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 March 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). [ ] Yes [X] No



The number of shares issued and outstanding of issuer's common stock, $.001 par value, as of May 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 March 30, 2007

(unaudited) and December 31, 2006 (audited).

3

-Consolidated Interim Statements of Operations and

Comprehensive Loss for the Three Months Ended

March 30, 2007 and 2006 (unaudited).

4

-Consolidated Interim Statements of Changes in Capital

Deficit for the Three Months Ended

March 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

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Item 1. Financial Statements.

|Avani International Group Inc.                                                                 
|-----------------------------------------------------------------------------------------------
|Consolidated Interim Balance Sheets                                                            
|(Expressed in US dollars)                                                                      
|                                                                                               
|                                                                                               
|Assets                                                                                         
|Current                                                                                        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Property, plant and equipment                                                                  
|Other assets                                                                                   
|                                                                                               
|Liabilities and Capital Deficit                                                                
|Liabilities                                                                                    
|Current                                                                                        
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Obligations payable(Note 3)                                                                    
|                                                                                               
|Capital Deficit                                                                                
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|The accompanying notes are an integral part of these consolidated interim financial statements.

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|Avani International Group Inc.                                                                      
|----------------------------------------------------------------------------------------------------
|Consolidated Interim Statements of Operations and Comprehensive Loss                                
|(Expressed in US Dollars)                                                                           
|(Unaudited)                                                                                         
|                                                                                                    
|For the three-month periods ended March 31                                                          
|Revenue                                                                                             
|                                                                                                    
|                                                                                                    
|Cost of revenue                                                                                     
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Gross profit (loss)                                                                                 
|Operating expenses                                                                                  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Loss from operations                                                                                
|Other income (expenses)                                                                             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net loss for the period                                                                             
|Foreign currency translation adjustment                                                             
|Comprehensive loss for the period                                                                   
|Loss per share - basic and diluted                                                                  
|Weighted average shares outstanding                                                                 
|The accompanying notes are an integral part of these consolidated interim financial statements



4.

|Avani International Group Inc.                                                                   
|-------------------------------------------------------------------------------------------------
|Consolidated Interim Statements of Changes in Capital Deficit                                    
|(Expressed in US Dollars)                                                                        
|(Unaudited)                                                                                      
|                                                                                                 
|                                                                                                 
|                                                                                                 
|                                                                                                 
|Balance, January 1, 2006                                                                         
|Issuance of common stock on exercise of warrants                                                 
|                                                                                                 
|Stock option compensation                                                                        
|Net profit (loss)  for the year                                                                  
|Foreign exchange translation adjustment                                                          
|Balance, December 31, 2006                                                                       
|Net loss for the period                                                                          
|Foreign exchange translation adjustment                                                          
|Balance, March 31, 2006                                                                          
|The accompanying notes are an integral part of these consolidated interim financial statements
.5

|Avani International Group Inc.                                                                          
|--------------------------------------------------------------------------------------------------------
|Consolidated Statements of Cash Flows                                                                   
|(Expressed in US Dollars)                                                                               
|(Unaudited)                                                                                             
|                                                                                                        
|For the three-month periods ended March 31                                                              
|Cash provided by (used in)                                                                              
|Operating activities                                                                                    
|                                                                                                        
|                                                                                                        
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|                                                                                                        
|                                                                                                        
|Investing activities                                                                                    
|                                                                                                        
|Financing activities                                                                                    
|                                                                                                        
|Increase (Decrease) in cash during the period                                                           
|Effect of foreign exchange on cash                                                                      
|Cash and cash equivalents, beginning of period                                                          
|Cash and cash equivalents, end of period                                                                
|Supplemental Information:                                                                               
|                                                                                                        
|The accompanying notes are an integral part of these consolidated interim financial statements







6.

.



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 three-month period ended March 31, 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 three-month period ended March 31, 2007, the revenue of the Company was Nil, and the result of its operation is a deficit of 70,318.

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 March 31, 2007 of $8,082,383.  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.





1.

Obligations Payable



| |                                    |   | March 31,   |   | December 31,
| | ---------------------------------- | - | ----------- | - | ------------
| |                                    |   | 2007        |   | 2006        
| |                                    |   | (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 profits interest (The Net Profit 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 Profit Interests as obligations payable and will record

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reductions in this account as Net Profits 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 March 31, 2007 and December 31, 2006, the Company had 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 20,312,557 warrants were granted on May 13, 2002 and 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:



| |  |                                                     |  |            |       |        | Weighted | 
| |  | --------------------------------------------------- |  | ---------- | ----- | ------ | -------- | 
| |  |                                                     |  |            |       |        | Average  | 
| |  |                                                     |  |            |       |        | Exercise | 
| |  |                                                     |  |            |       | Number | Price    | 
| |  | Outstanding at December 31, 2006 and March 31, 2007 |  | 21,812,557 | $0.05 |       

All of the share purchase warrants are exercisable on the grant date and remain outstanding at March 31, 2007 and December 31, 2006.

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.



| |  |                                                   | Three-month  period
ended March 31                     
| |  | ------------------------------------------------- | -------------------------------------------------------
| |  |                                                   |                                                        
| |  | Net loss, as reported                             | $                                                      
| |  | Deduct: stock-based employee compensation expense |                                                        
| |  |                                                   | determined under fair-value based method for all awards
| |  |                                                   | not included in net loss                               
| |  | Pro-forma net loss                                | $                                                      
| |  | Loss per share:                                   |                                                        
| |  |                                                   | Basic and diluted  as reported                        
| |  |                                                   | Basic and diluted  pro-forma                          

All options granted by the Company expired in September 2006. As there was no stock-based compensation awarded to employees during the period ended March 31, 2007, the pro-forma information for the periods ended March 31, 2007 equals the information as reported on the Statement of Operations and Comprehensive Income (Loss).



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In February 2007, the Company the Company filed a Preliminary Information Statement with the Securities and Exchange Commission to increase its authorized capital stock from 400,000,000 common shares to 800,000,000 common shares, and to create 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, all as may be determined by from time to time by the Board of Directors of the Corporation. This type of preferred stock is known as blank check preferred.



4.

Related Party Transactions



During the three-month period ended March 31, 2006, the President of the Company was reimbursed $6,889 (2006  6,990) as transportation expenses. During the same period, the Company accrued $18,000 as salary (2006 - $18,000) and $13,443 (2006 - $12,884) of overseas living allowance, all of which are payable to the President of the Company.











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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 three month period ended March 30, 2007 compared with the three month period ended March 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.



Three Months Ended March, 2007 compared with Three Months Ended March, 2006.



For the three month period ending March 30, 2007, the Company had no revenues compared with $16,266 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 three month period ending March 30, 2007 compared with $43,333 which includes depreciation for the three-month period in 2006. Cost of revenue as a percentage of sales was 266% for the 2006 period. Cost of revenue for the three-month period ended March 31, 2006 consisted of costs of goods sold consisting of $17,844 in bottled water, supplies, coolers, and related equipment, and delivery costs and $25,489 in depreciation. Gross profit for the three-month period ended March 31, 2006 was $(27,067).



Operating expenses which includes marketing expenses, and general and administrative expenses for the three-month period ended March 31, 2007 totaled $68,892, a decrease of $65,945 or 47.7% from $134,837 for the same period in 2006. Marketing expenses totaled $22,678 for the three-month period in 2007 representing an increase of $7,368 or 48.2% from $15,310 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 $46,214 in 2007, a decrease of $59,116 or 56.1% from $105,310 in the prior period. The decrease reflects the reduced employees and payroll occasioned by the suspension of the Companys water production business. Loss from operations was $68,892 for the three month period in 2007 compared with a loss of $161,904 for the comparable period in 2006 for the reasons discussed above.



During the 2006 period, the Company recorded interest on debts payable of $1,707 compared with $1,732 for the 2006 period. Miscellaneous income was $281 in 2007 compared with $0 for the same period in 2006. The Company recorded a foreign currency translation adjustment of $36,468 in 2007 compared with $998 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 $106,786 compared with a loss of $162,638 for the same period in 2006 for the reasons discussed above. Loss per share was $0.01 in 2007 and $0.01 in 2006.









10

Liquidity and Capital Resources.



As of March 31, 2007, the Company had working capital deficit of $141,467. 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 first fiscal quarter of 2007.



Property, plant and equipment, net of accumulated depreciation, totaled $18,495 on March 31, 2007. Property, plant and equipment, net of accumulated depreciation, totaled $20,781 on December 31, 2006. The decrease is due to depreciation during the three 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.



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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 March 31, 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 March 31, 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.















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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.

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







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SIGNATURES



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



AVANI INTERNATIONAL GROUP, INC.





Date: May 11, 2007



/s/Dennis Robinson



Dennis Robinson



Treasurer and Principal



Financial Officer































































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