SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended May 31, 2001            Commission File Number 0-26673

                            FORESTINDUSTRY.COM, INC.
                            ------------------------
             (Exact name of Registrant as specified in its charter)


           DELAWARE                                      98-0207081
           --------                                      ----------
 (State of other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)

    2480 Kenworth Road, Suite 10                           V9T 3Y3
      Nanaimo, British Columbia                            -------
      -------------------------                           (Zip Code)
(Address of Principal Executive Offices)


Registrant's telephone number including area code:  (250) 758-0665

Securities registered under Section 12(b) of the Exchange Act:  None.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $0.0001.

Indicate by check mark 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 issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

YES    X       NO
    --------      ----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $466,326

The aggregate  market value of the issuer's voting stock held by  non-affiliates
of the issuer  based upon the average  bid and asked  prices of such stock as of
August 28, 2001, was $161,475.

The number of shares  outstanding of the issuer's  common stock as of August 28,
2001, was 1,521,058

Documents Incorporated By Reference:  None

Transitional Small Business Disclosure Format:  Yes    No X

<PAGE>2

ITEM 1. DESCRIPTION OF BUSINESS

General

     We  provide a full  range of  internet  services  for the  forest  and wood
products  industry.  Our website address is  "forestindustry.com."  Our internet
site  provides a  directory  of  companies  associated  with the forest and wood
products  industry.  Our website is divided  into three  categories:  Forest and
Logging,  Wood  Processing  and Logs,  Lumber and Wood  Products.  Companies may
advertise  their  services on our website and exchange  information  through our
online  discussion  forums.  Our website  includes The World Wood Exchange which
allows  manufacturers,  buyers  and  intermediaries  to list  all  types of wood
products for purchase and sale through the website. It also provides information
on industry  related trade shows,  conferences  and news items.  All updates and
changes made to the website are completed by our in-house  technical  staff.  We
generate revenues by charging a monthly fee to customers using our website based
on the  size of  advertisements  and  charging  for  internet  related  services
provided to forest and wood-related businesses.

     To date,  approximately  60% of  revenues  are  generated  from our website
advertisers and the other 40% through website design services.  Prior to January
31,  2000,  we had no source of revenues.  On January 31, 2000,  we acquired The
Forest Industry Online Inc. and our current business is now that which was being
conducted by them.

     The internet related services which we provide include all services which a
business needs to promote itself and to advertise and/or sell its forest or wood
related  products  and  services  through the  internet,  including  the design,
development and hosting of websites for our customers.

     Our corporate offices and operations are located at Suite 10, 2480 Kenworth
Road, Nanaimo, British Columbia V9T 3Y3. Our telephone number is (250) 758-0665.
We have one wholly-owned  subsidiary,  The Forest Industry  Online,  Inc., which
maintains business offices at our principal business office in Nanaimo.

     As used in this  report,  the terms "we," "us,"  "our," the  "Company"  and
"forestindustry"  means  forestindustry.com,  Inc. and its subsidiaries,  unless
otherwise  indicated.  All dollar  amounts refer to United States dollars unless
otherwise noted.

     On June 1, 2001, we effected a ten-for-one  reverse stock split.  Reference
to shares in this report have been adjusted to reflect this reverse split unless
otherwise noted.

Corporate History

     We were originally incorporated in Delaware on December 18, l997, under the
name  "Autoeye  Inc."  Autoeye's  initial  plan of business  was to merge with a
company in the  industry  of  vehicle  surveillance  systems,  but this plan was
abandoned prior to any operations.  Prior to Autoeye's acquisition of The Forest
Industry  Online Inc., it had not commenced  any  operations  other than initial
corporate formation and capitalization.

     On January 31, 2000  ,Autoeye  acquired  all of the issued and  outstanding
common  shares of The Forest  Industry  Online Inc. in  exchange  for  1,000,000
shares of Autoeye common stock.  The Forest  Industry  Online,  Inc. has been in
operation  since 1995,  first as a  proprietorship  and since  January 1997 as a
corporation.  The value  attributed to the share exchange was CDN $335,000.  The
principals of The Forest  Industry  Online were Joe Perraton,  Lara Perraton and
Teaco  Properties  Ltd.  (which  is  beneficially  owned by Marc  White and Dave
McNaught). Autoeye's then president, Andrew Hromyk, represented the interests of
Autoeye.  Concurrent  with the  acquisition of The Forest  Industry Online Inc.,

<PAGE>3

Autoeye issued 750 shares of its Series A Convertible preferred stock at a price
of $1,000 per share for gross  proceeds  of  $750,000.  The  subscribers  of the
preferred shares were Augustine Fund, LP, Ascent Financial,  and Indenture Trust
of James F. Cool.  Autoeye  also  issued  3,750  shares of its  common  stock to
Century  Capital  Management  Ltd,  as  consideration  for  consulting  services
provided in connection with Autoeye's  acquisition of The Forest Industry Online
Inc. Century Capital Management Ltd. is controlled by Andrew Hromyk.

     Following the acquisition of The Forest Industry Online Inc. Mr.  Perraton,
a principal  of The Forest  Industry  Online  Inc.,  was  appointed as Autoeye's
President  as well as a  director.  Mr.  Marc  White  was  also  appointed  as a
director. Autoeye's former President, Andrew Hromyk, resigned from that position
and was appointed as Autoeye's Secretary.  Mr. Hromyk resigned as an officer and
director in May 2000.  Mr.  White  resigned as a director of the Company in July
2000.

     On February  25,  2000,  Autoeye  changed its name to  "forestindustry.com,
Inc." We have also done business under the name "The Forest Industry Network."

     On  October  5, 2000,  we  appointed  Greg  Millbank,  our Chief  Operating
Officer,  to our board of directors.  Mr. Millbank resigned as an officer of the
Company as of January 31, 2001, and elected not to be re-appointed as a Director
for the following term.

        On May 29, 2001, we held an annual meeting of stockholders at which the
stockholders approved an amendment to the Company's Amended Certificate of
Incorporation to effect a ten-for-one share consolidation.

     On July 6, 2001,  the Company,  Teaco  Properties,  the  Company's  largest
shareholder, Sean Curran and Joe Nemeth entered into a stock purchase agreement.
Under the terms of the stock purchase  agreement,  Teaco Properties sold 900,000
shares in the aggregate of the  Company's  common stock that it owned to Messrs.
Curran and Nemeth.  Marc White and Dave  McNaught are the  beneficial  owners of
Teaco Properties Ltd. Prior to the transaction, Teaco Properties owned 1,000,000
shares  in the  aggregate.  As a result  of this  transaction  Teaco  Properties
currently  owns  100,000;  Curran owns  600,000 and Nemeth owns  300,000,  which
represents  approximately  39.4%  and  19.7%,  of  the  outstanding  shares.  In
connection  with the stock purchase  agreement,  Messrs.  Curran and Nemeth were
appointed to the Company's Board of Directors.  Mr. Perraton  continues to serve
as president and a director of the Company.

     For the  purchase  of the  shares,  Messrs.  Curran and  Nemeth  paid Teaco
Properties  the sum of $10.  Further,  as a condition  of the sale,  Mr.  Curran
undertook that he would use his best efforts to obtain third party financing for
the Company in an amount not less than US $250,000,  and that the Company  would
settle  outstanding  debt in the  amount  of Cdn  $155,710  with a  third  party
creditor through the issuance of Company shares.

     As an  inducement  to the sale,  the Company  granted  warrants to purchase
220,000 shares of common stock to Teaco Properties. The warrants are exercisable
for a period of two years  beginning  June 25, 2001.  The exercise price will be
calculated  by obtaining the twenty (20) day average  Market Price  (hereinafter
defined) of the shares of common stock  preceding a date determined by the Board
of Directors. In no event will the Market Price be below $0.20 per share. Market
Price shall be the average  closing  price of the shares of common stock on such
date, as reported by the National  Association of Securities  Dealers  Automated
Quotation   System   ("NASDAQ"),   or  the   average   closing   price   in  the
over-the-counter  market  if other  than  NASDAQ.  The Board of  Directors  will
determine  the date for which the exercise  price will be  determined  within 90
days of the date of grant.

<PAGE>4

     Our business is a continuation of that which was previously being conducted
by The Forest Industry Online,  Inc. which remains a wholly-owned  subsidiary of
the Company.

Products and Services

Website Hosting/Advertising

     Our   primary    business   is   supporting   our   website    located   at
"www.forestindustry.com." This site provides a directory of companies associated
with the forest and wood industry. Our website is divided into three categories:
Forest and Logging, Wood Processing and Lumber and Wood Products.  Within Forest
and Logging we list  services  pertaining to logging  equipment,  reforestation,
trucks, safety supplies, computer services, contractors and ancilliary services.
The Wood  Processing  section  contains  services  related  to  mills  including
equipment, safety services, computers,  consultants and ancilliary services. The
Lumber and Wood  Product  section of our website  contains  services  related to
pallets,  boxes and containers,  mill and  woodworking  machinery and consulting
services.  All  sections  are  linked  through  an  alphabetical  listing of all
customers who subscribe to our website.

     Our website  includes The World Wood Exchange  which allows  manufacturers,
buyers  and  intermediaries  to  purchase  and sell all  types of wood  products
through the website.  Our website also provides  information on industry related
trade shows, conferences and news items; trade magazines;  supplier listings and
provides access to secure  shopping  sites.  All updates and changes made to the
website are completed by our in-house technical staff.

     Our website also allows  companies to advertise their products or services.
We charge a monthly fee to customers based on the size of the advertisement. Our
monthly fees for basic advertising services currently range from $32 to $99.

Internet Services

     The internet related services we provide are essentially all services which
a business needs to promote itself and to advertise and/or sell its products and
services through the internet. We charge either a monthly fee for these services
or a fee based upon the number of hours  involved in the project.  Our services,
all of which can be customized to the specific needs of the customer, include:

     o    complete  web site  design,  hosting  and  maintenance
     o    design and maintenance of databases for new and used:
           o    equipment
           o    parts and supplies
           o    inventories of wood products
           o    real estate listings
           o    customers
     o    design of forms used to pay for products  and  services  with a credit
          card
     o    customized  layouts for order  forms,  multi-state  tax  calculations,
          international taxes
     o    database  administration  programs  which provide  customers  with the
          ability to:
           o    modify product prices
           o    provide product and services
           o    input shipping methods based on price, quantity and weight
                variables
           o    transaction and billing reports

     o    secure online storefronts and distributor  catalogues for products and
          services  offered  by our  members

<PAGE>5

     o    industrial equipment inventory applications for distributors of new or
          used industrial equipment parts
     o    dedicated email server and accounts for members
     o    internet video services
     o    link for online equipment financing
     o    collocation, disk storage and bandwidth
     o    industry specific template web sites

     We have  technical  and customer  support  staff who are  available  during
business hours to assist all members with the use of our services.

New Products

     The Company plans on developing a data and training component to our online
services.  Training  programs  will be  standardized,  hosted on an  application
service provider model and marketed to the forest and wood industry.

     We plan on providing market  information  services within the next year. We
will gather industry data from several sources in the industry, analyze the data
and repackage the information for specific areas of the industry.

     We plan to  develop  an online  business  exchange  for the forest and wood
industry called the Lumber and Equipment  Exchange,  or "LEE." The LEE will host
auctions of lumber, equipment and other wood products. Revenue will be generated
on a  commission  basis.  We will need to  license  sophisticated  software  and
hardware to support the LEE program.  We have identified an alliance  partner to
develop the LEE program.  Once financing has been secured, we anticipate it will
take  approximately six weeks to design the basic framework for the LEE. We will
require ongoing design and technical assistance from our alliance partner in the
following areas: e-commerce infrastructure, systems integration and installation
of enabling  internet  software.  We estimate  that it will take  between  12-18
months to have a fully integrated  exchange  developed and operational.  Related
services,  which we plan to  offer  to  customers  of the  LEE,  include  credit
verification, delivery scheduling, inspection services and payment settlement.

     Alternatively,  we may seek an alliance partner who has a fully operational
exchange  service and who wants to partner with us to provide a broader range of
services. If this occurs, we will not proceed with the online business exchange,
but instead integrate our systems with the alliance partners' systems.

Sales and Marketing

     We promote our website by participating in the following:

     o    industry trade shows and conferences
     o    advertising in industry journals
     o    working with key forest  associations  to  advertise  our products and
          services; and,
     o    publishing  a  yearly  guidebook  which  includes  information  on our
          products and services,  upcoming  industry  conferences  and events as
          well as a directory listing of organizations  which utilize our online
          services.

     In August 2001, we established a Marketing and Communications Group who are
responsible  for  selling  our  promotional  and  hosting  service  plans to new
customers.  In  addition,  we  created  an Agency  Program  wherein  independent
contractors will identify new customers and sell our customized applications and

<PAGE>6

services.  In order to generate new leads for both these groups, we are hiring a
new employee as of September 2001 as a Business Development Manager.

     Due to the seasonal  nature of the forest  industry,  our  advertising  and
marketing expenses will normally be higher in the second and fourth quarters.

     As of May 31, 2001,  the Company had 433 customers as well as 431 associate
members.  We have no  reliance  on any  specific  customer  or  small  group  of
customers.  Approximately 70% of our customers are U.S. companies,  20% are from
Canada and approximately 5% are from Europe, Asia and Australia.

Competition

     There are  currently  very few web sites  devoted  to the  forest  industry
sector. Our competitors include  "e-wood.com,"  "Talpx.com,"  "VerticalNet," and
other company's such as forestweb.com. We also compete with various regional and
national commodity exchanges.

     e-wood.com and Talpx.com provide internet websites which connect buyers and
sellers  of wood and  related  products  directly  and  facilitate  transactions
electronically.  Their  websites  include  news  and  information  for the  wood
products industry.

     VerticalNet is an enterprise  level software  provider that helps business'
leverage the internet for business services.  VerticalNet also provides websites
for  companies in the forest and wood  products  industry but does not currently
provide any news or information  on its websites,  which relate to the forest or
wood products industry.

     Indirect  competitors  include various web hosting and web design companies
ranging from large  corporate  internet  service  providers to small  home-based
businesses. These competitors comprise a small proportion of our competition and
often have little or no specific knowledge of the forest industry.

Intellectual Property, Government Approvals and Regulation

     Our  internet  services,  web site  design and  database  programs  are not
protected by any patents or  copyrights.  Our website  domain name is registered
with   Network   Solutions,   Inc.   We   also   have   registered   the   names
"forestindustry.net;"  "logsandlumber.com"  and other web addresses.  We are not
subject to government  regulation nor do we require any government  approvals in
either Canada or the United States to provide internet or web design services to
our  customers.  We may be  subject  to  regulations  in the  future if state or
federal agencies choose to impose regulations applicable to the Internet.

Employees

     As of August 28, 2001, we had seven full-time employees.  We plan on hiring
four new employees by October 2001 for administration,  marketing, technical and
customer service positions. In addition, we plan on contracting in total through
fiscal  2002 ten  Marketing  and  Communications  sales  people  as well as five
Agents.  We will also rely on independent  contractors to provide services on an
as needed basis. We currently utilize the services of seven consultants.

<PAGE>7

Risks Associated with Company's Developing Business

     The  Company is still in the early  stages of  developing  its  website and
marketing its internet services.  Consequently, it has only a limited history of
revenues and business track record.

     The Company's  ability to  successfully  operate and expand its website and
market its services will depend on, among other things:

     o    the continued  improvement  of its internet  technology to support the
          forest and wood industry
     o    the development and expansion of its internet services
     o    the  expansion  of  its  subscriber  base o the  establishment  of its
          website as an effective advertising and business medium for the forest
          and wood industry

     Given the Company's limited operating history and revenues, there can be no
assurance  that it will be able to  achieve  any of these  goals  and  develop a
sufficiently large subscriber base to be profitable.

     Until  revenues are sufficient to support the Company's  business,  it will
depend almost  exclusively on outside  capital to pay for the development of its
web services  business.  Such outside capital may include the sale of additional
stock and/or commercial  borrowing.  There can be no assurance that capital will
be available if necessary to the Company to meet these  development costs or, if
the capital is available,  it will be on terms  acceptable  to the Company.  The
issuance  of  additional  equity  securities  by the Company  would  result in a
further dilution in the equity interests of the current stockholders.  Obtaining
commercial  loans,  assuming  those loans would be available,  will increase the
Company's liabilities and future cash commitments.

     The  success of the  Company's  web-based  business  will depend on several
factors including the following:

     o    whether e-commerce will be suitable for the wood and forest industries
     o    internet  users  could  use  "filter"  software  programs  that  limit
          exposure to internet  advertising
     o    the absence of long-term  contracts or  agreements  with the Company's
          customers and, as a result, no assurance of ongoing revenues
     o    the need to  obtain  and  install  the  necessary  internet  operating
          programs to implement  the  Company's  proposed  Lumber and  Equipment
          Exchange service
     o    possible  government  regulation or taxation may adversely  affect the
          user of electronic commerce

     The Company's business depends on the efficient and uninterrupted operation
of its computer and communications hardware systems as well as adequate supplies
of bandwidth.  Any system interruptions that cause its website to be unavailable
or to perform poorly for users may reduce the  attractiveness to advertisers and
could adversely affect the Company's  business and operating  results.  Although
the Company has back-up  facilities for its computer  systems,  it relies on one
provider for its  telecommunication  lines.  If the telecom  provider  failed to
provide service to the Company's systems, it would be unable to maintain website
availability. Interruptions could result from natural disasters as well as power
loss, telecommunications failure and similar events.

     The  success of the  Company  will also depend on its ability to respond to
technological  advances and emerging industry  standards in a cost-effective and
timely  manner.  The Company may not have the technical or financial  ability to
respond to these technical challenges.

<PAGE>8

ITEM 2. DESCRIPTION OF PROPERTY

     Our corporate offices are located at 2480 Kenworth Road, Suite 10, Nanaimo,
British Columbia,  Canada V9T 3Y3. The Company leases approximately 1,000 square
feet of office space under a month to month lease.

     All of the Company's computer and  telecommunications  equipment is located
at its Nanaimo offices.  As of August 28, 2001, the Company was operating at 65%
capacity  and does not  foresee  the need to  upgrade  until its  customer  base
doubles.

ITEM 3. LEGAL PROCEEDINGS

     None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 29, 2001, a special  meeting of the  Stockholders  was duly held, at
which there was present a majority of stockholders of the Company,  to vote upon
the  election  of new  directors,  a ten for  one  share  consolidation  and the
re-appointment  of our  auditors  for 2001.  At the special  meeting  there were
present, either by proxy or in person,  1,009,713 shares of the 1,521,058 shares
of the  Company's  outstanding  Common  Stock.  With  respect to the election of
directors,  1,009,713 shares were represented of which 1,009,613 voted in favour
of the  appointment  of Joe Perraton  and 100  abstained  from the vote.  Of the
1,009,713  shares  represented,  1,009,693  voted  for the  ten  for  one  share
consolidation,  110 voted against and 110 abstained  from the vote. Our auditors
were  re-appointed  for 2001 based on the vote of 1,009,713  of which  1,009,613
voted for the  appointment  and 100 voted to abstain.  The  stockholders  of the
Company  that were not  present by proxy or in person  were given  notice of the
special  meeting  in  accordance  with  Section  222  of  the  Delaware  General
Corporation Law.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Principal Market

     Since  December 1999 the Company's  common stock has been quoted on the OTC
Bulletin  Board,  initially  under the symbol  "AUYE",  after February 25, 2000,
under the symbol  "FXCH" and after May 29,  2001,  under the  symbol  "FTIC".  A
trading market only developed on March 1, 2000. Prior to that date, there was no
public market for the Company's  common stock.  Set forth below are the range of
high and low bid  quotations  for the periods  indicated  as reported on the OTC
Bulletin Board. The market quotations reflect interdealer prices, without retail
mark-up, mark-down or commissions and may not represent actual transactions. The
below  prices have not been  adjusted to give  effect to the  one-for-ten  share
consolidation effective June 1, 2001.

                                                     Common Stock
                                                     ------------
               Quarter Ended                    High            Low
               -------------                    ----            ---
               May 31, 2001                    $0.04           $0.02
               February 28, 2001               $0.14           $0.09
               November 30, 2000               $1.06           $0.38
               August 31, 2000                 $1.69           $1.06
               May 31, 2000                    $1.25           $1.25

<PAGE>9

     Approximate  number of holders of common stock dividends.  As of August 28,
2001, there were 58 holders of record of the Company's common stock. This number
does not include stockholders who hold the Company's stock in street name.

Dividends

     Holders  of the  Company's  common  stock  are  entitled  to  receive  such
dividends as may be declared by the Board of  Directors.  The Board of Directors
is not  obligated to declare a dividend.  The Company has not paid any dividends
on its common stock and it does not have any current  plans to pay any dividends
in the foreseeable future.

Capital Stock

     During the  Company's  last  fiscal  year ended May 31,  2001,  it sold the
following equity securities  pursuant to exemptions from registration  under the
Securities Act of 1933.

     In August 2000, our board of directors  authorized 1,200 shares of Series B
preferred stock. Upon any liquidation or dissolution,  each outstanding share of
Series B preferred  stock is entitled to a  distribution  of $1,000 prior to any
distribution to the holders of our common stock. The Series B preferred stock is
not entitled to any  dividends  or voting  rights.  In August 2000,  we sold 200
shares of Series B preferred stock to two accredited institutional investors for
$1,000 per share.  Each share of Series B preferred  stock may be converted,  at
the option of the holder, into shares of our common stock equal in number to the
amount  determined by dividing $1,000 by 70% of the average closing price of our
common stock for the five trading days preceding the conversion date, subject to
a maximum of 5,000  shares of common stock being issued for each share of Series
B preferred  stock and a minimum of 250 shares of common  stock being issued for
each share of Series B preferred stock.

     Further,  pursuant to the terms of the Series B preferred stock, each share
of Series B preferred stock automatically  converted into shares of common stock
upon the effective date of a registration  statement  registering the underlying
shares of common stock.  Based on the current price of our common stock on March
13, 2001, the Series B preferred stock automatically converted into an aggregate
of 100,000 shares of common stock.

     On June 1, 2001, we completed a ten-for-one share consolidation.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

     The  following  discussion  may  contain  forward-looking   statements  and
projections.  Because these forward-looking statements and projections are based
on a number of  assumptions  and are subject to  significant  uncertainties  and
contingencies,  many of which are  beyond  the  Company's  control,  there is no
assurance that they will be realized,  and actual results may vary significantly
from those shown.

     We are an  internet  service  provider  to the  forest  and  wood  products
industry.  Our website includes  information and advertising  relating to forest
and logging;  wood processing and logs; and lumber and wood products. We plan on
introducing the following products and services during 2001:

     o    a business to business  exchange to support the  purchase  and sale of
          wood, wood products and wood related services;
     o    market information services; and,
     o    training  and  compliance  programs.

<PAGE>10

     Our  strategy is to become an internet  leader in  supporting  an e-focused
marketplace for the forest and wood products industry.

     The Company was formed on December 18, 1997,  under the name Autoeye,  Inc.
Autoeye's  business  was to evaluate  businesses  for possible  acquisition.  On
January 31, 2000, we acquired 100% of The Forest Industry Online, Inc. Following
the transaction,  the  shareholders of The Forest Industry Online,  Inc. owned a
majority of  Autoeye's  outstanding  shares of common  stock.  Accordingly,  for
financial  reporting  purposes the  transaction  was  accounted for as a reverse
acquisition  with The Forest  Industry  Online,  Inc.  considered the accounting
acquirer.  (See Notes  2(a) and 3 to the May 31,  2001,  consolidated  financial
statements).  As such, The Forest Industry Online,  Inc.'s historical  financial
statements are now reported as the Company's financial  statements.  On February
25, 2000, the Company changed its name from Autoeye, Inc. to forestindustry.com,
Inc. Prior to the acquisition of The Forest Industry  Online,  Inc., the Company
had not generated any revenue and had not  commenced any  operations  other than
initial corporate formation and capitalization.

     On May 29, 2001,  we held an annual  meeting of  stockholders  at which the
stockholders  approved an  amendment to the  Company's  Amended  Certificate  of
Incorporation to effect a ten-for-one share consolidation.

Plan of Operations

     In order  to  expand  the  Company's  operations  it will  need  additional
capital.  The Company does not have any  commitments  from any source to provide
additional  capital.  It will need to raise significant  outside capital to fund
its anticipated capital requirements over the next twelve months.  Approximately
$500,000  has  been  budgeted  to  finance  the  development  of  the  Company's
technology,  development  of new products  and  services and increase  sales and
marketing  efforts  over the next 12 months.  The  Company  anticipates  needing
approximately  $80,000 for technical upgrades to its existing network system and
re-locating all of our hosting and applications to Vancouver,  British Columbia.
We  estimate  that we will  need to spend  approximately  $50,000  on legal  and
financing  fees in order to  raise  the  additional  capital.  We have  recently
succeeded in  attracting  senior  management  and plan on adding two more senior
officers  over the next six months and will require  $120,000 to retain them. As
part of the Company's  expanded  business  plan there will be a  requirement  to
train remote agents,  customer  service  representatives  and  commission  based
Marketing and  Communication  specialists  (telemarketers).  Training costs have
been budgeted at  approximately  $25,000 and initial expenses for establishing a
call center will be $25,000.  The company has  accumulated  debt during the past
year and will  require  approximately  $150,000  to repay the debt.  The company
plans  on  using  the  balance  of  the  proceeds,   $50,000,  for  general  and
administrative  costs.  Capital commitments for the next 12 month period include
consultant  agreements  totalling  $134,000;  other leases $175;  and employment
agreements  totaling  $122,454.  As a result of this increased business activity
and  anticipated  increase  in  employees,   the  Company  expects  general  and
administrative  expenses and compensation  costs to increase  significantly from
current levels.

     An element of the Company's  business plan is to obtain license  technology
and hardware to support its proposed  Lumber and Equipment  Exchange or LEE. The
LEE program is expected to cost  between  $300,000  and  $400,000 to  implement.
However, the Company has delayed the development of the LEE until 2003.

     Since  inception,  the Company has relied on equity  financings to fund its
operations.  Funds required to finance its future internet  services,  marketing
efforts and ongoing business are expected to come primarily from debt and equity
financing  and alliance  partners with the  remainder  provided  from  operating
revenues.  Operating revenues to date have been substantially less than the cost

<PAGE>11

of  operations.  Future  financings  will be  necessary  to meet  the  Company's
anticipated working capital needs over the next 12 months.  Potential sources of
additional  capital include  private  placements  with  institutional  investors
and/or a public offering of its common stock.

     In order to  reduce  expenses  during  the year  ending  May 31,  2001,  we
permanently laid off 17 of our employees in November,  2000. We plan on building
our operations  and re-hiring our employees  once revenues  exceed our operating
costs.  As of August 28, 2001,  we had re-hired two  employees and have plans to
re-hire three more employee by October 2001.

Results of Operations

For the Fiscal Years Ended May 31, 2001 Versus Ten Months Ended May 31, 2000

     Revenues.  Revenues  increased to $466,326 for the year ended May 31, 2001,
as  compared  to  sales of  $335,287  for the ten  months  ended  May 31,  2000.
Increased sales were attributable to an increase in subscribers to the Company's
web  site  services  and web  design  services.  During  fiscal  2001,  we hired
additional sales staff and customer service representatives which contributed to
the growth in  customers.  The  customer  base  increased to  approximately  860
customers  by  May  31,  2001,  compared  to 640  customers  at  May  31,  2000.
Approximately  60% of the revenue is  attributable  to hosting  and  advertising
services  while the  remaining  40% of  revenues  were  derived  from web design
services and special applications.

     Expenses.  Total  operating  expenses  for the  year  ended  May 31,  2001,
increased by 52% to $1,208,247 compared to $793,868 for the ten months ended May
31, 2000.  This increase is due to the hiring of twenty-three  sales,  technical
and  administrative  employees  during 2001 and  attendance  at more trade shows
during this  period.  Consulting  fees were  $156,315 for the year ended May 31,
2001 compared to $125,099 for the ten months ended May 31, 2000. Consulting fees
increased  slightly  due to the addition of one officer  during  fiscal 2001 and
three  managers  between  February and May  2001.Professional  fees increased by
$13,853  during 2001,  from  $105,967 for the ten months ended May 31, 2000,  to
$119,820 for the year ended May 31, 2001.  Professional  fees included legal and
accounting fees relating to the preparation of our  registration  statements and
financial statements.

     Net and  Comprehensive  Loss.  Based on the above,  we  sustained a net and
comprehensive  loss of $741,921 for the year ended May 31,  2001,  compared to a
net loss of $458,581  and a  comprehensive  loss of $450,017  for the ten months
ended May 31, 2000. The increase in losses for the period ended May 31, 2001, is
due to the significant  increase in operating,  administrative  and professional
expenses.

     The weighted  average shares  outstanding  for the year ended May 31, 2001,
were 1,385,923, an increase of 333,743 shares (32%) in the same ten month period
of 2000.

Liquidity and Capital Resources

     As of May 31,  2001,  total  current  assets was  $89,155,  a  decrease  of
$202,644,  compared to $291,799 as at May 31, 2000.  This decrease is due to the
reduced investment in capital in 2001 and increase in general and administrative
costs.  The  Company is in a growth  stage in which  expenses  are  expected  to
increase as the Company  implements  its business plan. Due to the fact that the
Company has not generated  sufficient  cash flow to fund all of its  operations,
the Company  has relied  heavily on outside  sources of  capital.  During the 12
month period ended May 31, 2001, the Company raised $200,000 through the sale of
its Series B Convertible  Preferred  Stock.  Subsequent to year end, the Company
obtained $41,000  (CDN$63,000)  through a loan from two of our directors payable
in full by December 31,  2001,  at 10 per cent  interest per annum.  The Company
will require additional capital  investments or borrowed funds to meet cash flow

<PAGE>12

projections.  To date,  the Company has reduced  expenses to cover  monthly cash
requirements,  however,  the  Company  has not been able to  eliminate  accounts
payable and accrued liabilities. There can be no assurance that the Company will
be able to raise  capital from these outside  sources in  sufficient  amounts to
fund the Company's  business.  The failure to secure  adequate  outside  funding
would have an adverse affect on the Company's operating results.

     The Company  expects its expenses will continue to increase during the next
twelve months as a result of increased  marketing  expenses and the expansion of
its online services.

     By 2003, the Company plans to develop the Lumber and Equipment Exchange, or
LEE, which will conduct auctions of lumber, equipment and other wood products by
means of the  internet.  To  establish  the LEE, it will need to license  from a
third party the  sophisticated  computer  software  systems needed to operate an
internet-based auction site. The Company will earn commissions on any sales made
through  the LEE.  A  license  for the  computer  system  needed  for the LEE is
expected to cost  approximately  $300,000.  In the alternative,  the Company may
attempt to establish a joint venture or similar arrangement with a company which
has the rights to such a computer system,  in which case the initial cost of the
license would be less but the Company would be required to share any revenues it
earned from the LEE with its joint  venture  partner.  As of August 28, 2001 the
Company had not  obtained any license for the  computer  programs  which will be
required for the LEE and the launch date of the LEE will remain  uncertain until
additional sources of capital are obtained.

     Investing  activities  during the twelve  months ended May 31,  2001,  have
consisted  mainly of  purchasing  equipment,  primarily  computer  hardware  and
software.  Capital expenditures,  including those under capital leases,  totaled
$27,009 in 1999;  $119,377  in 2000;  and $31,265 in 2001.  The Company  expects
capital   expenditures   will   increase  and  growth  in  its   personnel   and
infrastructure will be required to support the growing customer base.

     To date, the Company has not invested in derivative securities or any other
financial  instruments  that  involve a high  level of  complexity  or risk.  It
expects,  that in the  future,  cash in  excess  of  current  requirements  will
continue  to be invested in high  credit  quality,  interest-bearing  securities
until utilized in business operations.

     Capital  commitments  for  the  next 12  month  period  include  consultant
agreements  totaling  $133,888;  other leases $175;  and  employment  agreements
totaling $122,454.

     In August 2001, the Company entered into a Debt  Settlement  Agreement with
one of our creditors. The agreement settles approximately $102,769 (Cdn$155,710)
in debt through the payment in cash of $49,500  (Cdn$75,000) and the issuance of
100,000 shares of our common stock in full settlement of the debt.

     As  of  May  31,  2001,  the  Company  had  negative   working  capital  of
approximately  ($244,788).  The Company  anticipates  obtaining  the  additional
capital which it will require through revenues from its operations and through a
combination  of debt and equity  financing.  In addition,  we plan on allocating
approximately  $150,000 to debt  repayment of accounts  payable upon third party
financing.  We will also  consider  joint  ventures or  strategic  alliances  to
develop  future  programs.  Current cash and cash  equivalents  are projected to
sustain the Nanaimo  operations  but alternate  sources will be required to fund
additional  expenses.  The Company will seek to raise  additional  funds through
public and private  equity  financings,  borrowed  funds or from other  sources.
There is no assurance  that the Company  will be able to obtain  capital it will
need  or that  its  estimates  of its  capital  requirements  will  prove  to be

<PAGE>13

accurate.  As of the  date  of  this  report,  the  Company  did  not  have  any
commitments from any source to provide additional capital.

ITEM 7. FINANCIAL STATEMENTS

     The financial statements of the Company,  including notes thereto, together
with the  report  of  independent  certified  public  accountants  thereon,  are
presented as an exhibit under Item 13 beginning on page F-1.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

        None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16 (A) OF THE EXCHANGE ACT

Directors and Executive Officers

     The directors and executive  officers,  and their ages and  positions,  and
duration as such, are as follows:

<TABLE>
<CAPTION>

Name                  Position                                  Age    Period
----                  --------                                  ---    ------
<S>                  <C>                                     <C>     <C>
Joe Perraton          President, Secretary, Chief Financial     35     January 31, 2000 - Present
                      Officer and Director
Joe Nemeth            Director                                  34     July 6, 2001 - Present
Sean Curran           Director                                  40     July 6, 2001 - Present

</TABLE>


Business Experience

     The following is  information  on the business  experience of each officer,
director and director nominee.

     Joe  Perraton  has  served as  president,  chief  financial  officer  and a
director since January 31, 2000, and as Secretary  since May 11, 2000.  Prior to
the  acquisition  by our company of our subsidiary  The Forest  Industry  Online
Inc., Mr. Perraton served as president,  co-founder and operations manager since
the inception of the business "forest  industry  online" as a proprietorship  in
1995.  He  became  president  of The  Forest  Industry  Online,  Inc.  upon  its
incorporation in January 1997. As co-founder Mr. Perraton had a unique vision of
how the forest  industry  could use the  internet to improve  the  industry as a
whole.  With over ten years experience  directly in the forest industry and over
five years working with internet and  client/server  technologies.  Mr. Perraton
has  insight  on how  technologies  relate  to the  forest  industry.  Prior  to
establishing  The Forest  Industry  Online Inc., Mr. Perraton was engaged in the
forest industry as an independent logging contractor.

     Joe Nemeth served as Vice  President,  North American  Newsprint  Sales for
Fletcher  Challenge  Canada Ltd. from 1999 to 2000. From 1996 to 1998, Mr Nemeth
served as their Production Director in their Elk Falls Paper Division. Currently
Mr. Nemeth is a Director of the following companies: Green Belt Renewable Energy

<PAGE>14

Inc.,  Cultus  Lake  Capital  VCC  Board,  and  the  International  Bio-Recovery
Vancouver  Island Board.  Mr. Nemeth holds a Masters of Business  Administration
from the University of Western Ontario.

     Sean  Curran  served as the  North  American  Newsprint  Sales  Manager  of
Norske-Skog Canada Ltd. from 1999 to August 2001.  Norske-Skog is engaged in the
business of pulp and paper.  For seven years  prior,  Mr.  Curran  worked as the
General  Manager for Atlantic  Newsprint  Inc.  within their sales and marketing
department.  Mr. Curran has worked within the pulp and paper  industry in senior
sales management positions for over 15 years.

     Each  director  holds  office  until his  successor  is duly elected by the
stockholders.  Executive  officers  serve  at  the  pleasure  of  the  Board  of
Directors.

Family Relationships

     There  are no  family  relationships  between  any  director  or  executive
officer.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"),  requires the Company's directors and executive  officers,  and
persons who own more than 10% of the Common Stock,  to file with the  Securities
and Exchange  Commission  (the "SEC")  initial  reports of beneficial  ownership
("Forms 3") and other equity  securities of the Company  ("Forms 4").  Officers,
directors,  and greater than 10% shareholders of the company are required by SEC
regulations  to furnish to the company  copies of all Section 16(a) reports that
they file. To the Company's knowledge, based solely on a review of the copies of
such reports  furnished to the company,  all Section  16(a) filing  requirements
applicable to its officers,  directors,  and greater than 10% beneficial  owners
were complied with for the year ended May 31, 2001.

ITEM 10. EXECUTIVE COMPENSATION

     The following  table sets forth the  compensation  of the  Company's  Chief
Executive  Officer during the last two complete  fiscal years. No other officers
or directors received annual  compensation in excess of $100,000 during the last
two complete fiscal years.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                               Annual Compensation                        Long Term Compensation
                        -----------------------------------    ----------------------------------------------
                                                                      Awards            Payout
                                                               ---------------------    -------
                                                               Restricted Securities    LTIP     All Other
                                             Other Annual      Stock      Underlying    Payout  Compensation($)
                Year    Salary   Bonus ($)   Compensation      Award(s)   Options        ($)
                                                 ($)                         (#)
               -------- -------- ---------- ---------------    ---------- ----------    ------- -------------
<S>            <C>      <C>          <C>          <C>              <C>        <C>         <C>        <C>
Joe Perraton   2001(1)  $46,500     -0-          -0-              -0-        -0-         -0-        -0-
President      2000(2)  $28,428     -0-          -0-              -0-        -0-         -0-        -0-
-----------------

</TABLE>

(1)  For the period June 1, 2000 to May 31, 2001.
(2)  For the period January 31, 2000 to May 31, 2000. Prior to January 31, 2000,
     Mr. Perraton was paid the following  salary by The Forest Industry  Online,
     Inc.  (a  subsidiary  of the  Company's  June 1, 1999 to January 30, 2000 -
     $13,406; fiscal year 1999 - $49,410; fiscal year 1998 - $25,325.

<PAGE>15

Employment/Consulting Agreements

     On  January  31,  2000 we  acquired  The Forest  Industry  Online  Inc.  In
connection  with  this  acquisition  the  Company  entered  into  an  employment
agreement with Joe Perraton,  the President of The Forest Industry  Online.  The
employment  agreement provides for a term of three years and an annual salary of
CDN $70,000 (approximately $46,000 at current exchange rates).

     On January 31, 2001, the Company amended the employment  agreement  entered
into with Joe Perraton, our President,  and revised it to a consulting agreement
for the same renumeration and a term of two years.

     In February 2001 the Company's  wholly owned subsidiary The Forest Industry
Online Inc. entered into consulting agreements with three consultants to provide
management, administration, sales and production services for total monthly fees
of $7,368. The contract terms are to February 1, 2003. The Company may terminate
each agreement upon thirty days notice.

Employee Pension, Profit Sharing or other Retirement Plans

     The Company does not have a defined benefit,  pension plan,  profit sharing
or other retirement plan, although it may adopt one or more of such plans in the
future.

Director's Compensation

     At present the Company does not pay its directors for attending meetings of
the Board of  Directors,  although  it expects to adopt a director  compensation
policy in the future. The Company has no standard  arrangement pursuant to which
its directors  are  compensated  for any services  provided as a director or for
committee participation or special assignments.

     Except as disclosed  elsewhere in this annual  report no director  received
any form of compensation from the Company during the year ended May 31, 2001.

Stock Option Plan

     In February  2000 the Company's  Board of Directors  adopted a stock option
plan which authorizes the issuance of options to purchase up to 25,000 shares of
our common  stock.  The option plan will remain in effect until  February  2010,
unless earlier  terminated by action of the Board of Directors.  Pursuant to the
option plan,  the  Company's  employees  and officers are eligible to be granted
options.  The Company's  directors may not be granted  options  unless they also
serve as  officers.  The option  exercise  price is  determined  by the Board of
Directors. On May 26, 2000, the Board of Directors amended the 2000 Stock Option
Plan to authorize the issuance of options to purchase up to 50,000 shares of the
Company's common stock and expanded the definition of an eligible person for the
purpose of authorizing stock options.

     Options  granted  pursuant  to  the  Option  Plan  terminate  on  the  date
established  by the Board of  Directors  when the option was  granted and in any
event cannot exceed ten years from the date of grant.

     Options granted  pursuant to the Option plan may be either  Incentive Stock
Options  within the  meaning  of Section  422 of the  Internal  Revenue  Code or
Nonqualified Stock Options.

     The exercise price of options granted pursuant to the Option Plan cannot be
less than the fair market value of the shares of our common stock on the date of

<PAGE>16

the grant and,  in the case of  Incentive  Stock  Options  granted to any of our
employees  who own more  than 10% of the  voting  power  of all  classes  of the
Company's shares, the exercise price cannot be less than 110% of the fair market
value of the shares of our common stock on the date of the grant.

     The Option Plan is administered  by the Company's  Board of Directors.  The
Board of Directors has the  authority to interpret the  provisions of the Option
Plan and supervise the administration of the Option Plan. In addition, the Board
of Directors  is  empowered  to select  those  persons to whom options are to be
granted,  to determine  the number of shares  subject to each grant of an option
and to determine when, and upon what conditions options granted under the Option
Plan will vest or otherwise be subject to forfeiture and cancellation.

     In the discretion of the Company's  Board of Directors,  any option granted
pursuant to the Option Plan may include installment exercise terms such that the
option  becomes  fully  exercisable  in a series  of  cumulating  portions.  The
Company's  Board of Directors may also accelerate the date upon which any option
(or any part of any options) is first exercisable.  Any options granted pursuant
to the Option Plan will be forfeited if the "vesting"  schedule  established  by
the Board of Directors  at the time of the grant is not met.  For this  purpose,
vesting  means the period  during which the employee  must remain an employee of
forestindustry.com or our subsidiary The Forest Industry Online Inc. At the time
an employee ceases working for the Company, any options not fully vested will be
forfeited and  cancelled.  Payment for the shares of the Company's  common stock
underlying the options  granted to its officers may be paid through the delivery
of shares of its common stock having an aggregate fair market value equal to the
option  price,  provided such shares have been owned by the option holder for at
least one year prior to such  exercise.  A combination of cash and shares of the
Company's  common stock may also be permitted at the  discretion of the Board of
Directors.  Options  are  generally  non-transferable  except  upon death of the
option holder.

     The Company's  Board of Directors  may at any time,  and from time to time,
amend, terminate, or suspend the Option Plan in any manner it deems appropriate,
provided that such amendment,  termination or suspension cannot adversely affect
rights or obligations with respect to shares or options previously granted.

     The Option  Plan is not  qualified  under  Section  401(a) of the  Internal
Revenue Code,  nor is it subject to any  provisions  of the Employee  Retirement
Income Security Act of 1974.

     No  directors or officers  were granted any options  during the past fiscal
year.  Options to purchase  10,900  shares of common  stock were issued to eight
employees and two  non-employees.  These options have exercise  prices of $0.60,
$2.00 and $4.00 per share and expire in December, April and May of 2005.

Limitation of Liability and Indemnification Matters

     The   General   Corporation   Law  of  the   State  of   Delaware   permits
indemnification  of directors,  officers,  and employees of  corporations  under
certain   conditions   subject  to   certain   limitations.   Article   XIII  of
forestindustry's  Certificate  of  Incorporation  states  that the  Company  may
provide  indemnification of its agents,  including its officers and directors to
the maximum extent permitted by the Delaware Corporation Law.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be  permitted to  directors,  officers  and  controlling  persons of
forestindustry   pursuant   to   the   foregoing   provisions,   or   otherwise,
forestindustry  has been  advised  that in the  opinion of the  Commission  such
indemnification  is against public policy as expressed in the Securities Act and
is,  therefore,  unenforceable.  In the event  that a claim for  indemnification
against such liabilities  (other than the payment by  forestindustry of expenses

<PAGE>17

incurred or paid by a director,  officer or controlling person of forestindustry
in the successful defense of any action, suit or proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, forestindustry will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth,  as of August 28, 2001,  information  with
respect to the only persons owning  beneficially  5% or more of our  outstanding
common stock and the number and percentage of  outstanding  shares owned by each
of our  directors  and officers  and by our  officers and  directors as a group.
Unless  otherwise  indicated,  each owner has sole voting and investment  powers
over his shares of common stock.

                                           Shares of            Percent of
Name and Address                          Common Stock             Class
----------------                          ------------          ----------

Teaco Properties Ltd.                       100,000                 6.6%
5299 Budd Crescent
Nanaimo, British Columbia
V9T 5N9

Joe Nemeth
9311 - 213th Street                         300,000                 19.7%
Langley, British Columbia
V1M 1P6

Sean Curran                                 600,000                 39.4%
139 Centennial Parkway
Boundary Bay, British Columbia
V4L 1K4

Augustine Fund, LLP                          93,908                 6.2%
141 W. Jackson Blvd., Suite 2182
Chicago, Illinois 60604

All Officers and Directors                  900,000                 59.1%
as a Group (2 persons)

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except  as  otherwise  indicated  below,  we have  not  been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to our knowledge,  any of our directors,
officers,  five  percent  beneficial  security  holder,  or  any  member  of the
immediate  family  of the  foregoing  persons  has had or will  have a direct or
indirect material interest.

     Should a  transaction,  proposed  transaction,  or series  of  transactions
involve an officer  or  director  of  forestindustry  or a related  entity or an
affiliate of a related  entity,  or holders of stock  representing 5% or more of
the voting power (a "related entity") of the then outstanding  voting stock, the

<PAGE>18

transactions  must  be  approved  by  the  unanimous  consent  of our  board  of
directors.  In the event a member of the board of directors is a related  party,
that member will abstain from the vote.

     We have  issued  shares of our  common  stock or  approved  the sale of our
common stock to the  following  persons  during the past two years,  who, at the
time of issuance, were affiliated with us:

<TABLE>
<CAPTION>
                                   Date of      Number of
Name                               Issuance      Shares        Share Value     Consideration
----                               --------     ---------      -----------     -------------
<S>                               <C>           <C>            <C>            <C>
Century Capital Management Ltd.      01/00         3,750          $9,375       Consulting
(1)                                                                            services

Todd Hilditch                        02/00        20,000         $50,000       Services Rendered

</TABLE>

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

(1)  The beneficial owner of Century Capital Management Ltd. is Andrew Hromyk, a
     former officer and director.

     In May 2000 Bona Vista West Ltd., a former principal  shareholder  returned
259,724  shares  of  common  stock  to us for  cancellation  by  way of a  stock
retirement  agreement  dated May 11, 2000.  Bona Vista West Ltd.  agreed with us
that in order to attract  future  financings it would be in our best interest to
reduce our issued and  outstanding  share  capital  through  the  surrender  and
retirement of certain  control stock  originally  issued to Bona Vista West Ltd.
upon our formation.  We released Bona Vista West Ltd. from all claims,  demands,
acts, omissions and causes of action, in return for the 259,724 shares of common
stock.

     We engaged Century Capital Management Ltd. as an advisor in connection with
our acquisition of The Forest  Industry Online Inc. For its services,  we issued
Century  Capital  Management  Ltd.  3,750  shares of our common  stock.  Century
Capital  Management  Ltd.  is owned by  Andrew  Hromyk,  a  former  officer  and
director.

     In  July  2001,  the  Company,  Teaco  Properties,  the  Company's  largest
shareholder, Sean Curran and Joe Nemeth entered into a stock purchase agreement.
Under the terms of the stock purchase  agreement,  Teaco Properties sold 900,000
shares in the  aggregate  of the  Company's  common  stock that it owned to each
Messrs.  Curran and Nemeth for the  purchase  price of $10.  Marc White and Dave
McNaught  are the  beneficial  owners  of  Teaco  Properties  Ltd.  Prior to the
transaction,  Teaco  Properties  owned 1,000,000  shares in the aggregate.  As a
result of this  transaction  Teaco  Properties  currently  owns 100,000  (6.6%),
Curran owns 600,000 (39.4%), and Nemeth owns 300,000 (19.7%), of the outstanding
shares.  In connection  with the stock purchase  agreement,  Messrs.  Curran and
Nemeth were appointed to the Company's Board of Directors.

     In addition,  as an  inducement  to the sale,  the Company  granted each to
Messrs. White and McNaught two year warrants to purchase 110,000 shares (220,000
shares in the aggregate) of common stock.

<PAGE>19

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)  The following documents are being filed as part of this report:

     (1)  Financial Statements


<TABLE>
<CAPTION>

<S>                                                                                      <C>
        Report of Independent Accountants                                                  F-1
        Year-end Consolidated Balance Sheets                                               F-2
        Year-end Consolidated Statements of Operations and Comprehensive Income            F-3
        Year-end Consolidated Statements of Stockholders' Equity                           F-4
        Year-end Consolidated Statements of Cash Flows                                     F-5
        Notes to Consolidated Financial Statements                               F-6 thru F-21

</TABLE>

     (2)  Exhibits

<TABLE>
<CAPTION>
              EXHIBIT
                NO.                    DESCRIPTION                           LOCATION
         ------------------  --------------------------------    ---------------------------------

<S>        <C>             <C>                                  <C>
             3.1 - 3.2       Articles of Incorporation and       Incorporated by reference to
                             Bylaws                              Exhibits No. 3.1-3.2 to the
                                                                 Company's Form SB-2 filed on
                                                                 May 19, 2000
                4.1          Stock Option Plan                   Incorporated by reference to
                                                                 Exhibit No. 4.1 to the
                                                                 Company's Form SB-2 filed on
                                                                 May 19, 2000
                4.2          Amended 2000 Stock Option Plan      Incorporated by reference to
                                                                 Exhibit No. 4.2 to the
                                                                 Company's Form 10KSB filed on
                                                                 August 31, 2000
               10.1          Share Purchase Agreement with       Incorporated by reference to
                             Teaco Properties, Ltd., Joe         Exhibit No. 10.1 to the
                             Perraton and Lara Perraton          Company's Form SB-2 filed on
                                                                 May 19, 2000
               10.2          Perraton Employment Agreement       Incorporated by reference to
                                                                 Exhibit No. 10.2 to the
                                                                 Company's Form 10KSB filed on
                                                                 August 31, 2000
               10.3          Consulting Agreement with Todd      Incorporated by reference to
                             Hilditch                            Exhibit No. 4.2 to the
                                                                 Company's Form 10KSB filed on
                                                                 August 31, 2000
               10.4          Consulting Agreement with           Incorporated by reference to
                             Summit Media Partners Inc.          Exhibit No. 4.2 to the
                                                                 Company's Form 10KSB filed on
                                                                 August 31, 2000
               10.5          Consulting Agreement with Joe       Filed herewith
                             Perraton
               16.1          Letter regarding Changes in         Incorporated by reference to
                             Certifying Accountant               Exhibit No. 16.1 to the
                                                                 Company's Form 8-K filed on
                                                                 March 8, 2000
</TABLE>

<PAGE>20


     (b)  Reports on Form 8-K for the year ended May 31, 2001:

          A Form 8-K dated  August 16,  2000 (filed  August 30,  2000) was filed
          during the last fiscal year. The Form 8-K reported an Item 2 event and
          included exhibits pursuant to Item 7.

          A Form 8-K dated  October 5, 2000 (filed  October 23,  2000) was filed
          during the last fiscal year. The Form 8-K reported an Item 2 event and
          included exhibits pursuant to Item 7.

          A Form 8-K  dated  July 6,  2001  (filed  July  17,  2001)  was  filed
          subsequent  to the last fiscal  year.  The Form 8-K reported an Item 1
          and included exhibits pursuant to Item 7.

<PAGE>21

                                   SIGNATURES

     In  accordance  with Section 13 or 15(d) of the  Exchange Act of 1934,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                            FORESTINDUSTRY.COM, INC.

                                         By     /s/  Joe Perraton

                                                 Joe Perraton, President

                                         By    /s/  Joe Perraton

                                                Joe Perraton, Secretary

     Pursuant  to  the   requirements  of  the  Securities  Act  of  l933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.

                                             Title                Date


/s/  Joe Perraton                            Director          August 31, 2001
-------------------------------
Joe Perraton

/s/  Joe Nemeth                              Director          August 31, 2001
-------------------------------
Joe Nemeth

/s/  Sean Curran                             Director          August 31, 2001
-------------------------------
Sean Curran

<PAGE>F-1

Independent Auditors' Report
-------------------------------------------------------------------------------

To the Shareholders and Board of Directors of:
forestindustry.com, Inc.


We have audited the Consolidated Balance Sheets of forestindustry.com,  Inc. and
subsidiary as of May 31, 2001 and 2000 and the related  Consolidated  Statements
of Operations and Comprehensive  Loss,  Stockholders'  Equity (Deficit) and Cash
Flows for the year ended May 31, 2001 and for the ten month period ended May 31,
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in  accordance  with United  States  generally  accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are  free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  these consolidated  financial statements present fairly, in all
material  respects,  the  financial  position of  forestindustry.com,  Inc.  and
subsidiary as of May 31, 2001 and 2000 and the results of their  operations  and
their cash flows for the year  ended May 31,  2001 and for the ten month  period
ended  May 31,  2000,  in  conformity  with  United  States  generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the Company has suffered recurring losses and
negative  cash flows from  operations  that raise  substantial  doubt  about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.



Signed "Watson Dauphinee & Masuch"
Chartered Accountants


Vancouver,  B.C., Canada
July 27, 2001


<PAGE>F-2


                            FORESTINDUSTRY.COM, INC.

Consolidated Balance Sheets
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                 May 31, 2001     May 31, 2000
                                                                            $                $

<S>                                                             <C>             <C>
ASSETS

CURRENT

Cash and Equivalents                                                   27,551          196,963
Accounts Receivable (Net of Allowance for
Doubtful Accounts - 2001 - $16,250; 2000 -                             52,926           84,151
$20,697)
Work in Process                                                         8,537            9,137
Prepaid Expenses                                                          141            1,548
                                                                 ------------      -----------
                                                                       89,155          291,799

Property and Equipment (Note 4)                                       109,821          123,792
                                                                 ------------      -----------
                                                                      198,976          415,591
                                                                 ============      ===========
LIABILITIES and STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts Payable and Accrued Liabilities                              280,519          129,513
Unearned Revenues                                                      53,424           43,877
                                                                 ------------      -----------
                                                                      333,943          173,390
                                                                 ------------      -----------
Commitments (Note 7)
Subsequent Event (Note 8)

STOCKHOLDERS' EQUITY (DEFICIT)

Share Capital (Note 5)
Common Stock, $0.0001 par value, Voting
    30,000,000 Authorized; Issued and
Outstanding:                                                              152              130
       2001 - 1,521,058; 2000 - 1,296,646
Preferred Stock, $0.0001 par value, Non Voting
    5,000,000 Authorized; Issued and
    Outstanding:
      2001 - Nil; 2000 - 375                                                -                1
Additional Paid in Capital                                          1,183,434          835,955
Deferred Stock Compensation                                                 -          (17,253)
Cumulative Translation Adjustment                                      10,014           10,014
Deficit                                                            (1,328,567)        (586,646)
                                                                 ------------      -----------
                                                                     (134,967)         242,201
                                                                 ------------      -----------
                                                                      198,976          415,591
                                                                 ============      ===========
</TABLE>


See notes to consolidated financial statements

<PAGE>F-3

                            FORESTINDUSTRY.COM, INC.

Consolidated Statements of Operations and Comprehensive Loss
(Expressed in U.S. Dollars)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                          Year     Ten Months'
                                                                         Ended           Ended
                                                                   May 31,2001    May 31, 2000
                                                                            $                $

<S>                                                              <C>             <C>
REVENUES                                                               466,326         335,287
                                                                  ------------     -----------
EXPENSES

Consulting Fees                                                        156,315         125,099
Depreciation                                                            45,236          27,826
General and Administrative                                             886,876         534,976
Professional Fees                                                      119,820         105,967
                                                                  ------------     -----------
                                                                     1,208,247         793,868
                                                                  ------------     -----------
NET (LOSS) FOR THE PERIOD                                             (741,921)       (458,581)

Foreign Currency Translation Adjustment                                      -           8,564
                                                                  ------------     -----------
COMPREHENSIVE (LOSS) FOR THE PERIOD                                   (741,921)       (450,017)
                                                                  ============     ===========

Weighted Average Number of Shares Outstanding,
Basic and Diluted                                                    1,385,923       1,052,180
                                                                  ============     ===========
(Loss) per Common Share,
Basic and Diluted                                                        (0.54)          (0.43)
                                                                  ============     ===========
</TABLE>

See notes to consolidated financial statements

<PAGE>F-4

                            FORESTINDUSTRY.COM, INC.

Consolidated Statements of Stockholders' Equity (Deficit)
For the Periods from July 31, 1998 to May 31, 2001
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>

                                       Common Stock     Preferred Stock
                                   --------------------------------------
                                                                           Additional      Deferred  Cumulative
                                                                              Paid-in         Stock Translation
                                      Number   Amount     Number   Amount     Capital  Compensation  Adjustment   Deficit     Total
                                   of Shares        $  of Shares        $           $             $           $         $         $
-----------------------------------------------------------------------------------------------------------------------------------

<S>                             <C>            <C>     <C>         <C>      <C>        <C>           <C>        <C>       <C>
Balance, July 31, 1998             1,000,000      100          -        -         (99)            -         991  (127,524) (126,532)

Translation adjustment
for the year ended
July 31, 1999                              -        -          -        -           -             -         459        -        459

Net loss for the year
ended July 31, 1999                        -        -          -        -           -             -           -     (541)      (541)

Common stock issued to
purchase all issued
and outstanding shares of
The Forest Industry
Online Inc.,
January 31, 2000 (note 3)            492,698       49          -        -         (49)            -           -        -          -

Adjustment to comply with
recapitalization
accounting (note 3)                        -        -          -        -     (28,042)            -           -        -    (28,042)

750 Series `A' convertible
preferred stocks issued for
cash, January 31, 2000 at
$1,000 per share (note 3)                  -        -        750        1     749,999             -           -        -    750,000

Common stock issued for
services, January 31,
2000, valued at $2.50 per
share (note 3)                         3,750        1          -        -       9,374             -           -        -      9,375

Common stock issued for services
in February 2000, valued at $2.50
per share (note 5(c))                 35,000        4          -        -      87,496             -           -        -     87,500

Common stock issued on conversion
of 375 Series `A' convertible
preferred stock (note 5 (a))          24,922        2       (375)       -          (3)            -           -        -         (1)

Retirement of common stock
returned to the Company at
no cost by a founding
shareholder (note 5 (d))            (259,724)     (26)         -        -          26             -           -        -          -

Deferred compensation                      -        -          -        -      17,253       (17,253)          -        -          -

Translation adjustment for the
period ended May 31, 2000                  -        -          -        -           -             -       8,564        -      8,564

Net loss for the period
ended May 31, 2000                         -        -          -        -           -             -           - (458,581)  (458,581)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 2000              1,296,646      130        375        1     835,955       (17,253)     10,014 (586,646)   242,201
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>F-5

                            forestindustry.com, Inc.

Consolidated Statements of Stockholders' Equity (Deficit)
For the Periods from July 31, 1998 to May 31, 2001
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>

                                    Common Stock     Preferred Stock
                                --------------------------------------
                                                                        Additional      Deferred  Cumulative
                                                                           Paid-in         Stock Translation
                                   Number   Amount     Number   Amount     Capital  Compensation  Adjustment     Deficit      Total
                                of Shares        $  of Shares        $           $             $           $           $          $
-----------------------------------------------------------------------------------------------------------------------------------

<S>                          <C>            <C>     <C>         <C>      <C>        <C>           <C>         <C>        <C>

Balance, May 31, 2000
(Continued)                     1,296,646      130        375        1     835,955       (17,253)     10,014    (586,646)   242,201

Common stock issued for
services in June
2000, valued at $8.00
per share (note 5(c))              20,000        2          -        -     159,998             -           -           -    160,000

Common stock issued on
conversion of 375
Series `A' convertible
preferred stock (note 5(a))       109,412       10       (375)      (1)         (9)            -           -           -          -

Retirement of common stock
returned to the Company at
no cost by a consultant for
services (note 5 (d))              (5,000)       -          -        -     (12,500)            -           -           -    (12,500)

Common stock issued on
conversion of 200 Series
`B' convertible preferred
stocks issued for cash,
August 1, 2000 at $1,000
per share (note 5 (a))            100,000       10          -        -     199,990             -           -           -    200,000

Amortization of deferred
compensation                            -        -          -        -           -        17,253           -           -     17,253

Net loss for the period
ended May 31, 2001                      -        -          -        -           -             -           -    (741,921)  (741,921)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 2001           1,521,058      152          -        -   1,183,434             -     (10,014) (1,328,567)  (134,967)
===================================================================================================================================

</TABLE>

See notes to consolidated financial statements

<PAGE>F-6

                            FORESTINDUSTRY.COM, INC.

Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
                                                                        Year Ended     Ten Months' Ended
                                                                      May 31, 2001          May 31, 2000
                                                                                 $                     $

<S>                                                                  <C>               <C>
CASH WAS PROVIDED FROM, UTILIZED (FOR):
OPERATING ACTIVITIES

Net (Loss) for the Period                                                  (741,921)            (458,581)
Non-Cash Items:
Depreciation                                                                 45,236               27,826
Common Stocks Issued in Exchange for Services                               160,000               87,500
Amortization Deferred Compensation                                           17,253                    -
Retirement of Common Stocks Issued for Services                             (12,500)                   -
Change in Non-Cash Working Capital Accounts:
   Accounts Receivable                                                       31,225              (19,494)
   Work in Process                                                              600               (9,137)
   Prepaid Expenses                                                           1,407                  247
   Accounts Payable and Accrued Liabilities                                 151,006               80,384
   Unearned Revenues                                                          9,547               (8,404)
                                                                        --------------------------------
Net Cash (Used in) Operating Activities                                    (338,147)            (299,659)
                                                                        --------------------------------
FINANCING ACTIVITIES

Operating Line of Credit (Repayments)                                             -              (68,973)
Advances from Affiliated Company                                                  -                  166
Repayments (to) Shareholders                                                      -              (68,013)
Net Proceeds from Issuance of Preferred Stocks                              200,000              750,000
                                                                        --------------------------------
Net Cash Provided by Financing Activities                                   200,000              613,180
                                                                        --------------------------------
INVESTING ACTIVITY

Acquisition of Property and Equipment (Net)                                 (31,265)            (119,377)
                                                                        --------------------------------
NET INCREASE (DECREASE)
IN CASH AND EQUIVALENTS                                                    (169,412)             194,144

Cash and Equivalents, Beginning of the Period                               196,963                2,819
                                                                        --------------------------------
CASH AND EQUIVALENTS, END OF THE PERIOD                                      27,551              196,963
                                                                        ================================
Supplemental Disclosure
Interest Paid                                                                 7,676               10,035
                                                                        ================================

</TABLE>

See notes to consolidated financial statements

<PAGE>F-7

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
 (Expressed in U.S. Dollars)


NOTE 1 - NATURE AND CONTINUANCE OF OPERATIONS

forestindustry.com,  Inc. (the "Company") was incorporated in Delaware,  U.S.A.,
on December 18, 1997,  under the name of Autoeye Inc. On February 25, 2000,  the
Company changed its name to forestindustry.com, Inc. Prior to its acquisition of
The Forest  Industry  Online  Inc.  ("Forest")  (note  2(a)),  the  Company  was
inactive.

The  Company's  current  business  activities  include  designing  web sites and
operating and maintaining a computer internet web site for companies  associated
with the forest and wood product industries.

These  consolidated  financial  statements have been prepared on a going concern
basis in accordance with United States generally accepted accounting principles.
The going  concern  basis of  presentation  assumes the Company will continue in
operation for the foreseeable  future and will be able to realize its assets and
discharge  its  liabilities  and  commitments  in the normal course of business.
Certain  conditions,  discussed below,  currently exist which raise  substantial
doubt upon the validity of this  assumption.  The  financial  statements  do not
include any adjustments that might result from the outcome of this uncertainty.

To May 31,  2001,  the  Company  has not  been  profitable  and has  experienced
negative cash flows from  operations.  Operations have been financed through the
issuance of stocks and other external financing. The Company's future operations
are dependent upon continued external funding,  its ability to increase revenues
and reduce  expenses,  and the success of its proposed  development of an online
business exchange auction website for the forest and wood industries.  There are
no assurances that the above conditions will occur.

Subsequent to May 31, 2001, the company obtained a short term loan in the amount
of $41,000 for working capital purposes (note 8).


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

a)   Reverse Takeover and Basis of Presentation

On January 31,  2000,  the Company  acquired  all of the issued and  outstanding
shares of Forest by issuing to Forest's stockholders  1,000,000 shares of common
stock and control of the Company.  The acquisition  was a reverse  takeover with
Forest being the deemed accounting  acquiror for financial  statement  purposes.
The  acquisition  has been  accounted for as a capital  transaction  effectively
representing   an  issue  of   stocks   by   Forest   for  the  net   assets  of
forestindustry.com, Inc.

The Company's  historical  financial  statements reflect the financial position,
results  of  operations   and  cash  flows  of  Forest  from  the  date  of  its
incorporation  on  January 9, 1997,  under the laws of the  Province  of British
Columbia, Canada. The historical stockholders' equity gives effect to the shares
issued  to  the   stockholders   of  Forest.   The  results  of   operations  of
forestindustry.com, Inc. are included only from the date of acquisition, January
31, 2000.

<PAGE>F-8

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

b)   Basis of Consolidation

These consolidated  financial statements include the accounts of the Company and
its  wholly-owned  subsidiary,  The Forest  Industry Online Inc. All significant
intercompany  balances and transactions have been eliminated in the consolidated
financial statements.

c)   Work in Process

Work  in  process  is  recorded  at  the  lower  of  cost,  determined  using  a
percentage-of-completion  method based on the contract price, and net realizable
value.

d)   Property and Equipment and Depreciation

Property  and  equipment  are  recorded  at cost and are  depreciated  using the
straight-line  method over their estimated useful lives ranging from five to ten
years, or their lease terms.

e)   Cash and Equivalents

The  Company  considers  all  short-term  investments  with a  maturity  date at
purchase of three months or less to be cash equivalents.

f)   Revenue Recognition and Unearned Revenues

Revenues on  advertising  fees and hosting  revenues  are recorded on the billed
basis.  Customers are invoiced on a quarterly  basis in advance for  advertising
and hosting spaces.  Unearned  revenues relate to the period of the billing that
has not yet transpired and therefore not earned.

Revenues   on  fixed   contract   website   designs   are   recognized   on  the
percentage-of-completion method of accounting.

g)   Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

<PAGE>F-9

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 2 - Significant Accounting Policies (continued)

h)   Net Earnings (Loss) Per Share

Basic earnings (loss) per share is computed using the weighted average number of
common stock outstanding during the periods.  Diluted loss per share is computed
using the weighted  average  number of common and  potentially  dilutive  common
stock  outstanding  during the period.  As the Company has losses in the periods
presented, basic and diluted loss per share are the same.

i)   Stock-Based Compensation

The Company accounts for its stock-based  compensation arrangement in accordance
with provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting
for  Stock  Issued  to  Employees",   and  related  interpretations.   As  such,
compensation  expense  under  fixed plans would be recorded on the date of grant
only if the fair value of the underlying stock at the date of grant exceeded the
exercise price. The Company recognizes  compensation  expense for stock options,
common stock and other equity  instruments  issued to non-employees for services
received based upon the fair value of the services or equity instruments issued,
whichever is more reliably  determined.  This  information  is presented in note
5(c).

Statement of Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for
Stock  Based  Compensation",  requires  entities  that  continue  to  apply  the
provision of APB Opinion No. 25 for  transactions  with employees to provide pro
forma net income and pro forma earnings per share disclosures for employee stock
option  grants made in 1995 and future years as if the  fair-value-based  method
defined in SFAS No. 123 had been applied to these transactions.

j)   Income Taxes

The Company  follows the asset and  liability  method of  accounting  for income
taxes. Under this method,  current taxes are recognized for the estimated income
taxes payable for the current period.

Deferred income taxes are provided based on the estimated  future tax effects of
temporary differences between financial statement carrying amounts of assets and
liabilities and their  respective tax bases as well as the benefit of losses and
tax credits available to be carried forward to future years for tax purposes.

Deferred tax assets and  liabilities  are measured  using enacted tax rates that
are  expected to apply to taxable  income in the years in which those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in operations in
the period that includes the substantive  enactment date. A valuation  allowance
is recorded  for  deferred  tax assets when it is more likely than not that such
deferred tax assets will not be realized.

<PAGE>F-10

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)

Note 2 - Significant Accounting Policies (continued)

k)   Foreign Currency Translation

The  functional  currency of the Company is the United States dollar and for its
Canadian subsidiary the Canadian dollar.  Transactions in foreign currencies are
translated  to United States  dollars at the rates in effect on the  transaction
date.  Exchange  gains or losses arising on translation or settlement of foreign
currency denominated  monetary items are included in the consolidated  statement
of operations.

l)   Impairment of Long-Lived Assets

The  recoverability of the excess of cost over fair value of net assets acquired
is  evaluated  by an analysis of operating  results and  consideration  of other
significant  events or  changes  in the  business  environment.  If the  Company
believes an impairment exists, the carrying amount of these assets is reduced to
fair  value as  defined  in SFAS No.  121,  "Accounting  for the  Impairment  of
Long-Lived Assets and for Long-Lived Assets to be Disposed of."

Note 3 - Acquisition

On January 31,  2000,  the Company  acquired  all of the issued and  outstanding
shares of Forest.  The acquisition was a reverse  takeover with Forest being the
deemed accounting acquiror for financial statement purposes.

Under the terms of the agreement, the Company issued 1,000,000 common shares for
all of the 100 common issued and outstanding shares of Forest. As at January 31,
2000,  there were 492,698 common shares of the Company (after  reflecting a 21:1
stock  consolidation  which  occurred on August 20, 1999 and a subsequent  stock
split of 1:40 which occurred on August 21, 1999.  These stock  adjustments  have
been  retroactively   adjusted  and  presented  as  of  May  31,  2000,  in  the
Consolidated  Statements of Stockholders' Equity). The acquisition was accounted
for as a  recapitalization  of Forest.  The  transaction  was accounted for as a
capital  transaction  effectively  representing an issue of shares by Forest for
the net  assets of the  Company.  On  January  31,  2000,  the net assets of the
Company consisted of:

        Cash and Equivalents                                $ 750,000
        Accounts Payable                                      (19,530)
                                                            ---------
                                                            $ 730,470
                                                            =========

Total costs related to this  recapitalization  transaction  were  $24,375.  They
included cash expense in the estimated amount of $15,000 and non-cash expense in
the amount of $9,375.  The  non-cash  expense  related to the  issuance of 3,750
shares of common  stock of the  Company.  The fair value of these  services  was
based upon the  estimated  fair  value of the  shares at $2.50 per share.  Total
transaction costs were recorded as a charge to the  stockholders'  equity of the
Company.

<PAGE>F-11

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 3 - Acquisition (continued)


Cash and equivalents held by the Company in the amount of $750,000 were obtained
through  subscriptions  for a private  placement  of 750  shares  of Series  "A"
convertible  preferred stock at a price of $1,000 per share. The closing of this
private  placement  and the release of funds held in escrow were  contingent  on
this acquisition being completed.  The shares of Series "A" preferred stock were
convertible,  at the option of the holder, and at any time after March 16, 2000,
into common  stock at 75% of the last ten day  average  closing bid price of the
Company  subject to a maximum  conversion rate of 500 shares of common stock for
one  share of  preferred  stock and a  minimum  conversion  rate of 25 shares of
common stock for one share of preferred stock.  24,922 and 109,412 shares of the
Company's  common  stock were  issued in,  respectively,  2000 and 2001,  on the
conversion in each year of 375 shares of Series "A" convertible preferred stock.

The following table reflects pro forma information which combines the operations
of  forestindustry.com,  Inc. for the ten months  ended May 31,  2000,  and year
ended July 31, 1999, as if the acquisition of forestindustry.com, Inc. had taken
place at the beginning of fiscal year 2000. There were no pro forma  adjustments
required in combining  this  information  of these two entities.  This pro forma
information  does not  reflect  any  non-recurring  charges or credits  directly
attributable to the transaction.  This pro forma information does not purport to
be  indicative  of the  revenues  and net loss that could have  resulted had the
acquisition  been in effect for the period presented and is not intended to be a
projection of future results or trends.

                                             Ten Months               Year
                                                  Ended              Ended
                                           May 31, 2000      July 31, 1999
                                                      $                  $

Revenues                                        335,287            300,362

Expenses

   Consulting Fees                              125,099                487
   Depreciation                                  27,826              7,763
   General and Administrative                   539,008            275,061
   Professional Fees                            109,822             27,344
                                             ----------       ------------
Net (Loss) for the Period                      (466,468)           (10,293)
                                             ==========        ===========
Net (Loss) Per Share                             (0.44)              (0.01)
                                             =========         ===========

<PAGE>F-12

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
 (Expressed in U.S. Dollars)


NOTE 4 - PROPERTY AND EQUIPMENT


<TABLE>
<CAPTION>

                                                 Accumulated              Net Book Value
                                        Cost    Depreciation     May 31, 2001      May 31, 2000
                                           $               $                $                 $
                                  -------------------------------------------------------------
<S>                                  <C>              <C>              <C>               <C>
Computer Equipment                   132,083          49,036           83,047            84,900
Furniture and Fixtures                34,847          16,439           18,408            30,043
Software                              20,242          17,889            2,353             5,104
Leasehold Improvements                 7,516           1,503            6,013             3,745
                                  -------------------------------------------------------------
                                     194,688          84,867          109,821           123,792
                                  =============================================================

</TABLE>

Note 5 - Stockholders' Equity

a)   Preferred Stock

On January 31, 2000, the Company  issued through a private  placement 750 shares
of  Series  "A"  convertible  preferred  stock at a price of $1,000  per  share.
Holders of Series "A" preferred stocks were entitled to a distribution of $1,000
per share  prior to any  distribution  to the  holders of the  Company's  common
stocks in the event of any liquidation or dissolution of the Company.

The Series "A"  preferred  stock was  convertible,  at the option of the holder,
into common  stock at 75% of the last ten day  average  closing bid price of the
Company  subject to a maximum  conversion rate of 500 shares of common stock for
one  share of  preferred  stock and a  minimum  conversion  rate of 25 shares of
common  stock for one share of  preferred  stock.  In  addition,  all series "A"
preferred stock was deemed to convert into common stock on or before January 31,
2001, the first anniversary date.

On May 10, 2000,  the Company  issued  24,922  shares of its common stock on the
conversion of 375 shares of Series "A" convertible preferred stock.

On June 12, 2000, and January 31, 2001, the Company issued, respectively, 21,714
and 87,698 shares of its common stock on the conversion of 175 and 200 shares of
Series "A" convertible preferred stock.

On August 1, 2000, the Company issued through a private  placement 200 shares of
Series "B" convertible  preferred stock at a price of $1,000 per share.  Holders
of Series "B"  preferred  stocks were entitled to a  distribution  of $1,000 per
share prior to any distribution to the holders of the Company's common stocks in
the event of any liquidation or dissolution of the Company.

<PAGE>

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 5 - Stockholders' Equity (continued)

The Series "B"  preferred  stock was  convertible,  at the option of the holder,
into common  stock at 70% of the last five day average  closing bid price of the
Company  subject to a maximum  conversion rate of 500 shares of common stock for
one  share of  preferred  stock and a  minimum  conversion  rate of 25 shares of
common stock for one share of preferred stock.

On March 13, 2001,  the Company issued 100,000 shares of its common stock on the
conversion of the 200 shares of Series "B" convertible preferred stock.

b)   Stock Options

In February  2000,  the Company  adopted a fixed stock option plan that provides
for the  issuance of  incentive  and  non-qualified  stock  options to officers,
directors,  employees  and  non-employees  to acquire up to 25,000 shares of the
Company's  common  stock.  The plan was  amended  in June 2000 to  increase  the
allowable number of stock options to be issued under this plan to 50,000 shares.
The Board of Directors  determines the terms of the options  granted,  including
the number of options granted, the exercise price and the vesting schedule.  The
exercise price for qualified  incentive stock options is not to be less than the
fair  market  value of the  underlying  stock at the date of grant,  and to have
terms no longer than ten years from the date of grant. There was no stock option
plan prior to February 2000.

Issued to Employees

On February 29, 2000, the Company  granted  options to purchase a total of 2,900
shares of the Company's  common stock at a price of $4.00 per share to employees
of the  Company.  The  options  vest on or after  February  29,  2001 and expire
between  February  and April 2005.  During year 2001,  1,200 stock  options were
forfeited as employees left the Company.

On June 11,  2000,  the  Company  granted  options to  purchase a total of 5,400
shares of the Company's  common stock at a price of $2.00 per share to employees
of the  Company.  The options  vest on or after June 11, 2001 and expire on June
11, 2005. During year 2001, 4,200 stock options were forfeited as employees left
the Company.

On December 18, 2000, the Company  granted  options to purchase a total of 4,500
shares of the Company's  common stock at a price of $0.60 per share to employees
of the  Company.  The  options  vest on or after  January 31, 2001 and expire on
December  15,  2005.  During year 2001,  500 stock  options  were  forfeited  as
employees left the Company.

As  discussed  in Note 2(i),  the Company  continues to account for its employee
stock-based  awards using the intrinsic  value method in accordance with APB No.
25, "Accounting for Stock Issued to Employees", and its related interpretations.
Accordingly,  no  compensation  expense  has been  recognized  in the  financial
statements  for employee  stock  arrangements,  because the fair value of common
stock at the measurement date is not greater than the option exercise price.

<PAGE>F-14

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 5 - Stockholders' Equity (continued)

b)  Stock Options (continued)

Issued to Employees (continued)

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been  determined  as if the Company had  accounted for its
employee stock options under the fair value method of that  statement.  The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:  risk-free
interest rate of 6.0%;  dividend yield of 0%; volatility factors of the expected
market price of the Company's stock of 600%; and an expected life of the options
of 2.5 years.  Accordingly,  compensation  expense  using the fair value  method
would have been $2,070, amortized over their respective vesting period.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

The Statement's pro forma information from the options is as follows:

<TABLE>
<CAPTION>

                                                                          Year        Ten Months
                                                                         Ended             Ended
                                                                  May 31, 2001      May 31, 2000
                                                                             $                 $

<S>                                                             <C>               <C>
Net (loss) as reported                                               (741,921)         (458,581)
Compensation  expense from stock  options under SFAS                     (915)           (1,217)
No. 123
                                                                   ----------------------------
Pro forma net (loss)                                                 (742,836)         (459,798)
                                                                   ============================
Pro forma (loss) per common share,
     Basic and Diluted                                                  (0.54)            (0.43)
                                                                   ============================

</TABLE>

<PAGE>F-15

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
 (Expressed in U.S. Dollars)


Note 5 - Stockholders' Equity (continued)

b)   Stock Options (continued)

Issued to Non-Employees

On May 26, 2000, the Company granted options to purchase a total of 4,000 shares
of the Company's  common stock at a price of $2.00 per share to non-employees of
the Company.  The options  vest on May 1, 2001 and expire on May 1, 2005.  Stock
options  issued  to  non-employees  are  accounted  for in  accordance  with the
provisions of SFAS No. 123, "Accounting for Stock Based Compensation", using the
fair value method.  Accordingly,  compensation  expense  relating to these stock
options in the amount of $17,253 was  recorded  in year 2000 as  deferred  stock
compensation to be amortized over their respective vesting period.

During year 2001,  $17,253 was charged as compensation  expense in the statement
of operations.

Additional Stock Option Plan Information

A summary status of the Company's fixed stock option plan and changes during the
period ended May 31, 2001 are as follows:

                                                Number of           Weighted
                                                   Shares            Average
                                                              Exercise Price
                                                                           $
Outstanding, August 1, 1999                             -                  -
     Granted                                        7,300               2.90
     Forfeited                                      (400)               4.00
                                                ----------------------------
Outstanding, May 31, 2000                           6,900               2.84

 Granted                                            9,900               1.36
 Forfeited                                        (5,900)               2.29
                                                ----------------------------
Outstanding, May 31, 2001                          10,900               1.80
                                                ============================
Options exercisable at end of May 31, 2001          9,700               1.77
                                                ============================

<PAGE>F-16

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 5 - Stockholders' Equity (continued)

The following  table  summarizes  information  about the  Company's  fixed stock
options outstanding at May 31, 2001:


                                                       Options Outstanding
                                                       -------------------
                                Number           Weighted           Weighted
Range of                   Outstanding            Average            Average
Exercise Prices                     at          Remaining           Exercise
$                         May 31, 2001        Contractual              Price
                                                     Life                  $
                                               (in years)

4.00 - 4.00                      1,700                  4               4.00
2.00 - 2.00                      5,200                  4               2.00
0.60 - 0.60                      4,000                  4               0.60
                        ---------------- ------------------ ----------------
                                10,900                  4               1.80
                        ================ ================== ================

The options  outstanding  at May 31,  2001,  will expire  between  February  and
December 2005.

c)   Stock-Based Compensation

In January  2000,  the Company  issued 3,750 shares of common stock to a company
controlled by the Company's former  president in exchange for services  relating
to the  acquisition  of Forest.  The fair value of these  services was estimated
based upon the estimated  fair value of the shares at $2.50 per share or $9,375.
The costs  were  deducted  from the  additional  paid-in  capital  from the said
acquisition.

In February 2000, the Company recorded non-cash  compensation expense of $87,500
relating to the issuance of 35,000 shares of common stock to certain consultants
to the Company. The fair value of the shares was estimated at $2.50 per share at
the time of the transaction.

In June 2000, the Company recorded non - cash  compensation  expense of $160,000
relating to the issuance of 20,000  shares of common stock for  advertising  and
marketing  services.  The fair value of the shares  was  estimated  at $8.00 per
share at the time of the transaction.

As  discussed  in Note 2(i),  the Company  recognizes  compensation  expense for
equity  instruments issued to non-employees for services received based upon the
fair value of the  services  or equity  instruments  issued,  whichever  is more
reliably determined.

<PAGE>F-17

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)

Note 5 - Stockholders' Equity (continued)

d)   Retirement of Common Stocks

By way of a stock  retirement  agreement  dated May 11, 2000,  and for a nominal
amount of $1.00, a former principal  shareholder of the Company returned 259,724
shares of common stock to the Company for cancellation.  The shareholder  agreed
that in order for the Company to attract  future  financing,  the Company should
reduce its issued and outstanding  share capital of its common stock through the
surrender and retirement of these shares.

In January  2001,  a consultant  returned  5,000 shares of common stock upon his
resignation  from the Company.  The Company  recorded a non - cash  compensation
recovery of $12,500 being the value of the shares at the time they were issued.

e)   Stock Split

The Company  consolidated  its share capital on June 1, 2001 by way of a reverse
stock split on the basis of one new common stock for each ten old common stocks.
All share and per share information have been adjusted for all periods presented
to reflect the reverse stock split.

f)   Stock Option Split

The Company  consolidated its existing stock option plan on June 1, 2001, by way
of a reverse  stock  option  split on the basis of one new stock option for each
ten old stock options.  All stock option  information have been adjusted for all
periods  presented to reflect the reverse stock option split. The exercise price
was not changed with the stock option consolidation.

Note 6 - INCOME TAXES

Deferred tax assets and liabilities

<TABLE>
<CAPTION>

                                                             May 31, 2001   May 31, 2000
                                                                        $              $

<S>                                                         <C>             <C>
Deferred tax assets:
     Operating loss carryforward                                  475,000        210,000
 Book depreciation in excess of tax depreciation                   19,000              -
                                                              --------------------------
Total deferred tax assets before valuation allowance              494,000        210,000
Valuation allowance                                              (494,000)      (210,000)
                                                              --------------------------
Net deferred tax assets                                                 -              -
                                                              ==========================

</TABLE>

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 6 - INCOME TAXES (continued)

Deferred tax assets and liabilities (continued)

Management  believes  that it is more  likely  than not that it will not  create
sufficient  taxable income  sufficient to realize its deferred tax assets. It is
reasonably  possible these  estimates  could change due to future income and the
timing and manner of the reversal of deferred tax liabilities.

The Company has no income tax expense due to its operating losses.

The Company has Canadian  operating loss  carryforwards  for Canadian income tax
purposes at May 31,  2001 of  approximately  $845,000  (CDN  $1,300,000).  These
operating losses begin to expire in fiscal year 2004.

Note 7 - Commitments

a)   The Company has entered into an  employment  contract with the President of
     the Company for management and administrative services for an annual salary
     of $45,000 (CDN $70,000).  The  employment  contract term is to January 31,
     2003.  The Company  may  terminate  the  agreement  on ninety days  written
     notice.

b)   The  Company  has  entered   into  an   agreement   to  lease  an  internet
     telecommunication  line to December 31, 2002.  The monthly lease payment is
     $959.

c)   The  Company  has  entered  into  three  consulting  agreements  with three
     consultants  to provide  management,  administration,  sales and production
     services  for total  monthly  fees of  $7,368.  The  contract  terms are to
     February 1, 2003.  The Company may terminate  each agreement on thirty days
     written notice.

NOTE 8 - SUBSEQUENT EVENT

a)   On July 13,  2001,  the  Company  entered  into a loan  agreement  with two
     individuals (the "lenders"), who were thereafter appointed directors of the
     Company.  Pursuant to the terms of the loan  agreement,  the  lenders  have
     agreed to lend to the  Company  an amount up to a maximum of  $65,000.  The
     loan,  secured  by a  general  security  agreement  over the  assets of the
     Company,  bears  interest rate at 10% per annum and is repayable in full by
     December 31, 2001.

     The Company received  amounts  totalling  $41,000  (CDN$63,000) to July 27,
2001.

<PAGE>F-19

                            FORESTINDUSTRY.COM, INC.

Notes to the Consolidated Financial Statements
Year Ended May 31, 2001 and Ten Months Ended May 31, 2000
(Expressed in U.S. Dollars)


Note 9 - RELATED PARTY TRANSACTIONS


<TABLE>
<CAPTION>
                                                                         Year       Ten Months
                                                                         Ended            Ended
                                                                  May 31, 2001     May 31, 2000
                                                                             $                $

<S>                                                             <C>              <C>
Wages paid to the President of the Company for
management, administration and supervision services                     46,500           28,428

Interest paid to shareholders for funds loaned to the                        -            3,490
Company

</TABLE>

Note 10 - Financial Instruments

Financial  instruments include cash and equivalents,  accounts  receivable,  and
accounts  payable  and accrued  liabilities.  The  estimated  fair value of such
financial instruments approximates their carrying value.