      Company may be involved from time to time in claims, lawsuits, and
      disputes with third parties, actions involving allegations or
      discrimination or breach of contract actions incidental in the normal
      operations of the business. The Company is currently not involved in any
      such litigation or disputes which management believes could have a
      material adverse effect on its financial position or results of
      operations.
  NOTE
      4.
              STOCKHOLDERS’
      DEFICIT
  The
stockholders’ equity section of the Company contains the following classes of
capital stock as of September 30, 2008:
  Common
stock, $.001 par value:  100,000,000 shares authorized: 18,375,067
shares issued and outstanding.
  Preferred
Stock, $.001 par value: 10,000,000 shares authorized.  3,000,000
shares designated as Series A Convertible Preferred.  2,033,333 shares
of Series A Convertible Preferred stock issued and outstanding.
  Common
Stock
  As
at December 31, 2005, the Company had 24,833,753, shares of its common stock
issued and outstanding.
  As
at December 31, 2006, the Company had 28,791,720 shares of its common stock
issued and outstanding.
  As
at December 31, 2007, the Company had 40,029,413 shares of its common stock
issued and outstanding.
  On
or about January, 2008, a majority of the Company’s shareholders approved the
resolution of the Company’s board of directors to amend the Company’s articles
of incorporation to reverse split the Company’s common stock on a 1 for 3
basis.  All fractional shares were rounded up.  Shares
issued prior to January, 2008, have been retroactively restated to reflect the
impact of the stock split.
  For
the quarter ended March 31, 2008, the Company issued 1,105,000 shares of its
common stock.
  For
the quarter ended June 30, 2008, the Company issued 1,598,814 shares of its
common stock.
  For
the quarter ended September 30, 2008, the Company issued 1,578,541 shares of its
common stock.
  Preferred
Stock
  As
at December 31, 2007, the Company had 1,200,000 shares of its Series C
Convertible Preferred stock, $.001 par value, issued and
outstanding.
  For
the quarter ended March 31, 2008, the Company cancelled all issued and
outstanding shares of its Series C Convertible Preferred stock and issued
1,200,000 shares of Series A Convertible Preferred stock, $.001 par
value.  As at March 31, 2008, the Company had 1,200,000 shares of its
Series A Convertible Preferred stock issued and outstanding.
  For
the quarter ended June 30, 2008, 166,667 shares of our issued and outstanding
Series A Convertible Preferred stock were converted into 1,000,000 shares of our
common stock.  The Company issued 1,000,000 shares of our Series A
Convertible Preferred stock as payment for the purchase of certain assets and
liabilities of AC Mexican Food, Inc., a California corporation.
  As
at June 30, 2008, the Company had 2,033,333 shares of its Series A Convertible
Preferred stock issued and outstanding.
  As
at September 30, 2008, the Company had 2,033,333 shares of its Series A
Convertible Preferred stock issued and outstanding.
  NOTE
5.                   INCOME
TAXES
  A
reconciliation of U.S. statutory federal income tax rate to the effective rate
follows:
  For
      The
              
              For
      TheThree
      Months Ended
              
              Year
                EndedJune
      30,
                2008
              
              December
      31, 2007U.S.
      statutory federal rate, graduated......................................
              
              39.%
              
              39.0%State
      income tax rate, net of federal...........................................
              
              0%
              
              0%Net
      operating loss (NOL) for which
              
              0
              
              0no
      tax benefit is currently
      available...........................................
              
              0
              
              039.0%
              
              39.0%
   The
Company had a net gain of $62,810 for the three months ended September 30,
2008.


ITEM
2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION ORPLAN
OF OPERATIONS





The
following discussion and analysis should be read in conjunction with our
unaudited consolidated financial statements and related notes included in this
report. The statements contained in this report that are not historic in nature,
particularly those that utilize terminology such as “may,” “will,” “should,”
“expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable
terminology are forward-looking statements based on current expectations and
assumptions.





Various
risks and uncertainties could cause actual results to differ materially from
those expressed in forward-looking statements.





The
forward-looking events discussed in this report, the documents to which we refer
you and other statements made from time to time by us or our representatives,
may not occur, and actual events and results may differ materially and are
subject to risks, uncertainties and assumptions about us. For these statements,
we claim the protection of the “bespeaks caution” doctrine. All forward-looking
statements in this document are based on information currently available to us
as of the date of this report, and we assume no obligation to update any
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements.





The
Company





AVT, Inc., is a public
company.  Our common stock is quoted on the Pink Sheets in the
over-the-counter market.  Our primary focus is on the manufacture of
vending and product dispensing systems which utilize an innovative approach of
development, integration of technology and advertising media.  Our
products define the cutting edge of the vending industry and position us as an
industry innovator.  We are also a vending operator having
approximately 1,000 vending systems throughout the Los Angeles, Orange and
Riverside, California counties.  It is our vending operation
experience over the past years that adds to the distinctive advantage and
overall success as a manufacture and leader of technology based vending
products. Ourexecutive offices, engineering and manufacturing facility and warehouse
are located at 341 Bonnie Circle, Suite 102, Corona, CA 92880.  Our
telephone number is (951) 737-1057.





We were originally incorporated under
the laws of the State of Delaware on February 25, 1969 as Infodex,
Incorporated.  In October, 2005, we acquired Automated Vending
Technologies, Inc., a Nevada corporation and began focusing our business on
vending operations. In December, 2006 we merged our operating wholly owned
subsidiary into the parent company and in January of 2008, we changed our state
of domicile to the State of Nevada and renamed the company to “AVT,
Inc.”  We operate in the State of California as “AVT Vending,
Inc.”





We have received a going concern
opinion from our auditors.





The
Business





AVT, Inc. is an innovative vending
operator and manufacturer of technology based vending solutions and
equipment.  We currently employ a workforce of approximately 35 people
and services approximately 300 commercial and government vending accounts in
Southern California.  We use ourpatent
pending  technologies to drive our vending innovations which are in
various stages of development.  AVT’s technology staff ranges from
electrical and mechanical engineers to software programmers and IT specialists
thereby enabling us to design and control all of our unique products while
keeping the “edge” on all of our developed products





Our
business currently focuses on the following:





·
            Manufacturing
      of the RAM 4000 vending machine, a refrigerated beverage/snack combination
      vending machine containing more sophisticated technology then our
      competitors and offered at competitive
pricing.





·
            Manufacturing
      of the RAM 5000 vending machine, a high capacity non-refrigerated
      snack/chip/pastry combination vending machine containing more
      sophisticated technology then our competitors and offered at competitive
      pricing.





·
            Manufacturing
      an attractive, built-in, secure access vending cabinet for hotels that do
      not have on-site food service. Our AEMTM cabinet incorporates patent
      pending touch-screen to vend or TSVTM which replaces both stand-alone
      machines and in-room locked mini-fridges while providing controlled access
      and a range of direct customer billing
options.





·
            AVT
      has developed a variety of ‘high end” PC based product dispensing
      systems.  These systems are derivatives of the AVT RAM 4000 or
      5000 base housing having front panels which are unique or customized to
      end customer’s needs for digital signage or large color touch
      screens.  These systems allow a variety of AVT designed
      technologies to be integrated into the system to meet specific customer
      needs for a custom dispensing system.  Our current high end
      product dispensing includes the Ivend, 24Hr. Vend Mart, and Tech-Store. We
      manufacture Patent-Pending, affordable, wireless VMSTM technology enabling
      vending machine owners/operators to remotely manage their vending systems
      and receive real time information via the Internet.  This system
      also utilizes a cashless payment system enabling patrons to use credit
      card or membership card for completing vending
    transactions.





·
            We
      offer advertising via our highly visible, remotely-programmable, AVTI
      MediaTM Network video panels which are integrated into vending machine
      signage that creates a new opportunity for advertisers to reach consumers
      in a captive setting.





Our goal is to be the leader in
technology based vending and product dispensing solutions that are reflective of
today’s “got to have it now” consumers. Serving international vending owners and
operators whose desire is to have a better experience with vending equipment. We
strive to grow our business by developing superior customer solutions, adapting
new technologies, and pursuing appropriate mergers and
acquisitions.  Our growth is dependant upon the development of new
technology, the incorporation of advertisement on the vending machines, the
sales of our RAM 4000 and RAM 5000 systems, the introduction of the next
generation Product Dispensing Centers, and the development
of   revolutionary vending technologies.





Vending
History





Vending machines had been introduced to
Americans over 70 years earlier by Thomas Adams, who installed them on New York
City's elevated train platforms to sell his Chicklets gum. After World War II
the vending industry grew twice as fast as the gross national product, driven by
three primary factors: rising labor costs made machines an attractive
alternative to human laborers; technological advances in food preservation and
dispensing equipment permitted service of hot meals, sandwiches, coffee, and
soft drinks; and technological advances were made in money-changing equipment.
Vendors targeted "captive" markets in factories, offices, schools, and other
institutions--a huge market with plenty of potential for growth and competition.
The vending industry had achieved $2.5 billion in annual sales by 1960, and with
statistics showing that Americans ate one in four meals away from home, vendors
and stockbrokers foresaw a fine future for vending.





Market
Information





The vending industry is a $42 billion
domestic market as reported by The Vending Times Census of the Industry
2004.  This figure represents the revenues generated by vending
owners/operators and excludes office coffee and manual food
service.  Manual food service represents an additional $10 billion in
annual demand for convenience food.  Vended Food Products, which
include refrigerated, frozen, can/bowl pack, and other meal items represents a
$3.1 billion segment. While data on vended frozen foods is not stated
specifically, industry sources including Vending Times and The Automatic
Merchandiser Magazine concur that frozen food is a growth category while fresh
foods are declining. Frozen food machines include ice cream machines as well as
frozen entree machines that require an adjacent microwave oven to heat the
item.





According to the Vending
Times, there are an estimated 1.4 million vending locations throughout the
United  States situated in manufacturing plants, factories, offices,
government buildings, schools, colleges, hospitals and other public locations.
These are served by approximately 9,000 vending operators.  In
addition, there are approximately 52,000 hotels in the United States and 300,000
worldwide according to the American Hotel & Lodging Association
(www.ahma.com). There are approximately 6,000 business-oriented hotels with more
than 150 rooms, and approximately 14,000 hotels with 75 to 150 rooms. The growth
rate for the overall vending market is 5% annually.




Products and Services


We
have a family of products which are geared towards improving the experience of
consumers, establishments, and operators in the convenience food, digital
signage and product dispensing industry.   Our current line of
products and services are described below.





Automated Express
Market





We have developed and
created our Automated Express Market (AEMTM) system which is Controlled Access
Cabinet system. These custom built wood and steel based cabinets are PC based
and designated for use in specialized locations suchas hotels, Inns,
c-stores, malls and retail stores that are limited in the ability to effectively
sell and market food, convenience items or higher priced items which are subject
to pilfering. The cabinets can be merchandised to dispense more than seventy-two
selections including snacks, hot meals, ice cream, alcoholic and non-alcoholic
beverages as well as personal amenities such as sunscreen, toothpaste, and
brushes.  They can also be configured for high ticket items such as
cell phones, digital cameras mp3 players personal electronic devise and more.
The AEMTM system gives the hotel’s customers the convenience of billing directly
to their room through touch screen pin technology so they do not have to carry
cash or coin to make purchases. The system automatically posts the charge to the
guest’s account by utilizing touch screen vending (TSVTM) and multi-payment
capabilities. AEMTM cabinets have multiple payment options built in that include
touch screen payment technology, credit/debit acceptors and smart card
readers.   We are currently exploring opportunities with many
limited service hotel chains in the U.S., a market that totals more than 50,000
establishments as well as c-stores and retail stores and shopping
malls.





Media Advertising





We have developed AVTi MediaTM which
allows for an advertising medium to be added to virtually any of AVT designed
systems including AEMTM cabinets and all ofour next generation vending
machines.  By incorporating AVTI Media, we allow the consumer to view
the media, advertising or hotel messaging while they make their
selections.  AVTi Media can generate advertising revenue for owners
and operators in many settings such as conference rooms, hotel lobbies, airport
terminals, restaurants, car rental outlets and surgery center waiting
rooms.  By having vending machines in prominent locations within major
companies, the vending operator “owns” the valuable space that can be used to
generate advertising revenue through the Digital TV Message Board or (DTVMB)
technology.  Our Vending Management System software allows for the
management of machine inventory, repairs, collections and advertising through
remote access. VMSTM enables owner/operators to reduce costs and increase profits
by enabling real time access to inventory levels, system status, machine service
and daily receivables with little to no machine down time.





Vending Management SystemTM
(VMS)





Our VMS systems allow us to view item
information for each machine to help plan for daily replenishment, sales
statistics and alerts us of defects to operators as well as defect history for
each machine. This technology increases operational efficiency of vending
operations and helps to prevent inventory shrinkage and skimming, both major
control issues in the vending industry. A key differentiator relative to the
offerings of other established players in the vending machine management space
is that our VMS solution works via a DSL line cellular modem or Internet Wi-Fi
and be substantially less expensive to own and operate than competing systems
who do not use the internet for bi-directional transmission of vending system
data..





Vend Sensing System (VSS)





We have developed and have a patent
pending on our VSS product to provide a surefire solution for detecting all
vended items.  The VSS was developed specifically to detect that a
vending type of product has dropped from one of the dispensing columns directly
above the sensing system and has fallen into the customer delivery bin at the
base of the vending system.





The VSS is coupled directly with the
vending system control electronics in such that the VSS circuitry is disabled
until the vending system control electronics has received
payment.  Once payment has been received and the vending system starts
the dispensing process, the control electronics enables the VSS circuitry to
detect product which has been dispensed and has dropped into the delivery bin
below.  During this sensing period, the VSS circuitry is only enabled
for the empirical time period it takes to detect any one of the vendible
products to fall into the delivery bin.





During the sensing period of time, the
VSS circuitry uses an auto-calibrated ultrasonic beam to detect if an object of
just about any size, form or shape (designed for detection of any object that
can be vended) has fallen into the detectable space of the customer product
delivery bin.  If an object (vended product) enters the detectable
vending space, the VSS circuitry detects the object and in turn sends a
“detected” signal to the Control Electronics.  If the VSS circuitry
does not detect an object has entered the customer delivery bin space within the
allotted empirical time frame, the VSS circuitry returns a command signal to the
control electronics that a “no vend object detected”.  It is the
control electronics responsibility to determine the next appropriate action to
take.





This invention for product detection
provides many distinct and exciting advantages over conventional
detection.  First and foremost, the VSS is calibrated to “look” across
the entire cross-sectional area of the delivery bin.  This is a
primary advantage over the conventional light beam detection
method.  The detection system is compatible in cost to that of
traditional vending detection systems.  The “self calibration mode
allows the system to be able to retrofit into other vending systems with minimal
modification needed.





Vending Machine Manufacturing, Sales
and Placements





We currently manufacture next
generation refrigerated and high capacity snack machines as well as standard and
customized product dispensing systems. These machines have been designed to meet
or exceed our specific performance specifications and give us the ability to
minimize costs traditionally associated with purchasing new
equipment.  The manufacturing of our own equipment also allows us to
incorporate our technology into the systems during at the time of production
reducing the costs associated with retrofitting units. We sell these systems
directly to distributors, vending operators and end users located primarily
throughout the United States, Canada and Mexico. We believe that we are
currently the only manufacturing entity with this capability in the vending
industry, giving us a tremendous lead and advantage over our
competition.





The major competitive advantages of
AVT’s next generation machines is they all have the capability of being
configured with an integrated PC.  The integrated PC allows for a
variety of additional functions which include but are not limited to, cashless
vending, remote sales management and media advertising for creating additional
revenue through the sale and display of advertising play loops.  The
feature of playing multiple looping advertisements yields the possibility of
adding additional stream of revenue which may exceed that of the sales of vended
product.  Another significant advantage is the  ability to
plug into a standard 120 VAC household power outlet. As an operator, AVT’s
experience is that the unit price of a machine and sometimes the required 220VAC
circuits for the units represent major constraints to growth of a vending
company.  Our next generation machines will cut machine acquisition
cost by greater than 50% and eliminate expensive power outlet upgrades for
establishments and operators increasing placement and sales
opportunities.  Through the design and manufacturing of vending and
product dispensing systems using new technologies, we have become a vendor of
equipment for the entire gamete of food and high priced consumer electronics and
dispensed items. With capabilities to produce machines that are far less
expensive, less power demanding and having multi-pay options other than the
traditional market standard, we have the opportunity to grow the mainstream as
well as specialty segment of vending machine manufacturing and operations to
become a major equipment provider to other distributors, all without a heavy
capital investment.





Business
Strategy





Manufacturing Capabilities





Our goal is to become a full service
developer and manufacture of highly integrated vending systems.  Over
the past several years, AVT has assembled an integral team of experienced
engineers and qualified technicians to develop vending solutions comprised of
original and inventive technology and integrating this technology into a line of
sophisticated self service products.





Our engineers use creative tools such
as “Solid Works” to develop and generate CAD drawings used by our local
manufacturing partners as well as our OEM manufacture in China to produce our
state of the art vending systems components which are shipped to our 30 thousand
square foot facility in Corona, California for integration, assembly, final
testing and deployment.  A multitude of electrical and software tools
are also used to create AVT’s proprietary control boards, sensors, and firmware
used by all AVT branded product.





Fabrication / Assembly





We fabricate the housing for our
vending machines utilizing offshore contract manufacturers.  Our final
fabrication and assembly is based in Corona, California at our main
facility.  Local manufacturing includes approximately 10,000 sq/ft of
sheet metal fabrication and 15,000 sq/ft of assembly.  In-house
Fabrication Capabilities include; Sheet Metal Forming, Welding, NC Punching, pot
Welding, Machining and Fab Win (Fabrication Programming
Software).  In-House Assembly Capabilities include; Line Assembly,
System Integration, QC Testing, Silk Screening, Operational Testing





Our Current Products





The RAM4000 Vending
Machine





Our RAM4000 is a refrigerated vending
system..  This is a refrigerated snack/beverage combo machine that
uses all of our current technology to vend 4 rows of food, beverage, snack and
candy or any combination thereof .  The RAM4000 is ideal for smaller
populated vending accounts, OCS locations and the school segment.  The
RAM400 uses our optional Multi-Pay system allows the machine to accept Cash,
ATM, and Credit Cards.  The system also accepts AVT’s optional AVTi
Media product and VSS product drop detection system.





The RAM5000 Vending
Machine





Our RAM5000 machine is our answer to
the industry’s need for a higher capacity non refrigerated snack machine which
utilizes all of our current technology.  The RAM5000 vends 5 rows of
non-refrigerated snack and candy or any combination thereof. RAM5000 is ideal
for smaller populated vending accounts needing a high capacity vending machine,
OCS locations and the school segment. Like the RAM4000, the RAM5000 uses our
optional Multi-Pay system allows the machine to accept Cash, ATM, and Credit
Cards.  The system also accepts AVT’s optional AVTi Media product and
VSS product drop detection system.





Kiosk Systems





In addition to our vending machines, we
have incorporated a line of computer and technology based kiosk
systems.  These kiosks will be deployed in conjunction with our line
of RAM vending systems as well as being sold as self service or control center
kiosks systems.  All kiosks have the ability to be fitted with digital
signage which runs our media software products to be come a part of AVTi Media
Network.





AVTi Media





AVTi Media is an advertising medium
option available basically all AVT products including our next generation
vending RAM 4000/5000 vending systems.  AVTi Media displays media,
advertising, or hotel messaging on video screens located on the vending machine
or product dispensing systems..  Consumers may view the media while
they make their selections at the vending machine.  AVTi Media can
generate advertising revenue for owners and operators in many settings. Our
target market are surgery centers, health clubs, dentist offices, retail sites,
and any organization that has a high-traffic, captive audience that is striving
to enhance the experience of their customers.





Competition





There are several vending companies in
Southern California and the United States.  These competitors offer
machine sales and vending route operations much the same as we do.





Route Competition





Our  route and vending
operations serve as our core business structure.  Our route and
vending operations utilize approximately 10 service trucks to service
approximately 650 placed systems in 250 locations.  Our service
operation is based in Corona California and covers the primarily the areas of
Riverside, Orange and Los Angeles counties.   We currently
compete in these counties with several other competitors.  Although
these are our competitors from the sense that they have offer similar route and
vending services, they do not manufacture machines as we
do.   These competitors are as follows.





•  Take a
Break:                                       Primary
operations in Corona having about 20 trucks to service their
routes.





•  Continental:                             Primarily
operations in Orange County having have about 30 to 35 trucksservicing their
routes.





•  Complete:                                       Primarily
operations in Riverside and San Bernardino Counties havingapproximately about 19
trucks.





Manufacturing Competition





We primarily manufacture two vending
systems; a refrigerated low capacity machine, the RAM 4000, and a
non-refrigerated high capacity vending machine, the RAM 5000.  Both of
these base models systems can house a variety of AVT designed and integrated
technology making either the RAM 4000 or RAM 5000 or any one of the several
derivative systems unique with the vending industry.  Several of our
pending patents may present a potential monopoly within the vending industry
thereby forcing other manufacturing competitors to pay us for royalties or
licenses fees for use of our patented technologies.





Many of our manufacturing competitors
have been in business for many years building base line types of traditional
vending systems. We believe that these companies are competitors for our RAM
4000 and RAM 5000 base line systems.  Several of these competitors are
described below.





•  Crane:                  Which
also owns Dixie Narco, AP (Auto Products) and National Vendors is the
largestmanufacture of traditional baseline vending systems.





•  USI:                  A
seasoned vending manufacture having many years in the manufacturing of
traditionalbaseline vending systems.





•  AMS:                  A
large manufacture which designs its own traditional baseline systems and has
been nthe vending business for many years.





•  Zoom
      Systems:
            A
      manufacture which does design vending systems which integrate high levels
      of technology.    Because Zoom Systems integrates high
      levels of technology into its systems, it would be considered one of AVT’s
      primary competitors.





Although we have competition with
vending routes and vending machine sales, we believe that as a technology based
company, we are unique to the vending and kiosk industries in that we have the
ability to design, develop then integrate our technology into our premium line
of vending systems.  Due to this specialized approach, we believe that
other than Zoom Systems,  we currently do not have any significant
competition which is capable of integrating current technologies in the form of
PC based operation, RF wireless control or similar technologies seamlessly into
vending systems or products.





Patents,
trademarks, licenses, franchises, concessions, royalty agreements or labor
contracts, including duration.





We currently have four pending patents
for our technology.  These pending patents are summarized
below.





Multimedia System, Method
for Controlling Vending Machines


Serial Number 11-588,422





Conventional control of vending systems
is typically done by using a system control board consisting of a PWB (printed
circuit board) and a microcontroller supported by a group of discrete electronic
components.  These system components are used to control the various
system functions of a vending machine i.e. spinning of auger motors, control of
bill and coin acceptors, LED display feed back etc.





Our invention of Touch Screen Vending
or TSV has redefined the conventional method of vending machine
control.  TSV empowers the use of a multimedia PC and a color touch
LCD display to virtually control the complete operation of the vending
machine.  The PC stores a data base software program of all desired
products to vend with an associated color digital image of each
item.  A second application program displays the color image of the
intended items to vend in the exact format as seen through the glass front of
the vending machine.  The PC also controls the collection of currency
(i.e. bill acceptor, coin acceptor, credit card reader) in place of the vending
machines control board.  I/O (input/output) ports from the PC are used
to interface to the vending machine control board and all aspects of operation
of the vending machine is under complete control by a multimedia PC coupled with
the touch screen LCD.





This invention for the control of
vending machines provides many distinct and exciting advantages over
conventional control such as the universal language of using a touch display to
select desired products to vend in place of an alphanumeric
keypad.  The system can generate virtually any type of report to
combat money or product shrinkage while providing exact control of
inventory.  The LCD provides a means of generating additional revenue
through advertising displayed products or other services while the system in
idle mode.





Vend Operating
System


Claims to be amended to the Multimedia
System, Method forControlling Vending Machines – Serial Number
11-588,420





Our Vend Operating System (Vend OS) is
a next generation vending and product dispensing system utilizing a personal
computer (PC) to drive the system components and utility
software.  The uniqueness in the system lies in that the vending
system uses a PC to control the vending system as compared to the prior art in
the vending industry which typically uses discrete component controllers for
overall system operation and control.





Our Vend OS is broken up into two
sections hardware and software. The hardware consists of the following devices:
Virtual Sensing System (VSS), a USB Omni-pattern scanner, a USB Magtek Card
Reader, a USB Pyramid Bill Acceptor, a MDB Coinco coin machine, a 7 inch LCD
screen built-in with the Nano-ITX PC, and a portable mpeg player (allowing
static media files to play in a continuous loop).   The software
consists of the following applications: Vending Management System (VMS), Touch
Screen Vending (TSV) and AVTI Digital Signage Media.





Our Vend OS is extremely flexible in
its capabilities because the product is installed in our RAM bases systems
without any peripheral devices and a Nano-ITX computer that includes a freeware
developed by our engineering department running as a Windows’ service allowing
vending by conventional ways. This freeware allows sales data and records to be
stored in a secure database and has the capability of manipulating a machine’s
state remotely through internet connectivity, memory stick, cell modem or phone
line.





With our Vend OS we
can:  manipulate product prices; turn the machine off and on, turn the
compressor off and an, manipulate the change returned, manipulate the system
clock, and read the machine’s state from the MDB interface and motor/auger
control.  Our Nano-ITX computer includes an optional 7” touch wide
screen LCD, a flash ROM that runs Microsoft Embedded System, a MDB to RS-232
interface board that connects from a VMC board to the PC serial port, motor
driver printed circuit board and a PCMCIA modem that allows wireless internet
connection as a typical system but control for any variety of input or out put
devices are part of the scalable system.





Wireless Management of
Remote Vending


Serial Number
60-730,369





Conventional methods for managing the
inventory of vending machine product, price selection and for checking the daily
sales numbers are typically performed by a route driver who manual checks the
vending machine on a frequent basis by driving to the vending machine/s location
and performing a variety of manual operations which include interrogation of the
vending machine’s control board.





The invention of “Wireless Management
of Remote Vending” defined as VMS (Vending Management System) is a method for
performing the management on many of the above listed vending machine
functions.  Information on vending activity is stored in the vending
machine’s electronic control board which is then wirelessly transmitted out
through the VMS module to a wireless cell phone network.  The
information received on wireless network is downloaded then transmitted over the
internet to one central PC server/s located at AVT.  The information
stored on AVT’s server/s can be accessed via a secure log-in function (user’s
account) to review and manage any specific vending machine in the network (which
has been equipped with a VMS module).  The flow of VMS information and
data is a bi-directional operation.  Users can also upload data,
changes and control function out from their secure account to any of the vending
machines in their specific network.





VMS was designed to be a low cost
solution with high tech performance.  Vending route operators with as
little as one or and many as one hundred (or more) vending systems in the field
and equipped with VMS can now remotely and effectively control and managed their
vending operations from a single PC located at the home
office.  Remote VMS management controls money and product shrinkage,
manages inventory by letting the vending operator know exactly what has sold and
what needs to be replaced and monitors and transmits systems critical
information such as machine temperature, system errors and failure modes and
alerting the vending operator instantly for expeditious disposition on any
vending system in the field equipped with a VMS telemetry module.





Vend Sensing
System


Serial Number 11-976,311





Historically, the vending industry has
typically used the conventional method of breaking or impeding a light beam for
detecting when a product which has vended (dropped from a column above delivery
bin).  In most cases, the light beam consists of an infrared
transmitter and infrared detector which are mounted in a direct “line of site”
of each other.  When a product has dropped across the light beam, the
product will momentarily break the path of the light beam which sends an
interruption signal to the vending system’s control board for
processing.  Because a focused light beam is inherently narrow, this
often causes the light beam to miss narrow items such as a thin candy
bar.  Our Vend Sensing System (VSS) has redefined this conventional
method for detecting a vended product utilizing ultrasonic sound.





During the sensing period of time, the
VSS circuitry uses an auto-calibrated ultrasonic beam to detect if an object of
just about any size, form or shape (designed for detection of any object that
can be vended) has fallen into the detectable space of the customer product
delivery bin.  If a vended product enters the detectable vending
space, the VSS circuitry detects the object and in turn sends a “detected”
signal to the control electronics. If the VSS circuitry does not detect an
object has entered the customer delivery bin space within the allotted empirical
time frame, the VSS circuitry returns a command signal to the control
electronics that a “no vend object detected.”  It is the control
electronics responsibility to determine the next appropriate action to
take.





The VSS is coupled directly with the
vending system control electronics so that the VSS circuitry is disabled until
the vending system control electronics has received payment.  Once
payment has been received and the vending system starts the dispensing process,
the control electronics enables the VSS circuitry to detect product which has
been dispensed and has dropped into the delivery bin below.  During
this sensing period, the VSS circuitry is only enabled for the empirical time
period it takes to detect any one of the vendible products to fall into the
delivery bin.





This invention for product detection
provides many distinct and exciting advantages over conventional
detection.  First, the VSS is calibrated to “look” across the entire
cross-sectional area of the delivery bin.  This is a primary advantage
over the conventional narrow light beam detection method.  The
detection system is compatible in cost to that of traditional vending detection
systems and because it is self calibrating, it can readily retrofited into other
vending systems with minimal modifications.





System and Method for
Interactive Advertising


Serial Number 60-935,045





Our System and Method for Interactive
Advertising is a unique solution for potential clients or users to interact to a
specific network of supplied information such as advertising and branding via a
secure or unsecured network.  The system is designed to allow for
direct customer interaction through existing telephone switch based
infrastructure such as pay phones.





The new system essentially takes our
base advertising hardware/software products and adapts them for the telephone
industry.  This adds a level of customer interaction based upon touch
or other interactive means such as a keyboard or a display
message.  Customers using the system may be rewarded either with
discounts and/or promotional deals depending upon the touched advertisement
after responding to simple instructions displayed on the screen.





In addition, the smart technology
integrated into each system telephone may also be fitted with the appropriate
hardware to make that specific location a “Hot-Spot.”  Each Hot-Spot
provides customers with another means  of interacting with the ATV
network through free of fee-based connectivity using the customer’s portable
device such as a smart phone or laptop computer, or any other portable
electronic device capable of linking to the Hot-Spot by means of cable,
wireless, or infrared radio frequency.  Each Hot-Spot location allows
customers to use wireless internet within the location’s range to aid them in
acquiring their discounts and/or rewards more quickly and specific
advertisements may be downloaded and displayed on the phone touch
screen.  Ideally, customers may form a dependency for the Hot-Spot’s
use and become a habitual user of the AVT technology and services.





Effect
of existing or probable governmental regulations on the business





The effects of existing or probable
government regulations are minimal.





Research
and Development





AVT is dedicated to the development of
technology enriched vending and product dispensing systems.  Our
research and development team is staffed with software, electromechanical and
firmware engineers, and information technology specialists with the primary
responsibility of developing and integrating new technology into our vending
systems.





Our Primary Research and Development
Efforts





Our research and development team uses
creative tools such as “Solid Works” to develop and generate CAD drawings which
are used by our local manufacturing partners and OEM manufacture in China to
produce our state of the art vending systems, components and retrofit
designs.  These machines are shipped to our facility in Corona,
California for integration, assembly, final testing and deployment.





One of our primary R&D concerns is
the continuous development of our RAM 4000 and RAM 5000 vending
machines.  Our team continuously develops a variety of software
application programs, administrative and database programs and embedded firmware
for these systems.





Another ongoing R&D effort is the
design and enhancement of our AVTi Media products.  The AVTi Media
products are integrated into our base systems and also sold to other vending
manufactures.  The following is a summary of our current AVTi
products:





•  AVTi Media
Administer:  This is a program designed to manage and
administer all aspects and features of our digital signage
program.  The Media Administrator allows a remote operator to create,
manage, update and scheduled ads that will play on LCD displays which have been
integrated into vending systems.





•  AVTi Media Client: This is a
program designed be located on the vending system’s integrated PC and has the
priority of playing the ad “play list.”  This client software also
uses prescheduled times to monitor the server to “update” the playlist as
required.





•  AVTI Media
Server:  This is a server based program which coordinates the
efforts, changes and directives from the administrator program with the schedule
efforts of all the multiple clients located in the field and connected via the
internet.





Our Secondary Research and Development
Efforts:





Our secondary R&D efforts run
concurrently with our primary R&D efforts to support ongoing systems and to
develop new products.  These products are summarized as
follows:





•  TSV:  Touch Screen
Vending is an ongoing software development effort which is our primary flagship
software product.  This is a modular program designed to evolve with
the changing technologies supporting our vending and dispensing
products.





•  IVend:This is an
ongoing development design that features a high-end dispensing center which
combines our base RAM 4000 cabinet with a creative front door design which
includes interactive touch screens and a variety of other supported
hardware.  The IVend also has its own software application program
which is designed to provide a high degree of interactive and intuitive
application to the user.





•  Tech Store: This system is
similar to our IVend system designed for middle priced systems.





•  Vend Mart: This system is
similar to our IVend system designed for entry level priced
systems.  The Vend Mart also has its own software application program
which is design to provide  a high degree of interactive and intuitive
application to a base line vending systems equipped with TSV.





In additional, we have a variety of
ongoing hardware and software R&D projects which are at various stages of
development.  The following is a brief list of some of our
non-confidential R&D efforts:





MDB – PC
Software
Interface                                                               VMSII
– Hardware/Server/Software Project


DEX to PC
software
Interface                                                                VMS
– Drop Sensing efforts


MDB to
USB Hardware
Device                                                             AEM
Cabinet Design and


DEX to
Radio Controller
PCB                                                                Multiple
All-In-One PC/LCD Displays designs


X – Y
Dispensing Center
Design                                                          Multiple
Custom Dispensing Projects





Costs
and effects of compliance with environmental laws





The expense of complying with
environmental regulations is of minimal consequence.





Number
of total employees and number of full time employees.





We currently have approximately 20 full
time employees and 5 part-time employees.  We also utilize the
services of independent contractors.





Results
of Operations





We have historically financed
operations through a combination of cash on hand and cash provided from
operations.





For the three months ended September
30, 2008, we had revenues of $872,687 and total cost of goods and operating
expenses of $744,523 for net income of $62,810.   This compares
to December 31, 2007, where we had $559,657 in total revenues and $441,551 in
operating expenses for a net income of $96,785.





We attribute this increase in net
income for the quarter ended June 30, 2008, to increased revenues generated from
increased vending machine sales.  However our general and
administrative expenses also increased primarily due to increased costs of goods
and operating expenses relating to increased vehicle expenses, fuel, rent for
our facility, advertising,  payroll expenses and taxes.





We expect to increase sales over the
next 12 months due primarily to sale of our RAM4000 vending
machine.  Increased sales of the RAM4000 along with increased
advertising sales should increase our overall revenues for the next 12
months.





We believe that we sufficient available
cash and cash flow from operations to satisfy our working capital and capital
expenditure requirements during the next 12 months.  There can be no
assurance, however, that cash and cash flow from operations will be sufficient
to satisfy our working capital and capital requirements for the next 12 months
or beyond.





Liquidity
and Capital Resources





At September 30, 2008, we had cash of
$216,277 compared to $145,012 at December 31, 2007.  As at August 18,
2008, we had $218,867 cash on hand.  We attribute the increased case
for the period ending September 30, 2008, to increase sales.





At September 30, 2008, we
had  inventory of $508,078 compared to $1,260,893 at December 31,
2007.  The decrease in inventory is due to increase
sales.





Total assets for the Company increase
from 14,597,810 at December 31, 2007, to $16,047,040 for the period ending
September 30, 2008.  This increase is due primarily to the purchase of
the AC Mexican, Inc. restaurant asset.





Total sales for the three months ended
September 30, 2008 were $872,687 compared to total sales for the year ended
December 31, 2007.  This increase is due to increased vending machine
sales.





General and administrative expenses
increased for the three months ended September 30, 2008 primarily to the
additional expenses associated with operating the AC Mexican, Inc. restaurant
and research and development costs.





Future
Goals




We have entered into manufacturing
agreements with offshore 3rd party
manufacturers to produce the housing for our RAM 5000 and RAM4000 vending
machines and we have put up a line of credit to pay for the
machines.  Our goal is to manufacture and sale as many machines as
possible in the next 12 months starting with sales to customers in the United
States.






In the next 12 month, we plan on
focusing on the manufacturing and sale of the RAM5000 which is a
non-refrigerated unit.  Market studies and research, along with
multiple distributor feedback, indicates a much stronger demand for the RAM5000.
We current have a blanket purchase order with our manufacturer for 2,500 RAM5000
units.  We received the initial prototypes, made the necessary
modifications and ordered 24 pre-production units which arrived at our warehouse
in July, 2008.  We are in the process of refining the
units  to be incorporated into our first order of 260 production
units.  We expect to receive approximately 50 production units for the
next five months beginning late November, 2008.






We are also completing software
advertising program and hardware network called “ATVi Media.” We believe that
this program has the potential to provide the largest revenue stream to the
company.  Our goal is to promote advertising sales with our existing
vending routes which we operate and as add-ons to the vending machines we sale
to independent operators.  AVT will sell advertising which will run on
systems within the AVTi Media network.  Both AVT systems and non-AVT
vending systems equipped with AVT based PCs running the advertising software
will be capable of being part of the national (and so international) AVTi Media
Network.






In addition, within the next 12 months,
we would like to become a fully reporting company and have our common stock
trading on the OTC Bulletin Board.




Off-balance
Sheet Arrangements




We maintain no significant off-balance
sheet arrangements





Foreign
Currency Transactions





None.





ITEM
3.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We currently do not utilize sensitive
instruments subject market risk in our operations.  In the event that
we borrow money for our operations, our principal exposure to financial market
risks is the impact that interest rate changes could have on our
loans.





ITEM
4.                      CONTROLS AND
PROCEDURES





As required by Rule 13a-15 under the
Securities Exchange Act of 1934 (“Exchange Act”) we carried out an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures as of June 30, 2008, being the date of our most recently completed
fiscal quarter. This evaluation was carried out under the supervision and with
the participation of our President and acting Chief Financial Officer. Based
upon that evaluation, our President has concluded that our disclosure controls
and procedures were effective to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to them to allow timely decisions regarding required disclosure.
There were not any changes in our internal control over financial reporting
during our most recent fiscal quarter that have materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.




PART
II – OTHER INFORMATION





ITEM
1. LEGAL
PROCEEDINGS





None.





ITEM
2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM
3. DEFAULT UPON SENIOR
SECURITIES





None.





ITEM
4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM
5. OTHER
INFORMATION





None.





ITEM 6. EXHIBITS





Exhibit
              #
            
            Description3.1
            
            Certificate
      of Incorporation filed with the Secretary of State of Delaware on February
      25, 1969 (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008)3.2
            
            Certificate
      of Amendment filed with the Secretary of State of Delaware on December 16,
      1985 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.3
            
            Certificate
      of Amendment filed with the Secretary of State of Delaware on March 5,
      1987 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.4
            
            Certificate
      of Amendment filed with the Secretary of State of Delaware on February 11,
      1991 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.5
            
            Certificate
      of Renewal filed with the Secretary of State of Delaware on January 14,
      2005 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.6
            
            Certificate
      of Amendment filed with the Secretary of State of Delaware on September
      22, 2005 (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).3.7
            
            Amended
      and Restated Certificate of Amendment of Incorporation filed with the
      Secretary of State of Delaware on April 28, 2006 (Attached as an exhibit
      to our Form 10-SB filed with the Commission on August 14,
      2008).3.8
            
            Articles
      of Incorporation filed with the Nevada Secretary of State on September 24,
      2007 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.9
            
            Certificate
      of Amendment filed with the Nevada Secretary of State  on
      November 30, 2007 (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).3.10
            
            Certificate
      of Merger filed with the Secretary of State of Delaware on December 11,
      2007 (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).3.11
            
            Certificate
      of Designation of Rights, Preferences, Privileges and Restrictions of
      Series A Convertible Preferred Stock filed with the Nevada Secretary of
      State on March 5, 2008 (Attached as an exhibit to our Form 10-SB filed
      with the Commission on August 14, 2008).3.12
            
            Amended
      and Restated Bylaws dated March 12, 2008 (Attached as an exhibit to our
      Form 10-SB filed with the Commission on August 14,
  2008).10.1
            
            Consulting
      Agreement effective October 1, 2006 between Automated Vending
      Technologies, Inc. and Star Capital (Attached as an exhibit to our Form
      10-SB filed with the Commission on August 14, 2008).10.2
            
            Consulting
      Agreement effective January 1, 2006, Between Automated Vending
      Technologies, Inc. and SWI Trading, Inc. (Attached as an exhibit to our
      Form 10-SB filed with the Commission on August 14,
  2008).10.3
            
            Employment
      Agreement effective May 1, 2006, by and between Automated Vending
      Technologies, Inc. and James Winsor (Attached as an exhibit to our Form
      10-SB filed with the Commission on August 14, 2008).10.4
            
            Employment
      Agreement effective as of January 1, 2006 by and between Automated Vending
      Technologies, Inc., and Natalie Bishop (Attached as an exhibit to our Form
      10-SB filed with the Commission on August 14, 2008).10.5
            
            Lease
      Agreement effective January 1, 2007 by and between AVT, Inc. and SWI
      Trading, Inc. (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).10.6
            
            Employment
      Agreement effective as of January 1, 2008 by and between AVT, Inc. and
      Natalie Russell (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).10.7
            
            Employment
      Agreement effective January 1, 2008, by and between AVT, Inc. and James
      Winsor (Attached as an exhibit to our Form 10-SB filed with the Commission
      on August 14, 2008).10.8
            
            Consulting
      Agreement effective January 1, 2008, by and between AVT, Inc. and Star
      Capital IR Corp. (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).10.9
            
            Consulting
      Agreement effective January 1, 2008, by and between AVT, Inc. and SWI
      Trading, Inc. (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).10.10
            
            Consulting
      Agreement effective March 1, 2008, by and between AVT, Inc. and SNI
      Innovations, Inc. (Attached as an exhibit to our Form 10-SB filed with the
      Commission on August 14, 2008).31.1
            
            Certification
      of  Natalie Russell pursuant to Rule 13a-14(a) (Attached
      hereto).31.2
            
            Certification
      of  James Winsor pursuant to Rule 13a-14(a) (Attached
      hereto).32.1
            
            Certification
      of  pursuant to 18 U.S.C Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002 (Attached
      hereto).








SignaturesIn
      accordance with the requirements of the Exchange Act, the registrant
      caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorizedSignatures
            
            Title
            
            Date/s/
      Natalie Russell
            
            President
      and acting Chief Financial Officer, Director
            
            November
      15, 2008Natalie
      Russell