Form 10-KSB
                       ANNUAL OR TRANSITION REPORT
                        UNDER SECTION 13 OR 15(d)
                                
      (As last amended by Exch Act Rel No. 35113, eff.1/30/95)
                                
                             UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549

    X   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE 
        SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

        For the fiscal year ended        December 31, 1997
                          
        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE   
        SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

             For the period from 

                             Forestry International, Inc.
                                                      
       (Name of small business issuer as specified in its charter)

              Colorado                                       84-1116284
                                                                       
(State or other jurisdiction of                    (I.R.S. Employer    
incorporation or organization)                  Identification No.)

1205 Ampere Street
Suite 206
Boucherville, Quebec                                
Canada                                                  J4B 7M6              
(Address of principal executive                        (Zip Code) 
offices)       

Issuer's telephone number (514) 495-7747

Securities registered under Section 12(b) of the Exchange Act: None

Securities register under Section 12(g) of the Exchange Act:

                  Common Stock, $0.0001 Par Value per Share                    
                                                                     
                                      (Title of class)
Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the 12 months (or 
for such shorter period that the registrant was required to file such 
reports), and (2) has been subject to such filing requirements for the
past 90 days.     X   Yes      No
         
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     $116,086 .
                                                       
State the aggregate market value of the voting stock held by non-affiliates 
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliated in Rule 12b-2 of the 
Exchange Act).      
    
      As of December 31, 1997, 15,417,833 voting shares were
      outstanding, 14,503,263 of which were held by non-affiliates.  
      On that date the bid and ask prices were $0.10  Therefore, 
      the aggregate market value of voting stock held by  non-affiliates 
      as of December 31, 1997 was $1,450,326.

Note: If determining whether a person is an affiliate will involve an 
unreasonable effort and expense, the issuer may calculate the aggregate 
market value of the common equity held by  non-affiliates on the basis of 
reasonable assumptions, if the assumptions are stated.

                      (ISSUERS INVOLVED IN BANKRUPTCY
              PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after 
distribution of securities under a plan confirmed by a court.    N/A 
 
                  (APPLICABLE TO CORPORATE REGISTRANTS)

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

                            15,757,833 as of September 30, 1998
                                                                  
                    DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe 
them and identify the part of the Form 10-KSB (e.g.,Part I, Part II, etc.) 
into which the document isincorporated: (1) any annual report to security 
holders; (2) any proxy or information statement: and (3) any prospectus 
filed pursuant to Rule 424 (b) or (c) of the Securities Act of 1933
(Securities 
Act").  The listed documents should be clearly described for identification 
purposes (e.g., annual report to security holders for fiscal year ended
December 24, 1990).         Not Applicable     
   
Transitional Small Business Disclosure Format (Check one):       
Yes   X    No       
(Added by Exch Act Rel No. 31905, eff 4/26/93)




























                          

                                                                   PART 1

ITEM 1. DESCRIPTION OF BUSINESS

Development

Established in December of 1992, Forestry International is a Colorado based
company. Initial involvement in the wood industry was the acquisition of
clonal technology relating to the accelerated development of rapid-growth
hardwood trees as an alternative wood species source.  The Paulownia project
proved to be highly unsuccessful. Therefore, in September of 1997, a new
management team evolved from major shareholders that saw the need for
change. The company took another direction with this new management team
and established a growth strategy plan.

Management's corporate objective is highly focused on growth via niche
markets in order to increase Forestry's net asset worth and enhance
shareholder value via the acquisition of businesses which are active within the
timber and wood products industry, led by strong and professional
management teams.  As it expands, the Company should gain competitive
advantages relative to smaller operators, including greater purchasing power 
for large timber tracts, a lower cost of capital, significant market
recognition,and  the ability to provide customers with a broader range of 
products and services in response to customer demand.

By way of careful analysis and evaluation of private and public acquisition
targets, management intends to develop a vertically integrated corporate
operation within the forest products industry.

Sale of Significant Amount of Assets not in the Ordinary Course of
Business

Dickson Plantation Assets

The Paulownia trees were planted in Elongata, the fastest growing species of
Paulownia, in 1994, with expectations of a harvest within five to seven years.
Thereafter, with self regeneration, the harvest would be every ten years for the
next forty years. The plantation was sold in March of 1997 with a lease being
paid yearly on the existing acreage of Paulownia. As the lease became due in
April, and with the annual expenses continuing, management decided to
evaluate the Paulownia investment to determine its viability by looking at the
present net worth, annual equivalent value, and internal rate of return.

The plantation had suffered from losses of trees due to an abundant quantity
of deer and unfavorable weather conditions, so that less than fifty percent of
the trees survived. In addition to the diminished volume of trees to harvest,
the others were not growing at the expected rate to be harvested at the proper
time. There were many scrub Paulownia in the growing acreage that would
not mature properly. Acknowledging the poor quality in the maintenance of
the crop, the deteriorated tree conditions, and the close proximity of the
surviving trees, a determination was needed as to the future of this project.

New management decided to see if the existing crop of trees could be presold
at a discount of the expected harvest value, in order to generate some income
and cover the annual expenses. These expenses included the lease, pruning,
irrigation, mowing, coppicing, pest control, and thinning of this crop.

In the research to find a potential buyer, several companies and individuals
were approached in the Southeast US . This included Virginia, Kentucky,
Tennessee, North Carolina, South Carolina, Georgia, Alabama, and
Mississippi. A group of previous customers of Forestry that had purchased
Paulownia seedlings in California was also contacted, along with the American
Paulownia Association, as well as Mr. Douglas Shorey, a former Forestry
Director and the overseer of this venture.

As it was eventually discovered, there is virtually no domestic, and a very
limited  export market for Paulownia, with the slow growing variety being
preferred for export. The development of this new variety of tree in North 
America is still in the incubator stage. As related to management from 
several experts in the field, it will be years and possibly decades before 
a market structure is developed to merchandise the Paulownia. 

Also, the trees that were available had been pruned and trimmed at twelve
foot sections. The only buyer interested was looking for sixteen foot sections
and indicated these trees would have to be cut and a new harvest would be
cultivated. The buyer indicated that he was not interested in purchasing only
the initial crop, but would purchase the entire tree stand, along with the
remaining future harvests, and also take over the past due lease. Management
realized that without the Paulownia, all of the other assets on site were also
unproductive and must be sold. At this time, the Paulownia buyer looked over
the existing greenhouses at the plantation site, and made an offer to purchase
all greenhouses and related equipment and supplies. This was the only other
offer received for the Paulownia, and the best offer obtained for the
greenhouses, and related equipment. The Company had previously rejected
a unfavorable offer to sale the leasehold in Georgia. It was based on future
cash distributions from a future Paulownia plantation project in Hawaii,
coming from an unknown  client of Performance Group Inc. Management also
sought to sell the irrigation system set up on the grounds. After considerable
time and effort the irrigation system was finally sold and Forestry was relieved
of several unproductive costly assets and related annual expenses.

Loss of Control of Dixieland Forest Products, Inc.

On December 1, 1995, a share purchase agreement was made for Forestry
International, Inc. to acquire Dixieland Forest Products. The signatories to the
agreement were David Shorey, President, and James Gibson, Secretary-Treasurer of
Forestry and Randy Pope, President of Dixieland.

On December 5, 1995 Forestry received, from a shareholder, an amount of
$250,000 to apply in whole as the first installment payment for the Dixieland
acquisition. Of this amount $200,000 was paid to Randy Pope and the balance
was kept by Forestry without the knowledge of the investor.

In July of 1996 a group of shareholders went to Dixieland to investigate the
unsuccessful actions of Forestry to complete the buyout. This shareholder
group then decided to raise the necessary funds.

In November of 1996, the parties restructured the terms of the proposed
acquisition and agreed upon a final  completion date of December 16, 1996.
The purchase price for Dixieland was paid and delivered to Randy  Pope, the
seller, as follows: (i) on December 16th $400,000 cash; (ii) on January 3,
1997, 250,000 restricted common shares of the Company; (iii) on January 3,
1997, 400,000 freely tradable common shares of the Company; and, (iv)
$750,000 in the form of a Promissory Note, the said Note bearing interest at
the rate of 7% per annum, with payments of principal and interest to be made
quarterly for a term of ten years. The Company also had an obligation to
relieve Mr. Pope of personal guarantees on notes he had signed for the
purchase of timber tracts and equipment that had been financed for loggers.

Of those free-trading shares referred to in (iii) above, 200,000 were to be 
purchased from Mr. Pope at $1.00 per share on or before January 16, 1997, 
with the balance to be purchased from Mr. Pope on or before April 1, 1997. 
Regarding the latter purchase, Mr. Pope had the option of accepting a price 
of $1.25 per share, or $1.00 per share. Upon exercising the latter option, 
Mr. Pope would receive an additional 50,000 restricted common shares. This 
obligation was fulfilled by Forestry and Mr. Pope received $400,000 cash, 
less commission, and 50,000 restricted common shares as per the agreement.

Mr. Pope entered into an employment contract with Dixieland for an  annual
gross base salary of $100,000 plus benefits and "bonus payments" based upon
defined operating results. He was paid $83,333.30. in salary for the first ten
months. The Company paid rent on the three facilities to Mr. Pope $8,333 per
month from January to November 1997 for a total amount of $83,333.

On December 23, 1996 Forestry purchased a $250,000 Certificate of Deposit
in the favor of Dixieland for the purchase of timber tracts at Deposit Guaranty
National Bank. This CD provided a line of credit to Dixieland in the amount
of $1,000,000.

In March of 1997 the Company paid the first installment of the $750,000 note.
Subsequent payments were made July 17th and October 1st for a total amount
of $80,287. Also Forestry provided Dixieland in excess of $440,000 for
working capital during the first ten months of 1997 and Dixieland's financial
statements reflected continuing monthly operating losses to the amount of 
approximately $431,000 for this same ten month period.

On August 4, 1997 a contract was signed between Forestry International, Inc.
and Southern Fiber, Inc., a subsidiary of Mitsubishi Corporation, for the
delivery of 34,500 GST of wood chips to the port at Reserve, Louisiana. 

On September 5, 1997 at the request of some shareholders, Mr. David Shorey
and Mr. James Gibson resigned, and a new management team took control at
Forestry. The home office in Tucson was closed and moved to Dixieland's
office in Meridian. This new team began immediately to concentrate on 
relieving Randy Pope of his personal guarantees and complete the 
transaction. Because of the operating losses that occurred during the year,
this became a more increasingly difficult task.

On September 19, 1997 another contract was signed for 25,000 GST, with an
option of Southern Fiber to increase the tonnage to 32,500 GST, to be
delivered to the same port. After the second contract was fulfilled, the
procurement manager of Dixieland, continued to purchase wood for delivery
to the chip mill, without a contract, and in direct defiance of the advice from
Forestry officers. This action increased the use of cash and depleted the
amount of available working capital. Forestry realized there were several
irregularities in the management of Dixieland Forest Products concerning the
contracts and the inability of the accounting department (treasurer of
Dixieland) to determine the earnings or losses from these contracts. With the
management of Dixieland in control position, Forestry was unable to know the
actual situation concerning the earnings of the company.
 
On October 23, 1997, Forestry International, through its subsidiary Dixieland
Forest Products, Inc. invested $33,333.33 to acquire a 33% interest in a joint
venture with Choctaw Pole and Piling Inc., AMpole Inc. and Shelby County
Forest Products, LLC.  The new entity, Precision Pole and Piling LLC., leased
a wood pole peeling facility from Gordon Redd Lumber Company in
Brookhaven, Mississippi. Dixieland is the exclusive supplier of pole quality
timber to this new entity.


In November 1997, Forestry International, Inc. received from Randy Pope  
a Notice of Default which alleged that Forestry failed to obtain the release of
Mr. Pope s personal guarantees of indebtedness for Dixieland Forest
Products, Inc. This was a unilateral decision by Mr. Pope. It is the position of
management that no default occurred to justify the action taken by Mr. Pope.
At that time Forestry s Officers were continuing to seek financing to enable
the Company to obtain the said release.

On November 19, 1997, after three months of negotiations, a letter was
received by Forestry from Hibernia Bank in New Orleans, stating that the
current performance and the continuing operating losses of Dixieland moved
the negotiations for a line of credit beyond the parameters of acceptability for
the bank. This line of credit was to relieve the personal guarantees of Mr.
Pope. Consequently, one of the avenues of financing being developed was
closed.

On December 5, 1997 Regions Bank sent Forestry a financing proposal that
would relieve the personal guarantees and cure the alleged default.

A meeting took place on December 18, 1997 between Randy Pope and Louis
Turp concerning the completion of the buyout with the Regions Bank
proposal. At this time Mr. Pope reaffirmed his desire to close and complete
the transaction.

On December 19, 1997 Forestry confirmed with Regions Bank their
agreement to comply with the above mentioned proposal and move forward
to establish this $3M line of credit and complete the transaction with
Dixieland. 

In response to a request by Forestry to release a portion of the CD at Deposit
Guaranty National Bank, on February 6, 1998, a letter was received from
Butler, Snow, O'Mara, attorneys for Mr. Pope and Dixieland. This letter
indicated that in order for Forestry to receive anything from this CD, Forestry
and Dixieland would have to agree to a Covenant Not to Sue each other and
that Forestry admits that Mr. Pope or the Dixieland Parties had not at any
time been a "control person". This agreement was never endorsed by
Forestry's Board of Directors.  It would have jeopardized the shareholders
rights to take any action for legitimate claims against Mr. Randy Pope and/or
Dixieland Forest Products, Inc. and/or any of the "Dixieland Parties" involved.

On February 25, 1998 Mr. Louis Turp met with Mr. Randy Pope and
Dixieland Forest Products  CPA firm. During that meeting Mr. Pope imposed upon
Forestry International to renegotiate the original offer and change the
financial structure of the buyout. He wanted an all cash offer without notes and
restricted common shares in order to complete the acquisition.

On February 26, 1998 Forestry proposed an all cash offer of $ 320,211 to Mr.
Pope in addition to the $1,000,000 cash that he had previously received. On
March 20, 1998 Forestry received a counter proposal from Mr. Pope. This
counter offer, a minimum of $900,000 cash, was rejected as unrealistic
according to the economic equivalent and relative performance to be received.
A letter dated March 23rd was sent to Mr. Pope to that effect and the 
Company would continue in good faith to negotiate the closing of the
transaction for its true value. It was also mentioned that if there was no
mutual agreement, the Company would have no other alternative than to
exercise its right to protect this investment for the shareholders. There 
was no further written communication received concerning this offer.

On July 8, 1998 a letter was sent to Mr. Pope concerning the audit of Forestry
and Dixieland for the year ended December 1997. After a period of two
months and several inquires, Mr. Pope set forth a proposal that the Company
felt would jeopardize its legal position with respect to claim its capital
investment in Dixieland. At this point, upon advise of its attorney Forestry
determined to proceed without the financial information from Dixieland.   

It is the position of management that Mr. Randy Pope unilaterally recaptured
the Dixieland common shares sold to Forestry. The alleged default was
without merit and was based on the non-release of Mr. Pope's personal
guarantees. Officers of Forestry, with the knowledge of Mr. Pope, were still
negotiating with financial institutions to execute that obligation.  Forestry
had performed such that the alleged default was not sufficiently material to
allow Mr. Pope to assert a breach of the agreement. On the contrary, Forestry
contends that Mr. Pope in fact breached the contract with poor management
and excessive losses during the year. The financial institutions made this clear
and plain to Forestry.

The status of a public company places a heightened responsibility to protect
the assets of the company for the benefit of the public shareholders. Because
of the delay and intransigence of the various parties involved with Dixieland,
Forestry will shortly address the entire acquisition transaction for the benefit
of the shareholders. Forestry has incurred a substantial loss which has
materially affected the operations. Management intends to pursue legal actions
to attempt to redress the losses incurred. 

Growth Strategy

Forestry International has targeted several acquisitions to fulfill its
management objectives. The Company is seeking to acquire timberland and
companies of varying size. In evaluating potential acquisition targets, the
Company considers a number of factors, including their market niche, the
quality of the assets and management, the opportunities to improve operating
margins and increase internal growth of the target, the economic prospects of
the region in which the target is located, and the potential for additional
acquisitions in the region. The Company will seek expansion opportunities in
the United States, with an emphasis in the southeast.  Canada will also be
considered in our future development program. Management will pursue
acquisition candidates with varying types of equipment (Chip mills, Sawmills,
Lumber mills) and customer specializations within the domestic and export
markets. Forestry believes that geographic and customer diversification will
enhance the Company's stability to fluctuations in regional economic
conditions or changes that affect particular market segments.

Management believes there will be significant opportunities to improve
operating margins of acquired companies through the efficient integration of
these acquisitions, the elimination of duplicated costs, reduction in overhead
and the centralization of functions. A lack of capital has constrained expansion
and modernization of many small and medium sized companies within the
industry. As a result there is significant potential to increase internal growth
of many acquired entities through capital investment. The Company will seek
efficiency by investing in additional and upgraded equipment, using advanced
technology systems to improve asset utilization. The Company intends also
to establish a sales and marketing program targeted toward the major
domestic and export players within the industry. Management will continually
evaluate its organizational structure and manufacturing operations to identify
opportunities to more effectively meet its customers' requirements and to
reduce cost.

Industry Outlook
                                                       
Mergers, acquisitions, divestitures and alliances are among the tools for
rationalizing and restructuring to achieve greater cost efficiencies and higher
return on investments. Today's basic structures under which the industry
operates is different. There is room for new thinking and being more
innovative in this fragmented industry with a disciplined approach. The
balance of production, supply, and demand has changed in the Forest
Products Industry. According to current market dynamics, the overall picture
appears brighter by looking at capacity, consumption, pricing, and inventory.
Another positive change has occurred in forest practices, as a direct result of
activism by environmentalists. Their efforts have helped create a more
sensitive and environmentally responsible industry.

Due to the highly fragmented nature of the industry, Forestry believes that
there is a large number of attractive acquisition opportunities in the Forest
Products Industry. The inability of many small and mid-sized companies to 
expand and modernize due to capital constraints, and the desire of many 
long-time owners for liquidity which Forestry has identified, will allow the
company to immediately start its strategic acquisition program and capitalize 
with these niche markets.

Paper is portable, disposable, recyclable, economical and versatile. According
to industry research and statistics, world demand for paper has doubled in the
past 20 years and is forecast to double again by the year 2010. World
consumption of paper and paperboard products is projected to reach 425-475
million tons by the year 2010. Annual consumption growth over the next 15
years for paper and paperboard (woodchip basis) is projected at 2.5% for
developed countries, 5.5% for developing countries and 3.2% for the world
overall.

The confirmation of a recession in Japan and sharp currency
devaluations among several Asian Countries will have positive effects over the
long term especially for a segment of the industry which Forestry intends to
be active. The Company believes that acquisition prices for chip mill
operations for export purposes will become attractive. With the virtual
elimination of the federal timber harvest in the U.S. Pacific Northwest,
production moved, quite literally, South. Forestry is well positioned, being
located in Mississippi, the "Woodbasket of the Nation", to benefit from this
movement of production.
       
Today's industry competes mostly on the basis of price, quality, availability,
product choice, sustainability and environmental impact.  Consequently, the
future of U.S. Forest Products Industry depends mainly upon factors which
are products that are second-to-none, access to world markets, industry
innovation, and a comprehensive global approach to sustainable forestry
practices. Market competitiveness starts with economic viability and the
outlook is favorable. Notwithstanding the cyclical nature of the industry, being
a low cost producer with adequate and attractive financial returns is
acceptable, but the ultimate goal for a company is to earn it's cost of 
capital. 

Significant Calendar 1997 Operating Results and Subsequent
Developments

IRS Assessment

By letter dated March 14, 1997, the IRS accepted an Offer in Compromise
made by the Company arising from federal and state corporate tax return filing
for fiscal 1994 in the amount of $160,000. As of March 20, 1997, the said
settlement amount of $160,000 had been paid in full by the Company.

Tax Assessments

The Arizona Department of Revenue is asserting a tax lien for fiscal 1993 and
1994 for unpaid Arizona state taxes against the Company in the amount of
$39,825.66

Sale of Dickson Plantation

Effective March 31, 1997, the company sold its interest in the Dickson
Plantation, in Hancock County, Georgia, to an unaffiliated third party for the
price of $1.234 million. The proceeds of sale of the Dickson Plantation were
applied to the reduction of long and short term debt owed by the Company
primarily the retirement of a mortgage in the principal sum of $927,500, with
interest accrued to the date of sale.

The Company also entered into leasing agreements with the purchaser of the
property whereby the Company would have full and unrestricted rights and
access to the field planted Paulownia trees at the plantation site (the "Field
Lease") and also to the Paulownia trees located within the tree nursery site of
approximately 23 acres (the "Nursery Lease").

The Nursery Lease had a term of up to twelve years commencing April 1,
1997, at an aggregate lease cost of $7,200 over the said term. The Field Lease
had a term of up to twelve years commencing April 1, 1997, at an aggregate
lease cost of $105,062 over the said term.

In April 1998 the new management realized the excessive costs of keeping the
Paulownia project alive, so the Company sold its interest in the lease along
with the trees, greenhouses, equipment and all assets affiliated with the
Paulownia project. 

Future Operations

New Company management has been consistently involved in the
identification and analysis of potential acquisition targets within the timber 
and forest product industry, including undertakings such as saw mills, chip 
mills, pole production plants and timber lots. The Company expects that these
activities will result in further acquisitions and anticipates that such will
provide additional corporate growth during the coming years.

Future Project Acquisition

Forestry International, Inc. is negotiating the acquisition of a fully 
integrated timber company.  The Company has received financial proposal from a
Southeastern Bank and is presently working with investment bankers to raise
additional cash to complete the transaction. Consummation of this transaction
is presently indeterminable.




ITEM 2. DESCRIPTION OF PROPERTY

The principal business offices of the Company are located at 1205, Ampere
Street, Suite 206, Boucherville, Quebec, Canada, J4B 7M6. The telephone number
is (514) 495-7747. As of December 31, 1997, the Company leased or owned the 
following properties:


                        TYPE                                          LOCATION

Administrative Office                               Meridian, Mississippi
Tree Nursery & Field Lease                          Sparta, Georgia
Greenhouse Facility                                 Sparta, Georgia

Since December 31, 1997 the Tree Nursery & Field Lease and Greenhouse
Facility has been disposed.


ITEM 3. LEGAL PROCEEDINGS

In connection with the case of Walter Doyle, in the United States District
Court for the District of Colorado, Forestry International received a
judgement entered August 11, 1997 in its favor. The judgement was entered
based upon a settlement agreement and stipulation filed by the parties to that
case, pursuant to which Forestry delivered 200,000 common shares of Forestry
International, Inc. to Walter Doyle and the Company canceled 1.2M
shares and 1.75M options previously issued to Walter Doyle. In return for the
delivery of these shares, Forestry retained all Paulownia tree stock
and clonal tissue that had previously been transferred by Walter Doyle and
received a release of all claims by and between Walter Doyle, WinCanton,
Inc., and the Company.

Forestry has received a Motion for Default Judgment in a lawsuit against them
in Kansas, for the amount of $55,000 plus interest filed on behalf of CEA Lab,
Inc. The settlement negotiations with respect to this matter have broken down
over the amount of stock that was requested. The stock was required to be
issued immediately and the Plaintiff's request for a back dating of the stock
certificates as a condition to settling this lawsuit.  Forestry could not meet
any of the specific requests, and as of today, Forestry has not attempted to
negotiate further with the plaintiff and they have not offered any further
counter-proposal. The Company intends to further consult with counsel and,
if possible, to negotiate a compromise between the parties. The judgement has
been recorded as a liability as of December 31, 1997.

A civil action for back-wages claims for approximately $97,000 was filed on
March 19, 1998 by David L. Shorey, former President of the Company in
Arizona Superior Court against Forestry International. The Company is
vigorously defending the lawsuit against it, and has several defenses and
claims that Forestry believes eliminate all of David Shorey's claims. 
Forestry's defense is based upon the fact that there are no written documents
or materials that support David Shorey's claims for compensation independant
of his own assertions.  Moreover, there are claims and setoffs based upon Mr.
Shorey's actions while he was President, which more than offsets his claims
for compensation.

To that effect, on October 2, 1998 Forestry filed a counterclaim against
Mr. David Shorey based on the alleged conversion of Company property to his
own use, and also a second claim contending a breach of fiduciary duty as
an officer and director of Forestry International, Inc. The latter claim
stipulates that Mr. Shorey substituted a promissory note to allow the conversion
of that debt into a recourse debt convertible into Forestry common shares 
without any consideration to the Company.  Although final resolution of this
matter may not occur until 1999 or thereafter, it is Forestry International's 
position that David Shorey's claims are not valid claims against the company.

Forestry filed, on July 24, 1998 in Tucson Arizona Superior Court, a
Declaratory Judgement action against several individuals and entities claiming
benefits under a Promissory Note on the basis that the Company never
received consideration for the Note or Notes. The litigation involving the
alleged debt is ongoing.  Forestry International, after diligent search, has 
been unable to locate documents substantiating the debts.  Management believes
that the ultimate result will be that the Court will declare the debt invalid. 

No other legal proceedings to which the Company is a party or to which the
property of the Company is subject is currently pending against the Company,
and no such material proceeding is known to be contemplated against any
officer or director which is adverse to the Company, except as mentioned in
the preceding paragraphs.


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

There has not, during the period covered by this report, up to and including
the date of signature of this report, been any submission of matters to a vote
of security holders.












                                                          PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Market Information

The common stock of the Company is quoted on the Bulletin Board
maintained by the NASD. The following table sets forth the range of closing
bid and ask quotations for the common stock in each full quarterly period
since January 1, 1993.

                              CLOSING BID    CLOSING ASK

March 31, 1993           1.50           2.50
June 30, 1993            1.875          2.50
September 30, 1993       2.50           4.00
December 31, 1993        2.75           4.00
March 31, 1994           3.00           4.50
June 30, 1994            3.00           5.00
September 30, 1994       3.00           4.00
December 31, 1994        3.00           3.875
March 31, 1995           2.00           4.00
June 30, 1995            2.00           3.00
September 30, 1995       0.75           1.125
December 31, 1995        0.47           0.53
March 31, 1996           0.29           0.30
June 30, 1996            0.12           0.12
September 30, 1996       1.00           1.07
December 31, 1996        1.38           1.38
March 31, 1997           1.20           1.22
June 30, 1997            0.375          0.4375
September 30, 1997       0.18           0.21
December 31, 1997        0.08           0.10
March 31, 1998           0.09           0.15
June 30, 1998            0.09           0.10
September 30, 1998       0.055          0.065

The above prices were obtained from National Quotation Bureau, Inc. These
quotations represent inter-dealer quotations, without retail mark-up,
markdown or commission, and may not necessarily represent actual
transactions. On September 30, 1998, the closing bid was $0.055 and the
closing ask price was $0.065, as quoted on the Bulletin Board for the
common stock of the Company. On that date, there were 10 broker-dealers
publishing quotes.
Dividends

Neither the Company nor any of its subsidiaries have, during their respective
existences, declared or paid or set aside for payment any cash dividends on
their common shares and no dividends are contemplated at any time in the
foreseeable future. There are no current or contemplated restrictions
attributable to any contractual commitment of the Company which will limit
the ability of the Company to declare and pay dividends.

ITEM 6. MANAGEMENTS' PLAN OF OPERATION

Forestry International's initial involvement and primary business was the
acquisition of clonal technology relating to the accelerated development of
rapid-growth hardwood trees as an alternative wood species source. Effective
September 5, 1997, the Company took another direction with a new
management team and a growth strategy plan.

The Company sold its interest in the remaining Paulownia plantation located
in Sparta Georgia to pursue other business opportunities. While actively
negotiating on an acquisition and until a new business venture is determined,
the Company has eliminated the majority of its payroll and will utilize contract
consultants to maintain its reporting requirements.  It is anticipated that only
nominal funding should be necessary for the next several months, which
amounts should be available from debt financing.

The Company, as of December 31,1997 had net operating loss carryforwards
for federal and state income tax purposes of approximately $3,838,000 and
$2,485,000 respectively. Management plans to use these losses to its
advantage to save taxes on the operations of future acquisitions. Forestry will
consult tax specialists to determine to which extent this may be used to its
greatest benefit.

New management has determined that the Company's new business strategy 
plan is primarily to seek one or more potential businesses which may, in the
opinion of its Board of Directors and Principal Consultant, warrant the
Company's involvement.  In seeking to attain its business objective, the
Company will mainly focus on targets within the Forest Products Industry but
will not restrict its search to that industry.  Forestry may investigate
businesses of essentially any kind or nature, including but not limited to, high
technology, manufacturing, service, research and development,
communications and others.  Management's discretion is otherwise
unrestricted, and it may participate in any business whatsoever which may,
in the opinion of management, meet the business objectives discussed herein.

The Company may acquire any entity or position in a company which is (i) a
fully integrated corporation in a specific segment of its industry; or (ii) in 
its preliminary or development stage; or (iii) is a going concern. In other
instances, possible business endeavors may involve the acquisition of or a
merger with a company that does not need additional equity, but seeks to
establish a public trading market for its securities.  Businesses that seek the
Company's participation in their operations may desire to do so to avoid what
such businesses deem to be adverse factors related to undertaking a public
offering.  Such factors include substantial time requirements and legal costs,
along with other conditions or requirements imposed by Federal and State
securities laws.

Since new management got involved in the daily operation of Forestry
International, the analysis of potential business endeavors will be undertaken
by or under the supervision of the Company's Directors and their principal
consultants.  The Directors and principal consultants are comprised of
individuals of varying business experiences, and management will rely on their
own business judgment in formulating decisions as to the types of businesses
that the Company may acquire or in which the Company may participate.

In analyzing prospective businesses, management will consider such factors
as available technical, financial and managerial resources, working capital and
other financial requirements such businesses history of operations, if any, and
prospect for the future, the nature of present and expected compensation, the
quality and experience of management services, the depth of that
management, the potential for further research and development and risk
factors.  Forestry will also consider their niche market, the opportunities to
improve operating margins, potential growth and expansion, the economic of
the region in which the target is located, the potential for profit, the 
perceived public recognition or acceptance of such businesses, products, 
services and other relevant factors.  The Company will seek opportunities in the
United States, with an emphasis in the southeast.  Canada will also be 
considered in future development program. Management believes that geographic
and customer diversification will enhance the Company's stability to 
fluctuations in regional economic conditions or changes that affect particular 
market segments.

Generally, the Company will analyze all available information and make a
determination based upon a composite of available facts, without reliance
upon a single factor as controlling.  

Forestry has targeted several acquisitions to fulfill its management 
objectives. Also, it is anticipated that prospective businesses will be
available to the Company from various sources, including its management, its 
professional advisors, securities broker dealers, venture capitalists members of
the financial community, and others who may present unsolicited proposals.
In some instances, the Company may publish notices or advertisements in 
financial or trade publications seeking potential business acquisition.  In 
certain circumstances, the Company may agree, in connection with an acquisition,
to pay a finder's fee or other compensation to an investment banking firm or
other person who submits to the Company a business in which Forestry
participates. 

ITEM 7. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

The Company engaged Mrs. Sylvie Monette-Houle, CA, and Mr. Robert Kliaman,
CA, CPA (Massachusetts) as the new auditors and dismissed Mr. Gary Gethmann,
CPA. The Company's audit committee consists of its Board of Directors.

ITEM 8. FINANCIAL STATEMENTS

The audited financial statements and supporting schedules required under this
item are listed under Item 13 below, and are set forth in the pages immediately
following Item 13.


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

The following table sets forth all current directors, executive officers and
significant employees of the Company and of each significant subsidiary, as
well as their ages:

     Name           Age                  Positions With The Company

Louis R. Turp        40             President and CEO
Andrea Audet         46             Secretary / Treasurer
Perry Gower          53             Chief Financial Officer

No Director or executive officer has any arrangement or understanding
whereby they have been or will be selected as a director of the Company.
Further, no executive officer or director of the Company is related to any
other executive officer or director, other than Louis R. Turp and Andrea
Audet, who are husband and wife. All directors of the Company hold office
until the next annual meeting of shareholders, and until their successors have
been duly elected and qualified. Executive officers are selected by the board
at its annual meeting and hold office until the first to occur of their death,
resignation or removal from office.

Biographical Profiles

The following biographical profiles relate to each individual currently serving
as a director, and executive officer of the Company.


Louis R. Turp - Portfolio manager associated with several major Canadian
brokerage firms for 14 years. Accepted the invitation to serve as a director
of FII on July 21 1997 and became President and CEO on September 1997.
Corporate restructuring objective with fundamental emphasis on selected
strategic acquisitions and business combinations with profitable operating
companies in niche markets, within the Paper and Forest Products Industry.

Perry Gower - Chief Financial Officer of FII, Mr. Gower has been associated
as a Controller and Administrative Manager of Canal Wood Corporation of
Mississippi, a major southeastern wood supplier, for the last eight years. He
brings an impressive array of financial and administrative skills with a strong
background in the timber industry.  Mr. Gower is a graduate of Mississippi
State University, B.S. in Business Management and Accounting.

Andrea Audet - Mrs. Audet has been involved internationally with various 
companies as a Bookkeeper. As the Director of public relations  for a family
business for several years, Mrs. Audet is also a real estate agent and a
graduate with honors in computer applications.  She offers to the Company
an international experience with evidence of administrative competence.  

ITEM 10. EXECUTIVE COMPENSATION

     No compensation was paid in fiscal 1994, 1995, 1996, 1997 and as of
1998 to the Board of Directors of the Company in their capacities as such.
There are no agreements concerning compensation of Directors or executive
officers. The following table sets forth all cash and any other compensation
paid for each of the two years ended March 31, 1996 and the calendar years
ended 1996 and 1997.

                       Annual                          Long Term
Name And            Compensation                  Other Compensation
Principal          Year    Salary ($)       Bonus  Compensation     Options

David L. Shorey    1994      nil             nil       $96,000(1)      nil
Chairman           1995      $51,562         nil       $44,438(1)      nil
                   1996      $92,153      $7,500     $  6,000(1)       nil
    9 months (cal) 1996      $57,692(3)      nil      $  4,500         nil
                   1997      $43,269         nil           nil         nil

James M. Gibson    1994      nil             nil     $56,000(2)        nil
Vice President     1995      nil             nil     $72,000(2)        nil
                   1996      $68,044        $7,250   $  6,000          nil
    9 months(cal)  1996      $54,000         nil          nil          nil
                   1997      $52,615         nil          nil          nil

Douglas Shorey     1994      $37,809         nil          nil          nil
Forestry Director  1995      $65,211         nil          nil          nil
                   1996      $58,788         $5,000       nil          nil
    9 months(cal)  1996      $46,154(4)      nil          nil          nil
                   1997      $30,000         nil          nil          nil

Randy Pope         1997      $87,500         nil          nil          nil

Steve Busbey        1997      $5,417         nil          nil          nil

Louis R. Turp       1997      nil            nil          nil          nil

Perry Gower         1997       $5,000        nil          nil          nil


(1) Except for automobile allowance of $6,000 per year, the funds disclosed
as "Other Compensation" were paid by the Company to SSI Development
Corporation, a company which David L. Shorey controls through his
shareholdings therein.
(2) The funds disclosed as "Other Compensation" were paid by the Company
to Magazette Communications, Inc., a company in which James M. Gibson
holds a 20% equity interest.
(3) Total compensation paid to David Shorey during the nine months ended 
December 31, 1996 amount to $0. All compensation listed in this column
remains unpaid at the signature date of this report. See Item 3 Legal
Proceedings.
(4) Total compensation paid to Douglas Shorey during the nine months ended
December 31, 1996, amount to $4,615. All compensation listed in this column
remains unpaid at the signature date of this report. New management disputes
these claims.











ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL     
                 OWNERS AND MANAGEMENT

Based upon information which has been made available to the Company by its
stock transfer agent, the following table sets forth, as of September 15, 1998,
the shares of common stock owned by each current Director and executive
officer, by Directors and officers as a group and by each person known to the
Company to own more than 5% of the outstanding common shares:

Title Of        Name & Address Of              Amount Of              Percent Of
Class          Beneficial Owner            Beneficial Ownership        Class (1)


Common         Louis R. Turp                      639,414                    4.1
               4640 Poplar Springs Dr.           
               Suite A 29
               Meridian, MS 39305  

Common         Perry Gower                         50,000                    0.3
               6720 Valley Road
               Meridian, MS 39307 

Common         Andrea Audet                       225,156                    1.4
               474, Cote Ste-Catherine
               Outremont, (QC) Canada   
               H2V 2B4

Common         Lorraine E. Bourgoin              790,114                    5.1
               4740 E. Sunrise Dr.
               Box 143
               Tucson, AZ 85718

Common         FAI Overseas Investments,        1,200,000                  8.0
               Pty Ltd., 18 Macquarie St.
               Sydney, NSW 2000
               Australia

Officers & Directors                               914,570                  5.8
as a Group (3 persons)

(1) The figures in this column are based upon approximately 15,757,833
common shares which had been or were to be issued and were outstanding on
September 30, 1998.


ITEM 12. EXHIBITS AND REPORTS ON FORM 8-K
     The following reports have been filed as a part of this
report:

      (1) Report of Sylvie Monette-Houle, CA and 
          Robert Kliaman, CA, CPA (Massachusetts)

      The following 8-K reports were filed on the dates indicated:

      (1) A report on Form 8-K was filed by the Company on January
22, 1997, reporting the Company's acquisition of Dixieland Forest
Products, Inc.

      (2) A report on Form 8-K was filed by the Company on
February 14, 1997, reporting the change of the Company's fiscal
year end from March 31, to December 31.

      (3) A report on Form 8-K/A was filed by the Company on
February 28, 1997, reporting the Company's acquisition of
Dixieland Forest Products, Inc.  This report amended the January
22, 1997 8-K to include financial statements.

      (4) A report on Form 8-K was filed by the company on March 3, 1997,
reporting the sale of common shares for the completion of the purchase of
Dixieland Forest Products, Inc.

      (5) A report on Form 8-K was filed by the company on October 17, 1997,
reporting the appointment of a new CEO and directors, the resignation of
current officers and the change of address of registrant.

      (6)  A report on Form 8-K was filed by the company on February 9, 1998
reporting an new director, change of address of the registrant, receipt of a
notice of default from Randy Pope, President of Dixieland Forest Products,
Inc. and resignation of a director of the Company.

      (7) A report on Form 8-K was filed by the company on August 7, 1998
reporting the sale of common stock.

      (8) A report on Form 8-K was filed by the company on September 17,
1998 reporting the appointment of a director, change in registrant's certifying
accountant, and resignation of a director.

      (9) A report on Form 8-K was filed by the Company on November 9, 1998
reporting the new address of principal executive offices.

      (10) A report on form 8-K was filed by the Company on November 12, 1998
reporting that Mr. Robert Kliaman, CA, CPA (Massachusetts) was joining Mrs.
Sylvie Monette-Houle as auditor of the Company.                        
                        
                        
                        
                        
          Independent Auditor's Report
                                
                                
Board of Directors
Forestry International, Inc.

We have audited the accompanying balance sheet of Forestry International, Inc.
as of December 31, 1997 and the related statements of operations,
stockholders' equity (deficit) , and cash flows for year ended December 31,
1997. The 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. The consolidated financial statements of the
prior year were examined by other auditors, an unqualified independent
auditors' report was issued June 18, 1997.

Except as discussed on the following paragraphs, We conducted our audit in
accordance with United States' generally accepted auditing standards.  Those
standards require that we plan and perform the audit to obtain reasonable
assurance about 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 statement.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
preparation.  We believe that our audit provides a reasonable basis for our
opinion.

On the advise of counsel, management of the Company strongly disagreed
with the conditions required by Dixieland Forest Products, Inc. to perform an
audit of their books, as it would jeopardize its legal position for all 
legitimate claims against Dixieland. As a result, and in the absence of
Dixieland Forest Products, Inc. financial statements, we have been unable to
obtain sufficient audit evidence to form an opinion with respect to the
allocation of the reduction of the investment in Dixieland Forest Products,
Inc. between loss from operations of discontinued operations and loss
on DFP investment.

Because there was a change of management during the current year, we were
unable to determine whether any adjustments might be necessary to reduce long
term debt, consulting fees in the amount of $160,000 included in general and
administrative expenses, net loss, and accumulated deficit.

In our opinion, except for the effects of adjustments if any, which we might
have determined to be necessary had we been able to examine the opening long
term debt and the consulting fees as described in the preceding paragraphs,
the financial statements referred to above present fairly, in all material 
respects the financial position of Forestry International, Inc. as of December 
31, 1997,and the results of its operations and its cash flows for the year then 
ended in conformity with United States generally accepted accounting principles.


/s/ Sylvie Monette-Houle, CA
Calgary, Alberta
Canada
November 12, 1998

/s/ Robert Kliaman, CA, CPA (Massachusetts)
Toronto, Ontario
Canada
November 12, 1998       






                        
                        
          Forestry International, Inc.
                  Balance Sheet
      December 31, 1997 and December 31, 1996
                                        1997           1996
                                                  (Consolidated)
                                                   (Verified by
Assets                                           previous auditors)

Current Assets:
Cash and Cash Equivalents (Note 2)    $2,772         $855,436
Notes and Accounts Receivable
Net of Allowance                           -           399,510
Accrued Interest                           -             1,336
Equipment held for sale               60,175           129,496
Inventory                                  -           498,453
Prepaid Expenses and Deposits              -            27,402
Due from Related Party                     -            10,763 
     Total Current Assets             62,947         1,922,396
                                                              
Investment-Forestry Development Costs      -           883,131
Notes Receivable-Long Term                 -           404,102
Property and Equipment (Note 2)
Land                                       -           907,423
Building and Nursery Facilities            -           262,093
Machinery and Equipment                    -           264,707
Office Equipment                       6,000            54,445
Computers and Software                 6,000            22,374
Vehicles                                   -           162,323
                                      12,000         1,673,365
Less Accumulated Depreciation          8,000           114,572
     Net Property and Equipment        4,000         1,558,793
Other Assets:
Intangible Assets                          -         2,108,835
Cash Surrender Value, Life Insurance       -             4,450
Organizational Expense, Net of $ - , $8,067
Accumulated Amortization                   -             2,016
Deferred Income Tax Benefit, Net of
$1,513,000 and $1,263,000 Valuation Allowance
(Note 9)                                   -                 -
Total Other Assets                         -         2,115,301

Total Assets                        $ 66,947       $ 6,883,723
                        
        (See Accompanying Notes to Financial Statements)
                   Forestry International, Inc.
                       Balance Sheet
            December 31, 1997 and December 31, 1996
                        
                        
                                        1997        1996
                                              (Consolidated
                                              (Verified by
                                             previous auditors)
Liabilities and Stockholders' Equity (Deficit)

Current Liabilities
Current portion of Long Term Debt   $     -         $494,218
(Note 7)
Notes Payable                             -          511,554
Accounts Payable                    109,779          356,880
Accrued Payroll and Other Expenses  118,158          230,998
Income Tax Payable (Note 9)          40,908          252,420
Due to Related Parties (Note 8)       9,895           13,500
                                   _________        _________
  Total Current Liabilities         278,740        1,859,570

Long Term Debt - Unrelated        1,052,127        2,902,092
(Note 7)

Contingency (Note 11)

Stockholders' Equity (Deficit):
Preferred Stock, Par Value $.0001 Per
Share, Authorized 10,000,000 Shares             -              -
Common Stock, Par Value $.0001 Per
Share, Authorized 100,000,000 Shares:
Issued and Outstanding 15,417,833 Shares    1,542          1,560
Capital in Excess of Par Value          6,941,327       6,844,571
Accumulated deficit                    (8,206,789)     (4,724,070)

 Total Stockholders' Equity            (1,263,920)      2,122,061 

Total Liabilities and 
Stockholders' Equity                      $66,947      $6,883,723 

        (See Accompanying Notes to Financial Statements)
                        
                        
                        
                        
                       Forestry International, Inc.
                         Statement of Operations
                                   Year Ended          Nine Months
                                December 31, 1997  Ended March 31, 1996     
                                                    (Consolidated)
                                                   (Verified by
                                                   previous auditors)
Operating Revenue                      $9,375           $215,786
Cost of Sales                           6,467            128,658
                                                                               
Gross Margin                            2,908             87,128
Operating Expenses:
General & Administrative              598,710            608,670
Impairment Loss on Long Lived Assets        -             147,609
                                                                               
Total Operating Expenses              598,710             756,279

Operating Loss                       (595,802)            (669,151)
                                                                         
Other Income (Expense):
Interest and Dividends                 11,702                6,626
Interest Expense                     (183,789)            (231,608)
Finance Cost                                -              (27,709)
Loss on Sale of Land                        -              (27,220)
Loss on Seedling Spoilage                   -              (36,111)
Gain on Settlement of debt              95,009                   -
Loss on DFP Investment
  (Notes 4 and 6)                   (1,519,375)                  -    
Total Other Income and Exp          (1,596,453)           (316,022)
                                                                         
Loss Before Income Taxes
and Discontinued Operations         (2,192,255)           (985,173)
Income Tax Benefit                           -              94,586
Equity in Loss of F I Philippines, Inc.      -              (1,000)
Loss from operations of
Discontinued Operations (Note 6)      (475,546)                  -
Loss on disposal of                                     
Segment Assets (Note 6)               (814,918)                  -  
Net Loss                            (3,482,719)          ($891,587)
Net Loss per Common Share               ($0.22)             ($0.08)
Weighted Average Number
of Common Shares                    15,599,517          11,854,489

          (See Accompanying Notes to Financial Statements)


                               Forestry International, Inc.
                      Statement of Stockholder's Equity (Deficit)
                         For the year ended December 31, 1997

                 Common Stock          Paid in
                                      Capital in                        Net
                Number        Par      Excess of      Accumulated  Stockholders
              of Shares     Value      Par Value        Deficit       Equity


Balances at
March 31, 1996 9,205,699      921      3,550,953      (3,832,483)    (280,609)

Issuance of 
Common Stock
for Cash       2,101,583      210      1,469,290             -      1,469,500

Issuance of
Common Stock
for debt payments
in lieu
of Cash        3,072,235      307        946,949             -        947,257

Issuance of
Common Stock
for Services     120,000       12         89,988              -        90,000

Issuance of
Common Stock
for Interest      50,000        5         37,495              -        37,500

Issuance of
Common Stock
for Acquisition
of DFP, Inc.   1,050,000      105        749,895              -       750,000

Net Loss            -           -             -          (891,587)   (891,587)

Balances at
Dec. 31, 1996  15,599,517     1,560     6,844,571      (4,724,070)  2,122,061

Issuance of 
Common Stock
for Cash         440,000         44       96,756             -         96,800

Cancellation of
Common Stock  (1,200,000)      (120)        -                 -          (120)

Issuance of
Common Stock
for Services     578,316         58         -                 -            58

Net Loss               -          -         -           (3,482,719)(3,482,719)

Balances at
Dec. 31, 1997  15,417,833     1,542     6,941,327       (8,206,789)(1,263,920)


                    (See Accompanying Notes to Financial Statements)
                        
                    Forestry International, Inc.
                      Statement of Cash Flows
Year Ended December 31,1997 and Nine Month Period ended March 31, 1996
                                             1997                  1996
                                                              (Consolidated) 
                                                            (Verified by   
                                                             previous auditors)
Cash Flows from Operating Activities:
Net Loss                                 ($3,482,719)            ($891,587)
Adjustments to Reconcile Net Loss
Amortization & Depreciation                   85,524                47,109
Amortization of Note Receivable Discount     (10,000)                    -
Common Stock issued for Interest                   -                37,500
Loss on Impairment Long Lived Assets               -               147,609
Loss (Gain) on Sale of Ppty & Equip                -                27,220
Loss on investment on Dixieland Forest 
Products, Inc.                             1,519,375                     -
Loss from operations of Discontinued
Operations                                   475,546                     -
Loss on disposal of segment assets           814,918                     -
(Increase) Decrease in:
Notes and Accounts Receivable                 30,461                (7,735)
Accrued Interest Receivable                        -                (1,336)
Inventory                                          -               (40,606)
Prepaid Expenses and Deposits                  3,698                50,995
Due from Related Party                             -               (10,763)
Other Assets                                       -                (4,450)

Increase (Decrease) in:
Accounts Pay.And Accrued Expenses           (168,426)              331,198
Income Tax Payable                          (211,512)             (129,823)
                                                                            
Net Cash Used by Oper. Activities           (943,135)             (444,669)

Cash Flows from (Applied to) Investing Activities:
Notes Receivable, Net                              -                (1,993)
Purchase of Business, net of cash required         -              (692,772)
Purchase of Property And Equipment            (3,110)              (26,984)
Proceeds from Loss of DFP                    141,251                     -
Proceeds from Sale of
Property & Equipment                       1,174,235               137,123
Proceeds from Sale of
Forestry Development Costs                   131,160                     -
Increase in Forestry Devel. Costs             (6,390)              (11,154)
Deferred Acquisition Cost                          -               306,139

Increase in Long-Term Investment             (88,187)                    -
                                    
Net Cash Used by Investing Activities:     1,348,959              (289,641)

Cash Flows From (Applied to)
 Financing Activities:
Repayment of Note Payable                     (2,090)                    - 
Increase in Long-Term Debt                   319,647                     -
Repayment of Long-Term Debt               (1,669,390)             (172,174) 
Net (Decrease) In Related Party Debt          (3,455)             (113,550)
Issuance of Common Stock                      96,800             1,559,500
Issuance of Notes Payable                          -               315,970
Net Cash Applied to
Financing Activities                      (1,258,488)            1,589,746

Net Increase (Decrease) in Cash             (852,664)              855,436
Cash, Beginning of period                    855,436               000,000

Cash, End of Period                          $ 2,772             $ 855,436
                        

                                               1997                1996   
Supplemental Disclosure of
Cash Flow Information:

Cash Paid for Interest                     $       -              $ 117,557
Cash Paid for Income Tax                     160,000                 43,772

Supplemental Schedule of
Noncash Investing:

Note payable relating to
disposal of Dickson Plantation               927,500                      -  

Note payable relating to
loss of DFP, Inc. investment                 614,390

Intercompany advances receivable 
relating to loss of DFP, Inc. Investment     441,915                      -  

Common Stock issued for
purchase of DFP, Inc.                              -                750,000
Common Stock issued for
debt payments                                      -                947,257

Disposal of business - Dickson Plantation:

Total assets disposed on sale
of Dickson Plantation                      1,245,040                      -  
Total debt reduced on sale
of Dickson Plantation                      1,171,641                      -  

Disposal of Business DFP, Inc.:
Working capital other than cash             (839,562)                     -  
Advances receivable                         (441,915)                     -  
Equipment                                   (225,240)                     -  
Cash Surrender Value                          (4,450)                     -  
Long-term debt                             1,650,771                      -  
Note payable                                 508,419                      -  
Goodwill                                  (2,167,398)                     -  
                                          (1,519,375)                     -

        Purchase of business, net of cash acquired:
Working capital other than cash                    -                 89,804
Long-term notes receivable                         -               (402,109)
Equipment                                          -               (225,240)
Goodwill                                           -             (2,108,835)
Long-term debt                                     -              1,203,608 
Common Stock issued                                -                750,000 
                                                   -               (692,772)
                                          
                   (See Accompanying Notes to Financial Statement)





















                        
                        
           FORESTRY INTERNATIONAL, INC
          Notes to Financial Statements
                December 31, 1997


(1)   Organization and Purposes
     
Plantation Capital corporation ("Plantation"), was incorporated in the State
of Colorado on August 9, 1988, for the primary purpose of seeking selected
mergers or acquisitions with a small number of business entities expected to
be private companies, partnerships or sole proprietorships.  On August 10,
1990, Plantation acquired RehabNet, Inc. through an exchange of stock. 
Subsequently, RehabNet, Inc. was merged into Plantation with a name change
to RehabNet, Inc.

On September 18, 1992, the stockholders of RehabNet, Inc. approved the
acquisition of all assets and the assumption of all liabilities of RehabNet,
Inc. by an unrelated public entity in a tax-free stock exchange.  

On January 2, 1993, the stockholders approved a name change to Forestry
International, Inc. (The "Company"). 

On March 1, 1993, the Company acquired the exclusive right to the use of
clonal research and development pertaining to the paulownia tree, a hardwood
species developed by BioTech Plants Pty, Ltd.  At that time the Company
planted, grew, developed and marketed this rapid growing hardwood tree on
a global basis. 

The Company was in its development stage until December 16, 1996 when it
acquired Dixieland Forest Products, Inc ("DFP"), a Mississippi corporation. 
DFP, a wholly owned subsidiary, supplied timber to pulp, paper, and lumber
mills and provided landowner assistance with replanting, thinning, and timber
transportation.

On November 12, 1997 the Company loss control of Dixieland Forest
Products, Inc. through a unilateral decision of Mr. Randy Pope that was not
recognized by Forestry.

In May 1998 the Company has also discontinued the operations of planting,
developing and marketing Paulownia trees.

The Company has restructured its operations for the primary purpose of
seeking selected acquisitions with a number of entities primarily in the forest
products industry.


(2) Summary of Significant Accounting Policies

      (a) Cash and Cash Equivalents         

All short-term investments purchased with an original maturity of three
months or less are considered to be cash equivalents.  Cash and cash
equivalents primarily include cash on hand and amounts on deposit with
financial institutions.

    (b) Long-Term Investment in an Unconsolidated Subsidiary
    
    As of November 12, 1997 the Company lost control of its investment in
Dixieland Forest Products, Inc. The results from operations of DFP had been
consolidated with the results of the Company from January 1, 1997 to
November 12, 1997.

Because of its inability to influence Dixieland's financial and operating
policies, the Company must discontinue using the consolidation and equity
method of accounting. As of November 12, 1997 the investment is accounted
under the cost method. This cost is determined by the total equity pick-up to
that date.

     (c) Property and Equipment

Property and equipment are stated at cost.  Property and equipment of the
Company  are depreciated using the straight-line method over the estimated
useful lives of the respective assets, which has been determined to be five to
seven years for equipment.

     (d) Income Taxes

The Company uses the asset and liability method of accounting for income
taxes.  Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of the existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
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 the period that
includes the enactment date.

     (e) Computation of Earnings Per Share

Earnings per share is based upon the weighted average number of common
shares outstanding.  Outstanding stock options are non-dilutive as of
December 31, 1997. 

     (f) 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 amounts reported in the financial statements and
related notes to the financial statements.  Changes in such estimates may affect
amounts reported in future periods.
   
(3)   Going Concern

The Company's  financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's
business plan calls for the use of banks, investment and merchant bankers, and
venture capital firms to provide capital to acquire future investments.

Since the Company lost control of Dixieland, it has lost substantially all of 
the assets of the Company. In order to meet its liability requirements,
management has proceeded to dispose of certain assets and substantially
reduce and delay expentitures. It is likely that management's plans for dealing
with such adverse circumstances can be implemented for the duration of the
fiscal year ending December 31, 1998.

(4)     Dixieland Forest Products, Inc. (DFP) Investment

On December 1, 1995, a share purchase agreement was made for Forestry
International, Inc. to acquire Dixieland Forest Products, Inc.

On December 5, 1995 Forestry received, from a shareholder, an amount of
$250,000 to apply in whole as the first installment payment for the Dixieland
acquisition. Of this amount $200,000 was paid to Randy Pope.

In November of 1996, the parties restructured the terms of the proposed
acquisition and agreed upon a final  completion date of December 16, 1996.
The purchase price for Dixieland was paid and delivered to Randy  Pope, the
seller, as follows: (i) on December 16th $400,000 cash; (ii) on January 3,
1997, 250,000 restricted common shares of the Company; (iii) on January 3,
1997, 400,000 freely tradable common shares of the Company; and, (iv)
$750,000 in the form of a Promissory Note, the said Note bearing interest at
the rate of 7% per annum, with payments of principal and interest to be made
quarterly for a term of ten years. The Company also had an obligation to
relieve Mr. Pope of personal guarantees on notes he had signed for the
purchase of timber tracts and equipment that had been financed for loggers.

The terms of acquisition also required that the Company, locate a buyer for
the free-trading shares referred to in (iii) above. Of those free-trading
shares, 200,000 were to be purchased from Mr. Pope at $1.00 per share on or 
before January 16, 1997, with the balance to be purchased from Mr. Pope on or
before April 1, 1997. Regarding the latter purchase, Mr. Pope had the option
of accepting a price of $1.25 per share, or $1.00 per share. Upon exercising
the latter option, Mr. Pope would receive an additional 50,000 restricted
common shares. This obligation was fulfilled by Forestry and Mr. Pope
received $400,000 cash, less commission, and 50,000 restricted common
shares as per the agreement.

Mr. Pope entered into an employment contract with Dixieland for an  annual
gross base salary of $100,000 plus benefits and "bonus payments" based upon
defined operating results. He was paid $83,333.30. in salary for the first ten
months. The Company paid rent on the three facilities to Mr. Pope $8,333 per
month from January to November 1997 for a total amount of $83,333.

On November 12, 1997, Mr. Pope unilaterally decided to take back Dixieland
Forest Products, Inc.'s common shares based on an alleged default of Forestry
to obtain the release of his personal guarantees of indebtedness.

On February 26, 1998 Forestry proposed an all cash offer of $ 320,211 to Mr.
Pope in addition to the $1,000,000 cash that he had previously received.
On March 20, 1998 Forestry received a counter proposal from Mr. Pope.
This counter offer, a minimum of $900,000 cash, was rejected as unrealistic
according to the economic equivalent and relative performance to be received.

Due to indeterminable future benefits of this investment, its value is written
down to nil. In addition related intercompany advances receivable of $441,915
and a note payable balance of $614,390 has been eliminated.

(5)     Fair Value of Financial Instruments

The fair values of cash and cash equivalents, notes and accounts receivable,
notes payable and accounts payable approximate cost because of the
short-term maturity of these financial instruments.  Long-term notes
receivable, notes payable and most long-term debt including current maturities
are at variable rates tied to the prime rate and therefore carrying values
approximate fair values.  The estimated fair values of the Company's financial
instruments are as follows:






                         December 1997                   December 1996
                     Carrying          Fair        Carrying          Fair
                      Amount          Value         Amount          Value  
Financial assets:
   Cash and cash
    equivalents       $2,772         $2,772        $855,436        $855,436
   Notes and accounts 
    receivable             0              0         399,509        399,509
   Long term notes 
    receivable             0              0         404,102        404,102

Financial Liabilities:
   Notes Payable           0              0         511,554        511,554
   Accounts Payable  109,717        109,717         356,880        356,880
   Long term debt
    Incl Maturities1,052,127      1,052,127       2,904,204      2,904,204

(6)     Discontinued Operations

On March 31, 1997, the Company sold its Dickson Plantation. The sale price
of $1,234,318 resulted in a loss of $158,331 of which $147,609 was
recognized as an impairment loss on long-lived assets at December 31, 1996
and $10,722 is recognized as a loss from disposal of segment assets at
December 31, 1997. Total assets of $1,245,040 and total debts of $1,171,641
were disposed.

On May 5, 1998, the Company sold all greenhouses, all associated supplies
and equipment, and all Paulownia trees located on the Dickson Plantation.
The sale price of $42,000 will result in a loss of $734,361 which has been
recognized as a loss from disposal of segment assets. Other assets relating to
the operation of the plantation have been sold. The sales price of those assets
of $90,490 has resulted in a loss of $33,841 which has been recognized as a
loss from disposal of segment assets.

Due to the discontinued operations the value of certain long-lived assets has
been reduced to its net realizable value, thus has resulted in a loss of $35,994
which has also been recognized as a loss from disposal of segment assets.

Loss from operations of discontinued operations represent the losses of
Dixieland Forest Products, Inc. from January 1, 1997 to November 12, 1997.

The following represents the Loss on DFP investment:



Total Cost of Investment
as of December 16, 1996                      $2,109,604

DFP loss from December 16, 1996
to December 31, 1996                               (769)
                                              2,108,835

Additional Cost relating to Acquisition          88,186

DFP loss from January 1, 1997
to November 12, 1997                           (475,546)

Amortization of Goodwill                        (39,624)
Amortization of Note Discount                    10,000 

Investment November 12, 1997
according to the equity method
of accounting                                 1,691,851

Elimination of intercompany advances
receivables and note payable on
November 12, 1997.                             (172,476)

Loss on DFP investment                       $1,519,375 

(7)     Long Term Debt

A summary of unrelated long-term debt follows:

                                        Dec 31, 1997         Dec 31, 1996
                                                            (Consolidated)
                                                             (Verified by
                                                           previous auditors)
                                     -----------------      -------------------
Note payable to unrelated party,
12% interest bearing; convertible
into common shares;  principal
and interest due April 1, 1999.            $1,052,127           $754,480

Note payable to unrelated party,
8% interest  bearing; interest 
payments are due quarterly
through March 1, 1999 at which time 
the total principal balance becomes 
due; secured by Georgia plantation 
and buildings.                               927,500

Notes payable to Deposit Guaranty 
National bank, 9% to 10% interest 
bearing, due in monthly to quarterly 
payments of principal and interest 
due 1997 to 1999 secured by various 
pieces of equipment and timber.              278,506
     
Notes payable to Bank Plus, 7.05% -
10.25% interest bearing, due at maturity 
or quarterly to 12-1-99; secured by 
equipment, timber and  a shareholder's 
personal certificate of deposit.             146,593

Notes payable to various credit 
companies, 8 1/2 % -10 1/2 % interest 
bearing due in monthly payments of 
principal and interest to 7-31-99; 
secured by various pieces of equipment
and vehicles.                                569,341

Note payable to seller of DFP, 7%
interest bearing, due in quarterly
payments of $26,763 principal
and interest at 1-1-07                                            668,835

Other equipment notes                         42,153

Capital lease for machinery and 
equipment costing $10,790 and 
accumulated depreciation of  $1,285
as December 31, 1996.                          8,902
                                           --------------   -------------- 
                                          $1,052,127           $3,396,310
            Less current maturities                          -    494,218
                                          ---------------   --------------
                                          $1,052,127           $2,902,092
                                          ===========         ============

Maturities of long-term debt for the next five years as of
December 31, 1997 are as follows:

      1997         
      1998          
      1999                 $1,052,127
      2000                         
      2001                         
Thereafter           
                         -------------
                           $1,052,127

New management disputes the validity or existence of this debt. In that regard,
the Company has initiated litigation to have the debt declared invalid and is
otherwise seeking to have the debt determined invalid.

(8)     Due to Related Parties

As of  December 31 , 1997, the Company owed $9,895 to an officer of the Company
for loans made up to December 31, 1997.

(9)     Income Taxes 

At December 31, 1997 the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $3,838,000 and
$2,485,000 respectively.  The federal loss is from operations of which $592,000
relates to the year ended December 31, 1997, $761,000 relates to the nine 
month period ended December 31, 1996 and $2,485,000 relates to the year ended
March 31, 1996 and will expire after December 31, 2012, December 31, 2011 and
March 31, 2011 respectively.  The state loss is also from operations of 
which $318,000 relates to the year ended March 31, 1995, $1,225,000 relates 
to the year ended March 31, 1996, $350,000 relates to nine month period ended 
December 31, 1996,and $592,000 relates to the year ended December 31, 1997, 
the state loss carryovers will expire in the following years:

                    2000       $  318,000
                    2001          954,000
                    2002          271,000   
                    2011          270,000
                    2012           80,000       
                    2013          592,000
                              -------------                               
                               $2,485,000

Other temporary differences between carrying amounts of the assets for
financial reporting purposes and the amount used for income tax purposes are
insignificant and are not included in the deferred tax asset.  The deferred tax
asset resulting from net operating loss carryforwards amount to approximately
$1,513,000 at December 31, 1997 and $1,263,000 at December 31, 1996. 
Realization of this tax benefit depends upon the Company's future revenue
from acquisitions.

A loss limitation applies if there is an acquisition of control of the Company.
Generally the amount of net operating loss carryforwards would be limited to
the value of the Company when control changed times the long-term tax-exempt 
rate.

At December 31, 1997, the Company also had net capital loss carryforwards
for federal and state income taxes payable of approximately $1,500,000.
Capital losses are deductible only to the extent of capital gains for a period 
of five years and may not offset operating income. The tax benefit will be
reflected when realized.

Management is unable to predict whether future revenues will be adequate to
generate taxable income before expiration of the loss carryforwards. 
Therefore a valuation allowance of $1,513,000 and $1,263,000 has been
provided at December 31, 1997 and December 31, 1996 respectively to reflect
the estimated value of the deferred tax asset.  If the Company achieves
sufficient profitability to utilize the net operating loss carryforwards the
valuation allowance will be reduced by a credit to income at that time.

Significant components of the provision for income taxes for the year ended
December 31, 1997 and the nine months ended December 31, 1996  are as
follows:                                          

                                     Dec 31, 1997        Dec 31, 1996
                                                        (Consolidated)
                                                         (Verified by
                                                       previous auditors)
                                      ------------        -----------
     Current income tax (benefit):              
          Federal                 $        -              $  (94,586)
          State                            -                     -     
                                      ------------        ------------
                                  $        -              $  (94,586)         
                                      ============        ============
      Deferred income tax (benefit):
               Federal                $1,303,000          $1,103,000
               Less allowance         (1,303,000)         (1,103,000)
                                     ------------        ------------
                                           -                     -
                                     ------------        ------------
          States                         210,000             160,000
               Less Allowance           (210,000)           (160,000)       
                                     ------------        ------------
                                           -                     -    
                                     ------------        ------------
      Total deferred tax benefit  $        -             $       -          

The current income tax liability consists of the following:
                                                              (Consolidated)
                                                               (Verified by
                                                             previous auditors)

                                              1997                    1996
                                       ----------------       ----------------
Balance due from year
 ended March 31, 1994:
                      
          Federal penalties
          and interest                  $         -                 $ 160,000
          State tax                            40,908                  91,820
                                         -------------          ---------------
                                             $ 40,908             $   252,420
                                             ========              ==========

A reconciliation of the provision for income taxes to the federal statutory rate
is:
                                              1997                     1996     
                                       ----------------        --------------- 
   Statutory federal rate                  34.0%                     34.0 %
   Change in valuation allowance             -                         -     
                                       ----------------        ---------------
                                           34.0 %                    34.0%     
                                         ==========                =========

(10)     Stock Options

On December 20, 1995, the stockholders approved a Stock Option Plan for
a maximum of 1,000,000 shares of the Company's common stock to be sold
to employees and others providing valuable services to the Company at option
prices equal to the market price of the stock at the time of the grant.  The
options can be exercised for a period of up to ten years and are registerable
by the Company at the time of exercise under the Securities Act of 1933.  At
December 31, 1997 there were no options exercisable or exercised.

On April 3, 1997 the Board of Directors authorized the granting of stock
options to David Shorey, Chairman of the Board, CEO, CFO and Treasurer
and James Gibson, Senior Vice President and Secretary to purchase up to
100,000 shares each of common stock of the Company at $1.00 per share for
a period of five years. The options were granted in recognition of past
services and the shares received by their exercise were subjected to Rule 144
of the Securities Act of 1933. New management canceled these options at the
resignation of these individuals.

(11)     Contingency

A civil action for back-wages claims for approximately $97,000 was filed on
March 19, 1998 by David L. Shorey, former President of the Company in
Arizona Superior Court against Forestry International. The Company is
vigorously defending the lawsuit against it, and has several defenses and
claims that Forestry believes eliminate all of David Shorey's claims. 
Forestry's defense is based upon the fact that there are no written documents
or materials that support David Shorey's claims for compensation independant
of his own assertions.  Moreover, there are claims and setoffs based upon Mr.
Shorey's actions while he was President, which more than offsets his claims
for compensation. 

To that effect, on October 2, 1998, Forestry filed a counterclaim against
Mr. David Shorey based on the alleged conversion of Company property to his
own use, and also a second claim contending a breach of fiduciary duty as an
officer and director of Forestry International, Inc. The latter claim stipulates
that Mr. Shorey substituted a promissory note to allow the conversion of that
debt into a recourse debt convertible into Forestry common shares without any
consideration to the Company.

Although final resolution of this matter may not occur until
1999 or thereafter. The occurrence of the future judgement is not
determinable. As of December 31, 1997 the Company has accrued salaries payable
to Mr. David Shorey in the amount of $ 59,774.


           SIGNATURES

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


Forestry International, Inc.                                 
----------------------------------
(Registrant)

By: /s/ Louis R. Turp, President                     
----------------------------------
(Signature and Title)

October 22, 1998                                                 
----------------------------------
Date



November 11, 1998


Mr. Louis R. Turp
Forestry International, Inc.
1205 Ampere Street
Suite 206
Boucherville, Quebec
Canada   J4B 7M6


Dear Louis,

I Hereby consent to the use of my name as joint auditor in the Annual Reoprt
pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for
the fiscal year ended December 31, 1997 filed by Forestry International, Inc.
on Form 10-KSB.


/s/
Sylvie Monette-Houle
November 12, 1998

Calgary, Alberta
Canada




November 12, 1998


Mr. Louis R. Turp
Forestry International, Inc.
1205 Ampere Street
Suite 206
Boucherville, Quebec
Canada   J4B 7M6


Dear Louis,

I hereby consent to the use of my name as joint auditor in the Annual Report
pursuant to Section 13 of 15 (d) of the Securities Exchange Act of 1934 for
the fiscal year ended December 31, 1997 filed by Forestry International, Inc.
on Form 10-KSB.


/s/
Robert Kliaman, CA, CPA, (Mass)
November 12, 1998

Montreal, Quebec
Canada