---

**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 December 31, 2003

** ̈****** 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 February 12, 2004, the registrants outstanding
  common stock consisted of 16,380,000 shares.

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

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ONLINE INNOVATION, INC.

INDEX TO FORM 10QSB

|                               | PAGE NO.
|------------------------------ | --------
|                               |         
|PART I  FINANCIAL INFORMATION | 3       
|                               |         
|                               | Item 1. 
|                               |         
|                               | Item 2. 
|                               |         
|                               | Item 3. 
|                               |         
|PART II  OTHER INFORMATION    | 22      
|                               |         
|                               | Item 1. 
|                               |         
|                               | Item 2. 
|                               |         
|                               | Item 3. 
|                               |         
|                               | Item 4. 
|                               |         
|                               | Item 5. 
|                               |         
|                               | Item 6. 
|                               |         
|SIGNATURES                     |         
|                               |         
|EXHIBITS                       |         

2

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PART 1  FINANCIAL INFORMATION

Item 1  Financial Statements

Attached are the registrants unaudited financial statements
  for the six month period ended December 31, 2003, with comparative figures for
  the six month period ended December 31, 2002, and the Independent Accountants
  Report thereon.

3

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ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company) 
  Balance Sheet 
  December 31, 2003 
  (In U.S. Dollars) (With Comparative Figures at December 31, 2002)

(Unaudited)

|                                                                                                            |   | December 31, |  
|----------------------------------------------------------------------------------------------------------- | - | ------------ | -
|                                                                                                            |   | 2003         |  
|ASSETS                                                                                                      |  
|Current Assets                                                                                              |   |              |  
|Cash                                                                                                        | $ | 70,725       |  
|Shares
      subscription receivable                                                                        |   | 7,500        |  
|Prepaid
      expense                                                                                       |   | --           |  
|                                                                                                            |   | 78,225       |  
|Deferred tax asset                                                                                          |   | 52,500       |  
|Fixed assets                                                                                                |   |              |  
|Computer
      equipment, at cost less accumulated depreciation (Note 5)                                    |   | 25,877       |  
|Computer software development(Note 6(b))                                                                    |   |              |  
|Application
      development stage costs                                                                   |   | 325,000      |  
|                                                                                                            |   |              |  
|                                                                                                            | $ | 481,602      |  
|                                                                                                            |   |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                        |  
|                                                                                                            |   |              |  
|Current Liabilities                                                                                         |   |              |  
|Accounts payable                                                                                            | $ | 88,348       |  
|Management fees payable (Note
      4(a))                                                                   |   | 72,500       |  
|Due to related parties (Notes
      4(c))                                                                   |   | 45,067       |  
|Loans payable (Note 11)                                                                                     |   | 60,000       |  
|                                                                                                            |   | 265,915      |  
|                                                                                                            |   |              |  
|Stockholders' Equity                                                                                        |   |              |  
|Capital Stock (Note 3)                                                                                      |   |              |  
|Authorized:                                                                                                 |   |              |  
|75,000,000
      common shares at $0.001 par value per share                                                |   |              |  
|Issued
      and outstanding - 16,380,000 common shares (including a subscription for
      250,000 shares) |   |              |  
|(2002
      - 15,480,000 common shares)                                                                     |   | 16,380       |  
|Paid
      in capital in excess of par value of stock                                                       |   | 2,756,970    |  
|Deficit accumulated during development stage (note 1)                                                       |   | (2,551,707   | )
|Cumulative translation adjustment (Note 2(b))                                                               |   | (5,956       | )
|                                                                                                            |   | 215,687      |  
|                                                                                                            |   |              |  
|                                                                                                            | $ | 481,602      |  

|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

4

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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  |   |   | Six Months Ended |   |   | Three Months Ended |  
|                                         |   | to December 31, |   |   | December 31,     |   |   | December 31,       |  
|                                         |   | 2003            |   |   | 2003             |   |   | 2002               |   |   | 2003     |   |   | 2002     |  
|                                         |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Interest and Other Income                | $ | 582             |   | $ | 582              |   | $ | --                 |   | $ | 582      |   | $ | --       |  
|                                         |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Administration Costs                     |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Compensation on stock option             | $ | 150,000         |   | $ | --               |   | $ | --                 |   | $ | --       |   | $ | --       |  
|Funding agreement commitment
      costs |   | 345,600         |   |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|Depreciation                             |   | 91,212          |   |   | 6,938            |   |   | 6,938              |   |   | 3,469    |   |   | 3,469    |  
|Filing and transfer agent fees           |   | 27,513          |   |   | 1,756            |   |   | 4,664              |   |   | 1,459    |   |   | 4,116    |  
|Financing costs                          |   | 22,550          |   |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|Interest on loans                        |   | 4,851           |   |   | --               |   |   | 4,851              |   |   | --       |   |   | --       |  
|Management and consulting fees           |   | 748,832         |   |   | 101,313          |   |   | 80,442             |   |   | 77,472   |   |   | 54,636   |  
|Office expenses, net                     |   | 192,460         |   |   | 11,241           |   |   | 18,898             |   |   | 8,158    |   |   | 6,797    |  
|Option payment, mineral properties       |   | 30,000          |   |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|Professional fees                        |   | 237,129         |   |   | 8,667            |   |   | 8,853              |   |   | --       |   |   | 6,650    |  
|Promotion, investor relations,           |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|and investor communications              |   | 88,518          |   |   | 1,393            |   |   | 540                |   |   | 1,393    |   |   | 540      |  
|Computer technology and                  |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|software
      development-preliminary   |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|development
      stage costs            |   | 372,768         |   |   | 18,679           |   |   | 47,884             |   |   | 10,185   |   |   | 15,708   |  
|Website marketing/Banner                 |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|advertising
      costs                  |   | 251,805         |   |   | 19,447           |   |   | 20,827             |   |   | 13,817   |   |   | 16,503   |  
|Travel expenses                          |   | 41,551          |   |   | 1,625            |   |   | 865                |   |   | 1,238    |   |   | 865      |  
|                                         |   | 2,604,789       |   |   | 171,059          |   |   | 194,762            |   |   | 117,191  |   |   | 109,284  |  
|                                         |   | (2,604,207      | ) |   | (170,477         | ) |   | (194,762           | ) |   | (116,609 | ) |   | (109,284 | )
|Deferred income taxes                    |   | (52,500         | ) |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|                                         |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Net profit (loss) for the period         | $ | (2,551,707      | ) | $ | (170,477         | ) | $ | (194,762           | ) | $ | (116,609 | ) | $ | (109,284 | )
|                                         |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Net loss per share(Note 8)               |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Basic                                    | $ | (0.17           | ) | $ | (0.01            | ) | $ | (0.01              | ) | $ | (0.01    | ) | $ | (0.01    | )
|Diluted                                  | $ | (0.17           | ) | $ | (0.01            | ) | $ | (0.01              | ) | $ | (0.01    | ) | $ | (0.01    | )

See Accompanying Notes and Independent Accountants' Review
  Report

5

---

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  |   |   | Six Months Ended |   |   | Three Months Ended |  
|                                                |   | to December 31, |   |   | December 31,     |   |   | December 31,       |  
|                                                |   | 2003            |   |   | 2003             |   |   | 2002               |   |   | 2003     |   |   | 2002     |  
|Cash Provided by (Used for)                     |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Operating Activities                            |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Net profit (loss) for the period                | $ | (2,551,707      | ) | $ | (170,477         | ) | $ | (194,762           | ) | $ | (116,609 | ) | $ | (109,284 | )
|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 loan payable            |   | 33,000          |   |   | --               |   |   | 33,000             |   |   | --       |   |   | --       |  
|Depreciation                                    |   | 91,212          |   |   | 6,938            |   |   | 6,938              |   |   | 3,469    |   |   | 3,469    |  
|Cumulative
      translation adjustment         |   | (5,956          | ) |   | (7,356           | ) |   | 1,126              |   |   | (2,214   | ) |   | --       |  
|Changes in non-cash working
      capital items |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Deferred
      income tax                       |   | (52,500         | ) |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|Shares
      subscription receivable            |   | (7,500          | ) |   | (7,500           | ) |   | --                 |   |   | (7,500   | ) |   | --       |  
|Accounts
      payable                          |   | 88,348          |   |   | 48,359           |   |   | (13,242            | ) |   | 42,300   |   |   | 5,250    |  
|Management
      fees payable                   |   | 72,500          |   |   | 17,500           |   |   | (2,500             | ) |   | 12,500   |   |   | (5,000   | )
|                                                |   | (1,689,253      | ) |   | (112,536         | ) |   | (169,440           | ) |   | (68,054  | ) |   | (105,565 | )
|Investing Activities                            |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Computer software development                   |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Application
      development stage costs       |   | (325,000        | ) |   | --               |   |   | --                 |   |   | --       |   |   | --       |  
|Fixed assets purchased                          |   | (117,089        | ) |   | --               |   |   | (435               | ) |   | --       |   |   | (435     | )
|                                                |   | (442,089        | ) |   | --               |   |   | (435               | ) |   | --       |   |   | (435     | )
|Financing Activities                            |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Capital stock subscribed                        |   | 2,097,000       |   |   | 112,500          |   |   | 335,000            |   |   | 112,500  |   |   | 125,000  |  
|Loan payable (repayment)                        |   | 60,000          |   |   | 60,000           |   |   | (85,000            | ) |   | 20,000   |   |   | --       |  
|Loan from Fusion Capital (repayment)            |   | --              |   |   | --               |   |   | (50,000            | ) |   | --       |   |   | --       |  
|Due to related parties                          |   | 45,067          |   |   | 955              |   |   | --                 |   |   | --       |   |   | --       |  
|                                                |   | 2,202,067       |   |   | 173,455          |   |   | 200,000            |   |   | 132,500  |   |   | 125,000  |  
|Cash increase (decrease)                        |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|during the period                               |   | 70,725          |   |   | 60,919           |   |   | 30,125             |   |   | 64,446   |   |   | 19,000   |  
|Cash, Beginning of period                       |   | --              |   |   | 9,806            |   |   | 12,972             |   |   | 6,279    |   |   | 24,097   |  
|                                                |   |                 |   |   |                  |   |   |                    |   |   |          |   |   |          |  
|Cash, End of period                             | $ | 70,725          |   | $ | 70,725           |   | $ | 43,097             |   | $ | 70,725   |   | $ | 43,097   |  

See Accompanying Notes and Independent Accountants' Review
  Report

6

---

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  |   |   | Six Months Ended |   |   | Three Months Ended |  
|                                       |   | to December 31, |   |   | December 31,     |   |   | December 31,       |  
|                                       |   | 2003            |   |   | 2003             |   |   | 2002               |   |   | 2003       |   |   | 2002       |  
|                                       |   |                 |   |   |                  |   |   |                    |   |   |            |   |   |            |  
|Balance (deficit), beginning of period | $ | --              |   | $ | (2,381,230       | ) | $ | (2,058,214         | ) | $ | (2,435,098 | ) | $ | (2,143,692 | )
|                                       |   |                 |   |   |                  |   |   |                    |   |   |            |   |   |            |  
|Net profit (loss) for the period       |   | (2,551,707      | ) |   | (170,477         | ) |   | (194,762           | ) |   | (116,609   | ) |   | (109,284   | )
|                                       |   |                 |   |   |                  |   |   |                    |   |   |            |   |   |            |  
|Balance (deficit), end of period       | $ | (2,551,707      | ) | $ | (2,551,707       | ) | $ | (2,252,976         | ) | $ | (2,551,707 | ) | $ | (2,252,976 | )

See Accompanying Notes and Independent Accountants' Review
  Report

7

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Statement of Stockholders' Equity From Date of Inception on August 1, 1997 to December 31, 2003 
  (In U.S. Dollars) (Unaudited)

|                                      | Number of  |  |   |        |  |   | Additional |  |   | Total     |  |   | Retained   |   |  | Cumulative  |   |   | Total         |  
|------------------------------------- | ---------- |  | - | ------ |  | - | ---------- |  | - | --------- |  | - | ---------- | - |  | ----------- | - | - | ------------- | -
|                                      | Common     |  |   | par    |  |   | Paid-in    |  |   | Capital   |  |   | Earnings   |   |  | Translation |   |   | Stockholders' |  
|                                      | Shares     |  |   | Value  |  |   | Capital    |  |   | Stock     |  |   | (Deficit)  |   |  | Adjustment  |   |   | 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 translation adjustment     |            |  |   |        |  |   |            |  |   |           |  |   |            |   |  | (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       |  
|Cumulative translation adjustment     |            |  |   |        |  |   |            |  |   |           |  |   |            |   |  | 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       |  
|(Carried forward to next
      page)  |            |  |   |        |  |   |            |  |   |           |  |   |            |   |  |             |   |   |               |  

See Accompanying Notes and Independent Accountants' Review
  Report

8

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Statement of Stockholders' Equity From Date of Inception on August 1, 1997 to December 31, 2003
  (In U.S. Dollars) (Unaudited)

|                                      | Number of  |   |   |        |   |   | Additional |   |   | Total     |   |   | Retained   |   |   | Cumulative  |   |   | Total         |  
|------------------------------------- | ---------- | - | - | ------ | - | - | ---------- | - | - | --------- | - | - | ---------- | - | - | ----------- | - | - | ------------- | -
|                                      | Common     |   |   | par    |   |   | Paid-in    |   |   | Capital   |   |   | Earnings   |   |   | Translation |   |   | Stockholders' |  
|                                      | Shares     |   |   | Value  |   |   | Capital    |   |   | Stock     |   |   | (Deficit)  |   |   | Adjustment  |   |   | Equity        |  
|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 translation adjustment     |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | 592         |   |   | 592           |  
|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 translation adjustment     |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | 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 translation adjustment     |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | 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         |  
|Net loss for period ended             |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   |             |   |   |               |  
|December 31, 2003                     |            |   |   |        |   |   |            |   |   |           |   |   | (170,477   | ) |   |             |   |   | (170,477      | )
|Cumulative translation adjustment     |            |   |   |        |   |   |            |   |   |           |   |   |            |   |   | (7,356      | ) |   | (7,356        | )
|Balance, December 31, 2003            | 16,380,000 |   | $ | 16,380 |   | $ | 2,756,970  |   | $ | 2,773,350 |   | $ | (2,551,707 | ) | $ | (5,956      | ) | $ | 215,687       |  

See Accompanying Notes and Independent Accountants' Review
  Report

9

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

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

10

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

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

| |  |  |                                          |   | Year Ended   |   |  
| |  |  | ---------------------------------------- | - | ------------ | - | -
| |  |  |                                          |   | December 31, |   |  
| |  |  |                                          |   | 2003         |   |  
| |  |  | Beginning balance, June 30, 2003 & 2002  | $ | 1,400        |   | $
| |  |  | Changes during the period                |   | (7,356       | ) |  
| |  |  | Ending balance, December 31, 2003 & 2002 | $ | (5,956       | ) | $

| | c) | Amortization of Computer Software
        Development  Application Development Stage Costs
      The company is in the application development stage
        relating to the development of computer software, and accordingly, costs
        are capitalized. When the company is in the post-implementation / operation
        stage, costs will be expensed as incurred.
      Amortization of computer software costs of $325,000
        will commence when the software service is available to be marketed. The
        amortization period is for twenty-six months on a straight-line basis.
        The software is not available to be marketed as at December 31, 2003,
        and therefore no amortization of this cost has been charged to operations
        for the six month period ended December 31, 2003.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

11

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ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

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

| |  | December 31, 2003             |   | Canada   |   |   | U.S. |  |   | Total    |  
| |  | ----------------------------- | - | -------- | - | - | ---- |  | - | -------- | -
| |  | Current assets                | $ | 78,225   |   | $ | 0    |  | $ | 78,225   |  
| |  | Deferred tax assets           |   | 52,500   |   |   | 0    |  |   | 52,500   |  
| |  | Net fixed assets              |   | 25,877   |   |   | 0    |  |   | 25,877   |  
| |  | Computer software development |   | 325,000  |   |   | 0    |  |   | 325,000  |  
| |  | Total Assets                  | $ | 481,602  |   | $ | 0    |  | $ | 481,602  |  
| |  |                               |   |          |   |   |      |  |   |          |  
| |  | Revenue                       | $ | 582      |   |   | 0    |  |   | 582      |  
| |  | Administration costs          |   | 171,059  |   |   | 0    |  |   | 171,059  |  
| |  | Net (loss) for the year       | $ | (170,477 | ) | $ | 0    |  | $ | (170,477 | )
| |  |                               |   |          |   |   |      |  |   |          |  
| |  | December 31, 2002             |   | Canada   |   |   | U.S. |  |   | Total    |  
| |  | Current assets                | $ | 45,306   |   | $ | 0    |  | $ | 45,306   |  
| |  | Deferred tax assets           |   | 52,500   |   |   | 0    |  |   | 52,500   |  
| |  | Net fixed assets              |   | 39,753   |   |   | 0    |  |   | 39,753   |  
| |  | Computer software development |   | 325,000  |   |   | 0    |  |   | 325,000  |  
| |  | Total Assets                  | $ | 462,559  |   | $ | 0    |  | $ | 462,559  |  
| |  |                               |   |          |   |   |      |  |   |          |  
| |  | Revenue                       | $ | 0        |   |   | 0    |  |   | 0        |  
| |  | Administration costs          |   | 194,762  |   |   | 0    |  |   | 194,762  |  
| |  | Net (loss) for the year       | $ | (194,762 | ) | $ | 0    |  | $ | (194,762 | )

| | 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 for the current fiscal year. SFAS 143 does not have a material
        effect on the Companys results of operations, financial position
        or liquidity.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

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

| |  |  |                                | Shares     |  |   | $         | 
| |  |  | ------------------------------ | ---------- |  | - | --------- | 
| |  |  | Balance, June 30, 2003         | 15,630,000 |  | $ | 2,660,850 | 
| |  |  | Issued during six month period |            |  |   |           | 
| |  |  | ended December 31, 2003        | 750,000    |  |   | 112,500   | 
| |  |  | Balance, December 31, 2003     | 16,380,000 |  | $ | 2,773,350 | 

13

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

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

| |  |  |  | Chad D. Lee         | 5,500,000 | common shares
| |  |  |  | ------------------- | --------- | -------------
| |  |  |  | Marlene C. Schluter | 2,500,000 | common shares
| |  |  |  |                     | 8,000,000 |              

| | c) | Loans to the Company unpaid as at December 31, 2003 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.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (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:
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  |                          |   | December 31, |  
| |  |  |  | ------------------------ | - | ------------ | -
| |  |  |  |                          |   | 2003         |  
| |  |  |  | Cost                     | $ | 117,089      |  
| |  |  |  | Accumulated depreciation |   | (91,212      | )
| |  |  |  | Net balance              | $ | 25,877       |  

|Note 6. | COMPUTER TECHNOLOGY AND
        WEBSITE COSTS 
|------- | ----------------------------------------------
|        |                                               
|        | a)                                            
|        |                                               
|        |                                               
|        |                                               
|        |                                               
|        |                                               
|        | b)                                            
|        |                                               
|Note 7. | STOCK BASED COMPENSATION/
        PENSION PLAN
|        |                                               
|        | a)                                            
|        |                                               
|        | b)                                            

15

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

|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:
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |         | December 31, |  |           
| | ------- | ------------ |  | ----------
| |         | 2003         |  | 2002      
| | Basic   | 16,380,000   |  | 15,480,000
| | Options | 1,500,000    |  | 1,500,000 
| | Diluted | 17,880,000   |  | 16,980,000

| | Computation of net loss per share:
| | ----------------------------------

| |                              |   | December 31, |   |  
| | ---------------------------- | - | ------------ | - | -
| |                              |   | 2003         |   |  
| | Net loss per share - Basic   | $ | (0.01        | ) | $
| | Net loss per share - Diluted | $ | (0.01        | ) | $

|Note 9.  | INCOME TAXES
      The Company has losses carried forward to future years of $2,551,707.
        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, loans 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.

16

---

ONLINE INNOVATION, INC. (A Delaware Corporation) 
  (A Development Stage Company)Notes to Financial Statements
  December 31, 2003
  (In U.S. Dollars)
  (Unaudited)

|Note 11. | LOANS PAYABLE
      On July 4, 2003, the Company arranged financing of $40,000
        and issued Convertible Bridge Financing Notes, whereby the Company promises
        to pay $20,000 each to Ross Kraemer and Fortune Capital Management, respectively,
        with interest at 10% per annum, and maturity date of January 4, 2004.
        After January 4, 2004, the Holders shall have the right, at their options
        to convert the principal amount of the notes, together with all accrued
        interest into fully paid and non-assessable shares of the Companys
        common stock at a conversion price of $0.10 per share.
      On October 1, 2003, November 1, 2003, the Company arranged
        financing of $20,000 and issued Convertible Bridge Financing Notes, whereby
        the Company promises to pay $10,000 each to Michael-John James Ross and
        Fortune Capital Management Inc., respectively with interest at 10% per
        annum, and maturity date of January 1, 2004. After January 4, 2004, the
        Holders shall have the right, at their options to convert the principal
        amount of the notes, together with all accrued interest into fully paid
        and non-assessable shares of the Companys common stock at a conversion
        price of $0.10 per share.
      The loans payable are summarized as at December 31,
        2003, as follows:
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Name of Holders            |   | Amount | 
| | -------------------------- | - | ------ | 
| | Ross Kraemer               | $ | 20,000 | 
| | Fortune Capital Management |   | 30,000 | 
| | Michael-John James Ross    |   | 10,000 | 
| |                            | $ | 60,000 | 

|Note 12. | CONSULTING AGREEMENTS
|-------- | ---------------------
|         |                      
|         | (a)                  
|         |                      
|         | (b)                  
|         |                      
|         | (c)                  
|         |                      
|         | (d)                  

17

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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 website
  became fully operational on September 3, 2002, when the e-commerce portion of
  the website and certain value added components were completed.

Prior to full launch the website was available for use free
  of charge and had developed an established user base of approximately 39,000
  members. 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. This introductory
  offer was originally made for a 30 day period but has been extended by the Company
  for an indefinite period. 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.

With the full launch of the website the Company now intends
  to focus its energies on marketing the website in order to develop a paying
  member base and generate revenues. The Company is not currently certain, however,
  exactly what resources will be devoted to marketing or what steps will be taken
  in this area. The Companys current financial resources are still limited.
  The Company will, therefore, initially be working towards securing 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. Over the next 12 months,
  depending on resources available, management anticipates that administrative
  expenses, ongoing website maintenance costs, development costs (related to proposed
  new products) and marketing will be the Companys primary expenses. Specific
  marketing strategies 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. 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.

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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.

The website was launched in July 2000, but the e-commerce
  component of the website, which includes the fee payment infrastructure, was
  not operational until September 3, 2002. Prior to September 3, 2002, therefore,
  memberships were offered free of charge. 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. As of February 10, 2004, the website had 66,244 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 spend money on marketing. 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

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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

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.

Investor Relations / Corporate & Strategic Planning

On November 24, 2003 the Company entered into a consulting
  agreement with Westport Strategic Partners, Inc. (Westport). Under
  the terms of the consulting agreement Westport is to provide an independent
  research report on the Companys business and distribute the report to
  potential investors. In addition, Westport is to provide consultation to the
  Company on shareholder relations and assist the Company in strategic planning
  for potential mergers, acquisitions and strategic relationships. The Company
  is required to pay a fee of $3,000 per month to Westport. The agreement is for
  a term of 3 months, after which it will continue on a month to month basis unless
  one of the parties gives 10 business days written notice that it does not wish
  to continue with the consulting agreement for an additional one month period.

Additional Website Development

The Company retains the services of 3 web-programming consultants
  to perform maintenance and additional development work. The consultants work
  under the Companys direct supervision and are paid by the Company on a
  monthly basis. 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. 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.

In addition to the foregoing, on July 15, 2002, the Company
  entered into a consulting agreement with Jon Wiggens, pursuant to which Mr.
  Wiggens has agreed to provide graphic design services to the Company for both
  the VirtuallyDating website and the Companys corporate website. In addition,
  Mr. Wiggens will provide the Company with graphic design services in connection
  with its ongoing marketing efforts, in the areas of both print media and online
  marketing. The agreement was originally for a term of 3 months but is currently
  being continued on a month to month basis. The Company is required to pay Mr.
  Wiggens a monthly fee of $3,000 (CDN) for services performed under the agreement
  and to reimburse Mr. Wiggens or expenses incurred in carrying out his duties
  under the agreement.

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Urban Flirt

The company also recently announced that development is underway
  to launch 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, compatability 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 company intends to
  launch the initial version of this web community in early Spring 2004.

Purchase of Equipment

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

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 April 30, 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.

On November 1, 2003, the Company completed a sale of 700,000
  units at a price of $0.15 per unit for aggregate cash proceeds of $105,000.
  Each unit consisted of one share of the Companys common stock and one
  share purchase warrant. Each warrant entitles the purchaser to purchase one
  additional share of the Companys common stock at a price of $0.15 at any
  time during the first year after the purchase of the units or at a price of
  $0.20 at any time during the second year after the purchase of the units. The
  warrants are exercisable for a period of two years after the purchase of the
  units.

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

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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.

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, 2003, the Company completed a sale of 700,000
  units at a price of $0.15 per unit for aggregate cash proceeds of $105,000.
  The units were issued to three separate purchasers (Ms. Lenora Gates and Mr.
  Noble Larsen as to 100,000 units each and 482047 B.C. Ltd. as to 500,000 units).
  Each unit consisted of one share of the Companys common stock and one
  share purchase warrant. Each warrant entitles the purchaser to purchase one
  additional share of the Companys common stock at a price of $0.15 at any
  time during the first year after the purchase of the units or at a price of
  $0.20 at any time during the second year after the purchase of the units. The
  warrants are exercisable for a period of two years after the purchase of the
  units. The units 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 has 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.

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Item 5  Other Information

There is no information reportable pursuant to this section.

Item 6 - Exhibits and Reports on Form 8-K

|(a) | Exhibits                                                                         
|--- | ---------------------------------------------------------------------------------
|    |                                                                                  
|    | 15                                                                               
|    |                                                                                  
|    | 31.1                                                                             
|    |                                                                                  
|    | 31.2                                                                             
|    |                                                                                  
|    | 32.1                                                                             
|    |                                                                                  
|    | 32.2                                                                             
|    |                                                                                  
|(b) | No reports on form 8-K were filed during the period
      covered by this report.

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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: | February 12, 2004 |     | ONLINE INNOVATION, INC.          
|----- | ----------------- | --- | ---------------------------------
|      |                   |     | (Registrant)                     
|      |                   |     |                                  
|      |                   | By: | /s/ Chad D. Lee                  
|      |                   |     | Chad D. Lee, President, Director,
|      |                   |     | Principal Executive Officer      
|      |                   |     |                                  
|      |                   | By: | /s/ Marlene C. Schluter          
|      |                   |     | Marlene C. Schluter, Director,   
|      |                   |     | Principal Financial Officer      

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: | February 12, 2004                                                    | 
|      |                                                                      | 
|By:   | /s/ Marlene C. Schluter                                              | 
|      | Marlene C. Schluter, Director, 
      Principal Financial Officer    | 
|      |                                                                      | 
|Date: | February 12, 2004                                                    | 

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