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**UNITED STATESSECURITIES 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**September 30, 2004**

 ̈ TRANSITION
  REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT 
  For the transition period from _________ to _________

Commission File Number: **0-29285**

ONLINE INNOVATION, INC.
  (Name of Small Business Issuer in its charter)

|Delaware                        | 52-2058364                
|------------------------------- | --------------------------
|(state or other jurisdiction of | (I.R.S. Employer I.D. No.)
|incorporation or organization)  |                           

1118 Homer Street, #118, Vancouver, British Columbia
  V6B 6L5
  (Address of principal executive offices)

(604) 669-7564
  
  Issuer's telephone number

_________________________________________________________________
  Former name, former address, and former fiscal year, if changed since last report

Check whether the registrant (1) filed all reports required
  to be filed by sections 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 registrant 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 ̈ N/A

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:

As of November 10, 2004, the registrant's outstanding common
  stock consisted of 17,104,166 shares.

Transitional Small Business Disclosure Format (Check one):
  YES ̈ NO  x

---

ONLINE INNOVATION, INC.

INDEX TO FORM 10QSB

|                               | PAGE NO.
|------------------------------ | --------
|                               |         
|PART I  FINANCIAL INFORMATION | 3       
|                               |         
|                               | Item 1. 
|                               |         
|                               | Item 2. 
|                               |         
|                               | Item 3. 
|                               |         
|PART II  OTHER INFORMATION    | 7       
|                               |         
|                               | Item 1. 
|                               |         
|                               | Item 2. 
|                               |         
|                               | Item 3. 
|                               |         
|                               | Item 4. 
|                               |         
|                               | Item 5. 
|                               |         
|                               | Item 6. 
|                               |         
|SIGNATURES                     | 9       

2

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PART 1  FINANCIAL INFORMATION

Item 1  Financial Statements

Attached are the registrant's unaudited financial statements
  for the three month period ended September 30, 2004, with comparative figures
  for the three month period ended September 30, 2003, and the Independent Accountant's
  Report thereon.

3

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MOEN AND COMPANYCHARTERED ACCOUNTANTS

|Member:                                                 |                                     
|------------------------------------------------------- | ------------------------------------
|Canadian Institute of Chartered Accountants             | Securities Commission Building      
|Institute of Chartered Accountants of British Columbia  | PO Box 10129, Pacific Centre        
|Institute of Management Accountants (USA) (From 1965)   | Suite 1400  701 West Georgia Street
|                                                        | Vancouver, British Columbia         
|Registered with:                                        | Canada V7Y 1C6                      
|Public Company Accounting Oversight Board (USA) (PCAOB) | Telephone: (604) 662-8899           
|Canadian Public Accountability Board (CPAB)             | Fax: (604) 662-8809                 
|Canada - British Columbia Public Practice Licence       | Email: moenca@telus.net             
|                                                        |                                     

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

We have reviewed the accompanying Balance Sheet of Online Innovation, Inc.
  (A Delaware Corporation) (A Development Stage Company) as of September 30, 2004,
  and the Statements of Income, Retained Earnings (Deficit), Cash Flows and Stockholders'
  Equity for the three month periods ended September 30, 2004 and September 30,
  2003. These financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the American
  Institute of Certified Public Accountants. A review of interim financial information
  consists principally of applying analytical procedures to financial data and
  making inquiries of persons responsible for financial and accounting matters.
  It is substantially less in scope than an audit conducted in accordance with
  U.S. generally accepted auditing standards, the objective of which is the expression
  of an opinion regarding the financial statements taken as a whole. Accordingly,
  we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that
  should be made to the accompanying financial statements for them to be in conformity
  with U.S. generally accepted accounting principles.



|                                    | "Moen and Company"   
|----------------------------------- | ---------------------
|                                    | ("Signed")           
|                                    |                      
|                                    | Chartered Accountants
|                                    |                      
|Vancouver, British Columbia, Canada |                      
|November 2, 2004                    |                      

*"Independent Accountants and Auditors"*

F-1

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|ONLINE INNOVATION, INC.                    
|-------------------------------------------
|(A Delaware Corporation)                   
|(A Development Stage Company)              
|Balance Sheet                              
|September 30, 2004                         
|(In U.S. Dollars)                          
|(With Comparative Figures at June 30, 2004)
|(Unaudited)                                

|                                                                         |   | September 30, |   |   | June 30,   |  
|------------------------------------------------------------------------ | - | ------------- | - | - | ---------- | -
|                                                                         |   | 2004          |   |   | 2004       |  
|                                                                         |   |               |   |   |            |  
|ASSETS                                                                   |  
|                                                                         |   |               |   |   |            |  
|Current Assets                                                           |   |               |   |   |            |  
|Cash                                                                     | $ | 6,048         |   | $ | 3,245      |  
|TOTAL CURRENT ASSETS                                                     |   | 6,048         |   |   | 3,245      |  
|                                                                         |   |               |   |   |            |  
|Deferred tax asset                                                       |   | 52,500        |   |   | 52,500     |  
|Fixed assets                                                             |   |               |   |   |            |  
|Computer equipment, at cost less
      accumulated depreciation (Note 5) |   | 15,470        |   |   | 18,939     |  
|Computer software development(Note 6(b))                                 |   |               |   |   |            |  
|Application development stage costs                                      |   | 287,500       |   |   | 325,000    |  
|                                                                         |   |               |   |   |            |  
|TOTAL ASSETS                                                             | $ | 361,518       |   | $ | 399,684    |  
|                                                                         |   |               |   |   |            |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                     |  
|                                                                         |   |               |   |   |            |  
|Current Liabilities                                                      |   |               |   |   |            |  
|Accounts payable                                                         | $ | 96,268        |   | $ | 96,801     |  
|Management fees payable (Note 4(a))                                      |   | 117,500       |   |   | 102,500    |  
|Loan payable (Note 11)                                                   |   | 28,846        |   |   | 25,000     |  
|Due to related parties (Notes 4(c))                                      |   | 45,067        |   |   | 45,067     |  
|TOTAL CURRENT LIABILITIES                                                |   | 287,681       |   |   | 269,368    |  
|Stockholders' Equity                                                     |   |               |   |   |            |  
|Capital Stock (Note 3)                                                   |   |               |   |   |            |  
|Authorized:                                                              |   |               |   |   |            |  
|75,000,000 common shares at $0.001 par value per share                   |   |               |   |   |            |  
|Issued
      and outstanding - 17,104,166 common shares                  |   |               |   |   |            |  
|(June 30, 2004 - 17,004,166 common shares), par value                    |   | 17,104        |   |   | 17,004     |  
|Paid
      in capital in excess of par value of stock                    |   | 2,833,663     |   |   | 2,818,763  |  
|Deficit accumulated during development
      stage (Note 1)              |   | (2,769,140    | ) |   | (2,697,661 | )
|Cumulative currency translation adjustments (Note
      2(b))            |   | (7,790        | ) |   | (7,790     | )
|TOTAL STOCKHOLDERS' EQUITY                                               |   | 73,837        |   |   | 130,316    |  
|                                                                         |   |               |   |   |            |  
|TOTAL CURRENT LIABILITIES AND STOCKHOLDERS' EQUITY                       | $ | 361,518       |   | $ | 399,684    |  

|Approved on Behalf of the Board |  |                                                                         
|------------------------------- |  | ------------------------------------------------------------------------
|                                |  |                                                                         
|"Chad D. Lee"                   |  | , President and Chief Executive Officer and Director                    
|                                |  |                                                                         
|"Marlene C. Schluter"           |  | , Secretary and Treasurer and Chief Financial Officer and
      Director

See Accompanying Notes and Independent Accountants' Review
  Report

F-2

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|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Statement of Income          
|(In U.S. Dollars)            
|**(Unaudited)**              

|                                                                |   | Cumulative From  |   |   |                    |   |   |            |  
|--------------------------------------------------------------- | - | ---------------- | - | - | ------------------ | - | - | ---------- | -
|                                                                |   | Inception Date   |   |   |                    |   |   |            |  
|                                                                |   | on Aug 1, 1997   |   |   | Three Months Ended |  
|                                                                |   | to September 30, |   |   | September 30,      |  
|                                                                |   | 2004             |   |   | 2004               |   |   | 2003       |  
|                                                                |   |                  |   |   |                    |   |   |            |  
|                                                                |   |                  |   |   |                    |   |   |            |  
|Interest and Other Income                                       | $ | 1,264            |   | $ | --                 |   | $ | --         |  
|                                                                |   |                  |   |   |                    |   |   |            |  
|Administration Costs                                            |   |                  |   |   |                    |   |   |            |  
|Amortization of computer software
      development stage costs |   | 37,500           |   |   | 37,500             |   |   | --         |  
|Compensation on stock option                                    |   | 150,000          |   |   | --                 |   |   | --         |  
|Computer technology and                                         |   |                  |   |   |                    |   |   |            |  
|software
      development-preliminary                          |   |                  |   |   |                    |   |   |            |  
|development stage costs                                         |   | 393,438          |   |   | --                 |   |   | 8,494      |  
|Depreciation - fixed assets                                     |   | 101,619          |   |   | 3,469              |   |   | 3,469      |  
|Filing and transfer agent fees                                  |   | 28,675           |   |   | 491                |   |   | 297        |  
|Financing costs                                                 |   | 22,550           |   |   | --                 |   |   | --         |  
|Funding agreement commitment costs                              |   | 345,600          |   |   | --                 |   |   | --         |  
|Interest on loans                                               |   | 7,268            |   |   | --                 |   |   | --         |  
|Management and consulting fees                                  |   | 797,002          |   |   | 15,000             |   |   | 23,841     |  
|Office expenses, net                                            |   | 220,236          |   |   | 6,909              |   |   | 3,083      |  
|Option payment, mineral properties                              |   | 30,000           |   |   | --                 |   |   | --         |  
|Professional fees                                               |   | 249,013          |   |   | 2,650              |   |   | 8,667      |  
|Promotion, investor relations,                                  |   |                  |   |   |                    |   |   |            |  
|and
      investor communications                               |   | 88,711           |   |   | 845                |   |   | --         |  
|Travel expenses                                                 |   | 50,566           |   |   | 577                |   |   | 387        |  
|Website marketing/Banner                                        |   |                  |   |   |                    |   |   |            |  
|advertising costs                                               |   | 300,726          |   |   | 4,038              |   |   | 5,630      |  
|                                                                |   | 2,822,904        |   |   | 71,479             |   |   | 53,868     |  
|Profit (Loss) Before Income Taxes                               |   | (2,821,640       | ) |   | (71,479            | ) |   | (53,868    | )
|Deferred income taxes                                           |   | (52,500          | ) |   | --                 |   |   | --         |  
|                                                                |   |                  |   |   |                    |   |   |            |  
|Net profit (loss) for the period                                | $ | (2,769,140       | ) | $ | (71,479            | ) | $ | (53,868    | )
|                                                                |   |                  |   |   |                    |   |   |            |  
|Weighted Average Share Outstanding                              |   |                  |   |   |                    |   |   |            |  
|Basic                                                           |   |                  |   |   | 17,079,166         |   |   | 15,630,000 |  
|Diluted                                                         |   |                  |   |   | 19,079,166         |   |   | 17,130,000 |  
|                                                                |   |                  |   |   |                    |   |   |            |  
|Net loss per common share(Note 8)                               |   |                  |   |   |                    |   |   |            |  
|Basic                                                           |   |                  |   |   | (0.00              | ) | $ | (0.00      | )
|Diluted                                                         |   |                  |   |   | (0.00              | ) | $ | (0.00      | )

See Accompanying Notes and Independent Accountants' Review
  Report

F-3

---

|ONLINE INNOVATION, INC.                 
|----------------------------------------
|(A Delaware Corporation)                
|(A Development Stage Company)           
|Statement of Retained Earnings (Deficit)
|(In U.S. Dollars)                       
|(Unaudited)                             

|                                       |   | Cumulative From  |   |   |                    |   |   |            |  
|-------------------------------------- | - | ---------------- | - | - | ------------------ | - | - | ---------- | -
|                                       |   | Inception Date   |   |   |                    |   |   |            |  
|                                       |   | of Aug 1, 1997   |   |   | Three Months Ended |  
|                                       |   | to September 30, |   |   | September 30,      |  
|                                       |   | 2004             |   |   | 2004               |   |   | 2003       |  
|                                       |   |                  |   |   |                    |   |   |            |  
|Balance (deficit), beginning of period | $ | --               |   | $ | (2,697,661         | ) | $ | (2,381,230 | )
|                                       |   |                  |   |   |                    |   |   |            |  
|Net profit (loss) for the period       |   | (2,769,140       | ) |   | (71,479            | ) |   | (53,868    | )
|                                       |   |                  |   |   |                    |   |   |            |  
|Balance (deficit), end of period       | $ | (2,769,140       | ) | $ | (2,769,140         | ) | $ | (2,435,098 | )

See Accompanying Notes and Independent Accountants' Review
  Report

F-4

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|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Statement of Cash Flows      
|(In U.S. Dollars)            
|**(Unaudited)**              

|                                                                |   | Cumulative From  |   |   |                    |   |   |         |  
|--------------------------------------------------------------- | - | ---------------- | - | - | ------------------ | - | - | ------- | -
|                                                                |   | Inception Date   |   |   |                    |   |   |         |  
|                                                                |   | on Aug 1, 1997   |   |   | Three Months Ended |  
|                                                                |   | to September 30, |   |   | September 30,      |  
|                                                                |   | 2004             |   |   | 2004               |   |   | 2003    |  
|                                                                |   |                  |   |   |                    |   |   |         |  
|Cash Provided by (Used for)                                     |   |                  |   |   |                    |   |   |         |  
|Operating Activities                                            |   |                  |   |   |                    |   |   |         |  
|Net profit (loss) for the period                                | $ | (2,769,140       | ) | $ | (71,479            | ) | $ | (53,868 | )
|Items not requiring use of cash:                                |   |                  |   |   |                    |   |   |         |  
|Shares
      issued for funding agreement                       |   |                  |   |   |                    |   |   |         |  
|commitment costs                                                |   | 345,600          |   |   | --                 |   |   | --      |  
|Shares
      issued for assignment of                           |   |                  |   |   |                    |   |   |         |  
|option on mineral properties                                    |   | 30,000           |   |   | --                 |   |   | --      |  
|Shares
      issued for compensation                            |   |                  |   |   |                    |   |   |         |  
|on stock options                                                |   | 150,000          |   |   | --                 |   |   | --      |  
|Shares
      issued for private business                        |   | 200,000          |   |   | --                 |   |   | --      |  
|Shares
      cancellation                                       |   | (82,250          | ) |   | --                 |   |   | --      |  
|Shares
      issued for services and loan payable               |   | 95,417           |   |   | --                 |   |   | --      |  
|Depreciation
      - fixed assets                               |   | 101,619          |   |   | 3,469              |   |   | 3,469   |  
|Amortization
      of computer software development stage costs |   | 37,500           |   |   | 37,500             |   |   | --      |  
|Cumulative
      currency translation adjustments               |   | (7,790           | ) |   | --                 |   |   | (5,142  | )
|Changes in non-cash working capital
      items                 |   |                  |   |   |                    |   |   |         |  
|Deferred
      income tax                                       |   | (52,500          | ) |   | --                 |   |   | --      |  
|Accounts
      payable                                          |   | 96,268           |   |   | (533               | ) |   | 6,059   |  
|Management fees payable                                         |   | 117,500          |   |   | 15,000             |   |   | 5,000   |  
|Cash used for operating activities                              |   | (1,737,776       | ) |   | (16,043            | ) |   | (44,482 | )
|Investing Activities                                            |   |                  |   |   |                    |   |   |         |  
|Computer software development                                   |   |                  |   |   |                    |   |   |         |  
|Application
      development stage costs                       |   | (325,000         | ) |   | --                 |   |   | --      |  
|Fixed assets purchased                                          |   | (117,089         | ) |   | --                 |   |   | --      |  
|Cash used for investing purposes                                |   | (442,089         | ) |   | --                 |   |   | --      |  
|Financing Activities                                            |   |                  |   |   |                    |   |   |         |  
|Capital stock subscribed                                        |   | 2,112,000        |   |   | 15,000             |   |   | --      |  
|Loan payable                                                    |   | 28,846           |   |   | 3,846              |   |   | 40,000  |  
|Due to related parties                                          |   | 45,067           |   |   | --                 |   |   | 955     |  
|Cash provided by financing activities                           |   | 2,185,913        |   |   | 18,846             |   |   | 40,955  |  
|Cash increase (decrease)                                        |   |                  |   |   |                    |   |   |         |  
|during the period                                               |   | 6,048            |   |   | 2,803              |   |   | (3,527  | )
|Cash, Beginning of period                                       |   | --               |   |   | 3,245              |   |   | 9,806   |  
|                                                                |   |                  |   |   |                    |   |   |         |  
|Cash, End of period                                             | $ | 6,048            |   | $ | 6,048              |   | $ | 6,279   |  

See Accompanying Notes and Independent Accountants' Review
  Report

F-5

---

|ONLINE INNOVATION, INC.                                             
|--------------------------------------------------------------------
|(A Delaware Corporation)                                            
|(A Development Stage Company)                                       
|Statement of Stockholders' Equity                                   
|From Date of Inception on August 1, 1997 to
      September 30, 2004
|(In U.S. Dollars)                                                   
|**(Unaudited)**                                                     

|                                                  |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  | Cumulative  |   |   |               |  
|------------------------------------------------- | ---------- |  | - | ------ |  | - | ---------- |  | - | --------- |  | - | --------- | - |  | ----------- | - | - | ------------- | -
|                                                  | Number of  |  |   |        |  |   | Additional |  |   | Total     |  |   | Retained  |   |  | Currency    |   |   | Total         |  
|                                                  | Common     |  |   | par    |  |   | Paid-in    |  |   | Capital   |  |   | Earnings  |   |  | Translation |   |   | Stockholders' |  
|                                                  | Shares     |  |   | Value  |  |   | Capital    |  |   | Stock     |  |   | (Deficit) |   |  | Adjustments |   |   | Equity        |  
|                                                  |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|Net loss for eleven month                         |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|period
      ended June 30, 1998                  |            |  |   |        |  |   |            |  |   |           |  | $ | (144,175  | ) |  |             |   | $ | (144,175      | )
|Issued for cash, @$0.01                           |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|October
      23, 1997                            | 1,500,000  |  | $ | 1,500  |  | $ | 13,500     |  | $ | 15,000    |  |   |           |   |  |             |   |   | 15,000        |  
|Issued for cash, @$0.001                          |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|May
      8, 1997                                 | 500,000    |  |   | 500    |  |   |            |  |   | 500       |  |   |           |   |  |             |   |   | 500           |  
|Issued for assignment of
      option on          |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|mineral
      properties, @$0.0035                |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|September 30, 1997                                | 8,500,000  |  |   | 8,500  |  |   | 21,500     |  |   | 30,000    |  |   |           |   |  |             |   |   | 30,000        |  
|                                                  | 10,500,000 |  |   | 10,500 |  |   | 35,000     |  |   | 45,500    |  |   | (144,175  | ) |  |             |   |   | (98,675       | )
|Shares subscribed and fully                       |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|paid
      and issued, @$0.50                     |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|April 6, 1999                                     | 85,000     |  |   | 85     |  |   | 42,415     |  |   | 42,500    |  |   |           |   |  |             |   |   | 42,500        |  
|Balance, June 30, 1998                            | 10,585,000 |  |   | 10,585 |  |   | 77,415     |  |   | 88,000    |  |   | (144,175  | ) |  |             |   |   | (56,175       | )
|Net loss for year ended June 30,
      1999       |            |  |   |        |  |   |            |  |   |           |  |   | (478,497  | ) |  |             |   |   | (478,497      | )
|Compensation on stock options                     |            |  |   |        |  |   | 120,000    |  |   | 120,000   |  |   |           |   |  |             |   |   | 120,000       |  
|Cumulative currency translation
      adjustments |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  | (1,055      | ) |   | (1,055        | )
|Issued for cash, @$0.50                           |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|April
      6, 1999                               | 20,000     |  |   | 20     |  |   | 9,980      |  |   | 10,000    |  |   |           |   |  |             |   |   | 10,000        |  
|Issued for cash, @$0.50                           |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|April
      6, 1999                               | 100,000    |  |   | 100    |  |   | 49,900     |  |   | 50,000    |  |   |           |   |  |             |   |   | 50,000        |  
|Issued for private business, @$0.50               |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|April
      2, 1999                               | 400,000    |  |   | 400    |  |   | 199,600    |  |   | 200,000   |  |   |           |   |  |             |   |   | 200,000       |  
|Issued for cash, @$0.50                           |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  
|April 15, 1999                                    | 1,600,000  |  |   | 1,600  |  |   | 798,400    |  |   | 800,000   |  |   |           |   |  |             |   |   | 800,000       |  
|Balance, June 30, 1999                            | 12,705,000 |  |   | 12,705 |  |   | 1,255,295  |  |   | 1,268,000 |  |   | (622,672  | ) |  | (1,055      | ) |   | 644,273       |  
|(Carried forward to next page)                    |            |  |   |        |  |   |            |  |   |           |  |   |           |   |  |             |   |   |               |  

See Accompanying Notes and Independent Accountants' Review
  Report

F-6

---

|ONLINE INNOVATION, INC.                                             
|--------------------------------------------------------------------
|(A Delaware Corporation)                                            
|(A Development Stage Company)                                       
|Statement of Stockholders' Equity                                   
|From Date of Inception on August 1, 1997 to
      September 30, 2004
|(In U.S. Dollars)                                                   
|(Unaudited)                                                         

|                                                  |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  | Cumulative  |   |  |               |  
|------------------------------------------------- | ---------- |  |  | ------ |  |  | ---------- |  |  | --------- |  |  | ---------- | - |  | ----------- | - |  | ------------- | -
|                                                  | Number of  |  |  |        |  |  | Additional |  |  | Total     |  |  | Retained   |   |  | Currency    |   |  | Total         |  
|                                                  | Common     |  |  | par    |  |  | Paid-in    |  |  | Capital   |  |  | Earnings   |   |  | Translation |   |  | Stockholders' |  
|                                                  | Shares     |  |  | Value  |  |  | Capital    |  |  | Stock     |  |  | (Deficit)  |   |  | Adjustments |   |  | Equity        |  
|Balance, June 30, 1999                            | 12,705,000 |  |  | 12,705 |  |  | 1,255,295  |  |  | 1,268,000 |  |  | (622,672   | ) |  | (1,055      | ) |  | 644,273       |  
|Cumulative currency translation
      adjustments |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  | 543         |   |  | 543           |  
|Shares subscribed and                             |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|fully
      paid, @$0.50                          |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|January
      4, 2000                             | 450,000    |  |  | 450    |  |  | 224,550    |  |  | 225,000   |  |  |            |   |  |             |   |  | 225,000       |  
|Net loss for year ended                           |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|June
      30, 2000                               |            |  |  |        |  |  |            |  |  |           |  |  | (503,489   | ) |  |             |   |  | (503,489      | )
|Issued for exercise of option                     |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|@ $0.50,
      March 13, 2000                     | 100,000    |  |  | 100    |  |  | 49,900     |  |  | 50,000    |  |  |            |   |  |             |   |  | 50,000        |  
|Compensation on stock options                     |            |  |  |        |  |  | 30,000     |  |  | 30,000    |  |  |            |   |  |             |   |  | 30,000        |  
|Exercise of warrants @ $0.50                      |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|May
      9, 2000                                 | 50,000     |  |  | 50     |  |  | 24,950     |  |  | 25,000    |  |  |            |   |  |             |   |  | 25,000        |  
|Exercise of warrants @ $0.60                      |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|June 16, 2000                                     | 66,667     |  |  | 67     |  |  | 39,933     |  |  | 40,000    |  |  |            |   |  |             |   |  | 40,000        |  
|Balance, June 30, 2000                            | 13,371,667 |  |  | 13,372 |  |  | 1,624,628  |  |  | 1,638,000 |  |  | (1,126,161 | ) |  | (512        | ) |  | 511,327       |  
|Exercise of warrants @$0.60                       |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|August
      17, 2000                             | 83,333     |  |  | 83     |  |  | 49,917     |  |  | 50,000    |  |  |            |   |  |             |   |  | 50,000        |  
|Exercise of warrants @$0.60                       |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|February
      9, 2001                            | 250,000    |  |  | 250    |  |  | 149,750    |  |  | 150,000   |  |  |            |   |  |             |   |  | 150,000       |  
|Issued for services at an ascribed                |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|price
      of $0.47 per share on                 |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|June
      11, 2001                               | 200,000    |  |  | 200    |  |  | 93,800     |  |  | 94,000    |  |  |            |   |  |             |   |  | 94,000        |  
|Issue for cash, @$0.75                            |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|June
      19, 2001                               | 50,000     |  |  | 50     |  |  | 37,450     |  |  | 37,500    |  |  |            |   |  |             |   |  | 37,500        |  
|Issued as commitment                              |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|shares
      at an ascribed                       |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|price
      of $0.54 per share on                 |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  
|June
      25, 2001                               | 640,000    |  |  | 640    |  |  | 344,960    |  |  | 345,600   |  |  |            |   |  |             |   |  | 345,600       |  
|Net loss for year ended
      June 30, 2001       |            |  |  |        |  |  |            |  |  |           |  |  | (796,776   | ) |  |             |   |  | (796,776      | )
|Cumulative currency translation  adjustments      |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  | 592         |   |  | 592           |  
|Balance, June 30, 2001                            | 14,595,000 |  |  | 14,595 |  |  | 2,300,505  |  |  | 2,315,100 |  |  | (1,922,937 | ) |  | 80          |   |  | 392,243       |  
|(Carried forward to next page)                    |            |  |  |        |  |  |            |  |  |           |  |  |            |   |  |             |   |  |               |  

See Accompanying Notes and Independent Accountants' Review
  Report

F-7

---

|ONLINE INNOVATION, INC.                                             
|--------------------------------------------------------------------
|(A Delaware Corporation)                                            
|(A Development Stage Company)                                       
|Statement of Stockholders' Equity                                   
|From Date of Inception on August 1, 1997 to
      September 30, 2004
|(In U.S. Dollars)                                                   
|(Unaudited)                                                         

|                                                  |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | Cumulative  |   |   |               |  
|------------------------------------------------- | ---------- | - | - | ------ | - | - | ---------- | - | - | --------- | - | - | ---------- | - | - | ----------- | - | - | ------------- | -
|                                                  | Number of  |   |   |        |   |   | Additional |   |   | Total     |   |   | Retained   |   |   | Currency    |   |   | Total         |  
|                                                  | Common     |   |   | par    |   |   | Paid-in    |   |   | Capital   |   |   | Earnings   |   |   | Translation |   |   | Stockholders' |  
|                                                  | Shares     |   |   | Value  |   |   | Capital    |   |   | Stock     |   |   | (Deficit)  |   |   | Adjustments |   |   | Equity        |  
|Balance, June 30, 2001                            | 14,595,000 |   |   | 14,595 |   |   | 2,300,505  |   |   | 2,315,100 |   |   | (1,922,937 | ) |   | 80          |   |   | 392,243       |  
|Cancellation of 175,000 shares
      on           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|August
      23, 2001                             | (175,000   | ) |   | (175   | ) |   | (82,075    | ) |   | (82,250   | ) |   |            |   |   |             |   |   | (82,250       | )
|Cumulative currency translation
      adjustments |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | 194         |   |   | 194           |  
|Net loss for year ended June 30, 2002             |            |   |   |        |   |   |            |   |   |           |   |   | (135,277   | ) |   |             |   |   | (135,277      | )
|Balance, June 30, 2002                            | 14,420,000 |   |   | 14,420 |   |   | 2,218,430  |   |   | 2,232,850 |   |   | (2,058,214 | ) |   | 274         |   |   | 174,910       |  
|Issued for cash @ $0.30                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|July
      22, 2002                               | 100,000    |   |   | 100    |   |   | 29,900     |   |   | 30,000    |   |   |            |   |   |             |   |   | 30,000        |  
|Issued for cash @ $0.30                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|July
      26, 2002                               | 600,000    |   |   | 600    |   |   | 179,400    |   |   | 180,000   |   |   |            |   |   |             |   |   | 180,000       |  
|Issued for loan payable @ $0.30                   |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|August
      31, 2002                             | 110,000    |   |   | 110    |   |   | 32,890     |   |   | 33,000    |   |   |            |   |   |             |   |   | 33,000        |  
|Shares subscribed and                             |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|paid
      for cash @$0.50                        |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|November
      6, 2002                            | 250,000    |   |   | 250    |   |   | 124,750    |   |   | 125,000   |   |   |            |   |   |             |   |   | 125,000       |  
|Issued for cash @ $0.40                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|April
      25, 2003                              | 100,000    |   |   | 100    |   |   | 39,900     |   |   | 40,000    |   |   |            |   |   |             |   |   | 40,000        |  
|Issued for cash @ $0.40                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|April
      25, 2003                              | 50,000     |   |   | 50     |   |   | 19,950     |   |   | 20,000    |   |   |            |   |   |             |   |   | 20,000        |  
|Cumulative currency translation
      adjustments |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | 1,126       |   |   | 1,126         |  
|Net loss for year ended                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|June 30, 2003                                     |            |   |   |        |   |   |            |   |   |           |   |   | (323,016   | ) |   |             |   |   | (323,016      | )
|Balance, June 30, 2003                            | 15,630,000 |   |   | 15,630 |   |   | 2,645,220  |   |   | 2,660,850 |   |   | (2,381,230 | ) |   | 1,400       |   |   | 281,020       |  
|Issued for cash @ $0.15                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|November
      1, 2003                            | 700,000    |   |   | 700    |   |   | 104,300    |   |   | 105,000   |   |   |            |   |   |             |   |   | 105,000       |  
|Issued for cash @ $0.15                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|December
      31, 2003                           | 50,000     |   |   | 50     |   |   | 7,450      |   |   | 7,500     |   |   |            |   |   |             |   |   | 7,500         |  
|Issued for notes payable                          |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|January
      4, 2004                             | 624,166    |   |   | 624    |   |   | 61,793     |   |   | 62,417    |   |   |            |   |   |             |   |   | 62,417        |  
|Net loss for year ended                           |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|June
      30, 2004                               |            |   |   |        |   |   |            |   |   |           |   |   | (316,431   | ) |   |             |   |   | (316,431      | )
|Cumulative currency translation adjustments       |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | (9,190      | ) |   | (9,190        | )
|Balance, June 30, 2004                            | 17,004,166 |   |   | 17,004 |   |   | 2,818,763  |   |   | 2,835,767 |   |   | (2,697,661 | ) |   | (7,790      | ) |   | 130,316       |  
|Warrants exercised                                | 100,000    |   |   | 100    |   |   | 14,900     |   |   | 15,000    |   |   |            |   |   |             |   |   | 15,000        |  
|Net loss for period ended                         |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|September 30, 2004                                |            |   |   |        |   |   |            |   |   |           |   |   | (71,479    | ) |   |             |   |   | (71,479       | )
|Balance, September 30, 2004                       | 17,104,166 |   | $ | 17,104 |   | $ | 2,833,663  |   | $ | 2,850,767 |   | $ | (2,769,140 | ) | $ | (7,790      | ) | $ | 73,837        |  

See Accompanying Notes and Independent Accountants' Review
  Report

F-8

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 1. | BUSINESS OPERATIONS            
|------- | -------------------------------
|        |                                
|        | a)                             
|        |                                
|        | b)                             
|        |                                
|Note 2. | SIGNIFICANT ACCOUNTING POLICIES

| | a) | Administration Costs                                                                                                                                                                                                
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Administration costs are written off to operations
        when incurred.                                                                                                                                           
|
| | b) | Translation of Foreign Currency                                                                                                                                                                                     
| |    | Both the functional currency and the reporting currency
        of the Company are the United States Dollar.                                                                                                        
|
| |    | The assets, liabilities, and operations of the Company
        are expressed in the United States Dollar, in conformity with US GAAP.                                                                               
|
| |    | Monetary assets and liabilities are translated at
        the current rate of exchange.                                                                                                                             
|
| |    | The weighted average exchange rate for the period
        is used to translate revenue, expenses, and gains or losses from the functional
        currency to the reporting currency.                               
|
| |    | The gain or loss on translation is reported as a
        separate component of stockholders' equity and not recognized in net income.
        Gains or losses on remeasurement are recognized in current net income.
|
| |    | Gains or losses from foreign currency transactions
        are recognized in current net income.                                                                                                                    
|
| |    | Fixed assets are measured at historical exchange
        rates that existed at the time of the transaction.                                                                                                         
|
| |    | Depreciation is measured at historical exchange
        rates that existed at the time the underlying related asset was acquired.                                                                                   
|
| |    | Capital accounts are translated at their historical
        exchange rates when the capital stock is issued.                                                                                                        
|
| |    | The effect of exchange rate changes on cash balances
        is reported in the statement of cash flows as a separate part of the reconciliation
        of change in cash and cash equivalents during the year.    

F-9

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 2. | SIGNIFICANT ACCOUNTING POLICIES
|------- | -------------------------------
|        | b)                             
|        |                                
|        |                                

| |  |                                           |   | Three Months Ended |  
| |  | ----------------------------------------- | - | ------------------ | -
| |  |                                           |   | September 30,      |  
| |  |                                           |   | 2004               |  
| |  | Beginning balance, June 30, 2004 & 2003   | $ | (7,790             | )
| |  | Change during the period                  |   | --                 |  
| |  | Ending balance, September 30, 2004 & 2003 | $ | (7,790             | )

| | c)  | Amortization of Computer Software                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Development  Application Development
        Stage Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Amortization of computer software costs
        of $325,000 commenced on July 1, 2004. The amortization period is for
        twenty-six months on a straight-line basis. Amortization of this cost
        of $37,500 has been charged to operations for the three month period ended
        September 30, 2004. The balance of $287,500 is to be amortized over future
        periods at the rate of $37,500 per quarter.                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | d)  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The preparation of financial statements
        in conformity with accounting principles generally accepted in the United
        States of America requires management to make estimates and assumptions
        that affect the reported amounts of assets and liabilities and disclosure
        of contingent assets and liabilities at the date of the financial statements
        and the reported amounts of sales and expenses during the reporting periods.
        Areas where significant judgment are made include, but are not limited
        to: revenue recognition, price protection and rebate reserves, and marketing
        program accruals. Actual results could differ materially from these estimates.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (e) | Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Cash is represented by funds on deposit
        with the Company's bankers and is unrestricted as to use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-10

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 2. | SIGNIFICANT ACCOUNTING POLICIES (cont'd)
|------- | ----------------------------------------
|        |                                         
|        | (f)                                     
|        |                                         
|        |                                         

| |  | September 30, 2004            |   | Canada  |   |   | U.S. |  |   | Total   |  
| |  | ----------------------------- | - | ------- | - | - | ---- |  | - | ------- | -
| |  | Current assets                | $ | 6,048   |   | $ | 0    |  | $ | 6,048   |  
| |  | Deferred tax assets           |   | 52,500  |   |   | 0    |  |   | 52,500  |  
| |  | Net fixed assets              |   | 15,470  |   |   | 0    |  |   | 15,470  |  
| |  | Computer software development |   | 287,500 |   |   | 0    |  |   | 287,500 |  
| |  | Total Assets                  | $ | 361,518 |   | $ | 0    |  | $ | 361,518 |  
| |  |                               |   |         |   |   |      |  |   |         |  
| |  | Revenue                       | $ | 0       |   | $ | 0    |  |   | 0       |  
| |  | Administration costs          |   | 71,479  |   |   | 0    |  |   | 71,479  |  
| |  | Net (loss) for the period     | $ | (71,479 | ) | $ | 0    |  | $ | (71,479 | )
| |  |                               |   |         |   |   |      |  |   |         |  
| |  | September 30, 2003            |   | Canada  |   |   | U.S. |  |   | Total   |  
| |  | Current assets                | $ | 6,279   |   | $ | 0    |  | $ | 6,279   |  
| |  | Deferred tax assets           |   | 52,500  |   |   | 0    |  |   | 52,500  |  
| |  | Net fixed assets              |   | 29,346  |   |   | 0    |  |   | 29,346  |  
| |  | Computer software development |   | 325,000 |   |   | 0    |  |   | 325,000 |  
| |  | Total Assets                  | $ | 413,125 |   | $ | 0    |  | $ | 413,125 |  
| |  |                               |   |         |   |   |      |  |   |         |  
| |  | Revenue                       | $ | 0       |   | $ | 0    |  |   | 0       |  
| |  | Administration costs          |   | 53,868  |   |   | 0    |  |   | 53,868  |  
| |  | Net (loss) for the period     | $ | (53,868 | ) | $ | 0    |  | $ | (53,868 | )

| | (g) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | In August, 2001, the FASB issued Statement of Financial
        Accounting Standards No. 143, "Accounting for Asset Retirement Obligations"
        ("SFAS 143"). SFAS 143 addresses financial accounting and reporting for
        obligations associated with the retirement of tangible long-lived assets
        and the associated asset retirement costs. SFAS 143 applies to all entities.
        It applies to legal obligations associated with the retirement of long-lived
        assets that result from the acquisition, construction, development and
        / or the normal operation of a long-lived asset, except for certain obligations
        of lessees. SFAS 143 requires that the fair value of a liability for an
        asset retirement obligation be recognized in the period in which it is
        incurred if a reasonable estimate of fair value can be made. The associated
        asset retirement costs are capitalized as part of the carrying amount
        of the long-lived asset. SFAS 143 is effective for financial statements
        issued for fiscal years beginning after June 15, 2002. The Company adopted
        SFAS 143. SFAS 143 does not have a material effect on the Company's results
        of operations, financial position or liquidity.

F-11

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 2. | SIGNIFICANT ACCOUNTING POLICIES
|------- | -------------------------------
|        |                                
|        | (g)                            
|        |                                
|        |                                
|        |                                
|        |                                
|        |                                
|        |                                
|        |                                
|Note 3. | CAPITAL STOCK                  
|        |                                
|        | a)                             
|        |                                
|        | b)                             

| |    |                                                               |         |  | Shares         |  |   | $                     
| | -- | ------------------------------------------------------------- | ------- |  | -------------- |  | - | ----------------------
| |    | Balance, June 30, 2004                                        |         |  | 17,004,166     |  | $ | 2,835,767             
| |    | Warrants exercised                                            |         |  | 100,000        |  |   | 15,000                
| |    | Balance, September 30, 2004                                   |         |  | 17,104,166     |  | $ | 2,850,767             
| |    |                                                               |         |  |                |  |   |                       
| | c) | Warrants outstanding as at September 30, 2004 are as follows: |         |  |                |  |   |                       
| |    |                                                               |         |  |                |  |   |                       
| |    |                                                               | Units   |  | Exercise Price |  |   | Maturity
      Date   
| |    | 482047 B.C. Ltd.                                              | 500,000 |  | 0.20           |  |   | November
      4, 2005

F-12

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 4. | RELATED PARTY TRANSACTIONS
|------- | --------------------------
|        |                           
|        | a)                        
|       
|        |                           
|       
|        |                           
|       
|        | b)                        



| |    |                                                                            | Chad D. Lee                       |   | 4,000,000 |  | common shares
| | -- | -------------------------------------------------------------------------- | --------------------------------- | - | --------- |  | -------------
| |    |                                                                            | Marlene C. Schluter               |   | 4,000,000 |  | common shares
| |    |                                                                            |                                   |   | 8,000,000 |  |              
| |    |                                                                            |                                   |   |           |  |              
| | c) | Loans to the Company unpaid as
      at September 30, 2004 are as follows: |                                   |   |           | 
| |    |                                                                            |                                   |   |           |  |              
| |    |                                                                            | Netgain Management Solutions Inc. | $ | 7,660     |  |              
| |    |                                                                            | Chad D. Lee                       |   | 20,000    |  |              
| |    |                                                                            | Snowy Creek Resources Ltd.        |   | 7,407     |  |              
| |    |                                                                            | Marlene C. Schluter               |   | 10,000    |  |              
| |    |                                                                            |                                   | $ | 45,067    |  |              

| |  | Netgain Management Solutions Inc. is a Company owned
        by Mr. Chad D. Lee, Chief Executive Officer, Director and a shareholder
        of the company. Snowy Creek Resources Ltd. is a Company owned by Ms. Marlene
        C. Schluter, Chief Financial Officer, Director, Secretary, and Treasurer
        and a shareholder of the company. These loans are non interest bearing,
        are unsecured, and have no specific terms of repayment, and are disclosed
        as current liabilities in these financial statements.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 5. | FIXED ASSETS - COMPUTER EQUIPMENT
      The Company depreciates its computer equipment using
        the declining-balance basis at the rate of 30% per annum. The cost and
        accumulated depreciation are as follows:
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                          |   | September
      30, |  
| | ------------------------ | - | ------------------- | -
| |                          |   | 2004                |  
| | Cost                     | $ | 117,089             |  
| | Accumulated depreciation |   | (101,619            | )
| | Net balance              | $ | 15,470              |  

|Note 6. | COMPUTER TECHNOLOGY
        AND WEBSITE COSTS
|------- | ---------------------------------------------
|        |                                              
|        | a)                                           
|        |                                              
|        |                                              
|        |                                              
|        |                                              
|        | b)                                           
|        |                                              

| |  |                                |   | September 30, |  
| |  | ------------------------------ | - | ------------- | -
| |  |                                |   | 2004          |  
| |  | Balance, June 30, 2004         | $ | 325,000       |  
| |  | Amortization during the period |   | (37,500       | )
| |  | Balance, September 30, 2004    | $ | 287,500       |  

F-14

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 7. | STOCK BASED COMPENSATION/ PENSION PLAN
|------- | --------------------------------------
|        |                                       
|        | a)                                    
|        |                                       
|        | b)                                    

|Note 8. | NET LOSS PER SHARE                                                                                                               
|------- | ---------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                  
|        | Net loss per common share is computed by dividing
      net loss by the weighted average of shares outstanding during the period.
|        |                                                                                                                                  
|        | Computation of basic and diluted weighted average
      number of shares outstanding:                                            

| |                                    |   | September 30, |  
| | ---------------------------------- | - | ------------- | -
| |                                    |   | 2004          |  
| | Basic                              |   | 17,079,166    |  
| | Warrants                           |   | 500,000       |  
| | Options                            |   | 1,500,000     |  
| | Diluted                            |   | 19,079,166    |  
| |                                    |   |               |  
| | Computation of net loss per share: |   |               |  
| |                                    |   | September 30, |  
| |                                    |   | 2004          |  
| | Net loss per share - Basic         | $ | (0.00         | )
| | Net loss per share - Diluted       | $ | (0.00         | )

|Note 9.  | INCOME TAXES
      The Company has losses carried forward to future years
        of $2,769,140. The potential tax benefit has not been recorded, as an
        equivalent reserve has been provided due to uncertainty of application
        of the losses.                                                                                                                                                                                         
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Note 10. | FINANCIAL INSTRUMENTS
      The Company's financial instruments consist of cash,
        accounts payable, management fees payable, loan payable, and due to related
        parties. It is management's opinion that the Company is not exposed to
        significant interest, currency or credit risks arising from these financial
        instruments. The fair value of these financial instruments approximates
        their carrying values.

F-15

---

|ONLINE INNOVATION, INC.      
|-----------------------------
|(A Delaware Corporation)     
|(A Development Stage Company)
|Notes to Financial Statements
|September 30, 2004           
|(In U.S. Dollars)            
|**(Unaudited)**              

|Note 11. | LOANS PAYABLE                                                                                                                                                                                                                                                                                                                
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                              
|         | (a)                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                              
|         | (b)                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                              
|Note 12. | CONSULTING AGREEMENTS
      A consulting agreement between Fortune Capital Management
        and the Company is effective on August 1, 2002. The Company agrees to
        pay the Consultant a consulting fee of $2,500 per month. The unpaid portion
        of these consulting fees as at September 30, 2004 is $30,000.

F-16

---

Item 2  Plan of Operation

General

The Company's business is conducted through its website, www.VirtuallyDating.com.
  The primary focus of the www.VirtuallyDating.com website is matchmaking. In
  addition to providing matchmaking services for single adults through a specialized
  search engine for members, the site provides various interactive, entertainment
  related components that facilitate social interaction between members.

The Company's website has been fully operational since September
  3, 2002. The Company hopes to generate revenues through the sale of memberships
  which will permit users to access the website. Prior to the full launch of the
  website, memberships were offered free of charge. Since the site became fully
  operational the Company has been working towards developing a user base through
  the sale of memberships. The Company is currently offering free 10-day trials
  and an introductory special in which users may purchase a 1-year membership
  for $19.95. The Company intends to continue the introductory offer until it
  has been able to carry out marketing activities to promote the website. After
  the introductory offer has been completed, memberships will be available for
  $10.95 per month, $29.95 for three months, $49.95 for 6 months and $79.95 for
  1 year.

After the website was launched the Company's intention was
  to promote the sale of memberships through various forms of marketing. The nature
  and extent of the Company's marketing efforts since the launch of the website
  have been determined in large part by the availability of capital to conduct
  marketing activities. Since the Company's revenue stream from the sale of memberships
  has been limited, the Company has had to rely on small equity financings to
  provide it with working capital for ongoing operations, including continuing
  website development and marketing. Funds available for marketing have, therefore,
  been somewhat limited. Nonetheless, the Company intends to continue to focus
  such capital as it has at its disposal on marketing the website with a view
  to increasing revenues through the sale of memberships. Available capital will
  also be utilized for maintenance and ongoing development of the Company's www.VirtuallyDating.com
  website as well as the development of its second revenue generating website,
  www.UrbanFlirt.com (discussed in further
  detail below).

The Company's initial focus over the next 12 months will be
  to secure financing on favorable terms. Once the Company's financial situation
  is clearer to management, management will make the necessary strategic decisions
  respecting marketing efforts and other uses of financial resources. Specific
  marketing strategies and website development plans are listed below. The Company
  will implement these strategies based on cost-effectiveness as resources become
  available.

Forward Looking Statements

All statements, other than statements of historical facts,
  included in this report that address activities, events or developments that
  the Company expects, believes, intends or anticipates will or may occur in the
  future, are forward-looking statements. Forward-looking statements are inherently
  subject to risks and uncertainties, many of which cannot be predicted with accuracy
  and some of which might not even be anticipated. Future events and actual results,
  financial and otherwise, could differ materially from those set forth in or
  contemplated by the forward-looking statements herein. These risks and uncertainties
  include, but are not limited to, the Company's reliance on current revenues;
  the uncertainties associated with the introduction of new products/services;
  management of growth, including the ability to attract and retain qualified
  employees; the ability to integrate acquisitions made by the Company and the
  costs associated with such acquisitions; dependence on its principal executive
  officer; substantial competition from larger companies with greater financial
  and other resources than the Company; the success of its marketing strategy;
  its dependence on suppliers for some of its products; currency fluctuations
  and other risks associated with foreign sales and foreign operations; quarterly
  fluctuations in revenues, income and overhead expense; and potential product
  liability risk associated with its existing and future products.

4

---

Readers are cautioned not to put undue reliance on forward-looking
  statements. The Company disclaims any intent or obligation to update publicly
  these forward-looking statements, whether as a result of new information, future
  events or otherwise.

Marketing Strategies

General

Management believes that marketing will be the key to the
  Company's success in the short term and in the long term. As a result, management
  intends to focus as much of its energies as possible in the upcoming 12 months
  on marketing activities. The Company intends to advertise online, through print
  media and possibly, depending on the resources available, through television,
  radio and billboards. The Company's goal is to capture 50,000 subscribing members
  in each of the three years following the launch of the website, for a total
  of 150,000 members within three years of launch. The target market for the Company's
  service is single adults, aged 18-49, with basic computer skills and access
  to the Internet. The Company intends to focus on the North American market in
  the short term and consider other markets at a later date.

As of September 30, 2004, the website had 76,318 registered
  members. The Company hopes to increase this number once it has secured the financing
  necessary to undertake more intensive marketing activities. The Company's inability
  to secure adequate financing since the launch of the website has limited its
  ability to invest money into marketing its flagship property. The Company's
  ability to undertake marketing activities in the upcoming 12 months will be
  dependent on its ability to secure financing. Readers should refer to the section
  entitled "Cash Requirements" for a discussion of the Company's attempts to raise
  capital in the past quarter and its plans to raise capital in the upcoming year.

Online Advertising

Online advertising can take a number of different forms. Banner
  advertising is the most common form. The Company intends to place banner advertisements
  on those websites which management believes will enable the Company to most
  effectively reach its target market.

Affiliations with other websites also provide an avenue for
  marketing for Internet companies. Companies with similar markets can form various
  types of strategic alliances to promote one another's products and services.
  The key component is usually a link to the affiliate company's website. In the
  upcoming 12 months, the Company will continue with its efforts to forge strategic
  partnerships with key industry players. The Company hopes that by doing so it
  will be able to increase traffic on its website.

Another form of online advertising being considered by the
  Company involves sponsoring e-mails or newsletters sent by other Internet companies.
  Through payment of a sponsorship fee, the Company would be shown as the sponsor
  of a particular e-mail or newsletter sent by an entity to its members. By selecting
  an entity with a large membership, the Company can reach large target markets.
  A message identifying the sponsor and a link to the sponsor's website are provided.

Management is exploring the various forms of online advertising
  available and intends to focus its initial energy on this sector because of
  the relatively low cost and the ability to reach its target market (i.e. personal
  computer users) effectively. It will, however, assess other marketing tools
  and utilize those which it feels will enable it to reach its target market in
  the most efficient and cost effective manner.

Print Media, T.V., Radio and Billboards

While management is of the view that online advertising is
  the most cost-effective marketing tool, it also believes that other, more traditional
  methods of marketing will be effective and must be developed to the

5

---

fullest extent possible. Management envisions placing advertisements
  in the personals sections of major newspapers and in high circulation magazines
  with general readership to brand the VirtuallyDating name and to expose the
  Company to a wider audience. Determination as to whether these types of advertisements
  will be placed will depend on funds available in the upcoming 12 months. In
  addition, advertisements on television, radio and on billboards will be considered
  and utilized if the Company has the capital available to purchase advertising
  space/time from these sources.

Current Marketing Efforts

In the period covered by this report the Company focused its
  marketing efforts on pay per click search engine placements to drive traffic
  to the website with several of the major and smaller search engine providers.
  The Company also explored and tested small opt-in (permission based) email campaigns
  as a way to expose the Company's product to a broad audience. These marketing
  activities were arranged by the Company and by marketing consultants retained
  by the Company as described below.

On August 1, 2002, the Company entered into an agreement with
  Fortune Capital Management (USA) Inc. ("Fortune"), pursuant to which Fortune
  has agreed to provide sales and marketing services to the Company. Under the
  terms of the agreement, Fortune is to provide marketing concepts for the VirtuallyDating
  website, explore strategic partnerships for the website and provide conceptual
  design for marketing materials to advertise the website. The Company pays $2,500
  per month to Fortune and reimburses Fortune for expenses incurred in carrying
  out its duties under the agreement. The Agreement was originally for a term
  of 12 months but is being continued on a month to month basis by mutual agreement
  between the parties.

Additional Website Development

The Company retains the services of 3 web-programming consultants
  to perform maintenance and additional development work on an as needed basis.
  The consultants work under the Company's direct supervision and their payment
  is tied to and based on the completion of specific tasks. The Company currently
  intends to continue to develop new features which will make the website more
  attractive to prospective members when and if funds are available. Proposed
  features may include a webpage entitled "Hey Bartender" which will provide recipes
  for alcoholic cocktails. Members will be invited to post their own favorite
  recipes on the page. Another section entitled "Postcards From Stanley" may be
  created. This section would feature travel reviews of destinations geared towards
  singles.

Urban Flirt

The Company also announced that development is underway in
  connection with a second revenue generating web property which will be known
  as "UrbanFlirt" and will be located on the web at www.urbanflirt.com. This web
  based community will feature the traditional online matchmaking components that
  have pioneered the Online Dating Industry to date. The site will feature core
  functionality such as photo upload, messaging capabilities, compatibility indicators,
  detailed matching and distance calculators. The Company's intentions are to
  design the site to appeal to the over 25-45 crowd. This demographic represents
  the highest users of Online Dating Services on the Internet today. The UrbanFlirt
  website is currently functional and is being subjected to internal testing by
  the Company. The launch of this product has been postponed by the Company until
  adequate equity financing is successfully raised to complete the final necessary
  programming and marketing to properly roll out this new property.

Purchase of Equipment

At this time, the Company does not anticipate the purchase
  of any significant equipment.

6

---

Employees

The Company currently has no full or part time employees.
  The Company retains consultants to provide it with services related to the administration,
  management and development of the Company. At this time, the Company does not
  anticipate any significant changes in staffing.

Cash Requirements

The Company currently has sufficient working capital to meet
  its operating requirements until December 15th, 2004. In order to fund business
  activity beyond this date, the Company will need to arrange additional financing.
  Website development and marketing efforts will be dependent on the Company's
  ability to raise such additional financing. Specific plans related to marketing
  and any additional website development which may occur in the upcoming months
  will be devised once financing has been completed and management knows what
  funds will be available for these purposes.

The Company intends to use available finances to fund ongoing
  operations. Funds will be utilized for general and administrative expenses,
  website maintenance and development and marketing.

Item 3  Controls And Procedures

The Company is managed exclusively by its principal executive
  officer and principal financial officer. The Company does not have management
  or employees which are separate from these 2 individuals. As a result, all disclosure
  decisions are made directly by the principal executive officer and principal
  financial officer of the Company and are based on direct knowledge of the Company's
  affairs held by them. These individuals also carry out all bookkeeping and other
  record keeping activities undertaken by the Company and make all business decisions
  for the Company. While the Company retains the services of a small number of
  consultants, none of these individuals has control over formal disclosure decisions
  or disclosure contained in documents such as press releases and financial reports.
  All formal disclosure documents are reviewed and approved by the Company's principal
  executive officer and principal financial officer and are based on first hand
  knowledge of these individuals (as opposed to knowledge derived from reports
  from employees, consultants or managers). As a consequence, the Company's principal
  executive officer and principal financial officer are of the view that the Company's
  disclosure controls and procedures are effective and result in full and true
  disclosure of material facts related to the Company's affairs.

There were no significant changes in the Company's internal
  controls or in other factors that could significantly affect these controls
  subsequent to the date of their evaluation, including any significant deficiencies
  or material weaknesses of internal controls that would require corrective action.
  There were no changes in the Company's internal control over financial reporting
  identified in connection with the Company's evaluation of its disclosure controls
  and procedures and the effectiveness of those procedures in the last fiscal
  quarter.

PART II  OTHER INFORMATION

Item 1  Legal Proceedings

There are no legal proceedings reportable pursuant to this
  section. As of the date of this report, the Company has not been served with
  notice of any legal proceedings and does not contemplate undertaking any legal
  proceedings.

7

---

Item 2 -Change in Securities

No instruments defining the rights of the holders of any class
  of registered securities were modified during the period covered by this report.
  No rights evidenced by any class of registered securities were materially limited
  or qualified by the issuance or modification of any other class of securities
  during the period covered by this report.

On November 1, 2004, the Company completed a sale of 100,000
  shares of its common stock at a price of $0.15 per share to Ms. Lenora Gates,
  for aggregate proceeds of $15,000. The shares were sold pursuant to the exercise
  of warrants issued to Ms. Gates in connection with a unit financing on November
  1, 2003. The shares were issued without registration under the Securities Act
  in reliance on the safe harbor provisions of Regulation S promulgated under
  the Securities Act. None of the purchasers of the securities was a "U.S. person"
  as that term is defined in Rule 902(o) of Regulation S and the sale of the securities
  constituted an "offshore transaction" as that term is defined in Rule 902(i)
  of Regulation S.

Item 3  Defaults Upon Senior Securities

There have been no material defaults in the payment of principal,
  interest, sinking or purchase fund installments or any other material defaults
  with respect to indebtedness of the Company exceeding 5% of the total assets
  of the Company. No material arrearage in the payment of dividends and no delinquency
  with respect to any preferred stock of the Company have occurred.

Item 4  Submission of Matters to a Vote of Security
  Holders

No matters have been submitted to a vote of security holders
  during the period covered by this report, through the solicitation of proxies
  or otherwise.

Item 5  Other Information

There is no information reportable pursuant to this section.

Item 6 - Exhibits and Reports on Form 8-K

|(a) | Exhibits                                                                         
|--- | ---------------------------------------------------------------------------------
|    |                                                                                  
|    | 31.1                                                                             
|    |                                                                                  
|    | 31.2                                                                             
|    |                                                                                  
|    | 32.1                                                                             
|    |                                                                                  
|    | 32.2                                                                             
|    |                                                                                  
|(b) | No reports on form 8-K were filed
      during the period covered by this report.

8

---

SIGNATURES

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

|Date: | November 12, 2004 |  | ONLINE INNOVATION, INC.
|----- | ----------------- |  | -----------------------
|      |                   |  |                        
|      |                   |  |                        
|      |                   |  |                        
|      |                   |  | By:                    
|      |                   |  |                        
|      |                   |  |                        
|      |                   |  |                        
|      |                   |  |                        
|      |                   |  | By:                    
|      |                   |  |                        
|      |                   |  |                        

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

|By:   | /s/ Chad D. Lee                   | 
|----- | --------------------------------- | 
|      | Chad D. Lee, President, Director, | 
|      | Principal Executive Officer       | 
|      |                                   | 
|Date: | November 12, 2004                 | 
|      |                                   | 
|      |                                   | 
|      |                                   | 
|      |                                   | 
|By:   | /s/ Marlene C. Schluter           | 
|      | Marlene C. Schluter, Director,    | 
|      | Principal Financial Officer       | 
|      |                                   | 
|Date: | November 12, 2004                 | 

9

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