Form 10-K for AVT, INC.

Annual Report

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Various risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from expectations include, but are not limited to, those set forth under the section "Risk Factors" set forth in this registration statement.

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

Critical Accounting Policies

The Company's policy is to use the accrual method of accounting to prepare and present financial statements, which conform to generally accepted accounting principles. The company has elected a December 31 year-end.

The Company considers all highly liquid investments with maturities of three months or less when purchased, to be cash equivalents.

Inventories are valued at the lower of average cost.

Revenue is recognized at the time of sale upon receipt of payment.

The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes." SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Results of Operations

We have historically financed operations through a combination of cash on hand, cash provided from operations and the sale of our securities.

For the year ended December 31, 2009, we had revenues of $2,956,645 and total cost of goods and general and administrative expenses of $2,918,674 for net income of $35,728.

For the year ended December 31, 2009, we had revenues of $4,431,154 and total cost of goods and general and administrative expenses of $4,297,078 for net income of $117,068.

Our revenues increased by $1,449,253 for the year ended December 31, 2009, Our general and administrative expenses also increased by $1,371,008 for the year ended December 31, 2009, primarily due to increased manufacturing product and operating expenses relating to increased restaurant expenses, rent for our facility, payroll expenses .

For the year ended December 31, 2009, our net income has increased by $78,245 compared to the previous year December 31, 2008.

Total revenues for the year ended December 31, 2009, were $4,431,154 compared to total revenues of $2,956,645 for the year ended December 31, 2008. The increase in revenues is due to increased manufacturing revenue of $1,471,442 and increased restaurant revenue of $215,687. Our product sales revenue decreased slightly by $212,620.

We attribute the increase manufacturing revenues to increased sales of custom vending machines. Increase restaurant revenue is due to increased catering revenue. The reduction in product sales is primarily related to decreased vending route sales.

Our general and administrative expenses increased for the year ended December 31, 2009, primarily due to increased costs of goods and operating expenses relating to increased rent for our facility, advertising and payroll expenses.

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

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 2010.

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. At December 31, 2009, we had cash of $1,078,252 compared to cash of $56,547 at December 31, 2008.

At December 31, 2009, we had inventory of $395,461 compared to $590,597 for the year ended December 31, 2008. The decrease in inventory for the year ended December 31, 2009, is due to increased sales of our vending machines.

The Company's assets increased from $14,957,664 for the year ended December 31, 2008 to $18,599,987 for the year ended December 31, 2009. This increase in assets is due to increased intellectual property assets.

The companies long term debt and notes payable as of December 31, 2009, for a total of $1,728,460. Are due to share holder notes of $1,476,996 and have terms on an average of three years from issue date. Long term debt of $251,464, consists of equipment leases.

For the year ended December 31, 2009, the Company's general and administrative expenses increased approximately $627,699 and $583,653 from the year ended December 31, 2008. The increase was due to the additional expenses associated with operating the AC Mexican, Inc. restaurant and fabrication costs.

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. As of December 31, 2009 accounts receivable total was $1,882,535, this increase is due to new customers with large orders for machines. Average days outstanding for December 31, 2009 is 90 days due to larger orders. December 31, 2008 our average days outstanding were 45-60 due to smaller orders.

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 become a fully company and have our common stock trading on the OTC Bulletin Board.

Off-balance Sheet Arrangements

We maintain no significant off-balance sheet arrangements

Foreign Currency Transactions

None.

I tem 7A. Quantitative and Qualitative Disclosures About Market Risk

We currently do not utilize sensitive instruments subject market risk in our operations.

Form 8-K for AVT, INC.

On February 22, 2010, AVT, Inc. announced that it has entered into an agreement with Samsclub.com to sell the company's line of PC based vending and automated dispensing systems through Sam's Club's e-commerce site. Sam's Club is a division of Wal-Mart Stores, Inc. Products for sale include the PC based AVT designed and built RAM 4000 and RAM 5000 systems along with Cup of Caf�, a multi-flavored fresh ground coffee dispensing machine.

Emerging Market Leader

In the emerging automated retailing market for 'product dispensing' solutions, including but not limited to food-- we believe AVTC is a low price, high quality leader offering technology solutions at 50% less, than the best known competitor.

In a recessive market were cash is king and convenience is a necessity, millions of coins surge through vending machines everyday thus creating a profitable market for the automated retail industry

Rapidly Growing Leader in a Dynamic Market

Based on market leadership in the fast growing self service marketplace, AVT (AVTC.PK)
[Links to http://finance.yahoo.com/q?s=avtc.pk] anticipates rapid internal, organic growth -- a very rare occurrence in today’s flat lined economy.

Unless a company directly participates in an ever growing market, top line revenue growth (if any) is slow and limited.

In AVT’s case, growth in the targeted self service segment is driven by two common sense trends:
(1) Large retailers need to reduce pilferage and reduce sales, through self-service retailing.
(2) Manufacturers want to increase brand awareness, sales and points of distribution by installing automated product dispensing centers.

For example, well recognized household brands, such as Wal-Mart, are now using AVT’s patent-pending technological advantage to increase sales and reduced costs.
AVT founder, Shannon Illingworth said in an interview with CNNCAP, “AVT is a low price, high quality leader offering proprietary technology solutions at 50% less, than the best known competitor.

“AVT,” he continued, “offers 4th generation networks of interactive self service machines, based on systems of highly integrated PCs. Wireless connections to consumers are all controlled through a secure wireless network. We provide state-of-the-art methods for text messaging, cashless payment, credit card & debit card use plus dynamic advertising with remote tracking and inventory management”
Read more in the AVT analyst report
http://www.gaskinsco.com/linkto-avtc.shtml
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Rapidly Growing Leader in a Dynamic Market --> -->
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Featured Stock; AVT Technologies Inc.

AVT, Inc. Says It Meets Congressional Requirements on Calorie Counts

CORONA, Calif., March 25 /PRNewswire-FirstCall/ -- AVT, Inc. (formerly Automated Vending Technologies), (Pink Sheets:AVTC.pk - News) today said it is already in compliance with new requirements in the recently passed major Health Care Reform Legislation that require vending machines to include calorie count information. The information will be available so consumers can view it before making their selections.

“For more than five years, our state-of-the-art dispensing machines integrated with high resolution LCD displays have had the ability to display nutritional information as well as streaming ads that can advise consumers of whatever information the law requires,” said Shannon Illingworth, Company founder. “We are delighted to be ahead of the sector in this important matter and will be exhibiting this capability during the 2010 National Automatic Merchandising Association show (NAMA) in April at the McCormick Place West Chicago, Ill."

News publications, including The New York Times, The Wall Street Journal, The Boston Globe and The Associated Press, today reported on the provision in the health care reform legislation which previously had received little publicity. It also mandates that more than 200,000 fast food and other chain restaurants must post calorie information. The Food and Drug Administration is directed to create the new national standards within one year.

“Investors and possible clients should visit our web site at (http://www.avtinconline.com/) to learn how we are in front of Congress in this matter,” Mr. Illingworth said. AVT is noted for having developed significant technologies in the dispensing machine sector, including cashless payment, credit and debit card use, and dynamic advertising with remote tracking and inventory management, yielding more efficient and reliable vending systems.

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