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, 2007  [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE Act of 1934 for the transition period from ___ to ___.  Commission file number: 000-23319  AVANI INTERNATIONAL GROUP INC. (Name of Small Business Issuer in its charter)  Nevada                                         88-0367866 (State of                                      (I.R.S. Employer Incorporation)                                 I.D. Number)  108-2419 Bellevue Ave. West Vancouver, B.C. V7V 4T4 Canada (Address of principal executive offices)              (Zip Code)   Issuer's telephone number (604)-913 2386  Securities registered under Section 12 (b) of the Act:  Title of each class         Name of exchange on which to be registered            each class is to be registered  None                              None  Securities registered under Section 12(g) of the Act:  Common Stock (Title of Class)  Check whether issuer (1) filed all reports to be filed by Section 13 or  15(d) of the Exchange Act during the past 12 months (or such shorter  period that the registrant was required to file such reports), and (2)  has been subject to such filing requirements for the past 90 days. (1). [X] Yes  [  ] No: (2). [X] Yes [  ] No:  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [  ] No  The number of shares issued and outstanding of issuer's common stock, $.001 par value, as of August 4, 2007 was 15,082,571.  Transitional Small Business Issuer Format (Check One): Yes:      No:  X   PART I - FINANCIAL INFORMATION  Item 1. Financial Statements. Page No. -Consolidated Interim Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006 (audited). 3 -Consolidated Interim Statements of Operations and Comprehensive Loss for the Six Months Ended June 30, 2007 and 2006 (unaudited). 4 -Consolidated Interim Statements of Changes in Capital Deficit for the Six Months Ended June 30, 2007 and 2006 (unaudited). 5 -Notes to Consolidated Interim Financial Statements. 7 Item 2. Management's Discussion and Analysis. 11 Item 3. Effectiveness of the Registrants Disclosure Controls and Procedures 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 13 Item 2. Unregistered Sales of Securities of Equity Securities and Use of Proceeds. 13 Item 3. Defaults upon Senior Securities. 13 Item 4. Submission of Matters to Vote of Securityholders. 13 Item 5. Other Information. 13 Item 6. Exhibits and Reports on Form 8-K. 13 Signatures 14                                Item 1. Financial Statements. Avani International Group Inc.Consolidated Interim Balance Sheets(Expressed in US dollars)June 30December 3120072006Assets(Unaudited)CurrentCash and cash equivalents$696,166$968,419Accounts receivable (net of allowance for doubtful accountsin 2007 - $Nil; 2006 - $Nil)884920Prepaid expenses3,9155,427700,965974,766Property, plant and equipment17,35520,781Other assets20,49121,507$738,811$1,017,054Liabilities and Capital DeficitLiabilitiesCurrentAccounts payable$734,606$797,561Accrued liabilities59,13369,059Debts payable155,184138,436Unearned revenue and deposits9,2208,428958,1431,013,484Obligations payable(Note 2)285,745285,7451,243,8881,299,229Capital DeficitCapital stock (Note 3)Authorized800,000,000 common shares, par value of $0.001
1,000,000 preferred sharesIssued and outstanding15,082,571 (2006  15,082,571) common shares-no preferred shares15,08315,083Additional paid-in capital7,717,6207,717,620Accumulated deficit(8,204,105)(7,012,065)Accumulated other comprehensive loss- foreign exchange translation(33,675)(2,813)(505,077)(282,175)$738,811$1,017,054The accompanying notes are an integral part of these consolidated interim financial statements.   Avani International Group Inc.Consolidated Interim Statements of Operations and Comprehensive Loss(Expressed in US Dollars)(Unaudited)Three-month periods endedSix-month periods endedJune 30June 302007200620072006RevenueBottled water and supply sales$-$84,827$-$101,093-84,827-101,093Cost of revenueCost of goods sold (excludingdepreciation)-125,106-142,950Depreciation-22,724-48,213-147,830-191,163Gross profit-(63,003)-(90,070)Operating expensesMarketing77,6779,440100,35524,750General and administration52,535178,84298,749284,172Gains on sale of assets-(252,230)-(252,230)Foreign exchange loss (gain)-(18,189)-32,386130,212(45,759)199,10489,078Income (loss) from operations(130,212)(17,244)(199,104)(179,148)Other income (expenses)Interest on debts payable(1,818)(1,782)(3,525)(3,514)Miscellaneous income10,308-10,5898,490(1,782)7,064(3,514)Net loss for the period(121,722)(19,026)(192,040)(182,662)Foreign currency translation adjustment5,606(60,056)(30,862)61,054Comprehensive loss for the period$(116,116)$41,030$(222,902)$(121,608)Gain(Loss) per share - basic and diluted$(0.01)$(0.01)$(0.01)$(0.01)Weighted average shares outstanding15,082,571115,082,57115,082,571115,082,571The accompanying notes are an integral part of these consolidated interim financial statements.
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Avani International Group Inc.Consolidated Interim Statements of Changes in Capital Deficit(Expressed in US Dollars)(Unaudited)AccumulatedAdditionalOtherTotalCommon SharesPaid-inAccumulatedComprehensiveCapitalSharesAmountCapitalDeficitLossDeficitBalance, January 1, 200614,582,571$14,583$7,693,120$(7,691,019)$(48,851)$(32,167)Issuance of common stock on exercise of warrants500,50050024,50025,000------Net profit (loss)  for the year---(321,046)-(321,046)Foreign exchange translation adjustment----46,03846.038Balance, December 31, 200615,082,57115,0837,717,620(8,012,065)(2,813)(282,175)Issuance of common stock on exercise of warrants----Net loss for the period---(192,040)-(192,040)Foreign exchange translation adjustment----(30,862)(30,862)Balance, June 30, 200715,082,571$15,083$7,717,620$(8,204,105)$(33,675)$(505,077)The accompanying notes are an integral part of these consolidated interim financial statements.


Avani International Group Inc.Consolidated Statements of Cash Flows(Expressed in US Dollars)(Unaudited)For the six-month periods ended June 3020072006Cash provided by (used in)Operating activitiesNet loss for the year$(192,040)$(182,662)Adjustments to reconcile net loss for the year tonet cash provided by (used in) operating activitiesDepreciation7,58057,981(Increase) decrease in assetsAccounts receivable364,290Inventories-107,227Prepaid expenses1,512(466)Increase (decrease) in liabilitiesAccounts payable(46,207)105,899Accrued liabilities(9,926)(73,589)Unearned revenue and deposits-(24,958)(239,045)(6,278)Investing activitiesProceeds from sale of assets-1,018,895Financing activitiesProceeds from share issuance-25,000Increase (Decrease) in cash during the period(239,045)1,037,617Effect of foreign exchange on cash(33,208)(150,533)Cash and cash equivalents, beginning of period968,419168,310Cash and cash equivalents, end of period$696,166$1,055,394Supplemental Information:Interest paid$3,525$3,514The accompanying notes are an integral part of these consolidated interim financial statements.  .


1. Basis of Presentation and Ability to Continue as a Going Concern The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated interim financial statements for the six-month period ended June 30, 2007 include the accounts of the Company and its wholly owned subsidiaries. All material inter-company balances and inter-company transactions have been eliminated. These statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary for fair presentation of the information contained therein. After the sale of its property including land, building and building improvements on June 15, 2006, the Companys production of water was suspended. For the six-month period ended June 30, 2007, the revenue of the Company was $Nil, and the result of its operation is a deficit of $192,040. 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, 2007 of $8,204,105.  The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders, obtaining additional long-term financing, as well as achieving and maintaining a profitable level of operations.  The Company plans to raise additional equity and debt capital as necessary to finance the operating and capital requirements of the Company.  Amounts raised will be used to provide financing for the marketing and promotion of the Company's business, capital expansion and for other working capital purposes.  While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might arise from this uncertainty.   2. Obligation Payable   June 30,December 31,20072006(Unaudited)Assignment of net profits interest$285,745$285,745  During 2002, the Company agreed with a number of lenders to fully settle the loan payables totaling $475,771. Pursuant to the agreements, the Company assigned a fully reserved account receivable in the amount of $200,944 to certain lenders in complete satisfaction of $190,026 of the loan payable. In addition to the assignment of the account receivable, the Company also assigned its before tax net profit interest (The Net Profits Interest was replaced by a rental fee in 2004) in production equipment located in Malaysia (Net Profits Interest) to two of the lenders. Pursuant to an amendment to the agreement, 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 $285,745, the principal amount of the cancelled loans.  The Company has  classified amounts related to these assignments of Net Profits Interests as obligation payable and will record reduction in this accounts as Net Profit Interests are received by the lenders.    3. Capital Stock Transactions not disclosed elsewhere in these consolidated interim financial statements are as follows: a) As at  June 30, 2007, the Company had 11,812,557 (December 31, 2006  21,812,557) fully exercisable share purchase warrants outstanding.  Of this amount, 1,500,000 warrants that were granted August 2003 are exercisable at any time within 5 years at an exercise price of $0.06 per share on or before September 2, 2008. The remaining 10,312,557 warrants were granted on July 15, 2002 and were exercisable at any time within 5 years at a price of $0.03 in the first two years, $0.05 in the third and fourth year and $0.07 in the last year.   b) A summary of share purchase warrant transactions for the periods presented is as follows:  WeightedAverageExerciseNumberPriceOutstanding at December 31, 200621,812,557$0.05Warrants expired on May 13, 200710,000,000$0.05Outstanding at June 30, 200711,812,557$0.05  c) The Company applies Accounting Principles Board (APB) Opinion 25 and related interpretations in accounting for stock options granted to employees.  Generally, under APB No. 25 compensation expense is recognized for the difference between the market price of the underlying stock and the exercise price of the stock options.  Accordingly, no compensation has been recognized in connection with options granted to employees. Had compensation cost been determined based upon the fair value of the stock options at the grant date consistent with the fair value method prescribed in SFAS No. 123, the Company's net loss and loss per share would have been increased to the pro forma amounts as indicated below.  Six-month  period
ended June 3020072006Net loss, as reported$(192,040)$(182,662)Deduct: stock-based employee compensation expensedetermined under fair-value based method for all awardsnot included in net loss--Pro-forma net loss$(192,040)$(182,662)Loss per share:Basic and diluted  as reported$(0.01)$(0.01)Basic and diluted  pro-forma$(0.01)$(0.01) All options granted by the Company expired in September 2006. As there was no stock-based compensation awarded to employees during the period ended June 30, 2007, the pro-forma information for the periods ended June 30, 2007 equals the information as reported on the Statement of Operations and Comprehensive Income (Loss). In June 2007, the Company increased its authorized shares of common stock from 400,000,000 shares to 800,000,000 shares, and authorized the creation of 1,000,000 shares of preferred stock, in one or more classes, having such designations, preferences, and relative, participating, optional, or other rights (including preferential voting rights), and qualifications, limitations, and/or restrictions thereof, as are stated and expressed in any amendment hereto, or in the resolutions providing for the issue of such class or series, all as may be determined by the Board of Directors of the Company.       4. Related Party Transactions  During the six-month period ended June 30, 2007; the Companys President was reimbursed for his overseas living allowances for the fiscal 2003, 2004, 2005 and 2006 periods. These amounts had previously been outstanding and accrued by the Company. For the six month period ended June 30, 2007, the Company has accrued $36,000 (2006 - $36,000) in salary and accrued $25,600 of overseas living allowance, both of which are due to its President.        Item 2. Management's Discussion and Analysis.  The following discusses the results of operations and the financial position of the consolidated accounts of the Company, and its two wholly owned subsidiaries for the six month period ended June 30, 2007 compared with the six month period ended June 30, 2006. During 2006, the Company suspended the production and sale of its oxygenated water. As a result, the period to period comparisons discussed below are not meaningful in potentially assessing future operations of the Company.  Results of Operations.  Six Months Ended June 30, 2007 compared with Six Months Ended June 30, 2006.  For the six month period ending June 30, 2007, the Company had no revenues compared with $184,827 in revenues for the comparable period in 2006. As previously reported by the Company, in July 2006, the Company sold its real estate which had previously housed it manufacturing plant, and the Company also has relocated it bottling equipment to Malaysia.  The Company has no cost of revenue for the six month period ending June 30, 2007 compared with $191,163 which includes depreciation for the six-month period in 2006. Cost of revenue as a percentage of sales was 189% for the 2006 period. Cost of revenue for the six-month period ended June 30, 2006 consisted of costs of goods sold consisting of $142,950 in bottled water, supplies, coolers, and related equipment, and delivery costs and $42,213 in depreciation. Gross profit for the six-month period ended June 30, 2006 was $(90,070). Due to the Companys lack of operations during the 2007 period, there was no gross profit (loss) for the comparable 2007 period.  Operating expenses which includes marketing expenses, and general and administrative expenses for the six-month period ended June 30, 2007 totaled $199,104, an increase of $110,038 or 124% from $89,078 for the same period in 2006. Marketing expenses totaled $100,355 for the six-month period in 2007 representing an increase of $75,605 or 305% from $24,750 for the prior period. The increase in marketing expenses is due to the Companys efforts to re-establish production in Malaysia, as well as conducting due diligence on potential merger or business acquisition candidate. General and administrative costs were $98,749 in 2007, a decrease of $185,423 or 65.3% from $284,172 in the prior period. The decrease reflects the reduced employees and payroll occasioned by the suspension of the Companys water production business. During the six month period in 2006, the Company recorded a gain on the sale of assets of $252,230 relating to its sale of real property. The Company has no gain for the comparable 2007 period.  The Company had a foreign exchange loss in 2006 in the amount of $32,386 due to the exchange rates between US currency and Canadian currency, and did not have a comparable loss in the 2007 period.  Loss from operations was $199,104 for the six month period in 2007 compared with a loss of $89,078 for the comparable period in 2006 for the reasons discussed above.  During the 2007 period, the Company recorded interest on debts payable of $3,525 compared with $3,514 for the 2006 period. The debt payable relates to an outstanding private loan. Miscellaneous income was $10,589 in 2007 compared with $0 for the same period in 2006. Miscellaneous income consisted of the bank interest on the Companys term deposits. The Company recorded a foreign currency translation adjustment of $30,862 in 2007 compared with $61,054 in 2006. The increase in foreign currency translation adjustment in 2007 is due to foreign exchange rates between the United States and Canada.  Comprehensive loss for the 2007 period was $222,902 compared with a loss of $121,608 for the same period in 2006 for the reasons discussed above. Loss per share was $0.01 in 2007 and $0.01 in 2006.     Liquidity and Capital Resources.  As of June 30, 2007, the Company had working capital deficit of $257,748. Working capital deficit as of December 31, 2006 was $38,718. The increase in working capital deficit is principally due to the comprehensive loss of the Company which occurred during the second fiscal quarter of 2007 together with payments to the Companys President of approximately $210,000 in accrued transportation and overseas living allowance expenses.  Property, plant and equipment, net of accumulated depreciation, totaled $17,355 on June 30, 2007. Property, plant and equipment, net of accumulated depreciation, totaled $20,781 on December 31, 2006. The decrease is due to depreciation during the six month period in 2007.  The Company continues to experience significant losses from operations. The Company expects to re-commence operations of its water business in Malaysia. However, in order to do so, the 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 instrument, the Company has no formal plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company. The Company can not predict whether it will be sucessful in raising additional capital, or whether it will be sucessful in effecting any form of business acquisition or combination. The private placement of its capital stock in capital raising transaction, or the issuance of capital stock in effecting any form of business acquisition or combination may result in significant dilution to existing shareholders (See disclosure relating to cautionary statements in the Companys Form 10-KSB for the period ending December 31, 2006 (2006 Form 10-KSB)). If the Company is unsuccessful in raising required funds, it will have a material adverse impact on the Company and its ability to re-commence operations and it future business in general. Accordingly, the Companys financial statements contain note disclosures describing the circumstances that lead to doubt over the ability of the Company to continue as a going concern. In their report on the consolidated financial statements for the year ended December 31, 2006, 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 2006 Form 10-KSB and elsewhere therein for a broader discussion of such risks and uncertainties. These risks include the lack of profitable operations, the need for additional capital to sustain operations, and significant dilution to existing shareholders.  Off-Balance Sheet Arrangement As the Company has adopted FIN 46R effective January 1, 2004, there are no off-balance sheet arrangement at the end of the 2005 fiscal year.  Critical Accounting Policies Revenue Recognition. Revenue on sales of bottled water and sales of cooler and equipment is recognized when the products are delivered and title transfers to customers. Sales terms generally do not permit a right of return.  Revenue from leasing of water coolers and filters are accounted for as operating leases and, accordingly, rental income is reported over the terms of the leases. Deposits received for bottles and coolers are accrued as liabilities until refunded upon return of bottles and coolers. Freight charges billed to customers are included in Revenue while associated freight costs are included in Cost of Revenue.     As part of the settlement of the loan payables from two lenders, the Company assigned its Net Profits Interest referred to above to these lenders.  The Company will recognize the revenue from the Net Profits Interest (subsequently amended to become a monthly rental fee) and reduce the amount of obligation payable related to the assignment of such interest when the lenders receive their assigned Net Profits Interest payments.  For the nine-month period ended September 30, 2005, all intercompany balances and transactions have been eliminated upon consolidation.  Stock Based Compensation. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", requires the Company to provide pro-forma information regarding net income as if compensation cost for the Company's stock option plan had been determined in accordance with the fair value based method prescribed in SFAS No. 123.  The value of stock options granted to consultants is recognized in these consolidated financial statements as compensation expense using the Black-Scholes option pricing model.  Such compensation is amortized over the contract services period or, if none exists, from the date of grant until the options vest.  Compensation associated with unvested options is remeasured on each balance sheet date using the Black Scholes option pricing model. The Company has not adopted the fair value method of accounting for stock-based compensation awarded to employees.   The pro-forma loss per share equals the loss per share as reported. During the nine months ended September30, 2006 and 2005, no stock based compensation was granted.  Off Balance Sheet Arrangements. As the Company has adopted FIN 46R effective January 2004, there are no off balance sheet arrangements as of June 30, 2007. New Accounting Pronouncement. There was no new accounting pronouncement that impacted the Company since the issuance of the audited consolidated financial statements.  Item 3. Effectiveness of the registrants disclosure controls and procedures.  (a) Under the supervision and with the participation of management, including the Companys President and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of June 30, 2007for this Form 10-QSB. Based on this evaluation, the Companys  President and Principal Financial Officer concluded that the Companys disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms relating to the Companys reporting obligations, and was made known to them by others within the Company, particularly during the period when this report was being prepared. (b) There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the Company first fiscal quarter of 2007 that 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 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. On June 6, 2007, the Company filed a Definitive Information Statement with the Securities and Exchange Commission  relating to the increase of the Companys authorized common shares to 800,000,000 and the authorization of a blank check preferred stock in the amount of 1,000,000 shares.  Item 5. Other Information. None  Item 6. Exhibits. Exhibit 31  Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002. Exhibit 32  Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.  (b) Reports on Form 8-K. None         SIGNATURES  Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  AVANI INTERNATIONAL GROUP, INC.   Date: August 14, 2007 /s/Dennis Robinson  Dennis Robinson  Treasurer and Principal  Financial Officer                                14