U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 for the period ended September 30, 2010

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE Act of 1934 for the transition period from ___ to ___.

Commission file number: 000-23319

AVANI INTERNATIONAL GROUP INC.

(Name of Small Business Issuer in its charter)

Nevada 88-0367866

(State of (I.R.S. Employer

Incorporation) I.D. Number)

108-2419 Bellevue Ave. West Vancouver, B.C. V7V 4T4 Canada

(Address of principal executive offices) (Zip Code)

Issuer's telephone number (604)-913 2386

Securities registered under Section 12 (b) of the Act:

Title of each class Name of exchange on which

to be registered each class is to be registered

None None

Securities registered under Section 12(g) of the Act:

Common Stock

(Title of Class)

Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(1). [X] Yes [ ] No (2). [X] Yes [ ] No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. [X] Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No

The number of shares issued and outstanding of issuer's common stock, $0.001 par value, as of November 22, 2010 was 17,582,571.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Page No.

-Consolidated Balance Sheets as of September 30, 2010

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

-Consolidated Statements of Operations and

Comprehensive Loss for the Three Months and Nine Months

Ended September 30 2010 and September 30, 2009 (unaudited).

-Consolidated Statements of Cash Flows

for the Nine Months Ended

September 30, 2010 and September 30, 2009 (unaudited).

-Notes to the Consolidated Financial Statements.

Item 2. Management's Discussion and Analysis.

Item 4. Controls and Procedures

Item 4(A)T Controls and Procedures.

PART II - OTHER INFORMATION

Item 6. Exhibits.

Signatures

AVANI INTERNATIONAL GROUP INC.

(A Development Stage Company)

Consolidated Balance Sheets

(Expressed in U.S. dollars)


	September 30	December 31,
	2010	2009
	$	$
	(unaudited)

ASSETS

Current assets

Cash and cash equivalents	311,487	401,300
Amounts receivable	27,218	10,302
Prepaid expenses and deposits	3,742	3,201

Total assets	342,447	414,803

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities

Accounts payable	9,676	20,620
Accounts payable – discontinued operations	63,961	62,625
Accrued liabilities	7,500	2,044
Accrued interest payable	88,758	81,536
Loan payable (Note 3)	97,180	95,550
Due to related party (Note 4)	414,000	414,000

Total liabilities	681,075	676,375

Basis of presentation (Note 1)

Stockholders’ deficit

Preferred stock, 1,000,000 shares authorized, $0.0001 par value,
1,000,000 issued and outstanding	100	100
Common stock, 800,000,000 shares authorized, $0.0001 par value
17,582,571 shares issued and outstanding	17,583	17,583
Additional paid-in capital	8,115,992	8,115,992
Accumulated deficit	(7,890,064)	(7,890,064)
Deficit accumulated during the development stage	(582,239)	(505,183)

Total stockholders’ deficit	(338,628)	(261,572)

Total liabilities and stockholders’ deficit	342,447	414,803

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

F-1

AVANI INTERNATIONAL GROUP INC.

(A Development Stage Company)

Consolidated Statements of Operations

(Expressed in U.S. dollars)

(unaudited)


	Three months ended September 30, 2010	Three months ended September 30, 2009	Nine months ended September 30, 2010	Nine months ended September 30, 2009	Accumulated from January 1, 2008 to September 30, 2010
	$	$	$	$	$

Revenue	–	–	–	–	–

Expenses

Foreign exchange loss (gain)	2,061	–	(2,434)	–	26,594
General and administrative (Note 4)	37,049	117,754	88,042	185,406	608,619

Total expenses	39,110	117,754	85,608	185,406	635,213

Loss before other income (expense)	(39,110)	(117,754)	(85,608)	(185,406)	(635,213)

Other income (expense)

Interest income	–	69	–	4,311	32,769
Interest expense	(1,924)	(5,128)	(5,792)	(5,128)	(20,305)
Royalty and rental income	5,273	(256)	14,344	5,268	55,503
Reversal of liabilities previously written off	–	(163,185)	–	–	–

Total other income (expense)	3,349	(168,500)	8,552	4,451	67,967

Net loss from continuing operations	(35,761)	(286,254)	(77,056)	(180,955)	(567,246)

Discontinued operations	–	–	–	–	(14,993)

Net loss for the period	(35,761)	(286,254)	(77,056)	(180,955)	(582,239)

Foreign currency translation adjustments	–	(26,948)	–	(35,469)	–

Comprehensive loss for the period	(35,761)	(313,202)	(77,056)	(216,424)	(582,239)

Net loss per share, basic and diluted	–	(0.02)	–	(0.01)

Weighted average shares outstanding	17,582,571	17,582,571	17,582,571	17,582,571

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

F-2

AVANI INTERNATIONAL GROUP INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)


	Nine months ended September 30, 2010	Nine months ended September 30, 2009	Accumulated from January 1, 2008 to September 30, 2009
	$	$	$

Operating Activities

Net loss for the period	(77,056)	(180,955)	(582,239)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	–	11,130	–
Foreign exchange translation loss	1,630	–	(3,700)

Changes in operating assets and liabilities:
Amounts receivable	(16,916)	(4,266)	(24,547)
Prepaid expenses and deposits	(541)	1,071	1,264
Accounts payable	(10,944)	(179,193)	(289,295)
Accrued liabilities	5,456	(33,552)	(56,053)
Accrued interest payable	7,222	5,128	18,819

Net cash used in operating activities	(91,149)	(380,637)	(935,751)

Discontinued Operations

Operating activities	1,336	–	29,267

Net cash provided by discontinued operations	1,336	–	29,267

Effect of exchange rate changes on cash and cash equivalents	–	(69,132)	–

Decrease in cash and cash equivalents	(89,813)	(449,769)	(906,484)

Cash and cash equivalents, beginning of period	401,300	948,473	1,217,971

Cash and cash equivalents, end of period	311,487	498,704	311,487

Supplemental disclosures:
Interest paid	–	–	–
Income tax paid	–	–	–

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

F-3

AVANI INTERNATIONAL GROUP INC.

Notes to the Consolidated Financial Statements

September 30, 2010

(Expressed in US dollars)

(unaudited)

Basis of Presentation

The accompanying consolidated financial statements of Avani International Group Inc. (the “Company”) should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since it re-entered the development stage and is unlikely generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2010, the Company has a working capital deficit of $338,628 and has accumulated losses of $8,472,303 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued an amendment to ASC 820, “Fair Value Measurements and Disclosures”, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. The adoption of this standard on January 1, 2010, with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010, did not have a material effect on the Company’s consolidated financial statements. The adoption of the remainder of the standard is not expected to have a material effect on the Company’s consolidated financial statements

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

Loan Payable

The loan payable of $97,180 (Cdn$100,000) (December 31, 2009 - $95,550 (Cdn$100,000)) is unsecured, bears interest at 8% per annum, and is due on demand.

Related Party Transactions

During the nine months ended September 30, 2010, the Company incurred management fees of $nil (2009 - $54,000) and an overseas living allowance of $nil (2009 - $11,900) to the former President of the Company.

As at September 30, 2010, the amount of $414,000 (December 31, 2009 - $414,000) owing to the former President of the Company for management fees is non-interest bearing, unsecured, and due on demand.

F-4

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

General.

The Company has no revenues from operations. The Company suspended its water bottling operations in Canada during fiscal 2006. Since the suspension of its operations, the Company has sold its real estate located in Coquitlam, British Columbia, and has transported its proprietary oxygenated water producing equipment to Malaysia for storage. In addition to its existing equipment, during 2008 the Company also recovered from Avani O2 Water Sdn. Bhd equipment that was the subject of its prior joint venture with Avani O2.

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

Results of Operations September 30, 2010 compared with September 30, 2009.

Three Month Periods Ended September 30, 2010 compared with September 30, 2009.

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

Expenses for the three month period ended September 30, 2010, which includes a foreign exchange loss of $2,061 and general and administrative expenses of $37,049, totaled $39,110 contrasted with $117,754 for the comparable period in 2009. The 2009 expenses consisted solely of general and administrative expenses. The decrease in general and administrative expenses is mainly due to the Company not incurring management fees to the former President of the Company in the current period compared to the 2009 three month period. The Company terminated its management arrangement with its former President on October 22, 2009.

Royalty and rental income for the current three month period in 2010 was $5,273 compared with royalty and rental income of $(256) for the same period in 2009. The Company receives non material royalty and rental income from time to time under an arrangement that terminated in 2008. The income results from inventory sold from time to time by the third party under the agreement. During the current three month period in 2010, the Company had interest expense of $1,924 compared with $5,128 for the 2009 period. Interest accrues on an outstanding loan payable.

During the three month period in 2009, the Company recorded a one time $163,185 in the reversal of liabilities previously written off. In 2009, the Company wrote off principal and interest of a loan and security deposits totaling this amount, all of which were unclaimed. During the 2009 year end audit, it was determined that these amounts were written off in error and they were reversed. There was no similar reversal in the current three month period in 2010.

Nine Month Periods Ended September 30, 2010 compared with September 30, 2009.

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

Expenses for the nine month period ended September 30, 2010, which includes a foreign exchange gain of $2,434 and general and administrative expenses of $88,042, totaled $85,608 contrasted with $185,406 for the comparable period in 2009. The 2009 expenses consisted solely of general and administrative expenses. The decrease in general and administrative expenses is mainly due to the Company not incurring management fees to the former President of the Company in the current period compared to the six month period in 2009. The Company terminated its management arrangement with its former President on October 22, 2009.

Royalty and rental income for the current nine month period in 2010 was $14,344 compared with royalty and rental income of $5,268 for the same period in 2009. The Company receives non material royalty and rental income from time to time under an arrangement that terminated in 2008. The income results from inventory sold from time to time by the third party under the agreement. During the current nine month period in 2010, the Company had interest expense of $5,792 compared with $5,128 for the 2009 period. Interest accrues on an outstanding loan payable.

Liquidity and Capital Resources.

As of September 30, 2010, the Company had a working capital deficit of $338,628 compared to a working capital deficit of $261,572 as of December 31, 2009. The decrease in working capital is principally due to the losses which occurred during the current fiscal year.

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

Beyond fiscal 2010, the Company likely will need to raise additional capital pursuant to the private placement of its debt or equity. The Company also is aggressively exploring other business opportunities for purposes of effecting a business acquisition or combination. In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. As of the date of this filing, the Company has no formal plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company. The Company can not predict whether it will be sucessful in raising additional capital, or whether it will be sucessful in effecting any form of business acquisition

or combination. The private placement of its capital stock in capital raising transaction, or the issuance of capital stock in effecting any form of business acquisition or combination may result in significant dilution to existing shareholders (See disclosure relating to Cautionary Statements in the Company’s Form 10-K for the year ended December 31, 2009 (“2009 Form 10-K”). If the Company is unsuccessful in raising required funds, it will have a material adverse impact on the Company and its ability to re-commence operations and its future business in general. Accordingly, the Company’s financial statements contain note disclosures describing the circumstances that lead to doubt over the ability of the Company to continue as a going concern. In its report on the consolidated financial statements for the year ended December 31, 2009, the Company’s independent registered accountants included an explanatory paragraph regarding the Company’s ability to continue as going concern.

Cautionary Statements. Readers are urged to refer to the section entitled "Cautionary Statements in the Company's 2009 Form 10-K and elsewhere therein for a broader discussion of such risks and uncertainties. These risks include the lack of profitable operations, the need for additional capital to sustain operations, and significant dilution to existing shareholders.

Critical Accounting Policies

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

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

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

New Accounting Pronouncements.

Item 4. Controls and Procedures.

(a) Under the supervision and with the participation of management, including the Company’s President and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as of September 30, 2010 (“Evaluation Date”)for this Form 10-Q. Based on this evaluation, the Company’s President and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of the Evaluation Date as a result of material weaknesses disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 (“2009 Annual Report”).

Disclosure controls and procedures are those control and procedures that are designed to ensure that the information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms relating to the Company’s reporting obligations, and was made known to them by others within the Company, particularly during the period when this report was being prepared.

Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as identified in our 2009 Annual Report, we believe that our financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 fairly present our financial condition, results of operations and cash flows in all material respects.

(b) There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the period ended September 30, 2010 has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting.

Part II OTHER INFORMATION

Item 6. Exhibits.

Exhibit 31 – Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002.

Exhibit 32 – Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.

SIGNATURES

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

AVANI INTERNATIONAL GROUP, INC.

Date: November 22, 2010

/s/Dennis Robinson

Dennis Robinson

President and Principal

Financial Officer

AVANI INTERNATIONAL GROUP INC // 10-Q