DRAFT



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 September 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.

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(Name of Small Business Issuer in its charter)



Nevada                                         88-0367866

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(State of                                      (I.R.S. Employer

Incorporation)                                 I.D. Number)



#328-17 Fawcett Road, Coquitlam, B.C. (Canada)           V3K 6V2

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(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

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(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 September 30, 2002 was 9,522,571.



Transitional Small Business Issuer Format (Check One):

Yes:      No:  X





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|Avani International Group Inc.                                                                 
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|Consolidated Balance Sheets                                                                    
|(Expressed in US dollars)                                                                      
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|Assets                                                                                         
|Current                                                                                        
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|Property, plant and equipment                                                                  
|Other                                                                                          
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|Liabilities and Stockholders Equity                                                           
|Liabilities                                                                                    
|Current                                                                                        
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|Obligations payable(Note 4)                                                                    
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|Stockholders Equity                                                                           
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|The accompanying notes are an integral part of these consolidated interim financial statements.

|Avani International Group Inc.                                                                 
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|Consolidated Interim Statements of Operations                                                  
|(Expressed in US Dollars)                                                                      
|(Unaudited)                                                                                    
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|Revenue                                                                                        
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|Cost of revenue                                                                                
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|Gross profit                                                                                   
|Operating expenses                                                                             
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|Loss from operations                                                                           
|Other                                                                                          
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|Net loss for the period                                                                        
|Foreign currency translation                                                                   
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|Total comprehensive loss                                                                       
|Loss per share                                                                                 
|- basic and diluted                                                                            
|Weighted average shares                                                                        
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|The accompanying notes are an integral part of these consolidated interim financial statements.

|Avani International Group Inc.                                                                 
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|Consolidated Interim Statements of Changes in Stockholders Equity                             
|(Expressed in US Dollars)                                                                      
|(Unaudited)                                                                                    
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|Balance, January 1, 2001                                                                       
|Cancellation of common stock                                                                   
|Issuance of common stock and warrants upon conversion                                          
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|Issuance of common stock and warrants for services                                             
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|Net loss for the year                                                                          
|Foreign currency translation adjustment                                                        
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|Balance, December 31, 2001                                                                     
|Issuance of common stock and warrants for cash (Note 2(b))                                     
|Issuance of common stock and warrants for services                                             
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|Costs of raising capital (Note 2(b))                                                           
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|Net loss for the period                                                                        
|Foreign exchange translation adjustment                                                        
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|Balance, September 30, 2002                                                                    
|The accompanying notes are an integral part of these consolidated interim financial statements.

|Avani International Group Inc.                                                                 
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|Consolidated Interim Statements of Cash Flows                                                  
|(Expressed in US Dollars)                                                                      
|(Unaudited)                                                                                    
|For the nine months ended September 30                                                         
|Cash provided by (used in)                                                                     
|Operating activities                                                                           
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|Investing activities                                                                           
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|Financing activities                                                                           
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|Decrease in cash during the period                                                             
|Effect of foreign exchange on cash                                                             
|Cash, beginning of period                                                                      
|Cash, end of period                                                                            
|Supplemental Information:                                                                      
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|The following transactions which did not result in cash                                        
|flows have been excluded from financing activities:                                            
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|The accompanying notes are an integral part of these consolidated interim financial statements.

|Avani International Group Inc.                        
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|Notes to the Consolidated Interim Financial Statements
|(Expressed in US Dollars)                             
|(Unaudited)                                           
|September 30, 2002 and 2001                           
|1.                                                    
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|Avani International Group Inc.                        
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|Notes to the Consolidated Interim Financial Statements
|(Expressed in US Dollars)                             
|(Unaudited)                                           
|September 30, 2002 and 2001                           
|2.                                                    
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|Avani International Group Inc.                        
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|Notes to the Consolidated Interim Financial Statements
|(Expressed in US Dollars)                             
|(Unaudited)                                           
|September 30, 2002 and 2001                           
|2.                                                    
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|3.                                                    
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|4.                                                    
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|Avani International Group Inc.                        
|------------------------------------------------------
|Notes to the Consolidated Interim Financial Statements
|(Expressed in US Dollars)                             
|(Unaudited)                                           
|September 30, 2002 and 2001                           
|5.                                                    
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|6.                                                    
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|7.                                                    
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Item 2. Management's Discussion and Analysis.

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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



Nine Months Ended September 30, 2002 compared with Nine Months Ended September 30, 2001.



Revenues for the nine months ended September 30, 2002 were $292,390 representing a decrease of 16.2% from revenues of $348,687 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 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. The Malaysian distributor has entered into an Agreement of Sale with the Company as discussed further below.



Revenues for the nine month period in 2002 consisted of $277,709 in water sales (a decrease of 14% from $322,838 for the prior period), $467 in cooler and equipment sales (a decrease of 93.3% from $7,002 for the prior period) and $14,214 in cooler rentals (a decrease of 24.6% from $18,847 for the prior period).  Of the total revenue for the nine month period in 2002, $53,063 (or 18.1% of total sales) represented sales to the Malaysian distributor referenced above.  During the 2001 period, the Company had sales to the same distributor in the amount of $215,715.



Cost of goods sold which includes depreciation for the nine month period in 2002 totaled $244,183 representing a 19.5% decrease from $303,359 for the same period in 2001. Cost of goods sold as a percentage of sales was 83.5% for the 2002 period representing a decrease from 87% for the prior period. The decrease of 4% in cost of goods sold on a percentage basis for the 2002 period reflects the effect of lower sales on variable costs. Cost of goods sold for the nine month period in 2002 consisted of $152,642 in bottled water, supplies, coolers and related equipment, and delivery costs (a decrease of 25.6% from $205,107 for the prior period) and $91,541 in depreciation (a decrease of 7.3% from $98,252 for the prior period). The decrease in costs of goods sold is due mainly to lower material, labor and delivery costs associated with reduced production. Gross profit for the nine month period in 2002 increased 6.4% to $48,207 from $45,328 for the prior period due to the reasons discussed above.



Operating expenses which includes marketing expenses, and general and administrative expenses for the nine month period in 2002 totalled $450,692, a decrease of 36.3% from $707,657 for the same period in 2001. General and administrative costs were $415,393 in 2002, a 24.9% decrease from $553,368 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 that occurred during the 2002 period. Marketing expenses totalled $35,299 for the nine month period in 2002 representing a decrease of 77.1% from $154,289 for the prior period. The decrease is a result of reduced overseas marketing and promotional activities.



During the nine month period in 2002, the Company received consulting income of $16,409 in connection with its Malaysian venture with Avani O2. No consulting income was recorded in the comparable period last year. During 2002, the Company recognized miscellaneous income in the amount $9,828, which is comprised of $9,714 in commission income and $114 in interest income. For the 2001, the Company recognized $15,516 in miscellaneous income, which was comprised of $9,022 of mainly expense recovery and miscellaneous service charges and $6,494 in interest income. The 36.7% decrease for the 2002 period is due to decrease in interest income. During the 2002 period, the Company experienced a foreign exchange gain of $14,909, contrasted with no gain for the prior period. During the current period, the Company assigned to certain lenders, discussed in greater detail below, accounts receivable from Avani O2 which relate to product shipments previously made to Avani O2. The accounts receivable assigned were fully reserved and equal the amount of the loans satisfied. Resultantly, the Company realized a gain on this settlement of $190,026. For the 2002 period, interest on debt payable was reduced by 23.9% from $25,298 to $19,256 reflecting the principal payments made on such debt. During the 2002 period, the Company incurred a loss in the amount of $531,069 in connection with the settlement of an outstanding liability to a shareholder in the amount of $124,800. As discussed below, the Company issued 4,160,000 shares of its common stock and stock purchase warrants to acquire 12,480,000 shares of its common stock in exchange for the cancellation of the indebtedness. Net loss for the nine month period in 2002 was $721,638 compared with a net loss of $672,111 for the prior period for 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. On May 13, 2002, 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. 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, the Companys majority shareholder, 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.



In June 2001, the Company received working capital loans from five private lenders in the amount of $500,771. During the 2002 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 Company and the lenders agreed to cancel the remaining amount of the indebtedness in exchange for the assignment of an account receivable in the amount of $200,944 discussed above, and the assignment of a net profits interest that it received under an agreement with Avani O2 Water Sdn. Bhd., a Malaysian company (Avani O2). Pursuant to the agreement with Avani O2, 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.



As reported in the Companys Form 8-K filed on August 1, 2002, the Company and Mr. Chin Yen Ong settled an outstanding obligation in the amount of $124,800 (US) in exchange for issuing to Mr. Ong 4,160,000 shares of common stock of the Company and stock purchase warrants to acquire 12,480,000 shares of common stock of the Company.



As of September 30, 2002, the Company had a working capital deficiency in the amount of $504,306. 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 $1,472,613 on September 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 additional capital or seek to acquire all or part of other business opportunities by merger or share exchange, 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 period ended September 30, 2002, the Company has 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.



As reported on the Companys Form 8-K filed on November 5, 2002, on October 23, 2002,  the Company, together with its wholly owned subsidiary, Avani Oxygen Water Corp. entered into a Sale and Purchase Agreement with Avani O2 Water Sdn. Bhd. (Avani O2) (Agreement of Sale).  Pursuant to the Agreement of Sale, the Company has agreed to sell to Avani O2 all of the assets of its subsidiary consisting of its plant and equipment for a total consideration of $1,650,000 Canadian Dollars (CDN) (or $1,053,525 USD at current exchange rates). In addition, Avani O2 is responsible for the payment of all transfer taxes. The total purchase price is payable in 24 monthly instalments of $70,620 CDN (or $45,090 USD at current exchange rates) commencing October 1, 2002 to and continuing on the first date of each month to end including September 1, 2004; and a final payment of $220,686 CDN (or $140,908 USD at current exchange rates) on October 1, 2004. Interest accrues on the unpaid balance at the rate of 8% per annum calculated annually, shall be charged and payable by Avani O2 on October 1, 2004 on the balance of the sale price outstanding from November 1, 2002 in the event sale price is not fully paid on or before September 31, 2003.



Mr. Ong, the Companys largest shareholder, also is a 30% shareholder and a director of Avani O2.



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.



Item 3. CONTROLS AND PROCEDURES.



(a)

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the chief executive officer and the principal financial officer of the Company concluded that the Company's disclosure controls and procedures were adequate.



(b)

Changes in internal controls. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the chief executive officer and principal financial officer.





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.



99.1

Certification under Section 906 of the Sarbanes-Oxley Act.





(b) Reports on Form 8-K.



On August 1, 2002 the Company filed a Form 8-K to report events under Item 1., Change of Control, and Item 7. Financial Statements and Exhibits.



On August 15, 2002, the Company filed a Form 8-K/A to report events under Item 1., Change of Control.



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: November 18, 2002        /s/ Dennis Robinson



Dennis Robinson

Treasurer and



Chief Financial Officer

EXHIBIT 99.1.

CERTIFICATION

I, Dennis Robinson, certify that:



1. I have reviewed this quarterly report on Form 10-QSB of Avani International Group, Inc.;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and



6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002



/s/ Dennis Robinson



Dennis Robinson

Treasurer and



Chief Financial Officer

CERTIFICATION

I, Robert Wang, certify that:



1. I have reviewed this quarterly report on Form 10-QSB of Avani International Group, Inc.;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and



6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 18, 2002



/s/Robert Wang

Robert Wang

President and

Chief Executive Officer