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 ~~March~~June 3130, 2010

[ ] 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. [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, $0.001 par value, as of ~~May~~August 1016, 2010 was 17,582,571.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Page No.

-Consolidated Balance Sheets as of ~~March~~June 3130, 2010

(unaudited) and December 31, 2009 (audited).

-Consolidated Statements of Operations and

Comprehensive Loss for the Three Months and Six Months

Ended ~~March~~June 3130 2010 and ~~March~~June 3130, 2009 (unaudited).

-Consolidated Statements of Cash Flows

for the ~~Three~~Six Months ~~Month~~ Ended

~~March~~June 3130, 2010 and ~~March~~June 3130, 2009 (unaudited).

-Notes to the Consolidated Financial Statements.

Item 2. Management's Discussion and Analysis.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures

Item 4(A)T Controls and Procedures.

PART II - OTHER INFORMATION

Item 6. Exhibits.

Signatures

AVANI INTERNATIONAL GROUP INC.

Consolidated Balance Sheets

(Expressed in USU.S. dollars)

	March 31		December 31,
	June 30	December 31,
	2010	2009	~~2009~~
	$	$	$
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	~~379~~332,~~532~~752	401,300	~~401,300~~
Accounts receivable	1623,~~056~~477	13,386	~~13,386~~
Prepaid expenses	49,~~380~~876	3,201	~~3,201~~
Total current assets	~~399~~366,~~968~~105	417,887	~~417,887~~
Property and equipment (Note 3)	59,355		63,727
Property and equipment (Note 4)	55,309	63,727
Total assets	~~459~~421,~~323~~414	481,614	~~481,614~~
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable	6562,~~524~~930	71,422	~~71,422~~
Accrued liabilities	–	2,044	~~2,044~~
Accrued interest payable	85,~~972~~242	81,536	~~81,536~~
Loan payable (Note 4)	98,440		95,550
Loan payable (Note 5)	95,420	95,550
Due to related party Note 5)	517,010		508,723
Due to related party (Note 6)	507,161	508,723
Unearned revenue and deposits	9,~~670~~373	9,386	~~9,386~~
Total current liabilities	776,616		768,661
Total liabilities	760,126	768,661
Nature of operations and continuance of business (Note 1)
Stockholders’ deficit
Preferred stock, 1,000,000 shares authorized, $0.0001 par value,
1,000,000 issued and outstanding	100	100	~~100~~
Common stock, 800,000,000 shares authorized, $0.0001 par value
17,582,571 shares issued and outstanding	17,583	17,583	~~17,583~~
Additional paid-in capital	8,115,992	8,115,992	~~8,115,992~~
Accumulated deficit	(8,~~450~~472,~~968~~387)	(8,420,722)	~~(8,420,722)~~
Total stockholders’ deficit	(~~317~~338,~~293~~712)	(287,047)	~~(287,047)~~
Total liabilities and stockholders’ deficit	~~459~~421,~~323~~414	481,614	~~481,614~~

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

F-1

AVANI INTERNATIONAL GROUP INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Expressed in USU.S. dollars)

(unaudited)

			Three Months Ended March 31, 2010	Three Months Ended March 31, 2009
	Three months ended June 30, 2010	Three months ended June 30, 2009	Six months ended June 30, 2010	Six months ended June 30, 2009
	$	$	$	$
Revenue	–	–	–	–
Expenses
Foreign exchange loss			8,817	–
Depreciation	4,046	(878)	8,418	2,000
General and administrative			21,998	69,698
Foreign exchange loss (gain)	(11,368)	–	(2,551)	–
Total expenses			30,815	69,698
General and administrative (Note 6)	33,375	42,424	51,001	128,357
Loss before other income (expense)			(30,815)	(69,698)
Total expenses	26,053	41,546	56,868	130,357
Loss before other income (expense)	(26,053)	(41,546)	(56,868)	(130,357)
Other income (expense)
Interest income	–	4,000	–	4,242
Interest expense	(1,946)	–	(13,~~923~~869)	~~(1,606)~~–
Royalty and rental income	6,580	5,153	29,~~492~~072	~~864~~5,524
Total other income (expense)			569	(500)
Management fees reversed	–	44,705	–	62,705
Net loss for the period			(30,246)	(70,198)
Loans and unearned revenue deposit written off	–	163,185	–	163,185
Foreign currency translation adjustments			–	7,773
Total other income (expense)	4,634	217,043	5,203	235,656
Comprehensive loss for the period			(30,246)	(62,425)
Net income (loss) for the period	(21,419)	175,497	(51,665)	105,299
Net loss per share, basic and diluted			–	(0.01)
Foreign currency translation adjustments	–	(16,294)	–	(8,520)
Weighted average shares outstanding			17,582,571	17,582,571
Comprehensive income (loss) for the period	(21,419)	159,203	(51,665)	96,779
Net earnings (loss) per share, basic and diluted	–	0.01	–	–
Weighted average shares outstanding	17,582,571	17,582,571	17,582,571	17,582,571

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

1F-2

AVANI INTERNATIONAL GROUP INC.

Consolidated Statements of Cash Flows

(Expressed in USU.S. dollars)

(unaudited)

	Three Months Ended March 31, 2010	Three Months Ended March 31, 2009
	Six months ended June 30, 2010	Six months ended June 30, 2009
	$	$
Operating Activities
Net loss for the period	(3051,~~246~~665)	~~(70~~105,~~198)~~299
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	48,~~372~~418	2,~~878~~000
Foreign exchange loss	~~2,890~~(130)	–
Changes in operating assets and liabilities:
Accounts receivable	(210,~~670~~091)	~~3,495~~(768)
Prepaid expenses	(16,~~179~~675)	~~601~~(82)
Accounts payable	(58,~~898~~492)	(91347,~~761~~228)
Accrued liabilities	(2,044)	(236,~~053~~240)
Accrued interest payable	43,~~436~~706	–
Due to related party	8(1,~~287~~562)	–
Unearned revenue and deposits	~~284~~(13)	(38,~~413~~065)
Net cash used in operating activities	(2168,~~768~~548)	(~~160~~285,~~451~~084)
Effect of exchange rate changes on cash and cash equivalents	–	7,773
Financing Activities
Decrease in cash and cash equivalents	(21,768)	(152,678)
Repayment of loans payable	–	(145,594)
Net cash used in financing activities	–	(145,594)
Effect of exchange rate changes on cash and cash equivalents	–	(8,521)
Decrease in cash and cash equivalents	(68,548)	(439,199)
Cash and cash equivalents, beginning of period	401,300	948,473
Cash and cash equivalents, end of period	~~379~~332,~~532~~752	~~795~~509,~~795~~274
Supplemental disclosures:
Interest paid	–	–
Income tax paid	–	–

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

2F-3

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(unaudited)

~~Nature~~Basis of ~~Operations and Continuance of Business~~Presentation

The accompanying consolidated financial statements of Avani International Group Inc. (the “Company”) ~~was~~should ~~incorporated~~be ~~under~~read ~~the~~in ~~laws~~conjunction ofwith the ~~State~~consolidated offinancial ~~Nevada~~statements onand ~~November~~accompanying ~~29,~~notes ~~1995.~~filed ~~The~~with ~~Company~~the ~~has~~U.S. ~~been~~Securities ~~engaged~~and Exchange Commission in the ~~business~~Company’s ofAnnual ~~developing,~~Report ~~manufacturing~~on ~~and~~Form ~~distributing~~10-K ~~oxygen~~for ~~enriched,~~the ~~purified~~fiscal ~~bottled~~year ~~water~~ended ~~under~~December ~~the~~31, ~~trade~~2009. ~~name~~In ~~"Avani~~the ~~Water"~~opinion ~~for~~of ~~domestic~~management, ~~and~~the ~~export~~accompanying ~~sales.~~financial Onstatements ~~June~~reflect ~~15,~~all ~~2006,~~adjustments ~~the~~of ~~Company~~a ~~sold~~recurring ~~its~~nature ~~real~~considered ~~property~~necessary ~~including~~to ~~land,~~present ~~building~~fairly ~~and~~the ~~building~~Company’s ~~improvements.~~financial ~~After~~position and the ~~sale~~results of its ~~real~~operations ~~property,~~and ~~the~~its ~~Company~~cash ~~suspended~~flows ~~its~~for ~~production~~the ofperiods ~~water~~shown.

~~These~~The ~~consolidated~~preparation of financial statements ~~have~~in ~~been~~accordance ~~prepared~~with onaccounting aprinciples ~~going~~generally ~~concern~~accepted ~~basis,~~in ~~which implies~~ the ~~Company~~United ~~will~~States ~~continue~~requires management to ~~realize~~make ~~its~~estimates ~~assets~~ and ~~discharge~~assumptions ~~its~~that ~~liabilities~~affect in the ~~normal~~amounts ~~course of business~~reported. ~~The~~Actual ~~Company~~results ~~has~~could ~~incurred~~differ ~~losses~~materially tofrom ~~date~~those ~~of $8,450,968~~estimates. The ~~continuation~~results of ~~the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue~~ operations, and ~~the~~cash ~~attainment~~flows offor ~~profitable operations. These factors raise substantial doubt regarding~~ the ~~Company’s~~periods ~~ability~~shown toare ~~continue as a going concern. These financial statements do~~ not ~~include~~necessarily ~~any~~indicative ~~adjustments~~of to the ~~recoverability~~results ~~and~~to ~~classification of recorded asset amounts and classification of liabilities that might~~ be ~~necessary~~expected ~~should~~for the ~~Company~~full ~~be unable to continue as a going concern~~year.

The Company’s plans for the next twelve months are to focus on is seeking new business opportunities in Asia. There can be no assurance that the Company will be able to raise sufficient funds to pay the expected expenses for the next twelve months.

Summary of Significant Accounting Policies

(a)

Basis of Presentation and Consolidation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The consolidated financial statements include the financial statements of the Company and its’ wholly-owned subsidiaries, Avani Oxygen Water Corporation and Avani International Marketing Corporation. All intercompany balances and transactions have been eliminated. The Company’s fiscal year-end is December 31.

(b)

Interim Financial Statements

The interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future.

(c)

Use of Estimates

The preparation of these consolidated financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

(d)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(unaudited)

Summary of Significant Accounting Policies (continued)

(e)

Accounts Receivable

The Company recognizes allowances for doubtful accounts to ensure accounts receivable are not overstated due to the inability or unwillingness of its customers to make required payments. The allowance is based on the age of receivable and the specific identification of receivables the Company considers at risk.

(f)

Property and Equipment

Property and equipment is comprised of equipment which is recorded at cost and amortized using the declining balance method at 20% per annum.

(g)

Long-lived Assets

In accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

(h)

Asset Retirement Obligations

The Company follows the provisions of ASC 410, “Accounting for Asset Retirement Obligations,” which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.

(i)

Revenue Recognition

The Company recognizes revenue from royalties and equipment rentals in accordance with ASC 605, “Revenue Recognition”. Revenue will be recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is provided, and collectability is assured.

(j)

Financial Instruments and Fair Value Measures

ASC 820, “Fair Value Measurements and Disclosures” and ASC 825, “Financial Instruments” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(unaudited)

Summary of Significant Accounting Policies (continued)

(j)

Financial Instruments and Fair Value Measures (continued)

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, accrued interest payable, due to related party, and loan payable. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(k)

Loss Per Share

The Company computes net income (loss) per share in accordance with ASC 260, "Earnings per Share" which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

(l)

Comprehensive Loss

ASC 220, “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income (loss) and its components in the financial statements. As at March 31, 2010, the Company had no items representing comprehensive income/loss. As at March 31, 2009, the Company‘s only component of comprehensive income/loss was foreign currency translation adjustments.

(m)

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As of March 31, 2010, the Company did not have any amounts recorded pertaining to uncertain tax positions.

The Company files federal and provincial income tax returns in Canada and federal, state and local income tax returns in the US, as applicable. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and US income tax returns, the open taxation years range from 2006 to 2009. In certain circumstances, the US federal statute of limitations can reach beyond the standard three year period. US state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and US have not audited any of the Company’s, or its subsidiaries’ income tax returns for the open taxation years noted above.

The Company recognizes interest and penalties related to uncertain tax positions in tax expense. During the periods ended March 31, 2010 and 2009, there were no charges for interest or penalties.

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

March 31, 2010

(Expressed in US dollars)

(unaudited)

Summary of Significant Accounting Policies (continued)

(n)

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

(o)

Foreign Currency Translation

Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into US dollars at the exchange rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in income.

The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into US dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting exchange gains or losses are recognized in income.

(p)

Recent Accounting Pronouncements

In ~~August~~October 2009, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting standards related to the ~~measurement~~accounting offor ~~liabilities~~revenue ~~that~~in ~~are~~arrangements ~~recognized~~with ormultiple ~~disclosed~~deliverables atincluding ~~fair~~how ~~value~~the onarrangement aconsideration ~~recurring~~is ~~basis.~~allocated ~~This~~among ~~standard~~delivered ~~clarifies~~and ~~how~~undelivered aitems ~~company~~of ~~should~~the ~~measure~~arrangement. Among the ~~fair~~amendments, ~~value~~this standard eliminated the use of ~~liabilities~~the residual method for allocating arrangement considerations and ~~that~~requires ~~restrictions~~an ~~preventing~~entity to allocate the ~~transfer~~overall ofconsideration ato ~~liability~~each ~~should~~deliverable ~~not~~based beon ~~considered~~an asestimated aselling ~~factor~~price of each individual deliverable in the ~~measurement~~arrangement in the absence of ~~liabilities~~having ~~within~~vendor-specific ~~the~~objective ~~scope~~evidence or other third party evidence of ~~this~~fair ~~standard~~value of the undelivered items. This standard isalso ~~effective~~provides ~~for~~further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the ~~Company~~disclosure onrequirements ~~October~~about 1,the ~~2009.~~judgments ~~The~~made ~~adoption~~in applying the estimated selling price method and how those judgments affect the timing or amount of ~~this~~revenue ~~amendment~~recognition. ~~did~~This standard will be adopted on January 1, 2011 but is not expected to have a material effect on the Company’s consolidated financial statements.

In October 2009, the FASB issued an amendment to the accounting standards related to ~~the~~certain ~~accounting for~~ revenue in arrangements ~~with~~that ~~multiple~~include ~~deliverables~~software ~~including~~elements. ~~how~~This ~~the~~standard ~~arrangement~~clarifies ~~consideration~~the isexisting ~~allocated~~accounting ~~among~~guidance ~~delivered~~such ~~and~~that ~~undelivered~~tangible ~~items~~products ofthat ~~the~~contain ~~arrangement.~~both ~~Among~~software ~~the~~and ~~amendments,~~non-software ~~this~~components ~~standard~~that ~~eliminated~~function ~~the~~together ~~use~~to ofdeliver the ~~residual~~product’s ~~method~~essential ~~for~~functionality, ~~allocating~~shall ~~arrangement~~be ~~considerations~~excluded ~~and~~from ~~requires~~the anscope ~~entity~~of ~~to allocate~~ the ~~overall~~software ~~consideration~~revenue torecognition ~~each~~accounting ~~deliverable~~standards. ~~based~~Accordingly, onsales ~~an estimated selling price~~ of ~~each~~these ~~individual~~products ~~deliverable~~may infall ~~the~~within ~~arrangement in~~ the ~~absence~~scope of ~~having~~other ~~vendor-specific~~revenue ~~objective~~recognition ~~evidence~~standards or ~~other~~may ~~third~~now ~~party~~be ~~evidence~~within ofthe ~~fair~~scope ~~value~~ of ~~the~~this ~~undelivered items. This~~ standard ~~also~~and ~~provides~~may ~~further~~require ~~guidance~~an onallocation ~~how to determine a separate unit~~ of ~~accounting~~the ~~in a multiple-deliverable revenue~~ arrangement ~~and~~consideration ~~expands~~for ~~the~~each ~~disclosure~~element ~~requirements~~of ~~about~~ the ~~judgments~~arrangement. ~~made~~This instandard ~~applying~~will ~~the~~be ~~estimated~~adopted ~~selling~~on ~~price~~January ~~method~~1, ~~and~~2011 ~~how~~but ~~those~~is ~~judgments~~not ~~affect~~expected ~~the~~to ~~timing~~have ora ~~amount~~material ofeffect ~~revenue~~on ~~recognition. This standard, for which~~ the Company’s isconsolidated ~~currently~~financial ~~assessing the impact, will become effective on January 1, 2011~~statements.

In ~~October~~January ~~2009~~2010, the FASB issued an amendment to ~~the~~ASC ~~accounting~~820, ~~standards~~Fair ~~related~~Value toMeasurements ~~certain~~and ~~revenue~~Disclosure, ~~arrangements~~to ~~that~~require ~~include~~reporting ~~software~~entities ~~elements.~~to ~~This~~separately ~~standard~~disclose ~~clarifies~~ the ~~existing~~amounts ~~accounting~~and ~~guidance~~business ~~such~~rationale ~~that~~for ~~tangible~~significant ~~products~~transfers ~~that~~in ~~contain~~and ~~both~~out ~~software~~of Level 1 and ~~non-software~~Level ~~components~~2 ~~that~~fair ~~function~~value ~~together~~measurements toand ~~deliver~~separately ~~the~~present ~~product’s~~information ~~essential~~regarding ~~functionality~~purchase, ~~shall~~sale, beissuance, ~~excluded~~and ~~from~~settlement ~~the~~of ~~scope~~Level of3 ~~the~~fair ~~software~~value ~~revenue~~measures ~~recognition~~on ~~accounting~~a ~~standards~~gross basis. ~~Accordingly,~~The ~~sales~~adoption of ~~these~~this ~~products~~standard ~~may~~on ~~fall~~April ~~within~~1, 2010, with the ~~scope~~exception of ~~other~~disclosures ~~revenue~~regarding ~~recognition~~the ~~standards~~purchase, orsale, ~~may~~issuance, ~~now~~and besettlement ~~within~~of ~~the~~Level ~~scope~~3 offair ~~this~~value ~~standard~~measures ~~and~~which ~~may~~are ~~require~~effective anfor ~~allocation~~fiscal ofyears ~~the~~beginning ~~arrangement~~after ~~consideration~~December ~~for~~15, ~~each~~2010, ~~element~~did ofnot have a material effect on the ~~arrangement~~Company’s consolidated financial statements. ~~This~~The ~~standard,~~adoption ~~for~~of ~~which~~the remainder of the ~~Company~~standard is ~~currently~~not ~~assessing~~expected ~~the~~to ~~impact,~~have ~~will~~a ~~become~~material ~~effective~~effect on ~~January~~the 1,Company’s ~~2011.~~consolidated financial statements

In ~~January~~February 2010, the FASB issued anAccounting ~~amendment~~Standards toUpdate ~~ASC~~2010-10 ~~505,~~(“ASU ~~Equity~~2010-10”), ~~where~~“Consolidation ~~entities~~(Topic ~~that~~810): ~~declare~~Amendments ~~dividends~~for toCertain ~~shareholders~~Investment ~~that~~Funds”. ~~may~~The beamendments ~~paid~~ in ~~cash~~this orupdate ~~shares~~are ateffective ~~the~~as ~~election~~ of the ~~shareholders~~beginning ~~are~~of ~~considered~~a toreporting beentity’s afirst ~~share~~annual ~~issuance~~period that isbegins ~~reflected~~after ~~prospectively~~November ~~in EPS~~15, 2009 and ~~is not accounted~~ for ~~as a stock dividend. This standard is effective for~~ interim ~~and annual~~ periods ~~ending~~within onthat orfirst ~~after~~reporting ~~December~~period. ~~15,~~Early ~~2009~~application ~~and~~ is tonot bepermitted. ~~applied~~The onCompany’s aadoption ~~retrospective~~of ~~basis. The~~provisions ~~adoption~~ of ~~this~~ASU ~~standard~~2010-10 isdid not ~~expected to~~ have a ~~significant~~material ~~impact~~effect on the Company’s consolidated financial statements.

6In March 2010, the FASB issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives”. The amendments in this update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the Company’s consolidated financial statements.

F-4

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

~~March~~June 3130, 2010

(Expressed in US dollars)

(unaudited)

Summary of Significant Accounting Policies (continued)

(p)

Recent Accounting Pronouncements (continued)

In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial statements.

~~(q)~~3.

Reclassifications

Certain comparative figures have been reclassified to conform to the current period’s presentation.

Property and Equipment

	Cost	Accumulated Depreciation	Net Book Value March 31, 2010	Net Book Value December 31, 2009
	$	$	$	$
Equipment	85,829	26,474	59,355	80,304

~~Loan~~Property ~~Payable~~and Equipment

The loan payable of $98,440 (Cdn$100,000) (December 31, 2009 - $95,550 (Cdn$100,000)) is unsecured, bears interest at 8% per annum, and is due on demand.


	Cost	Accumulated Depreciation	Net Book Value June 30, 2010	Net Book Value December 31, 2009
	$	$	$	$

Equipment	85,829	30,520	55,309	63,727

Loan Payable

The loan payable of $95,420 (Cdn$100,000) (December 31, 2009 - $95,550 (Cdn$100,000)) is unsecured, bears interest at 8% per annum, and is due on demand.

Related Party Transactions

During the ~~three~~six months ended ~~March~~June 3130, 2010, the Company incurred management fees of $nil (2009 - $1836,000) and an overseas living allowance of $nil (2009 - $911,~~556~~900) to the former President of the Company.

As at ~~March~~June 3130, 2010, the amount of $~~517~~507,~~010~~161 (December 31, 2009 - $508,723) isowing ~~owed~~ to the former President of the Company, for management fees and expenses incurred on behalf of the Company, is non-interest bearing, unsecured, and due on demand.

6. F-5

Share Purchase Warrants

As at March 31, 2010, the following share purchase warrants were outstanding:

Number of Warrants	Exercise Price $	Expiry Date
750,000	0.06	October 12, 2012

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

General.

The Company has no revenues from operations. The Company suspended its water bottling operations in Canada during fiscal 2006. 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. In addition to its existing equipment, during 2008 the Company also recovered from Avani O2 Water Sdn. Bhd equipment that was the subject of its prior joint venture with Avani O2.

Shortly after the suspension of its operations, the Company intended to relocate the manufacture and sale of its oxygen enriched bottled water into Malaysia. It later determined not to resume its manufacturing operations in Malaysia due to the capital requirements necessary to resume and sustain manufacturing operations, and instead, intended to seek and identify a joint venture partner or licensee in the Far East to utilize the Company’s proprietary oxygen enriched proprietary equipment. Under this proposed arrangement, the Company expected the licensee or joint venture partner to engage in the actual manufacture and sale of its oxygenated product, subject to the payment of a negotiated royalty to the Company. In doing so, management believed that it would limit its overhead and other expenditures attendant to its operations. However, the Company has been unable to successfully identify a joint venture partner or licensee that will utilized its proprietary bottled water equipment. Consequently, the Company now expects to sell its existing water production equipment and direct most of its ongoing efforts towards identifying a merger or acquisition candidate, unrelated to the bottled water business. The Company can not predict whether it will be successful in it efforts. (See discussion below in Liquidity and Capital Resources section).

Results of Operations ~~March~~June 3130, 2010 compared with ~~March~~June 3130, 2009.

Three Month Periods Ended ~~March~~June 3130, 2010 compared with ~~March~~June 3130, 2009.

During the three month periods ended ~~March~~June 3130, 2010 and ~~March~~June 3130, 2009, respectively, the Company had no revenues due to its lack of operations.

Expenses for the three month period ended ~~March~~June 3130, 2010, which includes a foreign exchange ~~loss~~gain of $811,~~817~~379 and general and administrative expenses of $2138,~~998~~575, totaled $3026,~~815~~053 contrasted with $6941,~~698~~546 for the comparable period in 2009. The 2009 amount was entirely attributable to general and administrative costs. General and administrative costs includes salaries for other employees, production and other equipment storage, rent, other office expenses, and legal and accounting fees was $21,998 for the 2010 period compared with $69,698 for the prior period. The decrease in general and administrative expenses is mainly due to the ~~fact~~Company nonot incurring management fees ~~were incurred during the current quarter compared~~ to the ~~prior~~former ~~period~~President quarter and the Company has made efforts to cut down costs to preserve cash. Since June 2006, the Company has been subject to a month to month office lease agreement with an officer and director for a monthly sum of ~~$400. The office space is approximately 120 square feet. The agreement is non-arms length however,~~ the Company ~~believes that the terms are consistent with rates~~ in the ~~area.~~current Inperiod ~~addition,~~compared ~~the Company also pays Avani Oxygen Water Corporation Sdn Bhd, an unaffiliated third party (“AOWC”), a monthly fee of $3,000~~ to ~~store~~the ~~production~~2009 ~~equipment,~~three ~~spare~~month ~~parts and inventory~~period. ~~The leasehold space is approximately 10,000 square feet and the~~

~~arrangement~~Net isother onincome afor ~~month~~the tothree month ~~basis~~period in 2010 was $4,634 compared with net other income of $217,043 for the same period in 2009. The Company ~~has~~receives non material royalty income from time to time under an arrangement that terminated in 2008. The income is due to inventory sold under the agreement. ~~effective~~For ~~October~~the 31current period the Company received $6,580 in such income and for the prior period the amount was $5,153. The Company also earned $4,000 in interest income on its cash deposits in 2009 compared to nil for the 2010 period. During the 2009 period, the Company recorded $44,705 in the reversal of management fees and $163,185 in the write off of loans and security deposits. The write offs relate to a loan amount of

~~Other~~approximately ~~income~~$155,120 ~~for~~in ~~the~~principal ~~three~~and ~~month~~interest ~~period~~and insecurity ~~2010~~deposits ~~was~~in ~~$569~~the ~~compared~~approximate ~~with~~amount ~~other income~~ of $~~(500)~~8,065 ~~for~~all ~~the~~of ~~same~~which ~~period~~were ~~in 2009~~unclaimed. ~~The~~During ~~Company~~the ~~receives~~2009 ~~non~~year ~~material~~end ~~royalty~~audit, ~~income~~it ~~from~~was ~~time~~determined ~~to time under an arrangement~~ that ~~terminate~~these inamounts ~~2008.~~were ~~The~~written ~~income~~off ~~is due to inventory sold under the agreement. For the current period the Company received $2,492~~ in ~~such~~error ~~income~~ and ~~for~~they ~~the~~were ~~prior period $864~~reversed. ~~Interest expense on an outstanding loan totaled $1,923 for the 2010 period compared with $1,606 for the 2009 period.~~

~~For~~Six ~~the~~Month ~~three~~Periods ~~month~~Ended ~~period~~June in30, 2010, ~~the~~compared ~~Company~~with ~~had~~June ~~a foreign exchange loss of $8~~30,~~817.~~ ~~In the comparable period, the Company had a foreign currency translation adjustment gain of $(7,773) which was included as part of comprehensive loss~~2009.

During the three month periods ended June 30, 2010 and June 30, 2009, respectively, the Company had no revenues due to its lack of operations.

Expenses for the six month period ended June 30, 2010, which includes a foreign exchange gain of $2,551 and general and administrative expenses of $51,001, totaled $56,868 contrasted with $130,357 for the comparable period in 2009. The decrease in general and administrative expenses is mainly due to the Company not incurring management fees to the former President of the Company in the current period compared to the six month period in 2009.

Net other income for the six month period in 2010 was $5,203 compared with net other income of $235,656 for the same period in 2009. The Company receives non material royalty income from time to time under an arrangement that terminated in 2008. The income is due to inventory sold under the agreement. For the current period the Company received $9,072 in such income and for the comparable period in 2009 the amount was $5,524. The Company earned $4,242 in interest income on its cash deposits in 2009 compared to nil in the 2010 period. During the 2009 period, the Company recorded $62,705 in the reversal of management fees and $163,185 in the write off of loans and security deposits. The write offs relate to a loan amount of approximately $155,120 in principal and interest and security deposits in the approximate amount of $8,065 all of which were unclaimed. The reversal of management fees relates to a clerical error in the entry of such amounts. During the 2009 year end audit, it was determined that these amounts were written off in error and they were reversed

Liquidity and Capital Resources.

As of ~~March~~June 3130, 2010, the Company had a working capital deficit of $~~376~~394,~~648~~021 compared ~~too~~to a working capital deficit of $350,774 as of December 31, 2009. The decrease in working capital is principally due to the losses which occurred during the current fiscal year.

Property and equipment, net of accumulated depreciation, totaled $59,355 on March 31, 2010. Property and equipment, net of accumulated depreciation, totaled $63,727 on December 31, 2008. The decrease is due to depreciation for the three month period in 2010.

The Company believes that it will be able to meet its anticipated expenditures for the 2010 period through some combination of; deferment of paying certain accounts payable and cash on hand. The Company’s projected capital expenditures for 2010 fiscal year are as follows: $25,000 for marketing expenses and $150,000 for general and administrative expenses. Other than as stated, above the Company does not have any projected capital expenditures.

Beyond fiscal 2010, 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-K for the year ended December 31, 2009 (“2009 Form 10-K”). 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 its 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 its report on the consolidated financial statements for the year ended December 31, 2009, the Company’s independent registered accountants included an explanatory paragraph regarding the Company’s ability to continue as going concern.

9issuance 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-K for the year ended December 31, 2009 (“2009 Form 10-K”). 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 its 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 its report on the consolidated financial statements for the year ended December 31, 2009, 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 2009 Form 10-K 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.

Critical Accounting Policies

Use of Estimates. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related the useful life and recoverability of long lived assets, stock-based compensation, and deferred income tax asset valuations. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Long-lived Assets. In accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Stock-based Compensation. The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

New Accounting Pronouncements.

In August 2009, the FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The adoption of this amendment did not have a material effect on the Company’s consolidated financial statements.

measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The adoption of this amendment did not have a material effect on the Company’s consolidated financial statements.

In October 2009, the FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.

Item 4. 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 ~~March~~June 3130, 2010 (“Evaluation Date”)for this Form 10-Q. Based on this evaluation, the Company’s President and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of the Evaluation Date as a result of material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 (“2009 Annual Report”).

Disclosure controls and procedures are those control and procedures that are designed to ensure that the 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.

Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in our 2009 Annual Report, we believe that our financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended ~~March~~June 3130, 2010 fairly present our financial condition, results of operations and cash flows in all material respects.

(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 ~~March~~June 3130, 2010 has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting.

Part II OTHER INFORMATION

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: ~~May~~August 2117, 2010

/s/Dennis Robinson

Dennis Robinson

President and Principal

Financial Officer

Filing Compare · AVANI INTERNATIONAL GROUP INC //