UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION


                             Washington D. C. 20549


                                   FORM 10-QSB


                   QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                    For the quarterly period ended September 30, 2005


                         Commission file number 0-25909


                          Australian Forest Industries
        (Exact name of small business issuer as specified in its charter)


           Nevada                                               86-0931332
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)


                  4/95 Salmon Street, Port Melbourne, Victoria
                                 Australia, 3207
               (Address of principal executive offices) (Zip Code)


                  Issuer's telephone number: 011 61 3 8645 4340


Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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    X    No
   --------   --------

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

The number of shares of the issuer's outstanding common stock, which is the only
class of its common equity, on November 16, 2005 was 257,400,680.

<PAGE>

ITEM 1 FINANCIAL STATEMENTS

    Description                                                             Page
                                                                             No.
FINANCIAL INFORMATION:

Financial Statements

Consolidated Balance Sheets at September 30, 2005 (Unaudited) ..............   3

Consolidated Statement of Operations (Unaudited) ...........................   4

Consolidated Statements of Cash Flows (Unaudited) ..........................   5

Notes to Consolidated Financial Statements (Unaudited) .....................   6

                                        2
<PAGE>

ITEM 1.  FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS

                       AUSTRALIAN FOREST INDUSTRIES, INC.

                      UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                  September 30,   December 31,
                                                                                      2005            2004
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
CURRENT ASSETS
   Accounts receivable                                                            $  3,224,449    $  1,611,756
   Inventory                                                                         2,224,756       1,983,039
   Prepaid expenses and other                                                            8,764         141,609
                                                                                  ------------    ------------
          Total Current Assets                                                       5,457,969       3,736,404

PROPERTY, PLANT AND EQUIPMENT                                                       11,523,056       9,712,015

OTHER ASSETS
   Receivable from related party                                                                       500,496
   Long-term timber supply contract, net of amortization                               839,200         849,705
                                                                                  ------------    ------------
          Total Assets                                                            $ 17,820,225    $ 14,798,620
                                                                                  ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Bank overdraft                                                                 $     41,524    $    421,097
    Accounts payable                                                                 4,336,411       3,154,429
   Current portion of capitalized lease obligations                                    764,183         731,217
   Accrued payroll, related taxes and benefits                                         559,390         542,414
                                                                                  ------------    ------------
          Total Current Liabilities                                                  5,701,508       4,849,157

NON-CURRENT LIABILITIES
   Timberman's group loan                                                              775,990
   Capitalized lease obligations                                                     4,106,520       2,797,975
                                                                                  ------------    ------------
          Total Non-Current Liabilities                                              4,882,510       2,797,975

STOCKHOLDERS' EQUITY
   Preferred stock, par value $0.001, 5,000,000 shares
     authorized, none issued and outstanding
   Common stock, par value $0.001, 300,000,000 shares
     authorized, 257,400,680 issued and outstanding                                    257,400         257,400
   Additional paid-in capital                                                        9,810,817       9,810,817

   Comprehensive income                                                                255,909          42,210
   Accumulated deficit                                                              (3,087,919)     (2,958,939)
                                                                                  ------------    ------------
          Total Stockholders' Equity                                                 7,236,207       7,151,488
                                                                                  ------------    ------------
          Total Liabilities and Stockholders' Equity                              $ 17,820,225    $ 14,798,620
                                                                                  ============    ============
</TABLE>

                 See accompanying notes to financial statements.

                                       3
<PAGE>

                       AUSTRALIAN FOREST INDUSTRIES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           For the Three Months Ended        For the Nine Months Ended
                                                  September 30,                     September 30,
                                              2005             2004             2005             2004
                                         -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>
REVENUE - SALES                          $   3,377,974    $   2,725,673    $  10,124,288    $   9,291,027

COSTS AND EXPENSES
   Cost of goods sold                        1,894,605        1,495,781        5,753,756        4,613,457
   Selling, general and administrative       1,851,387        2,178,360        5,712,336        5,351,491
   Management fees                            (357,064)
   Interest expense                             89,555           42,137          269,612          140,770
   Depreciation and amortization               206,320          196,595          578,574          516,228
                                         -------------    -------------    -------------    -------------
          Total Costs and Expenses           4,041,867        3,555,809       12,314,278       10,621,946
                                         -------------    -------------    -------------    -------------

OPERATING LOSS                                (663,893)        (830,136)      (2,189,990)      (1,330,919)

OTHER INCOME                                   895,989        8,242,332        2,061,010        8,242,332
                                         -------------    -------------    -------------    -------------

NET INCOME (LOSS)                        $     232,096    $   7,412,196    $    (128,980)   $   6,911,413
                                         =============    =============    =============    =============

NET PROFIT/(LOSS) PER  SHARE             $        0.01    $        0.01    $       (0.01)   $        0.02
                                         =============    =============    =============    =============

WEIGHTED AVERAGE SHARES
   OUTSTANDING                             257,400,680      257,400,680      257,400,680       26,666,667
                                         =============    =============    =============    =============
</TABLE>

                 See accompanying notes to financial statements.

                                        4
<PAGE>

                       AUSTRALIAN FOREST INDUSTRIES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                            For the Nine Months Ended
                                                                   September 30,
                                                               2005            2004
                                                          ------------    ------------
<S>                                                       <C>             <C>
CASH FLOW FROM OPERATING ACTIVITIES
   Receipts from customers                                $  8,621,505    $  9,150,402
   Payments to suppliers and employees                     (10,730,283)    (10,387,947)
   Other income                                                 97,210         442,108
                                                          ------------    ------------

          Net Cash Used in Operating Activities             (2,011,568)       (795,437)
                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Payment for property, plant, and equipment               (5,492,136)     (3,114,799)
   Proceeds from sale of property, plant, and equipment      4,305,409       1,557,187
                                                          ------------    ------------
          Net Cash Used in Investing Activities             (1,186,727)     (1,557,612)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net proceeds from borrowings/capitalized leases           1,423,717       2,482,682
   Loans to related parties                                  2,147,831      (1,295,650)
                                                          ------------    ------------
          Net Cash Proved by Financing Activities            3,571,548       1,187,032

NET INCREASE (DECREASE) IN CASH                                373,253      (1,166,017)
EFFECT OF EXCHANGE RATES ON CASH                                 6,320         131,748
CASH AT BEGINNING OF YEAR                                     (421,097)        459,927
                                                          ------------    ------------

CASH AT END OF YEAR                                       $    (41,524)   $   (574,342)
                                                          ============    ============
</TABLE>

                 See accompanying notes to financial statements.

                                       5
<PAGE>

                       AUSTRALIAN FOREST INDUSTRIES, INC.

                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

      The accompanying condensed consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles for
      interim financial information. 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 (consisting of normal recurring accruals)
      considered necessary in order to make the financial statements not
      misleading have been included. Results for the three and nine months ended
      September 30, 2005 are not necessarily indicative of the results that may
      be expected for the year ending December 31, 2005. For further
      information, refer to the financial statements and footnotes thereto
      included in Australian Forest Industries' Inc. annual report on Form
      10-KSB for the year ended December 31, 2004.


                                       6
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

It should be noted that this Management's Discussion and Analysis of Financial
Condition and Results of Operations may contain "forward-looking statements."
The terms "believe," "anticipate," "intend," "goal," "expect," and similar
expressions may identify forward-looking statements. These forward-looking
statements represent the Company's current expectations or beliefs concerning
future events. The matters covered by these statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in the forward-looking statements, including the Company's
dependence on weather-related factors, introduction and customer acceptance of
new products, the impact of competition and price erosion, as well as supply and
manufacturing restraints and other risks and uncertainties. The foregoing list
should not be construed as exhaustive, and the Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events. In light of the significant uncertainties
inherent in the forward-looking information included herein, the inclusion of
such information should not be regarded as a representation that the strategy,
objectives or other plans of the Company will be achieved. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.

RESULTS OF OPERATIONS

We are currently in the second year of operations and have generated significant
revenues to date. Our activities from inception to date were related to our
formation, preparation of our business model, arranging and planning financing
and the acquiring all rights, title and interest to our timber rights located in
the Canberra region in addition to the implementation and completion of our
first upgrade of the Canberra sawmill.

Sales levels remained constant during this quarter compared to the previous
quarter. Compared to this time last year sales were up by 16% for the quarter
and 3% YTD.

Cost of Goods Sold improved due to better quality of log received. Quarterly
Gross Profit margin was 43.9% compared to 43.2% YTD.

Labor costs were down for the quarter due to greater efficiencies (capital
improvements) in the sawmill. However, on a YTD basis labor costs have increased
by over 6% for the same time last year.

Operating Expenses have once again remained static with our costs for the
quarter and YTD being the same as at this time last year. However, our costs for
this quarter compared to the previous quarter rose by 11%. This was primarily
due to some additional leasing costs on our new forklifts and mobile equipment.

Continual capital upgrades are still being undertaken. Major works have included
the full commissioning of the Quad Saw, Reinbold Grinder and Cant Gang Sawing
Line. All of these capital improvements have enabled the sawmill to be able to
increase production substantially and to a level this sawmill has never been
able to reach.

In regard to the Bombala sawmill, we are in the final stage of the approval
process and hope to receive Government approval in early 2006. As soon as this
occurs, we will be in a position to commence construction of this new facility
immediately and still hope to be able to complete construction by the end of
2006.

Operating costs for the nine-month period ended September 30, 2005 aggregated
$12,314,278 as compared to $10,621,946 for the corresponding period in 2004.
This also includes an increase in cost of goods sold expenses of $1,140,299 from
the corresponding period in 2004 which was result of the continuing development
of our business plan and increasing of our production and engineering efforts.
In the nine-month period ended September 30, 2005 we realized a net loss of
$(128,980) as compared to net income of $6,911,413 for the corresponding
nine-month period ending in 2004. The reduction in income from 2004 to 2005 was
due to our other income being $2,679,658 in 2005, compared to $11,306,013 at the
same time in 2004. Our net loss per share was $(0.01) for the period ending
September 30, 2005.

                                       7
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

On September 30, 2004 we had current assets of $4,478,421 and on September 30,
2005, we had current assets of $5,457,969.

Net cash used in operating activities for the nine months ending September 30,
2005 was $(2,011,568) as compared to $(795,437) for the nine months ending
September 30, 2004. The increase in net cash used was a result of other income
of $97,210 for the period in 2005 as compared to other income of $442,108 in
2004.

In the nine months ending September 30, 2005, the Company experienced an
increase in net cash provided by financing activities of $3,571,548 compared to
$1,187,032 for the same period in 2004.

The Company is presently completing a second sawmill upgrade in Canberra which
is anticipated to be operational in the third quarter of 2005 and which will be
used primarily for processing the logs resulting from the Bombala Agreement
which was entered into in 2004.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the appropriate
application of certain accounting policies, many of which require estimates and
assumptions about future events and their impact on amounts reported in the
financial statements and related notes. Since future events and their impact
cannot be determined with certainty, the actual results will inevitably differ
from our estimates.

Management believes application of accounting policies, and the estimates
inherently required by the policies, are reasonable. These accounting policies
and estimates are constantly re-evaluated, and adjustments are made when facts
and circumstances dictate a change. Historically, management has found the
application of accounting policies to be appropriate, and actual results
generally do not differ materially from those determined using necessary
estimates.

Item 3. Controls and Procedures.

      (a) Our principal executive officer and principal financial officer have
each evaluated the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) as of a date within 90 days
prior to the filing date of this quarterly report and have each concluded that
our disclosure controls and procedures are adequate.

      (b) There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

      (c) Not applicable

                                       8
<PAGE>

                                     PART II

Item 1. Legal Proceedings
None.

Item 2. Changes in Securities
None

Item 3. Defaults Upon Senior Securities
None

Item 4. Submission of Matters to a Vote of Security Holders
None

Item 5. Other Information
None

Item 6. Exhibits and Reports on Form 8-K

a. Exhibit Index

Exhibit 31.1 Certification of Chief Executive Officer

Exhibit 31.2 Certification of Chief Financial Officer

Exhibit 32.1 Certification of Chief Executive Officer

Exhibit 32.1 Certification of Chief Financial Officer

b. Reports on Form 8-K

None.


                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


AUSTRALIAN FOREST INDUSTRIES


/s/ Michael Timms
-------------------------------
Name: Michael Timms
Title: CEO, President and Chairman of the Board
Date:  November 16, 2005


/s/ Colin Baird
--------------------------------
Name: Colin Baird
Title: Chief Financial Officer
Date: November 16, 2005