**SECURITIES
          AND EXCHANGE COMMISSION**
 **WASHINGTON,
          D.C. 20549**
 **FORM
        10-Q-A**
 
  (MARK
                  ONE)x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934FOR
                  THE QUARTERLY PERIOD ENDED JUNE 30, 2005*OR*o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934FOR
                  THE TRANSITION PERIOD FROM __________ TO
                  __________
 
 COMMISSION
        FILE NUMBER: 1-13861
  **MED-EMERG
        INTERNATIONAL INC.**
 
 (Exact
        Name of Registrant as Specified in Its Charter)
 
 PROVINCE
        OF ONTARIO, CANADA
 (State
        or Other Jurisdiction of Incorporation or Organization)
  6711
                Mississauga Road, Suite 404Mississauga,
                  Ontario, Canada
              L5N
                  2W3(Address
                  of Principal Executive Offices)
              (Zip
                  Code)
 
 Registrant’s
        telephone number, including area code: (905) 858-1368
 
 Securities
        registered or to be registered pursuant to Section 12(g) of the
        Act.
  (Title
                  of each
                  class)
              (Name
                  of each
                  exchange on which registered)COMMON
                  STOCK, NO PAR VALUE
              OTC
                  Bulletin BoardREDEEMABLE
                  COMMON STOCKPURCHASE
                  WARRANTS
              OTC
                  Bulletin Board
 
 Securities
        for which there is a reporting obligation pursuant to Section 15(d) of the
        Act.
        NONE
  Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 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 o
  Indicate
        by check mark whether registrant is an accelerated filer (as defined in Exchange
        Act Rule 12(b)-2). Yes o
        No x
 
 The
        aggregate market value of the shares of Common Stock (based upon the closing
        sales price of the Company’s Common Stock as reported on the OTC Bulletin Board
        on June 30, 2005) of the registrant held by non-affiliates was approximately
        US$19,232,000.
 
 As
        of
        June 30, 2005, 58,277,696 shares of the registrant’s Common Stock were
        outstanding.
 
 (All
        figures in US dollars unless otherwise indicated.)


1
 
 
 **MED-EMERG
        INTERNATIONAL INC.**
 
 JUNE
        30, 2005 QUARTERLY REPORT ON FORM 10-Q
 
 
 TABLE
        OF CONTENTS
  
 PART
                  I: FINANCIAL INFORMATIONItem
                  1.
              Financial
                  StatementsItem
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  OperationsItem
                  3.
              Quantitative
                  and Qualitative Disclosures about Market RiskItem
                  4.
              Controls
                  and ProceduresPART
                  II: OTHER INFORMATIONItem
                  5.
              Exhibits
                  and Reports on Form 8-K(a)
                  Exhibits(b)
                  Reports on Form 8-KSignatures
 
 
  
 2
 
 **SPECIAL
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 This
        Quarterly Report on Form 10-Q contains forward-looking statements as defined
        by
        the Private Securities Litigation Reform Act of 1995. Forward-looking statements
        include statements concerning plans, objectives, goals, strategies, future
        events or performance and underlying assumptions and other statements, which
        are
        other than statements of historical facts. These statements are subject to
        uncertainties and risks including, but not limited to, product and service
        demand and acceptance, changes in technology, economic conditions, the impact
        of
        competition and pricing, government regulation, and other risks defined in
        this
        document and in statements filed from time to time with the Securities and
        Exchange Commission. All such forward-looking statements are expressly qualified
        by these cautionary statements and any other cautionary statements that may
        accompany the forward-looking statements. In addition, Med Emerg International
        Inc. (“MEII” or the “Company”) disclaims any obligations to update any
        forward-looking statements to reflect events or circumstances after the date
        hereof.
 
 **PART
        I: FINANCIAL INFORMATION**
 
 **ITEM
        1.**  **CONDENSED FINANCIAL STATEMENTS**
 
 Revised
        Consolidated Balance Sheets as at June 30, 2005 (unaudited) and December
        31,
        2004 (audited)
 
 Revised
        Consolidated Statement of Operations and Deficit for the three months and
        six
        months ended June 30, 2005 and 2004 (unaudited)
 
 Revised
        Consolidated Statement of Cash Flows for the three months and six months
        ended
        June 30, 2005 and 2004 (unaudited)
 
 Notes
        to Unaudited Revised Consolidated Financial Statements
 
 
 
 
 
 3
 
 
 
 **Med-Emerg
        International Inc.**
 **Revised
        Consolidated Balance Sheet**
 **As
        at June 30, 2005 (Unaudited) and December 31, 2004
        (Audited)**
 **(in
        US$)**
 
 June
                  30
              
              December
                  312005
              
              2004**Assets****Current
                  assets**Cash
              
              $
              584,460
              
              $
              2,312,156Accounts
                  receivable
              
              
              1,722,415
              
              
              1,452,586Prepaid
                  expenses and other
              
              
              89,288
              
              
              72,557Discontinued
                  operations (note 4)
              
              
              1,174,475
              
              
              2,655,0983,570,638
              
              
              6,492,397Long-term
                  investment
              
              
              83,195
              
              
              83,195Property,
                  plant and equipment
              
              
              471,296
              
              
              470,243Goodwill
              
              
              237,596
              
              
              237,596Discontinued
                  operations (note 4)
              
              
              30,970
              
              
              38,596$
              4,393,695
              
              $
              7,322,027**Liabilities
                  and Shareholders' Equity****Current
                  liabilities**Accounts
                  payable and accrued liabilities
              
              $
              1,572,953
              
              $
              1,661,794Discontinued
                  operations (note 4)
              
              
              1,372,549
              
              
              3,606,4762,945,502
              
              
              5,268,270**Long-term
                  liabilities**Notes
                  payable
              
              
              599,991
              
              
              599,991Discontinued
                  operations (note 4)
              
              
              720,431
              
              
              894,5174,265,924
              
              
              6,762,778Contingent
                  liabilities (note 10)**Shareholders'
                  Equity**Capital
                  stock (note 5)
              
              
              16,044,736
              
              
              16,044,736Contributed
                  surplus (note 6)
              
              
              2,805,767
              
              
              2,536,409Deficit
              
              
              (17,902,532
              )
              
              (17,221,105
              )Cumulative
                  translation adjustment
              
              
              (820,200
              )
              
              (800,791
              )127,771
              
              
              559,249$
              4,393,695
              
              $
              7,322,027
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
 4
 
 
 **Med-Emerg
        International Inc.**
 **Revised
        Consolidated Statement of Operations and Deficit**
 **Three
        and six months ended June 30, 2005 and 2004 (Unaudited)**
 **(in
        US$)**
 
 **THREE
                  MONTHS ENDED**
              
              **SIX
                  MONTHS ENDED**June
                  30
              
              June
                  30
              
              June
                  30
              
              June
                  302005
              
              2004
              
              2005
              
              2004**Revenue**
              
              $
              3,010,613
              
              $
              2,178,969
              
              $
              6,090,045
              
              
              4,624,182**Less:
                  Physician fees and other direct costs**
              
              
              2,249,720
              
              
              1,611,143
              
              
              4,521,279
              
              
              3,512,967760,893
              
              
              567,826
              
              
              1,568,766
              
              
              1,111,215**Expenses**Salaries
                  and
                  benefits
              
              
              606,172
              
              
              494,546
              
              
              1,271,279
              
              
              910,973General
                  and administration
              
              
              203,778
              
              
              239,948
              
              
              431,746
              
              
              431,504Occupancy
                  costs
                  and supplies
              
              
              108,600
              
              
              78,282
              
              
              228,897
              
              
              169,448Closing
                  costs
              
              
              -
              
              
              592,285
              
              
              -
              
              
              592,285Travel
                  and marketing
              
              
              69,520
              
              
              63,026
              
              
              143,404
              
              
              130,222988,070
              
              
              1,468,087
              
              
              2,075,326
              
              
              2,234,432**Loss
                  before under noted items**
              
              
              (227,177
              )
              
              (900,261
              )
              
              (506,560
              )
              
              (1,123,217
              )Interest
                  income
              
              
              (1,725
              )
              
              -
              
              
              (7,115
              )
              
              0Interest
                  and
                  financing expenses
              
              
              -
              
              
              38,286
              
              
              -
              
              
              83,857Amortization
                  of
                  property, plant, and equipment
              
              
              57,305
              
              
              14,869
              
              
              99,962
              
              
              23,040Stock
                  compensation expense
              
              
              18,241
              
              
              5,076
              
              
              269,358
              
              
              45,44673,821
              
              
              58,231
              
              
              362,205
              
              
              152,343**Net
                  loss before discontinued operations**
              
              
              (300,998
              )
              
              (958,492
              )
              
              (868,765
              )
              
              (1,275,560
              )**Discontinued
                  operations**Income
                  (loss) from discontinued operations (note 4 )
              
              
              (83,525
              )
              
              234,142
              
              
              187,339
              
              
              437,394**Net
                  loss**
              
              
              (384,523
              )
              
              (724,350
              )
              
              (681,426
              )
              
              (838,166
              )Preferred
                  share
                  dividends
              
              
              -
              
              
              527
              
              
              -
              
              
              (33,223
              )Forgiveness
                  of
                  preferred share dividends
              
              
              -
              
              
              563,477
              
              
              -
              
              
              563,477**Net
                  loss attributable to common shareholders**
              
              
              (384,523
              )
              
              (160,346
              )
              
              (681,426
              )
              
              (307,912
              )**Deficit,
                  beginning of the period**
              
              
              (17,518,008
              )
              
              (16,572,875
              )
              
              (17,221,105
              )
              
              (16,425,309
              )**Deficit,
                  end of the period**
              
              $
              (17,902,531
              )
              $
              (16,733,221
              )
              $
              (17,902,531
              )
              $
              (16,733,221
              )**Basic
                  loss per common share**Continuing
                  operations
              
              $
              (0.01
              )
              $
              (0.02
              )
              $
              (0.01
              )
              $
              (0.04
              )Discontinued
                  operations
              
              $
              (0.00
              )
              $
              0.01
              
              $
              0.00
              
              $
              0.02**Weighted
                  average common shares outstanding**
              
              
              58,277,696
              
              
              25,805,515
              
              
              58,277,696
              
              
              17,687,469
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
 
 
 5
 
 
 **Med-Emerg
        International Inc.**
 **Revised
        Consolidated Statement of Cash Flows**
 **Three
        and six months ended June 30, 2005 and 2004 (Unaudited)**
 **(in
        US$)**
 
 THREE
                  MONTHS ENDED
              
              SIX
                  MONTHS ENDEDJune
                  30
              
              June
                  30
              
              June
                  30
              
              June
                  302005
              
              2004
              
              2005
              
              2004**Cash
                  Flows from Operating Activities**Net
                  loss before discontinued operations
              
              $
              (300,998
              )
              $
              (958,492
              )
              $
              (868,765
              )
              
              (1,275,560
              )Adjustments
                  for:Amortization
                  of
                  property, plant and equipment
              
              
              57,305
              
              
              14,869
              
              
              99,962
              
              
              23,040Stock
                  compensation expense
              
              
              18,241
              
              
              5,076
              
              
              269,358
              
              
              45,446(225,452
              )
              
              (938,547
              )
              
              (499,445
              )
              
              (1,207,074
              )Increase
                  (Decrease) in non-cash working capital components
              
              
              (20,165
              )
              
              223,053
              
              
              (375,402
              )
              
              162,643Discontinued
                  operations (note 4)
              
              
              (545,195
              )
              
              179,760
              
              
              (733,219
              )
              
              (216,741
              )(790,812
              )
              
              (535,734
              )
              
              (1,608,066
              )
              
              (1,261,172
              )**Cash
                  Flows from Investing Activities**Additions
                  to
                  property, plant, and equipment
              
              
              (81,850
              )
              
              (176,843
              )
              
              (101,015
              )
              
              (183,806
              )Discontinued
                  operations (note 4)
              
              
              487
              
              
              397
              
              
              794
              
              
              (11,373
              )(81,363
              )
              
              (176,446
              )
              
              (100,221
              )
              
              (195,179
              )**Cash
                  Flows from Financing Activities**Demand
                  loan
              
              
              -
              
              
              (318,017
              )
              
              -
              
              
              455,412Common
                  shares issued
              
              
              -
              
              
              4,500,000
              
              
              -
              
              
              4,500,000-
              
              
              4,181,983
              
              
              -
              
              
              4,955,412Effect
                  of foreign currency exchange rate changes
              
              
              (13,481
              )
              
              30,183
              
              
              (19,409
              )
              
              62,096**Increase
                  (decrease) in cash**
              
              
              (885,656
              )
              
              3,499,986
              
              
              (1,727,696
              )
              
              3,561,157Cash,
                  beginning of the period
              
              
              1,470,116
              
              
              441,481
              
              
              2,312,156
              
              
              380,310**Cash,
                  end of the period**
              
              $
              584,460
              
              $
              3,941,467
              
              $
              584,460
              
              
              3,941,467
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
 
 6
 
 
 **MED-EMERG
        INTERNATIONAL INC**
 **Notes
        to Unaudited Revised Consolidated Financial Statements**
 **Six
        months ended June 30, 2005 and 2004**
 
 **1. ORGANIZATION
        AND DESCRIPTION OF BUSINESS**
 
 Med-Emerg
        International Inc. (“MEII” or the “Company”) is a private sector provider of
        quality healthcare management services to the Canadian healthcare industry.
 
 The
        Company is publicly traded and listed on the OTC Bulletin Board. The Company
        completed its initial public offering in February 1998.
 
 The
        Company’s operations were divided into four units during the 2004 fiscal year.
        The contract with the Department of National Defence (“DND”) expired on March
        31, 2005. MEII’s three remaining business units are: Staffing Solutions, Medical
        Services and Healthcare Consulting.
 
 For
        Staffing Solutions, the Company provides emergency department physician and
        nurse recruitment, staffing and administrative support services to hospitals
        and
        federal corrections facilities, on a contractual basis, and physician and
        nurse
        practitioners to select long-term facilities in Ontario, British Columbia
        and
        Nova Scotia. At June 30, 2005, the Company had 38 physician and nurse staffing
        contracts.
  The
        Medical Services division provides special access Remicade ’ infusion services to patients suffering from Crohn’s disease and rheumatoid
        arthritis at clinic locations across Ontario. In November 2004, the Company
        acquired a pain management clinic and commenced offering services to Canadians
        who experience chronic pain. The Company now offers these services at three
        locations in the Greater Toronto Area.
  MEII
        provides Healthcare Consulting services to select Canadian private and public
        institutions on issues related to a variety of healthcare topics.
 
 **2. BASIS
        OF
        PRESENTATION**
 
 The
        accompanying unaudited Revised Consolidated financial statements have been
        prepared in accordance with Canadian generally accepted accounting principles
        (GAAP). These financial statements consolidate the accounts of MEII and its
        wholly owned subsidiaries: 927563 Ontario Inc., 927564 Ontario Inc., Med-Emerg
        Inc., Med-Emerg Health Centres Inc., YFMC Healthcare Inc., YFMC Healthcare
        (Alberta) Inc., Doctors on Call Ltd, CPM Health Centres Inc and OPA Locum
        Direct
        Inc.
 
 Significant
        intercompany accounts and transactions have been eliminated on
        consolidation.
 
 The
        Revised Consolidated financial statements are expressed in U.S. dollars.
        Differences between Canadian and United States accounting principles are
        described in note 8.
 
 In
        the
        opinion of management, the unaudited interim Revised Consolidated financial
        statements follow the same accounting policies and methods of application
        as the
        most recent audited annual financial statements.
 
 Operating
        results for the interim periods are not necessarily indicative of the results
        that may be expected for the year ended December 31, 2005.
 
 These
        unaudited Revised Consolidated financial statements are condensed, and do
        not
        include all disclosures required for annual financial statements, which are
        contained in the notes to the Company’s audited Revised Consolidated financial
        statements filed as part of the Company’s Form 10-K for the year ended December
        31, 2004. These unaudited Revised Consolidated financial statements, footnote
        disclosures and other information should be read in conjunction with the
        Revised
        Consolidated financial statements and the notes thereto included in the
        Company’s Annual Report on Form 10-K for the year ended December 31,
        2004.
 
 
 7
 
 **3. SUMMARY
        OF
        SIGNIFICANT ACCOUNTING POLICIES**
 
 **(a)** **Use
        of estimates**
  The
        preparation of Revised Consolidated financial statements in conformity with
        Canadian generally accepted accounting principles requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent liabilities during the reporting
        period. Significant areas requiring the use of estimates relate to: 1) the
        reported amounts of revenues and expenses, 2) the disclosure of contingent
        liabilities, 3) the carrying value of property, plant, and equipment and
        the
        rate of amortization related thereto. Actual results could differ from those
        estimates. When adjustments become necessary, those adjustments are reported
        in
        earnings in the period in which they become known.
 
 **(b)** **Long-term
        investments**
 
 Investments
        are accounted for at cost when the conditions for equity accounting are not
        present, and on the equity basis when significant influence exists. Declines
        in
        market values of investments are expensed when such declines are considered
        to
        be other than temporary.
  **(c)** **Property,
        plant, and equipment**
 
 Property,
        plant, and equipment are recorded at cost and are amortized over their estimated
        useful lives at the undernoted rates and methods:
 
 Furniture
                  and fixtures
              20%
              Declining
                  balanceComputer
                  software
              100%
              Declining
                  balanceComputer
                  hardware
              30%
              Declining
                  balanceLeasehold
                  improvements
              3-5
                  years
              Straight-line
 
 **(d)** **Goodwill**
 
 Goodwill
        is the excess of the purchase price of assets over the fair value of the
        underlying net identifiable assets. The Company has adopted CICA Handbook
        Section 3062 “Goodwill and Other Intangible Assets”, which states that goodwill
        and indefinite life intangible assets should no longer be amortized, but
        should
        be tested for impairment at least on an annual basis. The Company has determined
        that there was no condition existing to indicate a permanent decline in the
        value of the goodwill as at the period end.
 
 **(e)** **Impairment
        charges**
 
 At
        least annually and when events and circumstances warrant a review, the Company
        evaluates the
 carrying
        value of its assets for potential impairment. An impairment loss is recognized
        when the estimated net realizable value of any asset is less than its carrying
        value. Any impairment in assets is written down and charged to earnings in
        the
        year.
 
 **(f)** **Revenue
        recognition**
 
 The
        company has adopted the provisions of EIC - 123 and EITF 99-19. Both address
        the
        reporting of revenue on a gross basis as a principal versus on a net basis
        as an
        agent. The pronouncements generally state that revenue should be reported
        on a
        gross basis if:
 •
              The
                  enterprise is the primary obligor in the
                  relationship;
 •
              The
                  enterprise has latitude in establishing
                  price;
 •
              The
                  enterprise performs part of the
                  service;
 
 8
 
 
 •
              The
                  enterprise has discretion in supplier
                  selection;
 •
              The
                  enterprise is involved in the determination of service specifications;
                  and
 •
              The
                  enterprise has credit risk.
 
 With
        the exception of determining how the specific service is delivered, MEII
        meets
        the six tests identified for each of its service offerings. Accordingly revenue
        is reported on a gross basis for all business units.
  The
        following is a description of MEII’s revenue recognition policies for each of
        the significant business units.
 
 **(1) Staffing
        Solutions:**
 
 Revenue
        is reported on a gross basis.
 
 MEII
        acts as a principal in providing these services. MEII contracts with emergency
        room physician and nursing personnel to provide services to hospitals and
        correctional facilities in Ontario, British Columbia and Nova Scotia, a mix
        of
        rural and urban facilities including tertiary care centres.
 
 Contracts
        are both fee-for-service and fixed monthly contracts. Contracts are negotiated
        annually and are cancelable by either party on 60 days notice.
 
 Revenue
        is recognized on a current basis, as services are delivered.
 
 **(2) Medical
        Services:**
 
 Revenue
        is reported on a gross basis.
 
 Under
        contracts with Schering-Plough Canada and Novartis Pharmaceuticals Canada
        Inc,
        MEII acts as the coordinator for the community-based infusion of certain
        medications for the treatment of patients with rheumatoid arthritis, Chron’s
        disease and certain cancers.
 
 The
        Company acts as the principal in providing pain management treatments to
        patients in its Toronto-based clinics.
 
 Revenue
        is recognized on a current basis, as services are delivered.
 
 **(3) Healthcare
        Consulting:**
 
 Revenue
        is reported on a gross basis.
 
 MEII
        is
        involved with several provincial governments, advising on a variety of issues
        related to primary care staffing, training and integrated service delivery
        models. MEII also advises several aboriginal communities with regards to
        healthcare infrastructure service delivery issues.
 
 Revenue
        is recognized over the life of the contracts, based on pre-defined
        milestones.
 
 **(4) Government
        Healthcare Services (Includes Department of National Defence (“DND”))-
        Discontinued Operations:**
 
 Revenue
        is reported on a gross basis.
 
 MEII
        had an administrative management contract with Public Works and Government
        Services Canada (“PWGSC”) to provide personnel to Canadian armed forces across
        Canada on behalf of the Minister of National Defence.
 
 Under
        the terms of the contract, MEII had the responsibility to hire medical personnel
        and support staff and where necessary provide appropriate training and
        supervision of the work performed at the respective bases across Canada.
        MEII
        billed DND for the work performed by these individuals and in turn paid the
        medical personnel and support staff based on the terms of the respective
        contracts signed with them. This contract expired on March 31,
        2005.
 
 
 9
 
 Revenue
        is recognized on a current basis, as services are delivered.
 
 **(g)** **Future
        income taxes**
 
 The
        Company accounts for income taxes using the asset and liability method. Future
        tax assets and liabilities are recognized for the future taxes attributable
        to
        the temporary differences between the financial statement carrying amounts
        of
        existing assets and liabilities and their respective tax carrying values.
        Future
        tax assets and liabilities are measured using enacted or substantially enacted
        tax rates expected to apply to taxable income in the years in which those
        temporary differences are expected to be recovered or settled. A valuation
        allowance against future tax assets is provided to the extent that the
        realization of these future tax assets is not “more likely than
        not”.
 
 **(h)** **Cash**
 
 Cash
        consists of cash on hand and in banks.
 
 **(i)** **Foreign
        currency translation**
 
 The
        Company maintains its books and records in Canadian dollars. The Revised
        Consolidated financial statements are converted to U.S. dollars as the Company
        is a reporting issuer under the Securities laws of the United States of America.
        The translation method used is the current rate method. Under the current
        rate
        method all assets and liabilities are translated at the current rate prevailing
        at the balance sheet date, shareholders’ equity (deficit) is translated at
        historical rates and all income and expense items are translated at average
        rates for the year. Due to the fact that items in the Revised Consolidated
        financial statements are being translated at different rates according to
        their
        nature, a translation adjustment is created. This translation adjustment
        has
        been included in the cumulative translation adjustment.
 
 **(j)** **Stock
        compensation expenses**
 
 The
        Company has adopted section 3870 issued by the CICA in respect of stock based
        compensation and other stock based payments. This section requires that a
        fair
        value based method of accounting be applied to all stock based payments to
        non-employees and to direct awards of stock to employees. The standard requires
        the recognition of a compensation expense for grants of stock, stock options,
        and other equity instruments to employees based on the estimated fair value
        of
        the instruments at the grant date.
 
 **(k)** **Loss
        per share attributable to common shareholders**
 
 Basic
        loss per share attributable to common shareholders is computed by dividing
        the
        net loss attributable to common shareholders before discontinued operations
        over
        the weighted average number of common shares outstanding, including contingently
        issuable shares where the contingency has been resolved. Due to the loss
        for all
        periods presented, all potential common shares outstanding are considered
        anti-dilutive and are excluded from the calculation of diluted loss per
        share.
 
 **4. DISCONTINUED
        OPERATIONS**
 
 The
        contract with DND, to provide personnel to Canadian armed forces across Canada,
        expired on March 31, 2005. This was a significant contract generating separate
        identifiable cash flows, and hence it has been classified as a discontinued
        operation, and accounted for accordingly.
 
 10
 
 The
        summarized statements of income for the Discontinued Business for the six
        months
        ended June 30, 2005 and 2004 are as follows:
 
 Jun-05
              
              Jun-04Revenue
              
              $
              11,094,253
              
              $
              10,108,387Physician
                  fees and other direct costs
              
              
              10,344,992
              
              
              9,468,043Gross
                  margin
              
              
              749,261
              
              
              640,344Operating,
                  general and administrative expenses
              
              
              489,700
              
              
              341,630Depreciation
              
              
              6,832
              
              
              11,678Interest
                  and financing
              
              
              65,390
              
              
              83,784Income
                  from discontinued operations
              
              $
              187,339
              
              $
              203,252
 
 The
        summarized balance sheets for the Discontinued Business as at June 30, 2005
        and
        December 31, 2004 are as follows:
 
 Jun-05
              
              Dec-04Current
                  assetsCash
              
              $
              6,256
              
              $
              800Accounts
                  receivable
              
              
              1,168,219
              
              
              2,652,044Prepaid
                  expenses and other
              
              
              0
              
              
              2,2541,174,475
              
              
              2,655,098Property,
                  plant and equipment
              
              
              30,970
              
              
              38,596$
              1,205,445
              
              $
              2,693,694Current
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              1,372,549
              
              $
              3,606,4761,372,549
              
              
              3,606,476Long-term
                  liabilitesAccounts
                  payable and accrued liabilities
              
              
              720,431
              
              
              894,517$
              2,092,980
              
              $
              4,500,993Net
                  assets
              
              
              ($887,535
              )
              
              ($1,807,299
              )
  
 11
 
 **5. CAPITAL
        STOCK**
 
 On
        June
        15, 2004, the Company issued 39,360,272 common shares for $4,500,000. As
        a
        condition of the transaction, Preferred Shares, 50% of which were indirectly
        held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common
        shares; and unpaid preferred share dividends, in the amount of $579,582,
        were
        forgiven.
  The
        investment resulted from the previously announced letter of intent signed
        by
        MEII and Global Healthcare Workforce Limited (“GHW”) of London, UK.
  The
        Investors received 43,708,272 common shares of MEII, of which 39,360,272
        were
        purchased from the Company for $4,500,000 and 4,348,000 were purchased directly
        from the Preferred Shareholder for $500,000. Closing costs including legal,
        travel and due diligence costs for the equity financing amounted to $609,214,
        and were expensed during the second quarter of 2004.
  In
        addition to issuing the common shares, MEII also issued to the Investors
        and the
        former Preferred Shareholder, anti-dilution warrants (the “New Warrants”) to
        purchase common shares of MEII at prices of either $0.50 per common share
        or
        $1.00 per common share. The exercise of the New Warrants is directly tied
        to the
        exercise of existing options and warrants at $0.50 per common share and $1.00
        per common share that are currently outstanding. The exercise of the New
        Warrants is intended to allow the Investors and former Preferred Shareholder
        to
        maintain their pro rata share of their equity position.
  **6. CONTRIBUTED
        SURPLUS**
 
 During
        the first quarter of 2005, the terms of the common stock purchase warrants
        were
        amended, extending the expiry of these warrants from February 11, 2005 to
        February 11, 2006. As a result of this, stock compensation expense of $225,442
        was recorded. In addition, an amount of $25,675 has been recorded as stock
        compensation expense for options granted to an employee in 2004 for the portion
        that vested in the first quarter of 2005. These amounts have been credited
        to
        contributed surplus.
 
 During
        the second quarter of 2005, an amount of $18,241 has been recorded as stock
        compensation expense for options granted to an employee in 2004 for the portion
        that vested in the second quarter of 2005. These amounts have been credited
        to
        contributed surplus.
 
 During
        the first quarter of 2004, 100,000 options were granted with an exercise
        price
        of $0.50 per option. The options vested immediately and are available for
        a term
        of five years expiring on January 30, 2009. Due to the issuance of new options
        the fair value amounting to $40,876 has been determined using an option pricing
        model (Black Scholes) as per section 3870 of the CICA handbook. This amount
        has
        been credited to contributed surplus.
 
 During
        the second quarter of 2004, 250,000 options were granted to an employee with
        an
        exercise price of $0.115 per option. 125,000 options vest every year. Options
        for 125,000 shares were exercisable on the first anniversary and options
        for the
        remaining 125,000 would be exercisable on the second anniversary of the
        employment agreement. Due to the issuance of new options, the fair value
        amounting to $57,746 has been determined using an option pricing model (Black
        Scholes) as per section 3870 of the CICA handbook. This amount has been credited
        to contributed surplus.
 
 During
        the second quarter of 2004, 1,000,000 options were granted to each of two
        employees, and 150,000 each to two other employees, at an exercise price
        of
        $0.115 per option. Twenty per cent of these options lapsed at June 30, 2005,
        when specified earnings tests were not achieved. The remaining 80% of these
        options are subject to future earnings tests. Since the earnings tests are
        in a
        future period, no expense is recognized in the current quarter.
 
 During
        the fourth quarter of 2004, 100,000 options were granted in connection with
        the
        acquisition of the Scarborough pain clinic. An amount of $39,938 has been
        credited to contributed surplus.
 
 
 
 
 12
 
 **7. RELATED
        PARTY
        TRANSACTIONS**
 
 Consulting
        fees of approximately $28,329 (Cdn $35,000) were paid to each of two directors,
        who have been retained as consultants.
 
 **8. CANADIAN
        AND
        UNITED STATES ACCOUNTING POLICY DIFFERENCES**
 
 These
        Revised Consolidated financial statements have been prepared in accordance
        with
        Canadian generally accepted accounting principles (“Canadian GAAP”), which
        conform in all material respects with those in the United States (“U.S. GAAP”)
        during the periods presented, except with respect to the following:
 
 (a) Shareholders’
        equity (deficit)
 
 Under
        Canadian GAAP, the purchase price of an acquisition is determined based on
        the
        share price on the date the transaction is consummated. Under U.S. GAAP,
        the
        purchase price of an acquisition where shares are issued is determined based
        on
        the share price for the period surrounding the announcement date of the
        acquisition. The share price used for the YFMC Healthcare Inc. acquisition
        under
        Canadian GAAP was $1.25. The share price used for the YFMC Healthcare Inc.
        acquisition under U.S. GAAP was $1.859. The differential was allocated to
        Goodwill at that time. Subsequently the Goodwill was impaired and
        written-off.
 
 Under
        U.S. GAAP, detachable stock purchase warrants are given separate recognition
        from the primary security issued. Upon initial recognition, the carrying
        amount
        of the two securities is allocated based on the relative fair values at the
        date
        of issuance. Under Canadian GAAP, the detachable stock purchase warrants
        issued
        in conjunction with the private stock offering on January 22, 1996 and
        subsequently surrendered, have been given no recognition in the financial
        statements. Under U.S. GAAP, based on an ascribed fair value of $0.364 for
        each
        of the 1,000,000 share warrants issued, share capital would be lower by $36,406
        and, given that the stock purchase warrants were cancelled, the carrying
        amount
        of contributed surplus would be increased by $36,406.
 
 Under
        U.S. GAAP the effect on shareholders’ equity (deficit) would be adjusted as
        follows:
 
 June
                2005
              
              December
                2004Capital
                  stock (as previously shown)
              
              $
              16,044,736
              
              $
              16,044,736Capital
                  stock issued on purchase of YFMC Healthcare Inc.
              
              
              1,087,872
              
              
              1,087,872Ascribed
                  fair value of share purchase warrants issued
              
              
              (36,406
              )
              
              (36,406
              )Capital
                  stock - U.S. GAAP
              
              
              17,096,202
              
              
              17,096,202Contributed
                  surplus (as previously shown)
              
              
              2,805,767
              
              
              2,536,409Share
                  purchase warrants
              
              
              36,406
              
              
              36,406Paid-in-capital
                  - U.S. GAAP
              
              
              2,842,173
              
              
              2,572,815Deficit
                  (as previously shown)
              
              
              (17,902,532
              )
              
              (17,221,105
              )Cumulative
                  translation adjustment
              
              
              (820,200
              )
              
              (800,791
              )Shareholders’
                  equity - U.S. GAAP
              
              $
              1,215,643
              
              $
              1,647,121
 
 (b) Comprehensive
        loss
 
 Statement
        of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”
(SFAS 130), establishes standards for reporting and display of comprehensive
        loss and its components in the financial statements. Under U.S. GAAP, the
        comprehensive loss for the six months ended June 30, 2005 and 2004 would
        be
        adjusted as follows:
 
 13
 
 
 **June**
              
              **June****2005**
              
              **2004**Net
                  loss - U.S. GAAP
              
              
              ($681,426
              )
              
              ($307,912
              )Foreign
                  currency translation adjustment
              
              
              (19,409
              )
              
              75,579Comprehensive
                  loss
              
              
              ($700,835
              )
              
              ($232,333
              )
 
 **9. CONTINGENT
        LIABILITIES**
 
 (i)
              YFMC
                  HealthCare Inc (“YFMC”), a wholly owned subsidiary of the Company, is in
                  receipt of a letter from CCRA dated April 30, 2001, adjusting YFMC’s Goods
                  and Services Tax returns for the period from December 31, 1992,
                  to
                  December 31, 1996. The total amount claimed by CCRA for this period
                  is
                  $249,000. In the event that YFMC is ultimately found liable, the
                  Company
                  intends to claim an indemnity for such amount against the directors
                  and
                  certain named principals of YFMC pursuant to the Company’s rights under
                  the purchase agreement for YFMC executed on August 10, 1999. 1292363
                  Ontario Ltd, a subsidiary of YFMC, is in receipt of a letter from
                  CCRA
                  dated February 4, 2005 for YFMC’s Goods and Services Tax, and the total
                  amount claimed is $50,828. The Company’s legal counsel has advised that
                  CCRA does not intend to pursue YFMC for these amounts, and accordingly
                  no
                  provision has been made in these Revised Consolidated financial
                  statements.
 
 On
        the
        advice of the legal counsel, this note was removed in September 2005, because
        the contingency expired at that time
 
 (ii)
              There
                  is uncertainty with respect to the Company’s liability for Goods and
                  Services tax pertaining to certain services that it provides, and
                  with
                  respect to the Company’s liability for Workers Safety and Insurance Board
                  premiums pertaining to its contract with PWGSC. The measurement
                  of this
                  uncertainty is not determinable and accordingly no provision has
                  been made
                  in respect thereof in these Revised Consolidated financial
                  statements.
 
 (iii)
              There
                  is uncertainty with respect to the Company’s liability arising from a
                  contractual dispute with a customer. Based on the advice of counsel,
                  the
                  Company is of the view that it is unlikely that the Company will
                  be found
                  liablefor these costs. The costs associated with this contingent
                  liability
                  range from $400 thousand to $1.3
                  million.
 
 (iv)
              Claims
                  have been made against the Company for general damages for breach
                  of
                  contract and in tort.A claim for approximately $423,000 has been
                  made
                  against the company for wrongful termination of a person working
                  on a
                  third party contract. A second claim for unspecified damages has
                  been made
                  against the company for wrongful dismissal and breach of contract.
                  The
                  Company’s lawyers are of the view that liability, if any, would be the
                  responsibility of the third party contractor. The Company’s lawyers are of
                  the opinion that the amount claimed grossly exceeds what a court
                  would
                  award in light of the current law. Since the Company’s lawyers are of the
                  opinion that these claims are unlikely to succeed, no provision
                  has been
                  made in respect thereof in these Revised Consolidated financial
                  statements.
 
 (v)
              The
                  Company sub-leased certain premises to third parties when it disposed
                  of
                  its clinic operations. In case of payment defaults by the third
                  parties,
                  the Company could be held liable for rent on these premises. Rent
                  for
                  these premises over the next seven years, during the respective
                  lease
                  terms, totals $1.7 million. In July of this year the Company was
                  notified
                  that one of the third parties was in default on their rent, in
                  the amount
                  of $29 thousand. We have been in touch with the third party and
                  they are
                  endeavoring to remedy the
                  situation.
 
 Any
        liability resulting from the above will be reflected as a charge to income
        in
        the year incurred.
 14
 **10. COMPARATIVE
        FIGURES**
 
 Certain
        figures in the 2004 financial statements have been reclassified and restated
        to
        conform with the basis of presentation in 2005
 
 **11. REVISED
        CONSOLIDATED FINANCIAL STATEMENTS**
 
 These
        revised consolidated financial statements have been prepared to comply with
        the
        recommendations of the US Securities and Exchange Commission, which required
        the
        company to reverse the effect of the quasi reorganization and elimination
        of
        deficit. Accordingly, notes 5, 6 and 8 have been amended. In addition note
        9 for
        Contingent Liabilities has been updated. The net loss attributable to common
        shareholders and basic loss per common share from continuing and discontinued
        operations remain unchanged.
 
 
 15
 
 
 **ITEM
        2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND** **RESULTS
        OF OPERATIONS**
 
 Forward-looking
        statements of Med-Emerg International Inc. ("MEII" or the "Company) included
        herein or incorporated by reference including, but not limited to, those
        regarding future business prospects, the acquisition of additional clinics,
        the
        adequacy of capital resources and other statements regarding trends relating
        to
        various revenue and expense items, could be affected by a number of
        uncertainties and other factors beyond management’s control
 
 **BACKGROUND**
 
 Based
        in Ontario, Canada, Med Emerg International Inc (“MEII”) is an established
        health care solutions provider. Founded in 1983, initially to provide contract
        staffing of emergency room physicians and nurses, the Company has expanded
        to
        offer a wide variety of healthcare staffing solutions and medical services
        to
        governments, communities and facilities across Canada.
 
 In
        these times, with the Canadian Healthcare system facing continuous challenges
        on
        several fronts, opportunities exist for a company like MEII to deliver
        innovative solutions within the confines of the Canada Health Act. Demand
        for
        more complex services from an ageing population, the capital and human resource
        requirements of new lifesaving technology and the need to retrofit existing
        ageing facilities all place strain on the system. The situation is exacerbated
        by burn-out in the workplace caused by declining enrolments in health
        professions and increased levels of retirement by the existing practitioners.
        The increasing severity of the condition now manifests itself in daily headlines
        announcing long waiting lists for elective surgery, shortages of family
        physicians and the governments struggle to keep pace with the ever increasing
        costs of a publicly funded, universally available healthcare
        system.
  The
        Company currently employs staff covering several categories of healthcare
        professionals including physicians, dentists, pharmacists and nurses.
 
 As
        a
        healthcare solutions provider, MEII in addition to its staffing business
        provides medical services such as chronic pain management and intravenous
        infusion services for pharmaceutical companies in conveniently located
        community-based clinics.
 
 As
        a
        result of its many years of healthcare experience, MEII has developed a
        comprehensive understanding of primary care renewal, project evaluation,
        and
        healthcare human resource planning.
  The
        Company's operations are divided into three units: Staffing Solutions, Medical
        Services and Healthcare Consulting Services.
 
 **STAFFING
        SOLUTIONS**
 
 Hospitals
        are increasingly turning to third-party experts to devise and implement
        improvements to the recruitment and management of their clinical staff. We
        provide physician staffing services to approximately 38 healthcare facilities
        in
        various provinces, including rural and urban facilities as well as tertiary
        care
        centers. In 2004 the company introduced Primary Health Care Nurse Practitioners
        to our mix of healthcare providers in hospitals.
  
  
 16
 
 MEII
        has developed a unique integrated staffing solution as a result of an approach
        by the Whitby Mental Health Centre to recruit primary care physicians. Reviewing
        the patient population, the nature of the cases being treated, and the total
        cost of the current system, MEII pioneered an integrated health care model
        combining Primary Care Physicians with Primary Care Nurse Practitioners.
        This
        was the first time a nurse practitioner function was introduced into a mental
        health setting. The program, now in its ninth year of operation, has received
        high satisfaction ratings from both staff and patients, resulting in the
        Whitby
        Mental Health Centre receiving the ACE award from the Ministry of Health
        for
        Innovation in Health Care Delivery Design. In June 2002, the Centre for
        Addiction and Mental Health awarded MEII a similar contract for primary care
        services.
  Since
        1990, the Company has been involved in the provision of healthcare services
        in
        some of the most difficult environments. The Company currently provides after
        hours physician coverage to 8 federal penitentiaries in Ontario, and has
        developed a unique delivery model in a provincial penitentiary in Nova Scotia,
        using Physician Assistants supported telephonically by emergency
        physicians.
  In
        March 2005, MEII reached an understanding with the Ontario Pharmacists’
Association, to create a program to provide temporary placement of pharmacists
        in pharmacies across the province. MEII will be responsible for the recruitment,
        credentialing, placement and monitoring of the pharmacists.
 
 **MEDICAL
        SERVICES**
  In
        addition to its healthcare staffing solutions, MEII provides innovative medical
        services directly to healthcare consumers.
  *Infusion
        Services*
 In
        March 2001, Med-Emerg entered into an agreement with Schering-Plough Canada
        to
        become a coordinator for the community-based infusion of RemicadeTM, in
        Ontario.  This contract capitalizes on the Company's access to clinics for
        the treatment of patients with disabling rheumatoid arthritis and Crohn's
        disease. The Company has established over 20 infusion sites to-date and
        delivered over 6,000 infusions in 2004. MEII is expecting continued growth
        for
        this service, as the trend seems to be to move infusion services from
        institution settings into community based settings.
 
 *Pain
        Management Services*
 Med-Emerg’s
        chronic pain management service, CPM Health Centres (“CPM”), was launched in
        November 2004 with the acquisition of the Scarborough Pain Clinic. Two
        additional locations have since been opened. CPM has developed a standardized
        approach to the treatment of chronic pain, using an integrated
        multi-disciplinary approach including anesthetists, ER physicians,
        physiotherapists and chiropractors, amongst others.
 
 It
        is
        estimated that more than 10% of Canadians suffer from chronic pain (unexplained
        pain lasting more than 6 months). This equates to more than 800,000 people
        living in southern Ontario who would potentially access medical services
        for the
        treatment of pain. Existing facilities in the region are backlogged with
        waiting
        times of 4-6 months. Due to the large demand, existing facilities in the
        rural
        areas are backlogged with waiting times of between 4-12 months.
 
 With
        the objective of reducing these waiting times, the Company has created a
        two-pronged approach to improving service availability to that require
        professional chronic pain management care. The Company developed and launched
        a
        training program specifically designed to educate
 
 17
 
 emergency
        room physicians in chronic pain management. The first group has completed
        the
        didactic portion of the training program. MEII is now scheduling these doctors
        in our Toronto-area clinics to complete the clinical portion of their
        training.
 
 Preliminary
        plans have been completed to increase the capacity and throughput of the
        Scarborough clinic by doubling the number of clinical pain providers and
        increasing the hours and days of operation of the facility.
 
 Plans
        are underway to open additional sites in 2005.
 
 **HEALTHCARE
        CONSULTING**
  Over
        the years, MEII has developed significant experience in international and
        domestic healthcare consulting. Currently, the Company is involved with several
        provincial governments, advising on a variety of issues related to primary
        care
        staffing, training and integrated service delivery models. The Company is
        currently completing a project the four Atlantic Provinces (New Brunswick,
        Nova
        Scotia, PEI and Newfoundland and Labrador) and has created an innovative
        health
        human resource planning tool which is focused on a needs based model as opposed
        to the traditional supply based design. The Atlantic project has received
        wide
        recognition in the marketplace, and it is reasonable to expect new business
        opportunities as a result of this. The Company has recently been awarded
        contracts by the Canadian Nurses Association and the Canadian Medical
        Association in addition to several other smaller healthcare consulting
        projects.
 
 **GOVERNMENT
        HEALTHCARE SERVICES - DISCONTINUED OPERATIONS**
  In
        March of 2001, the Company was awarded an administrative management services
        contract, the largest of its kind, to provide medical staffing for military
        bases of the Department of National Defence (DND) across Canada. The contract
        had an initial period of three years ending on March 31, 2004, but the contract
        was amended and extended until March 31, 2005.
 
 In
        May
        2004, Public Works and Government Services Canada (PWGSC) re-tendered the
        Contract, which was set to expire March 31, 2005. The Company responded to
        the
        tender proposal and its bid was one of three considered by PWGSC. In December
        2004 MEII learned that it was not successful in its bid to win a follow-on
        contract with DND. Its contractual relationship with the Canadian government
        for
        DND medical staffing services ended on March 31, 2005.
 
 After
        learning that its bid had not been successful, in January 2005 the Company
        launched a Cdn.$100,000,000 lawsuit against the winning bidder and a former
        employee of the Company.  The Company believes that the successful bidder
        used confidential information obtained through the hiring of a former MEII
        employee to win the contract, and that the former MEII employee retained
        by the
        successful bidder breached his legal obligations by disclosing financial
        and
        other information confidential to Med-Emerg.  On January 31, 2005, the
        Company filed a complaint with the Canadian International Trade Tribunal
        (CITT).  The CITT is the administrative tribunal in Canada with the
        jurisdiction to conduct inquiries into complaints by potential suppliers
        concerning procurement by the federal government departments and agencies,
        including DND and PWGSC. In its submission to the CITT, Med-Emerg questioned
        the
        manner in which the Government of Canada’s procurement for the DND medical
        staffing contract, valued at $448,810,965, was conducted, including the
        evaluation of its proposal submitted in response to the Request for Proposal
        (RFP). Specifically, the Company alleged that PWGSC:
 
 
 18
 
 
 Ø
              Awarded
                  the contract to a bidder that did not meet the mandatory requirements
                  of
                  the bid;
 Ø
              Introduced
                  unpublished evaluation criteria to the evaluation process,
                  and
 Ø
              Failed
                  to properly apply the published evaluation
                  criteria.
  In
        filing the complaint, the company sought to terminate the contract award
        to the
        winning bidder, to have MEII awarded the contract, or in the alternative,
        to
        have a new bid process conducted.  In the further alternative, the Company
        asked that it be compensated for lost profit on the contract and the costs
        associated with the filing of the complaint. On June 15, 2005 the CITT
        ruled that the Company’s complaint against PWGSC was valid, in part, and awarded
        the Company its reasonable costs. On July 15, 2005 the Company filed an
        application for judicial review into the CITT decision. In its decision CITT
        held that PWGSC breached the applicable trade agreements in conducting its
        procurement. Despite this, the CITT declined to grant any remedy aside from
        the
        award of reasonable costs.
  **RESULTS
        OF
        OPERATIONS**
 
 NET
        LOSS BEFORE
        DISCONTINUED OPERATIONS
 
 The
        Company reported a net loss before discontinued operations of $868,765 for
        the
        six months ended June 30, 2005 compared to a net loss of $1,275,560 for the
        six
        months ended June 30, 2004. The loss amounted to $0.01 per share for continuing
        operations for the six months ended June 30, 2005 compared with a loss of
        $0.04
        per share for continuing operations for the six months ended June 30,
        2004.
  The
        Company reported a net loss before discontinued operations of $300,998 for
        the
        three months ended June 30, 2005 compared to a net loss of $958,492 for the
        three months ended June 30, 2004. The loss amounted to $0.01 per share for
        continuing operations for the three months ended June 30, 2005 compared with
        a
        loss of $0.02 per share for continuing operations for the three months ended
        June 30, 2004.
  The
        main reasons for the decrease in loss are the increased revenues, the
        non-recurrence of closing costs and the lower amounts of Interest and financing
        expenses. Furthermore, the Company continues to implement its strategic plan
        of
        realigning the business units and pursuing profitable opportunities that
        are
        consistent with its current operating strategy.
 
 REVENUE
 
 The
        Company’s revenue for the six months ended June 30, 2005 increased to
        $6,090,045, compared to $4,624,182 for the six months ended June 30, 2004
        or by
        32%.
 
 The
        Company’s revenue for the three months ended June 30, 2005 increased to
        $3,010,613, compared to $2,178,969 for the three months ended June 30, 2004
        or
        by 38%.
 
 This
        revenue increase was mainly attributable to the Medical Services Division
        where
        increases were experienced in both the Infusion Services and the Pain Management
        segments of the business.
 
 Revenue
        from the Institutional Staffing Division increased to $3,948,318 for the
        six
        months ended June 30, 2005 compared to $3,714,987 for the six months ended
        June
        30, 2004 an increase of approximately 6%.
 
 Revenue
        from the Infusion Services Division increased significantly to $836,419 for
        the
        six months ended June 30, 2005 compared to $522,390 for the six months ended
        June 30, 2004 an increase of approximately 60%. This increase results from
        a
        similar increase in the number of Remicade infusions.
 
 
 19
 
 Revenue
        from the Pain Management segment was $829,048 for the six months ended June
        30,
        2005 as compared to $NIL for the corresponding period last year. The Pain
        Management division commenced operations in November 2004.
 
 Revenue
        from the Healthcare Consulting division increased to $476,260 for the six
        months
        ended June 30, 2005 compared to $386,805 for the corresponding period in
        the
        prior year, an increase of approximately 23%.
 
 GROSS
        MARGIN
 
 Gross
        Margin (revenue less direct costs) for the six months ended June 30, 2005
        increased to $1,568,766 compared to $1,111,215 for the six months ended June
        30,
        2004, an increase of approximately 41%.
 
 Gross
        Margin (revenue less direct costs) for the three months ended June 30, 2005
        increased to $760,893 compared to $567,826 for the three months ended June
        30,
        2004, an increase of approximately 34%.
 
 This
        increase in gross margin was due to the Medical Services Division which enjoyed
        increased gross margins associated with growth in the division.
 
 OPERATING
        EXPENSES
 
 Operating
        expenses from continuing operations totaled $2,075,326 for the six months
        ended
        June 30, 2005 compared to $2,234,432 for the six months ended June 30, 2004,
        a
        decrease of approximately 7%. There was an increase in salaries and benefits
        but
        there were no closing costs as compared to the prior period.
 
 AMORTIZATION
        AND INTEREST
 
 Interest
        and financing costs were eliminated in the period, decreasing from $83,857
        for
        the six months ended June 30, 2004 to a positive balance of $7,115 for the
        six
        months ended June 30, 2005. This is due to the fact that, with the equity
        financing, the Company has reduced its reliance on banks and other financial
        institutions.
 
 INCOME
        TAXES
 
 The
        Company has loss carry forwards of approximately $8.5 million to be applied
        against future corporate income taxes. This benefit has not been reflected
        in
        these statements.
 
 **ITEM
        3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
 
 There
        are no financial instruments that are sensitive to changes in interest rates
        or
        exposed to foreign currency exchange gains/losses.
 
 **ITEM
        4: CONTROLS AND PROCEDURES**
 
 Included
        on the signature page of this report is the Certification that is required
        under
        Section 302 of the Sarbanes-Oxley Act of 2002. This section of the report
        contains information concerning the
 
 20
 
 controls
        evaluation referred to in the Section 302 Certifications and the information
        contained herein should be read in conjunction with the
        Certification.
 
 Internal
        controls are designed with the objective of ensuring that assets are
        safeguarded, transactions are authorized, and financial reports are prepared
        on
        a timely basis in accordance with generally accepted accounting principles
        in
        the United States. The disclosure procedures are designed to comply with
        the
        regulations established by the U.S. Securities and Exchange
        Commission.
 
 Internal
        controls, no matter how designed, have limitations. It is the Company's intent
        that the internal controls be conceived to provide adequate, but not absolute,
        assurance that the objectives of the controls are met on a consistent basis.
        Management plans to continue its review of internal controls and disclosure
        procedures on an ongoing basis.
 
 The
        Company's chief executive officer and chief financial officer, after supervising
        and participating in an evaluation of the effectiveness of the Company's
        internal and disclosure controls and procedures during the six months ended
        June
        30, 2005 (the "Evaluation Date"), have concluded that as of the Evaluation
        Date,
        the Company's internal and disclosure controls and procedures were
        effective.
 
 There
        were no significant changes in the Company's internal and disclosure controls
        or
        in other factors that could significantly affect such internal and disclosure
        controls subsequent to the date of their evaluation.
 
 
 
 21
 
 **PART
        II: OTHER INFORMATION**
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 (i)
              YFMC
                  HealthCare Inc (“YFMC”), a wholly owned subsidiary of the Company, is in
                  receipt of a letter from CCRA dated April 30, 2001, adjusting YFMC’s Goods
                  and Services Tax returns for the period from December 31, 1992,
                  to
                  December 31, 1996. The total amount claimed by CCRA for this period
                  is
                  $249,000. In the event that YFMC is ultimately found liable, the
                  Company
                  intends to claim an indemnity for such amount against the directors
                  and
                  certain named principals of YFMC pursuant to the Company’s rights under
                  the purchase agreement for YFMC executed on August 10, 1999. 1292363
                  Ontario Ltd, a subsidiary of YFMC, is in receipt of a letter from
                  CCRA
                  dated February 4, 2005 for YFMC’s Goods and Services Tax, and the total
                  amount claimed is $50,828. The Company’s legal counsel has advised that
                  CCRA does not intend to pursue YFMC for these amounts, and accordingly
                  no
                  provision has been made in these Revised Consolidated financial
                  statements.
 
 On
        the
        advice of the legal counsel, this note was removed in September 2005, because
        the contingency expired at that time
 
 (ii)
              There
                  is uncertainty with respect to the Company’s liability for Goods and
                  Services tax pertaining to certain services that it provides, and
                  with
                  respect to the Company’s liability for Workers Safety and Insurance Board
                  premiums pertaining to its contract with PWGSC. The measurement
                  of this
                  uncertainty is not determinable and accordingly no provision has
                  been made
                  in respect thereof in these Revised Revised Consolidated financial
                  statements.
 
 (iii)
              There
                  is uncertainty with respect to the Company’s liability arising from a
                  contractual dispute with a customer. Based on the advice of counsel,
                  the
                  Company is of the view that it is unlikely that the Company will
                  be found
                  liablefor these costs. The costs associated with this contingent
                  liability
                  range from $400 thousand to $1.3
                  million.
 
 (iv)
              Claims
                  have been made against the Company for general damages for breach
                  of
                  contract and in tort.A claim for approximately $423,000 has been
                  made
                  against the company for wrongful termination of a person working
                  on a
                  third party contract. A second claim for unspecified damages has
                  been made
                  against the company for wrongful dismissal and breach of contract.
                  The
                  Company’s lawyers are of the view that liability, if any, would be the
                  responsibility of the third party contractor. The Company’s lawyers are of
                  the opinion that the amount claimed grossly exceeds what a court
                  would
                  award in light of the current law. Since the Company’s lawyers are of the
                  opinion that these claims are unlikely to succeed, no provision
                  has been
                  made in respect thereof in these Revised Consolidated financial
                  statements.
 
 (v)
              The
                  Company sub-leased certain premises to third parties when it disposed
                  of
                  its clinic operations. In case of payment defaults by the third
                  parties,
                  the Company could be held liable for rent on these premises. Rent
                  for
                  these premises over the next seven years, during the respective
                  lease
                  terms, totals
 
 22
 
 $1.7
        million. In July of this year the Company was notified that one of the third
        parties was in default on their rent, in the amount of $29 thousand. We have
        been in touch with the third party and they are endeavoring to remedy the
        situation.
 
 **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 On
        June
        15, 2004, the Company issued 39,360,272 common shares for $4,500,000. As
        a
        condition of the transaction, Preferred Shares, 50% of which were indirectly
        held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common
        shares; and unpaid preferred share dividends, in the amount of $579,582,
        were
        forgiven.
  The
        investment resulted from the previously announced letter of intent signed
        by
        MEII and Global Healthcare Workforce Limited (“GHW”) of London, UK.
  The
        Investors received 43,708,272 common shares of MEII, of which 39,360,272
        were
        purchased from the Company for $4,500,000 and 4,348,000 were purchased directly
        from the Preferred Shareholder for $500,000. Closing costs including legal,
        travel and due diligence costs for the equity financing amounted to $609,214,
        and were expensed during the second quarter of 2004.
  In
        addition to issuing the common shares, MEII also issued to the Investors
        and the
        former Preferred Shareholder, anti-dilution warrants (the “New Warrants”) to
        purchase common shares of MEII at prices of either $0.50 per common share
        or
        $1.00 per common share. The exercise of the New Warrants is directly tied
        to the
        exercise of existing options and warrants at $0.50 per common share and $1.00
        per common share that are currently outstanding. The exercise of the New
        Warrants is intended to allow the Investors and former Preferred Shareholder
        to
        maintain their pro rata share of their equity position.
  **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 None
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None
 
 **ITEM
        5. OTHER INFORMATION**
 
 None
 
 **ITEM
        6. EXHIBITS AND REPORTS OF FORM 8-K**
 
 (a) Exhibits
 
 Exhibit
        31    
        Rule 13a-14(a)/15d-14(a) Certifications. Filed herewith.
 Exhibit
        32.1  Certification
        by the
        Chief Executive Officer Relating to a Periodic Report Containing Financial
        Statements.*
 Exhibit
        32.2  Certification
        by the
        Chief Financial Officer Relating to a Periodic Report Containing Financial
        Statements.*
 
 
 23




(b) Reports
        on
        Form 8-K
 
 Attached
 *
        The
        Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes
        of
        Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or
        otherwise subject to liability under that section, nor shall it be deemed
        incorporated by reference in any filing under the Securities Act of 1933,
        as
        amended, or the Exchange Act, except as expressly set forth by specific
        reference in such filing.
 
 
 
 
 
 
 
 24
 
  **SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        caused this report to be signed on its behalf by the undersigned thereunto
        duly
        authorized.
  MED-EMERG
                  INTERNATIONAL INC.By:
              /s/
                  Ramesh ZachariasRamesh
                  ZachariasChief
                  Executive Officer
 
 Date:
        November 30 ,
        2005
 
 
 
 25