# UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549

# Form 10-QSB

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

| | For
the quarterly period ended  June 30, 2004
| | ---------------------------------------------

[   ] TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE ACT

| | For
the transition period from __________ to __________
| | -------------------------------------------------------

| | Commission
file number  000-30299
| | ---------------------------------

GLOBAL INNOVATIVE
SYSTEMS, INC.      (Exact name of small business issuer as specified
in its charter)

|                                                               |                                  
|-------------------------------------------------------------- | ---------------------------------
|Nevada                                                         | 98-0217653                       
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)

2114 Nanton Avenue,
Vancouver, BC V6L 3C7, Canada(Address of principal
executive offices)

604.737.6030
                                            (Issuer's telephone number)

N/A
                 (Former name, former address and former fiscal year, if changed since
last report)

Check whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
    Yes [X]     No [   ]

# APPLICABLE ONLY TO
ISSUERS INVOLVED IN BANKRUPTCY                                     PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Check whether the issuer has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed by a court.     Yes [   ]
    No [   ]

# APPLICABLE ONLY TO
CORPORATE ISSUERS

State the number of shares
outstanding of each of the issuer's classes of common equity, as of the latest
practicable date:  1,508,274 common shares issued and outstanding as of July 27, 2004

Transitional Small Business
Disclosure Format (Check one):     Yes [   ]     No [X]

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2

# PART I - FINANCIAL
INFORMATION

# Item 1.  Financial
Statements.

# GLOBAL INNOVATIVE
SYSTEMS, INC.                                            (A Development Stage Company)

# CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

# JUNE 30, 2004
                                                    (Unaudited)
                                             (Stated in U.S. Dollars)

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3

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# CONSOLIDATED INTERIM
BALANCE SHEET                                                     (Unaudited)
                                             (Stated in U.S. Dollars)

|                                                        
|--------------------------------------------------------
|                                                        
|                                                        
|                                                        
|ASSETS                                                  
|Current                                                 
|Cash                                                    
|Receivable from sale of subsidiary                      
|                                                        
|                                                        
|                                                        
|LIABILITIES                                             
|Current                                                 
|Accounts payable and accrued liabilities                
|Short term notes payable                                
|                                                        
|                                                        
|                                                        
|SHAREHOLDERS' DEFICIENCY                                
|Common Stock (Note 4)                                   
|Authorized:                                             
|200,000,000 common shares, par value $0.001 per share   
|100,000,000 preferred shares, par value $0.001 per share
|Issued and outstanding:                                 
|1,508,145 common shares at June 30, 2004 and            
|1,224,054 common shares at September 30, 2003           
|Additional paid-in capital                              
|Deficit Accumulated During The Development Stage        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                        

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4

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# CONSOLIDATED INTERIM
STATEMENT OF OPERATIONS                                                     (Unaudited)
                                             (Stated in U.S. Dollars)

|                                   
|-----------------------------------
|                                   
|                                   
|                                   
|Expenses                           
|General and administrative         
|Other Income                       
|Interest, net                      
|                                   
|Net Loss From Continuing Operations
|                                   
|                                   
|Discontinued Operations            
|Loss from operations of Niew       
|Industries, Inc. to be disposed,   
|including gain on disposal of      
|$344,977, net of tax effect of $0  
|Loss from operations of Energy     
|Medicine Developments Corp.,       
|including gain on disposal of      
|$10,403, net of tax effect of $0   
|                                   
|Net (Loss) Income From Discontinued
|Operations                         
|                                   
|Net (Loss) Income For The Period   
|                                   
|Income (Loss) Per Share,Basic and  
|diluted                            
|(Loss) from continuing operations  
|Income (Loss) from discontinued    
|operations                         
|                                   
|Loss Per Share                     
|                                   
|Weighted Average Number of Shares  
|Outstanding                        
|                                   

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5

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# CONSOLIDATED INTERIM STATEMENT OF
CASH FLOWS                                                     (Unaudited)
                                             (Stated in U.S. Dollars)

|                                                         
|---------------------------------------------------------
|                                                         
|                                                         
|                                                         
|Cash Flows From Operating Activities                     
|Net (loss) income for the period                         
|Adjustments To Reconcile Net Loss To Net Cash Provided By
|Operating Activities                                     
|Net (income) loss from discontinued operations           
|Decrease in other receivables                            
|(Decrease) in accounts payable and accrued               
|liabilities                                              
|Increase in short term notes payable                     
|                                                         
|Net cash used in continuing activities                   
|Net cash used in discontinued activities                 
|                                                         
|                                                         
|                                                         
|Cash Flows From Investing Activity                       
|Net cash from discontinued activities                    
|                                                         
|Cash Flows From Financing Activities                     
|Share capital issued                                     
|Payments on short term notes payable                     
|Advances from directors and officers                     
|Net cash from discontinued activities                    
|                                                         
|                                                         
|                                                         
|Increase In Cash                                         
|Effect Of Foreign Exchange On Cash                       
|Cash, Beginning Of Period                                
|                                                         
|Cash, End Of Period                                      
|                                                         

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6

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# NOTES TO CONSOLIDATED INTERIM
FINANCIAL STATEMENTSJUNE 30, 2004(Unaudited)
                                             (Stated in U.S. Dollars)

# 1. BASIS OF PRESENTATION

| | The
unaudited consolidated financial statements as of June 30, 2004 included herein have been
prepared without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with United States generally accepted
principles have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. It is suggested that
these financial statements be read in conjunction with the September 30, 2003 audited
financial statements and notes thereto.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 2. NATURE OF OPERATIONS

| | a)    
Organization
| | -------------------

| | The
Company was incorporated in the State of Nevada on September 14, 1995 and was inactive
until January 31, 2000 when it closed a share exchange agreement with the stockholders of
Niew Industries, Inc. (Niew). The transaction resulted in Niew becoming a
wholly-owned subsidiary of the Company. Since the stockholders of Niew controlled 55% of
the combined entity after the merger and the business of Niew presents the only
operations of the new entity, the transaction was recorded as a recapitalization of Niew.
As such, the historical financial information of the Company is that of Niew.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Niew
was incorporated on January 15, 1997 under the British Columbia Company Act. The Company
was inactive until March 23, 1998 when it began the development of a twin rotating
asphalt mixing system. During the year ended September 30, 2003, the Company sold its
wholly-owned subsidiary, Niew Industries, Inc., for cash (CDN$70,000).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)    
Development Stage Activities
| | -----------------------------------

| | The
Company currently has limited operations and, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 7  Accounting and Reporting by Development
Stage Enterprises, is considered a development stage company. The Company was
organized to pursue the acquisition and development of Energy Medicine Development Corp.
and Niew Industries, Inc. As at September 30, 2003, the Company has sold both of its
subsidiaries. During the quarter ended June 30, 2004, the Company was seeking new
business opportunities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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7

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# NOTES TO CONSOLIDATED INTERIM
FINANCIAL STATEMENTSJUNE 30, 2004(Unaudited)
                                             (Stated in U.S. Dollars)

2.    NATURE
OF OPERATIONS (Continued)

| | c)    
Going Concern
| | --------------------

| | These
accompanying consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets, and the satisfaction of liabilities
and commitments in the normal course of business. As at June 30, 2004, the Company has
accumulated operating losses of $999,981 since its inception. The continuation of the
Company is dependent upon the continuing financial support of creditors, directors and
stockholders, and obtaining long term financing, as well as achieving and maintaining a
profitable level of operations through the successful product development or through the
acquisition of new businesses. Subsequent to the fiscal year end, the Company commenced a
restructuring which included negotiating debt settlement arrangements with certain
creditors, raising new equity financing sufficient to retire all outstanding liabilities
and to fund the restructuring, and consolidation of the capital of the Company. Upon
successful completion of the restructuring, management has determined the Company will be
better positioned to seek out and complete acquisitions and related financings. While the
Company is expending its best efforts to achieve the restructuring and new acquisitions,
there is no assurance that any such activity will be successful and will generate funds
necessary for continued operation of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | These
conditions raise substantial doubt about the Companys ability to continue as a
going concern. These financial statements do not include any adjustments that might arise
from this uncertainty.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3. SIGNIFICANT
ACCOUNTING POLICIES

| | The
financial statements of the Company have been prepared in accordance with generally
accepted accounting principles in the United States. Because a precise determination of
many assets and liabilities is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which have been made
using careful judgment.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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8

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

3.    SIGNIFICANT
ACCOUNTING POLICIES (Continued)

| | The
financial statements have, in managements opinion, been properly prepared within
reasonable limits of materiality and within the framework of the significant accounting
policies summarized below:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)    
Consolidation
| | --------------------

| | The
consolidated financial statements include the accounts of Global Innovative Systems, Inc.
and the following wholly-owned and majority-owned subsidiaries:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -
   Niew Industries, Inc., a British Columbia corporation (100%)
| | -----------------------------------------------------------------

| | -
   Energy Medicine Developments Corp., a Delaware corporation (99.9%)
| | -----------------------------------------------------------------------

| | The
results of subsidiaries acquired during the year are consolidated from their effective
dates of acquisition. As of September 30, 2003, the Company has sold both of its
subsidiaries.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)    
Foreign Currency Translation
| | -----------------------------------

| | The
Companys primary functional currency is the U.S. dollar. Monetary assets and
liabilities resulting from transactions with foreign suppliers and customers are
translated at year end exchange rates. All other assets, liabilities and stockholders equity
are translated at historical exchange rates for past transactions, and at year end
exchange rates for current and future transactions. Revenue and expense accounts are
translated at the average exchange rates in effect during the year, except those related
to assets and liabilities, which are translated at historical exchange rates.
Re-measurement gains and losses are included in income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)    
Earnings (Loss) Per Share
| | --------------------------------

| | Basic
loss per share has been computed by dividing the loss for the year applicable to the
common stockholders by the weighted average number of common shares outstanding during
the years. There were no common equivalent shares outstanding at June 30, 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d)    
Income Taxes
| | -------------------

| | The
Company accounts for income taxes under the provisions of SFAS No. 109 Accounting
for Income Taxes. SFAS No. 109 requires recognition of deferred income tax assets
and liabilities for the expected future income tax consequences, based on enacted tax
laws, of temporary differences between the financial reporting and tax bases of assets
and liabilities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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9

# GLOBAL INNOVATIVE
SYSTEMS, INC. 
    (A Development Stage Company)

# NOTES TO CONSOLIDATED INTERIM
FINANCIAL STATEMENTSJUNE 30, 2004(Unaudited)
                                             (Stated in U.S. Dollars)

# 4. COMMON STOCK

| | On
October 25, 2003, the Company completed a private placement of 284,091 shares of common
stock for aggregate proceeds of $125,000. These funds were used to settle outstanding
obligations of the Company and to pay costs related to the planned restructuring of the
Company and for working capital.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November 8, 2003, the board of directors authorized 80 to 1 reverse stock split. The
reverse stock split was effective December 18, 2003. As a result of the split, the
authorized shares decreased from 200,000,000 to 2,500,000. All references in the
accompanying financial statements to the number of common shares and per-share amounts
have been restated to reflect the reverse stock split.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 3, 2004, the Company amended its Articles of Incorporation. As a result, the
authorized capital stock of the Company was amended to have 200,000,000 shares of common
stock, $0.001 par value, of which 1,508,145 are issued and outstanding, and 1,000,000
shares of preferred stock, $0.001 par value, of which no preferred shares are issued and
outstanding.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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10

# Item 2.  Managements
Discussion and Analysis or Plan of Operation.

# FORWARD-LOOKING
STATEMENTS

This quarterly report contains
forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by terminology
such as may, will, should, expects,
plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of
these terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the risks in
the section entitled Risk Factors, that may cause our or our industrys
actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these statements to
actual results.

Our consolidated financial statements
are stated in United States Dollars (US$) and are prepared in accordance with United
States Generally Accepted Accounting Principles. The following discussion should be read
in conjunction with our consolidated financial statements and the related notes that
appear elsewhere in this quarterly report.

In this quarterly report, unless
otherwise specified, all dollar amounts are expressed in United States dollars. All
references to CDN$ refer to Canadian dollars and all references to
common shares refer to the common shares in our capital stock.

As used in this quarterly report, the
terms we, us and our mean Global Innovative Systems,
Inc., unless otherwise indicated.

General Overview

We were incorporated in the State of
Nevada under the name Legacy Bodysentials Inc. on September 14, 1995. On
September 25, 1996, we changed our name to Legacy Minerals Inc.. On May 18,
1998, we changed our name to Global Commonwealth Inc.. On November 12, 1999,
we changed our name to our current name of Global Innovative Systems, Inc..
Our corporate offices are located at 2114 Nanton Avenue, Vancouver, BC V6L 3C7. Our
telephone number is 604.737.6030 and our facsimile number is 604.737.6030.

We were inactive until January 31,
2000, when we closed a share exchange agreement with the stockholders of Niew Industries
Inc. Following the completion of the transaction, Niew Industries became our wholly owned
subsidiary. Because the stockholders of Niew Industries controlled 55% of the resultant
entity, and because the business of Niew Industries represented the only business
operations of the new entity, the transaction was recorded as a reverse acquisition.
Following the accounting for reverse acquisitions, the financial statements subsequent to
closing of the share exchange were presented as a continuation of Niew Industries
consistent with the change of business. Accordingly, our operations were consolidated with
those of Niew Industries from the date of acquisition. Niew Industries was incorporated on
January 15, 1997, under the Company Act (British Columbia), and was inactive until March
23, 1998, when it began the development of a twin rotating asphalt mixing (tram) system.
Following the sale of the incomplete tram system prototype, we decided to completely
dispose of our subsidiary Niew, and focus entirely on developing a sales and marketing
program for the Enermed device and the Enermed Therapy through our majority owned
subsidiary Energy Medicine Developments Corp., a Delaware corporation. On January 22,
2003, we entered into an agreement to sell our wholly owned subsidiary, Niew Industries,
Inc to the former directors of Niew for $44,142 (CDN$70,000).

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11

On October 2, 2001, we entered into
an Acquisition Agreement with Energy Medicine Developments Corp., a Delaware corporation,
pursuant to which we agreed to purchase all of the issued and outstanding shares of Energy
Medicine Developments Corp. in exchange for 225,000 common shares post-split (18,000,000
of our common shares pre-split). Energy Medicine Developments Corp. owns the world-wide
marketing and distribution rights to the Enermed Therapy and the Enermed device as
described below. Also on October 2, 2001, and also as described in our annual report on
Form 10-KSB for the year ended September 30, 2001, we entered into a Purchase Agreement
with Energy Medicine Developments (North America) Inc., a company incorporated in the
province of British Columbia. Pursuant to the terms of the Purchase Agreement, we agreed
to purchase 100% of Energy Medicine Developments (North America) Inc.s issued and
outstanding shares for a purchase price of $300,000.

We have agreed to the sale of all of
the issued and outstanding shares of our subsidiary, Energy Medicine, owned by us to
Robert Fletcher and Fraser Lawrie, pursuant to the terms of a share purchase agreement
(the Agreement) dated September 30, 2003 (the Sale). On October
22, 2003 our Board of Directors approved the Sale of Energy Medicine, as a result of our
change in control, as discussed in our information statement on Schedule 14f-1, which was
filed and mailed to our registered shareholders on October 29, 2003. Due to our change in
control, our new management intends to pursue other opportunities unrelated to the
business of Energy Medicine.

The Agreement for the Sale of Energy
Medicine was made with Fraser Lawrie and Robert Fletcher, our former directors and
officers. Under the terms of the Agreement, the purchase price for the shares of Energy
Medicine was $28,400, which consisted of the forgiveness of certain debts owed by us to
Messrs. Lawrie and Fletcher or to companies controlled by Messrs. Lawrie and Fletcher.

Our Current Business

As we do not presently have an
operating business that we can pursue, we are seeking to either identify a suitable
business opportunity or enter into a suitable business combination. Management of our
company does not believe that we will be able to generate revenues without finding and
completing the acquisition of a suitable business opportunity. In addition, if no suitable
business opportunity is identified, shareholders will not realize any further return on
their investment in our company, and there will be no market for our common shares.

We continue to seek a new business
opportunity. Once a business opportunity has been identified, we will investigate and
evaluate the business opportunity. In selecting a suitable business opportunity,
management intends to focus on the potential for future profits and strength of current
operating management of the business opportunity. We have not put industry or
geographically specific limitations on the nature of acquisitions or business
opportunities to be evaluated. Management believes that the greatest potential lies in
technology and goods or products-related industries, rather than principally service
industries. Nevertheless, this shall not preclude the investigation or evaluation of any
other category of business or industry. We will conduct our own investigation to identify
an appropriate business opportunity, and will seek a potential business opportunity from
all known sources, relying principally upon personal contacts of our officers and
directors, as well as indirect associations between them and other business and
professional people.

Evaluation of
Opportunities

The analysis of new business
opportunities will be undertaken by, or under the supervision of, our officers and
directors. Management intends to concentrate on identifying prospective business
opportunities which may be brought to managements attention through present
associations. In analyzing prospective business opportunities, management will consider,
among other factors, such matters as:

| | (a) | the
available technical, financial and managerial resources;
| | --- | ------------------------------------------------------------

| | (b) | working
capital and other financial requirements;
| | --- | -------------------------------------------------

| | (c) | history
of operations, if any;
| | --- | ------------------------------

| | (d) | prospects
for the future;
| | --- | -------------------------

| | (e) | present
and expected competition;
| | --- | ---------------------------------

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12

| | (f) | the
quality and experience of management services which may be available and the
          depth of that management;
| | --- | --------------------------------------------------------------------------------------------------------------------

| | (g) | the
potential for further research, development or exploration;
| | --- | ---------------------------------------------------------------

| | (h) | specific
risk factors not now foreseeable but which may be anticipated as having           an
impact on our proposed activities;
| | --- | --------------------------------------------------------------------------------------------------------------------------------

| | (i) | the
potential for growth or expansion;
| | --- | --------------------------------------

| | (j) | the
potential for profit;
| | --- | -------------------------

| | (k) | the
perceived public recognition or acceptance of products, services or trades;           and
| | --- | ---------------------------------------------------------------------------------------------

| | (l) | name
identification.
| | --- | --------------------

Management will meet personally with
the management and key personnel of the firm sponsoring the business opportunity as part
of their investigation. To the extent possible, we intend to utilize written reports and
personal investigation to evaluate the above factors. We will not acquire or merge with
any company for which audited financial statements cannot be obtained.

Opportunities in which we participate
will present certain risks, many of which cannot be identified adequately prior to
selecting a specific opportunity. Our shareholders must, therefore, depend on management
to identify and evaluate such risks. Promoters of some opportunities may have been unable
to develop a going concern or may present a business in its development stage (in that it
has not generated significant revenues from its principal business activities prior to our
participation). Even after our participation, there is a risk that the combined enterprise
may not become a going concern or advance beyond the development stage. Other
opportunities may involve new and untested products, processes, or market strategies which
may not succeed. Such risks will be assumed by us and, therefore, our shareholders.

The investigation of specific
business opportunities and the negotiation, drafting, and execution of relevant
agreements, disclosure documents, and other instruments will require substantial
management time and attention as well as substantial costs for accountants, attorneys, and
others. If a decision is made not to participate in a specific business opportunity the
costs incurred in the related investigation would not be recoverable. Furthermore, even if
an agreement is reached for the participation in a specific business opportunity, the
failure to consummate that transaction may result in the loss of the related costs
incurred. There is the additional risk that we will not find a suitable target. Management
does not believe that we will generate revenue without finding and completing the
acquisition of a suitable business opportunity or a transaction with a suitable target
company. If no such business opportunity target is found, therefore, no return on an
investment in our company will be realized, and there will not, most likely, be a market
for our common shares.

Acquisition of
Opportunities

In implementing a structure for a
particular business acquisition, we may become a party to a merger, consolidation,
reorganization, joint venture, franchise or licensing agreement with another corporation
or entity. We may also purchase stock or assets of an existing business. It is likely that
any merger with an existing company will be in the form of a reverse takeover, which will
require both shareholder approval and a disclosure document. Once a transaction is
complete, it is possible that our present management and shareholders will not be in
control of our company. In addition, a majority or all of our officers and directors may,
as part of the terms of the transaction, resign and be replaced by new officers and
directors without a vote of our shareholders.

It is anticipated that securities
issued in any such reorganization would be issued in reliance on exemptions from
registration under applicable securities laws. In some circumstances, however, as a
negotiated element of the potential transaction, we may agree to register such securities
either at the time the transaction is consummated, under certain conditions or at a
specified time thereafter. The issuance of substantial additional securities and their
potential sale into any trading market in our common shares which may develop, may have a
depressive effect on such market.

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13

As part of our investigation of a
potential business combination or opportunity, our officers and directors may:

| | (a) | meet
personally with management and key personnel;
| | --- | --------------------------------------------------

| | (b) | visit
and inspect material facilities;
| | --- | --------------------------------------

| | (c) | obtain
independent analysis or verification of certain information provided;
| | --- | ----------------------------------------------------------------------------

| | (d) | check
references of management and key personnel; and
| | --- | -----------------------------------------------------

| | (e) | take
other reasonable investigative measures, as our limited financial resources           and
management expertise allow.
| | --- | --------------------------------------------------------------------------------------------------------------------------

The manner in which we participate in
an opportunity with a target company will depend on the nature of the opportunity, our
needs and desires, the needs and desires of the other party, management of the
opportunity, and our relative negotiating strength. With respect to any mergers or
acquisitions, negotiations with target company management will be expected to focus on the
percentage of our company which the target companys shareholders would acquire in
exchange for their shareholdings in the target company. Depending upon, among other
things, the target companys assets and liabilities, our shareholders will, in all
likelihood, hold a smaller percentage ownership interest in our company following any
merger or acquisition. The percentage ownership may be subject to significant reduction in
the event we acquire a target company with substantial assets. Any merger or acquisition
effected by us can be expected to have a significant dilutive effect on the percentage of
shares held by our then shareholders.

To date, we have not conducted
investigations of any business opportunity or company nor have we met with representatives
of any company or business. There can be no assurance that management will ever be able to
identify and secure a suitable business opportunity or that management has the requisite
experience to recognize and understand a business operation that would benefit us. In the
event that management is able to locate what it considers to be a suitable business
opportunity, there can be no assurance that the acquisition of such business opportunity
or the entering into of a business combination will be successful. Selecting a business
opportunity will likely be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries, and shortages of
available capital, management believes that there are numerous firms seeking the benefits
of a publicly-traded corporation. Such benefits of a publicly traded corporation may
include:

| | (a) | facilitating
or improving the terms on which additional equity financing may be           sought;
| | --- | -------------------------------------------------------------------------------------------------

| | (b) | providing
liquidity for the principals of a business;
| | --- | -----------------------------------------------------

| | (c) | creating
a means for providing incentive stock options or similar benefits to           key
employees; and/or
| | --- | -------------------------------------------------------------------------------------------------------------

| | (d) | providing
liquidity (subject to restrictions of applicable statutes) for all
          shareholders.
| | --- | ----------------------------------------------------------------------------------------------------

In contrast, negative aspects of
becoming a publicly traded corporation registered in the United States may include:

| | (a) | complying
with the requirements of the Securities Exchange Act of 1934;
| | --- | -----------------------------------------------------------------------

| | (b) | exposure
of our officers and directors to lawsuits and liabilities under various
          securities legislation;
| | --- | ------------------------------------------------------------------------------------------------------------------

| | (c) | distracting
managements attention from our day to day operations;
| | --- | ------------------------------------------------------------------

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14

| | (d) | restricting
publicity and other marketing activities to ensure compliance with           securities
law requirements and minimizing the potential liability of our           management and
our company; and/or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | increased
legal, accounting and other expenses associated with operating a           public
company.
| | --- | ----------------------------------------------------------------------------------------------------

Potentially available business
opportunities and/or business combinations may occur in many different industries and at
various stages in the development of a company, all of which will make the task of
comparative investigation and analysis of such business opportunities extremely difficult
and complex.

We are presently seeking to identify
a new business opportunity. As of the date of this quarterly report, we have no
agreements, understandings or arrangements concerning the acquisition or potential
acquisition of a specific business opportunity.

There is no assurance that management
will be able to secure a suitable prospect or that it has the requisite experience to
recognize and understand a business operation that would be beneficial to us.

PLAN OF OPERATIONS AND
CASH REQUIREMENTS

Review of Operations / Plan
of Operation

The following discussion should be
read in conjunction with our financial statements and the related notes that appear
elsewhere in this quarterly report. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this quarterly report, particularly in the section entitled
Risk Factors.

We will continue to seek a new
business opportunity or business combination over the 12 month period ending June 30,
2005. Once a business opportunity or business combination has been identified, we will
investigate and evaluate the business opportunity or business combination. Should our
company wish to pursue any specific business opportunity or business combination, we will
have to comply with all applicable corporate and securities laws in order to complete the
acquisition of or merger with any such business opportunity.

Operating Results

Quarter Ended June 30,
2004 and Quarter Ended June 30, 2003

We did not generate any revenue for
the three month period ending June 30, 2004. We reported a net loss for the quarter ended
June 30, 2004 of $5,607 or $nil per share compared to a net loss of $80,048 or $0.17 loss
per share for the quarter ended June 30, 2003. The decrease in our net loss was primarily
due to the discontinued operations of Niew Industries, Inc. and Energy Medicine
Developments Corp.

Our general and administrative
expenses decreased in the three months ended June, 2004 to $5,607, from $8,948 in total
general and administrative expenses for the three months ended June 30, 2003, due to the
discontinued operations of Niew Industries, Inc. and Energy Medicine Developments Corp.
Interest income for the quarter ended June 30, 2004 was $nil compared to $nil for the
quarter ended June 30, 2003.

We disposed of Niew Industries, Inc.
to the former directors of Niew for $44,142 (CDN$70,000). The purchase price for the
shares of Energy Medicine was $28,400, which consisted of the forgiveness of certain debts
owed by us.

Liquidity and Capital
Resources

As at June 30, 2004, we had a cash
position of $879 and a working capital deficit of $15,192.

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15

We do not currently have sufficient
cash resources to fund our normal operating expenses through the twelve month period
ending June 30, 2005. We plan to raise a small amount of additional capital by way of
private placement sufficient to fund our normal operating expenses. We also plan to use
some of our existing cash resources supplemented by the additional small amount of capital
we intend to raise, to pursue and fund new business opportunities over the period through
June 30, 2005. Additional professional fees, filing fees, and due diligence costs are
anticipated as new business opportunities are investigated and evaluated.

Cash Requirements

Over the twelve month period ending
June 30, 2005, we anticipate that we will have to raise approximately $25,000 through
private placements of our equity securities and/or debt financing. These funds in addition
to our current working capital which was raised through the sale of marketable securities,
will go to fund ongoing corporate maintenance expenses for the next twelve months. We plan
to use these funds and our current cash reserves to fund the identification and evaluation
of a suitable business opportunity. Once we locate a suitable business opportunity or
business combination, we may seek to obtain additional equity and/or debt financing from
third parties to facilitate and complete the acquisition of such a business opportunity or
a suitable business combination. We may also issue shares of our common stock as
consideration for the acquisition of a suitable business opportunity or a suitable
business combination.

As we require additional monies, we
plan to raise such additional capital primarily through the private placement of our
securities. Further, to the extent that such funds may be available to us, we may also
enter into commercial loans or credit facilities. The issuance of additional equity
securities by us could result in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be available,
will increase our liabilities and future cash commitments.

There are no assurances that we will
be able to obtain further funds required for our continued operations. We are pursuing
various financing alternatives to meet our immediate and long-term financial requirements.
There can be no assurance that additional financing will be available to us when needed
or, if available, that it can be obtained on commercially reasonable terms. If we are not
able to obtain the additional financing on a timely basis, we will not be able to proceed
with our expansion program and may not be able to meet our other obligations as they
become due.

Product Research and
Development

We do not anticipate that we will
expend any significant monies on research and development over the twelve months ending
June 30, 2005.

Purchase of Significant
Equipment

We do not intend to purchase any
significant equipment over the twelve months ending June 30, 2005.

Employees

Over the twelve months ending June
30, 2005, we anticipate an increase in the number of employees we retain only if we
identify and complete the acquisition of a business opportunity or enter into a business
combination. Such an increase on the number of employees may significantly increase our
monthly burn rate and such increase in the monthly burn rate depends on the number of
employees we ultimately retain.

Going Concern

We have suffered recurring losses
from operations. The continuation of our company as a going concern is dependent upon our
company attaining and maintaining profitable operations and raising additional capital.
The financial statements do not include any adjustment relating to the recovery and
classification of recorded asset amounts or the amount and classification of liabilities
that might be necessary should our company discontinue operations.

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16

Due to the uncertainty of our ability
to meet our current operating expenses and the capital expenses noted above, in their
report on the annual consolidated financial statements for the year ended September 30,
2003, our independent auditors included an explanatory paragraph regarding concerns about
our ability to continue as a going concern. Our consolidated financial statements contain
additional note disclosures describing the circumstances that lead to this disclosure by
our independent auditors.

The continuation of our business is
dependent upon us raising additional financial support. The issuance of additional equity
securities by us could result in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be available,
will increase our liabilities and future cash commitments.

There are no assurances that we will
be able to obtain further funds required for our continued operations. As noted herein, we
are pursuing various financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be available to us
when needed or, if available, that it can be obtained on commercially reasonable terms. If
we are not able to obtain the additional financing on a timely basis, we will be unable to
conduct our operations as planned, and we will not be able to meet our other obligations
as they become due. In such event, we will be forced to scale down or perhaps even cease
our operations.

Recently Issued
Accounting Standards

In June 2002, FASB finalized FAS 146,
Accounting for Costs Associated with Exit or Disposal Activities. FAS 146 addresses
financial accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The principal difference
between this Statement and Issue 94-3 relates to its requirements for recognition of a
liability for a cost associated with an exit or disposal activity. This Statement requires
that a liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined
in Issue 94-3 was recognized at the date of an entitys commitment to an exit plan. A
fundamental conclusion reached by the Board in this Statement is that an entitys
commitment to a plan, by itself, does not create a present obligation to others that meets
the definition of a liability. Therefore, this Statement eliminates the definition and
requirements for recognition of exit costs in Issue 94-3. This Statement also establishes
that fair value is the objective for initial measurement of the liability. The adoption of
this statement is not expected to have a material impact on the Companys financial
position and results of operations. FAS 146 is effective for exit and disposal activities
initiated after December 31, 2002.

In December 2002, the Financial
Accounting Standards Board Issued Statement No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123",
(SFAS 148). SFAS 148 amends FASB Statement No. 123, Accounting for Stock
Based Compensation (SFAS 123) and provides alternative methods for
accounting for a change by registrants to the fair value method of accounting for
stock-based compensation. Additionally, SFAS 148 amends the disclosure requirements of
SFAS 123 to require disclosure in the significant accounting policy footnote of both
annual and interim financial statements of the method of accounting for stock-based
compensation and the related pro-forma disclosures when the intrinsic value method
continues to be used. The statement is effective for fiscal years beginning after December
15, 2002, and disclosures are effective for the first fiscal quarter beginning after
December 15, 2002. The Company will continue to use the intrinsic model method.

In November 2002, the FASB issued
FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, including Indirect Guarantees and Indebtedness of Others, an
interpretation of FASB Statements No. 5, 57, and 107 and Recession of FASB Interpretation
No. 34 (FIN No. 45). FIN No. 45 elaborates on the disclosures to be made
by a guarantor in its interim and annual financial statements about its obligations under
certain guarantees that it has issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. FIN No. 45 does not prescribe a specific
approach for subsequently measuring the guarantors recognized liability over the
term of the related guarantee. It also incorporates, without change, the guidance in FASB
Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of
Others, which is being superseded. The disclosure provisions of FIN No. 45 are
effective for financial statements of interim or annual periods that end after December
15, 2003 and the provisions for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after June 30, 2004
irrespective of a guarantors year-end. The Company does not expect the adoption of
FIN No. 45 to have a material impact on its results of operations or financial position

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In May 2003, the FASB issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. This Statement establishes standards for how an issuer
classifies and measures in its statement of financial position certain financial
instruments with characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an obligation of
the issuer. This Statement is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003 except for mandatory redeemable financial instruments
of nonpublic entities. The Company does not expect that the adoption of this standard will
have a material effect on its financial position or results of operations.

In January 2003, the FASB issued
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46).
The objective of FIN 46 is to improve financial reporting by companies involved with
variable interest entities. A variable interest entity is a corporation, partnership,
trust, or any other legal structure used for business purposes that either 9a) does not
have equity investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. FIN 46 requires a
variable interest entity to be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual returns or both. FIN 46 also
requires disclosures about variable interest entities that the company is not required to
consolidate but in which it has a significant variable interest. The consolidation
requirements of Interpretation 46 apply immediately to variable interest entities created
after January 31, 2003. The consolidation requirements apply to older entities in the
first fiscal year or interim period beginning after June 15, 2003. Certain of the
disclosure variable interest entity were established. As of June 30, 2003, the Company
does not expect that the adoption of this standard will have a material effect on its
financial position or results of operations.

APPLICATION OF CRITICAL
ACCOUNTING POLICIES

Our financial statements and accompanying
notes are prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, and
expenses. These estimates and assumptions are affected by managements application of
accounting policies. We believe that understanding the basis and nature of the estimates
and assumptions involved with the following aspects of our consolidated financial
statements is critical to an understanding of our financials.

Going Concern

Our annual financial statements have
been prepared on the going concern basis, which assumes the realization of assets and
liquidation of liabilities in the normal course of operations. The financial statements
have been prepared assuming we will continue as a going concern. However, certain
conditions exist which raise doubt about our ability to continue as a going concern. We
have suffered recurring losses from operations and have accumulated losses of
approximately $999,981 since inception through June 30, 2004.

# RISK FACTORS

Much of the information included in
this annual report includes or is based upon estimates, projections or other forward
looking statements. Such forward looking statements include any projections or
estimates made by us and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based, are made
in good faith and reflect our current judgment regarding the direction of our business,
actual results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested herein.

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Such estimates, projections or other
forward looking statements involve various risks and uncertainties as outline
below. We caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to differ
materially from the results expressed in any such estimates, projections or other
forward looking statements.

Our common shares are considered
speculative during our search for a new business opportunity. Prospective investors should
consider carefully the risk factors set out below.

As there is a large number of
established and well-financed entities actively seeking suitable business opportunities or
business combinations, we are at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination

We are, and will continue to be, an
insignificant participant amongst numerous other companies seeking a suitable business
opportunity or business combination. A large number of established and well-financed
entities, including venture capital firms, are actively seeking suitable business
opportunities or business combinations which may also be desirable target candidates for
us. Virtually all such entities have significantly greater financial resources, technical
expertise and managerial capabilities than we do. We are, consequently, at a competitive
disadvantage in identifying possible business opportunities and successfully completing a
business combination. Moreover, we will also compete with numerous other small public
companies seeking suitable business opportunities or business combinations.

The loss of our present directors
and officers would affect our ability to identify a suitable business opportunity or enter
into a suitable business operation

Although none of our present officers
or directors are key to our continuing operations, we rely upon the continued service and
performance of these officers and directors, and our future success depends on the
retention of these people, whose knowledge of our business and whose technical expertise
would be difficult to replace. At this time, none of our officers or directors are bound
by employment agreements, and as a result, any of them could leave with little or no prior
notice.

If we are unable to hire and retain
technical, sales and marketing and operational personnel, any business we acquire could be
materially adversely affected. We intend to hire a significant number of additional
personnel in the future after we have identified and completed the acquisition of a
business opportunity or enter into a business combination. Competition for these
individuals in all sectors is intense, and we may not be able to attract, assimilate, or
retain additional highly qualified personnel in the future. The failure to attract,
integrate, motivate and retain these employees could harm our business.

If we are unable to obtain
additional capital to finance the development of any business opportunity that we acquire,
we may be required to delay, scale back or eliminate the development of any business
opportunity that we acquire

We anticipate that in addition to our
existing capital we will require minimal additional financing while we are seeking a
suitable business opportunity or business combination. Further, we anticipate that with
minimal additional capital we will have sufficient capital to fund our ongoing operations
for the next twelve months or until we complete a business combination or acquire a
business opportunity. However, we may be required to raise additional financing for a
particular business combination or business opportunity. We would likely secure any
additional financing necessary through a private placement of our common shares.

There can be no assurance that, if
required, any such financing will be available upon terms and conditions acceptable to us,
if at all. Our inability to obtain additional financing in a sufficient amount when needed
and upon terms and conditions acceptable to us could have a materially adverse effect upon
our company. Although we believe that we have funds sufficient to meet our immediate
needs, we may require further funds to finance the development of any business opportunity
that we acquire. There can be no assurance that such funds will be available or available
on terms satisfactory to us. If additional funds are raised by issuing equity securities,
further dilution to existing or future shareholders is likely to result. If adequate funds
are not available on acceptable terms when needed, we may be required to delay, scale back
or eliminate the development of any business opportunity that we acquire. Inadequate
funding could also impair our ability to compete in the marketplace, which may result in
the dissolution of our company.

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We are a company with a limited
operating history which makes it difficult to evaluate whether we will operate profitably

We have a limited operating history
on which to base an evaluation of our business and prospects. Our prospects must be
considered in light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies seeking to acquire or establish a new business opportunity. Some
of these risks and uncertainties relate to our ability to identify, secure and complete an
acquisition of a suitable business opportunity.

We cannot be sure that we will be
successful in addressing these risks and uncertainties and our failure to do so could have
a materially adverse effect on our financial condition. In addition, our operating results
are dependent to a large degree upon factors outside of our control. There are no
assurances that we will be successful in addressing these risks, and failure to do so may
adversely affect our business.

It is unlikely that we will generate
any or significant revenues while we seek a suitable business opportunity. Our short and
long-term prospects depend upon our ability to select and secure a suitable business
opportunity. In order for us to make a profit, we will need to successfully acquire a new
business opportunity in order to generate revenues in an amount sufficient to cover any
and all future costs and expenses in connection with any such business opportunity. Even
if we become profitable, we may not sustain or increase our profits on a quarterly or
annual basis in the future.

We will, in all likelihood, sustain
operating expenses without corresponding revenues, at least until we complete a business
combination or acquire a business opportunity. This may result in our company incurring a
net operating loss which will increase continuously until we complete a business
combination or acquire a business opportunity that can generate revenues that result in a
net profit to us. There is no assurance that we will identify a suitable business
opportunity or complete a business combination.

We have not generated any revenues
and our ability to generate revenues is uncertain

For the year ended September 30,
2003, we incurred net income from discontinued operations of $92,280, however, we incurred
a net loss of $92,269 from our continuing operations. We sold this business effective
September 30, 2003. We are a development stage company. We have not generated any revenues
and do not anticipate generating any revenues until we acquire a business opportunity or
complete a business combination. We had a cumulative net loss of $999,981 from inception
to June 30, 2004. At this time, our ability to generate any revenues is uncertain.

There is no assurance that we will
successfully locate business opportunities which have established operating histories

The success of our proposed plan of
operation will depend to a great extent on the operations, financial condition and
management of any identified business opportunity. While management intends to seek
business opportunities and/or business combinations with entities which have established
operating histories, there is no assurance that we will successfully locate business
opportunities meeting such criteria. In the event that we complete a business combination
or otherwise acquire a business opportunity, the success of our operations may be
dependent upon management of the successor firm or venture partner firm, together with a
number of other factors beyond our control.

We have no agreement for a
business combination or other transaction and there can be no assurance that we will be
able to successfully identify and evaluate a suitable business opportunity

We have no arrangement, agreement, or
understanding with respect to acquiring a business opportunity or engaging in a business
combination with any private entity. There can be no assurance that we will successfully
identify and evaluate suitable business opportunities or conclude a business combination.
There is no assurance that we will be able to negotiate the acquisition of a business
opportunity or a business combination on terms favorable to us. We have not established a
specific length of operating history or a specified level of earnings, assets, net worth
or other criteria which it will require a target business opportunity to have achieved,
and without which we would not consider a business combination in any form with such
business opportunity. Accordingly, we may enter into a business combination with a
business opportunity having no significant operating history, losses, limited or no
potential for earnings, limited assets, negative net worth or other negative
characteristics.

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20

We are dependent upon
managements personal abilities to evaluate business opportunities and the loss of
the services of any of these individuals would adversely affect the development of our
business

We are dependent upon
managements personal abilities to evaluate business opportunities that may be
presented in the future. While seeking to acquire a business opportunity, management
anticipates devoting up to 25% of their time to our business. Management may or may not
have prior experience in the technical aspects of the industry or the business within that
industry that may be acquired. Our officers have not entered into written employment
agreements with us with respect to our proposed plan of operation and are not expected to
do so in the foreseeable future. We have not obtained key man life insurance on our
officers or directors. Notwithstanding the combined limited experience and time commitment
of management, loss of the services of any of these individuals would adversely affect
development of our business and our likelihood of continuing operations.

We have not conducted a market
research on the demand for the acquisition of a business opportunity or combination and
there is no assurance that we will successfully complete such an acquisition or
combination

We have not conducted or received
results of market research indicating that there is a demand for the acquisition of a
business opportunity or business combination as contemplated by our company. Even if there
is demand for the acquisition of a business opportunity or combination as contemplated,
there is no assurance we will successfully complete such an acquisition or combination.

Because our proposed operations
may result in a business combination with only one entity we may be subject to economic
fluctuations within a particular business or industry, which could increase the risks
associated with our operations

In all likelihood, our proposed
operations, even if successful, may result in a business combination with only one entity.
Consequently, the resulting activities will be limited to that entitys business. Our
inability to diversify our activities into a number of areas may subject us to economic
fluctuations within a particular business or industry, thereby increasing the risks
associated with our operations.

If we complete a business
opportunity or combination, management of our company may be required to sell or transfer
common shares or resign as members of our board of directors

A business combination or acquisition
of a business opportunity involving the issuance of our common shares may result in new or
incoming shareholders obtaining a controlling interest in our company. Any such business
combination or acquisition of a business opportunity may require management of our company
to sell or transfer all or a portion of the common shares in the capital of our company
that they hold or resign as members of our Board of Directors. The resulting change in our
control could result in removal of one or more of our present officers and directors, and
a corresponding reduction in or elimination of their participation in the future affairs
of our company.

If we complete a business
opportunity or combination, we may be required to issue such number of shares which would
reduce the percentage of share ownership held by shareholders which may result in a change
of control of our company

Our primary plan of operation is
based upon the acquisition of a business opportunity or a business combination with a
private concern, which, in all likelihood, would result in us issuing common shares to
shareholders of such private company. Issuing previously authorized and unissued common
shares in our capital will reduce the percentage of common shares owned by present and
prospective shareholders and may result in a change in our control and/or management.

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The requirement of audited
financial statements may disqualify a potential business opportunity or combination

Management believes that any
potential business opportunity or target company must provide audited financial statements
for review and for the protection of all parties to the business acquisition or
combination. One or more attractive business opportunities may forego a business
combination with us rather than incur the expenses associated with preparing audited
financial statements.

Upon completion of a business
opportunity or combination there can be no assurance that we will be able to successfully
manage or achieve growth of that business opportunity or combination

Our ability to achieve any planned
growth upon the acquisition of a suitable business opportunity or business combination
will be dependent upon a number of factors including, but not limited to, our ability to
hire, train and assimilate management and other employees and the adequacy of our
financial resources. In addition, there can be no assurance that we will be able to manage
successfully any business opportunity or business combination. Failure to manage
anticipated growth effectively and efficiently could have a materially adverse effect on
our business.

Trading of our stock may be
restricted by the SECs Penny Stock regulations which may limit a
stockholders ability to buy and sell our stock

The U.S. Securities and Exchange
Commission has adopted regulations which generally define penny stock to be
any equity security that has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions. Our securities
are covered by the penny stock rules, which impose additional sales practice requirements
on broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers
generally to institutions with assets in excess of $5,000,000 or individuals with a net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with
their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and monthly
account statements showing the market value of each penny stock held in the
customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing before or
with the customers confirmation. In addition, the penny stock rules require that
prior to a transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchasers written agreement to the
transaction. These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules discourage
investor interest in and limit the marketability of, our common stock.

Trading in our common shares on
the OTC Bulletin Board is limited and sporadic making it difficult for our shareholders to
sell their shares or liquidate their investments

Our common shares are currently
listed for public trading on the OTC Bulletin Board. The trading price of our common
shares has been subject to wide fluctuations. Trading prices of our common shares may
fluctuate in response to a number of factors, many of which will be beyond our control.
The stock market has generally experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and price
earnings ratios previously experienced by our common shares will be matched or maintained.
These broad market and industry factors may adversely affect the market price of our
common shares, regardless of our operating performance.

In the past, following periods of
volatility in the market price of a companys securities, securities class-action
litigation has often been instituted. Such litigation, if instituted, could result in
substantial costs for us and a diversion of managements attention and resources.

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Our By-laws contain provisions
indemnifying our officers and directors against all costs, charges and expenses incurred
by them

Our By-laws contain provisions with
respect to the indemnification of our officers and directors against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a judgment, actually
and reasonably incurred by him, including an amount paid to settle an action or satisfy a
judgment in a civil, criminal or administrative action or proceeding to which he is made a
party by reason of his being or having been one of our directors or officers.

Investors interests in our
company will be diluted and investors may suffer dilution in their net book value per
share if we issue additional shares or raise funds through the sale of equity securities

Our constating documents authorize
the issuance of 2,500,000 post-split (200,000,000 pre-split) common shares. In the event
that we are required to issue any additional shares or enter into private placements to
raise financing through the sale of equity securities, investors interests in our
company will be diluted and investors may suffer dilution in their net book value per
share depending on the price at which such securities are sold. If we issue any such
additional shares, such issuances also will cause a reduction in the proportionate
ownership and voting power of all other shareholders. Further, any such issuance may
result in a change in our control.

Our By-laws do not contain
anti-takeover provisions which could result in a change of our management and directors if
there is a take-over of our company

We do not currently have a
shareholder rights plan or any anti-takeover provisions in our By-laws. Without any
anti-takeover provisions, there is no deterrent for a take-over of our company, which may
result in a change in our management and directors.

As a result of all of our assets
being located outside the United States and a majority of our directors and officers are
residents of other countries other than the United States, investors may find it difficult
to enforce, within the United States, any judgments obtained against our company or our
directors and officers

All of our assets are located outside
the United States and we do not currently maintain a permanent place of business within
the United States. In addition, a majority of our directors and officers are nationals
and/or residents of countries other than the United States, and all or a substantial
portion of such persons assets are located outside the United States. As a result,
it may be difficult for investors to enforce within the United States any judgments
obtained against our company or our officers or directors, including judgments predicated
upon the civil liability provisions of the securities laws of the United States or any
state thereof.

# Item 3.  Controls
and Procedures.

As required by Rule 13a-15 under the
Exchange Act, we have carried out an evaluation of the effectiveness of the design and
operation of our companys disclosure controls and procedures as of the end of the
period covered by this quarterly report, being June 30, 2004. This evaluation was carried
out under the supervision and with the participation of our companys management,
including our companys president and chief executive officer. Based upon that
evaluation, our companys president and chief executive officer concluded that our
companys disclosure controls and procedures are effective as at the end of the
period covered by this report. There have been no significant changes in our
companys internal controls or in other factors, which could significantly affect
internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures
are controls and other procedures that are designed to ensure that information required to
be disclosed in our companys reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our companys reports filed under the
Exchange Act is accumulated and communicated to management, including our companys
president and chief executive officer as appropriate, to allow timely decisions regarding
required disclosure.

---

23

# PART
II  -  OTHER INFORMATION

# Item 1.  Legal
Proceedings.

We know of no material, existing or
pending legal proceedings against our company, nor are we involved as a plaintiff in any
material proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.

# Item 6.  Exhibits
and Reports on Form 8-K.

Exhibits required by Item
601 of Regulation S-B

Exhibit Number Description

|(3) | (i)
Articles of Incorporation; and (ii) Bylaws
|--- | ----------------------------------------------

| | 3.1 | Charter
(incorporated by reference from our Registration Statement on Form 10-SB filed on April
11, 2000).
| | --- | ----------------------------------------------------------------------------------------------------------

| | 3.2 | Articles
of Incorporation (incorporated by reference from our Registration Statement on Form 10-SB
filed on April 11, 2000).
| | --- | ----------------------------------------------------------------------------------------------------------------------------

| | 3.3 | Bylaws
(incorporated by reference from our Registration Statement on Form 10-SB filed on April
        11, 2000).
| | --- | -----------------------------------------------------------------------------------------------------------------

| | 3.4 | Certificate
of Reverse Stock Split filed with the Nevada Secretary of State on November 12, 2003
(incorporated by reference from our Current Report on Form 8-K filed on December 17,
2003).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.5 | Certificate
of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on
March 3, 2004 (incorporated by reference from our Quarterly Report on Form 10-QSB filed
on May 15, 2004)
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Material
Contracts
|---- | ------------------

| | 10.1 | Share
Purchase Agreement, dated September 30, 2003, between Global Innovative Systems Inc.,
Fraser Lawrie and Robert Fletcher (incorporated by reference from our Current Report on
Form 8-K filed on November 7, 2003).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Acquisition
Agreement, dated January 22, 2003, between Ken Bergestad, Walter Niemi, Lloyd
                     Olson, Fraser Lawrie, Robert M. Fletcher and Global Innovative
Systems, Inc. (incorporated by                      reference from our Annual Report on
Form 10-KSB filed on December 23, 2003).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(31) | Rule
13a-14(a)/15d-14(a) Certifications
|---- | ---------------------------------------

| | 31.1* | Certification.
| | ----- | --------------

|(32) | Section
1350 Certifications
|---- | ---------------------------

| | 32.1* | Certification.
| | ----- | --------------

*Filed herewith

---

24

Reports on Form 8-K

None.

# SIGNATURES

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

# GLOBAL INNOVATIVE
SYSTEMS INC.

By: /s/ William McGintyWilliam
McGintyPresident, Secretary and
Treasurer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Date: August 13, 2004