SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                             FORM 10-Q

       Quarterly Report Pursuant to Section 13 or 15 (d) of the 
                Securities and Exchange Act of 1934



For the Quarter Ended                                   Commission File Number

May 31, 1998                                              0-12423           
      
                                 MERIT DIVERSIFIED INTERNATIONAL, INC.
                       (Exact name of registrant as specified in its charter)

Nevada                                                       94-2906927  
(state or other jurisdiction of                            (I.R.S. Employer 
incorporation or organization)                            Identification No.)
        

4570 Campus Drive, Newport Beach, California  92660
Address of principal executive offices)


Registrants telephone number, including area code:   (714) 252-2121           
                                                                           

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.

    Yes                                             No                      

The number of shares outstanding of each of the registrants classes of common 
stock, as of May 31, 1998 was 30,042,257 shares, all of one class of $.00 par 
value Common Stock.














               MERIT DIVERSIFIED INTERNATIONAL, INC.
                            FORM 10-Q
                      Quarter Ended May 31, 1998

                        TABLE OF CONTENTS

FINANCIAL INFORMATION                                               PAGE

Item 1-         Consolidated Financial Statements

                Consolidated Balance Sheets as of May 31, 1998 and
                       August 31, 1997                                3

                Consolidated Statements of Operations for the three months
                       ended May 31, 1998 and May 31, 1997            4
                
                Consolidated Statements of Operations for the nine months
                ended May 31, 1998 and May 31, 1997                   5

                Consolidated Statements of Cash Flows for the three months
                ended May 31, 1998 and May 31, 1997                   6

                Notes to Consolidated Financial Statements            7,8

Item 2-         Managements Discussion and Analysis of Financial
                       Condition and Results of Operations           9-11

OTHER INFORMATION

Item 1-  Legal Proceedings                                           12

Item 2-  Changes in Securities                                       12

Item 3-         Defaults upon Senior Securities                      12

Item 4-  Submission of Matters to a Vote of Security Holders         12

Item 5-         Other Information                                    12

Item 6-         Exhibits and Reports on Form 8-K                     12


SIGNATURES                                                           13























                  MERIT DIVERSIFIED INTERNATIONAL, INC.
                    (A Developmental Stage Company)
                    PART 1: FINANCIAL INFORMATION
                      CONSOLIDATED BALANCE SHEETS
                AS OF MAY 31, 1998 AND AUGUST 31, 1997


                                 May 31                        August 31,
                                 1998                               1997     
                                 (Unaudited)                   (Note 1)

Assets                           $       -                     $       -
                                                                        
Total Assets                     $       -                     $       -
                                                                             

Liabilities and Shareholders Equity

Current liabilities

  Accounts and taxes payable     $  -                           $  8,000

Total current liabilities           -                              8,000

Commitments

Shareholders Equity

        Common Stock-no par value; 
 50,000,000     shares authorized, 
 30,042,257 issued and 
 outstanding as of May 31, 1998 
 and August 31, 1997               1,332,349                      1,332,349

  Additional paid-in capital        1,130,215                     1,122,215

   Accumulated deficit-accumulated
   during the developmental stage  (2,462,564)                   (2,462,564)

Total shareholders equity          $       -                   $     (8,000)
                                                                             
Total liabilities and 
shareholders equity                 $       -                   $          -
                                                                            
        





See Notes to Consolidated Financial Statements
















                   MERIT DIVERSIFIED INTERNATIONAL, INC.
                   (A Developmental Stage Company)

                   CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED MAY 31, 1998 AND 1997
                               (UNAUDITED)
<TABLE>
<S>
<S>

                          Three Months      Three Months       Since Being
                            Ended               Ended               A
                           May 31,            May 31,          Developmental
                            1998              1997              Stage Company
                           (Note 1)
Net revenue               $       -         $          -       $      -

Costs and expenses:

  General and administrative      -                    -            2,244,147
  Depreciation and amortization   -                    -                6,200

Income (loss) from operations $   -                    -       $  (2,250,347)

Other income (expense):

  Interest expense             -                       -             (22,518)
  Loss on sale of fixed assets -                       -                (918)
  Loss on sale of investments  -                       -            (269,800)
  Income from debt adjustment  -                       -              86,419

Total other income (expense)   -                       -            (206,817)

Income before taxes
 on income                     -                       -           (2,457,164)

Taxes on income                -                       -                5,400

Net income (loss)              -                       -           (2,462,564)

Net income (loss) per share  nil                      nil             

Weighted average number of shares 
  and share equivalents 
  outstanding             30,042,257              16,209,316


</TABLE>



See Notes to Consolidated Financial Statements
















                          MERIT DIVERSIFIED INTERNATIONAL, INC.
                           (A Developmental Stage Company)

                        CONSOLIDATED STATEMENTS OF OPERATIONS
                        SIX MONTHS ENDED MAY 31, 1998 AND 1997
                                        (UNAUDITED)



                             Nine Months      Nine Months    Since Being
                              Ended           Ended              A
                              May 31,         May 31,        Developmental
                              1998            1997          Stage Company
                             (Note 1)
Net revenue                   $     -         $    -         $     -

Costs and expenses:

  General and administrative       -               -             2,244,147
  Depreciation and amortization   -                -                 6,200

Income (loss) from operations $   -                -         $  (2,250,347)

Other income (expense):

  Interest expense                -                -               (22,518)
  Loss on sale of fixed assets    -                -                  (918)
  Loss on sale of investments     -                -              (269,800)
  Income from debt adjustment     -                -                86,419

Total other income (expense)      -                -               (206,817)

Income before taxes
 on income                        -                -             (2,457,164)

Taxes on income                   -                -                  5,400

Net income (loss)                 -                -             (2,462,564)

Net income (loss) per share       nil            nil             

Weighted average number of shares 
and share equivalents 
outstanding                   30,042,257      16,209,316





See Notes to Consolidated Financial Statements


















                          MERIT DIVERSIFIED INTERNATIONAL, INC.
                            (A Developmental Stage Company)

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                      THREE MONTHS ENDED MAY 31, 1998 AND 1997
                                       (UNAUDITED)



Increase (Decrease) in Cash and Cash Equivalents


                             Three Months              Three Months             
                                 Ended                     Ended             
                                May 31,                   May 31,          
                                 1998                      1997     

Operating activities:

  Net income (loss)          $       -                    $ -               
  Adjustments to reconcile net loss
    to cash used in operating activities:
    Amortization expense            -                       -               
  Changes in operating assets and
     liabilities:
    Accounts payable          (8,000)                       -               
Cash provided by (used in)
 operating activities         (8,000)                       -               
Investing activities:            -                          -               
Financing activities:
  Contribution by shareholder 8,000
  Loan proceeds                  -                          -       
  Issuance of capital stock      -                          -               
Cash provided by financing
 activities                    8,000                        -               
Net increase (decrease) in 
 cash and cash equivalents       -                          -               
Cash and cash equivalents,
 beginning of period             -                          -              
Cash and cash equivalents,
 end of period            $      -                       $  -            




See Notes to Consolidated Financial Statements






















               MERIT DIVERSIFIED INTERNATIONAL, INC.
                (A Developmental Stage Company)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         MAY 31, 1998

Note 1 - Basis of Presentation
                                                                            

The accompanying consolidated financial statements have been prepared in 
accordance with United States generally accepted accounting principles for 
interim financial information and with the instructions to Form 10-Q and Rule 
10-01 of Regulation S-X.  Accordingly, they do not include all of the 
information and footnotes required by generally accepted accounting 
principles for complete financial statements.  In the opinion of management, 
all adjustments considered necessary for a fair presentation have been 
included.  Operating results for the three months ended May 31, 1998 are not 
necessarily indicative of the results that may be expected for the year ended 
August 31, 1998.  For further information, refer to the consolidated financial 
statements and footnotes thereto included in the Companys Form 10-K for the 
year ended August 31, 1997.     

Note 2 - Net Income (Loss) Per Share
                                                                          

Net income (loss) per share and common equivalent share is computed using the 
weighted average number of shares outstanding during each period.

During April, 1996, the Board of Directors declared a reverse stock split, 
reducing the number of common shares outstanding through the distribution of 
one common share in exchange for twenty (20) common shares held by 
shareholders of record as of April 30, 1996.  All references to common share 
and per share amounts in the accompanying financial statements have been 
retroactively adjusted to reflect the effect of this transaction.       

Note 3- Related Party Transactions
                                                                        

The Company has been able to continue in existence and reduce its debts and 
obligations through the assistance of certain major shareholders who continue
to fund the Companys general and administrative expenses and to pay  
outstanding obligations.  There can be no assurance that these shareholders 
will continue such funding in the future.

Note 4- Going Concern
                                                                        

The Company has incurred significant losses since its inception and as of 
May 31, 1998, has no source of revenue.  The Company has no cash and has 
maintained its existence and paid ongoing expenses through the issuance of 
common stock.




















                 MERIT DIVERSIFIED INTERNATIONAL, INC.
                   (A Developmental Stage Company)
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                            MAY 31, 1998



The Company has been able to continue because major shareholders have 
continued to invest in the Company to meet its expenses.  As of May 31, 
1998, the Company has been successful in converting most of its debt to equity.

The Company is considered a development stage Company and will remain in this 
status until operations begin.  There can be no assurance that the Company will
be able to merge with an operating company, acquire an ongoing business, or 
that the major shareholders will continue to pay the expenses of the Company.

Note 5- Common Stock
                                                                       

During February, 1997, major shareholders contributed $8,000 to the capital of 
the Company to satisfy outstanding accounts payable.  No additional shares of 
the Company were issued as a result of this contribution to capital and the 
amount was recorded as additional paid in capital.





















(Balance of Page Left Blank Intentionally)






















               MERIT DIVERSIFIED INTERNATIONAL, INC.
                  (A Developmental Stage Company)
                          MAY 31, 1998

Item 2 - Management's Discussion and Analysis of Financial Condition and 
         Results  of Operations or Plan of Operation
                                                                           

The following review concerns the three and nine month periods ended May 31, 
1998 and May 31, 1997, which should be read in conjunction with the financial 
statements and notes thereto presented in the Form 10-Q.

The information set forth in Managements Discussion and Analysis of Financial 
Condition and Results of Operations below includes forward looking statements 
within the meaning of Section 27A of the Securities Act, and is subject to the 
safe harbor created by that section.  Factors that could cause actual results 
to differ materially from these contained in the forward looking statements 
are set forth in Managements Discussion and Analysis of Financial Condition 
and Results of Operations.

Plan of operation.

The Company has continued its efforts to acquire, merge with or enter into 
another form of business combination with another entity, and the Company plans 
to continue these efforts in the current fiscal year.  It is presently unknown 
whether any transaction will be concluded. The Company considers it current 
cash and cash equivalent balances inadequate to satisfy its cash requirements 
for the next twelve months.  Legal and accounting and other expenses required 
could increase significantly in connection with any contemplated business 
combination.  The Company may not have the liquidity and capital resources to 
consummate such business combination.  Due to the nature of the Companys 
present activities, however the Company is unable to predict its likely 
expenditure for professional fees and other expenses.  The Company has no 
major capital commitments nor access to mechanisms to fund working or 
operating capital, and there can be no assurance that it will be successful 
in its efforts to raise additional capital to maintain its plan of operation.

Results of Operations Three Months and Nine Months Ended May 31, 1998 and 
May 31, 1997

The Company has no assets and has not engaged in any operational activities 
during the past four years.  At present, the Company has no employees.   The 
Company does not expect any changes in its operations unless the Company 
concludes a merger or other business combination.

During the three and nine months ended May 31, 1998, the Company had no 
operations.  The Company maintained its existence through contributions from 
its shareholders to satisfy its general and administrative expenses.  As 
detailed on the accompanying consolidated statements of cash flows, there 
were no significant adjustments between the net loss and net change in cash.

















                   MERIT DIVERSIFIED INTERNATIONAL, INC.
                      (A Developmental Stage Company)
                               MAY 31, 1998


Item 2 - Managements Discussion and Analysis of Financial Condition and 
                Results of Operations or Plan of Operation (Continued)
                                                                          

As stated above in the Plan of Operation, due to the nature of the Companys 
activities, the Companys prospects for the future are dependent on a number of 
variables which cannot be predicted.  Generally, after identifying a potential 
business opportunity, the Company could incur significant costs in evaluating 
the desirability of an acquisition or other form of business combination. 
Should the Company determine to proceed with the business combination, the 
transaction costs could be significant.  Thereafter, results of operation 
would likely be materially affected by the business acquired or merge with 
the Company.

Recent accounting pronouncements:  On March 3, 1997, the Financial Accounting 
Standards Board (FASB) issued the Statement of Financial Accounting Standards 
(SFAS) No. 128, Earning Per Share.  This pronouncement provides a different 
method of calculating earnings per share than is currently used in accordance 
with Accounting Principles Board Opinion No. 15, Earnings Per Share.  SFAS 
No. 128 provides for the calculation of Basic and Diluted earnings per share.  
Basic earnings per share includes no dilution and is computed by dividing 
income available to common shareholders by the weighted average number of 
common shares outstanding for the period.  Diluted earnings per share reflects 
the potential dilution of securities that could share in the earnings of an 
entity, similar to fully diluted earnings per share.  The Company will adopt 
SFAS No. 128 in the fiscal 1998 and its implementation is not expected to 
have a material effect on the financial statements.

In June 1997, FASB issued SFAS No. 130, Reporting Comprehensive Income which 
establishes standards for reporting and display of comprehensive income, as 
components and accumulated balances.  Comprehensive income is defined to 
include all changes in equity except those resulting from investments by 
owners and distributions to owners.  Among other disclosures, SFAS No. 120 
required that all items that are required to be recognized under current 
accounting standards as components of comprehensive income be reported in a 
financial statement that is displayed with the same prominence as other 
financial statements.

Also, in June 1997, FASB issued SFAS No. 131, Disclosures about Segments of an 
Enterprise and Related Information which supersedes SFAS No. 14, Financial 
Reporting for Segments of a Business Enterprise.  SFAS No.131 establishes 
standards for the way that public companies report information about operating 
segments in annual financial statements and required reporting of selected 
information about operating segments in interim financial statements issued to 
the public.  It also establishes standard for disclosure regarding products and 
services, geographic areas and major customer.  SFAS No. 131 defines operating 
segments as components of a company about which separate financial information 
is available that is evaluated regularly by the chief operating decision maker 
in deciding how to allocate resources in assessing performance.















                     MERIT DIVERSIFIED INTERNATIONAL, INC.
                        (A Developmental Stage Company)
                                MAY 31, 1998


Item 2 - Managements Discussion and Analysis of Financial Condition and 
                Results of Operations or Plan of Operation (Continued)
                                                                          

Both SFAS No. 130 and 131 are effective for financial statements for periods 
beginning after December 15, 1997 and require comparative information for 
earlier years to be restated.  Because of the recent issuance of these 
standards, management has been unable to fully evaluate the impact, if any, 
they may have on future financial statement disclosures.  Results of operations
and financial position, however, will be unaffected by implementation of 
these standards.





















(Balance of Page Left Blank Intentionally)






























                   MERIT DIVERSIFIED INTERNATIONAL, INC.
                     (A Developmental Stage Company)
                               MAY 31, 1998




Item 1                   Legal Proceedings                                

                                None

Item 2                  Change in Securities                      

                                None

Item 3                  Defaults Upon Senior Securities                   

                                None

Item 4                  Submission of Matters to a Vote of Security Holders

                                None

Item 5                  Other Information                         

                                None

Item 6                  Exhibits and Reports on Form 8-K          
        
                        None





































                        MERIT DIVERSIFIED INTERNATIONAL, INC.
                             (A Developmental Stage Company)

  SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities and 
Exchange Act of 1934, the Registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized.


 MERIT DIVERSIFIED INTERNATIONAL, INC.
 (Registrant)




Date:  November 7, 1998   By: __________________/s/__________________

                         Dwight Mallette, Secretary, Chief Accountant