U

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 for the period ended June 30, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE Act of 1934 for the transition period from ___ to ___.

Commission file number: 000-23319

AVANI INTERNATIONAL GROUP INC.

(Name of Small Business Issuer in its charter)

Nevada 88-0367866

(State of (I.R.S. Employer

Incorporation) I.D. Number)

108-2419 Bellevue Ave. West Vancouver, B.C. V7V 4T4 Canada

(Address of principal executive offices) (Zip Code)

Issuer's telephone number (604)-913 2386

Securities registered under Section 12 (b) of the Act:

Title of each class Name of exchange on which

to be registered each class is to be registered

None None

Securities registered under Section 12(g) of the Act:

Common Stock

(Title of Class)

Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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.

(1). [X] Yes [ ] No: (2). [X] Yes [ ] No:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. [X] Smaller Reporting Company

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

The number of shares issued and outstanding of issuer's common stock, $.001 par value, as of July 29, 2008 was 17,582,571.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Page No.

-Consolidated Interim Balance Sheets as of June 30, 2008

(unaudited) and December 31, 2007 (audited).

-Consolidated Interim Statements of Operations and

Comprehensive Loss for the Three Months and Six

Months ended June 30, 2008 and 2007 (unaudited).

-Consolidated Interim Statements of Changes in Capital

Deficit for the Three Months and Six Months Ended

June 30, 2008 and 2007 (unaudited).

-Notes to Consolidated Interim Financial Statements.

Item 2. Management's Discussion and Analysis.

Item 3. Effectiveness of the Registrant’s Disclosure Controls and

Procedures

Item 3(A)T Controls and Procedures.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors

Item 2. Unregistered Sales of Securities of Equity Securities

and Use of Proceeds.

Item 3. Defaults upon Senior Securities.

Item 4. Submission of Matters to Vote of Securityholders.

Item 5. Other Information.

Item 6. Exhibits and Reports on Form 8-K.

Signatures

Avani International Group Inc.

Consolidated Interim Balance Sheets

(Expressed in US dollars)

June 30

December 31

2008

2007

Assets

(Unaudited)

Current

Cash and cash equivalents

1,119,883

1,217,971

Accounts receivable (net of allowance for doubtful accounts

in 2008 - $Nil; 2007 - $Nil)

12,349

2,671

Prepaid expenses

3,727

5,006

1,135,959

1,225,648

Property, plant and equipment

8,094

12,874

Other assets

15,294

18,828

1,159,347

1,257,350

Liabilities and Capital Deficit

Liabilities

Current

Accounts payable

895,638

885,417

Accrued liabilities

61,783

63,553

Debts payable

169,984

170,819

Unearned revenue and deposits

9,633

9,909

1,137,038

1,129,698

Capital Deficit

Capital stock (Note 2)

Authorized

800,000,000 common shares, par value of $0.001

1,000,000 preferred shares, par value of $0.001

Issued and outstanding

- 17,582,571 (2006– 15,082,571) common shares

- 1,000,000 preferred shares

17,583

17,583

Additional paid-in capital

8,116,092

8,116,092

Accumulated deficit

(8,080,699)

(7,947,590)

Accumulated other comprehensive loss

- foreign exchange translation

(30,667)

(58,433)

22,309

127,652

1,159,347

1,257,350

The accompanying notes are an integral part of these consolidated interim financial statements.


Avani International Group Inc.
Consolidated Interim Statements of Operations and Comprehensive Loss
(Expressed in US Dollars)
(Unaudited)
			Three-month periods ended				Six-month periods ended
			June 30				June 30
				2008		2007		2008		2007

Revenue
	Bottled water and supply sales		$	-	$	-	$	-	$	-
				-		-		-		-
Cost of revenue
	Cost of goods sold (excluding
		depreciation)		-		-		-		-
	Depreciation		-			-		-		-
				-		-		-		-
Gross profit				-		-		-		-
Operating expenses
	Marketing			22,599		77,677		85,333		100,355
	General and administration		37,988			52,535		83,040		98,749
			60,587			130,212		168,373		199,104
Income (loss) from operations			(60,587)			(130,212)		(168,373)		(199,104)
Other income (expenses)
	Interest on debts payable			(1,980)		(1,818)		(3,972)		(3,525)
	Interest income			13,094		10,308		13,113		10,589
	Royalty income			6,290		-		6,290		-
	Equipment rental income			19,833		-		19,833		-
			37,237			8,490		35,264		7,064
Net loss for the period				(23,350)		(121,722)		(133,109)		192,040
Foreign currency translation adjustment				6,492		5,606		27,766		(30,862)
Comprehensive loss for the period			$	(16,858)	$	(116,116)	$	(105,343)	$	(222,902)
Gain(Loss) per share - basic and diluted			$	(0.01)	$	(0.01)	$	(0.01)	$	(0.01)
Weighted average shares outstanding				17,582,5711		15,082,571		17,582,5711		15,082,571
The accompanying notes are an integral part of these consolidated interim financial statements.


Avani International Group Inc.
Consolidated Interim Statements of Changes in Capital Deficit
(Expressed in US Dollars)
(Unaudited)
									Accumulated
					Additional				Other		Total
	Common Shares				Paid-in		Accumulated		Comprehensive		Capital
	Shares		Amount		Capital		Deficit		Loss		Deficit
Balance, January 1, 2007		15,082,571	$	15,083	$	7,717,620	$	(8,012,065)	$	(2,813)	$	(282,175)
Issuance of common stock		2,500,000		2,500		398,472				-		400,972
								-		-
Stock option compensation						-		-		-		-
Net profit (loss) for the year		-		-		-		64,475		-		64,475
Foreign exchange translation adjustment		-		-		-		-		(55,620)		(55,620)
Balance, December 31, 2007		17,582,571		17,583		8,116,092		(7,947,590)		(58,433)		127,652
Net loss for the period		-		-		-		(133,109)		-		(133,109)
Foreign exchange translation adjustment		-		-		-		-		27,766		27,766
Balance, June 30, 2008		17,582,571	$	17,583	$	8,116,092	$	(8,080,699)	$	(30,667)	$	22,309

		Preferred Shares
		Shares
Balance, January 1, 2007		Nil
Issuance of preferred stock in July 2007		1,000,000
Balance, December 31, 2007		1,000,000
Balance , June 30, 2008		1,000,000

The accompanying notes are an integral part of these consolidated interim financial statements


Avani International Group Inc.
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)

For the six-month periods ended June 30					2008		2007
Cash provided by (used in)
Operating activities
	Net loss for the year			$	(133,109)	$	(192,040)
	Adjustments to reconcile net loss for the year to
	net cash provided by (used in) operating activities
			Depreciation		8,258		7,580
	Loss (gain) on disposal of assets				-
	(Increase) decrease in assets
			Accounts receivable		(9,678)		36
			Prepaid expenses		1,279		1,512
	Increase (decrease) in liabilities
		Accounts payable			9,386		(46,207)
		Accrued liabilities			(1,770)		(9,926)
		Unearned revenue and deposits			-		-
					(125,634)		(239,045)
Investing activities
	Proceeds from sale of capital assets				-
Financing activities
	Issuance of common shares				-
Increase (Decrease) in cash during the period					(125,634)		(239,045)
Effect of foreign exchange on cash					27,546		(33,208)
Cash and cash equivalents, beginning of period					1,217,971		968,419
Cash and cash equivalents, end of period				$	1,119,883	$	696,166
Supplemental Information:
	Interest paid			$	3,984	$	3,414
The accompanying notes are an integral part of these consolidated interim financial statements.


Avani International Group Inc.
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)

Basis of Presentation and Ability to Continue as a Going Concern

The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

The consolidated interim financial statements for the six-month period ended June 30, 2008 include the accounts of the Company and its wholly owned subsidiaries. All material inter-company balances and inter-company transactions have been eliminated. These statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary for fair presentation of the information contained therein.

After the sale of its property including land, building and building improvements on June 15, 2006, the Company’s production of water has been suspended. For the six-month period ended June 30, 2008, the revenue of the Company was Nil, and the result of its operation is a deficit of 133,109.

Results of operations for the interim periods are not indicative of annual results.

These accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred accumulated losses to June 30, 2008 of $8,080,699. The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders, obtaining additional long-term financing, as well as achieving and maintaining a profitable level of operations. The Company plans to raise additional equity and debt capital as necessary to finance the operating and capital requirements of the Company. Amounts raised will be used to provide financing for the marketing and promotion of the Company's business, capital expansion and for other working capital purposes. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.

Capital Stock

Transactions not disclosed elsewhere in these consolidated interim financial statements are as follows:

As at June 30, 2008 and December 31, 2007, the Company had 1,500,000 fully exercisable share purchase warrants outstanding, which were granted August 2003 and are exercisable at any time within 5 years at an exercise price of $0.06 per share on or before September 2, 2008.


Avani International Group Inc.
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)

A summary of share purchase warrant transactions for the periods presented is as follows:


		Weighted
		Average
		Exercise
	Number	Price
Outstanding at June 30, 2008 and December 31, 2007	1,500,000	$0.06

All of the share purchase warrants are exercisable on the grant date and remain outstanding at June 30, 2008 and December 31, 2007.

The Company applies Accounting Principles Board (“APB”) Opinion 25 and related interpretations in accounting for stock options granted to employees. Generally, under APB No. 25 compensation expense is recognized for the difference between the market price of the underlying stock and the exercise price of the stock options. As of June 30, 2008, there were no employee options outstanding.

On October 11, 2007, the Company filed with the Nevada Secretary of State a Certificate of Designations to create a class of preferred stock consisting of 1,000,000 shares and known as the “Class A Super Voting Preferred Stock.” On all matters presented to the shareholders for a vote, the Class A Super Voting Preferred Stock has 2,000 votes per share. No other rights, privileges, or features are attendant to the Class A Super Voting Preferred Stock. On December 13, 2007, the Company issued 1,000,000 shares of the Class A Super Voting Preferred Stock to the Company’s Chairman and President.

Related Party Transactions

During the six-month period ended June 30, 2008, the Company’s President and Chairman was reimbursed $Nil (2007 – 6,889) as a transportation expense. For the same period, the Company also accrued $36,000 as salary (2007 - $36,000) and $31,628 (2007 - $25,600) as an overseas living allowance, all of which are payable to the Company’s President and Chairman.

Item 2. Management's Discussion and Analysis and Plan of Operations.

The following discusses the Company’s plan of operations for the next 12 month. During 2006, the Company suspended the production and sale of its oxygenated water. Since the suspension of its operations, the Company has sold its real estate located in Coquitlam, British Columbia, and has transported its proprietary oxygenated water producing equipment to Malaysia for storage.

As of the date of this report, the Company does not expect to resume the manufacture and sale of its oxygenated water. Rather, it is currently seeking a joint venture partner or licensee in the Far East, mainly Malaysia, for the purpose of re-commencing operations utilizing the Company’s proprietary oxygenated water producing equipment. Under this proposed arrangement, the Company expects that its licensee or joint venture partner will engage in the actual manufacture and sale of its oxygenated product, subject to the payment of a yet to be determined royalty to the Company. In doing so, management believes that it will limit its overhead and other expenditures attendant to its operations. In addition to its existing equipment, the Company also recovered from Avani O2 Water Sdn. Bhd equipment that was the subject of its prior joint venture with Avani O2. On March 14, 2008, the Company rented the recovered equipment to Avani Oxygen Water Corporation Sdn. Bdh. (formerly Avani Water Corporation Sdn. Bdn.) (“Avani Oxygen Water”), an unaffiliated Malaysian company, under a rental arrangement which provides for a rental of approximately $5,000 per month and 2% royalty on gross sales resulting from the equipment use. The term of the agreement is month to month. Apart from the monthly rental amount, the ability of the Company to receive additional revenues in the form of royalties from the equipment use will be dependent on the success of the Avani Oxygen Water business. The Company can not predict whether any royalty revenues will result from the transaction with Avani Oxygen Water.

The Company expects to incur approximately $360,000 in expenditures during fiscal 2008. The amount is comprised of an estimated $160,000 in marketing expenses, and an estimated $200,000 in general and administrative expenses. Marketing expenses include promotions, advertisements, and the repair and modifications of the existing equipment from 110v and 60hz to 220v and 50hz. The modification of the Company’s existing equipment will enable it to be utilized in Malaysia and elsewhere in the Far East. General and administrative expenses include payments to the Company’s President in the form of annual salary and overseas living allowances which total approximately $121,000, annual rent for its Canadian and Malaysia offices estimated to be $8,000, annual legal and accounting fees estimated to be $34,000, and annual salaries for two employees estimated to be $37,000 collectively.

The Company believes that it will be able to meet its anticipated expenditures for the 2008 period through some combination of; deferment of paying certain accounts payable, cash flow from its recent equipment rental arrangement, and cash on hand. In this regard, as stated below, the Company’s independent registered accountants included an explanatory paragraph regarding the Company’s ability to continue as going concern in their report on the consolidated financial statements for the year ended December 31, 2007.

It does not anticipate hiring additional personnel during this period, nor does it anticipate incurring any research and development costs during the 2008 period.

Liquidity and Capital Resources.

As of March 31, 2008, the Company had working capital deficit of $1,079. Working capital as of December 31, 2007 was $95,950. The decrease in working capital deficit is principally due to the comprehensive loss of the Company which occurred through the second fiscal quarter of 2008.

Property, plant and equipment, net of accumulated depreciation, totaled $8,094 on June 30, 2008. Property, plant and equipment, net of accumulated depreciation, totaled $12,874 on December 31, 2007. The decrease is due to depreciation during the three month period in 2008.

The Company continues to experience significant losses from operations. The Company expects to re-commence operations of its water business in Malaysia through a licensee or joint venture arrangement. As mentioned above, the Company believes that it will be able to meet its anticipated expenditures for the 2008 period through some combination of; deferment of paying certain accounts payable, cash flow from its recent equipment rental arrangement, and cash on hand. However, beyond fiscal 2008, the Company likely will need to raise additional capital pursuant to the private placement of its debt or equity. The Company also is aggressively exploring other business opportunities for purposes of effecting a business acquisition or combination. In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. As of the date of this filing, the Company has no formal plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company. The Company can not predict whether it will be sucessful in raising additional capital, or whether it will be sucessful in effecting any form of business acquisition or combination. The private placement of its capital stock in capital raising transaction, or the issuance of capital stock in effecting any form of business acquisition or combination may result in significant dilution to existing shareholders (See disclosure relating to Cautionary Statements in the Company’s Form 10-KSB for the period ending December 31, 2007 (“2007 Form 10-KSB”)). If the Company is unsuccessful in raising required funds, it will have a material adverse impact on the Company and its ability to re-commence operations and it future business in general. Accordingly, the Company’s financial statements contain note disclosures describing the circumstances that lead to doubt over the ability of the Company to continue as a going concern. In their report on the consolidated financial statements for the year ended December 31, 2007, the Company’s independent registered accountants included an explanatory paragraph regarding the Company’s ability to continue as going concern.

Cautionary Statements. Readers are urged to refer to the section entitled "Cautionary Statements in the Company's 2007 Form 10-KSB and elsewhere therein for a broader discussion of such risks and uncertainties. These risks include the lack of profitable operations, the need for additional capital to sustain operations, and significant dilution to existing shareholders.

Off-Balance Sheet Arrangement

As the Company has adopted FIN 46R effective January 1, 2004, there are no off-balance sheet arrangements at the end of the first quarter of 2008.

Critical Accounting Policies

Revenue Recognition. Revenue on sales of bottled water and sales of cooler and equipment is recognized when the products are delivered and title transfers to customers. Sales terms generally do not permit a right of return. Revenue from leasing of water coolers and filters are accounted for as operating leases and, accordingly, rental income is reported over the terms of the leases. Deposits received for bottles and coolers are accrued as liabilities until refunded upon return of bottles and coolers. Freight charges billed to customers are included in Revenue while associated freight costs are included in Cost of Revenue.

As part of the settlement of the loan payables from two lenders, the Company assigned its Net Profits Interest referred to above to these lenders. The Company will recognize the revenue from the Net Profits Interest (subsequently amended to become a monthly rental fee) and reduce the amount of obligation payable related to the assignment of such interest when the lenders receive their assigned Net Profits Interest payments. For the nine-month period ended September 30, 2005, all intercompany balances and transactions have been eliminated upon consolidation.

Stock Based Compensation. Statement of Financial Accounting Standards ("SFAS") No. 123,

"Accounting for Stock-Based Compensation", requires the Company to provide pro-forma information regarding net income as if compensation cost for the Company's stock option plan had been determined in accordance with the fair value based method prescribed in SFAS No. 123. The value of stock options granted to consultants is recognized in these consolidated financial statements as compensation expense using the Black-Scholes option pricing model. Such compensation is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options is remeasured on each balance sheet date using the Black Scholes option pricing model. The Company has not adopted the fair value method of accounting for stock-based compensation awarded to employees. The pro-forma loss per share equals the loss per share as reported. During the nine months ended September30, 2006 and 2005, no stock based compensation was granted.

Off Balance Sheet Arrangements. As the Company has adopted FIN 46R effective January 2004, there are no off balance sheet arrangements as of September 30, 2007.

New Accounting Pronouncement. There was no new accounting pronouncement that impacted the Company since the issuance of the audited consolidated financial statements.

Item 3. Controls and Procedures.

(a) Under the supervision and with the participation of management, including the Company’s President and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of June 30, 2008 for this Form 10-QSB. Based on this evaluation, the Company’s President and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms relating to the Company’s reporting obligations, and was made known to them by others within the Company, particularly during the period when this report was being prepared.

(b) There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the period ended June 30, 2008 has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting.

Item 3(A)T. Controls and Procedures.

Not applicable

Part II OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Securityholders.

None

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit 31 – Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002.

Exhibit 32 – Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AVANI INTERNATIONAL GROUP, INC.

Date: August 4, 2008

/s/Dennis Robinson

Dennis Robinson

Treasurer and Principal

Financial Officer