Avani International Group Inc

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the period ended December 31, 2008

[ ] 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.

(Exact name of registrant as specified 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)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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.

[X]Yes [ ]No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of

registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [X]

(Do not check if a 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

As of March 29, 2009, the aggregate market value of the voting and non-voting common equity held by non-affiliates is approximately $390,762. This calculation is based upon the average of the bid price of $0.021 and asked price of $0.07 of the common stock on March 29, 2009.

The number of shares issued and outstanding of issuer's common stock, $.001 par value, as of March 29, 2009 was 17,582,698.

DOCUMENTS INCORPORATED BY REFERENCE

None.

PART I

Item 1. Description of Business.

Introduction.

Avani International Group Inc. ("Avani" or "Company") was organized under the laws of the State of Nevada on November 29, 1995.

Following its inception, Avani constructed a bottling facility in Vancouver, Canada and engaged in the business of bottling and distributing a bottled water product under the trade name "Avani Water.” The product was an oxygen enriched, purified bottled water produced from proprietary technology developed by the Company. During 2005 and 2006, the Company sold a majority of its assets and suspended its bottling operations. During 2006, the Company has moved to Malaysia the bottling equipment previously used in Canada for its domestic operations. During 2008, the Company recovered from a former joint venture partner equipment that was previously the subject of a joint venture in Malaysia. Since the suspension of its operations, the Company has not conducted any further business operations.

Avani’s executive offices are located at 108-2419 Bellevue Avenue, West Vancouver, B.C. V7V 4T4 Canada, and its telephone number is (604) 913-2386.

General.

Avani was incorporated in the State of Nevada on November 29, 1995 under the name Rainfresh Technologies, Inc. and changed its name to Avani International Group, Inc. on January 14, 1997. As of December 31, 2008, it has two wholly owned subsidiaries; Avani Oxygen Water Corporation (formerly Avani Water Corporation), and Avani International Marketing Corporation.

Avani Oxygen Water Corporation was organized under the laws of the Province of British Columbia (Canada) on December 8, 1995. Avani International Marketing Corp. was incorporated under the laws of the Province of British Columbia on September 22, 1999.

Unless the context indicates otherwise, (i) all references to Avani or the Company herein include Avani International Group Inc. and its wholly-owned subsidiaries to the exclusion of Avani O2 and (ii) all dollar amounts are expressed in US dollars. Any reference to Canadian dollars shall be expressed as "CDN.”

Following its incorporation, Avani commenced construction of its bottling facility in May 1996 which was completed in August 1996. In September 1996, Avani initiated the production, marketing and sale of its purified, oxygen enriched water under the brand name “Avani Water”. It utilizes a unique technology which injects oxygen into purified water producing an oxygen enriched, purified bottled water.

Avani has sold its product in the greater Vancouver metropolitan area and internationally, from time to time, mainly to the United States, Malaysia and Japan. The Company also provided home and business delivery of 2.5 and 5 gallon bottles in the Vancouver metropolitan area. The Company's sales nationally and internationally, except in Malaysia, were limited. During 2004, substantially all of the Company’s distribution was made to Avani O2 Water Sdn. Bhd. (“Avani O2”). As previously disclosed previously by the Company, during late 2004 and in 2005, the

Company terminated its business relationships with Avani O2.

During 2005 and 2006, the Company sold a majority of its assets, including real estate located in Coquitlam, British Columbia, and suspended its bottling operations. During 2006, the Company has moved to Malaysia the bottling equipment previously used in Canada for its domestic operations. During 2008, the Company recovered from a joint venture partner equipment that was previously the subject of a joint venture in Malaysia. Since the suspension of its operations, the Company has not conducted any further business operations and has not generated any operating revenues during the 2008 period.

As of the date of this report, the Company does not expect to resume the manufacture and sale of its oxygenated water. Rather, it is currently seeking a joint venture partner or licensee in the Far East, mainly Malaysia, for the purpose of re-commencing operations utilizing the Company’s proprietary oxygenated equipment. Under this arrangement, the Company expects that its licensee or joint venture partner will engage in the actual manufacture and sale of its oxygenated product, subject to the payment of a yet to be determined royalty to the Company. In so doing, believes that it will limit its overhead and other expenditures.

In addition to the above described efforts, the Company may attempt to sell its equipment and seek other business opportunities. It continues to aggressively explore other business opportunities for purposes of effecting a business acquisition or combination. At this time, the Company has no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company. 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. It also may purchase stock or assets of an existing business. If a transaction is consumated, it is possible that the present management and shareholders of the Company will not be in control. If a transaction is consumated, it also is possible that the Company may be required to sell or spin-off its water business. Substantial dilution may result to existing shareholders upon consumation of such a business combination. In order to provide the Company with more flexibility to effect a potential business acquisition or combination, on July 11, 2007, pursuant to a vote of its shareholders, the Company increased its authorized shares of common stock from 400,000,000 to 800,000,000.

Product and Product Features.

In the past, the Company has manufactured and sold its purified, oxygen enriched water in 500 ml and 1.5 liter PET bottles and 2.5 and 5 gallon bottles under the trade name "Avani Water". If the Company enters into a joint venture or license arrangement, it expects that those product(s) will be have similar features to the prior product sold by the Company. The Company can not predict whether it will be successful in finding a joint venture or licensee candidate.

Avani Water contains less than 2 parts per million (ppm) of total dissolved solids (tds). The tds level of Avani water contrasts with other more recognizable products such as Evian water at 309 ppm of tds and Perrier water at 505 ppm of tds. Many regional spring waters fall between 45 and 600 ppm of tds. Total dissolved solids include metals such as iron, copper, and lead, and organic substances such as herbicides and pesticides. The limited tds content of Avani Water is achieved through a comprehensive filtration process used by the Company. The Company believes that this filtration process together with other aspects of its bottling process (reverse osmosis, carbon filtration and oxygen enrichment) enables the Company to deliver a smoother, more polished water when compared to most other bottled waters.

The Company's unique oxygenation process yields a water containing 26.4 mg/L (or 26.4 ppm) of dissolved oxygen which is approximately three times higher than the oxygen content level in Evian brand water or ordinary tap water. Internal tests performed by the Company indicate that 24 hours after opening a sealed bottle of Avani Water, the oxygen content is reduced to approximately 24 ppm. Ordinary water and most bottled water (unopened) contain less than 9 ppm of oxygen.

During fiscal years ending December 31, 2008 and December 31, 2007, the Company had no research and development costs.

Manufacturing Process.

The Company prior manufacturing process consisted (and any future manufacturing process, if any likely will consist) of the following processes. Water is purchased from the local municipality which was piped to a holding tank located on premises. From the holding tank, the water passes through the bottling process at constant pressure. The water initially passes through a 10 micron filter to remove the larger solids and then passes through a series of finer media filters to remove solids greater than 2 microns in size including inorganic metals such as iron, copper and lead. The water then passes through ozonation and carbon filtration processes. Ozonation is the strongest disinfectant and oxidizing agent available for water treatment and is a standard disinfectant for bottled water processing. Activated carbon filtration removed organic compounds such as pesticides and herbicides and associated tastes and odors. The water next passes through a seven membrane reverse osmosis process which removes particles greater than 0.001 micron. The water was demagnetized to remove remaining metals and is exposed to ultraviolet light for aseptic purposes. The water is then placed in a storage tank where high volumes of oxygen (O2) is injected into the purified water under pressure creating an oxygen enriched water product. Following the oxygen enrichment process, the water is piped to the "clean room." The "clean room" is a completely enclosed room with an over-balanced ventilation system which feeds filtered, sterile air to the room. There, the water product is automatically bottled in pre-rinsed bottles, capped and labeled. The bottles are directed to a case packer which automatically loads the bottles into shipping cases for distribution.

For quality assurance purposes, the Company tested its product every two hours at various points in the bottling process, including its finished products.

The Company purchased the plant equipment in Canada in 1996. The bottling equipment which includes a conveyor system together with an automatic rinsing, filling, capping, labeling and casing system, allows production of approximately 100 to 130 bottles per minute of the 500 ml bottles, 30 to 40 bottles per minute for the 1.5 liter bottles and 300 bottles per hour of the five gallon bottle. The Company is able to produce either the 500 ml or 1.5 liter bottles simultaneously with the production of the 5 gallon bottles. The conversion time to one of the PET sizes from the other requires approximately one hour. As of December 31, 2006, the plant equipment has been disassembled and shipped to Malaysia.

The Company is a member in good standing of NSF International and the International Bottled Water Association.

Sales and Distribution.

The Company’s products have been sold in the greater Vancouver metropolitan area and

internationally, from time to time, mainly in the United States, Malaysia, and Japan. During 2004, substantially all of the Company’s international sales were made through Avani O2 in Malaysia, and to a lesser extent through independent distributors located in Japan and Singapore. During 2005, no product sales were made to Avani O2. Substantially all of the Company sales during 2005, albeit limited, were to the United States and Canada.

During 2004 and part of fiscal 2005, the Company provided delivery of 2.5 and 5 gallon bottles in the Vancouver metropolitan area to business and residential customers, and sells 500 ml and 1.5 liter PET bottles directly to retail outlets in the Vancouver area. During 2004, revenues from its 2.5 and 5 gallon bottles accounted for $203,192 or approximately 25% of total water sales. During 2005, revenues from this segment accounted for $123,124 or approximately 40% of total water sales. As previously disclosed, on July 15, 2005, the Company sold to an unaffiliated third party its local business of delivering 2.5 and 5 gallon bottles and renting water coolers.

During January 2001, Avani contracted with Mr. Chin Yen Ong, as a consultant in Malaysia, to market and promote its products to the Asian market. In exchange, the Company agreed to pay Mr. Ong the sum of $10,000 CDN per month and to re-imburse all reasonable and customary business expenses not to exceed $1,000 per month. On July 15, 2002, as previously reported by the Company, an agreement was entered into with Mr. Ong pursuant to which the outstanding amount of $124,800 owed to Mr. Ong was cancelled in exchange for issuing 4,160,000 shares of common stock of Avani and stock purchase warrants to acquire 12,480,000 shares of common stock of Avani. Mr. Ong was a controlling shareholder of Avani O2 until July 1, 2005 when he divested himself of his entire equity position in Avani O2. As of December 31, 2005, Mr. Ong is a controlling stockholder of the Company. Mr. Ong is the nephew of the Company’s President. The agreement with Mr. Ong was terminated on January 1, 2005. As of December 31, 2008, the total outstanding consulting fee payable to Mr. Ong is $262,725 ($320,000 CDN).

As of the date of this report, the Company is currently exploring opportunities to manufacture and sell its water product in the Far East, including Malaysia, through a joint venture partner or licensee.

Facilities.

Presently, the Company does not maintain any production facilities. Its offices consist of 120 square feet and under a month to month lease agreement. The annual lease payment is $5,065.

The Company also had maintained an office in Kuala Lumpur, Malaysia which it opened on August 1, 2006. In March 2008, the Company terminated this office lease arrangement. The offices consisted of 1,200 square feet and under a month to month lease agreement. The annual lease payment was $3,158.

Competition.

The bottled water industry is extremely competitive and populated by a significant number of large regional, national, and international companies. Well established names in the industry, include Dasani and Acquafina, as well as a significant number of regional products. Many of these companies maintain significantly greater resources (including financial, technical and personnel) in all aspects of business than those available to the Company. In addition, their products have achieved enormous consumer acceptance and loyalty. The principal competitive factors in the bottled water industry are price, taste, packaging, name recognition and water source. However, the Company believes that its smooth taste and its unique oxygen enrichment will enable it to sufficiently compete against other non-oxygenated products in the market.

Proprietary Rights.

The Company has not sought patent protection for its proprietary oxygen enrichment process, rather, it relies, to the extent it can, upon trade secrets to protect its proprietary process.

Environmental Laws.

Due to its non-operating status, the Company is not subject to any environmental laws. If the Company re-commences operations, it intends to comply with all governing laws affecting environmental issues.

Employees.

As of December 31, 2008, Avani has 3 employees in total, including the Company’s President. The Company has no collective bargaining agreements with its employees and believes its relations with its employees are good.

Item 1A. Risk Factors.

Disclosure Regarding Forward Looking and Cautionary Statements.

Forward Looking Statements. Certain of the statements contained in this Annual Report on Form 10-K include "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts included in this Form 10-K regarding the Company's financial position, business strategy, and plans and objectives of management for future operations and capital expenditures, and other matters, are forward looking statements. These forward-looking statements are based upon management's expectations of future events. Although the Company believes the expectations reflected in such forward looking statements are reasonable, there can be no assurances that such expectations will prove to be correct. Additional statements concerning important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed below in the Cautionary Statements section and elsewhere in this Form 10-K. All written and oral forward looking statements attributable to the Company or persons acting on behalf of the Company subsequent to the date of this Form 10-K are expressly qualified in their entirety by the Cautionary Statements.

Cautionary Statements. Certain risks and uncertainties are inherent in the Company's business. In addition to other information contained in this Form 10-K, the following Cautionary Statements should be considered when evaluating the forward looking statements contained in this Form 10-K:

1. UNCERTAIN FUTURE OF COMPANY’S BUSINESS. As mentioned herein, the Company has suspended its operations, and is seeking to re-establish operations through a joint venture partner or licensee in Malaysia or another country in the Far East. While the Company believes that significant demand exists in Malaysia for its oxygenated water, since its inception, except for a brief period in which it sold products through a former joint venture partner in Malaysia, the Company has been unable to establish any meaningful sales of its water product. In addition, the Company may attempt to sell its equipment and seek other business opportunities. Accordingly, the Company cannot predict with certainty the future of its business.

2. THE COMPANY’S ACCOUNTANTS HAVE ISSUED A GOING CONCERN OPINION AND THE COMPANY HAS LIMITED WORKING CAPITAL, NEGATIVE NET WORTH AND SUBSTANTIAL CURRENT LOSSES. To date, the Company has met its working capital requirements principally through the private placement of its securities. To support its operations and planned re-location, the Company will require additional funds as described in greater detail below. Since its inceptions, the Company has not generated any significant revenue other than through Avani O2 and has experienced substantial losses. The Company also has very limited working capital and, as at December 31, 2008 recorded an accumulated deficit of $8,177,264.

3. THE COMPANY CAN NOT PREDICT WHETHER IT WILL BE PROFITABLE IN THE FUTURE. If the Company re-locates its water business in Malaysia through licensees or joint ventures, in order for it to be successful, the Company or its licensees or venturers, among other factors, will be required to establish and maintain meaningful channels of distribution. The Company can not predict whether it will be successful in developing and maintaining its new business.

4. NEED FOR ADDITIONAL CAPITAL/SIGNIFICANT DILUTION. The Company will need additional capital in order to re-establish and then maintain operations of its water business. No assurances can be given that the Company will be successful in raising the capital necessary for both near term and future operations. In addition, if the Company is successful in raising additional funds, it is likely that any such additional capital will be in the form of the sale and issuance of the Company’s common stock. The sale and issuance of common stock may substantially increase the number of shares of common stock outstanding and cause significant dilution to shareholders. If the Company is unsuccessful in raising additional capital, it likely will preclude the Company’s ability to re-commence and maintain operations in Malaysia.

5. THE COMPANY MAY PAY CONSULTANTS AND EMPLOYEES IN STOCK AS CONSIDERATION FOR THEIR SERVICES WHICH MAY RESULT IN STOCKHOLDER DILUTION. Due to the Company’s limited cash availability, the Company has in the past and may in the future pay consultants and employees in stock, warrants or options to purchase shares of our common stock rather than cash. Previously, the Company paid one of its consultants in common stock which resulted in significant dilution to existing shareholders. As of the date of this filing, the Company owes its President the sum of $462,443 in past due compensation and re-imbursements. Payments for services or other amounts due in equity may materially and adversely affect the Company’s stockholders by diluting the value of outstanding shares of our common stock.

6. SEEKING OTHER BUSINESS OPPORTUNITIES. The Company is seeking to acquire other business opportunities by merger, share exchange or other combination. However, at this time, the Company has no plan, proposal, agreement, understanding or arrangement to acquire or merge with any specific business or company, and Company has not identified any specific business or company for investigation and evaluation. In the event the Company does acquire a business opportunity, a change of control of the Company may result. The change of control may occur through the issuance of common stock to the owners of the acquired company which may exceed greater than fifty percent of the Company’s total issued and outstanding capital stock. Generally, the amount of stock issued in such a transaction results in significant dilution to existing shareholders. In addition, the officers and directors of the acquired company may replace part or all of the existing officers and directors. The Company cannot predict when or if an acquisition will occur, or if it does occur, whether it will result in profitable operations.

7. LIMITED DISTRIBUTION CHANNELS. As of December 31, 2006, the Company has limited distribution channels in its markets. Following the relocation of its operations in Malaysia, it will be required to seek a new distribution base for its product. Although the Company continues to seek distributors to advance sales, to date it has been unsuccessful in establishing any meaningful distributor arrangements.

8. PENNY STOCK REGULATION. The Company's common stock is deemed a "penny stock" under federal securities laws. The Securities and Exchange Commission has adopted regulations that define a "penny stock" generally to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These regulations impose additional sales practice requirements on any broker/dealer who sells such securities to other than established investors and accredited investors. For transactions covered by this rule, the broker/dealer must make certain suitability determinations and must receive the purchaser's written consent prior to purchase. Additionally, any transaction may require the delivery prior to sale of a disclosure schedule prescribed by the Commission. Disclosure also is required to be made of commissions payable to the broker/dealer and the registered representative, as well as current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account of the customers and information on the limited market in penny stocks. These requirements generally are considered restrictive to the purchase of such stocks, and may limit the market liquidity for such securities.

9. VOLATILE PRICES AND LIMITED VOLUME FOR THE COMPANY’S COMMON STOCK. Historically, there has been a limited trading market for the Company’s common stock. The price of the common stock has been extremely volatile. Due to the low price of the common stock, many brokerage firms may refrain or be prohibited from trading in the Company’s common stock. This could have an adverse effect on sustaining any market for the Company’s common stock. Consequently, shareholders may not be able to sell their shares at a desirable time, if at all.

10. THE COMPANY DOES NOT INTEND TO PAY DIVIDENDS ON ITS COMMON

STOCK. The Company has never declared or paid dividends on its common stock. It intends to retain future earnings to develop and commercialize its products and therefore it does not intend to pay cash dividends in the foreseeable future.

Item 2. Description of Property.

The Company maintains its offices at 108-2419 Bellevue Ave. West Vancouver, B.C. V7V 4T4 Canada. These offices consist of 120 square feet and are leased from a director of the Company under an oral lease agreement on a month to month basis. The annual lease payment is $5,065.

The Company also maintained an office consisting of 1,200 square feet in Kuala Lumpur, Malaysia which it opened on August 1, 2006. These offices are leased under oral lease arrangement with an unaffiliated third party on a month to month basis. The Company terminated this office lease arrangement in March 2008.

Item 3. Legal Proceedings.

None

Item 4. Submission of Matters to Vote of Security Holders.

None.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

The table below sets forth the high and low bid prices of the Common stock of the Company as reported by OTC- Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions. The Company's common stock is listed on the OTC-Bulletin Board under the symbol "AVIT.” There is an absence of an established trading market for the Company's common stock, as the market is limited, sporadic, and highly volatile. The absence of an active market may have an effect upon the high and low price as reported.

2007

Low Bid

High Bid

1^st Quarter

0.03

2^nd Quarter

0.28

1.74

3^rd Quarter

0.25

0.50

4^th Quarter

0.25

0.73

2008

Low Bid

High Bid

1^st Quarter

0.15

0.45

2^nd Quarter

0.15

0.25

3^rd Quarter

0.07

0.15

4^th Quarter

0.04

0.07

2009

Low Bid

High Bid

1^st Quarter

0.02

0.04

As of March 31, 2009, the Company had 733 shareholders of record of our common stock. Although there are no restrictions on the Company’s ability to declare or pay dividends, the Company has not declared or paid any dividends since our inception and do not anticipate paying dividends in the future.

The Company has no Equity Compensation Plan Information as of December 31, 2008, however, on December 13, 2007, the Company issued 1,000,000 shares of its Class A-Super Voting Preferred Stock to the Company’s Chairman and President. Each share of the Class A-Super Voting Preferred Stock carries 2,000 votes on matters submitted to shareholders for voting purposes. No other rights or privileges are attendant to the Class A-Super Voting Preferred Stock. Please refer to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 9, 2008 for a more complete description of the Class A Super Voting Preferred Stock.

Item 6. Selected Financial Data.

Not Applicable.

Item 7. 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 annual periods ended December 31, 2008 and December 31, 2007, respectively.

Results of Operations.

Fiscal year end 2008 compared with Fiscal year end 2007.

The Company suspended operations during fiscal 2006, and thus has had no revenues for fiscal years ended December 31, 2008 and 2007 respectively.

During the fiscal year ended December 31, 2008 and 2007, respectively, the Company had no cost of revenues due to its lack of operations.

Operating expenses which include marketing expenses and general and administrative expenses for the 2008 period totaled $350,852 contrasted with $373,419 for the 2007 period, which represents a decrease of $22,567 or 6% from the prior period. Marketing expenses totaled $105,087 for the 2008 period contrasted with $163,269 for the 2007 period, representing a decrease of $58,182 or 35.6% from the prior period. Marketing expenses includes overseas allowance to the Company’ President and fees to Avani Oxygen Water Corporation Sdn. Bhd., an unaffiliated third party that provides marketing services to the Company. The decrease in marketing expenses is due to a reduction in fees for marketing services paid in 2008. General and administrative expenses totaled $245,765 for the 2008 period contrasted with $210,150 for the 2007 period, representing an increase of $35,615 or 16.9% from the prior period. General and administrative costs in 2008 includes the salary to the Company’s President of $72,000 and $60,085 as an overseas living allowance for the President, salaries for other employees, storage, rent, and other office expenses. The increase in general and administrative expenses for the 2008 period is due to an increase in overseas living allowance for the Company’s President and a finder’s fee payment to Avani Oxygen Water Corporation Sdn. Bhd, in connection with the private placement of the Company’s common stock which occurred in 2007. No research and development costs were incurred in 2008 or 2007.

Loss from Operations for the 2008 period was $350,852 compared with $373,419 for the 2007 fiscal year end period. The slight decrease is due to the reasons discussed above.

Interest expense on outstanding loans totaled $7,449 for the 2008 compared with $7,449 for the 2007 period. The interest expense in Canadian dollars is the same for both periods, however the slight increase in for the 2008 period reflects the weakness of the US Dollar during the 2008 period. During fiscal 2008, the Company recovered from Avani O2 equipment that had been previously written off by the Company in 2005. During the 2007 period, the Company received a payment in the amount of $147,372 from Avani O2 on prior debt that had been written off by the Company in 2005. Both amounts were recorded as bad debt recovery. During the 2007 period, the Company also had an obligation payable write off in the amount of $285,745. The obligation relates to two former lenders that the Company assigned its net profits interest in its joint venture arrangement with Avani O2. Avani O2 has informed the Company that the amount has been satisfied by Avani O2.

During the 2008 period we had interest income of $18,224 compared with $12,226 for the period year end period. The increase in interest income is due to the additional capital received by the Company in the beginning of 2008 from a private placement. The Company received $10,089 in royalty income and $23,284 in equipment rental income for the 2008 period. Both incomes were due under an equipment rental agreement with Avani Oxygen Water Corporation Sdn. Bhd. (formerly Avani Water Corporation Sdn. Bhd.), an unaffiliated Malaysian company which was terminated in June 2008.

Other income for the 2008 period was $121,178 compared with $437,894 for the 2007 year end period. The difference is due to the reasons discussed above.

Foreign currency adjustment, which is the impact of different foreign exchange rates applied in balance sheet and income statement, was a gain of $91,170 for the 2008 period, which contrasts with a loss of $55,620 for the 2007 period. The disparity is due to application of different foreign exchange rates in consolidation of the Company’s balance sheets and income statements. Comprehensive loss for the 2008 period was $138,504 which compares with a comprehensive gain of $8,885 for the prior year. Loss per share applicable to common stock holders, basic and diluted, was $0.01 for the 2008 period contrasted with a gain of $0.01 per share for the 2007 period.

For the past two years, inflation has had no impact on the Company’s operations.

Liquidity and Capital Resources.

Working capital as of December 31, 2008 was $(101,489) compared with working capital as of December 31, 2007 of $127,652. The decrease in working capital for the 2008 year end from the prior year end reflects the operating loss experienced for the 2008 period.

Total assets as of December 31, 2008 were $1,047,250 which is a decrease of $210,100 from total assets of $1,257,350 as of December 31, 2007.

The Company believes that it has sufficient cash resources to meet its working capital need for the next 12 months. Thereafter, the company will be required to raise additional funds to meets its operating needs (which is discussed below). The Company’s projected capital expenditures for 2009 fiscal year are as follows: $110,000 for marketing expenses and $250,000 for general and administrative expenses. Other than as stated, above the Company does not have any projected capital expenditures.

During late 2006, the Company suspended its water bottling operations, however, it continues to experience significant losses and/or cash flow deficits. The Company can not predict when it will be able to re-establish operations as described above, if at all, and can not predict whether it will achieve profitable operations, if at all. As discussed herein, the Company does not expect to resume the manufacture and sale of its oxygenated water. Rather, it is currently seeking a joint venture partner, or licensee in the Far East, mainly Malaysia, for the purpose of re-commencing operations utilizing the Company’s proprietary oxygenated equipment. Under this arrangement, the Company expects that its licensee or joint venture partner will engage in the actual manufacture and sale of its oxygenated product, subject to the payment of a yet to be determined royalty to the Company. In so doing, believes that it will limit its overhead and other expenditures. In addition to the above described efforts, the Company may attempt to sell its equipment and seek other business opportunities. Despite the Company’s slimmed down operations, the Company nevertheless may need to raise additional working capital to support its future operations. At this time, the Company can not predict the amount of funds required, nor can it predict whether it will be successful in raising such funds.

If the Company is required to raise additional funds, it likely will attempt to do so pursuant to the private placement of debt or equity. The private placement of its capital stock may result in significant dilution to shareholders (See disclosure relating to Risk Factors above). At this time, the Company has no commitments for any such financing, and no assurances can be given that the Company will be successful in these endeavors. If the Company is unsuccessful in raising required funds, it will have a material adverse impact on the Company and its ability to conduct its business in the future. 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 years ended December 31, 2008 and December 31, 2007, respectively, the Company’s independent registered accountants included an explanatory paragraph regarding the Company’s ability to continue as going concern.

Capital Resources. The Company has no material commitments for capital expenditures as of December 31, 2008.

Off-Balance Sheet Arrangement. As the Company has adopted FIN 46R effective January 1, 2004, there are no off-balance sheet arrangement as of December 31, 2008.

Critical Accounting Policies.

Revenue Recognition. Revenue on sales of bottled water, coolers 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 is 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.

Stock-based Compensation. The Company applies SFAS No. 123, “Accounting for Stock-Based Compensation for Non-Employees” and has elected to continue to measure compensation cost for employees under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Generally, under APB 25, compensation cost is recognized for stock options granted to employees at prices below the market price of the underlying common stock on the date of grant.

SFAS No. 123, requires the Company to provide pro-forma information regarding net income as if compensation cost for the Company's stock options granted to employees had been determined in accordance with the fair value based method. 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.

SFAS 148 “Accounting for Stock-Based Compensation—Transition and Disclosure“ amends the disclosure requirements of SFAS 123 so that entities will have to make more prominent disclosures regarding the pro forma effects of using the fair value method of accounting for stock-based compensation, Accordingly, the pro-forma information as described in SFAS 123 are disclosed in the Summary of Significant Accounting Policies and Note 9 of the financial statements.

Valuation and Disposition of Long-lived Assets. The Company evaluates the future recoverability of its property, plant and equipment and trademarks and licenses in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS No. 144 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the estimated undiscounted future cash flows attributable to such assets. It requires that those long-lived assets to be disposed of by sale are to be measured at the lower of carrying amount or fair value less cost of sale whether reported in continuing operations or in discontinued operations. No impairment was required to be recognized during the periods presented in these consolidated financial statements

SFAS No. 144 also requires that long-lived assets to be disposed of by sale continue to be classified as assets held-and-used until such time that all of the criteria for classifying assets as held-for-sale are met. Accordingly, those long-lived assets that are included in the sale agreement with Avani O2 are continued to be classified as Property, Plant and Equipment on the consolidated balance sheet.

New Accounting Pronouncements.

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment.” SFAS No. 123(R) would require the Company to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements. In addition, SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. For public entities that file as a small business issuer, SFAS No. 123(R) is effective for the first interim or annual reporting period beginning after December 15, 2005.

In November 2004, the FASB issued SFAS No. 151 “Inventory Costs: an Amendment of ARB 43, Chapter 4” which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). SFAS No. 151 requires that these items be recognized as a current period charge regardless of whether they meet the criterion specified in ARB 43. In addition, this statement requires the allocation of fixed production overheads to the facilities. SFAS No. 151 is effective for financial statements for fiscal years beginning after June 15, 2005.

In December 2004, the FASB issued SFAS No. 153 to amend Opinion 29 by eliminating the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange is defined to have commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.

The Company is assessing the effect that the implementation of these new standards will have on the consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable

Item 8. Financial Statements and Supplementary Data.

The Financial Statements that constitute Item 8 of this Annual Report on Form 10-K are included in Item 14 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we undertook an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that such disclosure controls and procedures were effective to ensure (a) that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Internal Controls Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In making its assessment, our management, including the Chief Executive Officer and Chief Financial Officer, used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We have not identified any material weaknesses in our internal controls over financial reporting as of the end of the fiscal year ended December 31, 2008.

There were no changes in our internal controls over financial reporting during the fourth quarter of the fiscal year ended December 31, 2008 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

This annual report on Form 10-K for the fiscal year ended December 31, 2008 does not include an auditor attestation report on our internal controls over financial reporting inasmuch as no attestation report was required under the rules of the Securities and Exchange Commission applicable to us as in effect at that time..

Item 9B. Other Information.

None

PART III

Item 10. Directors, Executive Officers, and Corporate Governance.

The directors and executive officers of the Company, their ages, and the positions they hold are set forth below. The directors of the Company hold office until the next annual meeting of stockholders of the Company and until their successors in office are elected and qualified. All officers serve at the discretion of the Board of Directors.

Director/

Officer

Name

Age

Since

Position

Robert Wang

1999

President and Director

Dennis Robinson

1999

Secretary, Treasurer and

Director

Jeffrey Lightfoot

1999

Director

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

Robert Wang – Mr. Wang has been President and Director of the Company since August 1999. From 1992 to May 2002, Mr. Wang was president and director of Multiplex Technologies Inc., a Canadian public company involved in real estate development.

Dennis Robinson – Mr. Robinson has been a Director of the Company since May 1999, and Secretary and Treasurer of the Company since August 1999. From 1991 to the present, Mr. Robinson has maintained a public accounting practice in North Vancouver, British Columbia.

Jeffrey Lightfoot – Mr. Lightfoot has been a Director of the Company since May 1999. Mr. Lightfoot is a licensed attorney in Canada, and since 1994, has been a partner in the law firm of Maitland and Company, Vancouver, British Columbia. Mr. Lightfoot is a director of two companies publicly traded on the TSX Venture Exchange in Canada.

There are no family relationships among any of our officers and directors. The Company’s directors have been elected to serve until the next annual meeting of stockholders and until their successor(s) have been elected and qualified, or until death, resignation or removal.

To the best of our knowledge, during the past five years, none of our existing directors, executive officers, or control persons were involved in any of the following: (1) any bankruptcy petition filed by or against any property or business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending, or otherwise limiting his involvement in any type of business, securities or banking activities; or (4) being found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

In the past fiscal year, there has been no material change to the procedures by which security holders may recommend nominees to the small business issuer's board of directors.

Code of Ethics

- The Company has adopted a code of ethics which is attached hereto as Exhibit 14. The Code applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions in 2009.

Item 11. Executive Compensation.

The compensation for all directors and officers individually for services rendered to the Company for the fiscal years ended December 31, 2008 and 2007, respectively, are set forth in the following table:

SUMMARY COMPENSATION

Non-Equity Non-Qualified

Stock Option Incentive Plan Deferred Comp All Other

Principal

Salary Bonus Awards Awards Compensation Earnings Comp Total

Position

Year

($) ($) ($) ($) ($) ($) ($) ($)

Robert Wang(1) 2008 72,000 -0- -0- -0- -0- -0- 60,085 132,085

President and

2007 72,000 -0- -0- -0- -0- -0- 48,298 120,298

Director

Dennis Robinson 2008 -0- -0- -0- -0- -0- -0- -0- -0-

Principal Financial 2007 -0- -0- -0- -0- -0- -0- -0- -0- -

Officer, Secretary,

Treasurer and

Director

Jeffery Lightfoot 2008 -0- -0- -0- -0- -0- -0- -0- -0-

Director

2007 --0- -0- -0- -0- -0- -0- -0- -0-

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

(1). Under his management agreement with the Company, the President is entitled to a salary of $72,000 commencing with fiscal year 2003, and is entitled to a daily overseas expense allowance of $175 CDN. The allowance relates to food and lodging when the officer is in Malaysia on Company business. The President also is reimbursed for expenses incurred on behalf of the Company. For fiscal 2008, no transportaion expenses were incurred by the President, salary of $72,000 salary, and an overseas living allowance of $60,085, all of which were accrued during 2008. For fiscal 2007, the President was reimbursed $7,515 for transportation expenses, and was entitled to receive $72,000 as salary, and $48,298 as an overseas living allowance.

Employment Agreements, Compensation to Directors, and Stock Option Plans.

The Company has a management agreement with its Chairman and President as described in footnote 1 above.

No compensation was paid to any directors of the Company in such capacity during 2008 or 2007. Directors, however, are reimbursed for expenses incurred by them in connection with the Company's business. Other than as stated above, we do not have any employment or consulting agreement with any of our officers or directors and we will not pay our directors any amount for acting on the Board of Directors.

Other than as stated above, the Company does not have any other form of compensation payable to its officers or directors, including any equity awards, stock option plans, stock appreciation rights, or long term incentive plan awards for the periods indicated in the above table. The Company has no compensatory plan or arrangement that results or will result from the resignation, retirement, or any other termination of an executive officer’s employment or from a change-in-control or a change in an executive officer's responsibilities following a change-in-control.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table will identify, as of March 30, 2008, the number and percentage of outstanding shares of common stock and preferred stock of the Company owned by (i) each person known to the Company who owns more than five percent of the outstanding common stock, (ii) each officer and director, and (iii) and officers and directors of the Company as a group. Except as otherwise indicated, the address of each party is the address of the Company. The following is based on 17,582,698 and 1,000,000 shares of common stock and preferred stock, respectively, outstanding as of March 27, 2008, except that shares of common stock underlying options or warrants exercisable within 60 days of the date hereof are deemed to be outstanding for purposes of calculating the beneficial ownership of securities of the holder of such options or warrants.

Name and Address

Title

Amount and nature

Percent

of Beneficial Owner

of Class

Beneficial Ownership

of Class

Robert Wang

Common

Stock

-0-

President

Preferred Stock

2,000,000,000(1)

100%

Dennis Robinson

Common

Stock

-0-

Principal Financial Officer

Preferred Stock

-0-

Secretary, Treasurer

And Director

Jeffrey Lightfoot

Common Stock

-0-

Director

Preferred Stock

-0-

MX Power Systems, Co. Ltd.

Common Stock

2,500,000

14.2%

Chin Yen Ong

Common Stock

4,912,503

28%

106 Taman Sri Selayang

68100 Batu Caves, Selangor

Malaysia

Tee Ah Siew

Common

Stock

4,085,017

23.2%

No.6 Jalan 7,Kaw 15

Taman Seng Chai

41300 Kelang

Selangor Darul Ehsan

Malaysia

Officers and

Common Stock

-0-

Directors,

Preferred Stock

2,000,000,000(1)

100%

as a group (3 persons)

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

(1). Based on 1,000,000 outstanding shares of the Company’s Class A Super Voting Preferred Stock after giving effect to the 2,000 to 1 common voting rights per share.

Item 13. Certain Relationships and Related Transactions.

On December 13, 2007, the Company issued 1,000,000 shares of its Class A-Super Voting Preferred Stock to the President, the Company’s Chairman and President. Each share of the Class A-Super Voting Preferred Stock carries 2,000 votes on matters submitted to shareholders for voting purposes. No other rights or privileges are attendant to the Class A-Super Voting Preferred Stock.

On October 3, 2007, the Company received $400,000 in connection with the sale of 2,500,000 shares of its common stock to MX Power Systems, Co. Ltd, an unaffiliated third party located in Seoul, Korea. As of the effective date of the transaction (November 28, 2007), MX Power System now holds 14.2% of the total issued and outstanding shares of common stock of the Company. In connection with the transaction, the Company paid a finder’s fee to Avani Water Corporation Sdn. Bhd, an unaffiliated Malaysian company. The finder’s fee is $40,000 and stock purchase warrants to acquire 750,000 shares of common stock at $0.06 during a five year term.

On January 4, 2004, the Company entered into a management agreement with the President. The term of the agreement extends for a period of five years; however, the agreement may be terminated by either party with three months written notice, among other reasons. The President is entitled to receive an annual salary of $72,000, subject to re-negotiation by the parties after one year. He will receive a daily overseas expense allowance of $175 CDN. The President also is re-imbursed for expenses incurred in connection with Company business. The allowance relates to food and lodging when the officer is in Malaysia on Company business.

On May 13, 2002, the Company completed private placements with Mao-Lin Hsiao, and Hsien-Ho Lee pursuant to which such parties purchased 1,575,017 and 950,000 shares of common stock of the Company, respectively, at a price per share equal to $0.03. The total consideration received by the Company was $75,751. In addition, the Company issued to Mao Lin Hsiao and Hsien Ho Lee stock purchase warrants to acquire 4,725,051 and 2,850,000 shares of common stock of the Company, respectively. The stock purchase warrants are exercisable at $0.03 per share on or before May 13, 2004, $0.05 per share on or before May 13, 2006, and $0.07 per share on or before May 13, 2007. In connection with the transactions, the Company paid Chin Yen Ong a finder’s fee equal to 10% of the stock and stock purchase warrants received by the investors as described above. Mr. Ong received 252,502 shares of common stock and stock purchase warrants to acquire 757,506 shares of common stock of the Company. The stock purchase warrants are exercisable on the same terms and conditions as those of the investors.

During January 2001, the Company contracted with Mr. Chin Yen Ong, as a consultant in Malaysia, to market and promote the Company’s products to the Asian market. In exchange, the Company has contracted to pay the consultant the sum of $10,000 CDN per month and to re-imburse all reasonable and customary business expenses not to exceed $1,000 per month. On July 15, 2002, as reported by the Company, an agreement was entered into with Mr. Ong pursuant to which the outstanding amount of $124,800 owed Mr. Ong was cancelled in exchange for 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 December 31, 2008, Mr. Ong is a controlling stockholder of the Company, and formerly was a controlling shareholder of Avani O2. Mr. Ong is the nephew of the Company’s President. The agreement with Mr. Ong was terminated on January 1, 2005. As of December 31, 2008, the total outstanding consulting fee payable to Mr. Ong is approximately $275,150 ($320,000 CDN).

Item 14. Principal Accountant Fees and Services.

Jeffrey Tsang & Co. is the Company’s principal accountant and has provided auditing services for the Company during the 2008 and 2007 periods. Their pre-approved fees billed to the Company are set forth below:

Fiscal year ending Fiscal year ending

December 31, 2008 December 31, 2007

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

Audit Fees $ 29,000

$27,000

Audit Related Fees NIL

NIL

Tax Fees NIL

NIL

All Other Fees $NIL

$ NIL

Prior to engaging its accountants to perform a particular service, the Company’s Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.

PART IV

Item 15. Exhibits.

EXHIBIT INDEX

3.(i) Articles of Incorporation, as amended of the Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

Articles of Incorporation, as amended of Avani Marketing Corp. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

Certificate of Incorporation and Name Change and Articles of Avani Water Corporation. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

Articles of Marina Bottling Company Ltd. (Incorporated by reference to the Company's Form 10-KSB for the period ended December 31, 1997).

Articles of Incorporation of Avani Manufacturing (China) Inc. (Incorporated by reference to the Company's Form 10-KSB for the period ended December 31, 1997).

Certificate of Amendment to Articles of Incorporation of the Company dated April 3, 2001 (Incorporated by reference to the Company's Form 10-KSB filed on April 11, 2001).

Certificate Of Change Of Common Stock Of Avani International Group, Inc. dated July 27, 2001 (Incorporated by reference to the Company's Form 8-K filed on July 31, 2001).

3.(ii) By-Laws of the Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

By-Laws of Avani Marketing Corp. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

By-Laws of Avani Manufacturing (China) Inc. (Incorporated by reference to the Company's Form 10-KSB for the period ended December 31, 1997).

10(i) Mortgage in favor of International Commercial Bank

of Cathay (Canada) dated May 2, 1996. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(ii) Mortgage in favor of Riversedge Holding Corp. dated

May 2, 1996. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(iii) Mortgage in favor of International Commercial Bank

of Cathay (Canada) dated July 26, 1996. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(iv) Mortgage in favor of Riversedge Holding Corp. dated

July 26, 1996. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(v) Mortgage in favor of International Commercial Bank

of Cathay (Canada) dated March 25, 1997. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(vi) Mortgage in favor of Riversedge Holding Corp. dated

March 25, 1997. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(vii) Agreement dated December 15, 1995 between the Company

and Georgia Pacific Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(viii) Agreement dated December 18, 1995 between the Company

and Georgia Pacific Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(ix) Agreement dated December 26, 1996 between the Company

and Georgia Pacific Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(x) Distribution Agreement dated December 14, 1996 between the Company and Yueh Long Enterprise Co., LTD. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(xi) Distribution Agreement dated June 13, 1997 between the

Company and Beon Top Enterprises Ltd. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(xii) Agreement dated April 29, 1997 by and between the Company and Georgia Pacific Company. (Incorporated by reference to the Company's Form 10-SB Registration Statement filed on November 4, 1997).

10(xiii) Joint Venture Agreement dated May 5, 1999 by and between the Avani International Group, Inc. and Multimega Technologies SDN. BHD. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xiv) Share Subscription Agreement dated and effective May 12, 19999 by and between Avani International Group, Inc. and Yip, Kam Chong. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xv) Warrant Agreement dated and effective May 12, 19999 by and between Avani International Group, Inc. and Yip, Kam Chong. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xvi) Share Subscription Agreement dated May 12, 1999 by and between Avani International Group, Inc. and Ngai Sou Chang. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xvii) Warrant Agreement dated May 12, 1999 by and between Avani International Group, Inc. and Ngai Sou Chang. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xviii) Finder's Fee Agreement dated June 12, 1999 by and between Avani International Group, Inc. and Chin Yen Ong. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xix) Warrant Agreement dated June 12, 1999 by and between Avani International Group, Inc. and Chin Yen Ong. (Incorporated by reference to the Company's Form 10-QSB for the period ended June 30, 1999 filed on August 23, 1999).

10(xx) Joint Venture Agreement dated February 18, 2000 by and between the Company and Avani O2 Water Sdn. Bdn (Incorporated by reference to the Company's Annual Report on Form

10-KSB filed on April 3, 2000).

10(xxi) Agreement dated January 4, 2000 by and between Avani International Marketing Corp. and Avani Water Corporation Sdn. Bdn. (Incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 3, 2000).

10(xxii) Financial Consulting Agreement dated March 23, 2000 by and between the Company and SJH Corporate Services, Inc. (Incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 3, 2000).

10(xxiii) Investor Relations Service Agreement dated March 23, 2000 by and between the Company and SJH Corporate Services, Inc. (Incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 3, 2000).

10(xxiv) Agreement dated January 4, 2000 by and between Avani Water Corporation and Prime Source International Consultants. (Incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 3, 2000).

10(xxv) Avani International Group, Inc. 2000 Stock Option Plan (Incorporated by reference to the Company's Annual Report on Form 10-KSB filed on April 11, 2001).

10(xxvi) Loan Agreement dated June 13, 2001 by and between David Pok Beng Kwong and Avani International Group, Inc. (Incorporated by reference to the Company's Form 10-QSB filed on August 13, 2001).

10(xxvii) Promissory Note dated June 13, 2001 by Avani International Group, Inc in favor of David Pok Beng Kwong. Incorporated by reference to the Company's Form 10-QSB filed on August 13, 2001).

10(xxvii) Loan Agreement, as revised, dated June 13, 2001 by and between David Pok Beng Kwong and Avani International Group, Inc.

(Incorporated by reference to the Company's Form 8-K filed on October 11, 2001).

10(xxviii) Investment Agreement dated September 26, 2001 by and between David Pok Beng Kwong and Avani International Group, Inc.

(Incorporated by reference to the Company's Form 8-K filed on October 11, 2001).

10(xxix) Finder’s Fee Agreement dated September 26, 2001 by and between Avani International Group, Inc and Tee Ah Siew. (Incorporated by reference to the Company's Form 8-K filed on October 25, 2001).

10(xxx) Amendment To Agreement Dated February 18, 2000, Made Between Avani O2 Water Sdn. Bhd. (Called Aow) And Avani International Group Inc. (Called Aig) (Incorporated by reference to the Company's Form 10-QSB filed on November 11, 2001).

10(xxxi) Amendment To Agreement Dated February 18, 2000, made between Avani O2 Water Sdn. Bhd. (Called Aow) And Avani International Group Inc. (Called Aig) (Incorporated by reference to the Company's Form 10-KSB for fiscal year ended December 31, 2001).

10(xxxii) Consulting Agreement dated January 2, 2001 by and between Avani Oxygen Water Corporation, of suite 328, 17 Fawcett Road, Coquitlam, British Columbia V3K 6V2 Canada (the “Company”) and Chin Yen Ong, No. 106, Jalan 1, Taman Sri Selayang, 68100 Batu Caves, Selangor Darul Ehsan, Malaysia (the “Consultant”). (Incorporated by reference to the Company's Form 10-KSB for the fiscal year ended December 31, 2001).

10(xxxiii) Share Subscription Agreement and Warrant Agreement both dated May 13, 2002 by and between Hsiao, Mao-Lin and Avani International Group, Inc. (Incorporated by reference to the Company's Form 8-K filed on June 3, 2002).

10(xxxiv) Share Subscription Agreement and Warrant Agreement both dated May 13, 2002 by and between Lee, Hsien-Ho and Avani International Group, Inc. (Incorporated by reference to the Company's Form 8-K filed on June 3, 2002).

10(xxxv) Finder’s Fee Agreement and Warrant Agreement both dated May 13, 2002 by and between Chin Yen Ong and Avani International Group, Inc. (Incorporated by reference to the Company's Form 8-K filed on August 2, 2002).

10(xxxvi) Amendment to Consultant Agreement dated June 14, 2002 by and between Chin Yen

Ong and Avani Oxygen Water Corporation and Avani International Group, Inc. (Incorporated by reference to the Company's Form 8-K filed on August 2, 2002).

10(xxxvii) Sale and Purchase Agreement by and between Avani International group, Inc. and Avani Oxygen Water Corporation and Avani O2 Water Sdn. Bhd. dated October 4, 2002. (Incorporated by reference to the Company's Form 8-K filed on November 5, 2002).

10(xxxviii) Amendment to Joint Venture Agreement Made Between Avani O2 Water Sdn. Bhd. (Called Aow) And Avani International Group Inc. (Called Aig) entered January 23, 2003 and effective as of January 1, 2002. (filed herewith).

10(xxxix) Amendment To Sale & Purchase Agreement Dated October 4, 2002, Made Between Avani International Group Inc. And Avani Oxygen Water Corporation (Called “Vendor”) And Avani O2 Water Sdn. Bhd. (Called “Purchaser”) effective as of February 20,.2003. (filed herewith).

14. Code of Ethics (filed herewith).

17.1 Resignation letter of Ngai Sou Angeline Chang Incorporated by reference to the Company's Form 8-K filed on May 28, 2002).

17.2 Resignation letter of Wai Meng Yeap Incorporated by reference to the Company's Form 8-K filed on May 28, 2002).

21 (i) Subsidiaries of Registrant.

31 Certification under Section 302 of the Sarbanes-Oxley Act.

32 Certification under Section 906 of the Sarbanes-Oxley Act.

FINANCIAL STATEMENTS INDEX

-Report of Independent Registered Public Accounting

Firm of Jeffrey Tsang & Co. dated March 20, 2008

F-1

-Consolidated Balance Sheets as of December 31, 2008

and December 31, 2007.................................

F-3

-Consolidated Statements of Operations and

Comprehensive Loss for Fiscal Years Ended

December 31, 2008 and December 31, 2007................

F-4

-Consolidated Statements of Changes in Stockholder's Equity

(Capital Deficit) For Years Ended December 31, 2008

and December 31, 2007..................................

F-5

-Consolidated Statements of Cash Flows for

Fiscal Years Ended December 31, 2008 and

December 31, 2007.....................................

F-6

-Summary of Significant Accounting Polices

F-7

-Notes to Consolidated Financial Statements.........

F-12

Avani International Group Inc.

Consolidated Balance Sheets

(Expressed in US dollars)

December 31

2008

2007

Assets

Current

Cash and cash equivalents

948,473

1,217,971

Accounts receivable (net of allowance for doubtful accounts

in 2007 - $Nil)

4,066

2,671

Prepaid expenses

4,074

5,006

956,613

1,225,648

Property, plant and equipment (Note 2)

80,304

12,874

Other assets (Note 3)

10,333

18,828

1,047,250

1,257,350

Liabilities and Stockholders’ Equity (Capital Deficit)

Liabilities

Current

Accounts payable

852,719

885,417

Accrued liabilities

51,724

63,553

Debts payable (Note 4)

145,594

170,819

Unearned revenue and deposits

8,065

9,909

1,058,102

1,129,698

Commitments and Contingencies (Notes 8 and 9)

Stockholders’ Equity (Capital Deficit)

Capital stock (Note 7)

Authorized

800,000,000 common shares, par value of $0.001

1,000,000 preferred shares, par value of $0.001

Issued and outstanding

17,582,571 (2007– 17,582,571) common shares

17,583

17,583

- 1,000,000 preferred shares (2007 – 1,000,000)

Additional paid-in capital

8,116,092

8,116,092

Accumulated deficit

(8,177,264)

(7,947,590)

Accumulated other comprehensive loss

- foreign exchange translation

32,737

(58,433)

(10,852)

127,652

1,047,250

1,257,350

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.


Avani International Group Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in US Dollars)
For the years ended December 31			2008		2007			2006
Revenue
	Bottled water and supply sales	$	-	$	-	$		99,307
Cost of revenue
	Cost of goods sold (excluding depreciation)		-		-			143,525
	Depreciation		-		-			68,002
			-		-			211,527
Gross profit			-		-			(112,220)
Operating expenses
	Marketing		105,087		163,269			51,230
	General and administration		245,765		210,150			435,322
	Loss on sale of assets(gain)		-		-			(253,129)
	Foreign exchange loss (gain)		-		-			24,865
			350,852		373,419			258,288
Loss from operations			(350,852)		(373,419)			(370,508)
Other income (expenses)
	Interest on debts payable		(7,505)		(7,449)			(7,054)
	Bad debts recovery (Note 6)		77,086		147,372			-
	Obligation payable written-off		-		285,745			-
	Interest income		18,224		12,226			56,516
	Royalty income		10,089		-			-
	Equipment rental income		23,284		-			-
			121,178		437,894			49,462
Net profit (loss) for the year			(229,674)		64,475			(321,046)
Foreign currency translation adjustment			91,170		(55,620)		46,038
Comprehensive Gain (Loss) for the year		$	(138,504)	$	8,855	$	(275,008)
Gain (Loss) per share - basic and diluted		$	(0.01)	$	0.01		(0.02)
Weighted average shares outstanding			17,582,571		15,499,238		14,832,571
The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.


Avani International Group Inc.
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
For the years ended December 31				2008		2007			2006
Cash provided by (used in)
Operating activities
	Net gain (loss) for the year			$	(229,674)	$	64,475	$	(321,046)
	Adjustments to reconcile net loss for the year to
	net cash used in operating activities
			Depreciation and amortization		14,118		16,450		101,909
	Loss (gain) on disposal of assets								(252,230)
	(Increase) decrease in assets
			Accounts receivable		(1,395)		(1,751)		4,550
			Inventories		-		-		107,227
			Prepaid expenses		932		421		323
	Increase (decrease) in liabilities
		Accounts payable			(57,923)		120,239		126,230
		Accrued liabilities			(11,829)		(5,506)		(63,972)
		Unearned revenue and deposits			(1,844)		1,481		(25,330)
Cash from bad debts recovery (Note 6) C					(77,086)		(147,372)		-
	Cash provided (used in) operating activities from continuing operations				(364,701)		48,437		(322,339)

Investing activities
	Proceeds from sale of capital assets				-		-		1,018,895
					-		-		1,018,895
Financing activities

	Issuance of common shares				-		400,972		250,000
	Written-off obligation payable				-		(285,745)		-
					-		115,227		250,000
Increase (decrease) in cash during the year					(364,701)		163,664		721,556
Effect of foreign exchange on cash					95,203		85,888		78,553
Cash and cash equivalents, beginning of year					1,217,971		968,419		168,310
Cash and cash equivalents, end of year				$	948,473	$	1,217,971		968,419
Supplemental Information:
	Interest paid			$	7,505	$	7,449		7,504

The accompanying summary of significant accounting policies and notes are an integral part of these consolidated financial statements.


Avani International Group Inc.
Summary of Significant Accounting Policies
(Expressed in US Dollars)
December 31, 2008 and 2007
Basis of Presentation	These consolidated financial statements are expressed in US dollars and have been prepared in conformity with United States generally accepted accounting principles. Included in the financial statements for the year ended December 31, 2008 and 2007 are the accounts of the Company and its wholly-owned subsidiaries (Avani Oxygen Water Corporation and Avani International Marketing Corporation).
	All significant intercompany transactions and balances have been eliminated on consolidation. The Company’s previous business combinations were accounted for using the purchase method.
Use of Estimates	The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 materially differ from these estimates.
Financial Instruments	The Company's financial instruments consist of cash and cash equivalents, accounts receivable, due from related party, accounts payable, accrued liabilities, debts payable and obligations payable. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the portion of obligation payable related to the assignment of net profits, the fair value of financial instruments approximates their carrying values due to the immediate or short term maturity of these financial instruments. The carrying amount for the portion of obligations payable related to the assignment of net profits interest was not practicable to determine.
Foreign Currency Translation and Transactions	The parent company's functional currency is the United States dollar, however, the functional currency of the consolidated entity is the Canadian dollar as substantially all of the Company's operations have been in Canada. The Company uses the United States dollar as its reporting currency for consistency with other registrants of the Securities and Exchange Commission ("SEC").


Avani International Group Inc.
Summary of Significant Accounting Policies
(Expressed in US Dollars)
December 31, 2008 and 2007
Foreign Currency Translation and Transactions - Continued	Assets and liabilities of the subsidiary denominated in a foreign currency are translated at the exchange rate in effect at the period end. The Statement of Operations is translated at the average rates of exchange prevailing during the periods. Translation adjustments arising from the use of differing exchange rates from period to period are included in the Accumulated Other Comprehensive Loss account in Stockholders' Equity (Capital Deficit).
	Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in Other Income (Expenses) on the Statement of Operations and Comprehensive Loss.
Revenue Recognition	Revenue on sales of bottled water, coolers 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 is 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.


Cash and Cash Equivalents	The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Avani International Group Inc.
Summary of Significant Accounting Policies
(Expressed in US Dollars)
December 31, 2008 and 2007
Allowance for Doubtful Accounts	The Company records an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible and all receivables that are outstanding for more than 120 days. The criteria for allowance provision are determined based on historical experience and the Company’s assessment of the general financial conditions affecting its customer base. If the Company’s actual collections experience changes, revisions to the allowance may be required.
Inventories	Inventories are stated at the lower of cost (determined by the first-in, first-out method) and market. Market is determined based on the net realizable value of finished goods and the replacement cost for supplies. Inventory is comprised of small bottles, packaging containers, supplies and water coolers for resale.
Property, Plant and Equipment	Property, plant and equipment is recorded at cost. Depreciation is recorded at half the annual rate in the year such assets are acquired and is not recorded in the year of disposition. Depreciation is provided on a straight-line basis over the estimated useful life of the assets at the following annual rates:
	Coolers - 20% Plant equipment - 10% Office furniture and equipment - 10% to 20% Building - 2.5% Vehicle - 10%
Other Assets	Trademarks and licenses are recorded at cost and are amortized on a straight-line basis over the estimated useful life of 10 years in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”.
Income Taxes	The Company follows the provisions of SFAS 109, "Accounting for Income Taxes", which requires the Company to recognize tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is provided for all deferred tax assets when it is more-likely-than-not that these deferred tax assets will not be realized.


Avani International Group Inc.
Summary of Significant Accounting Policies
(Expressed in US Dollars)
December 31, 2008 and 2007
Loss Per Share	Loss per share is computed in accordance with SFAS No. 128, "Earnings Per Share". Basic loss per share is calculated by dividing the net loss available to common stockholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, potentially dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive. Basic and diluted loss per share are the same for the years presented.
	For the years ended December 31, 2008 and 2007, potentially dilutive common shares (relating to options and warrants outstanding at year end) totalling Nil (2007 – 1,500,000) were not included in the computation of loss per share because their effect was anti-dilutive.
Comprehensive Income	The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company is disclosing this information on its Statements of Operations and Comprehensive Loss. Comprehensive income (loss) is comprised of net income (loss) and all changes (loss) to stockholders' equity except those resulting from investments by owners and distributions to owners.
Stock-based Compensation	The Company applies SFAS No. 123, “Accounting for Stock-Based Compensation for Non-Employees” and has elected to continue to measure compensation cost for employees under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations.
	SFAS No. 123, 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. 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.


Avani International Group Inc.

December 31, 2008 and 2007
Stock Based Compensation - Continued	SFAS 148 “Accounting for Stock-Based Compensation—Transition and Disclosure“ amends the disclosure requirements of SFAS 123 so that entities will have to make more prominent disclosures regarding the pro forma effects of using the fair value method of accounting for stock-based compensation. 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 as the exercise price of these options is greater than the market price of the underlying stock. 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 Statement of Financial Accounting Standard (“SFAS”) No. 123, (based on a dividend yield of Nil; risk-free interest rate of 0.57%; expected volatility of 289%; and expected life of 2 years) the Company's net loss and loss per share would have been increased as follows:
	Years Ended December 31 2008 2007 Net loss, as reported $(229,674) $64,475 Deduct: Stock-based employee compensation expense determined under fair-value based method for all awards not included in net loss - - Pro-forma net loss $(229,674) $64,475 Loss per share: Basic and diluted – as reported $(0.01) $0.01 Basic and diluted – pro-forma $(0.01) $0.01
Advertising	The Company follows the provisions of Statement of Position 93-7 in accounting for costs of advertising. Advertising costs are charged to expense as incurred.
Valuation and Disposition of Long-lived Assets	The Company evaluates the future recoverability of its property, plant and equipment and trademarks and licenses in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS No. 144 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the estimated undiscounted future cash flows attributable to such assets. It requires that those long-lived assets to be disposed of by sale are to be measured at the lower of carrying amount or fair value less cost of sale whether reported in continuing operations or in discontinued operations. No impairment was required to be recognized during the periods presented in these consolidated financial statements.


Avani International Group Inc.
Summary of Significant Accounting Policies
(Expressed in US Dollars)
December 31, 2008 and 2007
Recent Accounting Pronouncements	In May 2008, the FASB issued Statement of Financial Accounting Standard No. 162 (“FAS 162”), The Hierarchy of Generally Accepted Accounting Principles” which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the U.S. The Company is evaluating the impact FAS 162 will have on its financial statements.
	In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“FAS 160”). FAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. FAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has determined the adoption of FAS 160 will not have a material effect on its consolidated financial statements.
	In September 2006, the FASB issued SFAS No. 157 (“FAS 157”), “Fair Value Measurements,” which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 is effective for fiscal years beginning after November 15, 2007. Earlier adoption is permitted, provided the company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company has determined that the adoption of FAS 157 will not have a material impact on its consolidated financial position, results of operations or cash flows.
	The Company is assessing the effect that the implementation of these new standards will have on the consolidated financial statements.


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
1.	Nature of Business and Ability to Continue as a Going Concern
	Avani International Group Inc. (the "Company"), a Nevada corporation, incorporated on November 29, 1995, has constructed a bottling facility in Coquitlam, British Columbia and has been engaged in the business of developing, manufacturing and distributing an oxygen enriched, purified bottled water under the trade name "Avani Water" for domestic and export sales. On June 15, 2006, the Company sold its real property including land, building and building improvements. After the sale of its real property, its production of water has been suspended.
	The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles 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 losses to date of $8,177,264 which includes a comprehensive loss of $138,504 for the current year. The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders, refinancing debts payable, obtaining additional long-term financing, as well as achieving and maintaining a profitable level of operations. The Company may be required to raise additional equity and debt capital as necessary to finance its ongoing operations. Presently, it is seeking new business opportunities in Asian. The Company can not predict when it will generate revenues from operations.
	These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might arise from this uncertainty.
2.	Property, Plant and Equipment
				2008		2007
		Canada
		Land	$	-	$
		Building		-
		Plant equipment		77,806
		Office furniture and equipment		67,125		67,125
				144,931		67,125
		Less: Accumulated depreciation		(64,627)		(54,251)
			$	80,304	$	12,874

3.	Other Assets
	The trademark and license is carried on the consolidated balance sheet at net book value of $10,333 (2007 - $18,828) which is calculated based on the original cost of the asset at $51,500 net of accumulated amortization of $41,167. Amortization expense of $6,364 was charged to the Statement of Operations and Comprehensive Loss in 2008 (2007 – $5,783) and annual amortization of approximately $6,000 is estimated to be expensed in each of the next five years.


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
4.	Debts Payable
				2008		2007
		Loan payable on demand, unsecured and bearing simple
		interest at 8%, calculated annually.	$	145,594	$	170,819

5.	Obligations Payable
				2008		2007
		Assignment of net profits interest as at December 31, 2006 Settled during 2007	$	-	$	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 in production equipment located in Malaysia (the "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 obligations payable and will record reductions in this account as Net Profits Interests are received by the lenders. The Net Profits Interest was replaced by a rental fee payable by Avani O2 to the Company in 2004. During fiscal 2007, the obligation payable of $285,745 was settled by a Company in Malaysia, and the obligation payable is written off accordingly.
6.	Bad Debts Recovery
	In December of 2007, the Company received $147,372 from Avani O2, a Malaysia company, as partial payment of amounts previously owed to the Company. Avani O2 owed the Company the sum of $502,110, which was written off by the Company as bad debt. This payment of $147,372 was recorded as bad debts recovery. In September 2008, the Company purchased assets from Avani O2, which include plant equipment and office equipment in an amount of $77,086. As agreed by the Company and Avani O2, this purchase amount offsets Avani O2’s owing to the Company which is stated as above, in the same amount of $77,863. This offset amount has been recorded as bad debts recovery.


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
7.	Capital Stock
	Transactions not disclosed elsewhere in these consolidated financial statements are summarized as follows:
	a)	In August 2003, the Company completed a private placement of 5,000,000 shares of common stock at $0.06 per share for gross proceeds of $300,000. In connection with the share issuance, the Company agreed to pay a finder's fee to a third party, who is the Company’s largest shareholder, equal to 10% of the gross proceeds, totaling $30,000 in cash and 1,500,000 share purchase warrants. These warrants are fully exercisable at any time within 5 years at an exercise price of $0.06 per share, expiring on September 2, 2008. On October 3, 2007, the Company completed a private placement of 2,500,000 shares of common stock for gross proceeds of $400,000. In connection with the share issuance, the Company agreed to pay a finder's fee to Avani Water Corporation Sdn. Bhd, an unaffiliated Malaysian company. The finder’s fee is $40,000 and stock purchase warrants to acquire 750,000 shares of common stock at $0.06 during a five year term. The warrants were valued at $45,300 based on the Black-Scholes option pricing model, using the following assumptions: dividend yield Nil%; risk-free interest rate 2.00%; expected volatility 289%; expected life 5 years
	b)	As at December 31, 2007, the Company had 2,250,000 fully exercisable share purchase warrants outstanding. On September 2, 2008, 1,500,000 share purchase warrants granted in August 2003 and are exercisable at any time within 5 years (Note (a) above) expired. As at December 31, 2008, the Company has 750,000 share purchase warrants outstanding, which are fully exercisable at any time at an exercise price of $0.06 per share, expiring on October 2, 2012.
		A summary of share purchase warrant transactions for the years presented is as follows:
					Weighted
					Average
					Exercise
				Number	Price
		Outstanding at January 1, 2002		1,347,500	$1.80
			Granted	20,812,557	$0.03
			Expired	(797,500)	$3.00

		Outstanding at December 31, 2002		21,362,557	$0.03
			Granted (a) and (b)	(1,500,000)	$0.07
		Outstanding at December 31, 2005		22,862,557	$0.05
		Exercise of warrants on June 21, 2006		(500,000)	$0.05
		Warrants expired on September 26, 2006		(550,000)	$0.05
		Outstanding on December 31, 2006		21,812,557	$0.05
		Warrants expired on May 13, 2007		(10,000,000)	$0.05
		Warrants expired on July 15, 2007		(10,312,557)	$0.05
		Warrants granted on October 3, 2007		750,000	$0.06
		Outstanding on December 31, 2007		2,250,000	$0.05
		Warrants expired on September 2, 2008		(1,500,000)	$0.05
		Outstanding on December 31, 2008		750,000	$0.06


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
7.	Capital Stock - Continued
	c)	During the year ended December 31, 2003, the Company granted 1,100,000 stock options to certain consultants as compensation for consulting services. Each option entitles the holder to purchase one share of the Company’s common stock at $0.05 per share during the first year and $0.30 per share in the second year. Of these options, 30% vested immediately with the remaining 70% to be vested on the one year anniversary of the date of grant. The Company also granted 500,000 fully vested options to a consultant, which entitles the holder to purchase one share of the Company's common stock at $0.05 per share for a three-year period. On November 18, 2002, the Company granted 300,000 stock options to a consultant as compensation for consulting services. Each option entitles the holder to purchase one share of the Company’s common stock at $0.05 per share during the first year and $0.30 per share in the second year. Of these options, 30% vested immediately with the remaining 70% to be vested one year after the date of grant. The above described options expired during fiscal 2006.
		The Company follows SFAS No.123, "Accounting for Stock-Based Compensation," which requires compensation cost associated with stock options granted to other than employees to be valued based on the fair value of the stock options, where such fair value was estimated using the Black-Scholes option pricing model. Unvested stock options are remeasured on each balance sheet date for the purpose of determining stock option compensation. The weighted average grant date fair value of the options granted during 2003 ($0.04 per option) was estimated using the following weighted average assumptions and remeasured:
				2008	2007
			Dividend yield	Nil	Nil
			Risk-free interest rate	Nil	Nil
			Expected volatility	Nil	Nil
			Expected lives	Nil	Nil
		Compensation expense was amortized over the vesting period and expenses totaling $Nil for the year ended December 31, 2008 and 2007.
		On June 10, 2003, the Company granted 1,950,000 stock options to Company employees and directors. Of this amount, 1,150,000 stock options have an exercise period of two years. Each option entitles the holder to purchase one share of the Company’s common stock at $0.05 per share during the first year and $0.30 per share in the second year. Only 30% of the options granted during the period are exercisable immediately with the remaining 70% to be vested on the one year anniversary of the date of grant. Another 800,000 fully vested stock options have an exercisable period of 3 years and an exercise price of $0.05 per share. The above described options expired during fiscal 2006. As there was no stock-based compensation awarded to employees during the year ended December 31, 2008 and 2007, the pro-forma information for the period ended December 31, 2008 equals the information as reported on the statement of Operations and Comprehensive Income (Loss).


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
7.	Capital Stock - Continued
		A summary of stock option transactions for the years presented is as follows:
					Weighted
					Average
					Exercise
				Number	Price
		Outstanding at January 1, 2002		300,000	$ 0.30
			Granted – employees	1,950,000	0.05
			Granted – non-employees	1,600,000	0.05
		Outstanding at December 31, 2003		3,850,000	0.07
		Expired		(300,000)	0.30
		Exercised		(60,000)	0.05
		Outstanding at December 31, 2004		3,490,000	$ 0.21
		Expired Cancelled Exercisable at December 31, 2005		3,490,000 (2,190,000) (300,000) 1,000,000	$ 0.21 0.30 0.05 0.05
				1,000,000	$ 0.05
		Expired on June 9, 2006		(1,000,000)	0.05
		Exercisable at December 31, 2008 and 2007		Nil

d) In July 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.

On October 11, 2007, the Company filed with the Nevada Secretary of State a Certificate of Designations to create a class of preferred stock consisting of 1,000,000 shares and known as the “Class A Super Voting Preferred Stock”.

On all matters presented to the shareholders for a vote, the Class A Super Voting Preferred Stock has 2,000 votes per shares. On December 13, 2007, the Company issued 1,000,000 shares of the Class A Super Voting Preferred Stock to Mr. Robert Wang, the Company’s Chairman and President.

In December 2007, the Company issued 2,500,000 shares of common stock to a Malaysian company for a private placement totaling $400,000.


Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008 and 2007
8.	Income Taxes
	The tax effect of the temporary differences that give rise to the Company's deferred tax assets and liabilities are as follows:
				2008				2007
	Net operating and capital losses	$		2,350,000		$		2,500,000
	Property, plant and equipment			30,000				5,000
	Valuation allowance			(2,380,000)				(2,505,000)
	Deferred tax assets (liability)	$		-		$		-

	The tax benefit of net operating and capital losses carried forward and the associated valuation allowance were reduced by approximately $30,000 (2007 – $290,000), representing the tax effect of losses which expired in the year
					2008				2007
	Provision (benefit) at the federal US statutory rate of 34%		$		(78,000)		$		22,000
	Foreign income taxes at other than the federal US statutory rate				(52,000)				(52,000)
	Effect of reduction in foreign income tax rates				(8,300)				2,000
	Effect of foreign exchange on valuation allowance				240,800				(438,000)
	Tax effect of reduction in losses carry forward from sale of
	subsidiary				-
	Tax effect of loss on settlement of payables				-				-
	Tax effect of gain on settlement of debt				-				-
	Utilization of net operating loss				-
	Non-deductible expenses				22,500				23,000
	Increase (decrease) in valuation allowance				(125,000)				443,000
			$		-		$		-
	The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management's judgement about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income.
	At December 31, 2008, the Company had net operating loss carryforwards of approximately $975,000 for U.S. income tax purposes, which if not used will expire during the years 2014 through 2027. At December 31, 2008, the Company had net operating loss carryforwards of approximately 3,720,000 for Canadian income tax purposes, which if not used will expire during the years 2009 through 2019 and allowable capital losses of approximately $Nil (2007 - $Nil) which are available to offset against future capital gains.
Avani International Group Inc.
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
*December 31, 2008 and 2007*
9.	Lease Obligations
	For the years ended December 31, 2008 and 2007, the Company has no lease obligation.
10.	Related Party Transactions
	Related party transactions not disclosed elsewhere in these consolidated financial statements include:
	During the year ended December 31, 2008, the President did not incur transportation expenses (2007 - $7,515). The Company also accrued salary compensation of $72,000 (2007 - $72,000) and overseas living allowance of $60,085 (2007 - $48,298) for the year ended December 31, 2008, both of which are payable to the President of the Company.
11.	Equipment Rental Agreements
	After the sale of its property including land, building and building improvements on June 15, 2006, the Company’s suspended its water production operation. As mentioned previously, it recovered from Avani O2 Water Sdn. Bhd its proprietary bottling equipment that was the subject of its prior joint venture with Avani O2 (See Note 4). On March 15, 2008, the Company rented the recovered equipment, on a month to month basis, to Avani Oxygen Water Corporation Sdn. Bdh. (formerly Avani Water Corporation Sdn. Bdn.), an unaffiliated Malaysian company (“AOW”). The rental arrangement was terminated on June 30, 2008. The rental arrangement provided for a rental of approximately $5,000 per month and 2% royalty on gross sales resulting from the equipment use. On October 20, 2008, the Company entered into a two year rental agreement with AOW for renting certain production and office equipment. The rental arrangement provided for a rental payment by AOW to the Company of approximately $600 per month. This agreement commenced September 2, 2008 and terminates on August 31, 2010.

SIGNATURES

In accordance with Section 13 or 15(d) 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.

/s/Robert Wang

March 31, 2009

Robert Wang

Date

Principal Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/Robert Wang March 31, 2009

Robert Wang Date

Principal Executive Officer

and Director

/s/Dennis Robinson March 31, 2009

Dennis Robinson Date

Principal Financial Officer

and

Director

/s/Jeffrey Lightfoot March 31, 2009

Jeffrey Lightfoot Date

Director


Avani International Group Inc.
Consolidated Interim Statements of Changes in Stockholders’ Equity (Capital Deficit)
(Expressed in US Dollars)
										Accumulated
						Additional				Other		Total
		Common Shares				Paid-in		Accumulated		Comprehensive		Stockholders’
		Shares			Amount	Capital		Deficit		Loss		Equity
Balance, January 1, 2006			14,582,571		14,583		7,693,120		(7,691,019)		(48,851)		(32,167)
Issuance of common stock			500,000		500		24,500						25,000
Net loss for the year									(321,046)				(321,046)
Foreign exchange translation adjustment											46,038		46,038
Balance, December 31, 2006			15,082,571		15,083		7,717,620		(8,012,065)		(2,813)		(282,175)
Issuance of common stock on exercise of warrants			2,500,000		2,500		398,472						400,972
Net loss for the year			-		-		-		64,475		-		64,475
Foreign exchange translation adjustment			-		-		-		-		(55,620)		(55,620)
Balance, December 31, 2007			17,582,571	$	17,583	$	8,116,092	$	(7,947,590)	$	(58,433)	$	127,652
Issuance of common stock			-		-		-						-
Net gain (loss) for the period			-		-		-		(229,674)		-		(229,674)
Foreign exchange translation adjustment			-		-		-		-		91,170		91,170
Balance, December 31, 2008			17,582,571	$	17,583	$	8,116,092	$	(8,177,264)	$	32,737	$	10,852

	Preferred Shares
	Shares
Balance, January 1, 2006	Nil
Balance, December 31, 2006	Nil
Issuance of preferred stock in July 2007	1,000,000
Balance, December 31, 2007	1,000,000
Balance , December 31, 2008	1,000,000