SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-Q





(MARK
      ONE)





ý
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934FOR
                THE QUARTERLY PERIOD ENDED JUNE 30, 2005*OR* ̈
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934FOR
                THE TRANSITION PERIOD FROM __________ TO
                ____





COMMISSION
      FILE NUMBER: 1-13861


**MED-EMERG
      INTERNATIONAL INC.**


(Exact
      Name of Registrant as Specified in Its Charter)





PROVINCE
      OF ONTARIO, CANADA


(State
      or Other Jurisdiction of Incorporation or Organization)





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





Registrant’s
      telephone number, including area code: (905) 858-1368





Securities
      registered or to be registered pursuant to Section 12(g) of the
      Act.




(Title
                  of each class)
            (Name
                of each exchange on which registered)COMMON
                STOCK, NO PAR VALUE
            OTC
                Bulletin BoardREDEEMABLE
                COMMON STOCKPURCHASE
                WARRANTS
            OTC
                Bulletin Board







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 ý
      No
 ̈





Indicate
      by check mark whether registrant is an accelerated filer (as defined in Exchange
      Act Rule 12(b)-2). Yes  ̈
      No
ý





The
      aggregate market value of the shares of Common Stock (based upon the closing
      sales price of the Company’s Common Stock as reported on the OTC Bulletin Board
      on June 30, 2005) of the registrant held by non-affiliates was approximately
      US$19,232,000.





As
      of
      June 30, 2005, 58,277,696 shares of the registrant’s Common Stock were
      outstanding.





(All
      figures in US dollars unless otherwise indicated.)











1





**MED-EMERG
      INTERNATIONAL INC.**





JUNE
      30, 2005 QUARTERLY REPORT ON FORM 10-Q














TABLE
      OF CONTENTS








PART
                I: FINANCIAL INFORMATIONItem
                1.
            Financial
                StatementsItem
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                OperationsItem
                3.
            Quantitative
                and Qualitative Disclosures about Market RiskItem
                4.
            Controls
                and ProceduresPART
                II: OTHER INFORMATIONItem
                5.
            Exhibits
                and Reports on Form 8-K(a)
                Exhibits(b)
                Reports on Form 8-KSignatures





2





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**





This
      Quarterly Report on Form 10-Q contains forward-looking statements as defined
      by
      the Private Securities Litigation Reform Act of 1995. Forward-looking statements
      include statements concerning plans, objectives, goals, strategies, future
      events or performance and underlying assumptions and other statements, which
      are
      other than statements of historical facts. These statements are subject to
      uncertainties and risks including, but not limited to, product and service
      demand and acceptance, changes in technology, economic conditions, the impact
      of
      competition and pricing, government regulation, and other risks defined in
      this
      document and in statements filed from time to time with the Securities and
      Exchange Commission. All such forward-looking statements are expressly qualified
      by these cautionary statements and any other cautionary statements that may
      accompany the forward-looking statements. In addition, Med Emerg International
      Inc. (“MEII” or the “Company”) disclaims any obligations to update any
      forward-looking statements to reflect events or circumstances after the date
      hereof.








**PART
      I: FINANCIAL INFORMATION**


**ITEM
        1.**  **CONDENSED FINANCIAL STATEMENTS**





Consolidated
      Balance Sheets as at June 30, 2005 (unaudited) and December 31, 2004 (audited)





Consolidated
      Statement of Operations and Deficit for the three months and six months ended
      June 30, 2005 and 2004 (unaudited)





Consolidated
      Statement of Cash Flows for the three months and six months ended June 30,
      2005
      and 2004 (unaudited)





Notes
      to Unaudited Consolidated Financial Statements











3


**Med-Emerg
        International Inc.**
 **Consolidated
        Balance Sheet**
 **As
        at June 30, 2005 (Unaudited) and December 31, 2004
        (Audited)**
 **(in
        US$)**





June
                30
            
            December
                312005
            
            2004**Assets****Current
                assets**Cash
            
            $
            584,460
            
            $
            2,312,156**Accounts
                receivable
            
            
            *1,722,415*
            
            
            *1,452,586*Prepaid
                expenses and other
            
            
            89,288
            
            
            72,557Discontinued
                operations (note 4)
            
            
            1,174,475
            
            
            2,655,0983,570,638
            
            
            6,492,397Long-term
                investment
            
            
            83,195
            
            
            83,195Property,
                plant and equipment
            
            
            471,296
            
            
            470,243Goodwill
            
            
            237,596
            
            
            237,596Discontinued
                operations (note 4)
            
            
            30,970
            
            
            38,596$
            4,393,695
            
            $
            7,322,027**Liabilities
                and Shareholders' Equity****Current
                liabilities**Accounts
                payable and accrued liabilities
            
            $
            1,572,953
            
            $
            1,661,794Discontinued
                operations (note 4)
            
            
            1,372,549
            
            
            3,606,4762,945,502
            
            
            5,268,270**Long-term
                liabilities**Notes
                payable
            
            
            599,991
            
            
            599,991Discontinued
                operations (note 4)
            
            
            720,431
            
            
            894,5174,265,924
            
            
            6,762,778Contingent
                liabilities (note 10)**Shareholders'
                Equity**Capital
                stock (note 5)
            
            
            1,361,280
            
            
            1,361,280Contributed
                surplus (note 6)
            
            
            336,438
            
            
            67,080Deficit
                (note 7)
            
            
            (749,747
            )
            
            (68,320
            )(Accumulated
                deficit of $17,152,785 has been eliminated by applying it against
                contributed surplus and capital stock)Cumulative
                translation adjustment
            
            
            (820,200
            )
            
            (800,791
            )127,771
            
            
            559,249$
            4,393,695
            
            $
            7,322,027





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


4





Med-Emerg
      International Inc.


Consolidated
      Statement of Operations and Deficit


Three
      and six months ended June 30, 2005 and 2004 (Unaudited)


(in
      US$)





**THREE
                MONTHS ENDED**
            
            **SIX
                MONTHS ENDED**June
                30
            
            June
                30
            
            June
                30
            
            June
                302005
            
            2004
            
            2005
            
            2004**Revenue**
            
            $
            3,010,613
            
            $
            2,178,969
            
            $
            6,090,045
            
            
            4,624,182**Less:
                Physician fees and other direct costs**
            
            
            2,249,720
            
            
            1,611,143
            
            
            4,521,279
            
            
            3,512,967760,893
            
            
            567,826
            
            
            1,568,766
            
            
            1,111,215**Expenses**Salaries and benefits
            
            
            606,172
            
            
            494,546
            
            
            1,271,279
            
            
            910,973General and administration
            
            
            203,778
            
            
            239,948
            
            
            431,746
            
            
            431,504Occupancy costs and supplies
            
            
            108,600
            
            
            78,282
            
            
            228,897
            
            
            169,448Closing costs
            
            
            -
            
            
            592,285
            
            
            -
            
            
            592,285Travel and marketing
            
            
            69,520
            
            
            63,026
            
            
            143,404
            
            
            130,222988,070
            
            
            1,468,087
            
            
            2,075,326
            
            
            2,234,432**Loss
                before under noted items**
            
            
            (227,177
            )
            
            (900,261
            )
            
            (506,560
            )
            
            (1,123,217
            )Interest income
            
            
            (1,725
            )
            
            -
            
            
            (7,115
            )
            
            0Interest and financing expenses
            
            
            -
            
            
            38,286
            
            
            -
            
            
            83,857Amortization of property, plant, and equipment
            
            
            57,305
            
            
            14,869
            
            
            99,962
            
            
            23,040Stock compensation expense
            
            
            18,241
            
            
            5,076
            
            
            269,358
            
            
            45,44673,821
            
            
            58,231
            
            
            362,205
            
            
            152,343**Net
                loss before discontinued operations**
            
            
            (300,998
            )
            
            (958,492
            )
            
            (868,765
            )
            
            (1,275,560
            )**Discontinued
                operations**Income(loss) from discontinued operations (note 4 )
            
            
            (83,525
            )
            
            234,142
            
            
            187,339
            
            
            437,394**Net
                loss**
            
            
            (384,523
            )
            
            (724,350
            )
            
            (681,426
            )
            
            (838,166
            )Preferred share dividends
            
            
            -
            
            
            527
            
            
            -
            
            
            (33,223
            )Forgiveness of preferred share dividends
            
            
            -
            
            
            563,477
            
            
            -
            
            
            563,477**Net
                loss attributable to common shareholders**
            
            
            (384,523
            )
            
            (160,346
            )
            
            (681,426
            )
            
            (307,912
            )**Deficit,
                beginning of the period**
            
            
            (365,223
            )
            
            (16,572,875
            )
            
            (68,320
            )
            
            (16,425,309
            )**Deficit,
                end of the period**
            
            $
            (749,746
            )
            $
            (16,733,221
            )
            $
            (749,746
            )
            $
            (16,733,221
            )**Basic
                loss per common share**Continuing operations
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            (0.01
            )
            $
            (0.04
            )Discontinued operations
            
            $
            (0.00
            )
            $
            0.01
            
            $
            0.00
            
            $
            0.02**Weighted
                average common shares outstanding**
            
            
            58,277,696
            
            
            25,805,515
            
            
            58,277,696
            
            
            17,687,469








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











5





**Med-Emerg
      International Inc.**


**Consolidated
      Statement of Cash Flows**


**Three
      and six months ended June 30, 2005 and 2004 (Unaudited)**


**(in
      US$)**





THREE
                MONTHS ENDED
            
            SIX
                MONTHS ENDEDJune
                30
            
            June
                30
            
            June
                30
            
            June
                302005
            
            2004
            
            2005
            
            2004**Cash
                Flows from Operating Activities**Net loss before discontinued operations
            
            $
            (300,998
            )
            $
            (958,492
            )
            $
            (868,765
            )
            
            (1,275,560
            )Adjustments for:Amortization of property, plant and equipment
            
            
            57,305
            
            
            14,869
            
            
            99,962
            
            
            23,040Stock compensation expense
            
            
            18,241
            
            
            5,076
            
            
            269,358
            
            
            45,446(225,452
            )
            
            (938,547
            )
            
            (499,445
            )
            
            (1,207,074
            )Increase (Decrease) in non-cash working capital components
            
            
            (20,165
            )
            
            223,053
            
            
            (375,402
            )
            
            162,643Discontinued operations (note 4)
            
            
            (545,195
            )
            
            179,760
            
            
            (733,219
            )
            
            (216,741
            )(790,812
            )
            
            (535,734
            )
            
            (1,608,066
            )
            
            (1,261,172
            )**Cash
                Flows from Investing Activities**Additions to property, plant, and equipment
            
            
            (81,850
            )
            
            (176,843
            )
            
            (101,015
            )
            
            (183,806
            )Discontinued operations (note 4)
            
            
            487
            
            
            397
            
            
            794
            
            
            (11,373
            )(81,363
            )
            
            (176,446
            )
            
            (100,221
            )
            
            (195,179
            )**Cash
                Flows from Financing Activities**Demand loan
            
            
            -
            
            
            (318,017
            )
            
            -
            
            
            455,412Common shares issued
            
            
            -
            
            
            4,500,000
            
            
            -
            
            
            4,500,000-
            
            
            4,181,983
            
            
            -
            
            
            4,955,412Effect
                of foreign currency exchange rate changes
            
            
            (13,481
            )
            
            30,183
            
            
            (19,409
            )
            
            62,096**Increase
                (decrease) in cash**
            
            
            (885,656
            )
            
            3,499,986
            
            
            (1,727,696
            )
            
            3,561,157Cash,
                beginning of the period
            
            
            1,470,116
            
            
            441,481
            
            
            2,312,156
            
            
            380,310**Cash,
                end of the period**
            
            $
            584,460
            
            $
            3,941,467
            
            $
            584,460
            
            
            3,941,467








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








6





**MED-EMERG
      INTERNATIONAL INC**


**Notes
      to Unaudited Consolidated Financial Statements**


**Six
      months ended June 30, 2005 and 2004**





**1.
      ORGANIZATION AND DESCRIPTION OF BUSINESS**





Med-Emerg
      International Inc. (“MEII” or the “Company”) is a private sector provider of
      quality healthcare management services to the Canadian healthcare industry.





The
      Company is publicly traded and listed on the OTC Bulletin Board. The Company
      completed its initial public offering in February 1998.





The
      Company’s operations were divided into four units during the 2004 fiscal year.
      The contract with the Department of National Defence (“DND”) expired on March
      31, 2005. MEII’s three remaining business units are: Staffing Solutions, Medical
      Services and Healthcare Consulting.





For
      Staffing Solutions, the Company provides emergency department physician and
      nurse recruitment, staffing and administrative support services to hospitals
      and
      federal corrections facilities, on a contractual basis, and physician and nurse
      practitioners to select long-term facilities in Ontario, British Columbia and
      Nova Scotia. At June 30, 2005, the Company had 38 physician and nurse staffing
      contracts.




The
      Medical Services division provides special access Remicade ’ infusion services to patients suffering from Crohn’s disease and rheumatoid
      arthritis at clinic locations across Ontario. In November 2004, the Company
      acquired a pain management clinic and commenced offering services to Canadians
      who experience chronic pain. The Company now offers these services at three
      locations in the Greater Toronto Area.





MEII
      provides Healthcare Consulting services to select Canadian private and public
      institutions on issues related to a variety of healthcare topics.





**2.
      BASIS OF PRESENTATION**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with Canadian generally accepted accounting principles (GAAP). These
      financial statements consolidate the accounts of MEII and its wholly owned
      subsidiaries: 927563 Ontario Inc., 927564 Ontario Inc., Med-Emerg Inc.,
      Med-Emerg Health Centres Inc., YFMC Healthcare Inc., YFMC Healthcare (Alberta)
      Inc., Doctors on Call Ltd, CPM Health Centres Inc and OPA Locum Direct
      Inc.





Significant
      intercompany accounts and transactions have been eliminated on
      consolidation.





The
      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 ended December 31, 2005.





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 Form 10-K for the year ended December 31, 2004. 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 Company’s Annual Report on Form
      10-K for the year ended December 31, 2004.


7





**3.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





a)
            **Use
                of estimates**





The
      preparation of consolidated financial statements in conformity with Canadian
      generally accepted accounting principles requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosure of contingent liabilities during the reporting period. Significant
      areas requiring the use of estimates relate to: 1) the reported amounts of
      revenues and expenses, 2) the disclosure of contingent liabilities, 3) the
      carrying value of property, plant, and equipment and the rate of amortization
      related thereto. Actual results could differ from those estimates. When
      adjustments become necessary, those adjustments are reported in earnings in
      the
      period in which they become known.





b)
            **Long-term
                investments**





Investments
      are accounted for at cost when the conditions for equity accounting are not
      present, and on the equity basis when significant influence exists. Declines
      in
      market values of investments are expensed when such declines are considered
      to
      be other than temporary.





**(c)**
            **Property,
                plant, and equipment**





Property,
      plant, and equipment are recorded at cost and are amortized over their estimated
      useful lives at the undernoted rates and methods:





Furniture
                and fixtures
            20%
            Declining
                balanceComputer
                software
            100%
            Declining
                balanceComputer
                hardware
            30%
            Declining
                balanceLeasehold
                improvements
            3-5
                years
            Straight-line





**(d)**
            **Goodwill**





Goodwill
      is the excess of the purchase price of assets over the fair value of the
      underlying net identifiable assets. The Company has adopted CICA Handbook
      Section 3062 “Goodwill and Other Intangible Assets”, which states that goodwill
      and indefinite life intangible assets should no longer be amortized, but should
      be tested for impairment at least on an annual basis. The Company has determined
      that there was no condition existing to indicate a permanent decline in the
      value of the goodwill as at the period end.





**(e)**
            **Impairment
                charges**





At
      least annually and when events and circumstances warrant a review, the Company
      evaluates the


carrying
      value of its assets for potential impairment. An impairment loss is recognized
      when the estimated net realizable value of any asset is less than its carrying
      value. Any impairment in assets is written down and charged to earnings in
      the
      year.





**(f)**
            **Revenue
                recognition**





The
      company has adopted the provisions of EIC - 123 and EITF 99-19. Both address
      the
      reporting of revenue on a gross basis as a principal versus on a net basis
      as an
      agent. The pronouncements generally state that revenue should be reported on
      a
      gross basis if:





•
            The
                enterprise is the primary obligor in the relationship;•
            The
                enterprise has latitude in establishing price;•
            The
                enterprise performs part of the
                service;





8





•
            The
                enterprise has discretion in supplier selection;•
            The
                enterprise is involved in the determination of service specifications;
                and•
            The
                enterprise has credit risk.





With
      the exception of determining how the specific service is delivered, MEII meets
      the six tests identified for each of its service offerings. Accordingly revenue
      is reported on a gross basis for all business units.




The
      following is a description of MEII’s revenue recognition policies for each of
      the significant business units.





**(1)
      Staffing Solutions:**





Revenue
      is reported on a gross basis.





MEII
      acts as a principal in providing these services. MEII contracts with emergency
      room physician and nursing personnel to provide services to hospitals and
      correctional facilities in Ontario, British Columbia and Nova Scotia, a mix
      of
      rural and urban facilities including tertiary care centres.





Contracts
      are both fee-for-service and fixed monthly contracts. Contracts are negotiated
      annually and are cancelable by either party on 60 days notice.





Revenue
      is recognized on a current basis, as services are delivered.





**(2)
      Medical Services:**





Revenue
      is reported on a gross basis.





Under
      contracts with Schering-Plough Canada and Novartis Pharmaceuticals Canada Inc,
      MEII acts as the coordinator for the community-based infusion of certain
      medications for the treatment of patients with rheumatoid arthritis, Chron’s
      disease and certain cancers.





The
      Company acts as the principal in providing pain management treatments to
      patients in its Toronto-based clinics.





Revenue
      is recognized on a current basis, as services are delivered.





**(3)
      Healthcare Consulting:**





Revenue
      is reported on a gross basis.





MEII
      is
      involved with several provincial governments, advising on a variety of issues
      related to primary care staffing, training and integrated service delivery
      models. MEII also advises several aboriginal communities with regards to
      healthcare infrastructure service delivery issues.





Revenue
      is recognized over the life of the contracts, based on pre-defined
      milestones.





**(4)
      Government Healthcare Services (Includes Department of National Defence
      (“DND”))- Discontinued Operations:**





Revenue
      is reported on a gross basis.





MEII
      had an administrative management contract with Public Works and Government
      Services Canada (“PWGSC”) to provide personnel to Canadian armed forces across
      Canada on behalf of the Minister of National Defence.





Under
      the terms of the contract, MEII had the responsibility to hire medical personnel
      and support staff and where necessary provide appropriate training and
      supervision of the work performed at the respective bases across Canada. MEII
      billed DND for the work performed by these individuals and in turn paid the
      medical personnel and support staff based on the terms of the respective
      contracts signed with them. This contract expired on March 31,
      2005.





9


Revenue
      is recognized on a current basis, as services are delivered.





**(g)**
            **Future
                income taxes**





The
      Company accounts for income taxes using the asset and liability method. Future
      tax assets and liabilities are recognized for the future taxes attributable
      to
      the temporary differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax carrying values. Future
      tax assets and liabilities are measured using enacted or substantially enacted
      tax rates expected to apply to taxable income in the years in which those
      temporary differences are expected to be recovered or settled. A valuation
      allowance against future tax assets is provided to the extent that the
      realization of these future tax assets is not “more likely than
      not”.





**(h)**
            **Cash**





Cash
      consists of cash on hand and in banks.





**(i)**
            **Foreign
                currency translation**





The
      Company maintains its books and records in Canadian dollars. The consolidated
      financial statements are converted to U.S. dollars as the Company is a reporting
      issuer under the Securities laws of the United States of America. The
      translation method used is the current rate method. Under the current rate
      method all assets and liabilities are translated at the current rate prevailing
      at the balance sheet date, shareholders’ equity (deficit) is translated at
      historical rates and all income and expense items are translated at average
      rates for the year. Due to the fact that items in the consolidated financial
      statements are being translated at different rates according to their nature,
      a
      translation adjustment is created. This translation adjustment has been included
      in the cumulative translation adjustment.





**(j)**
            **Stock
                compensation expenses**





The
      Company has adopted section 3870 issued by the CICA in respect of stock based
      compensation and other stock based payments. This section requires that a fair
      value based method of accounting be applied to all stock based payments to
      non-employees and to direct awards of stock to employees. The standard requires
      the recognition of a compensation expense for grants of stock, stock options,
      and other equity instruments to employees based on the estimated fair value
      of
      the instruments at the grant date.





**(k)**
            **Loss
                per share attributable to common
                shareholders**





Basic
      loss per share attributable to common shareholders is computed by dividing
      the
      net loss attributable to common shareholders before discontinued operations
      over
      the weighted average number of common shares outstanding, including contingently
      issuable shares where the contingency has been resolved. Due to the loss for
      all
      periods presented, all potential common shares outstanding are considered
      anti-dilutive and are excluded from the calculation of diluted loss per
      share.








**4.
      DISCONTINUED OPERATIONS**





The
      contract with DND, to provide personnel to Canadian armed forces across Canada,
      expired on March 31, 2005. This was a significant contract generating separate
      identifiable cash flows, and hence it has been classified as a discontinued
      operation, and accounted for accordingly.


10


The
      summarized statements of income for the Discontinued Business for the six months
      ended June 30, 2005 and 2004 are as follows:





Jun-05
            
            Jun-04Revenue
            
            $
            11,094,253
            
            $
            10,108,387Physician
                fees and other direct costs
            
            
            10,344,992
            
            
            9,468,043Gross
                margin
            
            
            749,261
            
            
            640,344Operating,
                general and administrative expenses
            
            
            489,700
            
            
            341,630Depreciation
            
            
            6,832
            
            
            11,678Interest
                and financing
            
            
            65,390
            
            
            83,784Income
                from discontinued operations
            
            $
            187,339
            
            $
            203,252





The
      summarized balance sheets for the Discontinued Business as at June 30, 2005
      and
      December 31, 2004 are as follows:





Jun-05
            
            Dec-04Current
                assetsCash
            
            $
            6,256
            
            $
            800Accounts receivable
            
            
            1,168,219
            
            
            2,652,044Prepaid expenses and other
            
            
            0
            
            
            2,2541,174,475
            
            
            2,655,098Property,
                plant and equipment
            
            
            30,970
            
            
            38,596$
            1,205,445
            
            $
            2,693,694Current
                liabilitiesAccounts payable and accrued liabilities
            
            $
            1,372,549
            
            $
            3,606,4761,372,549
            
            
            3,606,476Long-term
                liabilitesAccounts payable and accrued liabilities
            
            
            720,431
            
            
            894,517$
            2,092,980
            
            $
            4,500,993Net
                assets
            
            
            ($887,535
            )
            
            ($1,807,299
            )





11





**5.
      CAPITAL STOCK**




On
      June
      15, 2004, the Company issued 39,360,272 common shares for $4,500,000. As a
      condition of the transaction, Preferred Shares, 50% of which were indirectly
      held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common
      shares; and unpaid preferred share dividends, in the amount of $579,582, were
      forgiven.




The
      investment resulted from the previously announced letter of intent signed by
      MEII and Global Healthcare Workforce Limited (“GHW”) of London, UK.




The
      Investors received 43,708,272 common shares of MEII, of which 39,360,272 were
      purchased from the Company for $4,500,000 and 4,348,000 were purchased directly
      from the Preferred Shareholder for $500,000. Closing costs including legal,
      travel and due diligence costs for the equity financing amounted to $609,214,
      and were expensed during the second quarter of 2004.




In
      addition to issuing the common shares, MEII also issued to the Investors and
      the
      former Preferred Shareholder, anti-dilution warrants (the “New Warrants”) to
      purchase common shares of MEII at prices of either $0.50 per common share or
      $1.00 per common share. The exercise of the New Warrants is directly tied to
      the
      exercise of existing options and warrants at $0.50 per common share and $1.00
      per common share that are currently outstanding. The exercise of the New
      Warrants is intended to allow the Investors and former Preferred Shareholder
      to
      maintain their pro rata share of their equity position.





**6.
      CONTRIBUTED SURPLUS**





During
      the first quarter of 2005, the terms of the common stock purchase warrants
      were
      amended, extending the expiry of these warrants from February 11, 2005 to
      February 11, 2006. As a result of this, stock compensation expense of $225,442
      was recorded. In addition, an amount of $25,675 has been recorded as stock
      compensation expense for options granted to an employee in 2004 for the portion
      that vested in the first quarter of 2005. These amounts have been credited
      to
      contributed surplus.





During
      the second quarter of 2005, an amount of $18,241 has been recorded as stock
      compensation expense for options granted to an employee in 2004 for the portion
      that vested in the second quarter of 2005. These amounts have been credited
      to
      contributed surplus.





During
      the first quarter of 2004, 100,000 options were granted with an exercise price
      of $0.50 per option. The options vested immediately and are available for a
      term
      of five years expiring on January 30, 2009. Due to the issuance of new options
      the fair value amounting to $40,876 has been determined using an option pricing
      model (Black Scholes) as per section 3870 of the CICA handbook. This amount
      has
      been credited to contributed surplus.





During
      the second quarter of 2004, 250,000 options were granted to an employee with
      an
      exercise price of $0.115 per option. 125,000 options vest every year. Options
      for 125,000 shares were exercisable on the first anniversary and options for
      the
      remaining 125,000 would be exercisable on the second anniversary of the
      employment agreement. Due to the issuance of new options, the fair value
      amounting to $57,746 has been determined using an option pricing model (Black
      Scholes) as per section 3870 of the CICA handbook. This amount has been credited
      to contributed surplus.





During
      the second quarter of 2004, 1,000,000 options were granted to each of two
      employees, and 150,000 each to two other employees, at an exercise price of
      $0.115 per option. Twenty per cent of these options lapsed at June 30, 2005,
      when specified earnings tests were not achieved. The remaining 80% of these
      options are subject to future earnings tests. Since the earnings tests are
      in a
      future period, no expense is recognized in the current quarter.





During
      the fourth quarter of 2004, 100,000 options were granted in connection with
      the
      acquisition of the Scarborough pain clinic. An amount of $39,938 has been
      credited to contributed surplus.








12


**7.
      ELIMINATION OF DEFICIT**





On
      August 18, 2004, at the Company’s Annual and Special meeting of shareholders,
      shareholders adopted a resolution to reduce the stated capital account of the
      common shares, by the amount of the deficit as at the end of the fiscal quarter
      following the shareholders’ meeting. Accordingly, the Company’s accumulated
      deficit of $16,892,002 as at September 30, 2004 has been eliminated by applying
      $2,469,329 against contributed surplus and the balance of $14,422,673 against
      the capital stock of the Company.








Capital
                Stock
            
            
            Contributed
                SurplusBalance
                at December 31, 2003
            
            $
            11,544,736
            
            $
            2,397,849Stock
                compensation expense for 2004
            
            
            0
            
            
            98,622Fair
                value of options in connection with acquisition of a
                clinic
            
            
            0
            
            
            39,93811,544,736
            
            
            2,536,409Shares
                issued to new investors
            
            
            4,500,000
            
            
            016,044,736
            
            
            2,536,409Elimination
                of Sept 30, 2004 deficit
            
            
            (14,422,673
            )
            
            (2,469,329
            )Elimination
                of Dec 31, 2004 deficit*
            
            
            (260,783
            )
            
            0Balance
                at December 31, 2004
            
            
            1,361,280
            
            
            67,080Stock
                compensation expense for 2005
            
            
            0
            
            
            269,358Balance
                at June 30, 2005
            
            $
            1,361,280
            
            $
            336,438





*
      In
      December 2004, the Company changed its accounting policy regarding its
      promissory notes, as required by section 3860 of the CICA Handbook. Had this
      change been made in September 2004, the amount of the deficit eliminated would
      have been higher. To capture the essence of this change in accounting policy,
      we
      have modified the calculation of deficit elimination accordingly.





**8.
      RELATED PARTY TRANSACTIONS**





Consulting
      fees of approximately $28,329 (Cdn $35,000) were paid to each of two directors,
      who have been retained as consultants.





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





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





13


(a)
      Shareholders’ equity (deficit)





Under
      Canadian GAAP, the purchase price of an acquisition is determined based on
      the
      share price on the date the transaction is consummated. Under U.S. GAAP, the
      purchase price of an acquisition where shares are issued is determined based
      on
      the share price for the period surrounding the announcement date of the
      acquisition. The share price used for the YFMC Healthcare Inc. acquisition
      under
      Canadian GAAP was $1.25. The share price used for the YFMC Healthcare Inc.
      acquisition under U.S. GAAP was $1.859. The differential was allocated to
      Goodwill at that time. Subsequently the Goodwill was impaired and
      written-off.





Under
      U.S. GAAP, detachable stock purchase warrants are given separate recognition
      from the primary security issued. Upon initial recognition, the carrying amount
      of the two securities is allocated based on the relative fair values at the
      date
      of issuance. Under Canadian GAAP, the detachable stock purchase warrants issued
      in conjunction with the private stock offering on January 22, 1996 and
      subsequently surrendered, have been given no recognition in the financial
      statements. Under U.S. GAAP, based on an ascribed fair value of $0.364 for
      each
      of the 1,000,000 share warrants issued, share capital would be lower by $36,406
      and, given that the stock purchase warrants were cancelled, the carrying amount
      of contributed surplus would be increased by $36,406.





Under
      U.S. GAAP the effect on shareholders’ equity (deficit) would be adjusted as
      follows:


June
                  2005
              
              December
                  2004Capital
                  stock (as previously shown)
              
              $
              1,361,280
              
              $
              1,361,280Capital
                  stock issued on purchase of YFMC Healthcare Inc.
              
              
              1,087,872
              
              
              1,087,872Ascribed
                  fair value of share purchase warrants issued
              
              
              (36,406
              )
              
              (36,406
              )Capital
                  stock - U.S. GAAP
              
              
              2,412,746
              
              
              2,412,746Contributed
                  surplus (as previously shown)
              
              
              336,438
              
              
              67,080Share
                  purchase warrants
              
              
              36,406
              
              
              36,406Paid-in-capital
                  - U.S. GAAP
              
              
              372,844
              
              
              103,486Deficit
                  (as previously shown)
              
              
              (749,747
              )
              
              (68,320
              )Cumulative
                  translation adjustment
              
              
              (820,200
              )
              
              (800,791
              )Shareholders’
                  equity - U.S. GAAP
              
              $
              1,215,643
              
              $
              1,647,121





(b)
      Comprehensive loss





Statement
      of Financial Accounting Standards No. 130, “Reporting Comprehensive Income”
      (SFAS 130), establishes standards for reporting and display of comprehensive
      loss and its components in the financial statements. Under U.S. GAAP, the
      comprehensive loss for the six months ended June 30, 2005 and 2004 would be
      adjusted as follows:





**June**
            
            **June****2005**
            
            **2004**Net
                loss - U.S. GAAP
            
            
            ($681,426
            )
            
            ($307,912
            )Foreign
                currency translation adjustment
            
            
            (19,409
            )
            
            75,579Comprehensive
                loss
            
            
            ($700,835
            )
            
            ($232,333
            )











14


**10.
      CONTINGENT LIABILITIES**





(i)
            YFMC
                HealthCare Inc (“YFMC”), a wholly owned subsidiary of the Company, is in
                receipt of a letter from CCRA dated April 30, 2001, adjusting YFMC’s Goods
                and Services Tax returns for the period from December 31, 1992, to
                December 31, 1996. The total amount claimed by CCRA for this period
                is
                $249,000. In the event that YFMC is ultimately found liable, the
                Company
                intends to claim an indemnity for such amount against the directors
                and
                certain named principals of YFMC pursuant to the Company’s rights under
                the purchase agreement for YFMC executed on August 10, 1999. 1292363
                Ontario Ltd, a subsidiary of YFMC, is in receipt of a letter from
                CCRA
                dated February 4, 2005 for YFMC’s Goods and Services Tax, and the total
                amount claimed is $50,828. The Company’s legal counsel has advised that
                CCRA does not intend to pursue YFMC for these amounts, and accordingly
                no
                provision has been made in these consolidated financial
                statements.(ii)
            There
                is uncertainty with respect to the Company’s liability arising from a
                contractual dispute with a customer. Based on the advice of counsel,
                the
                Company is of the view that it is unlikely that the Company will
                be found
                liable for these costs. The costs associated with this contingent
                liability range from $400 thousand to $1.3 million.(iii)
            Claims
                have been made against the Company for general damages for breach
                of
                contract and in tort. A claim for approximately $423,000 has been
                made
                against the company for wrongful termination of a person working
                on a
                third party contract. A second claim for unspecified damages has
                been made
                against the company for wrongful dismissal and breach of contract.
                The
                Company’s lawyers are of the view that liability, if any, would be the
                responsibility of the third party contractor. The Company’s lawyers are of
                the opinion that the amount claimed grossly exceeds what a court
                would
                award in light of the current law. Since the Company’s lawyers are of the
                opinion that these claims are unlikely to succeed, no provision has
                been
                made in respect thereof in these consolidated financial statements.(iv)
            The
                Company sub-leased certain premises to third parties when it disposed
                of
                its clinic operations. In case of payment defaults by the third parties,
                the Company could be held liable for rent on these premises. Rent
                for
                these premises over the next seven years, during the respective lease
                terms, totals $1.7 million. In July of this year the Company was
                notified
                that one of the third parties was in default on their rent, in the
                amount
                of $29 thousand. We have been in touch with the third party and they
                are
                endeavoring to remedy the
                situation.





Any
      liability resulting from the above will be reflected as a charge to income
      in
      the year incurred.








**11.
      COMPARATIVE FIGURES**





Certain
      figures in the 2004 financial statements have been reclassified and restated
      to
      conform with the basis of presentation in 2005


15





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





Forward-looking
      statements of Med-Emerg International Inc. ("MEII" or the "Company) included
      herein or incorporated by reference including, but not limited to, those
      regarding future business prospects, the acquisition of additional clinics,
      the
      adequacy of capital resources and other statements regarding trends relating
      to
      various revenue and expense items, could be affected by a number of
      uncertainties and other factors beyond management’s control





**BACKGROUND**





Based
      in Ontario, Canada, Med Emerg International Inc (“MEII”) is an established
      health care solutions provider. Founded in 1983, initially to provide contract
      staffing of emergency room physicians and nurses, the Company has expanded
      to
      offer a wide variety of healthcare staffing solutions and medical services
      to
      governments, communities and facilities across Canada.





In
      these times, with the Canadian Healthcare system facing continuous challenges
      on
      several fronts, opportunities exist for a company like MEII to deliver
      innovative solutions within the confines of the Canada Health Act. Demand for
      more complex services from an ageing population, the capital and human resource
      requirements of new lifesaving technology and the need to retrofit existing
      ageing facilities all place strain on the system. The situation is exacerbated
      by burn-out in the workplace caused by declining enrolments in health
      professions and increased levels of retirement by the existing practitioners.
      The increasing severity of the condition now manifests itself in daily headlines
      announcing long waiting lists for elective surgery, shortages of family
      physicians and the governments struggle to keep pace with the ever increasing
      costs of a publicly funded, universally available healthcare system.




The
      Company currently employs staff covering several categories of healthcare
      professionals including physicians, dentists, pharmacists and nurses.





As
      a
      healthcare solutions provider, MEII in addition to its staffing business
      provides medical services such as chronic pain management and intravenous
      infusion services for pharmaceutical companies in conveniently located
      community-based clinics.





As
      a
      result of its many years of healthcare experience, MEII has developed a
      comprehensive understanding of primary care renewal, project evaluation, and
      healthcare human resource planning.




The
      Company's operations are divided into three units: Staffing Solutions, Medical
      Services and Healthcare Consulting Services.





**STAFFING
      SOLUTIONS**




Hospitals
      are increasingly turning to third-party experts to devise and implement
      improvements to the recruitment and management of their clinical staff. We
      provide physician staffing services to approximately 38 healthcare facilities
      in
      various provinces, including rural and urban facilities as well as tertiary
      care
      centers. In 2004 the company introduced Primary Health Care Nurse Practitioners
      to our mix of healthcare providers in hospitals.




16




MEII
      has developed a unique integrated staffing solution as a result of an approach
      by the Whitby Mental Health Centre to recruit primary care physicians. Reviewing
      the patient population, the nature of the cases being treated, and the total
      cost of the current system, MEII pioneered an integrated health care model
      combining Primary Care Physicians with Primary Care Nurse Practitioners. This
      was the first time a nurse practitioner function was introduced into a mental
      health setting. The program, now in its ninth year of operation, has received
      high satisfaction ratings from both staff and patients, resulting in the Whitby
      Mental Health Centre receiving the ACE award from the Ministry of Health for
      Innovation in Health Care Delivery Design. In June 2002, the Centre for
      Addiction and Mental Health awarded MEII a similar contract for primary care
      services.




Since
      1990, the Company has been involved in the provision of healthcare services
      in
      some of the most difficult environments. The Company currently provides after
      hours physician coverage to 8 federal penitentiaries in Ontario, and has
      developed a unique delivery model in a provincial penitentiary in Nova Scotia,
      using Physician Assistants supported telephonically by emergency
      physicians.




In
      March 2005, MEII reached an understanding with the Ontario Pharmacists’
      Association, to create a program to provide temporary placement of pharmacists
      in pharmacies across the province. MEII will be responsible for the recruitment,
      credentialing, placement and monitoring of the pharmacists.






**MEDICAL
      SERVICES**




In
      addition to its healthcare staffing solutions, MEII provides innovative medical
      services directly to healthcare consumers.




*Infusion
      Services*


In
      March 2001, Med-Emerg entered into an agreement with Schering-Plough Canada
      to
      become a coordinator for the community-based infusion of RemicadeTM, in
      Ontario.  This contract capitalizes on the Company's access to clinics
      for
      the treatment of patients with disabling rheumatoid arthritis and Crohn's
      disease. The Company has established over 20 infusion sites to-date and
      delivered over 6,000 infusions in 2004. MEII is expecting continued growth
      for
      this service, as the trend seems to be to move infusion services from
      institution settings into community based settings.





*Pain
      Management Services*


Med-Emerg’s
      chronic pain management service, CPM Health Centres (“CPM”), was launched in
      November 2004 with the acquisition of the Scarborough Pain Clinic. Two
      additional locations have since been opened. CPM has developed a standardized
      approach to the treatment of chronic pain, using an integrated
      multi-disciplinary approach including anesthetists, ER physicians,
      physiotherapists and chiropractors, amongst others.





It
      is
      estimated that more than 10% of Canadians suffer from chronic pain (unexplained
      pain lasting more than 6 months). This equates to more than 800,000 people
      living in southern Ontario who would potentially access medical services for
      the
      treatment of pain. Existing facilities in the region are backlogged with waiting
      times of 4-6 months. Due to the large demand, existing facilities in the rural
      areas are backlogged with waiting times of between 4-12 months.





With
      the objective of reducing these waiting times, the Company has created a
      two-pronged approach to improving service availability to that require
      professional chronic pain management care. The Company developed and launched
      a
      training program specifically designed to educate


17





emergency
      room physicians in chronic pain management. The first group has completed the
      didactic portion of the training program. MEII is now scheduling these doctors
      in our Toronto-area clinics to complete the clinical portion of their
      training.





Preliminary
      plans have been completed to increase the capacity and throughput of the
      Scarborough clinic by doubling the number of clinical pain providers and
      increasing the hours and days of operation of the facility.





Plans
      are underway to open additional sites in 2005.






**HEALTHCARE
      CONSULTING**




Over
      the years, MEII has developed significant experience in international and
      domestic healthcare consulting. Currently, the Company is involved with several
      provincial governments, advising on a variety of issues related to primary
      care
      staffing, training and integrated service delivery models. The Company is
      currently completing a project the four Atlantic Provinces (New Brunswick,
      Nova
      Scotia, PEI and Newfoundland and Labrador) and has created an innovative health
      human resource planning tool which is focused on a needs based model as opposed
      to the traditional supply based design. The Atlantic project has received wide
      recognition in the marketplace, and it is reasonable to expect new business
      opportunities as a result of this. The Company has recently been awarded
      contracts by the Canadian Nurses Association and the Canadian Medical
      Association in addition to several other smaller healthcare consulting
      projects.




**GOVERNMENT
      HEALTHCARE SERVICES - DISCONTINUED OPERATIONS**




In
      March of 2001, the Company was awarded an administrative management services
      contract, the largest of its kind, to provide medical staffing for military
      bases of the Department of National Defence (DND) across Canada. The contract
      had an initial period of three years ending on March 31, 2004, but the contract
      was amended and extended until March 31, 2005.





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





After
      learning that its bid had not been successful, in January 2005 the Company
      launched a Cdn.$100,000,000 lawsuit against the winning bidder and a former
      employee of the Company.  The Company believes that the successful bidder
      used confidential information obtained through the hiring of a former MEII
      employee to win the contract, and that the former MEII employee retained by
      the
      successful bidder breached his legal obligations by disclosing financial and
      other information confidential to Med-Emerg.  On January 31, 2005, the
      Company filed a complaint with the Canadian International Trade Tribunal
      (CITT).  The CITT is the administrative tribunal in Canada with the
      jurisdiction to conduct inquiries into complaints by potential suppliers
      concerning procurement by the federal government departments and agencies,
      including DND and PWGSC. In its submission to the CITT, Med-Emerg questioned
      the
      manner in which the Government of Canada’s procurement for the DND medical
      staffing contract, valued at $448,810,965, was conducted, including the
      evaluation of its proposal submitted in response to the Request for Proposal
      (RFP). Specifically, the Company alleged that PWGSC:





18


ð
              Awarded
                  the contract to a bidder that did not meet the mandatory requirements
                  of
                  the bid;ð
              Introduced
                  unpublished evaluation criteria to the evaluation process,
                  andð
              Failed
                  to properly apply the published evaluation
                  criteria.




In
      filing the complaint, the company sought to terminate the contract award to
      the
      winning bidder, to have MEII awarded the contract, or in the alternative, to
      have a new bid process conducted.  In the further alternative, the Company
      asked that it be compensated for lost profit on the contract and the costs
      associated with the filing of the complaint. On June 15, 2005 the CITT
      ruled that the Company’s complaint against PWGSC was valid, in part, and awarded
      the Company its reasonable costs. On July 15, 2005 the Company filed an
      application for judicial review into the CITT decision. In its decision CITT
      held that PWGSC breached the applicable trade agreements in conducting its
      procurement. Despite this, the CITT declined to grant any remedy aside from
      the
      award of reasonable costs.





**RESULTS
      OF OPERATIONS**





NET
      LOSS BEFORE DISCONTINUED OPERATIONS





The
      Company reported a net loss before discontinued operations of $868,765 for
      the
      six months ended June 30, 2005 compared to a net loss of $1,275,560 for the
      six
      months ended June 30, 2004. The loss amounted to $0.01 per share for continuing
      operations for the six months ended June 30, 2005 compared with a loss of $0.04
      per share for continuing operations for the six months ended June 30,
      2004.





The
      Company reported a net loss before discontinued operations of $300,998 for
      the
      three months ended June 30, 2005 compared to a net loss of $958,492 for the
      three months ended June 30, 2004. The loss amounted to $0.01 per share for
      continuing operations for the three months ended June 30, 2005 compared with
      a
      loss of $0.02 per share for continuing operations for the three months ended
      June 30, 2004.





The
      main reasons for the decrease in loss are the increased revenues, the
      non-recurrence of closing costs and the lower amounts of Interest and financing
      expenses. Furthermore, the Company continues to implement its strategic plan
      of
      realigning the business units and pursuing profitable opportunities that are
      consistent with its current operating strategy.





REVENUE





The
      Company’s revenue for the six months ended June 30, 2005 increased to
      $6,090,045, compared to $4,624,182 for the six months ended June 30, 2004 or
      by
      32%.





The
      Company’s revenue for the three months ended June 30, 2005 increased to
      $3,010,613, compared to $2,178,969 for the three months ended June 30, 2004
      or
      by 38%.





This
      revenue increase was mainly attributable to the Medical Services Division where
      increases were experienced in both the Infusion Services and the Pain Management
      segments of the business.





Revenue
      from the Institutional Staffing Division increased to $3,948,318 for the six
      months ended June 30, 2005 compared to $3,714,987 for the six months ended
      June
      30, 2004 an increase of approximately 6%.





Revenue
      from the Infusion Services Division increased significantly to $836,419 for
      the
      six months ended June 30, 2005 compared to $522,390 for the six months ended
      June 30, 2004 an increase of approximately 60%. This increase results from
      a
      similar increase in the number of Remicade infusions.


19





Revenue
      from the Pain Management segment was $829,048 for the six months ended June
      30,
      2005 as compared to $NIL for the corresponding period last year. The Pain
      Management division commenced operations in November 2004.





Revenue
      from the Healthcare Consulting division increased to $476,260 for the six months
      ended June 30, 2005 compared to $386,805 for the corresponding period in the
      prior year, an increase of approximately 23%.





GROSS
      MARGIN





Gross
      Margin (revenue less direct costs) for the six months ended June 30, 2005
      increased to $1,568,766 compared to $1,111,215 for the six months ended June
      30,
      2004, an increase of approximately 41%.





Gross
      Margin (revenue less direct costs) for the three months ended June 30, 2005
      increased to $760,893 compared to $567,826 for the three months ended June
      30,
      2004, an increase of approximately 34%.





This
      increase in gross margin was due to the Medical Services Division which enjoyed
      increased gross margins associated with growth in the division.





OPERATING
      EXPENSES





Operating
      expenses from continuing operations totaled $2,075,326 for the six months ended
      June 30, 2005 compared to $2,234,432 for the six months ended June 30, 2004,
      a
      decrease of approximately 7%. There was an increase in salaries and benefits
      but
      there were no closing costs as compared to the prior period.





AMORTIZATION
      AND INTEREST





Interest
      and financing costs were eliminated in the period, decreasing from $83,857
      for
      the six months ended June 30, 2004 to a positive balance of $7,115 for the
      six
      months ended June 30, 2005. This is due to the fact that, with the equity
      financing, the Company has reduced its reliance on banks and other financial
      institutions.





INCOME
      TAXES





The
      Company has loss carry forwards of approximately $8.5 million to be applied
      against future corporate income taxes. This benefit has not been reflected
      in
      these statements.







**ITEM
      3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





There
      are no financial instruments that are sensitive to changes in interest rates
      or
      exposed to foreign currency exchange gains/losses.







**ITEM
      4: CONTROLS AND PROCEDURES**





Included
      on the signature page of this report is the Certification that is required
      under
      Section 302 of the Sarbanes-Oxley Act of 2002. This section of the report
      contains information concerning the


20





controls
      evaluation referred to in the Section 302 Certifications and the information
      contained herein should be read in conjunction with the
      Certification.





Internal
      controls are designed with the objective of ensuring that assets are
      safeguarded, transactions are authorized, and financial reports are prepared
      on
      a timely basis in accordance with generally accepted accounting principles
      in
      the United States. The disclosure procedures are designed to comply with the
      regulations established by the U.S. Securities and Exchange
      Commission.





Internal
      controls, no matter how designed, have limitations. It is the Company's intent
      that the internal controls be conceived to provide adequate, but not absolute,
      assurance that the objectives of the controls are met on a consistent basis.
      Management plans to continue its review of internal controls and disclosure
      procedures on an ongoing basis.





The
      Company's chief executive officer and chief financial officer, after supervising
      and participating in an evaluation of the effectiveness of the Company's
      internal and disclosure controls and procedures during the six months ended
      June
      30, 2005 (the "Evaluation Date"), have concluded that as of the Evaluation
      Date,
      the Company's internal and disclosure controls and procedures were
      effective.





There
      were no significant changes in the Company's internal and disclosure controls
      or
      in other factors that could significantly affect such internal and disclosure
      controls subsequent to the date of their evaluation.








21








**PART
      II: OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**




(i)
              YFMC
                  HealthCare Inc (“YFMC”), a wholly owned subsidiary of the Company, is in
                  receipt of a letter from CCRA dated April 30, 2001, adjusting YFMC’s Goods
                  and Services Tax returns for the period from December 31, 1992,
                  to
                  December 31, 1996. The total amount claimed by CCRA for this period
                  is
                  $249,000. In the event that YFMC is ultimately found liable, the
                  Company
                  intends to claim an indemnity for such amount against the directors
                  and
                  certain named principals of YFMC pursuant to the Company’s rights under
                  the purchase agreement for YFMC executed on August 10, 1999. 1292363
                  Ontario Ltd, a subsidiary of YFMC, is in receipt of a letter from
                  CCRA
                  dated February 4, 2005 for YFMC’s Goods and Services Tax, and the total
                  amount claimed is $50,828. The Company’s legal counsel has advised that
                  CCRA does not intend to pursue YFMC for these amounts, and accordingly
                  no
                  provision has been made in these consolidated financial
                  statements.(ii)
              There
                  is uncertainty with respect to the Company’s liability arising from a
                  contractual dispute with a customer. Based on the advice of counsel,
                  the
                  Company is of the view that it is unlikely that the Company will
                  be found
                  liable for these costs. The costs associated with this contingent
                  liability range from $400 thousand to $1.3 million.(iii)
              Claims
                  have been made against the Company for general damages for breach
                  of
                  contract and in tort. A claim for approximately $423,000 has been
                  made
                  against the company for wrongful termination of a person working
                  on a
                  third party contract. A second claim for unspecified damages has
                  been made
                  against the company for wrongful dismissal and breach of contract.
                  The
                  Company’s lawyers are of the view that liability, if any, would be the
                  responsibility of the third party contractor. The Company’s lawyers are of
                  the opinion that the amount claimed grossly exceeds what a court
                  would
                  award in light of the current law. Since the Company’s lawyers are of the
                  opinion that these claims are unlikely to succeed, no provision
                  has been
                  made in respect thereof in these consolidated financial statements.(iv)
              The
                  Company sub-leased certain premises to third parties when it disposed
                  of
                  its clinic operations. In case of payment defaults by the third
                  parties,
                  the Company could be held liable for rent on these premises. Rent
                  for
                  these premises over the next seven years, during the respective
                  lease
                  terms, totals $1.7 million. In July of this year the Company was
                  notified
                  that one of the third parties was in default on their rent, in
                  the amount
                  of $29 thousand. We have been in touch with the third party and
                  they are
                  endeavoring to remedy the
                  situation.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





On
      June
      15, 2004, the Company issued 39,360,272 common shares for $4,500,000. As a
      condition of the transaction, Preferred Shares, 50% of which were indirectly
      held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common
      shares; and unpaid preferred share dividends, in the amount of $579,582, were
      forgiven.




22




The
      investment resulted from the previously announced letter of intent signed by
      MEII and Global Healthcare Workforce Limited (“GHW”) of London, UK.




The
      Investors received 43,708,272 common shares of MEII, of which 39,360,272 were
      purchased from the Company for $4,500,000 and 4,348,000 were purchased directly
      from the Preferred Shareholder for $500,000. Closing costs including legal,
      travel and due diligence costs for the equity financing amounted to $609,214,
      and were expensed during the second quarter of 2004.




In
      addition to issuing the common shares, MEII also issued to the Investors and
      the
      former Preferred Shareholder, anti-dilution warrants (the “New Warrants”) to
      purchase common shares of MEII at prices of either $0.50 per common share or
      $1.00 per common share. The exercise of the New Warrants is directly tied to
      the
      exercise of existing options and warrants at $0.50 per common share and $1.00
      per common share that are currently outstanding. The exercise of the New
      Warrants is intended to allow the Investors and former Preferred Shareholder
      to
      maintain their pro rata share of their equity position.





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None





**ITEM
      5. OTHER INFORMATION**





None





**ITEM
      6. EXHIBITS AND REPORTS OF FORM 8-K**





(a)
      Exhibits




Exhibit
              31
            Rule
              13a-14(a)/15d-14(a) Certifications. Filed herewith.Exhibit
              32.1
            Certification
              by
              the Chief Executive Officer Relating to a Periodic Report Containing
              Financial Statements.*Exhibit
              32.2
            Certification
              by
              the Chief Financial Officer Relating to a Periodic Report Containing
              Financial Statements.*





23







(b)
      Reports on Form 8-K





Attached


*
      The
      Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes
      of
      Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or
      otherwise subject to liability under that section, nor shall it be deemed
      incorporated by reference in any filing under the Securities Act of 1933, as
      amended, or the Exchange Act, except as expressly set forth by specific
      reference in such filing.














24


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      caused this report to be signed on its behalf by the undersigned thereunto
      duly
      authorized.








MED-EMERG
              INTERNATIONAL INC.By:
            /s/
                Ramesh ZachariasRamesh
                ZachariasChief
                Executive Officer





Date:
      August 15, 2005










25