**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





(MARK
      ONE)


x  
QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007


*OR*


o   
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934 FOR 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
            N/A(State
                or Other Jurisdiction of Incorporation or Organization)
            (IRS
                Employment Identification No.)





6711
                Mississauga Road, Suite 404Mississauga,
                Ontario, Canada
            L5N
                2W3(Address
                of Principal Executive Offices)
            (Zip
                Code)





(905)
      858-1368


(Registrant’s
      telephone number, including area code)





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 a large accelerated filer, an accelerated
      filer, or a non-accelerated filer. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one)





Large
                Accelerated Filer o
            Accelerated
                Filer o
            Non-Accelerated
                Filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x




As
      of
      November 14, 2007, 58,277,696 of the registrant’s common shares were
      outstanding. The aggregate market value of the shares of the issuer's common
      stock held by non-affiliates was approximately $4.1 million based on the last
      reported sale price of $0.16 per share on November 13, 2007 as quoted on the
      OTC
      Bulletin Board.




















1








**MED-EMERG
      INTERNATIONAL INC.**





TABLE
      OF CONTENTS





PagePART
                I:  FINANCIAL INFORMATION
            
            
            3ITEM
                1.  CONDENSED FINANCIAL STATEMENTS
            
            
            3Consolidated
                Balance Sheets at September 30, 2007 (unaudited) and December 31,
                2006
            
            
            4Consolidated
                Statements of Deficit for the three and nine months ended September
                30,
                2007 and 2006 (unaudited)
            
            
            5Consolidated
                Statements of Comprehensive Income (Loss) and Accumulated Other
                Comprehensive Loss for the three and nine months ended September
                30, 2007
                and 2006 (unaudited)
            
            
            5Consolidated
                Statement of Operations for the three and nine months ended September
                30,
                2007 and 2006 (unaudited)
            
            
            6Consolidated
                Statement of Cash Flows for the three and nine months ended September
                30,
                2007 and 2006 (unaudited)
            
            
            7Notes
                to Consolidated Financial Statements (unaudited)
            
            
            8ITEM
                3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK
            
            
            32ITEM
                4: CONTROLS AND PROCEDURES
            
            
            32PART
                II:  OTHER INFORMATION
            
            
            33ITEM
                1A.  RISK FACTORS
            
            
            33ITEM
                6. EXHIBITS
            
            
            33








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 described in
      this document and in other reports 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. 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















































3


**Med-Emerg
      International Inc.**


**Consolidated
      Balance Sheets**


**As
      at September 30, 2007 and December 31, 2006**


**(in
      US$)**





**September
                30**
            
            
            **December
                31****2007**
            
            
            **2006****ASSETS**
            
            **(Unaudited)****Current
                assets**Cash
            
            $
            2,178,026
            
            
            $
            4,028,128Accounts
                receivable
            
            
            3,523,434
            
            
            
            2,497,610Prepaid
                expenses and other
            
            
            458,359
            
            
            
            76,045Discontinued
                operations (Note 4)
            
            
            -
            
            
            
            463,8706,159,819
            
            
            
            7,065,653Property,
                plant and equipment
            
            
            1,318,042
            
            
            
            597,543Goodwill
            
            
            237,596
            
            
            
            237,596Other
                intangible assets
            
            
            445
            
            
            
            -Deferred
                clinic set-up costs
            
            
            123,347
            
            
            
            -$
            7,839,249
            
            
            $
            7,900,792**LIABILITIES
                AND SHAREHOLDERS' EQUITY****Current
                liabilities**Accounts
                payable and accrued liabilities
            
            $
            2,856,476
            
            
            $
            2,273,061Discontinued
                operations (Note 4)
            
            
            631,950
            
            
            
            880,3733,488,426
            
            
            
            3,153,434**Long-term
                liabilities**Long-term
                debt
            
            
            299,995
            
            
            
            453,369Discontinued
                operations (Note 4)
            
            
            57,629
            
            
            
            280,873Redeemable,
                convertible Series I Special shares (Note 6a)
            
            
            3,115,239
            
            
            
            2,589,1593,472,863
            
            
            
            3,323,4016,961,289
            
            
            
            6,476,835Contingent
                liabilities (Note 10)**SHAREHOLDERS'
                EQUITY**Capital
                stock (Note 6)
            
            
            16,420,668
            
            
            
            16,420,668Contributed
                surplus (Note 7)
            
            
            3,106,792
            
            
            
            3,106,792Deficit
            
            
            (17,929,711
            )
            
            
            (17,253,951
            )Accumulated
                other comprehensive income
            
            
            (719,789
            )
            
            
            (849,552
            )877,960
            
            
            
            1,423,957$
            7,839,249
            
            
            $
            7,900,792





The
      accompanying notes are an integral part of these consolidated financial
      statements.























4


**Med-Emerg
                International Inc.**


**Consolidated
                Statement of Deficit**


**For
                the three and nine months ended September 30, 2007 and September
                30, 2006
                (Unaudited)**


**(in
                US$)**








**THREE
                MONTHS ENDED**
            
            
            **NINE
                MONTHS ENDED****September
                30**
            
            
            **September
                30**
            
            
            **September
                30**
            
            
            **September
                30****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Balance,
                beginning of period, as previously reported
            
            $
            (17,717,430
            )
            
            $
            (17,316,257
            )
            
            $
            (17,253,951
            )
            
            $
            (18,077,662
            )Financial
                instruments - recognition and measurement (Note 3a)
            
            
            -
            
            
            
            -
            
            
            
            16,972
            
            
            
            -Balance,
                beginning of period
            
            
            (17,717,430
            )
            
            
            (17,316,257
            )
            
            
            (17,236,979
            )
            
            
            (18,077,662
            )Income
                (loss) attributable to common shareholders
            
            
            (212,281
            )
            
            
            357,455
            
            
            
            (692,732
            )
            
            
            1,118,860Balance,
                end of period
            
            $
            (17,929,711
            )
            
            $
            (16,958,802
            )
            
            $
            (17,929,711
            )
            
            $
            (16,958,802
            )







**Med-Emerg
      International Inc.**


**Consolidated
      Statements of Comprehensive Income (Loss) and Accumulated Other Comprehensive
      Loss**


**For
      the three and nine months ended September 30, 2007 and Septermber 30, 2006
      (Unaudited)**


**(in
      US$)**





**THREE
                MONTHS ENDED**
            
            
            **NINE
                MONTHS ENDED****September
                30**
            
            
            **September
                30**
            
            
            **September
                30**
            
            
            **September
                30****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Net
                income (loss) attributable to common shareholders
            
            $
            (212,282
            )
            
            $
            357,455
            
            
            $
            (692,732
            )
            
            $
            1,118,860Other
                comprehensive incomeChange
                in cumulative translation adjustment
            
            
            47,957
            
            
            
            37,312
            
            
            
            129,763
            
            
            
            62,537Comprehensive
                income (loss) for the period, attributable to common
                shareholders
            
            $
            (164,325
            )
            
            $
            394,767
            
            
            $
            (562,969
            )
            
            $
            1,181,397Accumulated
                other comprehensive loss, beginning of period
            
            $
            (767,746
            )
            
            $
            (767,662
            )
            
            $
            (849,552
            )
            
            $
            (792,887
            )Other
                comprehensive income
            
            
            47,957
            
            
            
            37,312
            
            
            
            129,763
            
            
            
            62,537Accumulated
                other comprehensive loss, end of period
            
            $
            (719,789
            )
            
            $
            (730,350
            )
            
            $
            (719,789
            )
            
            $
            (730,350
            )





The
      accompanying notes are an integral part of these consolidated financial
      statements.

















5





**Med-Emerg
      International Inc.**


**Consolidated
      Statement of Operations**


**Three
      months and nine months ended September 30, 2007 and 2006
      (Unaudited)**


**(in
      US$)**








**THREE
                MONTHS ENDED**
            
            
            **NINE
                MONTHS ENDED****September
                30**
            
            
            **September
                30**
            
            
            **September
                30**
            
            
            **September
                30****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**(Restated
                - see Note 4 )
            
            
            (Restated
                - see Note 4)**Revenue**
            
            $
            5,757,406
            
            
            $
            4,130,465
            
            
            $
            16,180,841
            
            
            $
            13,171,167**Physician
                fees and other direct costs**
            
            
            4,026,733
            
            
            
            3,054,833
            
            
            
            11,404,551
            
            
            
            9,521,3661,730,673
            
            
            
            1,075,632
            
            
            
            4,776,290
            
            
            
            3,649,801**Expenses**Salaries
                and
                benefits
            
            
            991,765
            
            
            
            732,591
            
            
            
            2,831,870
            
            
            
            2,144,306General
                and administration
            
            
            457,432
            
            
            
            309,674
            
            
            
            1,337,370
            
            
            
            816,132Occupancy
                costs
                and supplies
            
            
            229,717
            
            
            
            107,116
            
            
            
            565,015
            
            
            
            326,675Travel
                and marketing
            
            
            84,260
            
            
            
            57,995
            
            
            
            267,269
            
            
            
            178,7621,763,174
            
            
            
            1,207,376
            
            
            
            5,001,524
            
            
            
            3,465,875**Income/(loss)
                before undernoted items**
            
            
            (32,501
            )
            
            
            (131,744
            )
            
            
            (225,236
            )
            
            
            183,926Interest
                income, net of bank charges
            
            
            (10,084
            )
            
            
            (30,606
            )
            
            
            (63,474
            )
            
            
            (30,606
            )Interest
                on
                long-term debt
            
            
            20,660
            
            
            
            27,869
            
            
            
            89,640
            
            
            
            42,318Amortization
                of
                property, plant, and equipment
            
            
            108,331
            
            
            
            54,214
            
            
            
            250,154
            
            
            
            141,148Interest
                expense on financial liability carried at amortized cost
            
            
            3,665
            
            
            
            -
            
            
            
            12,700
            
            
            
            -Stock-based
                compensation expense
            
            
            -
            
            
            
            4,648
            
            
            
            -
            
            
            
            93,507122,572
            
            
            
            56,125
            
            
            
            289,020
            
            
            
            246,367**Loss
                before discontinued operations**
            
            
            (155,073
            )
            
            
            (187,869
            )
            
            
            (514,256
            )
            
            
            (62,441
            )**Discontinued
                operations**Income
                (loss) from discontinued operations
            
            
            (57,209
            )
            
            
            1,193,554
            
            
            
            (178,476
            )
            
            
            1,181,301Income
                taxes recovery
            
            
            -
            
            
            
            (648,230
            )
            
            
            -
            
            
            
            -**Net
                income (loss) from discontinued operations (Note
                4)**
            
            
            (57,209
            )
            
            
            545,324
            
            
            
            (178,476
            )
            
            
            1,181,301**Net
                income (loss) attributable to common shareholders**
            
            $
            (212,282
            )
            
            $
            357,455
            
            
            $
            (692,732
            )
            
            $
            1,118,860**Net
                income (loss) per common share, basic and fully
                diluted**Continuing
                operations
            
            $
            (0.003
            )
            
            $
            (0.003
            )
            
            $
            (0.009
            )
            
            $
            (0.001
            )Discontinued
                operations
            
            $
            (0.001
            )
            
            $
            0.009
            
            
            $
            (0.003
            )
            
            $
            0.020$
            (0.004
            )
            
            $
            0.006
            
            
            $
            (0.012
            )
            
            $
            0.019**Weighted
                average common shares and share equivalents,
                diluted**
            
            
            58,277,696
            
            
            
            58,277,696
            
            
            
            58,277,696
            
            
            
            58,277,696





The
      accompanying notes are an integral part of these consolidated financial
      statements.











6





**Med-Emerg
      International Inc.**


**Consolidated
      Statement of Cash Flows**


**Three
      months and nine months ended September 30, 2007 and 2006
      (Unaudited)**


**(in
      US$)**








**THREE
                MONTHS ENDED**
            
            
            **NINE
                MONTHS ENDED****September
                30**
            
            
            **September
                30**
            
            
            **September
                30**
            
            
            **September
                30****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Cash
                Flows from Operating Activities**Net
                income/(loss) before discontinued operations
            
            $
            (155,073
            )
            
            $
            (187,869
            )
            
            $
            (514,256
            )
            
            $
            (62,441
            )Adjustments
                for:Amortization
                of
                property, plant and equipment
            
            
            108,331
            
            
            
            54,214
            
            
            
            250,154
            
            
            
            141,148Interest
                expense on financial liability carried at amortized cost
            
            
            3,665
            
            
            
            -
            
            
            
            12,700
            
            
            
            -Stock
                compensation expense
            
            
            -
            
            
            
            4,648
            
            
            
            -
            
            
            
            93,507Accretion
                of
                expense on Series I Shares
            
            
            25,934
            
            
            
            24,022
            
            
            
            73,890
            
            
            
            24,022(17,143
            )
            
            
            (104,985
            )
            
            
            (177,512
            )
            
            
            196,236Decrease
                in
                non-cash working capital components
            
            
            (269,416
            )
            
            
            (339,707
            )
            
            
            (824,723
            )
            
            
            (722,283
            )Discontinued
                operations (Note 4)
            
            
            (198,898
            )
            
            
            1,147,784
            
            
            
            (186,274
            )
            
            
            1,234,223(485,457
            )
            
            
            703,092
            
            
            
            (1,188,509
            )
            
            
            708,176**Cash
                Flows from Investing Activities**Additions
                to
                property, plant, and equipment
            
            
            (125,230
            )
            
            
            (87,359
            )
            
            
            (970,653
            )
            
            
            (183,251
            )Additions
                to
                other intangible assets
            
            
            (403
            )
            
            
            -
            
            
            
            (403
            )
            
            
            -Additions
                to
                deferred development costs
            
            
            (33,349
            )
            
            
            -
            
            
            
            (123,347
            )
            
            
            -(158,982
            )
            
            
            (87,359
            )
            
            
            (1,094,403
            )
            
            
            (183,251
            )**Cash
                Flows from Financing Activities**Issuance
                of
                redeemable, convertible Series 1 Shares
            
            
            -
            
            
            
            3,106,554
            
            
            
            -
            
            
            
            3,106,554Repayment
                of
                long-term debt
            
            
            (104,100
            )
            
            
            -
            
            
            
            (153,374
            )
            
            
            -(104,100
            )
            
            
            3,106,554
            
            
            
            (153,374
            )
            
            
            3,106,554Effect
                of foreign currency exchange rate changes
            
            
            165,831
            
            
            
            37,310
            
            
            
            586,184
            
            
            
            62,538**Increase
                (decrease) in cash**
            
            
            (582,708
            )
            
            
            3,759,598
            
            
            
            (1,850,102
            )
            
            
            3,694,017Cash,
                beginning of the period
            
            
            2,760,734
            
            
            
            595,365
            
            
            
            4,028,128
            
            
            
            660,946**Cash,
                end of the period**
            
            $
            2,178,026
            
            
            $
            4,354,963
            
            
            $
            2,178,026
            
            
            $
            4,354,963





The
      accompanying notes are an integral part of these consolidated financial
      statements.














7


**MED-EMERG
      INTERNATIONAL INC**


**Notes
      to Unaudited Consolidated Financial Statements**


**Three
      and Nine Months ended September 30, 2007 and 2006**





**1.
      ORGANIZATION AND DESCRIPTION OF BUSINESS**





Med-Emerg
      International Inc. (“MedEmerg”, or the “Company”) provides quality healthcare
      solutions 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 are carried out in three units: Staffing Solutions, Medical
      Services and Healthcare Consulting.  Prior to 2005, the Company was
      also involved in the Government Healthcare Services (including Department of
      National Defence “DND”) and Family Medical Clinics. See Discontinued Operations
      - Note 4.





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. At September 30, 2007,
      the Company had about 40 physician and nurse staffing contracts in approximately
      30 facilities across Ontario.





The
      Medical Services division is comprised of infusion services and pain management
      services.  The infusion business provides special access Remicadeä infusion
      services
      to patients suffering from a variety of inflammatory disorders including 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 Toronto-area residents who experience chronic
      pain.  Since then, nine additional clinics have opened across Ontario
      and in Dartmouth, Nova Scotia.





MedEmerg
      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 consolidated financial statements have been prepared
      in
      accordance with Canadian generally accepted accounting principles (GAAP). These
      consolidated financial statements consolidate the accounts of MedEmerg and
      all
      of its wholly-owned subsidiaries: Med-Emerg Inc.; Med-Emerg Health Centres
      Inc.
      and CPM Health Centres Inc.





Intercompany
      accounts and transactions have been eliminated on consolidation.





The
      consolidated financial statements are expressed in U.S. dollars. Differences
      between Canadian and United States accounting principles are described in note
      9.





In
      the
      opinion of management, the unaudited interim 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 ending December 31, 2007.





These
      unaudited 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 consolidated financial statements filed as
      part of the Company’s Annual Report on Form 10-K for the year ended December 31,
      2006 (the “2006 Annual Report”). These unaudited consolidated financial
      statements, footnote disclosures and other information should be read in
      conjunction with the consolidated financial statements and the notes thereto
      included in the 2006 Annual Report.





8


**3.
      SUMMARY OF SIGNIFICANT CHANGES IN ACCOUNTING POLICIES**





**(a)**
            **Financial
                instruments - recognition and
                measurement**





On
      January 1, 2007, the Company adopted Section 3855 of the Canadian Institute
      of
      Chartered Accountants’ (“CICA”) Handbook, “Financial Instruments - Recognition
      and Measurement”. It describes the standards for recognizing and measuring
      financial instruments in the balance sheet and the standards for reporting
      gains
      and losses in the financial statements. Financial assets available for sale,
      assets and liabilities held for trading and derivative financial instruments,
      whether part of a hedging relationship or not, have to be measured at fair
      value.





The
      Company has made the following classifications:





o
            Cash
                and temporary investments are classified as financial assets held
                for
                trading and are measured at fair value. Gains and losses related
                to
                periodic revaluation are recorded in net
                income.


o
            Accounts
                receivable are classified as loans and receivables and are initially
                measured at fair value and subsequently measured at amortized cost
                using
                the effective interest rate method.


o
            Accounts
                payable and accrued liabilities and long-term debt are classified
                as other
                liabilities and are initially measured at fair value and subsequently
                measured at amortized cost using the effective interest rate
                method.


o
            The
                liability portion of the Series I Special Shares are classified as
                other
                liabilities and are recorded at amortized
                cost.





The
      adoption of this Section was done retroactively without restatement of the
      consolidated financial statements of prior periods. As at January 1, 2007,
      the
      impact on the consolidated balance sheet of measuring the financial assets
      and
      liabilities using the effective interest rate method was a decrease in accounts
      payable and opening deficit of $16,972.





**(b)           Comprehensive
      income**





On
      January 1, 2007, the Company adopted Section 1530 of the CICA Handbook,
“Comprehensive Income”, which describes reporting and disclosure recommendations
      with respect to comprehensive income and its components. Comprehensive income
      is
      the change in shareholders’ equity, which results from transactions and events
      from sources other than the Company’s shareholders.





The
      Company determined that the only impact of the adoption of Section 1530 of
      the
      CICA Handbook was the inclusion of the Consolidated Statements of Comprehensive
      Income (Loss) and Accumulated Other Comprehensive Loss in its financial
      statements.





**(c)           Equity**





On
      January 1, 2007, the Company adopted Section 3251 of the CICA Handbook,
“Equity”, replacing Section 3250, “Surplus”. Section 3251 describes standards
      for the presentation of equity and changes in equity for reporting period as
      a
      result of the application of Section 1530, “Comprehensive Income”.





The
      Company determined that there was no impact to its financial statements from
      the
      adoption of Section 3251 of the CICA Handbook.


9


**(d)           Hedges**





On
      January 1, 2007, the Company adopted Section 3865 of the CICA Handbook,
“Hedges”. The recommendations of this Section expand the guidelines required by
      Accounting Guideline 13 (AcG-13), “Hedging Relationships”. Section 3865
      describes when and how hedge accounting can be applied as well as the disclosure
      requirements. Hedge accounting enables the recording of gains, losses, revenues
      and expenses from the derivative financial instruments in the same period as
      for
      those related to the hedged item.





The
      Company determined that there were no hedging derivatives as at January 1,
      2007
      and accordingly there was no impact to its financial statements from the
      adoption of Section 3865 of the CICA Handbook.





**(e)           Deferred
      Clinic Set-up Costs**





During
      the year, the Company adopted the provisions of Emerging Issues Committee (EIC)
      27 “Revenues and Expenditures During the Pre-operating Period”, regarding the
      deferral and amortization of pre-operating costs over the term associated with
      which they are used.





**4.
      DISCONTINUED OPERATIONS**





**Family
      Medical Clinics Sale**





On
      September 5, 2003 the Company entered into a transaction with AIM Health Group
      Ltd. (“AIM”) to dispose of MedEmerg’s Ontario-based clinic
      operations.





On
      December 31, 2003, MedEmerg sold certain assets of the following four medical
      clinics located in the province of Alberta: Martindale Medical Centre, McKnight
      Village Medical Clinic, Jasper Avenue Medical Clinic, and West Edmonton Mall
      Medical Centre.





Ownership
      of two of the family medical clinics sold in 2003 reverted to the Company in
      2005.  During the fourth quarter of 2006 the decision was taken to
      dispose of these assets.  Effective August 1, 2007, one of these
      clinics was sold.   The Company continues with its efforts to
      sell the remaining family medical clinic.





**Government
      Healthcare Services (including Department of National
      Defence)**





In
      March of 2001, the Company was awarded an administrative management services
      contract (“the 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
      it was amended and extended until March 31, 2005.





In
      May
      2004, Public Works and Government Services Canada (“PWGSC”) re-tendered the
      Contract.  MedEmerg responded to the tender proposal and its bid was
      one of three considered by PWGSC (“the New Contract”).  In December
      2004 MedEmerg learned that it was not successful in its bid to win the New
      Contract with DND.  Its contractual relationship with the Canadian
      government for DND medical staffing services ended on March 31,
      2005.


10


The
      loss from discontinued operations is comprised of a loss from the Family Medical
      Clinics of $182,269 (2006 - a loss of $133,560) and income from the DND Contract
      of $3,793, (2006 - income of $1,314,861).





Three
                Months Ended Sept 30
            
            
            Nine
                Months Ended Sept 302007
            
            
            2006
            
            
            2007
            
            
            2006Revenue
            
            $
            144,993
            
            
            $
            176,545
            
            
            $
            479,461
            
            
            $
            601,369Physician
                fees and other direct costs
            
            
            81,652
            
            
            
            86,007
            
            
            
            244,704
            
            
            
            317,340Gross
                margin
            
            
            63,341
            
            
            
            90,538
            
            
            
            234,757
            
            
            
            284,029Operating,
                general and administrative expenses
            
            
            124,963
            
            
            
            145,986
            
            
            
            421,207
            
            
            
            417,589Interest
                and other income
            
            
            (4,413
            )
            
            
            (1,210,031
            )
            
            
            (7,974
            )
            
            
            (1,314,861
            )(57,209
            )
            
            
            1,154,583
            
            
            
            (178,476
            )
            
            
            1,181,301Income
                tax recovery
            
            
            -
            
            
            
            609,259
            
            
            
            -
            
            
            
            -Income
                (loss) from discontinued operations
            
            $
            (57,209
            )
            
            $
            545,324
            
            
            $
            (178,476
            )
            
            $
            1,181,301





Results
      of discontinued operations for 2006 have been restated to reflect the impact
      of
      the decision taken in November 2006 to discontinue the Family Medical
      Clinics.  The restatement had the following impact on the 2006
      results:





Three
                months to Sept 30, 2006
            
            
            Nine
                Months to Sept 30, 2006(as
                previously
            
            
            
            
            
            (as
                previouslyreported)
            
            
            (as
                adjusted)
            
            
            reported)
            
            
            (as
                adjusted)Revenue
            
            $
            -
            
            
            $
            176,545
            
            
            $
            -
            
            
            $
            601,369Physician
                fees and other direct costs
            
            
            -
            
            
            $
            86,007
            
            
            $
            -
            
            
            $
            317,340Gross
                margin
            
            
            -
            
            
            $
            90,538
            
            
            $
            -
            
            
            $
            284,029Operating,
                general and administrative expenses
            
            
            22,965
            
            
            
            145,986
            
            
            
            171,855
            
            
            
            417,589Interest
                and other income
            
            
            (1,229,572
            )
            
            
            (1,210,031
            )
            
            
            (1,486,716
            )
            
            
            (1,314,861
            )1,206,607
            
            
            
            1,154,583
            
            
            
            1,314,861
            
            
            
            1,181,301Income
                tax recovery
            
            
            -
            
            
            
            609,259
            
            
            
            -
            
            
            
            -Income
                from discontinued operations
            
            $
            1,206,607
            
            
            $
            545,324
            
            
            $
            1,314,861
            
            
            $
            1,181,301














11


The
      summarized balance sheets for the Discontinued Operations are as
      follows:








September
                30,
            
            
            December
                31,2007
            
            
            2006AssetsCurrentCash
            
            $
            -
            
            
            $
            1,755Accounts
                receivable
            
            
            -
            
            
            
            462,115$
            -
            
            
            $
            463,870LiabilitiesCurrentAccounts
                payable and accrued liabilities
            
            $
            631,950
            
            
            $
            880,373Long-term
                debt
            
            
            57,629
            
            
            
            280,873689,579
            
            
            
            1,161,246Net
                liabilities
            
            $
            689,579
            
            
            $
            697,376





**5. INCOME
      TAXES**





The
      Company continues to fully recognize its tax benefits which are offset by a
      valuation allowance to the extent that, it is not more likely than not that,
      the
      deferred tax assets will be realized. As at September 30, 2007, the Company
      had
      unrecognized tax benefits of $3.2 million associated with non-capital loss
      carryforwards and tax pools of $9.5 million.





The
      Company files federal and provincial income tax returns in
      Canada.  The Company is generally no longer subject to provincial
      income tax examinations by provincial tax authorities for years before 2005
      and
      to federal income tax examinations for years before 2003. The Canada Revenue
      Agency (“CRA”) commenced an examination of the Company’s Canadian income tax
      returns for 2003 and 2004 in the third quarter of 2006 that is anticipated
      to be
      completed by the end of 2007. As of September 30, 2007, the Company is in
      discussions with CRA regarding proposed adjustments to the Company’s tax loss
      positions. Management does not anticipate that adjustments, if any, which may
      be
      agreed to with the CRA would result in a material change to its financial
      position.





The
      Company recognizes any interest accrued related to unrecognized tax benefits
      in
      interest expense and penalties in operating expenses. During the three and
      nine
      month periods ended September 30, 2007 and 2006, there was no such interest
      or
      penalty.





**6.  CAPITAL
      STOCK**





**(a)           Share
      Capital**





On
      July
      11, 2006, the Company executed definitive agreements with Calian Technologies
      Ltd. for the private placement of 8,750,000 shares of the Company’s newly
      designated Series I Special Shares (the “Series I Shares”) for aggregate gross
      proceeds to the Company of CDN$3.5 million ($3.1 million).  On July
      12, 2006, the Company received CDN$1.75 million ($1.57 million). The remainder
      of the funds consisting of CDN$ 1.75 million ($1.57 million) were received
      by
      the Company as follows: (i) the amount of CDN$0.875 million ($0.785 million)
      was
      received on August 30, 2006, upon the filing by the Company of a registration
      statement covering the resale of the Common Shares underlying the Series I
      Shares and the (ii) remainder of the consideration was received on September
      21,
      2006, when the registration statement was declared effective by the Securities
      and Exchange Commission.  The Series I Shares have a term of five
      years.





12


The
      Series I Shares are, at the option of the holder, convertible at any time into
      the Company’s Common Shares, at an initial conversion rate of one Common Share
      for each Series I Share, subject to adjustment in the event of certain capital
      adjustments or similar transactions, such as a stock split or merger. Commencing
      on the second anniversary of issuance, the Company is entitled to require the
      conversion of outstanding Series I Shares at the applicable conversion rate,
      provided that the following conditions are satisfied: (i) the volume weighted
      average trading price (VWAP) of the Company’s Common Share on the principal
      exchange or market (including the OTC Bulletin Board) on which the Common Shares
      are traded or quoted is greater than or equal to $0.46 (as may be adjusted
      in
      respect of any stock split) during any 60 consecutive calendar day period,
      (ii)
      the total volume of Common Shares traded over such period


exceeds
      600,000 shares (as adjusted to reflect any stock splits), and (iii) the Company
      delivers written notice of such conversion to the holders of the Series I Shares
      within 10 days of the satisfaction of the above conditions. The Company's right
      to require such conversion is further subject to there being an effective
      registration statement at the time covering the resale of the Common Shares
      underlying the Series I Shares.  If not converted into Common Shares
      prior to the fifth anniversary of issuance, the Series I Shares are
      automatically redeemable at the sole discretion of the Company in either (a)
      cash at a rate of $0.45 per share or (b) in Common Shares of the Company based
      on the VWAP of the Common Shares of the Company during the sixty (60)
      consecutive calendar day period immediately preceding the fifth
      anniversary.  In the event of a change in control, the Series I Shares
      are also required to be redeemed in cash at a rate of $0.45 per
      share.  The mandatory redemption and conversion features of the Series
      I Shares result in the classification of separate liability and equity
      components of the Series I Shares.





The
      Series I Shares have been accounted for as a compound financial instrument
      consisting of both a financial liability and equity component.  The
      proceeds of the Series I Shares were allocated to the two components based
      on
      the present value of the future redemption value of the Series I Shares,
      discounted at a rate of 3.4%, which reflected management’s estimate of the rate
      of return required for instruments with similar characteristics and terms at
      the
      time of the issuance of the Series I Shares.





**(b)           Common
      stock purchase warrants**





During
      the third quarter of 2006, the terms of the 1,437,500 Common Share purchase
      warrants were amended, extending the expiry of these warrants from August 11,
      2006 to September 11, 2006.  The incremental fair value determined by
      Black Scholes was $4,648 and the fair value assumptions were a risk-free rate
      of
      2.6% an expected life of 30 days, expected volatility of 98% and expected
      dividends of nil. This amount was charged to income as stock based compensation
      expense and credited to contributed surplus. These warrants expired September
      11, 2006.





During
      the first quarter of 2006, the terms of the Common Share purchase warrants
      were
      amended, extending the expiry of these warrants from February 11, 2006 to August
      11, 2006. The incremental fair value determined by Black Scholes was $69,876
      and
      the fair value assumptions were a risk-free rate of 2.5% an expected life of
      one
      year, expected volatility of 119% and expected dividends of NIL.  This
      amount was charged to income as stock based compensation expense and credited
      to
      contributed surplus.





**7.  CONTRIBUTED
      SURPLUS**





During
      the third quarter of 2006 Common Share purchase warrants
      expired.  When the Common Share purchase warrants were issued in 1998,
      $106,111 of value was attributed to the Common Share purchase
      warrants.  With expiration of the Common Share purchase warrants the
      value attributed to them was credited to contributed surplus.





During
      the third quarter of 2006, an amount of $4,648 was recorded as stock
      compensation expense for the extension of 1,437,500 Common Share purchase
      warrants from August 11, 2006 to September 11, 2006. This amount was credited
      to
      contributed surplus.





13


During
      the second quarter of 2006, an amount of $10,456 was recorded as stock
      compensation expense for options granted to an employee in 2004 for the portion
      that vested in the second quarter of 2006. This amount was credited to
      contributed surplus.





During
      the first quarter of 2006, the terms of the Common Share purchase warrants
      were
      amended, extending the expiry of these warrants from February 11, 2006 to August
      11, 2006. As a result of this, stock compensation expense of $69,876 was
      recorded. In addition, an amount of $8,527 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 2006. These amounts have been credited
      to
      contributed surplus.





**8.
      RELATED PARTY TRANSACTIONS**





During
      the first nine months of 2007, included in general and administration expenses
      are administrative fees of $nil in regards to payments to a related company
      ($31,872 in 2006). There are no related party balances outstanding at September
      30, 2007 or December 31, 2006.   These transactions have been
      recorded at their exchange amount which is the amount agreed to by the related
      parties.





**9.
      CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES**





These
      consolidated financial statements have been prepared in accordance with Canadian
      GAAP, which conform in all material respects with accounting principles
      generally accepted in the United States (“U.S. GAAP”) during the periods
      presented, except with respect to the following:





**(a)           Redeemable
      Series I Special Shares**





The
      Series I Shares are accounted for as a compound financial instrument comprising
      both a financial liability and equity under Canadian GAAP, because of their
      underlying terms and conditions, which include a mandatory redemption feature.
      Under U.S. GAAP, EITF Abstract Topic D-98 *Classification and Measurement of
      Redeemable Securities*recommends that shares that are redeemable for cash
      based on an occurrence of events outside of the control of the company should
      be
      classified outside of shareholders’ equity. The Series I Shares, which are
      redeemable for cash in the event of a change in control, are presented outside
      of shareholders’ equity for U.S. GAAP purposes. At this time it is management’s
      intention to redeem the Series I Shares through the issuance of common
      shares.





As
      a
      result of accounting for the Series 1 Shares as a compound financial instrument
      under Canadian GAAP, the liability component is accreted to the face value
      of
      the shares over the five year period to maturity.  As the Series 1
      Shares are not a liability for U.S. GAAP purposes the accretion expense charged
      to net income for the period under Canadian GAAP is reversed for U.S. GAAP
      purposes.  Furthermore, since under U.S. GAAP the Series 1 Shares are
“quasi-equity” the face value is adjusted to the initial U.S. dollar value on
      issuance and the foreign currency translation adjustment recorded under Canadian
      GAAP relating to the liability component is reversed for U.S. GAAP
      purposes.





14


The
      reconciliation of Canadian to U.S. GAAP for the Series 1 Shares is as
      follows:








September
                30,
            
            
            December
                31,2007
            
            
            2006Liability
                portion of redeemable, convertible Series I Shares - Canadian
                GAAP
            
            $
            3,115,239
            
            
            $
            2,589,159Impact
                of accretion expense
            
            
            (120,511
            )
            
            
            (48,124
            )Equity
                portion of redeemable, convertible Series I Shares - Canadian
                GAAP
            
            
            482,043
            
            
            
            482,043Translation
                adjustment attributable to Series I Shares
            
            
            (370,217
            )
            
            
            83,476Series
                I Shares - U.S. GAAP
            
            $
            3,106,554
            
            
            $
            3,106,554





**(b)           Share
      capital, goodwill and correction of prior period error**





Under
      Canadian GAAP, the purchase price of an acquisition completed prior to 2006
      was
      determined based on the share price on the date the transaction was 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 in 1999 under Canadian GAAP was $1.25. The share price used for
      the
      YFMC Healthcare


Inc.
      acquisition under U.S. GAAP was $1.859. The difference was allocated to goodwill
      at that time and, subsequently, the goodwill was impaired and
      written-off.





At
      December 31, 2005, in the reconciliation of shareholders’ equity under Canadian
      GAAP to U.S. GAAP, the Company had incorrectly excluded the above noted charge
      to the deficit that was created when the goodwill was written-off in 2002.
      The
      effect of this error was to understate the ending deficit and overstate
      shareholders’ equity under U.S. GAAP by $1,087,272 at December 31, 2005. This
      error did not affect reported net income (loss) or net income (loss) per common
      share for any period presented in these financial statements. The comparative
      figures reflected in the reconciliation of the deficit and total shareholders’
equity under U.S. GAAP were restated from $18,077,662 to $19,165,534 and from
      $1,168,749 to $81,477, respectively, to correct this error.





**(c)           Stock
      purchase warrants**





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 consolidated financial statements. Under U.S. GAAP, based on an ascribed
      fair value of $0.364 for each of the 1,000,000 share purchase warrants issued,
      share capital would be lower by $36,406 and, given that the share purchase
      warrants were cancelled, the carrying amount of contributed surplus would be
      increased by $36,406.





**(d)           Start-up
      costs**





Under
      Canadian GAAP as described in EIC 27 “Revenues and Expenditures During the
      Pre-operating Period”, certain pre-operating costs may be deferred and amortized
      over the term associated with which they were incurred.  Under U.S.
      GAAP such start-up costs are expensed in the period in which they
      occur.





**(e)           Accounting
      for Income Taxes**





On
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109,
“Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. The interpretation
      requires that the Company recognize the impact of a tax position in the
      financial statements if that position is more likely than not to be sustained
      on
      audit, based on the technical merits of the position. FIN 48 also provides
      guidance on de-recognition, classification, interest and penalties, accounting
      in interim periods and disclosure. In accordance with the provisions of FIN
      48,
      any cumulative effect resulting from the change in accounting principle is
      to be
      recorded as an adjustment to the opening balance of deficit. The adoption of
      FIN
      48 did not result in a material impact on the Company’s financial position or
      results of operations.





15


The
      effect of these accounting differences on capital stock, contributed surplus,
      deficit, cumulative translation adjustment, net income (loss) and net income
      (loss) per share are as follows:








September
                30,
            
            
            December
                31,2007
            
            
            2006Capital
                stock - Canadian GAAP
            
            $
            16,420,668
            
            
            $
            16,420,668Capital
                stock issued on purchase of YFMC Healthcare Inc.(Note 9b)
            
            
            1,087,872
            
            
            
            1,087,872Ascribed
                fair value of share purchase warrants issued (Note 9c)
            
            
            (36,406
            )
            
            
            (36,406
            )Equity
                portion of redeemable Series I Shares (Note 9a)
            
            
            (482,043
            )
            
            
            (482,043
            )Capital
                stock - U.S. GAAP
            
            $
            16,990,091
            
            
            $
            16,990,091Contributed
                surplus - Canadian GAAP
            
            $
            3,106,792
            
            
            $
            3,106,792Share
                purchase warrants (Note 9c)
            
            
            36,406
            
            
            
            36,406Contributed
                surplus - U.S. GAAP
            
            $
            3,143,198
            
            
            $
            3,143,198Deficit
                - Canadian GAAP
            
            $
            (17,929,711
            )
            
            $
            (17,253,951
            )Write-off
                of goodwill on purchase of YFMC Healthcare Inc. (Note 9b)
            
            $
            (1,087,872
            )
            
            $
            (1,087,872
            )Impact
                of accretion expense (Note 9a)
            
            
            120,511
            
            
            
            48,124Financial
                instruments - recognition and measurement (Note 3a)
            
            
            (16,972
            )
            
            
            -Interest
                expense on financial liability carried at amortized cost (Note
                3a)
            
            
            12,700
            
            
            
            -Impact
                of start-up costs (Note 9d)
            
            
            (123,347
            )
            
            
            -Deficit
                - U.S. GAAP
            
            $
            (19,024,691
            )
            
            $
            (18,293,699
            )Cumulative
                translation adjustment - Canadian GAAP
            
            $
            (719,789
            )
            
            $
            (849,552
            )Translation
                adjustment attributable to Series I Shares (Note 9a)
            
            
            370,217
            
            
            
            (83,476
            )Cumulative
                translation adjustment - U.S. GAAP
            
            $
            (349,572
            )
            
            $
            (933,028
            )Shareholders'
                equity - U.S. GAAP
            
            $
            759,025
            
            
            $
            906,562











16








Three
                Months Ended Sept 30
            
            
            Nine
                Months Ended Sept 302007
            
            
            2006
            
            
            2007
            
            
            2006Net
                income (loss) - Canadian GAAP
            
            $
            (212,282
            )
            
            $
            357,455
            
            
            $
            (692,732
            )
            
            $
            1,118,860Impact
                of accretion expense
            
            
            25,934
            
            
            
            24,022
            
            
            
            73,890
            
            
            
            24,022Interest
                expense on financial liability carried at amortized cost
            
            
            3,665
            
            
            
            -
            
            
            
            12,700
            
            
            
            -Impact
                of deferred set-up costs
            
            
            (33,349
            )
            
            
            -
            
            
            
            (123,347
            )
            
            
            -Net
                income (loss) - U.S. GAAP
            
            
            (216,032
            )
            
            
            381,477
            
            
            
            (729,489
            )
            
            
            1,142,882Foreign
                currency translation adjustment
            
            
            165,831
            
            
            
            37,310
            
            
            
            583,455
            
            
            
            62,537Comprehensive
                income (loss)
            
            $
            (50,201
            )
            
            $
            418,787
            
            
            $
            (146,034
            )
            
            $
            1,205,419Net
                income (loss) per share, basic and diluted - Canadian GAAPContinuing
                operations
            
            $
            (0.003
            )
            
            $
            (0.003
            )
            
            $
            (0.009
            )
            
            $
            (0.001
            )Discontinued
                operations
            
            $
            (0.001
            )
            
            $
            0.009
            
            
            $
            (0.003
            )
            
            $
            0.020Net
                income (loss) per share, basic and diluted - U.S. GAAPContinuing
                operations
            
            $
            0.000
            
            
            $
            0.007
            
            
            $
            (0.003
            )
            
            $
            0.000Discontinued
                operations
            
            $
            (0.001
            )
            
            $
            0.009
            
            
            $
            (0.003
            )
            
            $
            0.020No.
                of shares outstanding
            
            
            58,277,696
            
            
            
            58,277,696
            
            
            
            58,277,696
            
            
            
            58,277,696





**Recently
      Issued Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" which
      is
      effective for fiscal years beginning after November 15, 2007 and for interim
      periods within those years. This statement defines fair value, establishes
      a
      framework for measuring fair value and expands the related disclosure
      requirements. The Company is currently evaluating the potential impact of this
      statement on its consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” This standard provides companies
      with an option to report selected financial assets and liabilities at fair
      value. The Standard’s objective is to reduce both complexity in accounting for
      financial instruments and the volatility in earnings caused by measuring related
      assets and liabilities differently. This standard also establishes presentation
      and disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities. This Statement is effective as of the beginning of an entity’s
      first fiscal year beginning after November 15, 2007. The Company is currently
      evaluating the potential impact of this statement on our consolidated financial
      statements.





**10.
      CONTINGENT LIABILITIES**





(i)
            There
                is uncertainty with respect to the Company’s liability for Goods and
                Services Tax pertaining to certain services that it previously
                provided.  The measurement of this uncertainty is not
                determinable and management is of the view that it is not probable
                that a
                liability will be confirmed.  No provision has been made in
                respect thereof, in these consolidated financial
                statements.





(ii)
            There
                is uncertainty with respect to the Company’s liability arising from a
                contractual dispute with a third party.  The potential costs to
                the Company associated with this dispute range from $nil to $1.6
                million.  The Company is of the view that it is not probable
                that the Company will be found liable for these costs. No provision
                has
                been made in respect thereof, in these consolidated financial
                statements.





(iii)
            Claims
                have been made against the Company for unspecified damages in regards
                to a
                claim for wrongful dismissal and breach of contract.  The
                Company is of the view that liability, if any, would be the responsibility
                of a third party contractor and if damages were found, they would
                not be
                material in light of the current law.  Since management is of
                the opinion that the claim is unlikely to succeed, no provision has
                been
                made in respect thereof in these consolidated financial
                statements.


17





(iv)
            The
                Company sub-leased certain premises to third parties when it disposed
                of
                its clinic operations (see Note 4 - Discontinued 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 approximately
                $570,000.





(v)
            The
                Company is party to various claims and legal proceedings arising in
                the normal course of business.  While claims and litigation
                are subject to inherent uncertainties, management currently believes
                that
                the ultimate outcome of claims and proceedings, individually and in
                the aggregate, will not have a material adverse effect on our consolidated
                financial position, results of operations or cash
                flows.





Any
      liability resulting from the above will be recorded as a charge to earnings
      in
      the period it is determined the occurrence of a confirming future event is
      likely and the amount of loss can be reasonably estimated.





**11.
      SEGMENTED INFORMATION**





The
      Company operates under three business units: Staffing Solutions, Medical
      Services, and Healthcare Consulting Services.





The
      segmented information for the business units are as follows:





Three
                Months Ended Sept 30
            
            
            Nine
                Months Ended Sept 302007
            
            
            2006
            
            
            2007
            
            
            2006RevenueStaffing
                solutions
            
            $
            2,698,807
            
            
            $
            2,512,067
            
            
            $
            8,074,423
            
            
            $
            8,199,150Medical
                services
            
            
            2,814,388
            
            
            
            1,441,493
            
            
            
            7,513,044
            
            
            
            4,143,245Healthcare
                consulting
            
            
            244,211
            
            
            
            176,905
            
            
            
            593,374
            
            
            
            828,7725,757,406
            
            
            
            4,130,465
            
            
            
            16,180,841
            
            
            
            13,171,167Divisional
                income (loss) before the undernotedStaffing
                solutions
            
            
            88,424
            
            
            
            (19,742
            )
            
            $
            109,939
            
            
            $
            226,121Medical
                services
            
            
            (44,987
            )
            
            
            (7,561
            )
            
            
            (21,326
            )
            
            
            72,794Healthcare
                consulting
            
            
            (75,938
            )
            
            
            (104,441
            )
            
            
            (313,849
            )
            
            
            (114,989
            )(32,501
            )
            
            
            (131,744
            )
            
            
            (225,236
            )
            
            
            183,926Interest
                income, net of bank charges
            
            
            (10,084
            )
            
            
            (30,606
            )
            
            
            (63,474
            )
            
            
            (30,606
            )Interest
                on long-term debt
            
            
            20,660
            
            
            
            27,869
            
            
            
            89,640
            
            
            
            42,318Amortization
                of property, plant and equipment
            
            
            108,331
            
            
            
            54,214
            
            
            
            250,154
            
            
            
            141,148Interest
                expense on financial liability carried at amortized cost
            
            
            3,665
            
            
            
            -
            
            
            
            12,700
            
            
            
            -Stock
                based compensation expenses
            
            
            -
            
            
            
            4,648
            
            
            
            -
            
            
            
            93,507122,572
            
            
            
            56,125
            
            
            
            289,020
            
            
            
            246,367Loss
                from continuing operations
            
            $
            (155,073
            )
            
            $
            (187,869
            )
            
            $
            (514,256
            )
            
            $
            (62,441
            )





**12.  ECONOMIC
      DEPENDENCE**





The
      Company derived approximately 19% of its revenue for the nine month period
      ended
      September 30, 2007 (15% - 2006) from services provided under its contract with
      Schering-Plough Canada Inc. (“Schering”), and as such is subject to
      concentration risk associated with the continuation of its contract with
      Schering.





18




**13.  COMPARATIVE
        FIGURES**





Certain
      figures in the 2006 consolidated financial statements have been reclassified
      to
      conform to the basis of presentation in 2007.  The results for Family
      Medical Clinics, which were reported as part of Medical Services in 2006, have
      been reclassified as discontinued operations (Note 4).


19





**ITEM
      2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





**THE
      FOLLOWING COMMENTARY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
      FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED ELSEWHERE IN THIS FORM 10-Q.
      THE DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
      UNCERTAINTIES. THESE STATEMENTS RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL
      PERFORMANCE. IN SOME CASES, YOU CAN IDENTIFY THESE FORWARD-LOOKING STATEMENTS
      BY
      TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "PLAN," "ANTICIPATE,"
      "BELIEVE," "ESTIMATE," "PREDICT," "POTENTIAL," "INTEND," OR "CONTINUE," AND
      SIMILAR EXPRESSIONS. THESE STATEMENTS ARE ONLY PREDICTIONS. OUR ACTUAL RESULTS
      MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS
      AS A RESULT OF A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET
      FORTH UNDER PART II, ITEM 1.A "RISK FACTORS" AND ELSEWHERE IN THIS QUARTERLY
      REPORT ON FORM 10-Q.**





The
      Company’s operations are comprised of three business units: Staffing Solutions,
      Medical Services and Healthcare Consulting Services.  During the first
      nine months of 2007, 50% of the Company’s revenue was generated by the Staffing
      Solutions unit; 46% by the Medical Services unit; and 4% by the Healthcare
      Consulting unit.  From a Gross Margin perspective, the gross margin
      generated from the three business units was 27%, 64% and 9%,
      respectively.





The
      Company is well positioned to deal with the continuous challenges that confront
      the Canadian healthcare system.  Some of these challenges, including
      the growing shortage of emergency department physicians, longer waiting times
      by
      patients, and the growing cost of public medicine, play directly into the
      Company’s strengths.





The
      Company’s Staffing Solutions unit provides physician staffing and billing
      services to more than 30 healthcare facilities across Ontario, including rural
      and urban hospitals as well as tertiary care centers and corrections
      facilities.





The
      Company’s Medical Services unit, which operates through wholly owned
      subsidiaries, provides chronic pain management and intravenous infusion services
      for pharmaceutical companies in conveniently located community-based clinics
      and
      family medical clinics





The
      Company’s Healthcare Consulting Services unit provides custom solutions for
      governments and national and provincial bodies on a variety of matters including
      primary care renewal, project evaluation, and healthcare human resource
      planning.





The
      Company tracks its operations by monitoring certain key performance
      indicators.  For Staffing Solutions, the Company monitors the number
      of contracts under administration, monthly shifts booked and gross margin per
      contract.  For Medical Services, the Company tracks the number of
      infusions for Infusion Services and the number of patient referrals, average
      billing per patient and the number of patient visits for the pain management
      practice.  For Healthcare Consulting Services, the Company tracks the
      gross margin per contract and its win / loss ratio on contract
      bids.   It also measure certain key balance sheet metrics such as
      working capital, to monitor its cash flow situation.





The
      Staffing Solutions business is driven by the Company’s ability to recruit and
      retain physicians and nurse practitioners.  With the chronic shortage
      of healthcare providers, the Company dedicates considerable resources to
      attracting new providers to the Company.  Because of the limited
      supply of healthcare providers, the inability to attract additional personnel
      could limit the Company’s ability to fill open shifts and to continue its
      revenue growth.





20


Growth
      of the Company’s Medical Services business is dependent on several
      factors.  The Infusion business is reliant upon the Company’s ability
      to introduce new drug therapies through its infusion clinics and by expanding
      the number of clinic locations. Failure to succeed with either of these
      initiatives will limit the Company’s ability to drive its revenue
      growth.  For Pain Management Services, growth is dependent on the
      Company’s ability to recruit additional doctors to provide pain
      therapies.





The
      growth of Healthcare Consulting Services is dependent on market developments
      in
      Canadian healthcare.  At this time, management believes that there
      exist growth opportunities because of on-going demand for health human resource
      planning, primary healthcare reform initiatives and pandemic
      planning.





*STAFFING
      SOLUTIONS*




MedEmerg
      is the leading provider of ER doctors to Ontario hospitals. The Company provides
      physician-staffing services to more than 30 healthcare facilities across
      Ontario, including rural and urban hospitals as well as tertiary care centers
      and corrections facilities. The Company believes that on-going physician
      shortages and continuing demand for improved levels of care will continue to
      drive its Staffing Solutions business.




In
      addition to its conventional ER staffing, MedEmerg has developed a unique
      integrated staffing solution, which was trialed in 1996 to recruit primary
      care
      practitioners into mental health facilities.  Based on patient
      population, the nature of the cases being treated, and the total cost of the
      current system, MedEmerg introduced a healthcare 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 tenth year of operation, has received high satisfaction
      ratings from both staff and patients, resulting in one of the Company’s clients
      receiving the Achievement, Commitment and Excellence (ACE) Award from the
      Ministry of Health for Innovation in Health Care Delivery Design. In June 2002,
      the Centre for Addiction and Mental Health in Toronto, Canada, awarded MedEmerg
      a similar contract for primary care services. In 2004, the Company introduced
      Primary Health Care Nurse Practitioners to its mix of healthcare providers
      in
      community-based hospitals.




In
      September 2006 the Company recruited Dr. Jim Ducharme to lead the clinical
      aspect of Staffing Solutions.  Dr. Ducharme is an internationally
      recognized emergency medicine specialist and is the past president of the
      Canadian Association of Emergency Physicians.  Dr. Ducharme brings a
      very broad perspective of the challenges facing emergency departments today
      and
      he is an important asset in the Company’s future growth of the Staffing
      Solutions business.  Dr Ducharme was instrumental in the Company’s
      development of a training program designed for Ontario’s family
      physicians.  In concert with the College of Family Physicians,
      MedEmerg developed and hosted training sessions designed to re-introduce family
      physicians to the ER.  The program was well received and it is
      anticipated that future training sessions will ensue in
      2007.  Concurrent with the addition of Dr. Ducharme, the division was
      realigned to expand its business development capabilities in anticipation of
      increased staffing opportunities.





*MEDICAL
      SERVICES*





MedEmerg
      provides innovative medical services directly to healthcare
      consumers.





*Infusion
      Services*





In
      March 2001, MedEmerg entered into an agreement with Schering-Plough Canada
      Inc.
      to become a coordinator for the community-based infusion of the medication
      known
      as RemicadeTM.  This contract capitalizes on the Company's access to clinics
      for the treatment of patients with disabling rheumatoid arthritis and Crohn's
      disease, among other diseases. During the first nine months of 2006 the Company
      delivered more than 7,400 infusions and more than 11,000 infusions during the
      first nine months of 2007.


MedEmerg
      expects continued growth for this service, as infusion services move from
      institutional settings into community-based settings.





21


As
      of
      September 30, 2007, the Company operated 24 virtual clinics across
      Ontario.  On an as-required basis, the Company rents space in
      community-based medical clinics.  MedEmerg’s team of infusion
      coordinators arrange for patients to arrive at the clinic at a prescribed time
      and for a physician and nurse to be available to attend to their
      needs.





RemicadeTM
      is currently approved by Health Canada for six indications in Ontario:
      rheumatoid arthritis, Crohn’s disease, ankylosing spondylitis ulcerative
      colitis, psoriatic arthritis and psoriasis. Once an indication is approved
      by
      Health Canada, it is more likely that doctors will prescribe the medicine and
      that insurance companies will offer the medicine to their
      clients.  Historically, more than 70% of infusions have related to
      Crohn’s disease and rheumatoid arthritis.  Total infusions grew by 49%
      in the first nine months of 2007 over the same period in 2006.  The
      Company expects growth related to RemicadeTM to level off in the near term,
      unless additional indications are approved by Health Canada.





The
      Company continues to look for additional products to offer through its infusion
      clinics and the opportunity to open clinics in new locations.





*Pain
      Management Services*





MedEmerg’s
      chronic pain management service, CPM Health Centres Inc. (“CPM”), was launched
      in November 2004 with the acquisition of the Scarborough Pain Clinic. A second
      location, in downtown Toronto, was opened in December 2004, two more locations
      were opened in 2005, in Hamilton and Mississauga and a fifth one in Oakville,
      Ontario opened in 2006.  During the first nine months of 2007, clinics
      were opened in Ottawa, London, Oshawa, and St. Catharines Ontario and Dartmouth,
      Nova Scotia.





CPM
      has
      developed a standardized approach to the treatment of chronic pain, using an
      integrated multi-disciplinary approach including anesthetists and ER physicians,
      amongst others.





In
      August of 2005, Dr. Roman Jovey, the President of the Canadian Pain Society,
      joined CPM as its Medical Director.  Over the last 16 years, Dr. Jovey
      has developed an international reputation in the field of chronic, non-cancer
      pain, using pharmacotherapy.  In addition to maintaining a private
      practice, Dr. Jovey also consults with the pharmaceutical industry and
      educational institutions on medical educational programs related to
      pain.  He is also a medico-legal expert for the Canadian Medical
      Protective Association on cases related to opioids, pain and
      addiction.  In his capacity as Medical Director, Dr. Jovey oversees
      the clinical aspects of CPM and assists in the training of new
      physicians.





The
      Company intends to increase the number of physicians available to treat those
      suffering from chronic pain and thereby improve service availability to a
      healthcare sector that is plagued by long wait times.  The Company has
      developed and launched a training program specifically designed to educate
      emergency room physicians in chronic pain management.





The
      clinic that CPM acquired in November 2004 increased monthly treatments from
      approximately 300 patients in November 2004 to more than 700 patients in
      September 2007.  CPM as a whole increased its volumes by 150%,
      treating 6,250 patient visits in the third quarter of 2007 compared to 2,497
      in
      the third quarter of 2006.





Plans
      are underway to further increase capacity in 2007 by training more physicians
      and by opening additional clinic locations.





22


*HEALTHCARE
      CONSULTING*





Over
      the years, MedEmerg has developed significant experience in international and
      domestic healthcare consulting.  Currently the Company is providing
      consulting services under several contracts, advising on a range of issues
      related to primary care staffing, health human resource planning, and integrated
      service delivery models.





The
      Company is currently in negotiations with several provincial bodies to provide
      services.  During 2006 the Company provided services to the Ministry
      of Health and Long-Term Care, Ontario, in regards to pandemic planning and
      the
      use of nurse practitioners and physicians’ assistants in an ER setting;
      developed and designed nine business plans with respect to Family Health Teams
      across Ontario; and assisted the Ministry of Health, Nova Scotia in researching
      the use of international medical graduates.





MedEmerg
      has used a ‘virtual’ model to build its healthcare consulting
      practice.  Under the guidance of MedEmerg’s Director of Health
      Services Consulting, the Company responds to contract tenders for projects
      that
      meet pre-defined criteria.  Project-specific teams are assembled,
      based on the needs of the contract.  The Company calls on the
      expertise of leading academics and industry leaders to work on specific
      projects.  On a recent contract, the Company worked with two
      internationally recognized subject-matter experts, a former senior public-health
      officer and surgeon, two professors at leading Canadian universities, a lawyer,
      and a chief health human resource officer for a provincial
      government.  In tandem with MedEmerg’s own project manager, the
      contract was won in a competition against bids from several multi-national
      consulting firms.





**DISCONTINUED
      OPERATIONS**





*GOVERNMENT
      HEALTHCARE SERVICES*





In
      March 2001, the Company was awarded an administrative management services
      contract (the “DND Contract”), the largest of its kind, to provide medical
      staffing for military bases of the Department of National Defence (DND) across
      Canada. The DND Contract had an initial period of three years ending on March
      31, 2004, but it was amended and extended until March 31, 2005. In December
      2004
      MedEmerg learned that it was not successful in its bid to win a replacement
      contract with DND and its contractual relationship for DND medical staffing
      services ended on March 31, 2005.





*FAMILY
      MEDICAL CLINICS*




In
      January 2005, the Company resumed operation of a family medical clinic in
      Wallaceburg, Ontario that it had sold in 2003, after the purchaser failed to
      achieve certain earnings targets.  In November 2005, the Company
      resumed operation of a second clinic in Calgary Alberta, when the buyer
      defaulted on certain payment obligations.  During the fourth quarter
      of 2006 the decision was taken to dispose of these assets.  Effective
      August 1, 2007, one of these clinics were sold.   The Company
      continues with its efforts to sell the remaining family medical
      clinic.





**RESULTS
      OF OPERATIONS**





**Three
      months ended September 30, 2007 compared to three months ended September 30,
      2006**





**REVENUE**





The
      Company's revenue from continuing operations for the three months ended
      September 30, 2007 was $5,757,406 compared to $4,130,465 for the three months
      ended September 30, 2006.





23


The
      increase in revenue during the 2007 period over the comparable 2006 period
      of
      approximately 39% was largely attributable to an increase in revenues in the
      Medical Services division.  Divisional revenues were:





**Quarter
                Ended September 30,****Revenue**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            2,698,807
            
            
            
            2,512,067Medical
                Services
            
            
            2,814,388
            
            
            
            1,441,493Healthcare
                Consulting
            
            
            244,211
            
            
            
            176,905**Total**
            
            ****
            **5,757,406**
            
            
            ****
            **4,130,465**





Staffing
      revenues increased by 7% during the three months ended September 30, 2007 over
      the corresponding period in 2006.  The increase in the 2007 period
      relative to the 2006 period was primarily attributable to the increase in the
      hourly rates charged to our clients.





Revenue
      from the Medical Services division increased by 95% to $2,814,388 from
      $1,441,493 in 2006.  The increase was driven primarily
      by.


1.
            In
                the third quarter of 2007, the Pain Management business generated
                $1,696,124 in revenue compared to $764,693 in 2006 as the Company
                grew
                from five to ten clinics and revenue per clinic increased.  As
                discussed previously, the Company believes that the Pain Management
                business represents an opportunity to generate considerable
                growth.  It is a field of healthcare that is vastly
                under-serviced in Canada.  Management believes that strong
                revenue growth will continue through the fourth quarter and beyond,
                though
                no assurance can be given that such growth will in fact be
                achieved.


2.
            The
                Infusion business increased revenues to $1,118,264 from $712,982
                in
                2006.  The 57% increase in the Infusion business was driven by a
                40% increase in infusions from 2,691 in the third quarter of 2006
                to 3,765
                in the same quarter of 2007 and higher average revenue per
                infusion.





Revenue
      from Healthcare Consulting was $244,210 for the third quarter of 2007 compared
      to $176,905 for the quarter ended September 30, 2006, an increase of
      38%.  The division secured certain healthcare consulting contracts
      during the quarter, increasing its revenues as compared to the same period
      in
      2006.  Consulting revenues are non-recurring in nature; there is no
      assurance that this growth will be continued.





**GROSS
      MARGIN**





Gross
      margin (revenue less physician and direct costs such as clinic salaries and
      medical supplies and excluding attributable overheads) increased to $1,730,674
      (61%) for the third quarter of 2007, from $1,075,632 for the same period in
      2006.





**Quarter
                Ended September 30,****Gross
                margin**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            472,791
            
            
            
            410,983Medical
                Services
            
            
            1,073,419
            
            
            
            594,139Healthcare
                Consulting
            
            
            184,464
            
            
            
            70,510**Total**
            
            ****
            **1,730,674**
            
            
            ****
            **1,075,632**





The
      Gross Margin from the Staffing business increased to $472,791 from $410,983
      in
      2006.  The increase of 15% was largely driven by an increase in the
      hourly rate charged to our clients.  There was also an increase in the
      gross margin percentage, 16.4% in 2006 versus 17.5% in 2007.





24


The
      Gross Margin from Medical Services increased 81%, or $479,280 in the third
      quarter of 2007 compared to the same period in 2006.  As discussed
      above concerning revenue, this was mainly attributable to (a) the expansion
      of
      the Pain management business which generated gross margin of $446,084, an
      increase of $226,199; and (b) Infusion margin of $627,335, an increase of
      $253,081.  The increase in infusion margin is the result of 40% more
      infusions and an increase in the average rate per infusion.





The
      Gross Margin from Consulting Services increased 162% for the third quarter
      of
      2007 from $70,510 in 2006 to $184,464 in 2007.  The increase is in
      line with the increase of Consulting Services’ revenues.





**OPERATING
      EXPENSES**





Operating
      expenses are comprised of both direct and indirect operating
      expenses.  Direct expenses include those costs that are directly
      related to the operations of the business unit.  Indirect expenses
      include corporate overheads, which are allocated to the divisions, based on
      the
      gross margin earned by the division.





On
      an
      overall basis, operating expenses increased 46%, $555,797 to $1,763,173 for
      the
      third quarter of 2007 from $1,207,376 for the quarter ended September 30,
      2006.  The increase was largely attributable to increased costs
      associated with the Medical Services unit where costs increased by $516,705,
      driven by increased business volumes.





On
      a
      divisional basis, after the allocation of corporate overheads, operating
      expenses were as follows:





**Quarter
                Ended September 30,****Operating
                expenses**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            384,365
            
            
            
            430,725Medical
                Services
            
            
            1,118,405
            
            
            
            601,700Healthcare
                Consulting
            
            
            260,403
            
            
            
            174,951**Total**
            
            ****
            **1,763,173**
            
            
            ****
            **1,207,376**





**AMORTIZATION
      AND INTEREST**





Amortization
      increased from $54,214 for the three months ended September 30, 2006 to $108,331
      for the same period in 2007.  During the fourth quarter of 2006 and
      the first nine months of 2007, the Company increased its capital spending on
      leasehold improvements and equipment associated with its Pain Management
      centers.  Consequently amortization costs increased in the current
      quarter of 2007 compared to the same period of the previous year.





For
      the
      three months ended September 30, 2007, the Company earned interest net of bank
      charges of $10,084, compared to $30,606 in the same period in
      2006.  When the Company completed its financing in July 2006, the cash
      on hand in the third quarter of 2006 increased significantly and interest earned
      on the cash on hand increased accordingly.





Interest
      on long-term debt in the third quarter of 2007 was $20,660 compared to $27,869
      in the third quarter of 2006.  Certain notes payable were renegotiated
      as of November 1, 2006.  The reduction in interest expense is
      associated with renegotiation of the notes payable.





**OTHER
      EXPENSES**





Interest
      expense on the financial liability carried at amortized cost of $3,665 (2006
      -
      $nil) arises as a result of the Company adopting Handbook Section 3855,
“Financial Instruments - Recognition and Measurement”.  This is a non
      cash expense.





25


Stock-based
      compensation expenses were $nil for the third quarter of 2007 compared to $4,648
      for the third quarter of 2006.  Stock compensation expenses arise when
      options or warrants, issued to employees or others, vest.  In 2006 the
      costs associated with the extension of certain stock purchase warrants were
      expensed in the period.





**INCOME
      TAXES**





For
      the
      three months ended September 30, 2007 there was no provision for income taxes
      payable due to the large tax loss carry-forwards available from previous loss
      years.  During the three months ended September 30, 2006, the Company
      recorded income tax expense of $648,230, which offset an income tax recovery
      booked in the previous quarter.  The Company is liable for income
      taxes in accordance with Canadian federal and provincial income tax legislation.
      We do not expect to be liable for significant corporate income tax in Canada
      in
      the foreseeable future because we have significant net operating loss carry
      forwards for Canadian income tax purposes.




**DISCONTINUED
      OPERATIONS**




**Family
      Medical Clinics**


For
      the
      three month period ended September 30, 2007, the Company reported a loss from
      its Family Medical Clinics of ($57,460) compared to a loss of ($55,448) in
      the
      same period in 2006.  The Company sold its clinic in Calgary, Alberta
      during the quarter and is in the process of disposing of its remaining Family
      Medical Clinic.





**Government
      Health Services**


During
      the three month period ended September 30, 2007, the Company had income from
      Government Health Services (the “DND Contract”) of $251 compared to income of
      $600,772 in the third quarter of 2006.  On July 11, 2006, the Company
      settled outstanding litigation regarding the loss of the DND contract. Pursuant
      to the settlement, the Company received $CDN2.0 million ($1.8 million). Proceeds
      of the settlement, net of expenses and income taxes, were recorded as Income
      from Discontinued Operations by the Company.





**Nine
      months ended September 30, 2007 compared to nine months ended September 30,
      2006**





**REVENUE**





The
      Company's revenue from continuing operations for the nine months ended September
      30, 2007 was $16,180,841 compared to $13,171,167 for the nine months ended
      September 30, 2006.





The
      increase in revenue during the 2007 period over the comparable 2006 period
      of
      approximately 23% was attributable to increased revenues for Medical Services
      while Staffing Solutions and Healthcare Consulting
      decreased.  Divisional revenues were:





**Nine
                months Ended September 30,****Revenue**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            8,074,423
            
            
            
            8,199,150Medical
                Services
            
            
            7,513,044
            
            
            
            4,143,245Healthcare
                Consulting
            
            
            593,374
            
            
            
            828,772**Total**
            
            ****
            **16,180,841**
            
            
            ****
            **13,171,167**





Staffing
      revenues decreased 2% for the nine months ended September 30, 2007 from
      2006.  This decrease was attributable to the loss of two contracts
      earlier in the year.


26








Revenue
      from the Medical Services division in the first nine months of 2007 increased
      81% to $7,513,044 from $4,143,245 in 2006.  The increase was driven
      by:


1.
            The
                Company expanded its Pain Management business.  For the first
                nine months of 2007 the Pain Management business generated $4,424,338
                in
                revenue compared to $2,175,540 in 2006 as the Company grew from five
                to
                ten clinics.  As discussed previously, the Company believes that
                the Pain Management business represents an opportunity to generate
                considerable growth.  It is a field of healthcare that is vastly
                under serviced in Canada.  It is anticipated that strong revenue
                growth will continue in the fourth quarter and beyond, though no
                assurance
                can be given that such growth will in fact be
                achieved.  .


2.
            The
                Infusion business increased to $3,088,706 from $1,967,705 in
                2006.  The 57% increase in the Infusion business was driven by a
                36% increase in infusions from 7,410 in the first nine months of
                2006 to
                10,052 in the same period of 2007 enhanced by an average increase
                in
                revenue per infusion of 16% and an increase in the foreign exchange
                rate.





Revenue
      from Healthcare Consulting was $593,374 for the first nine months of the year
      compared to $828,772 for the nine months ended September 30, 2006, a decrease
      of
      28%.  Contracts that the Company expected to sign have been delayed
      and accordingly revenues decreased during the first quarter of the
      year.





**GROSS
      MARGIN**





Gross
      margin (revenue less physician and direct costs such as clinic salaries and
      medical supplies and excluding attributable overheads)) increased to $4,776,290
      (31%) for nine month period ended September 30, 2007, from $3,649,801 for the
      same period in 2006.





**Nine
                months Ended September 30,****Gross
                margin**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            1,303,785
            
            
            
            1,467,105Medical
                Services
            
            
            3,058,184
            
            
            
            1,710,057Healthcare
                Consulting
            
            
            414,321
            
            
            
            472,639**Total**
            
            ****
            **4,776,290**
            
            
            ****
            **3,649,801**





The
      Gross Margin from the Staffing business decreased to $1,303,785 from $1,467,105
      in 2006.  The decrease of 11% was the result of a decrease in the
      gross margin percentage from about 17.9% in 2006 to 16.2% in
      2007.  The Company has addressed this by increasing its rates in
      recent months.





The
      Gross Margin from Medical Services increased 79%, or $1,348,127 for the first
      nine months of 2007 compared to the same period in 2006.  As discussed
      above concerning revenue, this is attributable to (a) the expansion of the
      Pain
      management business ($672,673); and (b) increased Infusion volumes ($372,522)
      and better margin per infusion ($302,932).





The
      Gross Margin from Consulting Services decreased 12% for the first nine months
      of
      2007 from $472,639 in 2006 to $414,321 in 2007.  The decrease is less
      than the reduction of revenue in the division.  With reduced business
      volumes the Company deployed fewer third party consultants on the projects
      undertaken during 2007, thereby increasing its gross margin
      percentage.





**OPERATING
      EXPENSES**





Operating
      expenses are comprised of both direct and indirect operating
      expenses.  Direct expenses include those costs that are directly
      related to the operations of the business unit.  Indirect expenses
      include corporate overheads, which are allocated to the divisions, based on
      the
      gross margin earned by the division.





27


On
      an
      overall basis, operating expenses increased 44% ($1,535,649) to $5,001,524
      for
      the first nine months of 2007 from $3,465,875 for the same period in
      2006.  The increase in expenses is largely attributable to increased
      costs associated with the Medical Services ($1,442,247).





On
      a
      divisional basis, after the allocation of corporate overheads, operating
      expenses were as follows:





**Nine
                months Ended September 30,****Operating
                expenses**
            
            **2007**
            
            
            **2006**Staffing
                Solutions
            
            
            1,193,845
            
            
            
            1,240,984Medical
                Services
            
            
            3,079,510
            
            
            
            1,637,263Healthcare
                Consulting
            
            
            728,169
            
            
            
            587,628**Total**
            
            ****
            **5,001,524**
            
            
            ****
            **3,465,875**





**AMORTIZATION
      AND INTEREST**





Amortization
      increased from $141,148 for the nine months ended September 30, 2006 to $250,154
      for the same period in 2007.  During the fourth quarter of 2006 and
      the first nine months of 2007, the Company increased its capital spending on
      leasehold improvements and equipment associated with its Pain Management
      centers.  Consequently amortization costs increased in the current
      quarter of 2007 compared to the same period of the previous year.





For
      the
      nine months ended September 30, 2007, the Company earned interest of $63,474,
      compared to interest earned of $30,606 for the same period in
      2006.  When the Company completed the Calian deal in July 2006, its
      cash position increased substantially.





The
      interest on long-term debt for the period was $89,640 compared to $42,318 for
      the same period in 2006. The increase relates to charges associated with the
      Series I Shares.  The Series I Shares have been accounted for as a
      compound financial instrument comprising both a financial liability and
      equity.  The allocation of the proceeds of the Series I Shares was
      allocated to the two components based on the present value of the future
      payments on the Series I Shares, discounted at a risk free rate of return that
      could be earned by the holder of the Series I Shares.  The liability
      is accreted to its full face value through a charge to interest expense over
      the
      five year term of the Series I Shares.  The costs associated with the
      Series I Shares are non-cash expenses.





**OTHER
      EXPENSES**





Stock
      compensation expenses were nil for the nine month period ended September 30,
      2007 compared to $93,507 for the same period in 2006.  Stock
      compensation expenses arise when options or warrants, issued to employees or
      others, vest.  In 2006, 1,437,500 share purchase warrants, that were
      set to expire, were extended by nine months.  .





Interest
      expense on the financial liability carried at amortized cost of $12,700 (2006
      -
      $nil) arises as a result of the Company adopting Handbook Section 3855,
“Financial Instruments - Recognition and Measurement”.  This is a non
      cash expense.





**INCOME
      TAXES**





For
      the
      nine months ended September 30, 2007 and 2006 there was no provision for income
      taxes payable due to the large tax loss carry-forwards available from previous
      loss years.  The Company pays income taxes in accordance with Canadian
      federal and provincial income tax legislation. We do not expect to pay
      significant corporate income tax in Canada in the foreseeable future because
      we
      have significant net operating loss carry forwards for Canadian income tax
      purposes.












28




**DISCONTINUED
      OPERATIONS**




**Family
      Medical Clinics**


For
      the
      nine month period ended September 30, 2007 the Company reported a loss from
      its
      Family Medical Clinics of ($181,879) compared to a loss of ($133,560) in the
      same period in 2006.  The Company sold its clinic in Calgary, Alberta
      effective August 1, 2007 and is in the process of disposing of its remaining
      Family Medical Clinic.





**Government
      Health Services**


During
      the nine month period ended September 30, 2007, the Company had income from
      Government Health Services (the “DND Contract”) of $3,403 compared to income of
      $1,314,861 for the same period in 2006.  On July 11, 2006, the Company
      settled outstanding litigation regarding the loss of the DND contract. Pursuant
      to the settlement, the Company received $CDN2.0 million ($1.8 million). Proceeds
      of the settlement, net of expenses and income taxes, were recorded as Income
      from Discontinued Operations by the Company.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      at
      September 30, 2007, the Company's cash position was $2,178,026 compared to
      $4,028,128 at December 31, 2006.





The
      Company’s principal source of liquidity is its cash on hand and its cash flow
      from operations.  Historically we have incurred operating losses;
      however, in fiscal 2006 the Company reported cash flow from operations of
      approximately $736,000.  This arose when the Company received
      $1,800,000 (Cdn$2,000,000) on the settlement of an outstanding
      lawsuit.  The Company’s working capital position (current assets minus
      current liabilities) decreased by approximately $1,240,000 in the first nine
      months of 2007.  During this time, the Company continued its expansion
      of its Pain Management business, by opening five new Pain Management
      centers.  Capital expenditures in the first nine months increased to
      approximately $970,000 from $180,000 in the nine months ended September 30,
      2006.





The
      reduction in the cash position of ($1,850,102) in the first nine months of
      2007
      resulted from (a) a use of cash from operations of ($180,000); (b) changes
      to
      non-cash working capital items of ($850,000); (c) a ($185,000) charge from
      discontinued operations, comprised of a loss of ($175,000) from discontinued
      operations and a ($10,000) decrease in working capital from discontinued
      operations; (d) ($1,095,000) used by the Company in investing activities with
      respect to the purchase of property, plant and equipment ($970,000) and deferred
      clinic set-up costs ($125,000) and (e) the repayment of notes payable of
      ($125,000). The strengthening of the Canadian dollar relative to the US dollar
      resulted in a positive foreign exchange impact of $585,000. The investing
      activities largely related to funds used for the acquisition of leasehold
      improvements at the Company’s Pain Management centers.





In
      the
      second quarter the Company implemented a cost reduction strategy.  It
      is expected that this initiative will yield annualized cost savings of up to
      $400,000 once it is fully implemented.





The
      Company believes that cash on hand is adequate to finance our working capital,
      capital expenditure, and other obligations for the foreseeable
      future.





29


**OFF
      BALANCE SHEET ARRANGEMENTS**





The
      Company is not a party to any off-balance sheet arrangements.





**ADOPTION
      OF ACCOUNTING POLICIES**





Effective
      January 1, 2007, the Company has adopted the Canadian Institute of Chartered
      Accountants (“CICA”) Handbook; Section 3855 “Financial Instruments - Recognition
      and Measurement”; Section 3865 “Hedges”; and Section 1530 “Comprehensive
      Income”. These accounting standards introduce new requirements for the
      recognition and measurement of financial instruments, the application of hedge
      accounting and the reporting of comprehensive income that are designed to
      harmonize Canadian accounting standards with US and International Financial
      Reporting Standards.





On
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board


(“FASB”)
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
      an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN
      48 prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. The interpretation requires that the
      Company recognize the impact of a tax position in the financial statements
      if
      that position is more likely than not of being sustained on audit, based on
      the
      technical merits of the position. FIN 48 also provides guidance on
      de-recognition, classification, interest and penalties, accounting in interim
      periods and disclosure. In accordance with the provisions of FIN 48, any
      cumulative effect resulting from the change in accounting principle is to be
      recorded as an adjustment to the opening balance of deficit. The adoption of
      FIN
      48 did not result in a material impact on the Company’s financial position or
      results of operations.





For
      details of the specific accounting changes and related impacts, refer to Notes
      3
      and 9 in the unaudited interim consolidated financial statements.





**Recently
      Issued Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" which
      is
      effective for fiscal years beginning after November 15, 2007 and for interim
      periods within those years. This statement defines fair value, establishes
      a
      framework for measuring fair value and expands the related disclosure
      requirements. The Company is currently evaluating the potential impact of this
      statement on its consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” This standard provides companies
      with an option to report selected financial assets and liabilities at fair
      value. The Standard’s objective is to reduce both complexity in accounting for
      financial instruments and the volatility in earnings caused by measuring related
      assets and liabilities differently. This standard also establishes presentation
      and disclosure requirements designed to facilitate comparisons between companies
      that choose different measurement attributes for similar types of assets and
      liabilities. This Statement is effective as of the beginning of an entity’s
      first fiscal year beginning after November 15, 2007. The Company is currently
      evaluating the potential impact of this statement on our consolidated financial
      statements.





**CRITICAL
      ACCOUNTING POLICIES AND ASSUMPTIONS**





The
      preparation of 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
      assessment of collection risk associated with accounts receivable, 3) the
      disclosure of


30


contingent
      liabilities, and 4) accounting for income taxes.  The Company
      evaluates its estimates on an on-going basis. A description of the Company’s
      accounting policies is included in the notes to the audited consolidated
      financial statements and related notes for the year ended December 31, 2006,
      contained therein. These estimates are based on information that is currently
      available to the Company and on various other assumptions that it believes
      to be
      reasonable under the circumstances.  Actual results could vary from
      those estimates under different assumptions or conditions.  The
      Company believes that the following critical accounting policies affect the
      more
      significant judgments and estimates used in the preparation of the consolidated
      financial statements:





•
            The
                Company maintains accruals for revenues, physician fees and other
                direct
                costs, salaries, benefits, and other costs.  Major accruals,
                revenues and expenses, relate to the accrual of revenue and expenses
                associated with staffing contracts.  These accruals are of a
                short duration; that is, revenues and expenses are generally known
                before
                financial statements are finalized.  Based on historical
                experience the Company’s accruals have proven accurate.  Should
                changes occur in the future, the Company may be required to revise
                its
                accrual assumptions.


•
            The
                Company maintains an allowance for doubtful accounts for estimated
                losses
                resulting from fraudulent claims made by patients, the inability
                of our
                corporate customers to make required payments, or as a result of
                a dispute
                in the invoiced amount.  Fraudulent claims arise when patients
                seek medical care and provide an invalid health card for
                payment.  The introduction of electronic medical records
                services, which pre-screen patients prior to services being rendered,
                is
                rapidly diminishing the Company’s exposure to fraudulent claims by
                patients.  The Company determines the adequacy of its bad debt
                allowance by continually evaluating individual customer receivables,
                considering the customer’s financial condition, credit history and current
                economic and business conditions. If the financial condition of the
                Company’s customers were to deteriorate, resulting in an impairment of
                their ability to make payments, additional allowances may be required.
                Historically losses on uncollectible accounts have not exceeded the
                Company’s allowances. As of September 30, 2007, the allowance for doubtful
                accounts was approximately $29,200 (December 31, 2006 -
                $23,200).


•
            The
                Company is subject to various claims and legal actions in the ordinary
                course of its business. These matters include breach of contract
                or
                similar matters arising from contractual disputes. The Company’s hospital
                and healthcare facility clients may also become subject to claims,
                governmental inquiries and investigations and legal actions to which
                the
                Company may become a party relating to services provided by its
                professionals. From time to time, and depending upon the particular
                facts
                and circumstances, the Company may be subject to indemnification
                obligations under its contracts with its hospital and healthcare
                facility
                clients relating to these matters.  As mentioned, the Company is
                unable to determine its potential exposure regarding these lawsuits
                at
                this time.  Similarly, the Company has other contingent
                liabilities that pertain to amounts potentially owing to government
                authorities.  The Company continues to evaluate the probability
                of an adverse outcome and will provide accruals for such contingencies
                as
                required. The Company is currently not aware of any other such pending
                or
                threatened litigation or similar contingency that it believes is
                reasonably likely to have a material adverse effect on it. If the
                Company
                becomes aware of such claims against it, it will evaluate the probability
                of an adverse outcome and provide accruals, as required, at that
                time.


•
            The
                Company is required to estimate the amount of tax payable for the
                current
                year and the future income tax assets and liabilities recorded in
                the
                financial statements accounts for future tax consequences of events
                that
                have been reflected in its financial statements.  Significant
                management judgment is required to assess the timing and probability
                of
                the ultimate tax impact.  The Company records valuation
                allowances on future tax assets to reflect the expected realizable
                future
                tax benefits.  Actual income taxes could vary from these
                estimates due to future changes in income tax law, changes in the
                jurisdictions in which the Company operates, the inability to generate
                sufficient future taxable income or unpredicted results from potential
                examinations or determinations of each year’s liability by the taxing
                authorities.


31





•
            Valuation
                allowances primarily relate to potential future tax assets arising
                from
                accounting amortization claimed in excess of tax depreciation and
                tax
                losses carried forward.  Management must assess both positive
                and negative evidence when determining whether it is more likely
                than not
                that future tax assets will be recoverable in future
                periods.  Based on this assessment, a valuation allowance must
                be established where management has determined, based on current
                facts and
                reasonable assumptions, that such future tax assets will not likely
                be
                realized by the Company.  Realization is based on the Company’s
                ability to generate sufficient future taxable income.  The
                Company intends to maintain a valuation allowance against its future
                tax
                assets until sufficient positive evidence exists to support its
                reversal.  Changes in material assumptions can occur from period
                to period due to the aging of prior year’s losses, the cumulative effect
                of current period taxable income and other sources of positive and
                negative evidence.  If these changes in material assumptions
                were to provide sufficient positive evidence, the Company could record
                the
                net benefit of $9.5 million, or a portion thereof, as a recovery
                of income
                taxes in the period when realization becomes more likely than not
                and a
                corresponding increase in net future income tax
                assets.





The
      Company has historically applied the dual approach in quantifying financial
      statement misstatements in all prior periods.  As such, no cumulative
      adjustment was required.





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





Evaluation
      of Disclosure Controls and Procedures: Our management with the participation
      of our principal executive officer and principal financial officer has evaluated
      the effectiveness of our disclosure controls and procedures (as such term is
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”) pursuant to Rule 13a-15c under the
      Exchange Act as of the end of the period covered by this Annual Report on Form
      10-K.





We
      have
      undertaken significant efforts to establish a framework to improve internal
      controls over financial reporting.  We committed considerable resources to
      design, implement and document our internal controls. In performing the
      assessment, our management believes that these efforts have improved our
      internal controls over financial reporting.  Further, management
      believes that it has remedied a previously identified material weakness in
      internal control over financial reporting with respect to the segregation of
      incompatible duties by removing financial application access rights to one
      of
      the senior financial officers, which access was previously creating a
      segregation of duties deficiency.





Changes
      in Internal Control over Financial Reporting: There was no change in our
      internal control over financial reporting (as defined in Rules 13a-15(f) and
      15d-15(f) under the Exchange Act) that occurred during the period covered by
      this Annual Report on Form 10-Q that has materially affected, or is reasonably
      likely to materially affect our internal control over financial
      reporting.





32





**PART
      II:  OTHER INFORMATION**





ITEM
      1A.  RISK FACTORS





There
        have been no material changes in our risk factors from those disclosed in
        our
        2006 Annual Report on Form 10-K.





ITEM
      6. EXHIBITS





Exhibit
      31.1   Rule 13a-14(a)/15d-14(a) Certification of the Chief
      Executive Officer of the Company.


Exhibit
      31.2   Rule 13a-14(a)/15d-14(a) Certification of the Chief
      Financial Officer of the Company.


Exhibit
        32.1   Section 1350 Certification of Chief Executive
        Officer


Exhibit
      32.2   Section 1350 Certification of Chief Financial
      Officer.





33


**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.(Registrant)Authorized
                Officer:By:
                /s/ Dr. Ramesh ZachariasRamesh
                ZachariasChief
                Executive OfficerDate:
                November 14, 2007Principal
                Financial and Accounting Officer:By:
                /s/ William DanisWilliam
                DanisChief
                Financial OfficerDate:
                November 14, 2007







34