Attached files
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EX-31.2 - EX 31.2 - AVT, Inc. | ex312.htm |
EX-32.1 - EX 32.2 - AVT, Inc. | ex323.htm |
EX-31.1 - EX 31.1 - AVT, Inc. | ex311.htm |
EX-32.1 - EX 32.1 - AVT, Inc. | ex321.htm |
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2011
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[ ]
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________ to _____________
AVT, INC.
Nevada
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000-53372
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11-3828743
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(State or other jurisdiction
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(Commission File Number)
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(IRS Employer
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of Incorporation)
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Identification Number)
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341 Bonnie Circle, Suite 102
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Corona, CA 92880
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(Address of principal executive offices)
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(951) 737-1057
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(Issuer’s Telephone Number)
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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].
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 [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ] (Do not check if smaller reporting company)
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Smaller reporting company [X]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]
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No [ X ]
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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 March 31, 2011, there were 4,071,054 shares of our common stock were issued and outstanding.
Item 1. Financial Statements
AVT, INC.
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TABLE OF CONTENTS
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Page No.
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Consolidated Balance Sheets - Three months ended March 31, 2011 and December 31, 2010
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F-2
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Consolidated Statements of Operations - Three months ended March 31, 2011
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F-3
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Consolidated Statements of Shareholders' Equity - Three months ended March 31, 2011
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F-4
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Consolidated Statements of Cash Flows - Three months ended March 31, 2011
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F-5
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Notes to Consolidated Financial Statements
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F-6
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AVT, Inc.
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Consolidated Balance Sheets - Three months ended March 31, 2011 and December 31, 2010
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March 31,
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December 31,
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2011
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2010
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Assets
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Current assets:
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Cash and cash equivalents
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$
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222,483
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$
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278,217
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Accounts receivable,
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1,641,851
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1,100,876
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Inventory, net
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2,548,883
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2,462,708
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Other current assets
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199,871
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177,216
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Total current assets
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4,613,088
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4,019,017
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Property and equipment, net
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4,519,711
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4,519,711
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Intangibles, net
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9,640,393
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9,748,147
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Goodwill
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1,048,865
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1,048,865
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Other assets
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1,493,767
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1,493,767
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Less: accumulated depreciation
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(2,120,973)
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(2,000,448)
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Total assets
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19,194,851
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18,829,059
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Liabilities and Shareholders' equity
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Current liabilities:
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Accounts payable
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(23,638)
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11,250
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Other current liabilities
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1,173,820
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1,107,825
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Total current liabilities
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$
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1,150,182
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$
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1,119,075
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Long-term liabilities:
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Long-term debt
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236,417
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277,834
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Notes payable
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1,142,926
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1,062,408
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Total long-term liabilities
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1,379,343
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1,340,242
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Total Liabilities
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2,529,525
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2,459,317
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Shareholders' equity
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Preferred stock, $.001 par value: Authorized shares 10,000,000;
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Issued and outstanding shares - 2,540,598, respectively
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2,278
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Common stock, $.001 par value: Authorized shares 100,000,000;
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Issued and outstanding shares - 4,071,054, respectively
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25,192
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Additional paid in capital
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23,197,352
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22,912,230
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Accumulated deficit
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(6,560,042)
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(6,569,958)
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Total shareholders' equity
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16,665,326
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16,369,742
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Total liabilities and shareholders' equity
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$
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19,194,851
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$
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18,829,059
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F-2
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See accompanying notes.
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AVT, Inc.
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Consolidated Statements of Operations
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Three months ended March 31, 2011
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3 months ended
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3 months ended
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March 31, 2011
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March 31, 2010
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Revenues:
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Vending products sales
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$
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222,478
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$
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253,477
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Manufacturing machine sales
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1,004,641
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544,843
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Non-vending
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177,079
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178,498
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Total revenues
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1,404,198
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976,818
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Cost of vending products
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114,709
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120,309
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Cost of manufacturing
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146,091
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233,200
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Cost of non-vending
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64,558
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52,537
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Cost of sales
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325,358
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406,046
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Gross profit
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1,078,840
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570,772
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Operating expenses:
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General and administrative
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802,484
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666,285
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Depreciation and amortization
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228,279
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171,139
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Total operating expenses
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1,030,763
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837,424
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Other income (expense):
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Interest expense
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38,161
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66,320
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Provision for Income Taxes
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0
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0
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Total other income (expense), net
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Net Income
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$
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9,916
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$
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(332,972)
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Net income per share - basic
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$
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0.01
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$
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0.01
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Net income per share - diluted
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$
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0.01
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$
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0.01
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Average shares outstanding
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4,071,054
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30,366,716
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Weighted average shares outstanding
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17,914,350
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47,609,737
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F-3
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See accompanying notes.
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AVT, Inc.
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Consolidated Statement of Shareholders' Equity
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Three months ended March 31, 2011
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Total
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Preferred Stock
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Common Stock
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Additional
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Accumulated
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Stockholders'
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Shares
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Amount
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Shares
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Amount
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Paid In Capital
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Deficit
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Equity
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Balance at December 31, 2008
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*
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2,033,333
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2,200
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2,114,962
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20,629
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18,646,914
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(6,553,513)
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12,116,230
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Issuance of common stock
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507,656
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1,986
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1,682,389
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1,684,375
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Common stock issued for interest on notes payable
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1,353
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Issuance of common stock for conversion of notes payable
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94,954
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625
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625,375
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626,000
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Net Income (Loss) for the year ended December 31,2009
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(38,636)
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(38,636)
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0
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Balance at December 31, 2009
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*
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2,033,333
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2,200
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2,718,925
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23,240
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20,954,678
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(6,592,149)
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14,387,969
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Issuance of common stock
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859,511
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808
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814,723
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815,531
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Common stock issued for interest on notes payable
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5,584
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14
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13,959
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13,973
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Issuance of preferred stock
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244,798
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78
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78
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Issuance of common stock for conversion of notes payable
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160,123
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1,130
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1,128,870
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1,130,000
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Net Income (Loss) for the year ended December 31, 2010
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22,191
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22,191
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Balance at December 31, 2010
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*
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2,278,131
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2,278
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3,744,143
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25,192
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22,912,230
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(6,569,958)
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16,369,742
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Issuance of common stock
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89,112
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143
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142,857
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143,000
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Common stock issued for interest on notes payable
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1,620
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9
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9,750
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9,759
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Issuance of preferred stock
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262,467
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262
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262
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Issuance of common stock for conversion of notes payable
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236,179
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132
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132,515
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132,647
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Net Income (Loss) for the year ended March 31, 2011
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9,916
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9,916
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Balance at March 31, 2011
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*
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2,540,598
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2,540
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4,071,054
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25,476
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23,197,352
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(6,560,042)
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16,665,326
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* Reflects 10 to 1 reverse split
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F-4
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See accompanying notes.
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AVT, Inc.
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Consolidated Statements of Cash Flows
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Three months ended March 31, 2011
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March 31, 2011
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March 31, 2010
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Operating activities:
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Net income
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$
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9,916
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$
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(332,972)
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation/ Amortization
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228,279
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171,139
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Changes in operating assets and liabilities:
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Accounts receivable
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(540,974)
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527
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Inventory
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(108,830)
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(555,818)
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Accrued expenses and other assets
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65,995
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397,563
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Accounts payable
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(34,889)
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176,643
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Net cash used in operating activities
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(380,503)
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(142,918)
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Investing activities
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Purchases of property and equipment, net
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0
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(311,243)
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Net cash used in investing activities
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0
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(311,243)
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Financing activities
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Net proceeds from payments on notes payable
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80,518
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(121,049)
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Equipment Leases
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(41,416)
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(27,018)
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Proceeds from the issuance of common stock
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285,667
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353,671
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Net cash provided by (used in) financing activities
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324,769
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205,604
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Net increase (decrease) in cash and cash equivalents
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(55,734)
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(248,557)
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Cash, beginning of year
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278,217
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1,103,252
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Cash, end of year
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$
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222,483
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$
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854,695
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Supplemental disclosures of cash flow information:
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Cash paid for interest
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$
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38,161
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$
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66,320
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Income taxes
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$
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$
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F-5
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See accompanying notes.
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AVT, Inc.
Notes to Consolidated Financial Statements
1. Accounting Policies
Business
AVT, Inc. (the “Company”, “We” or “Our”) was originally incorporated under the laws of the State of Delaware on February 26, 1969, as Infodex, Inc., the Company was renamed to Midwest Venture Group, Inc. in March 2005. The Company then changed its name to Automated Vending Technologies, Inc. in September 2005 to better reflect our primary operations as a machine manufacturer as well as vending route distribution. In January, 2008, the Company changed its state of domicile to Nevada, at that time we became AVT, Inc.. Due to the growth of AVTs technology foundation base, our hardware, software products, business and overall success relies on both innovative and creative designs. These systems include solutions for wireless management of remote vending, method for controlling vending machines and custom systems.
In April 2008, the Company acquired 100% of the outstanding common stock of AC Mexican Food, Inc. dba Jalapeno’s Mexican food restaurant.
Interim Financial Information
The accompanying audited consolidated financial statements of AVT, Inc. have been prepared in accordance with the United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting of normal recurring adjustments, have been included. Operating results for the three month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
The Company has incurred losses at times. The Company’s ability to meet its future obligations is dependent upon the success of its products in the market and capital resources. Until the Company’s products can generate sufficient operating revenues, the Company will be required to use its cash and cash equivalents on hand, as well as raise capital to meet its cash flow requirements including the issuance of Common Stock.
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly- owned subsidiary, AC Mexican Food dba Jalapeno’s. All significant inter-company accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents represent all highly liquid investments with original maturities of three months or less. Cash equivalents are comprised of certificates of deposit. The Company maintains its cash in bank accounts, which may exceed federally insured limits at times.
Inventory
Inventory consists of finished goods and vending products. The Company’s inventory is stated at the lower of cost (average cost basis) or market.
March 31, 2011
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March 31, 2010
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Food products
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80,651
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$ 61,629
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Machine inventory
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1,580,883
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$899,409
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Parts inventory
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863,785
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$541,122
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Machine change
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23,563
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$ 16,063
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$2,548,882
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$1,518,223
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Income Taxes
No provision for income taxes has been made for the three months ended March 31, 2011 and 2010 given the Company’s losses in prior years and available net operating loss carry forwards. A benefit has not been recorded as the realization of the net operating losses is not assured and the timing in which the Company can utilize its net operating loss carry forwards in any year or in total may be limited by provisions of the Internal revenue Code regarding changes in ownership of corporations.
Fair Value of Financial Instruments
On January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 relates to financial assets and financial liabilities.
In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities.
SFAS 157 defines fair value, establishes a framework for measuring fair value in the U.S. generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.
SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
2. Long- Term Debt/ Liabilities
Current Liabilities
Our current liabilities consist of payroll liabilities of $76,213, accounts payable of ($23,638), investor notes of $480,000 and notes payable of $534,948 and other current liabilities of $82,659.
Long Term Liabilities
Lease Account
|
2011
|
2012
|
Falcon 241414
|
$ 21,746
|
$ 5,538
|
Falcon 21430
|
$ 21,746
|
$ 5,538
|
Falcon 598
|
$ 16,474
|
$
|
De Lage
|
$ 14,867
|
$
|
Firestone Financial
|
$ 11,725
|
$
|
Firestone 528916
|
$ 24,096
|
$ 2,123
|
Chrysler
|
$ 22,857
|
$ 6,722
|
GMAC
|
$ 43,673
|
$32,027
|
GMAC
|
$ 20,939
|
$13,759
|
GMAC
|
$ 14,166
|
$ 8,500
|
America Leasing
|
$ 24,126
|
$10,407
|
$236,415
|
$ 84,614
|
Long term liabilities include investor notes of $568,652, notes payable in the amount of $574,274. We have long term equipment leases totaling $236,415.
The Notes are redeemable at the option of the holder, in whole or part, at any time from issuance date until up to twelve months from issue date, into such number of fully paid and non- assessable shares of common stock, as of such date that the Holder elects to convert by (y) a number which is 75% of the average Closing Price for the immediate preceding 10 Trading Days; or at any time from a date which is after 12 months from the Issuance Date up to a date which is 24 months from the Issuance date a number which is 85% of the average Closing Price for the immediate preceding 10 Trading Days; or at any time from a date which is after 24 months from the Issuance Date up to the Maturity Date a number which is 90% of the average Closing Price for the immediate preceding 10 Trading Days; or Mandatory Conversion at any time following the date in which the closing price of the Maker’s Common Stock exceeds $1.50 for a period of ten (10) consecutive trading day. Interest on the Notes is payable quarterly on the 15th of the following month that was earned.
3. Shareholders’ Equity
Common Stock
On March 2, 2011, the 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 10 basis. All fractional shares were rounded up. Shares issued prior to March 2011, have been retroactively restated to reflect the impact of the stock split. Common stock, $.001 par value: 100,000,000 shares authorized: 4,071,054 shares issued and outstanding.
As at March 31, 2010, the Company had 3,036,672 shares of its common stock issued and outstanding
As at March 31, 2011, the Company had 4,071,054 shares of its common stock issued and outstanding.
Preferred Stock
For the quarter ended March 31, 2008, the Company’s Board of Directors cancelled all issued and outstanding shares of its Series C Convertible Preferred stock and designated 3,000,000 preferred shares as Series A Convertible Preferred Stock, $.001 par value, of which 2,033,333 shares are issued and outstanding as at December 31, 2009.
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.
For the quarter ended June 30, 2008, we issued SWI Trading, Inc. a total of 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. The Series A Convertible Stock was valued at $.001 par value.
For the quarter ended December 31, 2010, we issued Worth, Inc. a total of 244,798 shares of our Series A Convertible Preferred stock as partial payment consideration of note.
For the quarter ended March 31, 2011, we issued Worth, Inc. a total of 262,467 shares of our Series A Convertible Preferred stock as partial payment consideration of note.
There are no previsions or circumstances that will require the company to record our Preferred Stock outside permanent equity.
Preferred Stock, $.001 par value: 3,000,000 shares authorized as Series A Convertible Preferred Stock, $.001 par value, of which 2,540,598 shares of Series A Convertible Preferred stock issued and outstanding.
The Series A Convertible Preferred Stock has the following rights and preferences:
Conversion/ Dividend Rights
Each share of the Series A Preferred Stock may be convertible, at the option of the holder thereof and subject to notice requirements described herein, at any time, into six (6) shares of our common stock. Holders of our Series A Convertible Preferred Stock will be entitled to receive dividends on the stock out of assets legally available for distribution when, as and if authorized and declared by our Board of Directors.
Liquidation Preference
The holders of Series A Convertible Preferred Stock are entitled to receive, prior to the holders of the other series of the Company’s Preferred Stock and prior and in preference to any distribution of our assets or surplus funds to the holders of any other shares of stock of the Company by reason of their ownership of such stock, an amount equal to $0.37 per share with respect to each share of Series A Convertible Preferred Stock, plus all declared but unpaid dividends with respect to such share.
Accounts Receivable
Accounts receivable are reported at their outstanding unpaid principle balances. The Company estimates doubtful accounts for accounts receivable and finance receivables based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when management determines the balance is uncollectible and the Company ceases collection efforts. The Company offers extended payment terms to certain customers for equipment sales. The Company provides an allowance for credit losses as discussed above extended receivables are carried at their contractual amount and charged off against the allowance for credit losses when management determines that recovery is unlikely and the Company ceases collection efforts.
Revenue Recognition
The Company records revenue when it is realized, or realizable, and earned. The company considers these requirements met when persuasive evidence of an arrangement exists, the products or services have been provided to the customer, the sales price is fixed or determinable and collect ability is reasonably assured. The company offers extended payment terms to certain customers for equipment sales. Income is subsequently recognized only to the extent cash payments are received and the principle balance is expected to be recovered.
Property and Equipment
Property and equipment are stated at cost. 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 3 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.
Intangible Assets
Intangible assets are carried at cost and consist of patents, copyrights and certain vending route contracts. Amortization is provided on the straight-line basis over the estimated useful lives of the respective assets, ranging from five to seventeen years.
Goodwill
Goodwill is the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized but is evaluated for impairment as described below.
Impairment of Long-Lived Assets
The Company accounts for its long-lived assets in accordance with ASC 360, "Property, Plant, and Equipment."
ASC 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value. The factors considered by management in performing this assessment include current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors. For the quarters ended March 31, 2011 and 2010, the Company did not deem any of its long-lived assets to be impaired and thus no impairment losses were recorded.
Segment Reporting
Pursuant to Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, (SFAS 131), the Company is required to disclose certain disclosures of operating segments, as defined in SFAS 131. Management has determined that the Company has two (2) segments related to its Vending and Restaurant operations.
Earnings Per Share
Basic earnings per share is computed in accordance with FASB 128 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.
Basic earnings per share take into account only the actual number of outstanding common shares during the period. Diluted earnings per share take into effect the common shares actually outstanding and the impact of convertible securities, stock options, stock warrants and their equivalents.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)), which replaces SFAS No. 141, Business Combinations, requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This Statement also requires the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values.
SFAS 141(R) makes various other amendments to authoritative literature intended to provide additional guidance or to confirm the guidance in that literature to that provided in this Statement. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 141 (R) to have a material impact on our financial statements.
In December 2007, FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS 160), which amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements.
SFAS 160 establishes accounting and reporting standards that require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This statement also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent’s ownership interest while the parent retains its controlling financial interest must be accounted for consistently, and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary must be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any non-controlling equity investment. The Statement also requires entities to provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners.
This Statement applies prospectively to all entities that prepare consolidated financial statements and applies prospectively for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect this to have a significant impact on its financial statements.
4. Fixed Assets - Property and Equipment
Machines on location
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$ 1,097,357
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Restaurant equipment
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$ 514,300
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Building improvements
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$ 360,070
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Vehicles
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$ 649,697
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Furniture and equipment
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$ 426,377
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Manufacturing Machinery
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$ 2,481,674
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Kiosk
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$ 262,866
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Computer and software
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$ 221,133
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$6,013,477
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5. Intangible Assets
Application software
Our intangible assets include the development of system design, proprietary technologies, application software, and customize systems in order to maintain the high degree of market position. AVT developed proprietary software, requires a methodical approach to the design and continuous evolution, enhancement and system architecture. Our application software programs, protocols, patents, and intellectual property that pertains to the design and system architecture that are all or in part of AVT’s group of key intangible assets. We acquired the rights to our pending Wireless Management of Remote Vending patent via payment of 3,000,000 restricted shares of the Company’s common stock valued at $1.00 per share and the rights to our pending MultiMedia System, Method for Controlling Vending Machines patent via payment of 1,000,000 restricted shares of the Company’s common stock valued at $1.00 per share.
6. Business Combination
In April 2008, we purchased 100% of the assets and liabilities 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 $1,000,000 pursuant to the value of fixtures in the restaurant. The Series A Convertible Preferred stock was arbitrarily valued at $1.00 per share as there is no public market for the Company’s Preferred stock.
Pursuant to FASB 141, the primary purpose of the purchase was to provide an alternative stream for the Company and to provide the Company with the ability to provide Mexican fresh foods in the Company’s vending machines.
Fair Value Option
On January 1, 2008, the Company adopted SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 provides a fair value option election that allows entities to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities.
Changes in fair value are recognized in earnings as they occur for those assets and liabilities for which the election is made. The election is made on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The adoption of SFAS 159 did not have a material impact on the Company’s financial statements as the Company did not elect the fair value option for any of its financial assets or liabilities.
9. Commitments and Contingencies
Indemnities and Guarantees
During the normal course of business, the Company may make certain indemnities and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities may 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 payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheet.
Leases
The Company has various operating lease commitments in connection with its office space and certain equipment.
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.
Voting Rights
Except as otherwise required by law, the holders of the Company’s Series A Convertible Preferred Stock vote; (i) as a single class and shall have such number of votes as is determined by multiplying (a) the number of shares of Series A Convertible Preferred Stock held by such holder, (b) the number of issued and outstanding shares of our Series A Convertible Preferred Stock and Common Stock as of the record date for the vote, or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited, and (c) 0.00000025; and (ii) the holders of our Common Stock shall have one vote per share of Common Stock held as of such date.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Forward Looking Statements
This report contains certain forward- looking statements regarding, among other things, the anticipated financial and operating results of the Company. For this purpose, forward- looking statements are any statements contained herein that are not statements of historical fact and include, but are not limited to, those preceded by or that include the words, “estimate”, “could”, “should”, “would”, “likely”, “may”, “will”, “plan”, “intend”, “believes”, “expects”, “anticipates”, “projected”, or similar expressions. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those contemplated by the statements. The forward looking information is based on various factors and was derived using numerous assumptions. 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.
Results of Operations
For the three months ended March 31, 2011, our net income has increased by $342,888, compared to the same period for the previous year.
Total revenues for the three months ended March 31, 2011, were $1,404,198 compared to total revenues of $976,818 for the three months ended March 31, 2010. The increase in revenues is due increased manufacturing revenues of $427,380. We attribute the increased manufacturing revenues to increased sales of custom vending machines.
For the three months ended March 31, 2011, we had revenues of $1,404,198, and total cost of goods and operating expenses of $1,394,282 for net income of $9,916. This compares to the three months ended March 31, 2010 where we had $976,818 in total revenues, $1,309,790 in total costs of goods and operating expenses for a net income of ($332,972). We attribute the increase in net income for the three months ended March 31, 2011, due to increased revenues from manufacturing machine sales. Our increased cost of goods sold for the three months ended March 31, 2011, was attributable to increased sales of our vending machines.
We believe that the increased spending on manufacturing is necessary for the company to move away from vending operations and work towards increased machine sales and the development of technology which allows for the sales of our electronic payment, back end inventory control and advertising products. We have experienced unexpected expenses related to the restaurant operations relating to unpaid back taxes and vendor costs. To address this issue we have hired new management to address these issues and we expect the restaurant related expenses to be reduced during the next year.
We expect to increase sales over the next 12 months due primarily to sales of our RAM4000 vending machine. We believe that we have sufficient 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.
We expect our manufacturing costs to increase approximately 15% due to the devaluation of the U.S. Dollar and the exchange rates with our foreign manufactures. Depending on the strength of the U.S. Dollar, this trend may or may not continue.
Inflation and changing prices have affected our business as related primarily to fuel and increased vehicle expenses. We anticipate that fuel costs will continue, thus increasing our operating costs. Our cost of goods and prices for our products remain relatively stable and we expect this trend to continue through the end of 2011.
Liquidity and Capital Resources
We have historically financed operations through a combination of cash on hand, cash provided from operations and the sale of our securities. As of March 31, 2011, we have $132,664 cash on hand.
At March 31, 2011, we had cash of $132,664 compared to cash of $250,006 at December 31, 2010. We consider this decrease in cash as insignificant for the current quarter.
For the three months ended March 31, 2011, our inventory increased compared to our ending inventory for the year ended December 31, 2010. At March 31, 2011, we had inventory of $2,548,884 compared to $2,462,708 at December 31, 2010. This increase relates primarily to receiving new shipments of vending machines from our manufacturer in China and Spain.
The Company’s assets increased to $19,194,850 at March 31, 2011 compared to $18,829,058 at December 31, 2010. This $365,792 increase in assets is primarily due to inventory.
All receivable accounts are due within 45 days of delivery. Upon special approval, we allow 90 days to receive payment. Collections for past due accounts are handled internally.
The Company
AVT, Inc. is an innovative developer, manufacturer and vending operator of technology based product dispensing solutions and equipment that is in the process of revolutionizing convenience food access and food product dispensing. With extensive experience in the vending machine industry, AVT combines vast market knowledge and strong customer relationships with best-in- class technologies to dramatically improve the values delivered to consumers.
AVT’s designs are innovative in that our systems exploit the use of an integrated PCs. As a design manufacture, creator of specialty application software and integrator of technology, our products define the cutting edge of the vending and dispensing industry and position us as a leader and industry innovator. We currently have 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
AVT, Inc. is the owner of AC Mexican Food, Inc. dba, Jalapenos. The restaurant is located in a food court of a retail mall at 20532 El Toro Road, #112, Lake Forest, CA 92692. The restaurant offers authentic Mexican food restaurant that operates from mid morning through late evening with the majority of its business being lunch and dinner patrons.
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.”
Our Products
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.
Automated Express Market
We have developed and created our Automated Express Market (AEM™) 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 such as 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 AEM™ 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 (TSV™) and multi-payment capabilities. AEM™ 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 a software product called AVTi Media™ which allows for an advertising medium (player) to be added to virtually any of AVT designed systems including AEM™ cabinets and all four next generation vending and product dispensing systems. 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. VMS™ 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 System™ (VMS)
Our VMS systems is another AVT developed software product that allows us to remotely view information for each machine to help plan for daily replenishment, sales statistics and alerts of systems malfunctions to operators as well as defect history for each machine by means of software error log files. 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. VMS currently holds a Patent pending.
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.
Touch Screen Vending (TSV)
TSV (Touch Screen Vending) is our primary flagship application software product. Designed and development by AVT’s software staff several years ago, it is like most of today’s application software, constantly maintained and in continuous refinement, support and development to remain compatible with and competitive with the ever changing PCs environment. Our TSV software product is the primary foundation for ALL of AVT’s touch screen based systems like the RAM 4000 and RAM 5000 to name a few. This application software is modular by design allowing extreme flexibly by our customers allowing them to have a product that is capable providing the system owner a specific “look and Feel” coupled with dispensing their own specific products via the customizable GUI interface.
The RAM4000 Vending Machine
The RAM4000 is a refrigerated vending 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. 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
The 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. The RAM5000 also 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/ Game Trader 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. AVT engineered the Game Trader machine that will allow customers to buy video games as well as trade used games in for cash.
Media Products
Technology 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.
• 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 fabrication and design efforts run concurrently with our primary 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
DEX to PC software Interface
MDB to USB Hardware Device
DEX to Radio Controller PCB
X – Y Dispensing Center Design
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VMSII – Hardware/Server/Software Project
VMS – Drop Sensing efforts
AEM Cabinet Design
Multiple All-In-One PC/LCD Displays designs
Multiple Custom Dispensing Projects
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The expense of complying with environmental regulations is of minimal consequence.
Patent Pending
Multimedia System, Method for Controlling Vending Machines
Serial Number 11-588,422
(Filed: October 27, 2006)
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 for
Controlling Vending Machines – Serial Number 11-588,420
(Filed: October 27, 2006)
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.
The effects of existing or probable government regulations are minimal.
Additional information
The Company currently has approximately 25 full time employees and 5 part-time employees. We also allow and utilize the services of independent contractors.
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
AVT is a full service developer and manufacture of highly integrated vending and product dispensing systems. Over the past several years, AVT has assembled an integral team of experienced engineers and qualified technicians and software programmers to develop technology based solutions comprised of original and inventive technology and integrating this technology into a line of sophisticated self service products. At the heart of our business is our engineering, manufacturing and creation of inventive and functional application software for use on AVT designed and manufactured systems.
Design: AVT employs a complete design team. 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.
Software Development: We also employ a complete software design and development team. Our software products are a key factor to the success, functional operation and financial position of the company. As AVT owned IP, once developed, our software products are sold as a licensed part of every system AVT sells that has been integrated with an optional PC. We design our software products using today’s state of the art high level programming environments which produce effective and efficient software programs that are highly flexibly and user friendly while maintaining the elevated degree of complexity and inventiveness that yield a superior and competitive product.
Future Goals
In the next 12 month, we will continue our research, development and marketing efforts. We have entered into multiple manufacturing agreements with offshore manufacturers to produce the housings for our technology based RAM4000 and RAM5000 vending systems and have established a line of credit to ensure payment and production of the systems.
Our goal is to manufacture and sell as many systems as possible in the next 12 to 24 months through established distributors and direct sales to meet the anticipated industry demand for a competitively priced vending system that is an energy efficient, technology based, “Green” system..
A critical focus for sales over the next 12 months will be our Product Dispensing Centers (PDCs). Our PDCs are based on our RAM4000 or RAM5000 system and integrates more sophisticated technology features and options such as full face large touch screen displays, receipt printers, cashless payment options and advertising displays. In addition, our PDCs systems can dispense a variety of snack items and non-food items such as cell phones, MP3 players, digital cameras, DVDs, consumer electronics and accessories. We will also focus on “Themed” systems to dispense products such as tee-shirts, promotional items, perfumes, contact lenses and just about any product our customers have a location and market for. Our “Themed” systems are of exceptional interest to our direct end customers as the products these systems dispense result in higher profit margins.
All of our vending systems are capable of the inclusion of PC hardware and LCD displays. A future goal of AVT is to complete and continue to refine application software that runs digital signage for the primary purpose of displaying paid advertisements. As we sell systems that are equipped with a PC and LCD display, each system becomes a “node” on a digital network. As the network expands, many thousands of vending systems and PDCs can be part of nationwide advertising network which we believe will be of interest for national advertisers. Our goal is to “own” the network but not the systems. All vending system owners will have the option to join the AVT nationwide network with our AVT based advertising vending system to get an equitable share of revenue for allowing advertisements from AVT’s server to be pushed-out onto their vending system.
Future goals and system refinements will include continued software and hardware development and refinements to include even more efficient operating systems to integrate more seamlessly with the internet, becoming Wi-Fi standard and including SMS and email features. Our goal is that the AVT vending systems will become the standard for intelligent self-service vending systems deployed throughout the US and world markets.
In addition, within the next 12 months, we will continue to work to 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
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as of the end of the period covered by this Report on Form 10-Q, our management evaluated, with the participation of our principal executive and financial officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on their evaluation of these disclosure controls and procedures, our chairman of the board and chief executive and financial officer has concluded that our disclosure controls and procedures are effective.
Item 4T. Controls and Procedures.
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as of the end of the period covered by this Report on Form 10-Q, our management evaluated, with the participation of our principal executive and financial officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based on their evaluation of these disclosure controls and procedures, our chairman of the board and chief executive and financial officer has concluded that our disclosure controls and procedures are effective.
Item 4T. Controls and Procedures.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles generally accepted in the United States of America. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company's internal control over financial reporting at March 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on that assessment under those criteria, management has determined that, at March 31, 2011, the Company's internal control over financial reporting was effective.
This Quarterly Report on Form 10-Q does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.
Inherent Limitations of Internal Controls
Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
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pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
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●
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provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
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●
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provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
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Our management does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has not identified any change in our internal control over financial reporting in connection with the its evaluation of our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II – Other Information
Item 1. Legal Proceedings
We are not a party to any pending legal proceedings responsive to this Item Number.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We have sold the following unregistered securities to accredited investors for the quarter ended March 31, 2011.
01/01/2011 - 03/31/2011
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||||
Date of Sale
|
Purchaser Name
|
Price
|
Security
|
# of Shares Sold
|
01/26/11
|
Scott Ohana
|
$36,000.00
|
Common Stock
|
60,000
|
01/26/11
|
David Schneider
|
$10,000.00
|
Common Stock
|
18,182
|
01/26/11
|
Paula Greco
|
$ 9,695.00
|
Common Stock
|
12,927
|
01/26/11
|
Nancy Caruso
|
$25,134.21
|
Common Stock
|
50,268
|
01/26/11
|
Thomas Caruso
|
$15,408.86
|
Common Stock
|
30,818
|
02/17/11
|
Samuel Gerber
|
$50,000.00
|
Common Stock
|
10,000
|
02/22/11
|
Donavon Working
|
$42,857.00
|
Common Stock
|
7,143
|
03/14/11
|
Richard Abe
|
$20,000.00
|
Common Stock
|
4,000
|
03/15/11
|
Merle & Onna Ready
|
$30,000.00
|
Common Stock
|
6,400
|
01/07/11
|
Claude W. Drake Jr.
|
$50,000.00
|
Note
|
|
02/11/11
|
Ralph Adams
|
$40,000.00
|
Note
|
|
03/17/11
|
Donald Hotter
|
$20,000.00
|
Note
|
There were no underwritten offerings employed in connection with any of the transactions set forth above. The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.
We intend to use the proceeds from sale of our securities to purchase equipment for vending operations, vending machines, supplies and payroll for operations, professional fees, and working capital.
Item 3.Default Upon Senior Securities
None.
Item 4.(Removed and Reserved)
Item 5.Other Information
None.
ITEM 6. EXHIBITS
Exhibit
|
Form
|
Filing
|
Filed with
|
|
Exhibits
|
#
|
Type
|
Date
|
This Report
|
Certificate of Incorporation filed with the Secretary of State of Delaware on February 25, 1969.
|
3.1
|
10
|
8/14/2008
|
|
Certificate of Amendment filed with the Secretary of State of Delaware on December 16, 1985.
|
3.2
|
10
|
8/14/2008
|
|
Certificate of Amendment filed with the Secretary of State of Delaware on March 5, 1987.
|
3.3
|
10
|
8/14/2008
|
|
Certificate of Amendment filed with the Secretary of State of Delaware on February 11, 1991.
|
3.4
|
10
|
8/14/2008
|
|
Certificate of Renewal filed with the Secretary of State of Delaware on January 14, 2005.
|
3.5
|
10
|
8/14/2008
|
|
Certificate of Amendment filed with the Secretary of State of Delaware on September 22, 2005.
|
3.6
|
10
|
8/14/2008
|
|
Amended and Restated Certificate of Amendment of Incorporation filed with the Secretary of State of Delaware on April 28, 2006.
|
3.7
|
10
|
8/14/2008
|
|
Articles of Incorporation filed with the Nevada Secretary of State on September 24, 2007.
|
3.8
|
10
|
8/14/2008
|
|
Certificate of Amendment filed with the Nevada Secretary of State on November 30, 2007.
|
3.9
|
10
|
8/14/2008
|
|
Certificate of Merger filed with the Secretary of State of Delaware on December 11, 2007.
|
3.10
|
10
|
8/14/2008
|
|
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.
|
3.11
|
10
|
8/14/2008
|
|
Amended and Restated Bylaws dated March 12, 2008.
|
3.12
|
10
|
8/14/2008
|
|
Consulting Agreement effective October 1, 2006 between Automated Vending Technologies, Inc. and Star Capital.
|
10.1
|
10
|
8/14/2008
|
|
Consulting Agreement effective January 1, 2006, Between Automated Vending Technologies, Inc. and SWI Trading, Inc.
|
10.2
|
10
|
8/14/2008
|
|
Employment Agreement effective May 1, 2006, by and between Automated Vending Technologies, Inc. and James Winsor.
|
10.3
|
10
|
8/14/2008
|
|
Employment Agreement effective as of January 1, 2006 by and between Automated Vending Technologies, Inc., and Natalie Bishop.
|
10.4
|
10
|
8/14/2008
|
|
Lease Agreement effective January 1, 2007 by and between AVT, Inc. and SWI Trading, Inc.
|
10.5
|
10
|
8/14/2008
|
|
Employment Agreement effective as of January 1, 2008 by and between AVT, Inc. and Natalie Russell.
|
10.6
|
10
|
8/14/2008
|
|
Employment Agreement effective January 1, 2008, by and between AVT, Inc. and James Winsor.
|
10.7
|
10
|
8/14/2008
|
|
Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and Star Capital IR Corp.
|
10.8
|
10
|
8/14/2008
|
|
Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and SWI Trading, Inc. (Attached as an exhibit to our Registration Statement on Form 10-SB filed with the Commission on August 14, 2008)
|
10.9
|
10
|
8/14/2008
|
|
Consulting Agreement effective March 1, 2008, by and between AVT, Inc. and SNI Innovations, Inc.
|
10.10
|
10
|
8/14/2008
|
|
Consulting Agreement effective September 1, 2008, by and between AVT, Inc. and Star Capital IR Corp.
|
10.11
|
10/A-1
|
2/24/2009
|
|
Agreement and Plan of Merger dated December 3, 2007 by and between Automated Vending Technologies, Inc. and AVT, Inc.
|
10.12
|
10/A-1
|
2/24/2009
|
|
Consulting Agreement effective January 1, 2008, by and between AVT, Inc. and SWI Trading, Inc.
|
10.13
|
10/A-2
|
7/29/09
|
|
Employment Agreement effective as of January 1, 2009 by and between AVT, Inc. and Natalie Russell.
|
10.14
|
10/A-1
|
2/24/2009
|
|
Employment Agreement effective January 1, 2009, by and between AVT, Inc. and James Winsor.
|
10.15
|
10/A-1
|
2/24/2009
|
|
SWI Trading, Inc, note effective November 1, 2006
|
10.16
|
10/A-2
|
7/2/09
|
|
SWI Trading Loan Cutback Agreement dated January 31, 2008
|
10.17
|
10/A-3
|
11/19/2009
|
|
Consulting Agreement effective September 1, 2009, by and between AVT, Inc. and Star Capital IR Corp.
|
10.18
|
10/A-3
|
11/19/2009
|
|
Employment Agreement effective as of January 1, 2010 by and between AVT, Inc. and Natalie Russell.
|
10.19
|
10/A-6
|
10/12/2010
|
|
Employment Agreement effective January 1, 2010, by and between AVT, Inc. and James Winsor.
|
10.20
|
10/A-6
|
10/12/2010
|
|
Employment Agreement effective as of January 1, 2011, by and between AVT, Inc. and Natalie Russell.
|
10.21
|
10-K
|
3/22/2011
|
|
Employment Agreement effective January 1, 2011, by and between AVT, Inc. and James Winsor.
|
10.22
|
10-K
|
3/22/2011
|
|
Code of Ethics
|
14.1
|
10
|
8/14/2008
|
Certification of Natalie Russell pursuant to Rule 13a-14(a)
|
31.1
|
X
|
||
Certification of James Winsor pursuant to Rule 13a-14(a)
|
31.2
|
X
|
||
Certification of Natalie Russell pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.1
|
X
|
||
Certification of James Winsor pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.1
|
X
|
Signatures
|
||
Pursuant to the requirements of the Securities Exchange Act 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
||
Signatures
|
Title
|
Date
|
/s/ Natalie Russell
Natalie Russell
|
Secretary,
Chief Financial Officer
Principal Accounting Officer
Director
|
May 4, 2011
|