U.S. SECURITIES AND EXCHANGE COMMISSION
                          Washington, D. C. 20549

                                FORM 10-QSB
(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, 2002

[ ] 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)

#328-17 Fawcett Road, Coquitlam, B.C. (Canada)                 V3K 6V2
----------------------------------------------                 --------
(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number 604-525-2386.

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). Yes: X No:
(2). Yes: X No:

The number of shares issued and outstanding of issuer's common stock,
$.001 par value, as of June 30, 2002 was 5,362,571.

Transitional Small Business Issuer Format (Check One):
Yes:   No: X

<PAGE>
Page 2

PART I - FINANCIAL INFORMATION
INDEX

Item 1. Financial Statements.                                           Page No.
        -Consolidated Balance Sheet as of
         June 30, 2002 (unaudited) and December 31, 2001 (audited).            3
        -Consolidated Interim Statement of Operations for the
         Six Months Ended June 30, 2002 and 2001 (unaudited).                  4
        -Consolidated Interim Statement of Changes in Stockholders
         Equity for the Six Months Ended June 30, 2002 (unaudited).            5
        -Consolidated Interim Statement of Cash Flows
         for the Six Months Ended June 30, 2002 and 2001 (unaudited).          6
        -Notes to Consolidated Interim Financial Statements.                   8
Item 2.  Management's Discussion and Analysis.                                10

PART II - OTHER INFORMATION
Item 1.  Legal Proceedings.                                                   12
Item 2.  Changes in Securities.                                               12
Item 3.  Defaults upon Senior Securities.                                     12
Item 4.  Submission of Matters to Vote of Securityholders.                    12
Item 5.  Other Information.                                                   12
Item 6.  Exhibits and Reports on Form 8-K.                                    12
Signatures                                                                    12



<PAGE>
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================================================================================

                                                  Avani International Group Inc.
                                                     Consolidated Balance Sheets
                                                       (Expressed in US dollars)


                                                           June 30   December 31
                                                              2002          2001
                                                            Assets   (Unaudited)
--------------------------------------------------------------------------------
Current
   Cash                                              $     29,416  $    169,214
   Accounts receivable (net of allowance for
     doubtful accounts of 2002 - $43,747;
     2001 - $40,965)                                       77,841        45,598
   Inventories                                             30,562        56,370
   Prepaid expenses                                         6,258         5,064
                                                          144,077       276,246
                                                     --------------------------
   Property, plant and equipment                        1,558,362     1,572,417
   Other                                                   37,448        35,810
                                                     $  1,739,887  $  1,884,473
===============================================================================


Liabilities and Stockholders' Equity

Liabilities
Current
   Accounts payable                                  $    250,140  $    255,665
   Accrued liabilities                                     55,263        39,967
   Loans payable (Note 4)                                    -          290,026
   Loans payable to related party (Note 4)                   -          185,745
   Bottle and cooler deposits                              76,615        74,232
   Debt payable                                           346,688       319,212
                                                     --------------------------
                                                          728,706     1,164,847
Obligations payable (Note 4)                              285,745          -
Total liabilities                                       1,014,451     1,164,847
Stockholders' Equity
   Capital stock (Note 2)
     Authorized
        400,000,000 common shares, par value of $0.001
     Issued
        5,362,571 (2001 - 2,585,052) common shares          5,363         2,585
   Additional paid-in capital                           6,640,104     6,567,132
   Accumulated deficit                                 (5,694,472)   (5,611,526)
   Accumulated other comprehensive loss -
    foreign exchange translation                         (225,559)     (238,565)
                                                     --------------------------
                                                          725,436       719,626
                                                     --------------------------
                                                     $  1,739,887  $  1,884,473
================================================================================



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

<PAGE>
Page 4

================================================================================

                                                  Avani International Group Inc.
                                   Consolidated Interim Statements of Operations
                                                       (Expressed in US Dollars)
                                                                     (Unaudited)

<TABLE>
<CAPTION>
                                               Three months ended                     Six months ended
                                                    June 30                              June 30
                                         ------------------------------   ------------------------------
                                               2002            2001            2002            2001
--------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>            <C>
Revenue
   Bottled water and supply sales        $     81,593   $    220,967   $    196,247   $    400,860
   Cooler and equipment sales                    (463)         2,535            428          6,014
   Cooler rentals                               4,786          6,024          9,784         11,251
                                         ---------------------------------------------------------
                                               85,916        229,526        206,459        418,125
                                         ---------------------------------------------------------
Cost of sales
   Cost of goods sold (excluding
     Depreciation)                             44,639        117,714        107,757        227,268
     Depreciation                              30,514         30,417         61,028         60,741
                                         ---------------------------------------------------------
                                               75,153        148,131        168,785        288,009
                                         ---------------------------------------------------------
Gross profit                                   10,763         81,395         37,674        130,116
                                         ---------------------------------------------------------
Operating expenses
   Marketing (Note 4)                           8,550         18,470         24,025         26,670
   General and administration                 135,178        297,218        296,407        484,882
                                         ---------------------------------------------------------
                                              143,728        315,688        320,432        511,552
                                         ---------------------------------------------------------
Loss from operations                         (132,965)      (234,293)      (282,758)      (381,436)
Other
   Interest on debt payable                    (5,419)        (8,175)       (10,730)       (16,191)
   Interest income                              8,182          1,987          8,264          4,182
   Consulting income                             -              -            12,278           -
   Gain on settlement of debt (Note 4)        190,000           -           190,000           -
                                         ---------------------------------------------------------
Net income (loss) for the period         $     59,798   $   (240,481)  $    (82,946)  $   (393,445)
==================================================================================================

Earnings (loss) per share
   - basic                               $       0.02   $      (0.12)  $      (0.03)  $      (0.19)
   - diluted                             $       0.02   $      (0.12)  $      (0.03)  $      (0.19)
==================================================================================================

Weighted average shares
   outstanding                              3,103,929      2,039,651      2,845,924      2,039,987
==================================================================================================
</TABLE>

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

<PAGE>
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================================================================================
                                                  Avani International Group Inc.
              Consolidated Interim Statements of Changes in Stockholders' Equity
                                                       (Expressed in US Dollars)
                                                                     (Unaudited)
<TABLE>
<CAPTION>
                                                                                                        Accumulated
                                                                        Additional                            Other           Total
                                                 Common Shares             Paid-in       Accumulated   Comprehensive  Stockholders'
                                            Shares           Amount        Capital           Deficit            Loss         Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>           <C>             <C>             <C>             <C>
Balance, January 1, 2001                 2,040,326      $    2,040    $  6,540,550    $ (4,764,985)   $   (192,649)   $  1,584,956
Cancellation of common stock                (5,274)             (5)              5            -               -               -

Issuance of common stock and warrants
  upon conversion of loan payable          500,000             500          24,161            -               -             24,661

Issuance of common stock and warrants
  for services                              50,000              50           2,416            -               -              2,466
                                         -----------------------------------------------------------------------------------------
                                         2,585,052           2,585       6,567,132      (4,764,985)       (192,649)      1,612,083
                                         -----------------------------------------------------------------------------------------

Net loss for the year                         -               -               -           (846,541)           -           (846,541)

Foreign currency translation adjustment       -               -               -               -            (45,916)        (45,916)
                                         -----------------------------------------------------------------------------------------
Total comprehensive loss                      -               -               -           (846,541)        (45,916)       (892,457)
                                         -----------------------------------------------------------------------------------------

Balance, December 31, 2001               2,585,052           2,585       6,567,132      (5,611,526)       (238,565)        719,626

Issuance of common stock and
  warrants for cash (Note 2)             2,525,017           2,525          73,225            -               -             75,750

Issuance of common stock and
  warrants for services (Note 2)           252,502             253          31,537            -               -             31,790

Costs of raising capital                      -               -            (31,790)           -               -            (31,790)
                                         -----------------------------------------------------------------------------------------
                                         5,362,571           5,363       6,640,104      (5,611,526)        238,565         795,376
                                         -----------------------------------------------------------------------------------------
Net loss for the period                       -               -               -            (82,946)           -            (82,946)

Foreign exchange translation adjustment       -               -               -               -             13,006          13,006
                                         -----------------------------------------------------------------------------------------
Total comprehensive loss                      -               -               -            (82,946)         13,006         (69,940)
                                         -----------------------------------------------------------------------------------------
Balance, June 30, 2002                   5,362,571      $    5,363    $  6,640,104    $ (5,694,472)   $   (225,559)   $    725,436
==================================================================================================================================
</TABLE>

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

<PAGE>
Page 6

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

For the six months ended June 30                              2002          2001
--------------------------------------------------------------------------------

Cash provided by (used in)

Operating activities
   Net loss for the period                           $    (82,946) $   (393,445)
   Adjustments to reconcile net loss for the
    period to net cash used in operating
    activities
     Settlement of debt through the assignment
      of receivables                                     (190,000)         -
     Depreciation                                          92,209        67,530
   (Increase) decrease in assets
     Accounts receivable                                  (32,243)      (62,806)
     Inventories                                           25,808       (21,757)
     Prepaid expenses                                      (1,194)        9,964
   Increase (decrease) in liabilities
     Accounts payable                                      (5,525)         -
     Accrued liabilities                                   15,296        27,467
     Bottle and cooler deposits                             2,383        (4,971)
                                                     --------------------------
                                                         (176,212)     (378,018)
                                                     --------------------------

Investing activity
   Acquisition of other assets                             (1,638)       (4,101)
   Acquisition of capital assets                          (37,128)         -
                                                     --------------------------
                                                          (38,766)       (4,101)
                                                     --------------------------
Financing activities
   Proceeds from loan payable                                -          500,745
   Issuance of common shares                               75,750          -
   Payments on long-term debt                              (2,742)       (3,937)
                                                     --------------------------
                                                           73,008       496,808
                                                     --------------------------

Increase (decrease) in cash during the period            (141,970)      114,689

Effect of foreign exchange on cash                          2,172         5,156

Cash, beginning of period                                 169,214       294,207
                                                     --------------------------

Cash, end of period                                  $     29,416  $    414,052
===============================================================================
Supplemental Information:
   Interest paid                                     $     10,730  $     16,191
===============================================================================
The following transactions which did not result in cash
Flows have been excluded from financing activities:

   Operating costs settled through the issuance of
     shares and warrants                             $     31,790  $       -
   Settlement of debt through the assignment of
     receivables (Note 4)                            $    190,000  $       -
   Settlement of debt through the assignment of
     net profits interest (Note 4)                   $    285,745  $       -
===============================================================================


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

<PAGE>
Page 7

================================================================================
                                                  Avani International Group Inc.
                          Notes to the Consolidated Interim Financial Statements
                                                       (Expressed in US Dollars)
                                                                     (Unaudited)

June 30, 2002 and 2001
--------------------------------------------------------------------------------

1.   Basis of Presentation

     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.

     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. It is suggested that
     these consolidated interim financial statements be read in conjunction with
     the financial statements of the Company for the year ended December 31,
     2001 and notes thereto included in the Company's 10-KSB annual report. The
     Company follows the same accounting policies in the preparation of interim
     reports.

     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, 2002 of
     $5,694,472. 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 $500,000 in
     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 export
     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.


<PAGE>
Page 8

================================================================================
                                                  Avani International Group Inc.
                          Notes to the Consolidated Interim Financial Statements
                                                       (Expressed in US Dollars)
                                                                     (Unaudited)

June 30, 2002 and 2001
--------------------------------------------------------------------------------

2.   Capital Stock

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

     a)   During the period ended June 30, 2002, the Company issued 2,777,519
          common shares (each with 3 share purchase warrants attached) to two
          private investors and a third party for finder's fees. The Company
          agreed to pay a finder's fee to a third party equal to 10% of the
          equity received by the private investors noted above. The finder's
          fee consists of 252,502 common shares (valued at $7,576 based upon the
          trading price of the common shares on the date the stock was issued)
          and 757,506 warrants (valued at $24,214 based on the Black-Scholes
          option pricing model, using the following assumptions
                     Dividend yield              Nil
                     Risk-free interest rate     4.50%
                     Expected volatility         100%
                     Expected lives              5 years

     b)   In connection with the above share issuance, the Company issued
          8,332,557 fully exercisable share purchase warrants. These warrants
          are exercisable at a price of $0.03 on or before May 13, 2004, $0.05
          on or before May 13, 2006 and $0.07 on or before May 13, 2007.

     c)   In addition to the above-mentioned warrants, at June 30, 2002 and
          December 31, 2001, the Company had 1,347,500 fully exercisable share
          purchase warrants outstanding. Of this amount, 385,000 warrants were
          exercisable at a price per share of $3.00 on or before July 1, 2002
          (expired). Another 412,500 warrants are exercisable at a price per
          share of $3.00 on or before August 12, 2002. 550,000 warrants
          granted September 26, 2001 are exercisable at any time within 5 years
          at an exercise price of $0.05 on or before September 26, 2003, $0.06
          on or before September 26, 2005, and $0.07 on or before September 26,
          2006.

--------------------------------------------------------------------------------
3.   Major Customer and Supplier

     During the six months ended June 30, 2002, sales to a customer in Malaysia
     totalled $53,062 (2001 - $215,715). At June 30, 2002 and December 31, 2001,
     there were $53,062 and $Nil amounts due from this customer in trade
     accounts receivable.

     During the six months ended June 30, 2002 and 2001, the Company purchased
     approximately 59% and 49% of its materials from one supplier. At June 30,
     2002 and December 31, 2001, there were $1,718 and $27,078 amounts due to
     that supplier.


<PAGE>
Page 9

================================================================================
                                                  Avani International Group Inc.
                          Notes to the Consolidated Interim Financial Statements
                                                       (Expressed in US Dollars)
                                                                     (Unaudited)

June 30, 2002 and 2001
--------------------------------------------------------------------------------

4.   Loans Payable

     As of December 31, 2001, the Company had outstanding loans payable of
     $475,771 with a number of lenders. On April 2, 2002, the Company entered
     into agreements with each of the lenders pursuant to which each lender
     cancelled the full amount of their respective loan outstanding. In
     exchange, the Company made an assignment of a fully reserved account
     receivable in the amount of $200,944 to certain of these lenders. The
     account receivable assignment was in complete satisfaction of amounts owing
     to these lenders. The account receivable assigned is due from Avani O2
     Water Sdn Bdh., a Malaysian company ("Avani O2") and relates to the
     shipment of water products to Avani O2 by the Company. The recovery related
     to $190,000 of these receivables has been recorded as a gain on settlement
     of debt. In connection with the agreement, the Company is entitled to
     receive 30% of the after tax profits ("Net Profits Interest") generated by
     the bottling equipment contributed by the Company under the terms of the
     agreement. In addition to the assignment of the account receivable, the
     Company also assigned its Net Profits Interest to two of the lenders. The
     assignment of Net Profits Interest to these lenders will revert back to the
     Company when the lenders have received from such interest, an amount equal
     to the principal amount of the cancelled loans, $274,827. The Company has
     classified amounts related to these assignments of net profits interests as
     obligations payable and will record reductions in this account as net
     profits interests are received by the lenders.

--------------------------------------------------------------------------------

5.   Related Party Transactions

     Included in accounts payable is $141,802 (2001 - $164,556) owed to a
     significant shareholder. During the period ended June 30, 2002, $67,500
     (2001 - Nil) in consulting fees was paid to this party.


<PAGE>
Page 10

Item 2. Management's Discussion and Analysis.
---------------------------------------------

The following discusses the financial results and position of the consolidated
accounts of the Company and its wholly owned subsidiaries for the periods
indicated.

Results of Operations

Six Months Ended June 30, 2002 compared with Six Months Ended June 30, 2001.

Revenues for the six months ended June 30, 2002 were $206,459 representing a
decrease of 50.6% from revenues of $418,125 for the same period in 2001. The
decrease reflects overall reductions in water sales, both domestic and
international, cooler equipment rentals, and cooler sales, the greatest impact
of which was international sales. The decrease in domestic water sales, and
local cooler sales and rentals reflects the lack of commissioned sales
representatives which use was suspended during 2001, and a reduction in the unit
charge for the five gallon bottles sold locally. The decrease internationally
reflects a reduction of sales to a Malaysian distributor and a Japanese
distributor. Revenues for the six month period in 2002 consisted of $196,247 in
water and supply sales (a decrease of 51% from $400,860 for the prior period),
$428 in cooler and equipment sales (a decrease of 92.9% from $6,014 for the
prior period) and $9,784 in cooler rentals (a decrease of 13% from $11,251 for
the prior period). Of the total revenue for the six month period in 2002,
$53,062 (or 25.7% of total sales) represented sales to a Malaysian distributor.
During the 2001 period, the Company had sales to the same distributor in the
amount of $215,715. Interest income for the 2002 period was $8,264 contrasted
with $4,182 for the prior period. The increase is due to the increase in
available cash during the period attributable to the loan proceeds received
during mid-2001. During the six month period in 2002, the Company satisfied
$274,827 in outstanding loans by assigning to these lenders a net profits
interest that it received under an agreement with Avani O2 Water Sdn. Bdh., a
Malaysian company ("Avani O2"). Pursuant to the agreement, the Company
contributed certain bottling equipment and granted Avani O2 the exclusive right
and license to construct manufacturing facilities in Malaysia, and to produce
and sell the Company's proprietary water product worldwide. In exchange, the
Company received a net profits interest equal to 30% of the after tax profits of
the bottling operation. The net profits interest assigned to the lenders will
revert back to the Company when the lenders have received from the net profits
interest an amount equal to the satisfied loans.

Cost of goods sold which includes depreciation for the six month period in 2002
totaled $168,785 representing a 41.4% decrease from $288,009 for the same period
in 2001. Cost of goods sold as a percentage of sales was 81.8% for the 2002
period representing an increase from 68.9% for the prior period. The increase in
cost of goods sold on a percentage basis for the 2002 period reflects the effect
of the foreign exchange conversion, and percentage impact of decreased revenues
on depreciation. Cost of goods sold for the six month period in 2002 consisted
of $107,757 in bottled water, supplies, coolers, and related equipment, and
delivery costs (a decrease of 52.6% from $227,268 for the prior period) and
$61,028 in depreciation (a slight increase from $60,741 for the prior period).
The decrease in costs of goods sold is due mainly to lower material and delivery
costs associated with reduced production. Gross profit for the six month period
in 2002 decreased 71% to $37,674 from $130,116 for the prior period due to the
reasons discussed above.

Operating expenses which includes marketing expenses, and general and
administrative expenses for the six month period in 2002 totaled $320,432, a
decrease of 37% from $511,552 for the same period in 2001. General and

<PAGE>
Page 11

administrative costs were $296,407 in 2002, a 38.9% decrease from $484,882 in
the prior period. The decrease is a result of lower salaries and benefits
attributable to staff reductions and reductions of other general and
administrative charges. Marketing expenses totaled $24,025 for the six month
period in 2002 representing a decrease of 8.9% from $26,670 for the prior
period. The Company assigned to the lenders accounts receivable from Avani O2
which relate to product shipments previously made to Avani O2 and realized gain
on this settlement of $190,000. The accounts receivable assigned have been fully
reserved and equal the amount of the loans satisfied. Interest on long term debt
which includes mortgage interest totaled $10,730, a decrease of 33.7%, from
$16,191 for the prior period. During the six month period in 2002, the Company
received consulting income of $12,278 in connection with its Malaysian venture
with Avani O2. No consulting income was recorded in the comparable period last
year. Net loss for the six month period in 2002 was $82,946 compared with a net
loss of $393,445 for the prior period. The net loss recorded during the period
is due to the reasons discussed above.

Liquidity and Capital Resources

Since its inception, the Company has financed its operations through loans and
the private placement of its common stock. During 1999, the Company raised
approximately $1,450,000 net of offering costs from the private placement of
its common stock. During 2000, the Company issued 17,000 shares of common stock
in exchange for services valued at $16,550. In June 2001, the Company received
working capital loans from five private lenders in the amount of $500,771.
During the 2001 period, $25,000 of a loan payable in favor of one lender was
converted to 500,000 shares of common stock and 500,000 common stock purchase
warrants. As reported on the Company's Form 8-K filed on April 29, 2002, the
balance of the loans payable were cancelled in exchange for an assignment of
accounts receivable and an assignment of an interest in a Malaysian bottling
venture, as described above. On May 13, 2000, the Company issued to two
investors 1,575,017 and 950,000 shares of common stock of the Company,
respectively, for a total consideration of $75,750.51. In addition each investor
received stock purchase warrants to acquire three shares of common stock of the
Company for each share of common stock purchased. Accordingly, the two investors
received stock purchase warrants to acquire 4,725,051 and 2,850,000 shares of
common stock of the Company, respectively. The stock purchase warrants are
exercisable at $0.03 per share on or before May 13, 2004, $0.05 per share on or
before May 13, 2006, and $0.07 per share on or before May 13, 2007. In
connection with the transactions, the Company paid Chin Yen Ong a finder's fee
equal to 10% of the stock and stock purchase warrants received by the investors
as described above. Mr. Ong received 252,502 shares of common stock and stock
purchase warrants to acquire 757,506 shares of common stock of the Company. The
stock purchase warrants are exercisable under the same terms as the investor
warrants described above.

As of June 30, 2002, the Company had a working capital deficiency in the amount
of $584,629. Working capital deficiency as of December 31, 2001 was $888,601.
The decrease in working capital deficiency is a result of the reduction of loans
payable and recovery of an account receivable, both as described above,
partially offset by the loss experienced during period.

Property, plant and equipment, net of accumulated depreciation, totaled
$1,558,362 on June 30, 2002. Property, plant and equipment, net of accumulated
depreciation, totaled $1,572,417 on December 31, 2001. The reduction is due to
amortization that occurred during the period.

The Company continues to experience significant losses from operations and is
uncertain as to when it will achieve profitable operations. The Company has an
immediate need for capital, as it will not be able to fund its ongoing
operations with its existing capital. The Company presently is seeking to raise

<PAGE>
Page 12

additional capital, however, as of the date of this filing, it has been
unsuccessful. If the Company is not successful in these endeavors, it will have
a material adverse impact on the Company and its ability to conduct its business
in the future. Consequently, 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, 2001, the Company's
independent auditors included an explanatory paragraph regarding the Company's
ability to continue as going concern. In addition, any future financings will
result in significant dilution to existing shareholders (see disclosure relating
to cautionary statements in the Company's Annual Report on Form 10-KSB for
the period ending December 31, 2001).

During the quarter ended June 30, 2002, the Company initiated the search for
business opportunities to acquire through a merger or share exchange. In this
regard, management of the Company has conducted discussions and engaged in
meetings with principals of a company located in mainland China. As of this
date, a formal agreement has not been entered into by the parties, and the
Company can not predict whether a formal agreement will be entered into by the
parties.

Forward Looking Statements. Certain of the statements contained in this
Quarterly Report on Form 10-QSB includes "forward looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"). Readers are urged to refer to the section entitled
"Cautionary Statements in the Company's Form 10-KSB for the period ended
December 31, 2001 and elsewhere therein for a broader discussion of such
risks and uncertainties. These risks include the lack of profitable operations,
limited distribution channels, the need for additional capital to sustain
operations, and significant dilution to existing shareholders.

Part II OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Changes in Securities.

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.

(a). Furnish the Exhibits required by Item 601 of Regulation S-B.

None.

(b) Reports on Form 8-K.

On April 29, 2002 the Company filed a Form 8-K to report events under Item 5.,
Other Events.

On May 28, 2002, the Company filed a Form 8-K to report events under Item 6.,
Resignation of Directors.

On June 3, 2002, the Company filed a Form 8-K to report events under Item 1.,
Change in Control.

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Page 13

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 16, 2002           /s/ Dennis Robinson
                                ---------------------------------------
                                Dennis Robinson
                                Treasurer and Chief Accounting Officer





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