SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(MARK ONE) |  |                                                                                         
|ý          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|           |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003                                             
|           |  | 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(State or Other Jurisdiction of Incorporation or Organization)

|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|2550 Argentia Road, Suite 205
Mississauga, Ontario, Canada |  | L5N 5R1   
|(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(b) of the Act.

|(Title of each class)      |                   | (Name of each exchange on which registered)
|-------------------------- | ----------------- | -------------------------------------------
|COMMON STOCK, NO PAR VALUE |                   | OTC Bulletin Board                         
|REDEEMABLE COMMON STOCK    |                   |                                            
|                           | PURCHASE WARRANTS |                                            

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

|                           |                   |                   
|-------------------------- | ----------------- | ------------------
|COMMON STOCK, NO PAR VALUE |                   | OTC Bulletin Board
|REDEEMABLE COMMON STOCK    |                   |                   
|                           | PURCHASE WARRANTS |                   

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.    NONE

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  ý

Indicate by check mark whether registrant is an accelerated filer (as defined in Exchange Act
Rule 126-2).  Yes o    No ý.



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PART I

ITEM 1:    BUSINESS

BACKGROUND

Med-Emerg International Inc. ("MEII" or the "Company") was founded in 1983 by Dr. Ramesh Zacharias to provide emergency room ("ER")
physician coverage to rural hospitals during nights and weekends. The Company has grown into Canada's largest provider of ER physician coverage. Since inception, MEII has provided staffing solutions
to over 60 hospitals across the country.

Today,
the Company is Canada's premier physician management provider, supplying more than 75,000 hours of ER physician coverage to hospitals in Ontario, Newfoundland and Nova
Scotia annually. In 2003, MEII was contracted by the Ministry of Health, Ontario to provide health care providers to help confront the Severe Acute Respiratory Syndrome ("SARS") epidemic that occurred
in Toronto, Ontario. In 2001, the Company was awarded the contract to provide more than 800 physicians, dentists, nurses, pharmacists and other regulated health professions for all 39 of Canada's
Department of National Defence ("DND") bases. In December of 2002, the Company was awarded a contract to supply healthcare providers to Canadian Forces overseas. MEII is now a supplier of healthcare
professionals to Canada's military whether in Canada or deployed anywhere in the world. In 2001, the Company leveraged its clinic network and was awarded a contract to provide infusion services for
Remicade to patients in Ontario suffering from rheumatoid arthritis and crohn's disease. MEII now provides more than 5,000 infusions per year of this remarkable new medication. Recently, MEII signed
another contract to supply Zometa via MEII's integrated infusion services for treating cancer patients that suffer with bone metastases. Taking advantage of its ability to provide creative healthcare
solutions, the Company was awarded two contracts to provide integrated physician  nurse practitioner primary care services to two of Canada's larger mental
health institutions at Whitby Mental Health and the Centre for Addiction and Mental Health in Toronto.

In
its twenty-year history, the Company has also conducted several international consulting assignments for healthcare clients in Saipan, the Cayman Islands, Malaysia and
India, including feasibility studies, identification of medical service needs, planning of healthcare delivery systems and developing marketing strategies. In 1997, the Company completed a consulting
assignment to provide an integrated strategic plan for the delivery of health and social services in the Northwest Territories in Canada, the costs of which were funded by the Northwest Territory
government. In June 2003, MEII was retained by the Primary Health Care Services Branch of Saskatchewan Health. Under this contract the
Company is providing the process facilitation and training programs required for the development and implementation of a "Team Based Culture" within the Saskatchewan Regional Health Authorities. The
resulting interdisciplinary provider teams are anticipated to improve the quality of primary health services within Saskatchewan. Another consulting project that MEII is currently carrying out is with
the Department of Health and Community Services, Office of Primary Health Care, in Newfoundland and Labrador. The Company's role is to evaluate the effectiveness of the primary health care reform
initiatives across the province. This experience has given MEII a leading understanding of the issues in implementing primary health reform in Canada.

MEII
has demonstrated industry leadership in Canada by providing integrated professional management services in the delivery of healthcare to the Canadian healthcare consumer. In 2004,
the Company intends to broaden its recruiting and management services over a wider geographic base and pursue opportunities for its expertise in the pharmaceutical industry.

MEII
believes that it is well positioned to benefit from the aging of the baby boomer population, to capitalize on recent developments within the North American healthcare environment
and the current restructuring initiatives within the healthcare industry in Canada. Specifically, the Company's strategy is to leverage its 20 years of physician recruitment experience to
become a dominant player in healthcare management services. Now with more than 1,000 physicians, nurses, dentists, pharmacists, physiotherapists and other regulated healthcare professionals employed
by the company, MEII is poised to play a dominant role in the delivery and management of Canada's healthcare system.

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THE COMPANY

The "Company" includes: (i) Med-Emerg International Inc.; (ii) its' wholly-owned subsidiaries, Med-Emerg Health
Centres Inc., Med-Emerg Elmvale Clinic Inc., YFMC Healthcare Inc., 927563 Ontario Inc., 927564 Ontario Inc., and Doctors on Call Ltd.;
(iii) its indirect wholly-owned subsidiaries Med-Emerg Inc. which is wholly-owned by 927563 Ontario, and YFMC Healthcare (Alberta) Inc., a subsidiary of YFMC
Healthcare Inc.

The
Company's operations were divided into five units during the 2003 fiscal year. Subsequent to 2003 the Company is no longer involved in the Medical Clinics business. The four
remaining units that MEII is engaged in are: Hospital Staffing, Government Healthcare Services (including Department of National Defence), Pharmaceutical Support and Long-Term Care. The
following represents a brief description of these units:

1.     HOSPITAL STAFFING

The Company provides ER physicians and Intensive Care Unit ("ICU") nurse staffing services to approximately 25 hospitals in Ontario, a mix of rural and urban
facilities including tertiary care centers. In 1991, the Company introduced registered nurses into its staffing mix, when it developed a cost-effective model for the Lester B. Pearson
International Airport utilizing "expanded role" registered nurses. The Company went on to launch a business devoted entirely to the provision of emergency trained registered nurses to hospitals in
1997. In 2003, the hospital staffing unit provided approximately 75,000 hours of physician and 55,000 hours of nursing coverage respectively. This represents an 85% increase over 2002,
driven largely by MEII's involvement during the SARS crisis. The Company pays its physicians on an hourly or sessional basis, and receives a fixed monthly administrative management fee from each
hospital.

Hospital Staffing Operations

The principal operating activities of the Hospital Staffing Division include the following:

Recruitment And Credentialing.MEII has developed into one of the larger providers of physician and nurse recruitment and
placement services to many communities and hospitals across Canada. Services include the complete assessment of a community's needs, practice opportunities, the development of a recruitment strategy
and implementation process.

The
recruitment and certifying of credentials of qualified independent contract physicians and nurses are a central aspect of the Company's operations. Full-time employees of
the Company are dedicated to recruiting and verifying credentials of the independent contract physicians for the Company. The Company recruits physicians from three groups. The first group is
recruited directly from postgraduate training programs. Seminars are held in most of the teaching hospitals in Ontario, with plans to provide seminars across Canada to educate all the residents in
family medicine and other specialties about career opportunities in the Company. The second and third groups recruited are established family physicians with an interest in emergency medicine and
full-time emergentologists.

Nurses
are recruited through advertising, word-of-mouth and trade shows. Nurses must have two years of experience in critical care nursing and possess Basic Life
Support ("BLS") training and preferably Advanced Cardiac Life Support ("ACLS") training.

Quality Assurance.The Company maintains a Quality Assurance program designed to ensure consistency in clinical practice
performance. These systems are subject to review and examination by independent hospital credential and regulatory agencies. The efficiency of these systems, and the performance of the Company's
contract physicians are critical to maintaining a good relationship with the hospitals, as well as minimizing the exposure of the Company to liability claims.

Time Scheduling.The scheduling of physician and nurse hours is performed daily, weekly or monthly. For physician services,
hospitals are provided a monthly physician coverage schedule prior to the first of each month. Under some of the hospital contracts, multiple physician coverage is required during certain periods. For
nursing services, hospitals contact the Company with their shift requirements. Because of varying other demands on the contract nurses and physicians, the scheduling process is complex and requires
significant management attention.

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Billing And Collection Services.Fees generated by emergency department coverage of physicians are comprised of two elements:
(i) hospital administrative fees which are on a fixed fee or a fee-for-service basis; and (ii) physician services. Under each hospital contract, the Company has
the responsibility for the billing and collection of physician fees. The Company's bad debt experience in collection of physician fees has historically been less than 1% of allowable billings.

Personnel Administration.The Company assists the contracted physicians in personnel administration, which includes the
administration of physician fee reimbursement. In addition, the Company provides for the administration of fringe benefit programs, which may include but are not limited to life insurance, health
insurance, professional dues and disability insurance.

The
Company expects to continue its growth through staffing additional hospital contracts. In particular, the Company intends to both strategically target hospitals and physician groups.
Management actively seeks opportunities to competitively bid for hospital contracts.

Recruitment of ER Physicians

The Company identifies, recruits and screens potential candidates to serve as emergency room physicians in hospitals for the Company's contract staffing services.
The Company then enters into contracts with physicians who meet its qualifications and provides these physicians as candidates for admission to the hospital's medical staff. As mentioned above, the
Company requires all physicians to be properly credentialed.

The
terms and conditions of the Company's contracts with physicians generally provides that the Company place the physician in a functioning facility and the Company collects all fees
due to the physician for rendering services. MEII pays the physician for the medical services provided based on terms agreed to between the Company and the physician. Each physician
full-time contract has a term of twelve months and, unless cancelled, renews automatically for additional one-year terms.

Contracts With Hospitals for Physician Staffing.

MEII generally provides contract physician staffing services to hospitals on either fee-for-service contracts, or fixed fee per shift
contracts. Physicians under contract to the Company authorize the Company to bill and collect fees. Pursuant to such contracts, MEII assumes responsibility for billing and collection and assumes risks
of administrative error and subsequent non-payment. All of these factors are taken into consideration by the Company in arriving at appropriate contractual arrangements with healthcare
institutions and professionals. The hospital contracts are generally for one year and automatically renew if not terminated.

Contracts With Hospitals for Nurse Staffing.

The Company provides nursing coverage to hospital emergency departments on a shift-by-shift basis. The Company charges a fixed hourly rate
for every hour of nursing coverage provided. The hospital contracts are generally for one year and automatically renew if not terminated.

Recruitment of ER Nurses.

The Company recruits and screens potential candidates to serve as emergency room nurses in hospitals that have contracted for the Company's staffing services. The
Company requires all nurses to meet its qualification criteria.

2.     MEDICAL CLINICS

The Company began expanding its healthcare services in the early 1990's, in response to the changing needs of patient care. The Company opened three immediate
care clinics in London and Mississauga, well before the concept became popular in Ontario. During the third quarter of 2003 MEII sold 15 medical clinics to another health care company in Ontario
leaving the Company with five family practice clinics to own and operate in Western Canada; Winnipeg (1), Edmonton (2) and Calgary (2). During the fourth quarter the Company sold the assets and
operations of the five remaining medical clinics.

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3.     GOVERNMENT HEALTHCARE SERVICES

Department of National Defence ("DND")

In March of 2001, the Company was awarded the administrative management services contract, the largest of its kind, to provide medical personnel to the Canadian
Armed Forces ("CF") bases across Canada. The contract has an initial period of three years ending on March 31, 2004, but recently the contract was amended and extended until March 31,
2005. As the service administrator, the Company recruits, credentials, schedules and pays physicians, nurses, dentists, physiotherapists and other regulated healthcare professionals as required by the
local health authority resident on each base. The Company is paid a monthly administrative management fee by the DND that is linked to the number of providers being managed.

The
primary benefit to DND from this contract is the creation of a "one stop shopping" arrangement for the military base. As part of a national organization, the Company's recruiters
source health service providers from all regions of Canada. By developing a long-term relationship with their employees and sub-contractors, and being able to react quickly to
changing local conditions, the Company provides some stability in the workforce and enhances continuity in the delivery of patient care for the DND.

4.     PHARMACEUTICAL SUPPORT

MEII continues to develop the Integrated Infusion Service ("IIS") which provides clients/patients with a safe, comfortable and convenient infusion care setting to
ensure the optimal administration of special drug therapies. In addition to providing infusions of Remicade (Schering Plough) to patients with crohn's disease and rheumatoid arthritis, MEII has
recently signed an agreement to supply Zometa (Novartis) for treating cancer patients with bone metastases. It is expected that the IIS team will provide over 12,000 infusions in 2004.

The
IIS team of dedicated health care providers and coordinators develop individualized plans for each client/patient ensuring compliance to prescribed therapies for optimal health
outcomes. MEII has alliances with many key healthcare groups forming a unique team focused on a "continuum of care" delivering the best service to patients and the prescribing physicians. Each
infusion clinic follows rigorous standard operating procedures ensuring a consistent, highly professional infusion service. The number of infusion clinics is expected to increase for both Schering and
Novartis from 16 to 25 by year-end 2004. The IIS team is dedicated to ensure "Patient Compliance with Care".

5.     LONG-TERM CARE

The problem of physician shortages is evident not only in hospitals but also in long-term care facilities. The Company has received requests from
long-term care facilities for physicians to provide admission physical assessments and regular primary care to residents. Residents of these facilities are typically not cared for by their
family physicians once they are transferred to long-term care facilities, thus they lack routine primary healthcare. As at December 31, 2003 the Company provided physicians and
nurse practitioners to 10 long-term care facilities in Ontario (six in Ottawa and four in the Greater Toronto Area ("GTA")). Subsequent to December 31, 2003, MEII stopped providing
services to six of these facilities.

FACTORS AFFECTING MEII'S BUSINESS

REGULATION OF HEALTHCARE IN CANADA

The provision of medical services in Canada is, for the most part, under provincial jurisdiction. Under the Health Insurance Act, the government of Ontario is
responsible for paying physicians for the provision of insured services to residents of Ontario. Individual physicians' billings under the Ontario Health Insurance Plan ("OHIP") are subject to
threshold amounts, or soft caps. Once a physician reaches a prescribed level in the 12-month period beginning April 1 of each year, the government reduces payments to the physician
by a prescribed fraction. Any changes in reimbursement regulations, policies, practices, interpretations or statutes that place material limitations on reimbursement amounts or practices could
adversely affect the operations of the Company, absent, or prior to, satisfactory renegotiations of contracts with clients and arrangements with contracted physicians.

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Under
a combination of statutory provisions, both federal and provincial, physicians are prohibited from billing their patients for fees in excess of those payable for services listed in
the Provincial Schedule of Benefits. The Canada Health Act allows for cash contributions by the federal government in respect of insured health services provided under provincial healthcare insurance
plans. In order for a province to qualify for a full cash contribution, there is a requirement that the provincial healthcare insurance plan satisfy the criteria set out in the Canada Health Act. In
addition, the provincial plan must ensure that no payments are permitted in respect of insured health services that have been subject to extra billing.

Continuing
budgetary constraints at both the federal and provincial level and the rapidly escalating costs of healthcare and reimbursement programs have led, and may continue to lead, to
significant reductions in government and other third party reimbursements for certain medical charges. The Company's independent contracted physicians as well as the Company are subject to periodic
audits by government reimbursement programs to determine the adequacy of coding procedures and reasonableness of charges.

Business
corporations are legally prohibited from providing, or holding themselves out as providers of, medical care in many provinces. While the Company will seek to structure its
operations to comply with the provincial laws relating to the corporate practice, given varying and uncertain interpretations of such laws, the Company could be found in non-compliance
with restrictions on the corporate practice of medicine in all provinces. A determination that the Company is in violation of applicable restrictions on the practice of medicine in any province in
which it operates or could operate could have a material adverse effect on the Company if the Company were unable to restructure its operations to comply with the requirements of such province.

COMPETITION

The Company competes with a variety of healthcare service providers. These include the following by MEII business unit:



EMPLOYEES

As of March 2004, the Company had 515 active full-time employees, 60 were employed in administration, 55 nurses were employed to work at
various hospitals, and 400 were employed to carry out the contract with the DND. The Company believes its relations with its employees to be good. The Company's employees do not belong to a union and
there is no collective bargaining agreement covering the employees. The Company also has approximately 300 contractors engaged on a full-time basis.

ITEM 2:    PROPERTIES

The Company's principal executive office is located at 2550 Argentia Road, Suite 205, Mississauga, Ontario. The principal office occupies approximately
8,000 square feet of space under a lease that expires May 30, 2004 at an average annual rental rate of approximately $105,000. The Company has an intention of entering into a lease agreement to
move the principal executive office to 6711 Mississauga Road, Suite 404, Mississauga, Ontario with effect from June 1, 2004. The new lease has not yet been signed. The new lease is
expected to be for a term of 43 months, and would expire in December 2007. The new office is approximately the same size as the current location, and the Company believes that the new
space will be adequate for its future needs.

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ITEM 3:    LEGAL PROCEEDINGS

YMFC HealthCare Inc. ("YFMC"), a wholly owned subsidiary of the Company, is in receipt of a letter from Canada Customs and Revenue Agency ("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 becomes liable to pay any such amount to CCRA, the Company will claim an indemnity for such amount against the directors and certain named principals of YFMC pursuant
to the Company's rights under the Business Combination Agreement executed on August 10, 1999. The Company's legal counsel has advised that CCRA does not intend to pursue YFMC for these amounts.

Other
than the above, the Company is not a party in any material legal proceedings.

ITEM 4:    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended, December 31, 2003.

PART II

ITEM 5:    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common shares and redeemable common stock purchase warrants are listed for trading under the symbols "MDER" and "MDERW", respectively, on the OTC Bulletin
Board. From February 12, 1998 to April 16, 2001 the Company's common shares and redeemable common stock purchase warrants were listed on the NASDAQ Small Cap Market. Since
April 16, 2001, the Company's common shares have been listed on the OTC Bulletin Board.

The
following table sets forth the range of high and low sales prices from First Quarter of 2002:

COMMON SHARESHIGH

LOWFirst Quarter, 2003

$
.77

$
.53Second Quarter, 2003

$
.68

$
.40Third Quarter, 2003

$
.57

$
.37Fourth Quarter, 2003

$
.58

$
.29First Quarter, 2002

$
1.00

$
.65Second Quarter, 2002

$
1.00

$
.70Third Quarter, 2002

$
1.00

$
.75Fourth Quarter, 2002

$
.81

$
.45


The
Company has never paid or declared cash or stock dividends on its common stock. The payment of cash dividends, if any, is at the discretion of the Board of Directors and will depend
upon the Company's earnings, capital requirements, financial condition and other relevant factors. The Company intends, for the foreseeable future, to retain any future earnings for use in its
business.

On
May 23, 2002 the Company issued 216,000 shares to Wellington Capital Corporation as consideration payable under a re-financing arrangement.

The
Company did not issue or redeem any shares during the 2003 fiscal year.

In
early 2004, 5,092 shares of common stock were issued to an investor pursuant to the acquisition of YMFC Healthcare Inc. ("YFMC") on November 4, 1999 by MEII.

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ITEM 6:    SELECTED FINANCIAL DATA

The following selected consolidated financial data of the Company is qualified by reference to and should be read in conjunction with the consolidated financial
statements, related notes thereto, other financial data, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.

|                              |                                             | US $
YEAR ENDED DECEMBER 31, 2003 |          
|----------------------------- | ------------------------------------------- | --------------------------------- | ---------
|
|Statement of Operations Data: |                                             |                                   |          
|                              | Revenue                                     |                                   |          
|                              | Physician fees and other direct costs       |                                   |          
|                              |                                             |                                   |          
|                              | Gross profit                                |                                   |          
|                              | Operating expenses before under noted items |                                   |          
|                              | Depreciation and amortization               |                                   |          
|                              | HealthyConnect.com                          |                                   |          
|                              | Other expense (income)                      |                                   |          
|                              |                                             |                                   |          
|                              |                                             |                                   | 6,646,322
|                              | Loss before income taxes                    |                                   |          
|                              | Provision for income taxes (recovery)       |                                   |          
|                              | Minority interest                           |                                   |          
|                              | Preferred share dividends                   |                                   |          
|                              | Net loss from continuing operations         |                                   |          
|                              | Discontinued operations                     |                                   |          
|                              | Net loss for the year                       |                                   |          
|                              | Basic loss per common share (1)             |                                   |          
|                              | Continuing operations                       |                                   |          
|                              | Discontinued operations                     |                                   |          
|Balance Sheet Data:           |                                             |                                   |          
|                              | Working capital deficit                     |                                   | $        
|                              | Total assets                                |                                   |          
|                              | Shareholders' deficit                       |                                   |          

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ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

MEII, based in Ontario, Canada, is a provider of a broad range of quality healthcare management services. Established in 1983, the Company specializes in the
coordination and contract staffing of emergency physicians, nurses and related healthcare professionals for hospitals, government agencies, and corporate clients in Canada. Though emergency-related
services are still an important component of the Company's business, MEII's recent growth has been largely attributable to the recruitment of various healthcare professionals to fulfill a contract
with the Department of National Defense, and a contract with Schering Plough Canada Inc. a leading pharmaceutical company, to provide infusion services to patients.

The
Company is positioned to build on its industry leadership in providing integrated professional healthcare services to consumers. The Company's operations were divided into five units
during the 2003 fiscal year, but subsequent to 2003 MEII no longer has a Medical Clinics division. The four remaining business units that MEII is now focused in are Hospital Staffing, Government
Healthcare Services, Pharmaceutical Support, and Long-Term Care.

In
early 2004, MEII was selected by the Atlantic Health Human Resources Association ("AHHRA") to conduct a major health human resource planning study in the four Atlantic Provinces. This
study will be complementary to the primary care renewal projects that MEII has underway in Saskatchewan and Newfoundland/Labrador. The AHHRA is expecting a comprehensive study of the requirements for
health professionals and available educational resources in and outside Atlantic Canada. The deliverables in this study call for two distinct but related modeling exercises. The first is a projection
on future health human resource supply and demand with gap analysis. The second is an education/training planning tool or tools. The latter could be a simulation which models, for example, the
implications of the size and duration of training programs under different demand, productivity and scope of practice scenarios.

In
the summer of 2003, MEII signed a contract with Novartis Pharmaceuticals Canada Inc. to provide infusion services for a drug called Zometa, for treating cancer patients with
bone metastases. This agreement will help the Company grow its infusion business that began in 2001 with its contract with Schering Plough Canada Inc. As at December 31, 2003 MEII did
not have any patients registered with the Company surrounding the contract with Novartis, but by the end of 2004 it is expected that there will be 1,000 patients.

In
late March of 2003, the Company was approached by the Ontario Provincial Government to help the public sector battle the SARS outbreak that occurred in the GTA. With a mortality rate
of 15%, the Ministry of Health for Ontario recognized the magnitude of the challenge and contacted MEII. MEII mobilized its network of healthcare providers and recruited approximately 250 doctors,
nurses and respiratory technologists from across Canada, the United States and the United Kingdom to combat the SARS outbreak. The SARS experience is an excellent example of the
Company's network in action. The ability to draw on multi-disciplinary experts to address specific issues is the core of the MEII service offering.

In
2001, the Company was awarded the contract for civilian in-garrison healthcare services for the Department of National Defence. The contract, the largest of its kind in
Canada has seen the Company recruit and staff an annual complement of in excess of 800 full time healthcare providers in all Canadian Forces Bases. The Company receives an administrative fee to
recruit and manage required personnel. Annual revenue for services provided under this contract is expected to exceed $43.7 million for fiscal 2004, of which approximately $41.2 million
will be paid to the healthcare providers supporting this contract. This contract and its supporting infrastructure create a horizontal platform to allow the Company to secure of other major government
staffing contracts.

In
March 2001, the Company and Schering Plough Canada Inc., a leading Canadian pharmaceutical supplier, entered into an agreement whereby the Company would recruit,
credential and install new infusion sites across Canada to deliver Remicade infusion services to patients suffering from crohn's disease and rheumatoid arthritis. Remicade
reduces inflammation in patients with crohn's disease and rheumatoid arthritis. It is estimated that 40,000 patients in Canada suffer from the debilitating effects of these two diseases. Under this
agreement, the Company coordinates and manages infusion services for patients referred to it by physicians. By December 2003, there were approximately 1,100 patients registered with the Company
for this program, receiving regular infusions. It is anticipated that the number of patients participating in this program will reach 1,500 by the end of 2004.

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Forward-looking
statements of MEII, included herein or incorporated by reference including, but not limited to, those regarding future business prospects, 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.

FINANCIAL OVERVIEW

The Company reported a net loss of $1,825,802 for the year ended December 31, 2003 compared to a net loss of $738,647 for the year ended
December 31, 2002. The loss amounted to $ 0.17 per share for continuing operations and a $0.02 loss for discontinued operations for the year ended December 31, 2003 compared with a loss
of $ 0.08 per share for continuing operations for the previous year. The main reason for the increase in the net loss during 2003 is the result of the non-cash stock compensation expenses
that the Company had to record as a result of re-pricing the outstanding warrants and the issuance of stock options. Furthermore, as the Company implemented their strategic plan of
realigning the business units and the consolidation and closure of non-performing medical clinics, the direct results had an impact on the operating results in 2003. MEII continues to
pursue profitable contracts that are consistent with the current operating strategy.

REVENUE

The Company's revenue for the year ended December 31, 2003 increased to $54.0 million, compared to $ 37.0 million for the year ended
December 31, 2002, an increase of approximately 46%. This revenue growth was largely attributable to the Department of National Defence management service contract whereby MEII staffed an
increased number of health providers in fiscal 2003 compared to the prior year. The Department of National Defence accounted for 74% of the Company's revenues during the year ended December 31,
2003. The Hospital staffing division had increased revenues for the year ended 2003 compared to the prior year as MEII was involved in staffing to help support existing healthcare providers during the
recent SARS outbreak. The Long-term care and Pharmaceutical Support business units have also been responsible for increased revenues for the year ended 2003.

Revenue
from the DND contract amounted to $40.3 million during the year ended December 31, 2003 compared to $ 31.3 million for the prior year, an increase of 29%.
MEII supplied more health providers to the DND bases throughout the 12 month of period of 2003 compared to the prior year.

Revenues
from the hospital staffing unit increased to $12.7 million during the year ended December 31, 2003 compared to $5.6 million for the prior year, an increase
of 127%. The increase in revenues is the result of the Company providing extensive support to the existing healthcare infrastructure during the SARS outbreak in the GTA. As described above, MEII
provided approximately 250 healthcare professionals and over 46,000 hours to assist the Ministry of Health for Ontario in combating the SARS epidemic.

Revenues
from the pharmaceutical support division amounted to $0.9 million for the 2003 fiscal year compared to $0.4 million for 2003. The 125% increase in revenues is the
result of MEII growing this new business line by supplying infusion services to more patients in the 2003 year.

GROSS MARGIN

Gross Margin (revenue less physician and other direct costs) increased to $5.1 million for the year ended December 31, 2003 compared to
$3.0 million for the prior year, an increase of 70%. This increase in gross margin was due to the DND management service contract and the Hospital Staffing, Long-term care, and
Pharmaceutical support business units all experiencing higher volumes.

Physician
fees and direct costs, primarily fees paid to contract physicians as a percentage of total revenues remained comparable to the prior year at approximately 91%.

OPERATING EXPENSES

Operating expenses totaled $4.7 million for the year ended December 31, 2003 compared to $2.7 million in the prior year, an increase of 74%.
The increase results mainly from a provision for estimated adjustments from the DND audit of the terms of the Government Healthcare Services contract. MEII is currently remedying these issues. It is
Management's opinion that such expenses will be substantially eliminated beyond Q1 of 2004. Also, with the growing pharmaceutical support division and new business development MEII has had to incur
increased costs during the year ended December 2003.

---

AMORTIZATION AND INTEREST

Amortization increased nominally in fiscal 2003 compared to the prior year.

Interest
and financing costs decreased by approximately $ 308,000 during the year ended December 31, 2003 compared to the prior year, as the Company negotiated lower borrowing
rates on its loan facilities and MEII realized a foreign exchange gain on the settlement of a financial instrument denominated in US dollars, due to the strengthening Canadian dollar during 2003.

INCOME TAXES

The Company has loss carry forwards of approximately $4.0 million to be applied against future corporate income taxes. This benefit has not been reflected
in these statements.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2003, the Company's working capital deficit totaled $ 3.1 million compared to $2.3 million for the prior year.

On
May 24, 2002 the Company issued a $720,000 discounted secured debenture, with net proceeds of $600,000 and repaid bank loans from the net proceeds.

The
terms of the secured debenture include:



A
principal shareholder of the Company guaranteed the debenture, providing as security, unrestricted free trading common shares of the Company equivalent to 150% of the face value of the
debenture. In exchange for the guarantee, the Company issued to the guarantor shareholder common share purchase options to purchase 100,000 common shares at $1.00 per share. In the event that the
market value of the common shares provided as security falls below 200% of the face amount of the debenture, the Company was required to pledge additional securities to return the market value to 200%
of the face amount.

On
June 28, 2002, Morrison Financial Services Ltd. ("MFSL") paid Hong Kong Bank of Canada ("HSBC") $475,406 on MEII's behalf. This had the effect of reducing
the Company's total debt by $228,459 since the obligation to the HSBC was eliminated at a discounted value. MFSL provided the Company with a full-recourse invoice discounted facility in an
amount not to exceed $475,406 based on purchasing and advancing up to 75% of the face amount of a qualifying invoice with the balance held on reserve until the invoice is collected in full. The
facility had a term of one year, with an annualized interest rate of 34.22% that matured on June 28, 2003 at which time the Company renegotiated the loan agreement with MFSL. The following
clauses of the agreement were amended as follows:



In
addition to the specific Standard Form Assignments (General), all amounts due to MFSL are secured by a general security agreement on all assets and undertakings of MEII, an assignment
of all risk insurance policies and an assignment of key man life insurance of a director.

---

OFF BALANCE SHEET ARRANGEMENTS

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

Contractual
Obligations and Commercial Commitments

The
Company is committed to payments under operating leases of its premises and equipment totaling 160,032. The Company has not engaged in off-balance sheet financing,
commodity contract trading or significant related party transactions. Annual payments under the operating leases are as follows:

|2004                |  | $ | 57,882 
|------------------- |  | - | -------
|2005                |  |   | 24,035 
|2006                |  |   | 24,035 
|2007                |  |   | 24,035 
|2008                |  |   | 24,035 
|2009 and thereafter |  |   | 6,010  
|                    |  |  
|                    |  | $ | 160,032
|                    |  |  

ITEM 7A:    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 8:    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements and the related notes, together with the report of Schwartz Levitsky Feldman LLP thereon, are set forth in
Item 15.

ITEM 9:    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have not been disagreements with the auditors on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement.

ITEM 9A:    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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our
disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in applicable SEC rules and forms.

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-K that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

---

PART III

ITEM 10:    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information concerning the directors, executive officers and key employees of the Company.

|Name                                               |  | Age |  | Position                         
|-------------------------------------------------- |  | --- |  | ---------------------------------
|William Thomson, C.A.                              |  | 62  |  | Chairman of the Board            
|Dr. Frank Baillie, M.D., Ch.B., FRCSC              |  | 52  |  | Director                         
|Major General Lewis MacKenzie, Oont, MSC, OstJ, CD |  | 63  |  | Director                         
|John Yarnell                                       |  | 75  |  | Director                         
|Ramesh Zacharias, M.D., FRCSC                      |  | 52  |  | Chief Executive Officer, Director
|Donald Ross, D.M.D., M.Sc.                         |  | 52  |  | V.P. Operations                  
|William J. Danis, C.A.                             |  | 48  |  | Chief Financial Officer          

|Name                    |  | Position |  | Principal Occupation and Positions Held                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------------------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|William E. Thomson(2)   |  | Chairman |  | Mr. Thomson has been President of Thomson Associates Inc., a provider of solutions to businesses encountering change, since 1978. Thomson Associates has operated companies in many industries and participated in
creating and executing remedial programs in virtually all sectors. They also act as investment bankers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                        |  |          |  | Mr. Thomson's current directorships are:Nasdaq Med-Emerg International Inc. chm. (Healthcare), Acto Digital Video (USA) Inc. (Consumer
Electronics), China Automotive Systems Inc. (Auto Parts), Maxus Technology Inc. (Technology Waste Recycling);TSX Asia Media Group Ltd. chm. (Media), Imperial
Plastech Inc. (Plastics);Crown Corp. Aurora Fund (Venture Capital);Private Delfour Corporation (Software),
Electrical Contacts Ltd. (Electrical Contacts), Redpearl Funding Corporation (IT Financing), Wright Environmental Management Inc. (Waste Management Solutions);Charitable Opera
Mississauga, World Education Services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Dr. Frank Baillie(1)(2) |  | Director |  | Dr. Frank Baillie has been a Director of the Company since January 1, 2002. Dr. Frank Baillie has over twenty years of clinical and managerial experience as an Emergency Physician and General Surgeon in an
academic setting. Dr. Baillie has maintained a surgical practice at McMaster University Medical Centre in Hamilton, Ontario since 1979. He also introduced emergency physician staffing and postgraduate training in Emergency Medicine at McMaster's
Faculty of Health Sciences. He has managed a number of medical programs, including Hamilton General Hospital, Chedoke McMaster Hospital and St. Peter's Hospital. Dr. Baillie has provided consultative services regarding the delivery of emergency
care for the Ontario government as well as internationally in Thailand, Malaysia, Kerala Province in India, Beijing and Abu Dhabi. Currently, Dr. Baillie is Associate Professor of Surgery and Postgraduate Surgical Program Director at McMaster
University Faculty of Health Sciences, he is the International Medical Liaison Officer for the Hamilton Health Sciences Corporation, and the Medical Director for Ontario CritiCall Service.

---

|Lewis MacKenzie(1) |  | Director                                           |  | During his thirty-six years of military service in the Infantry he served nine years in Germany with NATO forces and managed nine peacekeeping tours of duty in six different mission areas-The Gaza strip, Cyprus, Vietnam,
Cairo, Central America and Sarajevo. He retired from the forces in 1993 and in that same year received the prestigious Vimy Award for his outstanding contribution to the preservation of democratic values. Since his retirement from the military, Lew
MacKenzie has regularly appeared on many of the international TV and radio networks as a commentator. Following the attacks of September 11, 2001, General MacKenzie was appointed one of two advisors to the Government of Ontario on
counter-terrorism and emergency measures. He is a graduate of the Xavier Junior College of Sydney, Cape Breton and The University of Manitoba.                               
|------------------ |  | -------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|John Yarnell(1)(2) |  | Director                                           |  | John Yarnell is the President Of Yarnell Companies Inc. Yarnell Companies Inc. is an investment and management services company formed in 1978 to invest and manage venture capital initiatives. Mr. Yarnell
is the founder and retired Chairman of the Quorum Group of companies and a former director and chairman of Poco Petroleums Ltd., Guard Inc., and Aluma Systems Inc. He is a graduate of The University of Manitoba and Harvard Business
School.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Ramesh Zacharias   |  | President and Chief Executive Officer and Director |  | Dr. Ramesh Zacharias is the founder of Med-Emerg International Inc. and serves as the President and Chief Executive Officer, and Executive Medical Director, of Med-Emerg Inc. He has practiced medicine in
Canada since 1981 and has extensive experience in the delivery of emergency and primary, medical care. He has provided consulting services regarding the delivery of emergency care internationally in the Caribbean, Saipan and Malaysia and provided
management-consulting services regarding the operation of medical clinics in Canada, the United States and Russia. In this continued role in providing medical insight and with his extensive business experience, he provides the strategic guidance
and leadership to the Company's management team. Under his leadership, MEII has grown to become the leading Canadian medical clinic management and medical staffing organization.
|Donald Ross        |  | Vice President Operations                          |  | Dr. Ross has been Vice-President of Med-Emerg International Inc. since November 1, 2000 and is responsible for the operations of the Company. He is an experienced healthcare executive, responsible for
hands-on day-to-day operations. In addition to his professional experience, Don holds a Masters degree in Clinical Epidemiology, is a Doctor of Dental Medicine, and has an honours Bachelors degree in neurophysiology from the University of British
Columbia. Prior to working with the Company, Don was the Executive Vice President (Health Care) of Aetna Canada for five years and has extensive experience in managing clinical business units in the public and private sectors.                                                                                                                                                                                                        

---

|William J. Danis |  | Chief Financial Officer |  | Mr. Danis is an experienced financial professional, bringing 25 years of operational and investment experience to his role at MEII. Prior to joining the company Bill was a founding partner of Greybrook
Corporation, a private equity investment company. Previously Bill held senior investment roles with Working Ventures Canadian Fund Inc. and Royal Trust Enterprise Capital. Bill left public accounting in 1985 to accept the position of Managing
Director of an offshore subsidiary of Brascan Corporation (TSX:BNNA).
|---------------- |  | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Notes:

Board Committees:

The
Board has a standing Compensation Committee and Audit Committee.

The
Compensation Committee is primarily responsible for reviewing the compensation arrangements for the Company's executive officers, including the Chief Executive Officer, and for administering the
Company's stock option plans. Members of the Compensation Committee are Dr. Baillie, Mr. Mackenzie and Mr. Yarnell.

The
Audit Committee is primarily responsible for overseeing the services performed by the Company's independent auditors and internal audit department evaluating the Company's accounting policies and
its system of internal controls and reviewing significant financial transactions. The Audit Committee is comprised of three members: Dr Baillie, Mr. Thomson and Mr. Yarnell.

Mr. Yarnell
has been designated as the Financial Expert on the Audit Committee. The Company has adopted a code of conduct for all employees, which has been reviewed by the Board of Directors
and management.

---

ITEM 11:    EXECUTIVE COMPENSATION

The following table sets forth the cash compensation, as well as certain other compensation paid or accrued to the Company's Chief Executive Officer for the
fiscal years ended December 31, 2003, 2002 and December 31, 2001. No other executive officer has a total annual salary and bonus of more than $100,000 during the reporting periods.

|                                           |  | Annual Compensation (US$) | 
|------------------------------------------ |  | ------------------------- | 
|
|Ramesh Zacharias
(Chief Executive Officer) |  | 2003
2002
2001            | 
|William J Danis
(Chief Financial Officer)  |  | 2003                      | 

---

Stock Option Plan:

In
November 1999, the Board of Directors and shareholders adopted and approved the Company's Stock Option Plan (the "Plan"). The Plan provides for grants to both employees and
directors of the Company. The Plan is to be administered by the Board of Directors or a committee appointed by the Board. The Plan was amended to authorize the Company to issue options to acquire an
aggregate of 1,912,866 shares of Common Stock (20% of issued and outstanding common shares), 1,725,000 of which have been granted as of December 31, 2003. As at December 31, 2003,
187,866 options were still available to be granted under the Stock Option Plan.

During
the fiscal 2003, 785,000 options were issued and 730,000 options were cancelled or expired. No options were granted to eligible physicians during the fiscal year ended
December 31, 2003.

As
at December 31, 2003 total options outstanding of 2,325,000 are comprised of 1,725,000 granted under the Plan and 600,000 granted outside the Plan.

Director
Compensation:

During
the fiscal year 2003, the Chairman of the Company, Mr. Bill Thomson was paid director fees amounting to $42,827 ($60,000 CDN). Dr. Frank Baillie, Mr. Lewis Mackenzie
and Mr. John Yarnell were paid director fees amounting to $14,276 each ($20,000 CDN each).

Compensation
Committee Interlocks and Insider Participation:

The
current members of the Compensation Committee are Dr. Frank Baillie, Mr. Lewis Mackenzie and Mr. John Yarnell, none of whom are employees and each of whom are
considered independent directors. No executive officer of the Company (i) served as a member of the of the compensation committee (or other board committee performing similar functions or in
the absence of any such committee, the board of directors) of another entity, one of whose executive officers served on the Company's Compensation Committee, (ii) served as a director of
another entity one of whose executive officers served on the Company's Compensation Committee or (iii) served as a member of the compensation committee (or other board committee performing
similar functions or in the absence of any such committee, the board of directors) of another entity, one of whose executive officers served as a director of the company.

---

ITEM 12:    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of December 31, 2003 certain information with respect to stock ownership of (i) all Officers and Directors;
(ii) persons known by the Company to be beneficial owners of 5% or more of its outstanding shares of Common Stock; (iii) all directors and officers as a group.

|Name of Beneficial Owner(2)                                |  | Shares of
Common Stock(1) |  | Percentage
Ownership
|---------------------------------------------------------- |  | ------------------------- |  | --------------------
|1245841 Ontario Inc and Ramesh Zacharias M.D., FRCSC(3)(4) |  | 1,587,476                 |  | 8.9%                
|William Thomson, C.A.(5)                                   |  | 375,000                   |  | 2.1%                
|Lewis Mackenzie(6)                                         |  | 150,000                   |  | 0.8%                
|Donald Ross, D.M.D., M.Sc.(7)                              |  | 200,000                   |  | 1.1%                
|Frank Baillie(8)                                           |  | 150,000                   |  | 0.8%                
|John Yarnell(9)                                            |  | 150,000                   |  | 0.8%                
|All Officers and Directors as a group(10)                  |  | 2,612,476                 |  | 14.6%               
|H.T. Ardinger(11)                                          |  | 1,745,000                 |  | 9.8%                

---

---

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 as amended requires the Company's officers and directors and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission ('SEC"). Officers, directors
and greater than ten percent shareholders are also required by rules promulgated by the SEC to furnish the Company with copies of all section 16(a) forms they file.

Based
solely upon a review of the copies of such forms furnished to the Company or written representations that no Forms 5 were required, the Company believes that all
section 16(a) filing requirements were met during fiscal year 2003.

Equity Compensation Plan Information

|Plan category                                              |  | (a)
Number of Securities to be issued upon exercise of outstanding options, warrants and rights |  | (b)
Weighted-average exercise price of outstanding options, warrants and rights |  | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     |  | 1,725,000                                                                                       |  | 0.50                                                                            |  | 187,866                                                                                                                                    
|Equity compensation plans not approved by security holders |  | 600,000                                                                                         |  | 0.58                                                                            |  | 0                                                                                                                                          

ITEM 13:    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no transactions between the Company and any of its officers, directors or 5% or greater shareholders required to be reported hereunder, except for an
amount of $21,413 ($30,000 CDN) paid to Mr. John Yarnell for Consultancy services rendered.

The
Company believes all previous transactions between the Company and its officers, directors or 5% stockholders, and their affiliates were made on terms no less favorable to the
Company than those available from unaffiliated parties. The Company presents all proposed transactions with affiliated parties to the Board of Directors for its consideration and approval. Any such
transaction is approved by a majority of the disinterested directors.

---

ITEM 14:    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the fees paid to the Company's independent auditor, Schwartz Levitsky Feldman llp, during fiscal years 2003 and 2002

AUDIT
AND NON-AUDIT FEES:

|                      |  | 2003                 |  | 2002                
|--------------------- |  | -------------------- |  | --------------------
|Audit fees(1)         |  | $49,964 (CDN$70,000) |  | $44,575 (CDN$70,000)
|Audit related fees(2) |  | $3,212 (CDN$4,500)   |  | $1,592 (CDN$2,500)  
|Tax fees(3)           |  | $NIL                 |  | $NIL                
|All other fees        |  | $NIL                 |  | $NIL                
|TOTAL                 |  | $53,176 (CDN$74,500) |  | $46,167 (CDN$72,500)

---

Policy on Audit Committees Pre-approval of Audit and Non-Audit Services Performed by the Independent Auditors.

The
audit Committee has pre-approved the audit engagement in accordance with Regulation S-X Rule 201(c)(7)(i) of the Sarbanes Oxley Act.

---

PART IV

ITEM 15:    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

|14.1 |  | Code of Ethics of the Company                                            
|---- |  | -------------------------------------------------------------------------
|21   |  | Subsidiaries of Med-Emerg International Inc.                             
|23.1 |  | Independent Auditors' Consent                                            
|31.1 |  | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer      
|31.2 |  | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer      
|32.1 |  | Section 1350 Certification of Chief Executive and Chief Financial Officer

Auditors'
Report

Consolidated
Balance Sheet

Consolidated
Statement of Operations and Deficit

Consolidated
Statement of Changes in Financial Position

Notes
to Consolidated Financial Statements

There
were no reports filed on Form 8-K during the fourth quarter of fiscal 2003.

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

| | MED-EMERG INTERNATIONAL INC.                                                             
| | -----------------------------------------------------------------------------------------
| | /s/RAMESH ZACHARIASRamesh Zacharias Director, Chief Executive OfficerDATE: March 30, 2004

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

| | /s/WILLIAM THOMSONWilliam Thomson
Chairman of the Board
DATE: March 30, 2004             
| | -----------------------------------------------------------------------------------------
| | /s/RAMESH ZACHARIASRamesh Zacharias Director, Chief Executive OfficerDATE: March 30, 2004
| | /s/DR. FRANK BAILLIEDr. Frank Baillie DirectorDATE:
March 30, 2004                       
| | /s/LEWIS MACKENZIELewis MacKenzie DirectorDATE: March 30,
2004                           
| | /s/JOHN YARNELLJohn Yarnell
Director
DATE: March 30, 2004                                
| | /s/WILLIAM J DANISWilliam J Danis Chief Financial OfficerDATE:
March 30, 2004            

---

(A)    Exhibits

Exhibit 14.1

Code of Ethics of the Company

MEII
expects a reasonable level of responsible and appropriate conduct by individuals in the course of employment and while engaged in Company business. We expect that employees will
conduct themselves in a mature and responsible manner while engaged in Company business on or off Company premises.

Specifically
we expect that each person will:



Adhere
to all Company policies.

Exhibit 21

Subsidiaries of Med-Emerg International Inc.

927563
Ontario Inc.
927564 Ontario Inc.
Med-Emerg Inc.
Med-Emerg Health Centres Inc.
Med-Emerg Elmvale Clinic Inc.
YFMC Heathcare Inc.
YFMC Healthcare (Alberta) Inc.
Doctors on Call Ltd.

---

Exhibit 23.1

Independent
Auditors' Consent

Consent
of Schwartz Levitsky Feldman LLP. The undersigned, Schwartz Levitsky Feldman LLP, hereby consents to the use of our name and the use of our opinion dated
March 10, 2004 on the consolidated financial statements of Med-Emerg International Inc. (the "Company") included in its Annual Report on Form 10-KSB being filed by the Company,
for the fiscal year ended December 31, 2003.

|Toronto, Ontario
March 30, 2004 |  | Chartered Accountants
|------------------------------- |  | ---------------------

---

Exhibit 31.1

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

I,
Dr. Ramesh Zacharias, certify that:

1.
I have reviewed this report on Form 10-K of Med-Emerg International Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:

a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;

b)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and

c)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fiscal year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
March 30, 2004

| |  |                                             
| |  | --------------------------------------------
| |  |                                             
| |  | Dr. Ramesh Zacharias
Chief Executive Officer

---

Exhibit 31.2

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

I,
William Danis, certify that:

1.
I have reviewed this report on Form 10-K of Med-Emerg International Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:

a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;

b)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and

c)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fiscal year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
March 30, 2004

| |  |                                      
| |  | -------------------------------------
| |  |                                      
| |  | William Danis
Chief Financial Officer

---

Exhibit 32.1

1350 Certification of Chief Executive and Chief Financial Officer

CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the report of Med-Emerg International Inc. (the "Company") on Form 10-K for the period ended December 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dr. Ramesh Zacharias Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
§ 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1)        The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)        The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated:
March 30, 2004

| |  |                                                              
| |  | -------------------------------------------------------------
| |  | By:
Name: Dr. Ramesh Zacharias
Title: Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In
connection with the report of Med-Emerg International Inc. (the "Company") on Form 10-K for the period ended December 31, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William Danis Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350,
as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1)        The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)        The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated:
March 30, 2004

| |  |                                                       
| |  | ------------------------------------------------------
| |  | By:
Name: William Danis
Title: Chief Financial Officer

---

AUDITORS' REPORT

To
the Shareholders of
Med-Emerg International Inc.

We
have audited the consolidated balance sheets of Med-Emerg International Inc. as at December 31, 2003 and 2002 and the consolidated statements of operations
and deficit and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2003 and 2002 and the
results of its operations and cash flows for each of the years then ended in accordance with Canadian generally accepted accounting principles.

/s/
Schwartz Levitsky Feldman, LLP

Chartered
Accountants

Toronto,
Ontario
March 10, 2004

Comments by Auditors for U.S. readers on Canadian-U.S. Reporting Differences

In
the United States, reporting standards for auditors require the addition of an explanatory paragraph when the consolidated financial statements are affected by conditions and
events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in note 3 to the consolidated financial statements. Our report to the
shareholders dated March 10, 2004 is expressed in accordance with Canadian reporting standards, which do not permit a reference to such events and conditions in the auditor's report when these
are adequately disclosed in the financial statements.

/s/
Schwartz Levitsky Feldman, LLP

Chartered
Accountants

Toronto,
Ontario
March 10, 2004

---

MED-EMERG INTERNATIONAL INC.  CONSOLIDATED BALANCE SHEET  As at December 31, 2003 and 2002  (in US$)

|                                                        |                                          | 2003 |            | 2002        |  
|------------------------------------------------------- | ---------------------------------------- | ---- | ---------- | ----------- | -
|Assets                                                  |                                          |      |            |             |  
|Current assets                                          |                                          |      |            |             |  
|                                                        | Cash                                     |      | $          | 129,132     |  
|                                                        | Accounts receivable (note 5)             |      |            | 3,409,771   |  
|                                                        | Preferred expenses and other             |      |            | 81,041      |  
|                                                        | Deferred financing costs (note 6)        |      |            |            |  
|                                                        | Discontinued operations (note 4)         |      |            | 102,740     |  
|                                                        |                                          |      |            |             |  
|                                                        |                                          |      | 3,722,684  |             |  
|                                                        |                                          |      |            |             |  
|Long term investment (note 8)                           |                                          |      | 134,979    |             |  
|Property, plant and equipment (note 9)                  |                                          |      | 186,562    |             |  
|Discontinued operations (note 4)                        |                                          |      |           |             |  
|                                                        |                                          |      |            |             |  
|                                                        |                                          | $    | 4,044,225  |             | $
|                                                        |                                          |      |            |             |  
|Liabilities and Shareholders' Deficit                   |                                          |      |            |             |  
|Current liabilities                                     |                                          |      |            |             |  
|                                                        | Demand loan (note 11)                    |      | $          |            |  
|                                                        | Accounts payable and accrued liabilities |      |            | 6,717,406   |  
|                                                        | Other loans (note 12)                    |      |            |            |  
|                                                        | Discontinued operations (note 4)         |      |            | 60,703      |  
|                                                        |                                          |      |            |             |  
|                                                        |                                          |      | 6,778,109  |             |  
|Long-term liabilities                                   |                                          |      |            |             |  
|                                                        | Discontinued operations (note 4)         |      |            |            |  
|                                                        |                                          |      |            |             |  
|                                                        |                                          |      | 6,778,109  |             |  
|                                                        |                                          |      |            |             |  
|Minority interest                                       |                                          |      |           |             |  
|                                                        |                                          |      |            |             |  
|Commitments and contingent liabilities (note 19 and 20) |                                          |      |            |             |  
|Shareholders' Deficit                                   |                                          |      |            |             |  
|                                                        | Capital stock (note 14)                  |      |            | 11,544,736  |  
|                                                        | Contributed surplus (note 15)            |      |            | 2,397,849   |  
|                                                        | Convertible debentures (note 13)         |      |            | 414,434     |  
|                                                        | Deficit                                  |      |            | (16,265,370 | )
|                                                        | Cumulative translation adjustment        |      |            | (825,533    | )
|                                                        |                                          |      |            |             |  
|                                                        |                                          |      | (2,733,884 | )           |  
|                                                        |                                          |      |            |             |  
|                                                        |                                          | $    | 4,044,225  |             | $
|                                                        |                                          |      |            |             |  

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

---

Med-Emerg International Inc.  Consolidated Statement of Operations and Deficit  For the years ended December 31, 2003 and 2002  (in US$)

|                                                                |                                                | 2003 |             | 2002      |  
|--------------------------------------------------------------- | ---------------------------------------------- | ---- | ----------- | --------- | -
|Revenue                                                         |                                                | $    | 54,335,558  |           | $
|Physician fees and other direct costs                           |                                                |      | 49,217,416  |           |  
|                                                                |                                                |      |             |           |  
|                                                                |                                                |      | 5,118,142   |           |  
|                                                                |                                                |      |             |           |  
|Expenses                                                        |                                                |      |             |           |  
|                                                                | Salaries and benefits                          |      | $           | 2,249,647 |  
|                                                                | General and administration                     |      |             | 1,650,521 |  
|                                                                | Occupancy costs and supplies                   |      |             | 334,460   |  
|                                                                | Public company costs                           |      |             | 96,560    |  
|                                                                | Travel and marketing                           |      |             | 347,477   |  
|                                                                |                                                |      |             |           |  
|                                                                |                                                |      | 4,678,665   |           |  
|                                                                |                                                |      |             |           |  
|Income before undernoted items                                  |                                                |      | 439,477     |           |  
|                                                                |                                                |      |             |           |  
|                                                                | Interest and financing expenses                |      |             | 685,471   |  
|                                                                | Amortization of property, plant, and equipment |      |             | 120,924   |  
|                                                                | Stock compensation expenses                    |      |             | 1,161,262 |  
|                                                                | Forgiveness of loan (note 10)                  |      |             |          |  
|                                                                |                                                |      |             |           |  
|                                                                |                                                |      | 1,967,657   |           |  
|                                                                |                                                |      |             |           |  
|Loss before income taxes                                        |                                                |      | (1,528,180  | )         |  
|                                                                | Income taxes (recovery) (note 16)              |      |             | (2,458    | )
|                                                                |                                                |      |             |           |  
|Net loss before minority interest and preferred share dividends |                                                |      | (1,525,722  | )         |  
|                                                                | Minority interest                              |      |             | (2,095    | )
|                                                                |                                                |      |             |           |  
|Net loss before preferred share dividends                       |                                                |      | (1,523,627  | )         |  
|                                                                | Preferred share dividends                      |      |             | 135,006   |  
|                                                                |                                                |      |             |           |  
|Net loss before discontinued operations                         |                                                |      | (1,658,633  | )         |  
|Discontinued operations (note 4)                                |                                                |      |             |           |  
|                                                                | Loss from operations of discontinued component |      |             | (200,702  | )
|                                                                | Gain on disposal of discontinued component     |      |             | 33,533    |  
|                                                                |                                                |      |             |           |  
|                                                                | Loss on discontinued operations                |      |             | (167,169  | )
|                                                                |                                                |      |             |           |  
|Net loss for the year                                           |                                                |      | (1,825,802  | )         |  
|                                                                |                                                |      |             |           |  
|Deficit, beginning of the year                                  |                                                |      | (14,333,572 | )         |  
|                                                                | Convertible debenture charges (note 13)        |      |             | 105,996   |  
|                                                                |                                                |      |             |           |  
|Deficit, end of the year                                        |                                                | $    | (16,265,370 | )         | $
|                                                                |                                                |      |             |           |  
|Basic loss per common share (note 17)                           |                                                |      |             |           |  
|                                                                | Continuing operations                          |      | $           | (0.17     | )
|                                                                | Discontinued operations                        |      | $           | (0.02     | )
|Weighted average basic common shares outstanding                |                                                |      | 9,564,332   |           |  
|                                                                |                                                |      |             |           |  

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

---

Med-Emerg International Inc.  Consolidated Statement of Cash Flows  As at December 31, 2003 and 2002  (in US$)

|                                                 |                                                           | 2003                                                   |          | 2002       |          
|------------------------------------------------ | --------------------------------------------------------- | ------------------------------------------------------ | -------- | ---------- | ---------
|Cash Flows from Operating Activities             |                                                           |                                                        |          |            |          
|                                                 | Net loss for the year before discontinued operations      |                                                        | $        | (1,658,633 | )        
|                                                 | Adjustments for:                                          |                                                        |          |            |          
|                                                 |                                                           | Amortization of property, plant and equipment (note 9) |          |            | 120,924  
|                                                 |                                                           | Minority interest                                      |          |            | (2,170   
|                                                 |                                                           | Stock compensation expenses (note 15)                  |          |            | 1,161,262
|                                                 |                                                           | Convertible debentures (note 13)                       |          |            | 46,998   
|                                                 |                                                           | Forgiveness of loan (note 10)                          |          |            |         
|                                                 |                                                           | Common shares issued for financing                     |          |            |         
|                                                 |                                                           |                                                        |          |            |          
|                                                 |                                                           |                                                        | (331,619 | )          |          
|                                                 | Increase in non-cash working capital components (note 18) |                                                        |          | 1,158,052  |          
|                                                 | Discontinued operations (note 4)                          |                                                        |          | 22,244     |          
|                                                 |                                                           |                                                        |          |            |          
|                                                 |                                                           |                                                        | 848,677  |            |          
|                                                 |                                                           |                                                        |          |            |          
|Cash Flows from Investing Activites              |                                                           |                                                        |          |            |          
|                                                 | Additions to property, plant and equipment                |                                                        |          | (136,559   | )        
|                                                 | Proceeds from sale of investment in clinics (note 4)      |                                                        |          | 469,340    |          
|                                                 | Sale of investment in Next Generation Technology          |                                                        |          |            |          
|                                                 | Holdings, Inc. (note 7)                                   |                                                        |          |           |          
|                                                 | Discontinued operations (note 4)                          |                                                        |          | (210,127   | )        
|                                                 |                                                           |                                                        |          |            |          
|                                                 |                                                           |                                                        | 122,654  |            |          
|                                                 |                                                           |                                                        |          |            |          
|Cash Flows from Financing Activities             |                                                           |                                                        |          |            |          
|                                                 | Repayment of bank indebtedness                            |                                                        |          |           |          
|                                                 | Demand loan (note 11)                                     |                                                        |          | (11,462    | )        
|                                                 | Deferred financing costs incurred (note 6)                |                                                        |          | 42,883     |          
|                                                 | Issuance/(repayment) of other loans (note 12)             |                                                        |          | (535,00    | )        
|                                                 | Discontinued operations (note 4)                          |                                                        |          | (10,235    | )        
|                                                 |                                                           |                                                        |          |            |          
|                                                 |                                                           |                                                        | (513,814 | )          |          
|                                                 |                                                           |                                                        |          |            |          
|Effect of foreign currency exchange rate changes |                                                           |                                                        | (418,002 | )          |          
|Increase in cash                                 |                                                           |                                                        | 39,515   |            |          
|Cash, beginning of year                          |                                                           |                                                        | 89,617   |            |          
|                                                 |                                                           |                                                        |          |            |          
|Cash, end of year                                |                                                           | $                                                      | 129,132  |            | $        
|                                                 |                                                           |                                                        |          |            |          

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

---

MED-EMERG INTERNATIONAL INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        December 31, 2003 and 2002

1.     ORGANIZATION AND DESCRIPTION OF BUSINESS

Med-Emerg International Inc. 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 are in Canada and were divided into five business units in 2003: Hospital Staffing, Medical Clinics, Government Healthcare Services, Pharmaceutical Support and
Long-Term Care. The Company intends to broaden its healthcare management services over a wider geographic base.

For
hospital staffing, the Company provides emergency department physician and nurse recruitment, staffing and administrative support services to hospitals, on a contractual basis. At
December 31, 2003, the Company had 20 contracts for physician staffing and five contracts for nurse staffing.

The
Company sold all the medical clinics during the 2003 fiscal year (see note 4).

The
Company provides medical personnel to the entire Canadian Armed Forces ("CF"). The Company provides in-garrison healthcare at bases across Canada. Through this contract
the Company recruits, schedules and manages physicians, nurses, dentists, physiotherapists and other healthcare professionals to provide services as required by the CF health authority resident at
each base.

The
Company provides special access Remicade infusion services to patients suffering from crohn's disease and rheumatoid arthritis at clinic locations across Canada. The
Company has recently signed an agreement with Novartis Pharmaceuticals Canada Inc. to supply Zometa for treating cancer patients with bone metastases.

MEII
provides physician and nurse practitioners to select long-term care facilities in Ontario. Such physician services include admission physical assessments and regular
primary care to residents of the facilities.

2.     BASIS OF PRESENTATION

The accompanying audited consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. These
financial statements consolidate, with minority interest, the accounts of MEII and all wholly- and partially-owned subsidiaries of MEII.

Significant
intercompany accounts and transactions have been eliminated on consolidation.

The
consolidated financial statements are expressed in U.S. dollars and are prepared in accordance with Canadian generally accepted accounting principles. Differences between
Canadian and United States accounting principles are described in note 23.

---

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The
consolidated financial statements have been prepared on principles applicable to a going concern which assumes that the Company will be able to realize its assets and discharge its
obligations in the normal course of business. As at December 31, 2003, the Company had a working capital deficiency of $3,055,425 ($2,276,540 as at December 31, 2002) and a shareholders'
deficit of $ 2,733,884 ($1,698,340 as at December 31, 2002).

On
June 28th, 2002 the Company discharged its primary banker HSBC and MEII currently relies on an asset-based lender.

Management
continues to pursue opportunities to enhance profitability. These plans include:



The
Company's ability to continue as a going concern is dependent on the successful implementation of this plan.

Subsequent
to December 31, 2003 the Company signed a Letter of Intent ("LOI") concerning a prospective share exchange between MEII and Global Healthcare Workforce Ltd.
("GHW"), a company incorporated in the United Kingdom. The closing date for this deal is expected to be April 21, 2004, unless extended by MEII and GHW. Pursuant to the terms of the LOI,
GHW provided a guarantee for a bank facility of $385,654 ($500,000 CDN) for MEII, which is secured by an irrevocable short-term standby letter of credit in the aggregate amount of $385,654
(Cdn$ 500,000) provided by a foreign bank. The bank facility was available to MEII on February 23, 2004. There is no certainty to the closure of the share exchange transaction as the deal is
subject to due diligence procedures that are currently being carried out by both companies.

Should
the Company be unable to successfully implement its plan, it may not be able to continue as a going concern. As a result, certain assets and liabilities currently reflected in the
balance sheet at book value would have to be adjusted to liquidated values.

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 and 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.

Short-term
investments comprising marketable securities were written down to its market value.

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.

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

5-10 years

Straight-line


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.

The
company has adopted the provisions of the Emerging Issues Committee ("EIC")  123, issued by the Canadian Institute of Chartered Accountants
("CICA") that became effective on January 1, 2002. EIC 123 addresses the reporting of revenue on a gross basis as a principal versus on a net basis as an agent.

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

In
most circumstances revenue is reported on a mix of both gross and net basis for clinic staffing.

MEII
acted as a principal in providing health service delivery through its clinic network. MEII was the operator of the clinic that provided the health service, had the responsibility to
provide the facility, staffing and follow-up effort (both by way of clinic managers and by providing the billing function) and also controlled the patient records, patient billings and
patient collections. There were a number of risks MEII attempted to manage which included insurance coverage both in respect of the property and also coverage on healthcare professionals who worked
for the Company. Revenue from these clinics were recognized on a gross basis. However, in certain other clinics the billings were submitted and collected by the physicians directly and only the
Company's portion was remitted to MEII. In such cases the revenue was recorded on a net basis.

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 in Ontario, a mix of rural and
urban facilities including tertiary care centres.

Under
contract with Schering-Plough Canada, MEII acts as the coordinator for the community-based infusion of Remicade for the treatment of patients with rheumatoid arthritis
and chron's disease.

In
2002, MEII commenced a new line of business, which involves contracting with physicians and nurse practitioners to provide services to long-term care facilities in
Ontario.

Revenue
is reported on a gross basis.

MEII
has an administrative management contract with 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 has 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 bills for the work performed by these individuals and in turns pays the medical personnel and support staff based on the terms of the respective
contracts signed with them.

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 realizations of these future tax assets is not more likely than not.

Cash
consists of cash on hand and in banks.

During
2002, the Company adopted the recommendation of the CICA handbook section 1650 Foreign Currency Translation. The amended standard eliminates the deferral and amortization
approach to exchange gains and losses on long-term monetary items and requires the disclosure of the exchange gains and losses included in the calculation of net income. There is no
material effect of this change in accounting policy on the financial statements of the Company.

The
Company maintains its books and records in Canadian dollars. The financial statements are converted to U.S. dollars as the Company is a reporting issuer in 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' 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 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.

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 either 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, or alternatively, the disclosure of pro forma
net earnings and earnings per share data as if stock based compensation had been recognized in earnings.

4.     DISCONTINUED OPERATIONS

Ontario Medical Clinics Sale

On
September 5, 2003 the Company entered into a transaction with AIM Health Group Ltd. ("AIM") to dispose of MEII's Ontario-based clinic operations and more specifically
the following clinics: Elmvale, Merivale, Herongate, Kanata, Orleans, Hillside, Hampton, PSA, Caresource, Pond Mills, Central, Glenderry, Dundas and Wallaceburg.

The
Company sold the subsidiary corporations that owned these clinics to AIM. The names of these corporations are as follows: 1189543 Ontario Inc. (and its subsidiaries 1180668
Ontario Inc., 1292363 Ontario Corporation and 1024528 Ontario Inc.), Med-Plus Health Centres Ltd. (and its subsidiary Glenderry Medical Walk-In
Clinic Inc.), Med-Emerg Urgent Care Inc. and Caremedics (Elmvale) Inc.

---

MEII
sold all of the shares owned by MEII in these companies (including all assets and liabilities of the companies identified above), complete with all lease and employee obligations.

In
consideration for the sale of the shares of these corporations, MEII received $597,763 ($775,000 CDN). The purchase price was settled as follows:



This
transaction resulted in a $104,138 gain on disposition of these clinic companies as the net assets of the companies sold were less than proceeds received by MEII.

The
Company has accounted for the investment using the cost method at a value of $0.77 ($1 CDN) for each Class A preference share. It is the Company's intention to hold the
Class A preference shares for greater than one year and accordingly it has classified the investment as long-term (see note 8).

Each
Class A preference share entitles the holder to receive for each fiscal year as declared by the board of directors of AIM a cumulative dividend at an amount equal to the
greater of:



The
cumulative amount of the fixed dividends paid to the holders of Class A preference shares in prior years shall reduce the variable dividends payable to the holders of
Class A preference shares in a given year.

MEII
and AIM will continue to work together to ensure the long-term successful development of these clinics.

Alberta Medical Clinics Sale

On
December 31, 2003 MEII's indirect wholly-owned subsidiary YFMC Healthcare (Alberta) Inc. 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, West Edmonton Mall Medical Centre. In consideration of the sale MEII shall receive
$15,426 ($20,000 CDN) in cash during the 2004 fiscal year.

This
transaction resulted in a $51,581 loss on disposition of these clinic companies as the net assets of the companies sold were higher than proceeds received by MEII.

Manitoba Medical Clinic Sale

During
the fourth quarter of 2003 MEII sold certain assets of the Wildwood Medical Centre located in Winnipeg, Manitoba. In consideration for the sale, MEII received $6,557($8,500 CDN)
in cash. This transaction resulted in net loss of $19,024 upon disposition as the net assets of the companies sold were higher than proceeds received by MEII.

---

The summarized statements of income (loss) for the Discontinued Business are as follows:

|                                               |  | 2003 |           | 2002 |  
|---------------------------------------------- |  | ---- | --------- | ---- | -
|
|Revenue                                        |  | $    | 6,489,747 |      | $
|Physician fees and other direct costs          |  |      | 3,593,429 |      |  
|Gross margin                                   |  |      | 2,896,318 |      |  
|Operating, general and administrative expenses |  |      | 2,955,990 |      |  
|Depreciation                                   |  |      | 128,475   |      |  
|Other expense                                  |  |      | 13,255    |      |  
|Loss before income taxes                       |  |      | (201,402  | )    |  
|Income taxes (recovery)                        |  |      | (1,321    | )    |  
|Minority interest                              |  |      | 621       |      |  
|Loss for the period                            |  |      | (200,702  | )    |  
|Gain on sale of discontinued operations        |  |      | (33,533   | )    |  
|Loss from discontinued operations              |  |      | (167,169  | )    |  

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

|                              |                                          | 2003 |         | 2002  
|----------------------------- | ---------------------------------------- | ---- | ------- | ------
|
|Current assets                |                                          |      |         |       
|                              | Cash                                     |      | $       | 43,134
|                              | Accounts receivable                      |      |         | 59,606
|                              | Prepaid expenses and other               |      |         |      
|                              |                                          |      | 102,740 |       
|Property, plant and equipment |                                          |      |        |       
|                              |                                          |      | 102,740 |       
|Current liabilities           |                                          |      |         |       
|                              | Accounts payable and accrued liabilities |      | $       | 60,703
|                              | Current portion of deferred revenue      |      |         |      
|                              | Other loans                              |      |         |      
|                              |                                          |      | 60,703  |       
|Long-term liabilities         |                                          |      |         |       
|                              | Deferred revenue                         |      |         |      
|                              |                                          |      | 60,703  |       
|Net assets                    |                                          |      | 42,037  |       

---

5.     ACCOUNTS RECEIVABLE

2003

2002Trade receivable

$
3,455,886

$
1,747,976Allowance for doubtful accounts


(46,115
)

(32,189
)$
3,409,771

$
1,715,787


Included
in Accounts Receivable is an amount of $ 765,135 (CDN$ 991,998) owing from Sunnybrook Womens' College Hospital ("Sunnybrook") for nursing services provided during the month of
June 2003, to assist in battling the SARS crisis, which affected the Province of Ontario. The funds to settle this account were previously remitted to the Company by the Ontario Ministry of
Health. Subsequently, the Ontario Ministry of Health requested that these funds be repaid and in turn that the Company should seek compensation directly from Sunnybrook.

Accordingly,
the Company has recorded a receivable from Sunnybrook and a payable to Ontario Ministry of Health for the equivalent amount.

The
Company is in the process of reconciling the amounts charged to Sunnybrook and is of the opinion that any adjustments are immaterial and the amount is collectible.

6.     DEFERRED FINANCING COSTS

As part of the re-financing arrangement with Wellington Capital Corporation, the interest component of the loan totaling $ 120,000 was withheld and
these related interest charges were initially deferred then expensed over the term of the loan.

7.     SHORT-TERM INVESTMENTS

As part of the disposition of HCCI, the Company acquired shares of Next Generation Technology Holdings Inc. ("NGTH"). As at December 31, 2001 the
Company owned 510,255 NGTH shares acquired at $ 0.20 each. During fiscal 2002, MEII sold its ownership interest in NGTH at $0.20 per share.

8.     LONG-TERM INVESTMENTS

2003

2002Investment in AIM Health Group Ltd.

$
134,979

Nil


MEII
has an investment of 175,000 class A preference shares of AIM as a result of disposition of the Ontario based clinics on September 30, 2003 (see note 4
for further details).

---

9.     PROPERTY, PLANT AND EQUIPMENT

2003

2002Cost

Accumulated Amortization

Net

Cost

Accumulated Amortization

NetFurniture and fixtures

$
189,848

$
139,957

$
49,891

$
146,601

$
105,946

$
40,655Computer software


329,144


292,609


36,535


210,448


185,542


24,906Computer hardware


509,224


409,088


100,136


400,893


304,697


96,196Leasehold improvements


67,946


67,946





53,123


43,953


9,170$
1,096,162

$
909,600

$
186,562

$
811,065

$
640,138

$
170,927


Amortization
of property, plant, and equipment for the year amounted to $120,924 ($102,345 for December 31, 2002)

10.   REFINANCING ACTIVITIES



The
terms of the secured debenture included:



A
principal shareholder of the Company guaranteed the debenture, providing as security, unrestricted free trading common shares of the Company equivalent to 150% of the face value of the
debenture. In exchange for the guarantee, the Company issued to the guarantor shareholder common share purchase options to purchase 100,000 common shares at $1.00 per share. In the event that the
market value of the common shares provided as security falls below 200% of the face amount of the debenture, the Company was required to pledge additional securities to return the market value to 200%
of the face amount.

The
secured debenture was repaid, in full, on July 2, 2003.



In
addition to the specific Standard Form Assignments (General), all amounts due to MFSL are secured by a general security agreement on all assets and undertakings of MEII.

---

11.   DEMAND LOAN

The demand loan amount is owing to MFSL under the terms described in note 10(b).

12.   OTHER LOANS

2003

2002Secured debenture, effective interest at 23.4%, due June 2003

Nil

$
535,000


13.   CONVERTIBLE DEBENTURES

The convertible debentures were issued on September 30, 2001, are due on September 30, 2006 and bear interest at 7%. MEII may pay the principal
amount and accrued interest at any time prior to maturity by way of cash or shares of MEII common stock or a combination of cash and MEII common stock at the discretion of the Company. Accordingly,
these debentures have been reflected in the financial statements at its estimated present value and included in shareholders' deficit.

Undiscounted Total

Present ValueConvertible debenturesPrincipal due on September 30, 2006

$
590,536

$
92,130Interest due on September 30, 2006


206,688


32,245$
797,224

$
124,375


The
above debentures will be accreted to their principal values at the rate of 45% per annum on the net present values shown. During the year the amount of $105,996 ($84,080 for
December 31, 2002) was accreted to principal with a corresponding charge to retained earnings.

Convertible debentures at December 31, 2001

$
124,375Interest costs in 2002


52,985Convertible debenture charges in 2002


84,080Convertible debentures at December 31, 2002


261,440Interest costs in 2003


46,998Convertible debenture charges in 2003


105,996Convertible debentures at December 31, 2003

$
414,434


---

14.   CAPITAL STOCK

AuthorizedUnlimited number of the following classes of shares and warrants:



Issued

2003

2002500,000 Preference shares

$
445,717

$
445,7179,564,332 Common shares (2002-9,564,332)


10,992,908


10,992,9081,437,500 Common stock purchase warrants


106,111


106,111$
11,544,736

$
11,544,736


Common SharesNumber

AmountBalance, December 31, 2001

9,348,332

$
10,798,508Shares issued in connection with re-financing in 2002 (note 10)

216,000


194,400Balance, December 31, 2003 and 2002

9,564,332

$
10,992,908


WarrantsNumber

AmountBalance, December 31, 2003 and 2002

1,437,500

$
106,111


Each
preference share is convertible into one and one-half common shares of the Company at the option of the holder for a ten-year period from the date of
issuance. At the end of the ten year period, the preference shares are convertible at the option of the holder, into such number of shares of the Company's common shares as is equal to $ 4,500,000
divided by the then market value of the common shares. The preference shares are entitled to receive a cumulative dividend of $ 0.27 per share payable in cash or equivalent common shares based on the
quoted market value of the common shares at the date of closing the initial public offering. The preference shares were originally redeemable and retractable by the holder; on October 24, 1997,
the attributes of the shares were changed and the shares have since ceased to be redeemable and retractable.

Preference
share quarterly dividends of $33,750 are payable either by cash or issuance of equivalent common shares. The December 31, 1999 and March 31 and June 30,
2000 quarterly dividends were paid on November 13, 2000 through the issue of 48,395 common shares. All quarterly dividends since September 30, 2000, have not been paid, but have been
accrued in the accounts.

---

The
Company maintains a stock option plan (the "Plan") for the benefit of directors, officers and employees. Pursuant to an amendment of the Plan, the maximum number of options that may
be granted shall not exceed 1,912,866. Options expire no later than five years from date of grant. As at December 31, 2003 total options outstanding of 2,325,000 are comprised of 1,725,000
granted under the Plan and 600,000 granted outside the Plan. On May 15, 2003, 785,000 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 May 15, 2008. The Company also cancelled 730,000 options during the second quarter of 2003; 230,000 options at $1.25 per option and 400,000
options at $1.50 per option; and 100,000 options at $0.50 per option.

STOCK OPTIONS

Number of SharesExpiry date

Option price per share2003

2002Jan-04


1.25



230,000Jul-04

$
1.50



400,000Apr-06

$
0.50

1,440,000

1,540,000Jun-07

$
1.00

100,000

100,000May-08

$
0.50

785,000

2,325,000

2,270,000


Number of SharesExpiry date2003

2002Outstanding, beginning of year



2,270,000

2,441,300Granted



785,000

100,000Cancelled/expired



(730,000
)
(271,300
)Outstanding, end of year



2,325,000

2,270,000


The
Company expensed the fair value of the stock options granted during the year.

During
the first quarter of 2003 the terms of the warrants were amended entitling each warrant holder to purchase one share of common stock at a price of $0.50 (previously $4.50). The
expiry of these warrants has been extended from February 11, 2003 to February 11, 2005.

15.   CONTRIBUTED SURPLUS

2003

2002Stock compensation expense

$
2,309,782

$
1,148,520Share repurchase  difference between cost per share and assigned value


46,292


46,292Fair value of warrants and stock options issued in connection with the acquisition of YFMC Healthcare Inc.


41,775


41,775$
2,397,849

$
1,236,587


Due
to the amendment to the above mentioned warrants and the issuance of new options the fair value amounting to $790,600 and $370,662 respectively have been determined using an option
pricing model (Black Scholes) as per section 3870 of the CICA handbook. These amounts have been credited to contributed surplus.

---

16.   FUTURE INCOME TAXES

At December 31, 2003, the Company has non-capital losses available to reduce future federal and provincial taxable income of approximately $
4.0 million. These non-capital losses expire between 2004 and 2010. In addition, the Company has capital loss carry-forwards of approximately $ 2.0 million, which may be
applied against future taxable capital gains. The future tax benefits available as a result of these losses have been fully provided for in the financial statements.

In
fiscal 2001, the Company determined that future income tax assets should be fully allowed for.

17.   BASIC LOSS PER COMMON SHARE

Basic net loss per common share is calculated using the weighted average number of common shares outstanding during the year. Diluted earnings per common share is
calculated using the treasury stock method in accordance with the recommendations of Handbook section 3500. Had share options and common share purchase warrants been exercised, and the
preference shares and convertible debentures been converted, the effect on the basic loss per share would be anti-dilutive.

2003

2002Basic loss per common share:Continuing operations

$
(0.17
)
$
(0.08
)Discontinued operations

$
(0.02
)
$
(0.0
)


18.   NOTES TO THE STATEMENT OF CASH FLOWS

2003

2002Accounts receivable

$
(1,693,984
)
$
(120,870
)Prepaid expenses and other


(12,963
)

(1,350
)Accounts payable and accrued liabilities2,864,999


1,345,247$
1,158,052

$
1,223,027


Property,
plant, and equipment purchased during the year amounts to $136,559 ($65,866 for December 31, 2002) through cash payments.

Operating
expenses reflect interest paid of $ 719,727 during the year ended December 31, 2003 ($712,638 for December 31, 2002); and income taxes paid of $nil during the
year ended December 31, 2003 ($nil for December 31, 2002).

As
part of the sale of clinics to AIM, the company received partial payment by way of Class A preference shares in AIM.

---

19.   COMMITMENTS

The Company is committed to payments under operating leases of its premises and equipment totaling $160,032. Annual payments under the operating leases are as
follows:

2004

$
57,8822005


24,0352006


24,0352007


24,0352008


24,0352009 and thereafter


6,010$
160,032


20.   CONTINGENT LIABILITIES

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

21.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of accounts receivable, demand loan, accounts payable and accrued liabilities approximate their fair value due to the short-term
maturity of these items.

22.   SUBSEQUENT EVENTS

On January 13, 2004 the Company signed a Letter of Intent ("LOI") concerning a prospective share exchange between MEII and Global Healthcare
Workforce Ltd. ("GHW"), a company incorporated in the United Kingdom. The scheduled closing date for this transaction is April 21, 2004, unless extended by MEII and GHW.
Subsequent to April 21, 2004 and without an extension the LOI will terminate.

---

The
transaction, which is subject to material due diligence, provides for all shareholders of GHW to transfer 100% of their shares of GHW to MEII, and MEII shall in exchange issue to
such shareholders shares of MEII as are equal to on a fully diluted basis 75% of the share equity of MEII resulting in the former GHW shareholders controlling the majority of MEII's outstanding common
shares. The equity shall be calculated without taking into account the existing MEII 1,437,500 warrants and the 2,325,000 options currently outstanding. GHW shareholders will be granted a warrant
(pro rata to each of their shareholdings) whereby for each warrant or option share subsequently issued, GHW shareholders shall be issued, at the same price per share as the exercise price of
the warrant share or option issued, three common shares of MEII. The preference shareholders shall also be issued, at the same price per share as the exercise price of the warrant issued, one common
share of MEII for every two warrants or option shares or option issued shares.

Prior
to or at the closing date the following items must occur:



At
closing, there must be approval by the board of directors of each company and all necessary consents or approvals must be obtained from required third parties in connection with this
transaction.

23.   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:

Under
Canadian GAAP, the convertible debentures have been presented in Shareholders' deficit as the Company has the option to satisfy the debt by way of cash or shares or a combination
of cash and shares. The debentures have been discounted to reflect the net present value as at the balance sheet date. Under U.S. GAAP, these obligations should be shown as
long-term debt on the balance sheet.

If
U.S. GAAP were employed, deficit for the period would be adjusted as follows:

2003

2002Deficit based on Canadian GAAP

$
(16,265,370
)
$
(14,333,572
)Convertible debentures (note 13)


(289,453
)

(395,449
)Deficit based on U.S. GAAP

$
(16,554,823
)
$
(14,729,021
)


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.

---

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 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.

Under
U.S. GAAP the effect on Shareholders' deficit would be adjusted as follows:

2003

2002Capital stock (as previously shown)

$
11,544,736

$
11,544,736Capital stock issued on purchase of YFMC Healthcare Inc.


1,087,872


1,087,872Ascribed fair value of share purchase warrants issued


(36,406
)

(36,406
)Capital stock  U.S. GAAP


12,596,202


12,596,202Contributed surplus (as previously shown)


2,397,849


1,236,587Share purchase warrants


36,406


36,406Paid-in-capital  U.S. GAAP


2,434,255


1,272,993Deficit  U.S. GAAP


(16,554,823
)

(14,729,021
)Cumulative translation adjustment


(825,533
)

(407,531
)Shareholders' deficit  U.S. GAAP


(2,349,899
)
$
(1,267,357
)


Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), establishes standards for reporting and display of comprehensive income
and its components in the financial statements. Under U.S. GAAP, the comprehensive loss for the fiscal year ended December 31, 2003 and 2002 would be adjusted as follows:

2003

2002Net loss (U.S. GAAP)

$
(1,825,802
)
$
(738,647
)Foreign currency translation adjustment


(418,002
)

(15,550
)Comprehensive loss

$
(2,243,804
)
$
(754,197
)


The
foreign currency translation adjustments are not currently adjusted for income taxes. The company is situated in Canada, and the foreign currency translation adjustments relate to
the translation of the financial statements from Canadian dollars into United States dollars, solely for the convenience of the readers.



The
following standards were issued by the Financial Accounting Standards Board during 2003 and 2002:



---



The
Company believes that the above standards would not have a material impact on its financial position, results of operations or cash flows as it relates to the reconciliation of
Canadian and United States accounting policy differences.

24.   ECONOMIC DEPENDENCE

Approximately 74% of revenue and 46% of gross margin is derived from one customer (84% of revenue and 62% of gross margin in 2002). Receivables for this customer
amounted to 41% of total receivables (56% of total receivables in 2002). The loss of a material amount of revenue to this customer could have a material adverse effect on operations of the Company.

---

25.   SEGMENTED INFORMATION

The Company operated under five business units during 2003 as follows: Hospital Staffing, Medical Clinics, Government Healthcare Services, Pharmaceutical Support
and Long-Term Care. As at December 31, 2003 the Medical Clinics business unit was disposed of leaving only four units that the Company now focuses on.

The
Hospital Staffing unit contracts with hospitals for the provision of physician staffing, nurse staffing and administrative support services. The Company also contracts with clinical
facilities and local communities for the locum or permanent placement of a physician in a community.

The
Medical Clinics unit owned and managed medical clinic facilities. The clinics included family practice, walk-in services, and other related services such as massage
therapy and chiropractic services. This business unit will not be referred to in the chart below since it is a Discontinued operation (see note 4 for further details).

The
Government Healthcare Services division recruits, schedules and manages physicians, nurses, dentists, physiotherapists and other regulated healthcare professionals at all Canadian
Forces bases.

The
Pharmaceutical Support division provides infusion services to patients suffering from crohn's disease and rheumatoid arthritis.

In
the table below, the Hospital Staffing unit includes the revenue and cost for the Long-term Care business unit.

The
segmented information for the business units are as follows:

|                                 |  | 2003 |           
|-------------------------------- |  | ---- | ----------
|
|Revenue                          |  | $    | 12,716,827
|Gross margin                     |  | $    | 2,180,900 
|Net income (loss)                |  | $    | 436,234   
|Assets employed at end of period |  | $    | 35,121    
|Amortization                     |  | $    | 15,855    

|                                 |  | 2002 |          
|-------------------------------- |  | ---- | ---------
|
|Revenue                          |  | $    | 5,598,171
|Gross margin                     |  | $    | 992,006  
|Net income (loss)                |  | $    | (114,980 
|Assets employed at end of period |  | $    | 37,045   
|Amortization                     |  | $    | 15,727   

---

26.   RELATED PARTY TRANSACTIONS

Consulting fees of approximately $ 43,000 were paid to a director ($65,000 in 2002).

27.   COMPARATIVE FIGURES

Certain figures in the 2002 financial statements have been reclassified to conform with the basis of presentation in 2003.

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