FORESTINDUSTRY COM INC, 10KSB, 2000-09-13

FORESTINDUSTRY COM INC
10KSB, 2000-09-13
NON-OPERATING ESTABLISHMENTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-KSB

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

For The Fiscal Year Ended May 31, 2000 Commission File Number 0-26673

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

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

2480 Kenworth Road, Suite 11
Nanaimo, British Columbia V9T 3Y3
----------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number including area code: (604) 632-3802

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

Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

YES X NO

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $335,287

The aggregate market value of the issuer's voting stock held by non-affiliates
of the issuer based upon the average bid and asked prices of such stock as of
August 28, 2000, was $4,550,499

The number of shares outstanding of the issuer's common stock as of August 28,
2000, was 13,783,666.

Documents Incorporated By Reference: Certain exhibits required by Item 13 have
been incorporated by reference from the Company's Form 10-SB filed on November
4, 1999 and the Company's Registration Statement on Form SB-2 filed May 19,
2000.

Transitional Small Business Disclosure Format: Yes No X

<PAGE>2

ITEM 1. DESCRIPTION OF BUSINESS

General

forestindustry.com, Inc. is an internet service provider to the forest
and wood products industry. Our website includes information and advertising
relating to forest and logging; wood processing and logs; and lumber and wood
products. We are also in the process of establishing a business to business
exchange to support the purchase and sale of wood, wood products and wood
related services. Our strategy is to become an internet leader in supporting an
e-focused marketplace for the highly fragmented global forest industry.

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

Corporate History

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

On January 31, 2000 Autoeye acquired all of the issued and outstanding
common shares of The Forest Industry Online Inc. in exchange for 10,000,000
shares of Autoeye common stock. The Forest Industry Online, Inc. has been in
operation since 1995, first as a proprietorship and since January 1997 as a
corporation. The value attributed to the share exchange was CDN $335,000. The
principals of The Forest Industry Online were Joe Perraton, Lara Perraton and
Teaco Properties Ltd. (which is beneficially owned by Marc White and Dave
McNaught). Autoeye's then president, Andrew Hromyk, represented the interests of
Autoeye. Concurrent with the acquisition of The Forest Industry Online Inc.,
Autoeye issued 750 shares of its Series A Convertible preferred stock at a price
of $1,000 per share for gross proceeds of $750,000. The subscribers of the
preferred shares were Augustine Fund, LP, Ascent Financial, and Indenture Trust
of James F. Cool. Autoeye also issued 37,500 shares of its common stock to
Century Capital Management Ltd, as consideration for consulting services
provided in connection with Autoeye's acquisition of The Forest Industry Online
Inc. Century Capital Management is controlled by Andrew Hromyk.

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

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

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

<PAGE>3

Products and Services

Website Hosting/Advertising

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

Our website includes The World Wood Exchange which allows
manufacturers, buyers and intermediaries to purchase and sell all types of wood
products through the website. Our website also provides information on industry
related trade shows, conferences and news items and allows for the exchange of
information through our online discussion forums. All updates and changes made
to the website are completed by our in-house technical staff.

Our website also allows companies to advertise their products or
services. We charge a monthly fee to customers based on the size of the
advertisement. Our monthly fees for basic advertising services currently range
from $39 to $86.

Internet Services

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

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

We have technical and customer support staff who are available during
business hours to assist all members with the use of our services.
<PAGE>4

New Products

The Company plans to develop an online business exchange for the forest
and wood industry called the Lumber and Equipment Exchange, or LEE. The LEE will
host auctions of lumber, equipment and other wood products. Revenue will be
generated on a commission basis. We will need to license sophisticated software
and hardware to support the LEE program. We hope to attract an alliance partner
to help finance and develop the LEE program. Once an alliance partner is found
and financing has been secured, we anticipate it will take approximately 6 weeks
to design the basic framework for the LEE. We will require ongoing design and
technical assistance from an alliance partner in the following areas: e-commerce
infrastructure, systems integration and installation of enabling internet
software. We estimate that it will take between 12-18 months to have a fully
integrated exchange developed and operational. Related services, which we plan
to offer to customers of the LEE, include credit verification, delivery
scheduling, inspection services and payment settlement.

The Company also plans to design a standard storefront for our members.
We intend to upgrade existing storefronts used by our members to increase their
efficiency. Once our standard storefront is developed, we will be able to adapt
it to the needs of any of our customers with minimal effort.

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

Pending Acquisition

Subsequent to the year-end, the Company signed a non-binding letter of
intent to acquire C.C. Crow Publishing, Inc. for $330,000 and 400,000 shares of
our common stock. Crow's was established in 1921 and publishes market reports
for the softwood industry. Crow's currently publishes seven weekly market
reports which include the Crow's Weekly Market Report of Lumber and Panel
Prices. Crow's also publishes monthly the Crow's Forest Industry Journal which
is a trade journal directed toward major issues facing the wood and lumber
industry. This acquisition is subject to several conditions including the
Company's ability to pay the cash portion of this transaction by the closing
date of December 31, 2000. There is no assurance that this acquisition will be
consummated. The Company has placed the 400,000 shares in escrow pending the
closing of this transaction. 125,000 shares of this amount are a non-refundable
deposit which will be issued to the owner of Crow's whether this acquisition
closes or not.

Sales and Marketing

We promote our website by participating in the following:

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

Due to the seasonal nature of the forest industry, our advertising and
marketing expenses will normally be higher in the second and fourth quarters.
<PAGE>5

As of May 31, 2000, the Company had over 640 customers which number has
almost doubled since the fiscal year end. We have no reliance on any specific
customer or small group of customers. Approximately 70% of our customers are
U.S. companies, 20% are from Canada and approximately 5% are from Europe, Asia
and Australia.

Competition

There are currently very few internet websites devoted to the forest
industry sector. Our competitors include "e-wood.com," "Talpx.com,"
"VerticalNet," and other startup company's such as forestweb.com. The Company
also competes with various regional and national commodity exchanges.

e-wood.com and Talpx Inc. provide internet websites which connect
buyers and sellers of wood and related products and include news and information
for the wood products industry.

VerticalNet provides websites for companies in the forest and wood
products industry but does not currently provide any news or information on its
websites, which relate to the forest or wood products industry.

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

Intellectual Property, Government Approvals and Regulation

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

Employees

As of August 28, 2000 we had 26 full-time employees. We anticipate
hiring 5 more employees over the next six months to service customers using our
web site. We also utilize the services of 3 consultants.

ITEM 2 DESCRIPTION OF PROPERTY

Our corporate offices were located at Suite 504, 999 Canada Place,
Vancouver, British Columbia V6C 3E1 where the Company leased approximately 2,000
square feet of space under a subtenancy lease which expires on September 30,
2001. However, subsequent to the year-end the Company consolidated its corporate
offices with its operational and administrative offices located at 2480 Kenworth
Road, Suite 11, Nanaimo, British Columbia, Canada V9T 3Y3. The Company leases
approximately 4,000 square feet of office space under a lease, which expires May
31, 2001.

All of the Company's computer and telecommunications equipment is
located at its Nanaimo offices. As of August 28, 2000, the Company was operating
at 30% to 40% capacity and does not foresee the need to upgrade until its
customer base doubles.
<PAGE>6

Risks Associated with Company's Developing Business

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

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

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

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

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

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

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

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

The success of the Company will also depend on its ability to respond
to technological advances and emerging industry standards in a cost-effective
and timely manner. The Company may not have the technical or financial ability
to respond to these technical challenges.
<PAGE>7

ITEM 3. LEGAL PROCEEDINGS

None.

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

On February 25, 2000, a special meeting of the Stockholders was duly
held, at which there was present a majority of the stockholders of the Company,
to vote upon amending Article I of the Articles of Incorporation to change the
name of the Company from Autoeye Inc. to forestindustry.com, Inc. At the special
meeting there were present, either by proxy or in person, 14,137,240 shares of
the 14,964,540 shares of the Company's outstanding Common Stock. All 14,137,240
shares present voted for adopting the amendment to Article I of the Articles of
Incorporation. The stockholders of the Company that were not present by proxy or
in person were given notice of the special meeting in accordance with Section
222 of the Delaware General Corporation Law.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Principal Market

Since December 1999 the Company's common stock has been quoted on the
National Association of Securities Dealers' OTC Bulletin Board, initially under
the symbol "AUYE", and after February 25, 2000 under the symbol "FXCH". A
trading market only developed on March 1, 2000. Prior to that date, there was no
public market for the Company's common stock. Set forth below are the range of
high and low bid quotations for the periods indicated as reported by the NASD.
The market quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions.

Common Stock
-------------------------
Month Ended High Low
--------------- ----- -----
March 31, 2000 $8.00 $7.81
April 30, 2000 $3.00 $3.00
May 31, 2000 $1.25 $1.25

Approximate number of holders of common stock dividends. As of August
28, 2000 there were 58 holders of record of the Company's common stock. This
number does not include stockholders who hold the Company's stock in street
name.

Dividends

Holders of the Company's common stock are entitled to receive such
dividends as may be declared by the Board of Directors. The Board of Directors
is not obligated to declare a dividend. The Company has not paid any dividends
on its common stock and it does not have any current plans to pay any dividends
in the foreseeable future.
<PAGE>8

Capital Stock

During the Company's last fiscal year ended May 31, 2000, it sold the
following equity securities pursuant to exemptions from registration under the
Securities Act of 1933.

On January 31, 2000, the Company issued 10,000,000 shares of its common
stock in exchange for all of the outstanding stock of The Forest Industry
Online, Inc. from 3 shareholders of The Forest Industry Online, Inc. In
conjunction with this acquisition, 37,500 shares of common stock were issued to
one consultant for services rendered relating to the acquisition. The shares
were issued to investors residing outside of the United States. The issuance of
the Company's shares of common stock was deemed exempt pursuant to Regulation S.
No commissions were paid.

On January 31, 2000, the Company sold 750 shares of its Series A
Convertible Preferred Stock to three institutional investors for aggregate
proceeds of $750,000. Each Series A preferred share may be converted, at the
option of the holder, into shares of common stock equal in number to the amount
determined by dividing $1,000 by 75% of the average closing bid price of the
Company's common stock for the ten trading days preceding the conversion date,
subject to a maximum of 5,000 shares of common stock being issued for each
Series A preferred share and a minimum of 250 shares of common stock being
issued for each Series A preferred share. In addition, all outstanding Series A
preferred shares will automatically convert into shares of common stock on
January 31, 2001 at the conversion rate described above. In May 2000, 375 Series
A preferred shares were converted into 249,221 shares of common stock.
Subsequent to the year-end, an additional 125 Series A preferred shares were
converted into 155,039 shares of common stock and another 50 Series A preferred
shares were converted into 62,106 shares of common stock. As of August 28, 2000,
200 Series A Convertible Preferred Shares remained outstanding. All sales of the
Company's Series A preferred stocks were exempt from registration pursuant to
Rule 506 of the Securities and Exchange Commission. All shares of the preferred
stock were acquired for investment purposes only and without a view to
distribution. All of the persons who acquired the Company's Series A preferred
stock were fully informed and advised about matters concerning the Company,
including its business, financial affairs and other matters. The purchasers of
the Company's Series A preferred stock acquired the securities for their own
accounts. The certificates evidencing the Series A preferred stock bear legends
stating that they may not be offered, sold or transferred other than pursuant to
an effective registration statement under the Securities Act of 1933, or
pursuant to an effective registration statement under the Securities Act of
1933, or pursuant to an applicable exemption from registration. All Series A
preferred shares are "restricted" securities as defined in Rule 144 of the Rules
and Regulations of the SEC.

On February 24, 2000, the Company issued 200,000 shares of its common
stock to one consultant in payment for services to the Company, valued at
$4,600. On February 29, 2000, the Company issued 150,000 shares of its common
stock to one consultant in payment for services rendered to the Company. The
services were valued at $3,450. These transactions were private in nature and
involved investors who were not residents of the United States. On June 7, 2000,
the Company issued 200,000 shares of its common stock to one consultant in
payment for services rendered to the Company. The services were valued at
$160,000. This transaction was private in nature and involved one sophisticated
investor. Accordingly, the above issuances were deemed to be exempt from
registration by Regulation S or Section 4(2) of the Securities Act and the stock
is deemed to be restricted securities.
<PAGE>9

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

General

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

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

Plan of Operations

In order to expand the Company's operations it will need additional
capital. The Company does not have any commitments from any source to provide
additional capital. It will need to raise significant outside capital to fund
its anticipated capital requirements over the next twelve months. Approximately
$2.6 million has been budgeted to finance the development of the Company's
technology, development of new products and services and increased sales and
marketing over the next 12 months. The Company anticipates needing approximately
$200,000 to acquire additional equipment over the next 12 months to support the
Lumber and Equipment Exchange. The Company will need capital to finance
anticipated acquisitions during the next 12 months. The Company will need
$330,000 by December 31, 2000 if it determines to consummate a pending corporate
acquisition. Capital commitments for the next 12 month period include
approximately $21,468 in lease obligations for the one office premise;
consultant agreements totaling $50,000; other leases $18,000; and employment
agreements totaling $98,600. As a result of this increased business activity and
anticipated increase in employees, the Company expects general and
administrative expenses and compensation costs to increase significantly from
current levels.

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

Since inception, the Company has relied on equity financings to fund
its operations. Funds required to finance its future internet services,
marketing efforts and ongoing business are expected to come primarily from debt
and equity financing and alliance partners with the remainder provided from
operating revenues. Operating revenues to date have been substantially less than
the cost of operations. Future financings will be necessary to meet the
Company's anticipated working capital needs over the next 12 months. Potential
sources of additional capital include private placements with institutional
investors and/or a public offering of its common stock.
<PAGE>10

Results of Operations
For the Fiscal Years Ended May 31, 2000 (10 months) and July 31,1999

As indicated above, the Company commenced business operations in
January of 2000. As of May 31, 1999 and up to January 2000, the Company was not
conducting any business operations. Consequently, a comparison of the fiscal
years ended May 31, 2000 and 1999 would not be meaningful. Instead, the more
meaningful management's discussion compares the Company's latest fiscal year
ended May 31, 1999 with the prior fiscal year of The Forest Industry Online,
Inc. ending July 31, 1999. However, the Company's most recent fiscal year
consists of only ten months rather than a full twelve-month fiscal year.

Revenues. Revenues increased 11% to $335,287 for the 10-month period
ended May 31, 2000 as compared to sales of $300,362 for the year ended July 31,
1999. Increased sales were attributable to an increase in subscribers to the
Company's web site services and web design services. The customer base increased
to approximately 640 customers by May 31, 2000 as compared to approximately 350
at July 31, 1999. Approximately 60% of the revenue is attributable to web site
services while the remaining 40% of revenues were derived from web design
services.

Expenses. Selling, general and administrative expenses for the 10-month
period ended May 31, 2000 increased 94% to $534,976 as compared to $275,061 for
the year ended July 31, 1999. This increase is due to the hiring of additional
sales and technical staff and attendance at more trade shows during this period.
Consulting and professional fees were $151,616 for the 10-month period ended May
31, 2000 compared to $18,079 for the year ended July 31, 1999. Professional fees
increased by over 600% due to the acquisition in January 2000 and the change
from a privately held company to a publicly reporting company. Professional fees
also included legal and accounting fees relating to the preparation of a
registration statement.

Net and Comprehensive Loss. The Company recorded a net loss of $379,131
and a comprehensive loss of $370,567 for the 10 months ended May 31, 2000
compared to a net loss of $541 and a comprehensive loss of $82 for the year
ended July 31, 1999. The increase in losses for the period ended May 31, 2000 is
due to the significant increase in operating, administrative and professional
expenses.

Liquidity and Capital Resources

The Company is in a growth stage in which expenses are expected to
increase as the Company implements its business plan. Due to the fact that the
Company has not generated sufficient cash flow to fund all of its operations,
the Company has relied heavily on outside sources of capital. During the 10
month period ended May 31, 2000, the Company raised $750,000 through the sale of
its Series A Convertible Preferred Stock. The Company will require additional
capital investments or borrowed funds to meet cash flow projections. There can
be no assurance that the Company will be able to raise capital from these
outside sources in sufficient amounts to fund the Company's business expansion.
The failure to secure adequate outside funding would have an adverse affect on
the Company's operating results.

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

The Company plans to develop the Lumber and Equipment Exchange, or LEE,
which will conduct auctions of lumber, equipment and other wood products by
means of the internet. To establish the LEE, it will need to license from a
third party the sophisticated computer software systems needed to operate an
internet-based auction site. The Company will earn commissions on any sales made
through the LEE. A license for the computer system needed for the LEE is
<PAGE>11

expected to cost approximately $300,000. In the alternative, the Company may
attempt to establish a joint venture or similar arrangement with a company which
has the rights to such a computer system, in which case the initial cost of the
license would be less but the Company would be required to share any revenues it
earned from the LEE with its joint venture partner. As of August 28, 2000 the
Company had not obtained any license for the computer programs which will be
required for the LEE and the launch date of the LEE will remain uncertain until
additional sources of capital are obtained.

Subsequent to the year-end, the Company signed a letter of intent to
acquire a business whereby the Company will issue 400,000 shares of its common
stock and pay $330,000 in cash in exchange for all the issued and outstanding
shares of the business. The Company has until December 31, 2000 to raise
sufficient capital to acquire the business. The Company plans to obtain the
capital through debt and/or equity financing. If the Company fails to raise
sufficient capital or for some other reason decides not to consummate this
acquisition, the Company will pay a non-refundable deposit in the amount of
125,000 shares of its common stock.

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

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

Capital commitments for the next 12 month period include approximately
$21,468 in lease obligations for 1 office premises; consultant agreements
totaling $50,000; other leases $18,000; and employment agreements totaling
$98,600.

As of May 31, 2000, the Company had working capital of approximately
$118,409. The Company anticipates obtaining the additional capital which it will
require through revenues from its operations and through a combination of debt
and equity financing. We will also consider joint ventures or strategic
alliances to develop future programs. Current cash and cash equivalents are
projected to sustain the Nanaimo operations but alternate sources will be
required to fund additional expenses. The Company will seek to raise additional
funds through public and private equity financings, borrowed funds or from other
sources. There is no assurance that the Company will be able to obtain capital
it will need or that its estimates of its capital requirements will prove to be
accurate. As of the date of this report, the Company did not have any
commitments from any source to provide additional capital.

ITEM 7. FINANCIAL STATEMENTS

The financial statements of the Company, including notes thereto,
together with the report of independent certified public accountants thereon,
are presented as an exhibit under Item 13 beginning on page F-1.
<PAGE>12

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

Effective February 24, 2000, the Company retained Watson Dauphinee &
Masuch ("Watson") to act as the Company's independent certified public
accountant. In this regard Watson replaced Ernst & Young LLP ("E&Y") which
audited the Company's financial statement for the fiscal years ended May 31,
1999 and 1998. The reports of E&Y for these fiscal years did not contain an
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty audit scope or accounting principles. During the Company's two
most recent fiscal years and subsequent interim periods, there were no
disagreements with E&Y on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of E&Y would have caused it
to make reference to such disagreements in its reports.

The change in the Company's auditors was recommended and approved by
the Board of Directors of the Company. The Company does not have an audit
committee. See "Item 13. Exhibits and Reports on Form 8-K."

PART III

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

Directors and Executive Officers

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

Name Position Age Period

Joe Perraton President, Secretary, Chief Financial Officer 35 January 31, 2000 - Present
and Director
Todd Hilditch Vice President, Corporate Relations Officer 32 February 24, 2000 - Present
John A. Carmichael Chief Information Officer of The Forest 30 February 29, 2000 - July 21, 2000
Industry Online, Inc.
Marc R. White Director 40 January 31, 2000 to July 12, 2000
Andrew Hromyk Secretary and Director 34 December 18, 1997 to May 31, 2000
</TABLE>

Business Experience

The following is a description of our executive officers and directors
and their business background for at least the past five years.

Joe Perraton has served as president, secretary and a director of the
Company since January 31, 2000. Prior to the acquisition by Autoeye, Mr.
Perraton served as president, co-founder and operations manager since the
inception of the business "forest industry online" as a proprietorship in 1995.
He became president of The Forest Industry Online, Inc. upon its incorporation
in January 1997. As co-founder Mr. Perraton had a unique vision of how the
forest industry could use the internet to improve the industry as a whole. With

<PAGE>13

over 10 years experience directly in the forest industry and over five years
working with internet and client/sever technologies. Mr. Perraton has insight on
how technologies relate to the forest industry. Prior to establishing The Forest
Industry Online Inc. Mr. Perraton was engaged in the forest industry as an
independent logging contractor.

Todd Hilditch became Vice President of Corporate Relations as of
February 24, 2000. Mr. Hilditch has been an independent business consultant for
the past 7 years. From 1992 to 1993 Mr. Hilditch was a financial planner with
Albany Financial Group, a private financial planning firm. Prior to this Mr.
Hilditch was a professional hockey player. Mr. Hilditch has been involved in all
aspects of public company business formation, including seed capital financing,
business plan development and implementation, senior listing applications and
shareholder communication. Mr. Hilditch has provided consulting services to two
start-up environmental wood product companies, Kafus Industries Ltd. and The
Canfiber Group Ltd., both of which are publicly held companies listed on the
American Stock Exchange and the Canadian over-the-counter market, respectively.
Mr. Hilditch is also the President and a director of Terraco Energy Corporation,
an oil and gas exploration company. Mr. Hilditch holds a Bachelor of Science
degree in Management from Rensselaer Polytechnic Institute in New York State.

John A. Carmichael has served as the Chief Information Officer for the
Company's predecessor since February 29, 2000. He is an internet systems
architect and has been an independent technical consultant for the past 4 years,
providing services as a subcontractor to IMRglobal Corp. From 1990 to 1994, Mr.
Carmichael was employed as a sawmill worker by Tolko Industries Ltd. Mr.
Carmichael has extensive experience in designing and implementing database
enabled applications and is fluent in application servers, database servers,
Microsoft and Java technologies and Internet based applications. Mr. Carmichael
specializes in systems integration, and has provided systems architecture for
Creo Products Inc., BC Ferries Corporation, Canadian Pacific Railways and the
government of Ontario. Mr. Carmichael studied computer science at Simon Fraser
University in Vancouver, British Columbia. Mr. Carmichael resigned from his
position with the Company's subsidiary on July 21, 2000.

Marc Ralph White has served as a director since January 31, 2000.
He has 25 years experience working directly in the harvesting sector of the
forest industry. Mr. White's work in the harvesting sector has been based on
contract work for various businesses. Currently, Mr. White is a contractor for a
large forest company and a partner in many small woodlots with continual
involvement in the industry. Mr. White's business experience and in-depth
industry knowledge have enabled him to assist in guiding the business
development of The Forest Industry Online, Inc., as well as providing valuable
management experience. Mr. White resigned from the Board on July 12, 2000.

Andrew Hromyk served as the Company's President, Secretary and a
director since its formation in December, 1997. On January 31, 2000, he resigned
his position as President and on May 11, 2000 resigned as the Secretary and
director. Mr. Hromyk has been president of Century Capital Management Ltd., a
financial and business consulting firm located in Vancouver, British Columbia
since 1993. Since October 1999 Mr. Hromyk has also served as a director and
officer of Capital One Ventures Corp., a reporting company. He has held director
positions with several other companies in the past.

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

Family Relationships

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

<PAGE>14

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of the Company's Common Stock, to file reports of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission (the "SEC"). Such executive officers, directors and 10% stockholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon its review of copies of such forms
received by it, or on written representations from certain reporting persons
that other filings were required for such persons, the Company believes that,
during the year ended May 31, 2000, its executive officers, directors and 10%
stockholders complied with all applicable Section 16(a) filing requirements
except that Bona Vista West Ltd. filed two Form 4's which were filed after the
due date. The Company believes Bona Vista West Ltd. is no longer subject to the
reporting obligations of Section 16(a)

ITEM 10. EXECUTIVE COMPENSATION

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

SUMMARY COMPENSATION TABLE

Annual Compensation Long Term Compensation
------------------------------------------------------ -----------------------------------------------------
Awards Payout
-------------------------- ---------
Restricted Securities LTIP All Other
Other Annual Stock Underlying Payout Compensation
Year Salary Bonus ($) Compensation ($) Award(s) Options (#) ($) ($)
--------- ---------- --------------------------------- ------------ ------------- --------- -------------
Joe Perraton 2000(1) $15,022 -0- -0- -0- -0- -0- -0-
President
Andrew Hromyk 2000(2) -0- -0- -0- -0- -0- -0- -0-
Prior President
1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
-----------------

</TABLE>

(1) For the period January 31, 2000 to May 31, 2000. Prior to January 31, 2000,
Mr. Perraton was paid the following salary by The Forest Industry Online,
Inc. (a subsidiary of the Company): June 1,1999 to January 30, 2000 -
$13,406; fiscal year 1999 - $31,761; fiscal year 1998 - $25,284.

(2) For the period June 1, 1999 to January 31, 2000.

In January 2000, Joe Perraton replaced Andrew Hromyk as President of
the Company. Mr. Hromyk continued to serve as the Secretary and a director of
the Company until May 11, 2000 at which time he resigned from both positions.

Employment/Consulting Agreements

On January 31,2000 we acquired The Forest Industry Online Inc. In
connection with this acquisition the Company entered into an employment
agreement with Joe Perraton, the President of The Forest Industry Online. The
employment agreement provides for a term of three years and an annual salary of
CDN $70,000 (approximately $50,000 at current exchange rates).

<PAGE>15

In February 2000 the Company's wholly owned subsidiary The Forest
Industry Online Inc. entered into an employment agreement with John Carmichael
pursuant to which Mr. Carmichael agreed to serve as that Company's Chief
Information Officer. The employment agreement provides for a term of one year
and an annual salary of CDN $75,000 (approximately $50,000 at current exchange
rates). In addition, Mr. Carmichael was issued 150,000 shares of our common
stock as consideration for entering into this employment agreement. Mr.
Carmichael resigned as of July 21, 2000 and voluntarily returned the shares
issued in conjunction with the employment agreement.

In February 2000 the Company's wholly owned subsidiary The Forest
Industry Online Inc. entered into a consulting agreement with Todd Hilditch
pursuant to which Mr. Hilditch agreed to serve as that Company's corporate
relations officer. The consulting agreement provides for a term of one year with
monthly payments of CDN $3,500 (approximately $2,400 at current exchange rates).
In addition, Mr. Hilditch was issued 200,000 shares of the Company's common
stock as consideration for entering into this consulting agreement. Mr. Hilditch
was also appointed as the Company's Vice-President of Corporate Relations by the
Board of Directors as of the 24th of February 2000.

On March 1, 2000, the Company entered into a consulting agreement with
Summit Media Partners. The agreement had a term of 92 days and a cost of CDN
$15,000. Subsequent to the year-end the Company entered into a second consulting
agreement with Summit Media Partners. The agreement had a term of 92 days and
expires on September 7, 2000. The Company issued 200,000 shares of its common
stock valued at $160,000 in payment for these services. Summit Media is
providing advertising and marketing services through featured advertorial
mailings.

Employee Pension, Profit Sharing or other Retirement Plans

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

Director's Compensation

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

Except as disclosed elsewhere in this prospectus no director received
any form of compensation from the Company during the year ended May 31, 2000.

Stock Option Plan

In February 2000 the Company's Board of Directors adopted a stock
option plan which authorizes the issuance of options to purchase up to 250,000
shares of our common stock. The option plan will remain in effect until February
2010, unless earlier terminated by action of the Board of Directors. Pursuant to
the option plan, the Company's employees and officers are eligible to be granted
options. The Company's directors may not be granted options unless they also
serve as officers. The option exercise price is determined by the Board of
Directors. On May 26, 2000, the Board of Directors amended the 2000 Stock Option
Plan to authorize the issuance of options to purchase up to 500,000 shares of
the Company's common stock and expanded the definition of an eligible person for
the purpose of authorizing stock options.

<PAGE>16

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

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

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

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

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

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

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

No directors or officers were granted any options during the past
fiscal year. Options to purchase 69,000 shares of common stock were issued to
thirteen employees and two non-employees. These options had exercise prices of
$2.00 and $4.00 per share and expire in April and May of 2005.

Limitation of Liability and Indemnification Matters

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

<PAGE>17

the maximum extent permitted by the Delaware Corporation Law.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
forestindustry pursuant to the foregoing provisions, or otherwise,
forestindustry has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by forestindustry of expenses
incurred or paid by a director, officer or controlling person of forestindustry
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, forestindustry will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of August 28, 2000, information with
respect to the only persons owning beneficially 5% or more of our outstanding
common stock and the number and percentage of outstanding shares owned by each
of our directors and officers and by our officers and directors as a group.
Unless otherwise indicated, each owner has sole voting and investment powers
over his shares of common stock.

Shares of Percent of
Name and Address Common Stock (3) Class (2)
---------------- ------------------- ----------

Teaco Properties Ltd. (1) 6,900,000 50.1%
5299 Budd Crescent
Nanaimo, British Columbia
V9T 5N9

Joe Perraton 2,400,000 17.4%
7491 Elizabeth Way
Lantzville, British Columbia
V0R 2H0

Todd Hilditch 200,000 1.4%
Suite 1301
1188 Quebec Street
Vancouver, British Columbia
Canada V6A 4B3

All Officers and Directors 2,600,000 18.9%
as a Group (4 persons)
-----------------------
(1) Teaco Properties Ltd. is beneficially owned by Marc Ralph White and David
McNaught,. Mr. White was a former director of the Company.

(2) Computed without giving effect to any common stock which may be issued upon
the conversion of our Series A Preferred shares since these shares
represent less than 5% of the outstanding stock.

(3) Under Securities and Exchange Commission rules, beneficial ownership
includes any shares as to which an individual has sole or shared voting
power or investment power. Unless otherwise indicated, the Company believes
that all persons named in the table have sole voting and investment power

<PAGE>18

with respect to all shares of Common Stock beneficially owned by them. A
person is also deemed to be the beneficial of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held
by such person and which are exercisable within 60 days form the date
hereof have been exercised.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

The Company has issued shares of our common stock to the following
persons during the past two years, who are or were affiliated with us:

Date of Number
Name Issuance of Shares (3) Consideration
----------------------- -------- ------------- -----------------------

Teaco Properties Ltd(1) 01/00 6,900,000 69 shares of The Forest
Industry Online Inc.

Joe Perraton 01/00 2,400,000 24 shares of The Forest
Industry Online Inc.

Century Capital 01/00 37,500 Consulting services
Management Ltd. (2)

John Carmichael 02/00 150,000 Services rendered

Todd Hilditch 02/00 200,000 Services rendered
-----------------
</TABLE>

(1) The beneficial owners of Teaco Properties are Marc Ralph White and David
McNaught. Mr. White is a former director of the Company and Mr. McNaught is
a former director of The Forest Industry Online, Inc.
(2) The beneficial owner of Century Capital Management Ltd. is Andrew Hromyk, a
former officer and director.
(3) Price per share deemed value was $0.023.

In May 2000 Bona Vista West Ltd., a former principal stockholder,
returned 2,547,240 shares of common stock to us for cancellation by way of a
stock retirement agreement dated May 11, 2000. Bona Vista West Ltd. agreed with
us that in order to attract future financings it would be in our best interest
to reduce our issued and outstanding share capital through the surrender and
retirement of the control stock originally issued to Bona Vista West Ltd.

<PAGE>19

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>

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

(1) Financial Statements

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

(2) Exhibits

EXHIBIT
NO. DESCRIPTION LOCATION
--------------------- -------------------------------------- ---------------------------------------

3.1 - 3.2 Articles of Incorporation and Bylaws Incorporated by reference to Exhibits
No. 3.1-3.2 to the Company's Form
SB-2 filed on May 19, 2000

4.1 Stock Option Plan Incorporated by reference to Exhibit
No. 4.1 to the Company's Form SB-2
filed on May 19, 2000

4.2 Amended 2000 Stock Option Plan Filed herewith

10.1 Share Purchase Agreement with Teaco Incorporated by reference to Exhibit
Properties, Ltd., Joe Perraton and No. 10.1 to the Company's Form SB-2
Lara Perraton filed on May 19, 2000

10.2 Perraton Employment Agreement Filed herewith

10.3 Consulting Agreement with Todd Filed herewith
Hilditch

10.4 Consulting Agreement with Summit Filed herewith
Media Partners Inc.

16.1 Letter regarding Changes in Incorporated by reference to Exhibit
Certifying Accountant No. 16.1 to the Company's Form 8-K
filed on March 8, 2000
</TABLE>

(b) Reports on Form 8-K for the quarter ended May 31, 2000:

A Form 8-K dated February 24, 2000 (filed March 8, 2000) was filed during
the last fiscal quarter. The Form 8-K reported an Item 4 and an Item 5
event and included exhibits pursuant to Item 7.

<PAGE>20

SIGNATURES

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

FORESTINDUSTRY.COM, INC.

By /s/ JOE PERRATON
-----------------------
Joe Perraton, President

By /s/ JOE PERRATON
-----------------------
Joe Perraton, Secretary

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

Title Date

/s/ JOE PERRATON
---------------------
Joe Perraton Director September 12, 2000

<PAGE>F-1

To the Stockholders and Board of Directors of:
forestindustry.com, Inc.
(formerly Autoeye Inc.)

We have audited the Consolidated Balance Sheets of forestindustry.com, Inc. and
subsidiary as of May 31, 2000 and July 31, 1999 and the related Consolidated
Statements of Operations and Comprehensive Income, Stockholders' Equity and Cash
Flows for the ten month period ended May 31, 2000 and year ended July 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of forestindustry.com, Inc. and
subsidiary as of May 31, 2000 and July 31, 1999 and the results of their
operations and their cash flows for the ten month period ended May 31, 2000 and
the year ended July 31, 1999, in conformity with United States generally
accepted accounting principles.

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

Chartered Accountants

/S/ Watson Dauphinee & Masuch

Vancouver, B.C., Canada
August 11, 2000

<PAGE>F-2

Consolidated Balance Sheets
-----------------------------
<TABLE>
<S> <C> <C> <C>

(Audited) (Unaudited) (Audited)
May 31, 2000 May 31, 1999 July 31, 1999
US $ US $ US $
-------------- -------------- --------------
ASSETS

CURRENT

Cash and Equivalents 196,963 13,135 2,819
Accounts Receivable (Net of Allowance for Doubtful Accounts -
May 31, 2000 - $20,697; July 31, 1999 - $8,630) 84,151 54,133 64,657
Work in Process 9,137 - -
Prepaid Expenses 1,548 228 1,795
Due from Affiliated Company - 326 166
-------------- -------------- --------------
291,799 67,822 69,437

Property and Equipment (Note 4) 123,792 28,195 32,481
-------------- -------------- --------------
415,591 96,017 101,918
============== ============== ==============

LIABILITIES and STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Operating Line of Credit (Note 5) - 9,770 13,278
Accounts Payable and Accrued Liabilities 129,513 17,651 39,265
Unearned Revenues 43,877 22,797 52,281
Due to Stockholders (Note 6) - 73,496 68,013
Demand Bank Loan (Note 7) - 57,756 55,695
-------------- -------------- --------------
173,390 181,470 228,532
-------------- -------------- --------------
Commitments (Note 10)
Subsequent Events (Note 11)

STOCKHOLDERS' EQUITY

Share Capital (Note 8)
Common Stock, $0.0001 par value
30,000,000 Authorized; Issued and Outstanding:
May 31, 2000 - 12,966,521; July 31, 1999 - 10,000,000 1,296 1,000 1,000
Preferred Stock, $0.0001 par value
5,000,000 Authorized; Issued and Outstanding:
May 31, 2000 - 375; July 31, 1999 - Nil 1 - -
Additional Paid in Capital 755,339 (999) (999)
Deferred Stock Compensation (17,253) - -
Cumulative Translation Adjustment 10,014 991 1,450
Deficit (507,196) (86,445) (128,065)
-------------- -------------- --------------
242,201 (85,453) (126,614)
-------------- -------------- --------------
415,591 96,017 101,918
============== ============== ==============
</TABLE>

See notes to consolidated financial statements

<PAGE>F-3

Consolidated Statements of Operations and Comprehensive Income
-------------------------------------------------------------------------------

(Audited) (Unaudited) (Audited)
Ten Months Ended Year Ended
May 31, 2000 May 31,1999 July 31, 1999
US $ US $ US $
--------------- -------------- --------------

REVENUES 335,287 270,176 300,362

EXPENSES

Consulting Fees 45,649 487 487
Depreciation 27,826 2,316 7,763
General and Administrative 534,976 213,846 275,061
Professional Fees 105,967 11,456 17,592
--------------- -------------- --------------
714,418 228,105 300,903
--------------- -------------- --------------

NET INCOME (LOSS)
FOR THE PERIOD (379,131) 42,071 (541)

Foreign Currency Translation Adjustment 8,564 - 459
--------------- -------------- --------------
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD (370,567) 42,071 (82)
=============== ============== ==============
Weighted Average Number of Shares Outstanding,
Basic and Diluted 10,521,802 10,000,000 10,000,000
=============== ============== ==============
Earnings (Loss) per Common Share,
Basic and Diluted (0.035) 0.004 (0.001)
=============== ============== ==============

</TABLE>

See notes to consolidated financial statements

<PAGE>F-4

Consolidated Statements of Stockholders' Equity For the Periods from July 31,
1998 to May 31, 2000
--------------------------------------------------------------------------------

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

Balance, July 31, 1998 10,000,000 1,000 -- -- (999) -- 991 (127,524) (126,532)

Translation Adjustment
for the Period -- -- -- -- -- -- 459 -- 459

Net Loss for the Year -- -- -- -- -- -- -- (541) (541)

Common stock issued to
purchase all issued and
outstanding shares of The
Forest Industry Online Inc.,
January 31, 2000 (note 3) 4,927,040 493 -- -- (493) -- -- -- --

Adjustment to comply with
recapitalization accounting
(note 3) -- -- -- -- (19,530) -- -- -- (19,530)

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

Common stock issued for
service, January 31, 2000,
valued at approximately
$0.023 per share (note 3) 37,500 4 -- -- 859 -- -- -- 863

Common stock issued for
services in February, 2000,
valued at approximately $0.023
per share (note 5(c)) 350,000 35 -- -- 8,015 -- -- -- 8,050

Common stock issued on conversion
of series `A' convertible
preferred stock 249,221 24 (375) -- (25) -- -- -- (1)

Retirement of common stock
returned to the Company at no
cost by the founding stockholder (2,597,240) (260) -- -- 260 -- -- -- --

Deferred Compensation -- -- -- -- 17,253 (17,253) -- -- --

Translation Adjustment for the
Period -- -- -- -- -- -- 8,564 -- 8,564

Net Loss for the Period -- -- -- -- -- -- -- (379,131) (379,131)
------------ ------ ----------- ------ ---------- ------------ ----------- --------- ---------
Balance, May 31, 2000 12,966,521 1,296 375 1 755,339 (17,253) 10,014 (507,196) 242,201
============ ====== =========== ====== ========== ============ ========== ========= =========

</TABLE>

See notes to consolidated financial statements

<PAGE>F-5

Consolidated Statements of Cash Flows
------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>

(Audited) (Unaudited) (Audited)
Ten Months Ended Year Ended
May 31, 2000 May 31,1999 July 31, 1999
US $ US $ US $
------------ ------------ --------------
CASH WAS PROVIDED FROM, UTILIZED (FOR):

OPERATING ACTIVITIES
Net Income (Loss) for the Period (379,131) 42,071 (541)
Non-Cash Items:
Depreciation 27,826 2,316 7,763
Common Stock Issued in Exchange for Services 8,050 - -
Change in Non-Cash Working Capital Accounts:
Accounts Receivable (19,494) (30,635) (41,159)
Work in Process (9,137) - -
Note Receivable - 14,406 14,406
Prepaid Expenses 247 186 (1,381)
Accounts Payable and Accrued Liabilities 80,384 (16,547) 5,067
Unearned Revenues (8,404) (365) 29,119
------------ ------------ --------------
Net Cash Provided by (Used in) Operating Activities (299,659) 11,432 13,274
------------ ------------ --------------
FINANCING ACTIVITIES
Long-term Debt and Operating Line of Credit Advances (Repayments) (68,973) 67,526 68,973
Advances from (to) Affiliated Company 166 (326) (166)
Advances (to) Stockholders (68,013) (49,559) (55,042)
Net Proceeds from Issuance of Preferred Stocks 750,000 - -
------------ ------------ --------------
Net Cash Provided by Financing Activities 613,180 17,641 13,765
------------ ------------ --------------
INVESTING ACTIVITY

Acquisition of Capital Assets (Net) (119,377) (18,727) (27,009)
------------ ------------ --------------
NET INCREASE
IN CASH AND EQUIVALENTS 194,144 10,346 30

Cash and Equivalents, Beginning of the Period 2,819 2,789 2,789

CASH AND EQUIVALENTS, END OF THE PERIOD 196,963 13,135 2,819
============ ============ ==============
Supplemental Disclosure
Interest Paid 10,035 12,309 14,534
============ ============ ==============

</TABLE>

See notes to consolidated financial statements

<PAGE>F-6

Notes to the Consolidated Financial Statements
Ten Months Ended May 31, 2000 and Year Ended July 31, 1999
(Expressed in U.S. Dollars)
-------------------------------------------------------------------------------

NOTE 1 - NATURE AND CONTINUANCE OF OPERATIONS

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

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

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

To May 31, 2000, the Company has not been profitable and has experienced
negative cash flows from operations. Operations have been financed through the
issuance of preferred stocks and other external financing. The Company's future
operations are dependent upon continued external funding, its ability to
increase revenues and reduce expenses, and the success of its proposed
development of an online business exchange auction website for the forest and
wood industries. There are no assurances that the above conditions will occur.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

a) Reverse Takeover and Basis of Presentation

On January 31, 2000, the Company acquired all of the issued and outstanding
shares of Forest by issuing to Forest's stockholders 10,000,000 shares of common
stock and control of the Company. The acquisition was a reverse takeover with
Forest being the deemed accounting acquiror for financial statement purposes.
The acquisition has been accounted for as a capital transaction effectively
representing an issue of stocks by Forest for the net assets of
forestindustry.com, Inc.

The Company's historical financial statements reflect the financial position,
results of operations and cash flows of Forest from the date of its
incorporation on January 09, 1997 under the laws of the Province of British
Columbia. The historical stockholders' equity gives effect to the shares issued
to the stockholders of Forest. The results of operations of forestindustry.com,
Inc. are included only from the date of acquisition, January 31, 2000.

b) Basis of Consolidation

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

c) Work in Process

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

<PAGE>F-7

Note 2 - Significant Accounting Policies (continued)

d) Property and Equipment and Depreciation

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

e) Cash and Equivalents

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

f) Revenue Recognition and Unearned Revenues

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

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

g) Use of Estimates

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

h) Net Earnings (Loss) Per Share

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

i) Stock-Based Compensation

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

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

<PAGE>F-8

Note 2 - Significant Accounting Policies (continued)

j) Income Taxes

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

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

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

k) Foreign Currency Translation

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

l) Impairment of Long-Lived Assets

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

m) Comparative Figures

Certain figures presented for comparative purposes have been reclassified to
conform with current period financial statement presentation. These
reclassifications had no effect on net loss or stockholders' equity.

<PAGE>F-9

Note 3 - Acquisition

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

Under the terms of agreement, the Company issued 10,000,000 common shares for
all of the 100 common issued and outstanding shares of Forest. As at January 31,
2000, there were 4,927,040 common shares of the Company (after reflecting a 21:1
stock consolidation which occurred on August 20, 1999 and a subsequent stock
split of 1:40 which occurred on August 21, 1999. These stock adjustments have
been retroactively adjusted and presented as of May 31, 1999 in the Consolidated
Statements of Stockholders' Equity). The acquisition was accounted for as a
recapitalization of Forest. The transaction has been accounted for as a capital
transaction effectively representing an issue of shares by Forest for the net
assets of the Company. On January 31, 2000 the net assets of the Company
consisted of:

Cash and Equivalents $ 750,000
Accounts Payable (19,703)
----------
$ 730,297
==========

Total costs related to this recapitalization transaction were estimated at
$15,863. They include cash expense in the estimated amount of $15,000 and
non-cash expense in the amount of $863. The non-cash expense relates to the
issuance of 37,500 shares of common stock of the Company. The fair value of
these services was estimated based upon the estimated fair value of the shares
at $0.023 per share. Total transaction costs have been recorded as a charge to
the stockholders' equity of the Company.

Cash and cash equivalents held by the Company in the amount of $750,000 were
obtained through subscriptions for a private placement of 750 shares of Series
"A" convertible preferred stock at a price of $1,000 per share. The closing of
this private placement and the release of funds held in escrow were contingent
on this acquisition being completed. The shares of Series "A" preferred stock
are convertible, at the option of the holder, and at any time after March 16,
2000, into common stock at 75% of the last ten day average closing bid price of
the Company subject to a maximum conversion rate of 5,000 shares of common stock
for one share of preferred stock and a minimum conversion rate of 250 shares of
common stock for one share of preferred stock. In addition, if a registration
statement in respect of the common stock underlying the preferred stock is
effective, all Series "A" preferred stock will be deemed to convert into common
stock on or before January 31, 2001, the first anniversary date.

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

<PAGE>F-10

Note 3 - Acquisition (continued)

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

Revenues 335,287 300,362

Expenses

Consulting Fees 45,649 487
Depreciation 27,826 7,763
General and Administrative 539,008 275,061
Professional Fees 109,822 27,344
----------------- --------------

Net (Loss) for the Period (387,018) (10,293)
================= ==============
Net (Loss) Per Share (0.037) (0.001)
================= ==============

NOTE 4 - PROPERTY AND EQUIPMENT

Accumulated Net Book Value
Cost Depreciation May 31, 2000 July 31, 1999
$ $ $ $
----------- -------------- -------------- --------------
Computer Equipment 110,076 25,176 84,900 26,542
Furniture and Fixtures 33,927 3,884 30,043 3,477
Software 15,549 10,445 5,104 2,462
Leasehold Improvements 4,161 416 3,745 -
----------- -------------- -------------- --------------
163,713 39,921 123,792 32,481
=========== ============== ============== ==============

</TABLE>

Note 5 - Operating Line of Credit

The Company has a NIL (1999 -$10,347 (CDN $15,000)) revolving operating line of
credit with the Royal Bank of Canada. The line of credit was paid off in March
2000 and the general security agreement as well as the guarantees were
cancelled.

<PAGE>F-11

NOTE 6 - DUE TO STOCKHOLDERS

Amounts due to stockholders were unsecured and had no specific terms of
repayment except for $49,840 which bore interest at prime plus 5% per annum. The
amounts due to stockholders were repaid in March 2000.

May 31, 2000 July 31, 1999
$ $

Due to Stockholders - 68,013
-------------- ------------

NOTE 7 - DEMAND BANK LOAN

Demand Bank Loan, Royal Bank

The demand loan is repayable in
monthly instalments of $1,992
including interest at prime plus
2% per annum and is secured by a
general security agreement over
all the assets of the Company,
guarantees by the corporate
stockholder and personal
guarantees of the principals of
the Company. The loan was repaid
in March 2000. - 55,695
-------------- ------------

Note 8 - Stockholders' Equity

a) Preferred Stock

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

The Series "A" preferred stock is convertible, at the option of the holder, and
at any time after March 16, 2000, into common stock at 75% of the last ten day
average closing bid price of the Company subject to a maximum conversion rate of
5,000 shares of common stock for one share of preferred stock and a minimum
conversion rate of 250 shares of common stock for one share of preferred stock.
In addition, if a registration statement in respect of the common stock
underlying the preferred stock is effective, all Series "A" preferred stock will
be deemed to convert into common stock on or before January 31, 2001, the first
anniversary date.

On May 10, 2000, the Company issued 249,221 shares of its common stock on the
conversion of 375 Series "A" convertible preferred stocks.

<PAGE>F-12

Note 8 - Stockholders' Equity (continued)

b) Stock Options

In February 2000, the Company adopted a fixed stock option plan that provides
for the issuance of incentive and non-qualified stock options to officers,
directors, employees and non-employees to acquire up to 250,000 shares of the
Company's common stock. The plan was amended in June 2000 to increase the
allowable number of stock options to be issued under this plan to 500,000
shares. The Board of Directors determines the terms of the options granted,
including the number of options granted, the exercise price and the vesting
schedule. The exercise price for qualified incentive stock options is not to be
less than the fair market value of the underlying stock at the date of grant,
and to have terms no longer than ten years from the date of grant. There was no
stock option plan prior to February 2000.

Issued to Employees

On February 29, 2000, the Company granted options to purchase a total of 29,000
shares of the Company's common stock at a price of $4.00 per share to employees
of the Company. The options vest on or after February 29, 2001 and expire
between February and April 2005.

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

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions: risk-free
interest rate of 6.0% dividend yield of 0%; volatility factors of the expected
market price of the Company's stock of 78%; and an expected life of the options
of 2.5 years. Accordingly, compensation expense using the fair value method
would have been $4,870, amortized over their respective vesting period.

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

<PAGE>F-13

Note 8 - Stockholders' Equity (continued)

b) Stock Options (continued)

Issued to Employees (continued)

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

<TABLE>
<S> <C> <C>
Ten Months Ended Year Ended
May 31, 2000 July 31, 1999
$ $
----------------- ---------------

Net (loss) as reported (379,131) (541)
Compensation expense from stock options under SFAS No. 123 (1,217) -
----------------- ---------------

Pro forma net (loss) (380,348) (541)
================= ===============

Pro forma (loss) per common share:
Basic and Diluted (0.036) (0.001)
================= ===============
</TABLE>

Issued to Non-Employees

On May 26, 2000, the Company granted options to purchase a total of 40,000
shares of the Company's common stock at a price of $2.00 per share to
non-employees of the Company. The options vest and expire on May 01, 2001 and
May 01, 2005, respectively. Stock options issued to non-employees are accounted
for in accordance with the provisions of SFAS No. 123, "Accounting for Stock
Based Compensation", using the fair value method. Accordingly, compensation
expense relating to these stock options in the amount of $17,253 was recorded as
deferred stock compensation to be amortized over their respective vesting
period.

Additional Stock Option Plan Information

A summary status of the Company's fixed stock option plan and changes during the
period ended May 31, 2000 are as follows. There were no stock options as of July
31, 1999.

Number of Weighted Average
Shares Exercise Price
$
------------ -------------------
Outstanding, August 01, 1999 - -
Granted 73,000 2.90
Forfeited (4,000) 4.00
------------ -------------------

Outstanding, May 31, 2000 69,000 2.84
------------ -------------------

Options exercisable at end of period Nil -
------------ -------------------

<PAGE>F-14

Note 8 - Stockholders' Equity (continued)

b) Stock Options (continued)

Additional Stock Option Plan Information (continued)

The following table summarizes information about the Company's fixed stock
options outstanding at May 31, 2000:

Options Outstanding
-------------------------------------------------------------

Number Weighted Average Weighted Average
Range of Outstanding at Remaining Contractual Exercise
Exercise Prices May 31, 2000 Life (in years) Price
$ $
---------------- --------------- --------------------- ----------------

4.00 - 4.00 29,000 5 4.00
2.00 - 2.00 40,000 5 2.00
--------------- --------------------- ----------------
69,000 5 2.84
--------------- --------------------- ----------------

The options outstanding at May 31, 2000 will expire between April and May 2005.

c) Stock-Based Compensation

In January 2000, the Company issued 37,500 shares of common stock to a company
controlled by the Company's former president in exchange for services relating
to the acquisition of forestindustry.com, Inc. The fair value of these services
was estimated based upon the estimated fair value of the shares at $0.023 per
share or $863. The costs were deducted from the additional paid-in capital from
the said acquisition.

In February 2000, the Company recorded non-cash compensation expense of $8,050
relating to the issuance of 350,000 shares of common stock to certain
consultants to the Company. The fair value of the shares was estimated at $0.023
per share at the time of the transaction.

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

d) Retirement of Common Stocks

By way of a stock retirement agreement dated May 11, 2000 and for a nominal
amount of $1.00, a former principal stockholder of the Company returned
2,547,240 shares of common stock to the Company for cancellation. The
stockholder agreed that in order for the Company to attract future financing,
the Company should reduce its issued and outstanding share capital of its common
stock through the surrender and retirement of these shares.

<PAGE>F-15

Note 8 - Stockholders' Equity (continued)

e) Stock Splits

The Company consolidated its share capital on June 16, 1999 by way of a reverse
stock split on the basis of one new common share for each two old common shares,
on August 20, 1999 by way of a reverse stock split on the basis of one new
common share for each twenty-one old common shares, and on August 21, 1999 by
way of a stock split on the basis of forty new common shares for one old common
share. Issued and outstanding shares as of May 31, 1999 have been adjusted to
reflect these share splits.

Note 9 - INCOME TAXES

Deferred tax assets and liabilities

May 31, 2000 July 31, 1999
$ $
------------- --------------
Deferred tax assets:
Operating loss carryforward 210,000 56,000
------------- --------------

Total deferred tax assets before valuation allowance 210,000 56,000
Valuation allowance (210,000) (56,000)
-------------- --------------
Net deferred tax assets - -
============== ==============

</TABLE>

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

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

The Company has Canadian operating loss carryforwards for Canadian income tax
purposes at May 31, 2000 of approximately $490,000 (CDN $739,000). These
operating losses begin to expire in fiscal year 2004.

Note 10 - Commitments

a) The Company has entered into an agreement to lease office premises in
Nanaimo, B.C., Canada to May 31, 2001. The monthly lease payment is,
excluding operating costs, $1,789.

b) The Company has entered into an agreement to lease office premises in
Vancouver, B.C., Canada to September 30, 2001. The monthly lease payment
is, excluding operating costs, $2,561.

c) The Company has entered into an agreement to lease a vehicle to March 09,
2003. The monthly lease payment is $529 with an option to purchase the
vehicle at the end of the lease for $14,717.

<PAGE>F-16

Note 10 - Commitments (continued)

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

e) The Company has entered into a consulting contract with an individual to
perform various investor relations and corporate development functions for
an initial fee of $4,600, which was settled by the issuance of 200,000
common shares of the Company at $0.023 per share, and a monthly fee of
$2,414. The contract term is from February 29, 2000 to February 28, 2001.
The Company may terminate the agreement on fourteen days written notice.

f) The Company has entered into an employment contract with the President of
the Company for management and administrative services for an annual salary
of $47,600. The employment contract term is from February 01, 2000 to
January 31, 2003. The Company may terminate the agreement only with cause.

g) The Company has entered into an employment contract with the Chief
Information Officer ("CIO") to oversee the Company's technical systems and
applications for a signing bonus of $3,450, which was settled by the
issuance of 150,000 common shares of the Company at $0.023 per share, and
an annual salary of $51,000. The employment contract term is from February
29, 2000 to February 28, 2001. Subsequent to year-end, on July 21, 2000,
the CIO resigned.

h) The Company has entered into a consulting contract with a consulting firm
to provide strategic management services for a monthly fee of $3,450. The
contract term is from May 26, 2000 to November 26, 2000. The Company may
terminate the agreement on thirty days written notice. The Company also
granted to the principals of the consulting firm stock options allowing the
principals to acquire 40,000 common shares at an exercise price of $2.00
per share. The options vest on May 01, 2001 and expire on May 01, 2005 (see
note 8(b)).

Minimum future lease payments under operating leases are as follows:

Year $

2001 70,056
2002 28,100
2003 11,474

NOTE 11 - SUBSEQUENT EVENTS

a) On June 07, 2000, the Company entered into an agreement for advertising and
marketing services for a term of three months. In consideration, the
Company issued 200,000 shares of its common stock as compensation for
services rendered. The Company will record a non-cash compensation expense
of $212,500 based upon the estimated fair value of the shares which
approximates the value of the services received.

b) On June 12, 2000, the Company granted 54,000 stock options to employees
with an exercise price of $2.00 per share. The options vest on June 11,
2001 and expire on June 11, 2005.

c) On June 15, 2000, the Company issued 217,145 on the conversion of 175
shares of its Series "A" convertible preferred stock.

<PAGE>F-17

NOTE 11 - SUBSEQUENT EVENTS (continued)

d) On July 12, 2000, the Company accepted the resignation of a director of the
Company.

e) On August 01, 2000, the Company issued through a private placement 200
shares of Series "B" convertible preferred stock at a price of $1,000 per
share. Holders of Series "B" preferred stocks are entitled to distribution
of $1,000 per share prior to any distribution to the holders of the
Company's common stocks in the event of any liquidation or dissolution of
the Company.

The Series "B" preferred stock is convertible, at the option of the holder,
and at any time after August 01, 2000, into common stock at 70% of the last
five day average closing bid price of the Company subject to a maximum
conversion rate of 5,000 shares of common stock for one share of preferred
stock and a minimum conversion rate of 250 shares of common stock for one
share of Series "B" preferred stock.

Note 12 - RELATED PARTY TRANSACTIONS

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

Wages paid to the President of the Company for management,
administration and supervision 28,428 31,761

Interest paid to stockholders for funds loaned to the Company 3,490 10,420

</TABLE>

Note 13 - Financial Instruments

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