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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                     --------------------------------------
                                    FORM 10-K

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

(MARK ONE)

        [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934
               FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                            OR

        [ ]    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      NASDAQ SmallCap and Boston Stock
                                Exchange
REDEEMABLE COMMON STOCK         NASDAQ SmallCap and Boston Stock
PURCHASE WARRANTS               Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.
COMMON STOCK, NO PAR VALUE      NASDAQ SmallCap and Boston Stock
                                Exchange
REDEEMABLE COMMON STOCK         NASDAQ SmallCap and Boston Stock
PURCHASE WARRANTS               Exchange

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

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

               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. [ ]

               The aggregate market value of the shares of Common Stock (based
upon the closing sales price of these shares as reported on the NASDAQ Stock
Market's SmallCap Market on March 31, 2001) of the registrant held by
non-affiliates on March 31, 2001 was approximately US$ 3,951,131.

               As of March 31, 2001, 7,017,994 shares of the registrant's Common
Stock were outstanding.

               All figures in US dollars unless otherwise noted.


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PART I

ITEM 1:  BUSINESS

BACKGROUND

Med-Emerg International Inc. ("Med-Emerg" or the "Company"), 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 and nurses staffing, physician
management services and an internet-based healthcare network for hospitals and
clinics in Canada.

Med-Emerg has demonstrated industry leadership in Canada by providing integrated
professional management services in the delivery of healthcare to the Canadian
healthcare consumer. The Company's operations were divided into three divisions,
Physician and Nurse Recruitment Services, Physician Management Services and an
internet-based healthcare network called HealthyConnect.com. Med-Emerg's
strategy in 2001 will be to focus on Physician and Nurse Recruitment Services
and Physician Management Services. The Company intends to broaden our recruiting
and management services over a wider geographic base, as well as pursuing
opportunities for our expertise in the pharmaceutical industries and federal
government contracts. Med-Emerg 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 with the healthcare industry. Specifically, the
Company's strategy is to leverage its 17 years of physician recruitment
experience in becoming a dominant player in Physician and Nursing Management
Services.

THE COMPANY

The "Company" refers to: (i) Med-Emerg International Inc.;(ii) its wholly-owned
subsidiaries, Med-Emerg Urgent Care Centres Inc., Med-Emerg Dundas Urgent Care
Centre Inc., JC Medical Management Inc., YFMC Healthcare Inc., 927563 Ontario
Inc. and 927564 Ontario Inc.; (iii) its indirect wholly-owned subsidiaries
Med-Emerg Inc. and Med Plus Health Centres Ltd., which is wholly-owned by 927563
Ontario Inc. and 927564 Ontario Inc., respectively; (iv) its 75% owned
subsidiary, Doctors on Call Ltd.; (v) its 51% owned subsidiary Caremedics
(Elmvale) Inc.; and, (vi) its 51% owned subsidiary York Lanes Health Centres
Inc.

HIGHER REVENUES

Med-Emerg experienced accelerated growth, realizing revenues for the year ended
December 31, 2000 of $15.5 million, compared to $12.6 million for the year ended
December 31, 1999, an increase of approximately 23%. The increase was in large
part due to the Physician Management Services. Contributions to operating income
after physician and other direct costs for the year ended December 31, 2000 were
$5.5 million, compared to $3.8 million for the year ended December 31, 1999.
This represents an increase of $1.7 million or 45%.

Disappointing earnings obscured this exceptional performance. The underlying
causes are addressed subsequently.

During the summer of 2000, Med-Emerg's management team made a conscious decision
to pursue higher margin businesses by leveraging its core competencies. In
August the Company responded to a request for proposal for the provision of
Civilian Health Care Services for In-Garrison Support for the Canadian Armed
Forces. Significant time and effort was expended in fiscal 2000 to better
position the Company's possibilities in winning the contract. On March 8th,
2001, Med-Emerg was awarded a 3-year contract estimated at approximately $92
million Canadian. This management services contract, the largest of its kind in
Canada, will provide up to 400 medical personnel to all Canadian Forces Bases
across Canada. The contract, which is effective immediately, extends through
March 31, 2004. Through this agreement Med-Emerg will recruit, schedule and
manage physicians, nurses, dentists, physiotherapists and other regulated
healthcare professionals to provide services as required by the Canadian Forces
health authority resident on each base.


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The objective of the proposed contract is to place the sourcing, recruitment,
hiring and management of these scarce health professionals in the hands of a
company that understands, and is working in, this sector of healthcare. Each of
these functions brings our dedicated experts who understand the health labour
market and can bring their expertise to bear on placing appropriate individuals
at the medical clinics.

On March 15th, 2001 the Company entered into a contract with Schering Canada, a
leading pharmaceutical company in Canada to coordinate the special access
Remicade(TM) infusion services to patients with Crohn's Disease and Rheumatoid
Arthritis. Under this agreement, MEII medical staff will provide all infusion
services for patients referred to Shering Canada Inc.'s Remicade(TM) program at
clinic locations across Canada. However, our negotiations began during the
summer of 2000, and the first infusions were performed in our clinics in
December 2000. This is consistent with management's commitment to pursue higher
margin businesses.

OPERATING EXPENSES

Operating costs increased by $2.0 million, from $3.7 million for the year ended
December 31, 1999 to $5.7 million for the year ended December 31, 2000. This was
primarily due to the acquisition of YFMC clinics in November 1999, and the
related salary and occupancy costs assumed by Med-Emerg. To address the
operating losses experienced in the first half of fiscal 2000, management
undertook a major restructuring commencing in July of 2000 with a renewed focus
on the core business. Specifically, the Board and management determined that the
internet-business, HealthyConnect.com, would be segregated from the operations
and run under a separate management team. As a cost savings measure, the
administrative offices in Alberta and Ottawa were moved into existing clinics
along with appropriate staff reductions. The full benefit of these cost cutting
measures will only be realized in fiscal 2001.

OTHER EXPENSES (INCOME)

In June 2000, the Company issued shares representing 17% of its subsidiary
HealthyConnect.com to Harmonie Group, Inc. resulting in a dilution gain of
$1.2 million.

As a result of management and the board's decision to focus on the core
business, the Company intends to divest its interest in HealthyConnect.com in
fiscal 2001. This subsidiary continued to experience significant losses in
excess of $1.7 million for the year ended December 31, 2000, an increase of
almost $1 million from the prior year.

Consistent with our commitment to focus on supporting profitable clinics, the
Company sold Spirotec in August 2000 and the following month the Company
divested its 45% interest in Medical Urgent Care Inc. due to continued losses
from operations. At the end of fiscal 2000, the decision was made to forego
ownership in a clinic, JC Medical Management Inc. in lieu of a $405,371
convertible debenture, due December 31, 2000, which was issued as payment when
the clinic was acquired. The total loss from the disposition of these clinics
for the year ended December 31, 2000 represents approximately $0.4 million.

AMORTIZATION AND INTEREST

Amortization of capital and other assets increased by $1.3 million primarily due
to the Company's proportionate share of HealthyConnect.com's software costs,
representing approximately $0.7 million and the remaining amount represents the
write off of goodwill and acquisition costs associated with the purchase of the
YFMC clinics, previously deferred.

Interest and financing costs increased by $0.2 million from the prior year as a
result of extending our banking lines of credit to fund our operating
activities.


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OPERATING LOSS BEFORE INCOME TAXES

Due to these unusual expenses incurred in fiscal 2000, the loss increased
from $1.1 million to $3.1 million, representing an increase of approximately
$1.7 million. However, as described above, the one-time costs related to
HealthyConnect.com, restructuring costs related to the YFMC acquisition, and
the sale of the non-profitable clinics totaled approximately $2.2 million for
the year ended December 31, 2000.

Management believes that all related costs have now been appropriately reflected
on the balance sheet and does not anticipate there will be any further write
down required.

THE PHYSICIAN AND NURSE RECRUITMENT DIVISION

Competitive pressures have focused the attention of many healthcare
administrators, in the public sector, on the need for better staffing of their
medical professionals. Hospitals have increasingly turned to contract staffing
firms with specialized skills to help solve human resource problems.

The Physician and Nurse Recruitment Division was established in 1983 as a
medical staffing and recruitment business. The Company provides physician
staffing, nurse staffing and administrative support to emergency departments and
physician recruitment services to Canadian hospitals and physician groups. The
administrative services include billing, maintenance of records and coordinating
with third party payors. Under its contracts with hospitals, the Company
provides emergency department physician coverage. The Company also coordinates
the scheduling of staff physicians which provides emergency department coverage
and assists the hospital's administrative and medical staff in such areas as
quality assurance, risk management, departmental accreditation and marketing.

The Company's hospital physician staffing services are reimbursed either based
on a monthly fee payable by the hospital or on a per shift basis. As of April
16th, 2001, the Company had 15 hospital physician contracts, of which 9 were
contracted to pay monthly administration fees, 5 were contracted to pay on a
per-shift basis and 1 was contracted to pay based on a percentage of billings
generated by the physicians on each shift.

The Company's nurse staffing services are reimbursed at a fixed rate per hour of
coverage provided. The Company had 8 hospital nursing contracts as at April
16th, 2001, which provided a total of approximately 2000 hours/month. The
company has recently been designated a preferred provider of nursing services to
the Rouge Valley Hospital System in Toronto. This is the first time that the
company has received such designation. Management intends to pursue similar
arrangements with other hospitals as a strategy to grow the nursing division and
minimize fluctuations in demand for its services.

CONTRACTUAL ARRANGEMENTS

MANAGEMENT CONTRACTS WITH PHYSICIANS. The Company identifies, recruits and
screens potential candidates to serve as emergency room physicians in hospitals
that have contracted for the Company's contract staffing services. The Company
then enters into contracts with physicians who meet its qualifications and
provides those physicians as candidates for admission to the hospital's medical
staff. The Company requires all physicians to be currently licensed to practice
medicine in the Province of Ontario and to be Advanced Cardiac Life Support
("ACLS") or Advanced Trauma Life Support ("ATLS") certified before entering into
a contract for the physician's services.

The terms and conditions of the Company's contracts with physicians generally
provide that the Company, on a best efforts basis, will place the physician in a
functioning facility and the Company will collect all fees due to the physician
for rendering services. The Company then pays the physician for the medical
services provided based on the terms of the contract between the Company and the
physician. These contracts contain the following provisions: Each physician is
not an employee of the Company but is instead an independent contractor of
services to various medical facilities under contract with the Company; Each
physician must remain in good standing with the College of Physicians & Surgeons
of the Province of Ontario and be licensed to practice medicine in the Province
of Ontario; Each physician must remain in good standing with the Canadian
Medical Protective Association ("CMPA") and have appropriate CMPA coverage to
provide physician services to patients while working with the Company.
Physicians are bound by a non-competition restriction not to provide services at
any hospital where the



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Company has a contract for one year following the contract term. Each physician
full-time contract has a term of twelve months and renews automatically for an
additional twelve months.

CONTRACTS WITH HOSPITALS FOR PHYSICIAN STAFFING. The Company coordinates the
scheduling of staff physicians to provide coverage on a negotiated basis to a
hospital's emergency department.

The Company generally provides contract physician staffing services to hospitals
on the following arrangements: fee-for-service contracts and physicians per
shift that the Company provides to the hospital. In addition, physicians under
contract to the Company authorize the Company to bill and collect fees.
Depending upon the hospital patient volume, the Company may receive a subsidy
from the hospital. Pursuant to such contracts, the Company 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, are generally terminable by either party upon two months
written notice, and automatically renew if not terminated.

When determining the split arrangement to be used in the physician compensation
model for the Company's fee-for-service contracts, the Company considers a
hospital's emergency room patient volume, the monthly gross margin targets set
by the Company, the location of the hospital in relation to the supply of
physicians, and shift coverage offered or required by the hospital.

When determining the fixed administrative fee to be charged to the hospital, the
Company considers several factors including location of the hospital in relation
to the availability of physicians, number of physicians from which to draw, the
number of physician shifts required, and patient volumes.

For all but one of the hospital staffing contracts, the Company's monthly fee is
due on the 1st of the month for which shift coverage is being provided. For all
of the Company's hospital staffing contracts (fee-for-service and fixed fee) the
physicians are paid on the 15th of each month for services rendered up to the
15th of the prior month.

CONTRACTS WITH NURSES. The Company identifies, recruits and screens potential
candidates to serve as emergency room nurses in hospitals that have contracted
for the Company's staffing services. The Company then enters into contracts with
nurses who meet its qualifications. The Company requires all nurses to be Basic
Life Support ("BLS") certified and prefers Advanced Cardiac Life Support
("ACLS") certification. Nurses must have a minimum of two years' experience in
emergency departments and pass a written examination that tests their skills as
a critical care nurse.

The Company bills a fixed hourly rate to the hospital for each hour of service
provided by a nurse under contract with the Company. The nurses are paid a lower
fixed hourly rate on the 15th and 30th of each month.

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, are terminable by either
party upon three months written notice, and automatically renew if not
terminated.

THE PHYSICIAN AND NURSE RECRUITMENT DIVISION'S OPERATIONS

The principal operating activities of the Physician and Nurse Recruitment
Division include the following:

RECRUITMENT AND CREDENTIALS. Med-Emerg has developed into one of the larger
providers of physician 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 is a central aspect of the Company's operations. Full-time employees
of the Company are dedicated to recruiting and certifying 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 currently held in most of the teaching hospitals
in Ontario, with plans to provide seminars


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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. The Company has developed a database
that tracks the physicians during their medical career. This database enhances
the Company's ability to maximize the medical service contribution of each
physician. In the Canadian healthcare environment where there exists a
significant shortage of qualified physicians, one measure of value of a
Physician Management Organization is its ability to access in a timely manner
the quantity of physicians in an organization's database. As part of its
recruiting strategy, the Company has established a stock option plan and group
benefits plan in which its contracted physicians can participate. The Company
believes that this will encourage physicians to make long-term commitments.

Qualified independent contract 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. As part of the Company's quality assurance program, all physicians are
required to have ACLS and ATLS certification, provide a Certificate of
Professional Conduct from the College of Physicians and Surgeons of Ontario, be
approved by the credentialing committee in their respective hospitals that are
governed by the Public Hospital Act, maintain adequate malpractice coverage, and
maintain continuing medical education credits. Principally, quality assurance is
the responsibility of Dr. Stephen Fowler, the Company's Executive Medical
Director. 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 hours and nurse hours is performed
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.

BILLING AND COLLECTION OF SERVICES. Fees generated by emergency department
coverage of physicians are comprised of two elements: (i) hospital
administrative fees; 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. In addition, the Company
charges each hospital a fee for its recruiting and staffing services either on a
fixed fee or fee-for-service basis.

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.

CONSULTING AND HEALTHCARE MANAGEMENT SERVICES. Hospitals have increasingly
turned to consulting specialists with specialized skills to strengthen the
management of their professional medical staff and specific clinical
departments, to better control costs, and to assist hospitals in meeting their
healthcare coverage needs and obligations to patients who are indigent,
uninsured or unassigned to a referring physician..

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 Provincial
government.


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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.

In addition, the Company intends to take advantage of the government's plans to
restructure the delivery of Canadian medical care through fewer but more
efficient hospitals and hospital groups. Management expects that hospitals will
increasingly look to outsourcing from third party providers. Specifically, the
Company expects that hospitals will seek opportunities for emergency care
specialists not only to staff the emergency departments but also to administer
and operate all aspects of those departments.

THE PHYSICIAN MANAGEMENT SERVICES DIVISION

As of April 16th, 2001 the Company has an ownership interest in and manages 23
clinics in Canada. The locations of and services provided at the Company's
clinics are as follows:

The Company operates 23 clinics that offer both family practice and walk-in
services for patients. Other services that may be provided at the clinics are
travel medicine, chiropractic, massage therapy, weight loss program, internal
medicine, paediatrics, haemotology and professional family counseling. The
Company manages the clinics by providing scheduling, staffing, recruiting,
billing, collections and accounting services to the clinic.

In addition to family practice and walk-in clinics, the Company owns an Urgent
Care Centre through which it offers on-site, one-stop medical care comparable to
the services provided in a traditional emergency department. The Urgent Care
Centre concept consists of a group of emergency trained physicians, a medical
laboratory, a diagnostic radiology service, and a pharmacy, each of which must
be present for the others to co-exist, and each of which is provided by a
separately owned company. The Company operates the clinic component of the
Urgent Care Centre. The Company provides emergency medical services, including
emergency physician staffing, emergency nurse staffing, receptionist staffing,
physician billing services, all financial services, inventory control, Medical
Directorship and other operational components such as quality improvement and
risk management initiatives.

HEALTHYCONNECT.COM DIVISION

HealthyConnect.com, an internet-based e-commerce health portal, was launched on
March 22, 2000. HealthyConnect.com has been strategically designed to provide an
end to end solution for the information needs of the healthcare sector. We will
pursue both a business to business and business to consumer e-commerce strategy
connecting physicians, hospitals, third-party payors and consumers and will
allow all participants to access and exchange healthcare related information,
purchase healthcare products and services, and communicate more cost-effectively
with one another. HealthyConnect.com will deliver healthcare services and
products and provide timely access to reliable healthcare information through
the utilization of advanced telecommunication technology.

Targeted purchasers of HealthyConnect.com on line applications, are consumers,
healthcare institutions, physicians and other healthcare providers and
healthcare product suppliers. Consumers will benefit from 24-hour, 7-day a week
access, via the internet and telephone, to Med-Emerg's healthcare service
provider network. In addition, consumers will have multiple site secure access
to their own and their family members' electronic medical records, access to a
physician management health and wellness centre and convenient at-home shopping
for healthcare products and services.

HealthyConnect.com's secure, 128-bit encrypted web browser system incorporates
state-of-the-art security and privacy, and is fully compliant with healthcare
industry guidelines. The web-based products have been field-tested over the past
3 months. HealthyConnect.com will enable physicians and other healthcare
providers to access reliable information and provide them with additional
support in delivering cost effective, high quality healthcare services. Benefits
include 24-hour coverage for patients, access to a comprehensive physician
medical reference database, online continuing medical education courses, tools
for chronic disease management, and participation in clinical trials and web
casting. HealthyConnect.com will link healthcare product and service suppliers
with our clinical network family. Convenient and secure access and at
home/office browsing and purchasing capabilities will facilitate direct sales
opportunities for member suppliers. Healthcare product and service suppliers
that may


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benefit from using HealthyConnect.com include pharmaceutical companies,
insurance companies, employers, government, managed care organizations,
physicians and hospitals.

HealthyConnect.com has assembled several key strategic partners that will
provide health information content, end to end transaction processing capability
and e-commerce goods and services to its customers. HealthyConnect.com has
negotiated a relationship with AstraTek, headquartered in New York, N.Y.
AstraTek is a software product development firm, delivering advanced
technologies to Fortune 1000 companies and financial institutions. AstraTek
provides mission critical computing such as distributed computing, multi-tier
client-server systems, and object-oriented technology. The core proficiencies at
AstraTek include Windows NT development from driver level to application level,
using Visual C++, Visual Basic, MFC, ATL and OLE automation. AstraTek assisted
in the development and launch of the HealthyConnect.com portal.
HealthyConnect.com has also negotiated a relationship with Data General,
headquartered in Westborough, Massachusetts. Data General is a leading supplier
of servers and storage systems, and services for information systems users
worldwide. Data General designs, manufactures, markets, and supports two major
families of open systems, AViion(R) servers and CLARiion(R) mass storage
products, which represent over 90 percent of current product revenues. Data
General and its subsidiaries, distributors and representatives serve customers
in more than 70 countries. Data General works closely with leading software and
services suppliers who understand specific customer problems and provide
effective and affordable business solutions. Data General will provide a
consolidated computing infrastructure to support HealthyConnect.com including
hardware, software and network support.

GOVERNMENT REGULATION

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 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.

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 OHIP 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 corporate
practice of medicine laws of each province in which it operates, there can be no
assurance that, given varying and uncertain interpretations of such laws, the
Company would be found in 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.


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COMPETITION

Competition in the industry is based on the scope, quality and cost of services
provided. Certain of the Company's current and potential competitors have
substantially greater financial resources than the Company. While management
believes that it competes on the basis of the quality of its services, the
larger resources of its competitors may give them certain cost advantages over
the Company (e.g., in the areas of malpractice insurance, cost savings from
internal billing and collection and a broader scope of services). The clinics
operated by the Physician Management Services Division compete with hospitals
and other private physicians. The Urgent Care Centre competes with hospital
emergency rooms. The Company believes that the varied physician practice
alternatives coupled with competitive remuneration plans create a significant
incentive for physicians to provide patient services through the Company.

EMPLOYEES

As of March 31, 2001, the Company had 89 full-time employees, of whom 3 were
employed in general executive positions, 29 were employed in administration and
57 were employed in the Company's clinics. In addition, as of such date,
approximately 200 physicians and 45 nurses were actively working as independent
contractors of the Company. These physicians and nurses are not employees of the
Company.

ITEM 2:  PROPERTIES

The Company's principal executive office is located at 2550 Argentia Road, Suite
205, Mississauga, Ontario. The principal office occupies approximately 7,500
square feet of space under a lease that expires in April, 2001 at an average
annual rental rate of approximately $104,000.

ITEM 3:  LEGAL PROCEEDINGS

The Company is presently party to one legal proceeding that was commenced on
July 4, 1997 in the General Division of the Ontario Court. This proceeding
relates to the recapitalization of the Company, which occurred in November,
1996, in which the Estate of Dr. Donald Munro ("Estate") contributed 75,000 of
its 150,000 Med-Emerg Common Shares to the capital of the Company. The Estate,
the applicant in the proceeding, has taken the position that it continues to be
the beneficial owner of 150,000 shares of Med-Emerg Common Shares. The Company
disagrees with the Estate's position and intends to defend this action
vigorously. However, in the event that the Company is unsuccessful in its
action, the Company may be required to return to the Estate the 75,000 Med-Emerg
Common Shares which were previously surrendered. There has been no further
correspondence or action with respect to this claim since 1997.

In addition, in the future, the Company could be subject to claims arising from
its contracts with hospitals or other institutions or professional associations
to which it provides services.


<PAGE>


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

The Company is planning to have a shareholders meeting on June 1st, 2001
where it intends to present the audited 1999 and 2000 financial statements
for approval and conduct other matters of business.


<PAGE>

PART II

ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY & 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 NASDAQ
SmallCap Market and under the symbols "MEI" and MEIW", respectively, on the
Boston Stock Exchange. The Common Shares and Redeemable Common Stock Purchase
Warrants have been listed on both Exchanges since February 12, 1998. Prior to
that date the Common Shares and Redeemable Common Stock Purchase Warrants were
privately held.

The following table sets forth the range of high and low sales prices from First
Quarter of 1999:

<TABLE>
<CAPTION>
                                                        COMMON SHARES
                                                        -------------
                                                   HIGH               LOW
<S>                                              <C>              <C>
First Quarter, 1999                              US$  2-1/4       US$  1-1/32
Second Quarter, 1999                                  2-1/2            1-1/16
Third Quarter, 1999                                   2-1/16           1-1/2
Fourth Quarter, 1999                                  2-11/16          1
First Quarter, 2000                                   3-11/16          1-9/16
Second Quarter, 2000                                  3-1/16           1-5/8
Third Quarter, 2000                                   2-1/8            7/8
Fourth Quarter, 2000                                  1-3/4            3/8
</TABLE>

There were 49 holders of record of the Company's Common Stock and 2 holders of
record of the Company's Redeemable Common Stocks Purchase Warrants as of March
20, 2000.

The Company has not declared cash dividends on its Common Stock in the last two
fiscal years.

There were no unregistered sales of securities during the last fiscal year.

The net proceeds to the Company from its Initial Public Offering after deducting
underwriting discounts and commissions and other expenses of the Offering, were
US $3,737,158. The Company used the net proceeds of the Offering as follows:

<TABLE>
<CAPTION>
                                                                     Amount
                                                                 (U.S. DOLLARS)
                                                                 --------------

              <S>                                                   <C>
               Repayment of Lines of Credit (1)                    $  862,108
               Repayment of Bridge Notes (2)                          546,589
               Working Capital Requirements                           869,023
               Acquisitions (3)                                       735,442
               Urgent Care Centre                                     147,147
               Dividends on Preferred Shares                          221,247
               Capital Assets                                         226,949
               Share Repurchase Plan (4)                               77,965
               Purchase of Note Receivable                             50,688
                                                                 -------------
               Proceeds used to date                                3,737,158
               General Corporate Purposes and
                    Potential Acquisitions                                  -
                                                                 -------------
                                                                   $3,737,158
</TABLE>

(1)     Represents repayment of an aggregate of US $250,000 of loans against
        line of credit provided to the Company by Robert Rubin, a director of
        the Company. The loan bore interest at 2% over the prime rate in effect
        from time to time as reported in The Wall Street Journal. The Company
        used these loans for working capital and certain costs associated with
        the opening of the first urgent care centre. Also represents repayment
        of approximately $890,000 (US $600,200) against the Company's
        outstanding balance on its bank credit facility, such balance bearing
        interest on an annual basis at the facility's announced prime rate plus
        1.5%. The proceeds borrowed from the bank credit facility were used by
        the Company as working capital.

(2)     Represents repayment of the principal and accrued interest on the 8%
        promissory notes sold in the January 1997 private placement ("Bridge
        Financing"). The proceeds from the Bridge Financing were applied to
        reduce the Company's bank borrowings.

(3)     The Company completed six acquisitions since the completion of the
        Initial Public Offering. All of the shares of J.C. Medical Management
        Inc. were purchased in June, 1998. 75% of the shares of Doctors on Call
        Ltd. were purchased in September, 1998. 45% of the shares of Mississauga
        Urgent Care Inc. were purchased in January, 1999. 51% of the shares in
        York Lanes Health Centres were purchased in February, 1999. 51% of the
        shares of Caremedics (Elmvale) Inc. were purchase in March, 1999. All of
        the shares of YFMC Heathcare Inc. were purchased in November, 1999.

(4)     The Company repurchased 44,500 shares of its Common Stock between
        October, 1998 and January, 1999.


<PAGE>

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.

STATEMENT OF OPERATIONS DATA:                                 US $

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31, 2000
                                     ------------------------------------------------------------------
                                        2000         1999        1998          1997           1996

                                     ------------ ----------- ------------  -----------    ------------
STATEMENT OF OPERATIONS DATA:

<S>                                   <C>         <C>          <C>          <C>            <C>
     Revenue                          15,532,767  $12,648,428  $10,308,103  $ 8,358,937    $ 7,953,775
     Physician Fees and Other
     Direct Costs                     10,011,764    8,877,139    7,984,116    6,319,934      6,290,047
     Gross Profit                      5,521,004    3,771,289    2,323,987    2,039,004      1,663,728

     Operating Expenses before
     Depreciation and Amortization
     (1) and HealthyConnect.com
         -- Canadian GAAP              5,734,359    3,707,128    2,246,225    1,995,439      4,315,983
         -- U.S. GAAP                               3,680,333    2,422,974    2,101,456      4,359,053

     Depreciation and Amortization     1,629,437      361,333      124,239       92,548         57,632
     HealthyConnect.com                1,730,691      798,943       84,530            -              -
     Operating Income (Loss)
         -- Canadian GAAP                          (1,096,115)    (131,007)     (48,983)    (2,709,887)
         -- U.S. GAAP                              (1,069,320)    (307,756)    (155,001)    (2,752,957)

     Other Income (Expense)             (266,641)     (44,495)     (12,584)    (321,335)       (40,780)
     Provision for Income Taxes         (826,572)    (262,140)     (37,333)     (29,332)      (107,761)
     (Recovery)
     Net Income (Loss)
         -- Canadian GAAP             (2,258,087)    (878,470)    (106,258)    (340,987)    (2,642,906)
         -- U.S. GAAP                                (851,675)    (283,007)    (447,004)    (2,685,976)
     Net Income per Common Share (2)
         -- Canadian GAAP                         $     (0.26) $     (0.04) $     (0.18)   $     (0.87)
     Basic and Fully Diluted Income
     (Loss) per Common Share (2)
         -- Canadian GAAP                         $     (0.30) $     (0.08) $     (0.18)   $     (0.87)
     Primary and Fully Diluted
     Income (Loss) per Common Share
         -- U.S. GAAP                             $     (0.25) $     (0.10) $     (0.23)   $     (0.88)
BALANCE SHEET DATA:
    Working Capital                  $(2,218,224) $  (882,234) $ 1,499,329  $(1,349,530)   $  (870,509)
    Total Assets                       9,262,327   10,066,935    5,455,832    3,636,418      2,583,717
    Long-term Debt                       184,379      518,339       66,837       55,475              -
    Shareholders' Equity               4,091,458    5,230,930    3,703,504        9,760        196,335
OTHER DATA:
    EBITDA (3)
        -- Canadian GAAP                          $  (734,782) $    (6,768) $    43,565     (2,652,255)
        -- U.S. GAAP                                 (707,988)    (183,517)     (62,452)    (2,695,325)
</TABLE>

(1) At December 31, 1997, operating expenses included stock compensation expense
    of $100,400 for shares issued to a director. At December 31, 1996, operating
    expenses included stock compensation expenses of $1,271,214 for shares
    issued to a shareholder and $934,033 for the issuance of stock options to a
    director.

(2) Net income (loss) per common share reflects net income (loss) before
    preferred share dividends divided by the weighted average number of common
    shares outstanding. Basic and fully diluted income (loss) per common share
    reflects net income (loss) available to common shareholders divided by the
    weighted average number of common shares outstanding.

(3) EBITDA is the sum of income before interest, taxes, depreciation and
    amortization expense. EBITDA should not be considered as an alternative to
    net income (loss) or to cash flows from operating activities (all as
    determined in accordance with generally accepted accounting principles).


<PAGE>

    EBITDA is presented because it is a widely used financial indicator of a
    company's ability to service indebtedness and other factors.



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

OVERVIEW

Med-Emerg International Inc. ("Med-Emerg" or the "Company"), 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 for hospitals and clinics in Canada.
Though emergency-related services are still an important component of the
Company's business, Med-Emerg has expanded to offer a wide variety of medical
services including recruitment, nurse staffing, physician management services
and an internet-based healthcare network.

Med-Emerg is positioned to establish industry leadership by providing integrated
professional management services in the delivery of healthcare to the healthcare
consumer. The Company's operations are divided into three divisions: Physician
and Nurse Recruitment Services, Physician Management Services and an internet
based healthcare network called HealthyConnect.com. Med-Emerg's strategy is to
remain focussed on these three divisions while continuing to broaden its
consolidation of physicians over a wider geographic base. Med-Emerg 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 to integrate opportunities available through internet
technology. Specifically, the Company's strategy is to leverage its 17 years of
physician recruitment experience in becoming a dominant player in Physician
Management Services and to develop an internet-based healthcare network that
connects physicians, patients, third party payors and consumers to a "virtual
world" of healthcare products, services and health information.

The Company continues to promote its medical manpower staffing services
throughout Canada. Demand for emergency care has grown significantly over the
past ten years, notwithstanding the small proportion of physicians focusing on
emergency medicine. Moreover, recruitment of experienced emergency medicine
practitioners by hospitals in other countries is intense and such demand is
expected to continue for some time. Given the uncertainties associated with
patient volumes in several Ontario hospital emergency departments, the pool of
available physicians willing to practice emergency medicine has been declining.

The Company's ability to provide solutions and source physicians and highly
skilled nurses will be enhanced by its success in developing its dominant status
in the Physician Management Services Organization (PMSO) sector. The Company's
business strategy is to integrate and through its physicians program offer the
family physician a comprehensive practice opportunity. Management believes that
the creation of a dominant PMSO status will significantly contribute to the
Company's efforts in growing its emergency services recruitment division.

On March 22, 2000, the Company launched HealthyConnect.com, an internet-based
e-commerce health portal. HealthyConnect.com has been strategically designed to
provide an end to end solution for the information needs of the healthcare
sector. The Company will pursue both a business to business and business to
consumer e-commerce strategy connecting physicians, hospitals, third-party
payors and consumers and will allow all participants to access and exchange
healthcare related information, purchase healthcare products and services, and
communicate more cost-effectively with one another. HealthyConnect.com will
deliver healthcare services and products and provide timely access to reliable
healthcare information through the utilization of advanced telecommunication
technology.

Targeted purchasers of HealthyConnect.com on line applications are consumers,
healthcare institutions, physicians and other healthcare providers and
healthcare product suppliers. Consumers will benefit from 24-hour, 7-day a week
access, via the internet and telephone, to Med-Emerg's healthcare service
provider network. In addition, consumers will have multiple site secure access
to their own and their family members' electronic medical records, access to a
physician management health and wellness centre and convenient at-home shopping
for healthcare products and services.


<PAGE>

HealthyConnect.com will enable physicians and other healthcare providers to
access reliable information and provide them with additional support in
delivering cost effective, high quality healthcare services. Benefits include
24-hour coverage for patients, access to a comprehensive physician medical
reference database, online continuing medical education courses, tools for
chronic disease management, and participation in clinical trials and web
casting. HealthyConnect.com will link healthcare product and service suppliers
with our clinical network family. Convenient and secure access and at
home/office browsing and purchasing capabilities will facilitate direct sales
opportunities for member suppliers. Healthcare product and service suppliers
that may benefit from using HealthyConnect.com include pharmaceutical companies,
insurance companies, employers, government, managed care organizations,
physicians and hospitals.

HealthyConnect.com has assembled several key strategic partners that will
provide health information content, end to end transaction processing capability
and e-commerce goods and services to its customers. HealthyConnect.com has
negotiated, amongst others, a relationship with AstraTek, a software product
development firm, delivering advanced technologies to Fortune 1000 companies and
financial institutions and Data General, a leading supplier of servers and
storage systems, and services for information systems users worldwide. AstraTek
assisted in the development and launch of the HealthyConnect.com portal. Data
General will provide a consolidated computing infrastructure to support
HealthyConnect.com including hardware, software and network support.

Management of Med-Emerg sees HealthyConnect.com as a significant opportunity to
create a profitable business line while providing healthcare organizations with
new web-based technologies to increase practice efficiency, achieve measurable
cost savings and improve the quality of care.

The Company has not pursued a Business Combination Agreement to purchase all of
the issued and outstanding shares of Laser Rejuvenation Clinics Ltd. ("LRC"). At
present, the Company continues to work with LRC and are evaluating which clinics
could participate in offering cosmetic treatment with LRC equipment and
expertise.

On November 5, 1999, the shareholders of the Company approved the issuance of up
to 1,799,502 additional common shares in connection with the take over bid by
the Company for all the issued and outstanding securities of YFMC Healthcare
Inc. ("YFMC"), a Canadian physician management services organization that owns
and manages 22 medical clinics. Pursuant to the business combination agreement,
dated August 10, 1999, the Company mailed a take-over bid circular on November
5, 1999 to all YFMC shareholders making an offer to purchase all the issued and
outstanding securities of YFMC on the following basis:

a.  In the case of holders of YFMC Common Shares, one Med-Emerg Common Share for
    every 6 7/8 shares of YFMC

b.  In the case of holders of YFMC Series A Warrants, one Med-Emerg Series A
    Warrant for every 8 warrants of YFMC

c.  In the case of holders of YFMC Series B Warrants, one Med-Emerg Series B
    Warrant for every 8 warrants of YFMC

d.  In the case of holders of YFMC Preferred Shares, one Med-Emerg Common Share,
    subject to certain conditions, one Med-Emerg Common Shares for every 10 YFMC
    First Preferred Shares.

The Company issued 1,758,556 Common Shares to complete the transaction. In
addition, Med-Emerg substituted for every eight options to acquire YFMC Common
Shares under the YFMC Stock Option Plan, the right to acquire one Med-Emerg
Common Share at an exercise price of US$1.75.


<PAGE>

RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO DECEMBER 31, 1999

REVENUES. Revenues increased by $2,884,339 or 22.8% from $12,648,428 in 1999 to
$15,532,767 in 2000. The revenue growth is attributable to the acquisition of
YFMC, the acquisitions of MUCI, York Lanes and Elmvale and growth in existing
clinic business.

Revenues generated by Physician Management Services increased by $3,474,863 or
72.1% from $7,156,682 in 1999 to $12,623,105 during 2000. The acquisition of
YFMC Healthcare Inc. added total revenue of $4,625,000 for operations included
in the consolidated results of the Company.

Revenues from Physician and Nurse Recruiting decreased by $590,524 to
$7,241,184 during 2000 from $7,831,708 in 1999.

PHYSICIAN FEES AND OTHER DIRECT COSTS. Physician fees and direct costs, which
primarily represents fees to contract physicians, increased $1,134,624 or 11.3%
from $8,877,139 in 1999 to $10,011,763 in 2000. Physician fees and other
direct costs decreased as a percent of revenue, representing 64.5% of revenues
for 2000, and 70.2% of revenues for 1999.

OPERATING EXPENSES. Operating expenses in 2000 include $1,730,691 of expenses
relating to the development of HealthyConnect.com, an internet based e-commerce
health portal. Operating expenses before HealthyConnect.com have increased by
$2,027,230 or 35.4% from $3,707,128 in 1999 to $5,734,359 in 2000.
Incorporating a full year of operating expenses for YFMC's (or $2,536,233 for
2000) was the lead factor contributing to the increase in operating expenses
before HealthyConnect.com. development expenses.

NET LOSS. As a result of the above items, the Company reported a net loss of
$1,939,864 for 2000 as compared to a net loss of $878,470 for 1999. Med-Emerg's
tax rate being a publicly traded company, is approximately 44%.

Under U.S GAAP, the Company reported a net loss of $3,129,096 for the year
ended December 31, 2000 as compared to a net loss of $851,675 for the year
ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2000, the company's working capital deficit totaled
$2,218,224. The company has available credit facilities for up to approximately
$3,117,855. During the year, the Company was in violation of its loan covenants
and its bankers have requested repayment of advances. At year-end, the company
was in negotiation with its bankers to secure extensions of existing
arrangements and final settlement. The Company established credit facilities
that provide operating lines of credit amounting to $1,600,534, bearing
interest at the bank's prime lending rate plus 0.5% to 1.0% per annum with
interest payable monthly, and capital lines of credit amounting to
1,567,676. The capital lines of credit bear varying interest rates from the
bank's prime lending rate plus 0.75% to 9.65% per annum. As at December 31,
2000, the Company has drawn approximately $666,900 against the operating
facility and $121,154 against the capital facility.

On March 1, 2000, the Company issued a Private Placement Memorandum for
equity financing. The Company raised gross proceeds of US$1,040,000 for the
issuance of 1,040,000 common shares.

In order to provide the financing necessary for the further development of
HealthyConnect.com and the continued pursuit of the company's long-term
acquisition strategy, the company expects to issue equity and debt securities,
the availability and terms of which will depend upon market and other
conditions. There can be no assurance that such additional financing will be
available on terms acceptable to the company.


<PAGE>

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

ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements and the related notes, together with the
report of Schwartz Levitsky Feldman LLP thereon, are set forth in Item 14.

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.


<PAGE>

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.

<TABLE>
<CAPTION>
NAME                                               AGE    POSITION
----                                               ---    --------
<S>                                                <C>    <C>
William Thomson, CA.                               59     Chairman of the Board

Ramesh Zacharias, M.D., FRCSC                      49     Chief Executive Officer,
                                                          Director

Donald Ross                                        49     V.P. Operations

John Jarman                                        48     V.P. Finance

Robert M. Rubin                                    59     Director

Patrick Michaud                                    48     Director
</TABLE>

     WILLIAM E. THOMSON, C.A. Mr. William Thomson has been a Director of the
Company since January 1996 and is currently the non-executive Chairman. Mr.
Thomson is President of William E. Thomson Associates Inc., one of Canada's best
known crisis management firms. Mr. Thomson has been a director since 1996. Mr.
Thomson has been President and Chief Executive Officer of Speedware Corporation,
a TSE listed information technology company, since June 1998. Mr. Thomson is
Chairman of Asia Media Group Corp. in Singapore, and Esna Technologies Ltd. In
addition, Mr. Thomson acts as a director of the following companies: TPI
Plastics Ltd., Elegant Communications Ltd., Imperial Plastech Corp., Electrical
Contacts Ltd., The Aurora Fund and Media Groupings Far East Ptc Ltd.

     RAMESH ZACHARIAS, M.D., FRCSC., CHIEF EXECUTIVE OFFICER. Dr. Ramesh
Zacharias is the founder of Med-Emerg Inc. He is a surgeon and leading expert in
the design and delivery of emergency care. He has provided consulting services
regarding the delivery of emergency care in the Caribbean, Saipan and Malaysia
and provided management consulting services regarding the operation of medical
clinics in Canada, the United States and Russia. Dr. Zacharias provides medical
leadership to both Med-Emerg Inc. and its on-line subsidiary,
HealthyConnect.com.

     DR. DONALD ROSS, D.M.D., M.SC., VICE-PRESIDENT, OPERATIONS. Dr. Ross is an
experienced, results-oriented health care executive specializing in regulatory,
scientific and operational issues in not-for-profit public and private health
care. In addition to his professional experience, Don holds a Masters degree in
Clinical Epidemiology, is a Doctor of Dental Medicine, and has an honors
Bachelors degree in neurophysiology from the University of British Columbia.

     MR. JOHN JARMAN, B.COM, C.A., VICE-PRESIDENT, FINANCE. Mr. Jarman is a
chartered accountant having articled at PriceWaterhouseCoopers after obtaining
his Bachelor of Commerce degree from the University of Toronto. He has consulted
to the healthcare industry and brings more than eighteen years experience in
senior management positions prior to working with Med-Emerg Inc.

     ROBERT M. RUBIN Mr. Rubin has served as a director of the Company since
October 1996. Since June 1992, Mr. Rubin has served as a director of Diplomat
Corporation, a publicly traded company involved in the sale of infant wear and
babycare products through direct mail order catalogues. Since November 20, 1992,
Mr. Rubin has served as the Chairman of the Board of Directors of Western Power
& Equipment Corp. ("WPEC"), a construction equipment distributor. Between
October, 1990 and January 1, 1994, Mr. Rubin served as the Chairman of the Board
and Chief Executive Officer of American United Global Inc., a technology and
communication company and majority owner of WPEC ("AUGI") and since January 1,
1994, solely as Chairman of the Board of AUGI. Mr. Rubin was the founder,
President, Chief Executive Officer and a Director of Superior Care, Inc. ("SCI")
from its inception in 1976 until May 1986 and continued as a Director of SCI
(now known as Olsten Corporation until the latter part of 1987. Olsten, a


<PAGE>

New York Stock Exchange listed company, is engaged in providing home care and
institutional staffing services and health care management services. Mr. Rubin
is also a Director and minority stockholder of Response USA, Inc., a public
company engaged in the sale and distribution of personal emergency response
systems.

     MR. PATRICK MICHAUD. Mr. Michaud was previously a director and has since
rejoined the board. Since September 1993, Mr. Michaud has been self-employed as
an independent financial consultant. From April 1992 to September 1993, Mr.
Michaud was Senior Vice-President and Chief Financial Officer of Majestic
Electronic Stores, Inc., a publicly traded specialty electronics retailer. From
1990 to 1993, Mr. Michaud was a director of Continental Pharma Cryosan, a
company which at the time was a publicly traded healthcare company. Mr. Michaud
received his BA in Engineering Civil in 1974 from the Royal Military College of
Canada, his MBA in 1980 from the University of Western Ontario, and a certified
general accounting degree in 1985 from the Certified General Accountants
Association of Ontario.

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 Chairman, Chief Executive
Officer and Chief Operating Officer for the fiscal year ended December 31, 2000.
No other executive officer has a total annual salary and bonus of more than
U.S.$100,000 during the reporting periods.

<TABLE>
<CAPTION>
                                                   ANNUAL COMPENSATION (US$)
                                                   -------------------------
                                                                                   OTHER
NAME AND PRINCIPAL POSITION                    SALARY            BONUS          COMPENSATION
---------------------------                    ------            -----          ------------

<S>                                 <C>      <C>                <C>             <C>
Ramesh Zacharias                    2000     $227,000           $     0          $9,713 (1)
Chief Executive Officer             1999     $179,048           $67,300          $4,938 (1)
                                    1998     $151,088           $     0          $5,186 (1)
</TABLE>

(1)     In addition to being the Chief Executive Officer of the Company, Dr.
        Zacharias on occasion covers physician assignments that the Company is
        otherwise unable to fill. For each assignment that Dr. Zacharias covers,
        he is paid as an independent contracting physician. This amount
        represents fees paid to Dr. Zacharias for services rendered as a
        physician.

Employment Agreements

All of the Company's executive officers intend to offer their full business time
to the affairs of the Company. The Company entered into employment agreements
with both Dr. Zacharias and Mr. Pahapill. Dr. Zacharias' agreement provides that
he will devote all of his business time to the Company in consideration of an
annual salary of US$225,000 effective August 1, 1999 and a bonus of US$67,300
based on performance. The annual salary increases to US$250,000 per year during
the final year. The agreement is for a term of three years, but may be
terminated by the Company for cause, or without cause with penalty.

Mr. Pahapill, the previous President, has resigned from Med-Emerg International
Inc. having moved over to work at the HealthyConnect.com subsidiary.

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 is to be administered by
the Board of Directors or a committee appointed by the Board. Pursuant to the
Plan, options to acquire an aggregate of 1,000,000 shares of Common Stock may be
granted, 710,900 of which have been granted as of March 20, 2000. The Plan is to
provide for grants to employees and directors of the Company. During the fiscal
2000, Med-Emerg cancelled or let expire 645,000 options, including 400,000
options to the Named Executive Officers as the original objective in granting
the options criteria was not achieved. No options were granted to eligible
physicians during the fiscal year ended December 31, 2000.

<PAGE>

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 20, 2001, certain information with
respect to stock ownership of (i) all persons known by the Company to be
beneficial owners of 5% or more of its outstanding shares of Common Stock; (ii)
all directors and officers as a group.

<TABLE>
<CAPTION>

                                            SHARES OF            PERCENTAGE
NAME OF BENEFICIAL OWNER(2)                 COMMON STOCK         OWNERSHIP
---------------------------                 ------------         ---------
<S>                                         <C>                     <C>
1245841 Ontario Inc (3)                     1,042,544               17.4%
Ramesh Zacharias (4)                        1,607,544               26.1%
  M.D., FRCSC

Robert Rubin (5)                              750,000               12.8%
Hampton House
  International (9)                           274,375                5.2%
Ambrose Group                                 170,000                5.5%
All Officers and Directors as
  a group (9 persons)
  (4)(5)(6)(7)(8)(10)                       4,467,888               55.1%
</TABLE>


(1) Pursuant to the rules and regulations of the Securities and Exchange
    Commission, shares of Common Stock that an individual or group has a right
    to acquire within 60 days pursuant to the exercise of options or warrants
    are deemed to be outstanding for the purposes of computing the percentage
    ownership of such individual or group, but are not deemed to be outstanding
    for the purposes of computing the percentage ownership of any other person
    shown in the table.

(2) Unless otherwise indicated, the address is c/o Med-Emerg International,
    Inc., 2550 Argentia Road, Suite 205, Mississauga, Ontario L5N 5R1, Canada.

(3) 1245841 Ontario Inc. is a Canadian company which is owned by Ramesh and
    Victoria Zacharias.

(4) Includes (i) 292,544 shares owned by 1245841 Ontario Inc., which is owned by
    Dr. and Mrs. Zacharias (ii) 565,000 shares issuable upon exercise of
    currently exercisable options granted under the Company's 1997 Stock Option
    Plan to Dr. Zacharias, and (iii) 750,000 shares of Common stock issuable
    upon conversion of up to 500,000 shares of Convertible Preferred Stock which
    preferred stock is currently held by 1245841 Ontario Inc., a company owned
    by Dr. and Mrs. Zacharias. For a period of ten years from issuance, each
    share of preferred stock is convertible into 1.5 shares of Common Stock and
    thereafter into such number of shares of Common Stock as is equal to
    U.S.$4,500,000 divided by the then current market price of the Common Stock
    on the date of conversion. For purposes of the above chart, the number of
    shares of Common Stock issuable upon conversion of the Preferred Stock was
    calculated by assuming a one for one and one-half conversion. Dr.
    Zacharias and Mrs. Zacharias each disclaim beneficial ownership of the
    shares owned by the other.

(5) Includes 700,000 shares of Common Stock currently issuable upon exercise of
    options.

(6) Includes 100,000 shares of Common Stock and 565,000 shares issuable upon
    exercise of options.

(7) Includes 580,283 shares of Common Stock and 57,085 shares issuable upon
    exercise of warrants and options.

(8) Includes 535,061 shares of Common Stock and 57,085 shares issuable upon
    exercise of warrants and options.

(9) These shares may be deemed to be owned by Peter Deeb, a past director of the
    Company. Mr. Deeb owns 75% of Hampton House and is its Chairman and Chief
    Executive Officer.

<PAGE>

(10)Represents 2,426,221 voting securities currently owned and 2,041,667 voting
    securities issuable upon exercise of currently exercisable options issued
    under the Company's Stock Option Plan to Directors and Officers.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Between 1994 and 1996, the Company loaned an aggregate of $103,004 to Dr.
Zacharias and Victoria Zacharias. In February 1998, the Company repurchased
37,456 shares of its common stock from Ramesh and Victoria Zacharias at a
purchase price of US $2.75 per share. The aggregate consideration payable by the
Company was used to repay all outstanding amounts owed by Dr. Zacharias and
Victoria Zacharias and their affiliated companies.

In June 1996, the Company loaned Cdn$60,000 (US$43,940) to Carl Pahapill, the
Company's President, to purchase 100,000 shares of Common Stock in the Company.
The loan is non-interest bearing, unsecured with no specific terms of repayment.

On November 1, 1996, the Company effected a recapitalization whereby Dr.
Zacharias, the Company's Chief Executive Officer and Director, and Victoria
Zacharias, Dr. Zacharias' wife, converted an aggregate of 2,203,333 shares of
Common Stock into an aggregate of 500,000 shares of preferred stock. In 1997,
the shares were transferred to 1245841 Ontario Inc., a company owned by Dr. and
Mrs. Zacharias.

On November 1, 1996, the Company granted Robert Rubin, a director, an option to
purchase 700,000 shares of Common Stock at US$.75 per share and approved the
issuance of 50,000 shares of Common Stock, all of which shares were issued in
1997 in consideration of services rendered to the Company as director. On
December 31, 1999, Mr. Rubin exercised options for 58,333 common shares. Under a
US$800,000 line of credit previously established between Mr. Rubin and the
Company, Mr. Rubin advanced an aggregate of US$250,000 from July 1997 to
January 1998.

In connection with the Bridge Financing in January 1997, the Company issued 8%
promissory notes in the principal amount of US$500,000 and an aggregate of
125,000 shares of Common Stock to four investors for gross proceeds of
US$500,000. Robert Rubin, a director of the Company, purchased a promissory note
in the principal amount of US$150,000 and 37,500 shares of Common Stock. To
comply with the National Association of Securities Dealers, Inc., Mr. Rubin and
the another investor agreed to surrender to the Company for cancellation without
consideration an aggregate of 62,500 shares of Common Stock obtained in the
Bridge Financing. The Company remained obligated to repay the promissory notes
issued to the two investors in the aggregate principal amount of US$250,000,
upon the closing of the Initial Public Offering.

On February 25, 2000, the Company granted to each of Carl Pahapill and Dr.
Ramesh Zacharias 500,000 fully vested non-escrowed shares of HealthyConnect.com,
Inc. and an additional escrowed 500,000 shares of HealthyConnect.com, Inc.
released upon meeting certain conditions.

Except with respect to the non-interest bearing loans made to the Zacharias' and
Mr. Pahapill, 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. In the future, the Company will present all proposed transactions with
affiliated parties to the Board of Directors for its consideration and approval.
Any such transaction will be approved by a majority of the disinterested
directors.

PART IV

ITEM 14:       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following financial statements and exhibits are filed as part of this Annual
Report:

A.      FINANCIAL STATEMENTS

        Auditors' Report


<PAGE>

        Consolidated Balance Sheet

        Consolidated Statement of Operations

        Consolidated Statement of Deficit

        Consolidated Statement of Changes in Financial Position

        Notes to Consolidated Financial Statements

B.      EXHIBITS

<TABLE>
<CAPTION>
NUMBER         DESCRIPTION
------         -----------

<S>            <C>
3.1*           Certificate of Incorporation and Amendments thereto of the Company.

3.2*           By-laws of the Company.

10.1           Employment Agreement between the Company and Ramesh Zacharias.

10.2           Employment Agreement between the Company and Carl Pahapill.

10.3*          Operating lease covering the Company's facilities.

10.4           Deleted.

10.4.1**       1997 Stock Option Plan (as amended).

10.5*          Loan Agreement between the Company and Carl Pahapill.

10.6*          Corporate Resolution Regarding November Recapitalization.

10.7*          Form of Hospital Contract.

10.8*          Form of Physician Contract for Clinical Operations.

10.9*          Form of Physician Contract for Emergency Services.

10.10*         Letter of Credit Agreement dated April 17, 1997 between the
               Company and Robert Rubin.

10.11*         Amendment to April 17, 1997 Letter of Credit Agreement between
               the Company and Robert Rubin dated January 30, 1998.

21.1           Deleted.

21.1.1         List of Subsidiaries

23.1           Consent of Schwartz Levitsky Feldman, LLP, Chartered Accountants.
</TABLE>

*   Incorporated by reference to Registrant's registration statement on Form
F-1, Registration Statement No. 333-21899.

** Incorporated by reference to Registrant's registration statement on Form S-8,
filed on March 15, 2000.

<PAGE>


                                   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 Zacharias

                              -------------------------------
                              Ramesh Zacharias
                              Director, Chief Executive Officer

DATE:  March 31, 2001

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 Thomson

                               -------------------------------
                               William Thomson
                               Chairman of the Board
                               DATE: March 31, 2001


                               /s/ Ramesh Zacharias

                               -------------------------------
                               Ramesh Zacharias
                               Director, Chief Executive Officer
                               DATE: March 31, 2001


                               /s/ Robert M. Rubin

                               -------------------------------
                               Robert M. Rubin
                               Director
                               DATE: March 31, 2001


                               /s/ Patrick Michaud

                               -------------------------------
                               Patrick Michaud
                               Director
                               DATE: March 31, 2001


<PAGE>



                                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, 2000 and 1999 and the consolidated
      statements of operations and deficit and cash flows for each of the years
      ended. These 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 audit.

      We conducted our audits in accordance with 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, 2000 and 1999 and the results of its operations cash flows
      for each of the years then ended in accordance with generally accepted
      accounting principles.

      Canadian generally accepted accounting principles differ in some respects
      from those applicable in the United States of America (note 18).

      /s/ Schwartz Levitsky Feldman, LLP

      Chartered Accountants

      Toronto, Ontario
      March 31, 2001
<PAGE>

                          MED-EMERG INTERNATIONAL INC.
                           CONSOLIDATED BALANCE SHEET

                        AS AT DECEMBER 31, 2000 AND 1999
                                    (IN US$)

<TABLE>
<CAPTION>

                                                       2000         1999
                                                       ----         ----
<S>                                                <C>            <C>

ASSETS

CURRENT ASSETS

   Cash and short term investments                 $   121,765  $   229,966
   Accounts receivable (note 5)                      2,003,983    2,453,700
   Prepaid expenses and other                          231,167      281,385
                                                   -----------  -----------
                                                     2,356,915    2,965,051
                                                   -----------  -----------

Capital assets (note 6)                              1,667,716    2,329,847
Goodwill (note 7)                                    1,837,275    2,828,700
Other assets (note 8)                                3,394,914    1,177,068
Deferred income taxes (note 16)                          5,508      295,886
                                                   -----------  -----------
                                                   $ 9,262,328  $ 9,596,552
                                                   -----------  -----------
                                                   -----------  -----------

LIABILITIES

CURRENT LIABILITIES

   Bank Indebtedness (note 9)                      $ 1,567,676  $ 1,401,096
   Accounts payable and accrued liabilities          2,649,776    1,917,153
   Restructuring reserve (note 3)                       36,908      356,889
   Due to shareholder (note 10)                        175,059         --
   Current portion of long-term debt (note 11)         145,721      172,145
                                                   -----------  -----------
                                                     4,575,140    3,847,283

Long term debt (note 11)                               184,379      518,338
                                                   -----------  -----------
                                                     4,759,519    4,365,621
                                                   -----------  -----------

Minority interest (note 12)                            411,352         --

Commitments and contingencies (note 19)

   Capital Stock (note 13)                           9,723,816    8,251,290
   Convertible Debenture (note 14)                        --        405,371
   Contributed surplus (note 15)                     1,079,401    1,022,100
   Deficit                                          (6,406,671)  (4,335,566)
   Cumulative translation adjustment                  (305,089)    (112,264)
                                                   -----------  -----------
                                                     4,091,458    5,230,931
                                                   -----------  -----------
                                                   $ 9,262,328  $ 9,596,552
                                                   -----------  -----------
                                                   -----------  -----------
</TABLE>

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

Approved by the Board:

_______________________ Director

_______________________ Director

<PAGE>

                          MED-EMERG INTERNATIONAL INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS

                  FOR THE YEAR ENDED DECEMBER 31, 2000 AND 1999
                                    (IN US$)

<TABLE>
<CAPTION>

                                                           2000             1999
                                                           ----             ----
<S>                                                    <C>             <C>
REVENUE                                                $ 15,532,767    $ 12,648,428
PHYSICIAN FEES AND OTHER DIRECT COSTS                    10,011,764       8,877,139
                                                       ------------    ------------
                                                          5,521,004       3,771,289
                                                       ------------    ------------
EXPENSES

   Salaries and benefits                               $  2,748,536    $  1,838,276
   General and administration                               870,304         493,542
   Occupancy costs and supplies                           1,663,739         872,109
   Public company costs                                     312,751         301,592
   Travel & Marketing                                       139,029         201,610
                                                       ------------    ------------
                                                          5,734,359       3,707,128
                                                       ------------    ------------

(LOSS) INCOME BEFORE AMORTIZATION, INTEREST
   & FINANCING COSTS & TAXES                               (213,356)         64,160

   Amortization of capital assets                           315,925         194,097
   Interest and financing expense                           266,641          44,494
   Amortization of goodwill                                 454,164          99,803
   Amortization of other assets                             859,348          67,432
   HealthyConnect.com development costs                   1,730,691         798,943
   Dilution Gain                                         (1,188,525)           --
   Loss on Disposition                                      433,058            --
                                                       ------------    ------------
                                                          2,871,303       1,204,770
                                                       ------------    ------------

LOSS BEFORE INCOME TAXES                                 (3,084,659)     (1,140,609)
   Income taxes (recovery)                                 (826,572)       (262,140)
                                                       ------------    ------------

NET LOSS BEFORE MINORITY INTEREST & PREFERRED SHARES     (2,258,087)       (878,470)

   Minority Interest                                       (318,223)           --
                                                       ------------    ------------

NET LOSS BEFORE PREFERRED SHARE DIVIDENDS                (1,939,864)       (878,470)

   Preferred share dividends                               (131,240)       (134,194)
                                                       ------------    ------------

NET LOSS                                                 (2,071,104)     (1,012,664)

DEFICIT, BEGINNING OF THE YEAR                           (4,335,567)     (3,322,903)
                                                       ------------    ------------

DEFICIT, END OF THE YEAR                               $ (6,406,671)   $ (4,335,567)
                                                       ------------    ------------
                                                       ------------    ------------

BASIC AND FULLY DILUTED LOSS, PER SHARE (NOTE 16)      $      (0.36)   $      (0.30)
                                                       ------------    ------------
                                                       ------------    ------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES                  5,802,669       3,371,322
                                                       ------------    ------------
                                                       ------------    ------------
</TABLE>

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

<PAGE>

                          MED-EMERG INTERNATIONAL INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

                     AS AT DECEMBER 31, 2000 AND 1999
                                    (IN US$)

<TABLE>
<CAPTION>

                                                                           2000            1999
                                                                           ----            ----
<S>                                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

   Net loss for the period                                             $(1,939,864)   $  (878,469)
   Adjustments for:
      Amortization of capital assets                                       315,925        194,097
      Amortization of Goodwill and other assets                          1,313,512        167,235
      Deferred income taxes                                               (854,707)       180,878
      Dilution gain from HealthyConnect.com                             (1,188,525)
      Loss on sale of clinics                                              433,058
      Minority interest                                                   (318,223)
      Stock compensation                                                      --           26,174
                                                                       -----------    -----------
                                                                        (2,238,824)      (310,085)
   Increase in non-cash working capital components                         912,577        172,781
                                                                       -----------    -----------
                                                                        (1,326,247)      (137,304)
                                                                       -----------    -----------
                                                                       -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES

   Additions to capital assets                                            (137,718)    (1,817,699)
   Business acquisitions                                                         --      (630,453)
   Proceeds of Disposal                                                     33,828
   Other assets                                                            (94,536)        23,890
                                                                       -----------    -----------
                                                                          (198,428)    (2,424,262)
                                                                       -----------    -----------
                                                                       -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES

   Bank indebtedness                                                       215,796      1,222,815
   Issue of common shares                                                1,472,526           --
   Issuance of warrants                                                      --            41,775
   Repurchase of shares                                                      --            (1,542)
   Term loans                                                                --           555,089
   Obligation/(obligations repaid) under capital lease                     (26,424)       (12,047)
   Issuance/(repayment) of debt                                           (276,490)          --
   Due to shareholder                                                      172,425           --
   Dividends paid on preference shares                                    (131,240)      (100,575)
                                                                       -----------    -----------
                                                                         1,426,593      1,705,515
                                                                       -----------    -----------

Effect of foreign currency exchange rate changes                           (10,118)        (4,566)

INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS                    (108,200)      (860,617)
Cash and short-term investments, beginning of year                         229,965      1,090,582
                                                                       -----------    -----------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR                           $   121,765    $   229,965
                                                                       -----------    -----------
                                                                       -----------    -----------
</TABLE>


<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

1.       ORGANIZATION AND DESCRIPTION OF BUSINESS

Med-Emerg International Inc. is a publicly traded company listed on the NASDAQ
Exchange. The Company completed its initial public offering in February, 1998.

Med-Emerg International Inc. is a physician management services organization
specializing in the delivery of emergency and primary healthcare related
services. The Company is committed through information technology and its
physician management services to delivering an internet-based healthcare network
with the objective of delivering quality and timely access to healthcare
products and services.

The Company's operations are divided into three divisions, Physician and Nurse
Recruitment, Physician Management Services and HealthyConnect.com.

On a contractual basis, the Company provides emergency department physician and
nurse recruitment, staffing and administrative support services to hospitals. At
December 31, 2000, the Company had 15 contracts for physician staffing and 6
contracts for nurse staffing.

Under physician management services, the Company owns and manages medical clinic
facilities providing physicians with the ability to practice within a
professional managed network enabling the physician to concentrate on the
clinical aspects of their practices. All the clinic assets including medical
equipment are owned by the company. At December 31, 2000, the Company owned and
managed 23 clinics.

As a result of management and the board's decision to focus on the core
business, the Company intends to divest its interest in HealthyConncect.com in
fiscal 2001.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are expressed in US dollars and are
prepared in accordance with Canadian generally accepted accounting principles.
Differences between Canadian and United States accounting principles are
described in Note 18.

The translation of the Financial Statements from Canadian dollars into United
states dollars is performed for the convenience of the reader. Balance Sheet
accounts are translated using the closing exchange rates in effect at the
Balance Sheet date and income and expense accounts are translated using an
average rate prevailing during each reporting period. No representation is made
that the Canadian dollar amounts could have been, or could be, converted into
United States dollars at the rates on the respective dates and or at any other
certain rates. Adjustments resulting from the translation are included in the
cumulative translation adjustments in the shareholders' equity.

a)       Basis of Consolidation

The financial statements consolidate, with minority interest, the accounts of
Med-Emerg International Inc. and its wholly and partially owned subsidiaries
(collectively called the "Company").

Significant intercompany accounts and transactions have been eliminated.

b)       Product Development and Start-up Costs

Direct costs incurred, net of any revenue, during the development and start-up
period for a new clinic are deferred until the clinic reaches a commercial level
of activity and is then amortized on a straight-line basis over five years.
Direct costs incurred to develop HealthyConnect.com have been expensed as
start-up costs of a technology organization in accordance with the more
conservative accounting treatment under U.S. GAAP.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   (cont'd)

c)       Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the reported amounts of
revenues and expenses, and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.

d)       Capital Assets

Capital assets are recorded at cost and are amortized over their estimated
useful lives at the undernoted rates and methods:

<TABLE>

            <S>                       <C>               <C>
            Furniture and fixtures    20%               Declining balance
            Medical Equipment         10%               Declining balance
            Computer software         100%              Declining balance
            Computer hardware         30%               Declining balance
            Leasehold improvements    5-10 years        Straight-line

</TABLE>

e)       Goodwill

Goodwill is recorded at cost and is being amortized over a period of 10 to 20
years. The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through projected future operating results. Impairment, if any, is
measured based on discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds or based on the fair value of the
related business unit or activity. The assessment of the recoverability of
intangible assets will be impacted if estimated future operating cash flows and
future operating results are not achieved.

f)       Physician Contracts

In conjunction with the acquisition of YFMC Healthcare Inc. as described in note
3,the Company has assigned a value for long-term physician contracts secured
under the transaction. These costs are being amortized over sixty months.

g)       Revenue Recognition

The Company recognizes revenues in its Physician and Nurse Recruiting division
under its contracts with hospitals as its services are rendered, based on an
accrual of the monthly fee for actual shifts worked, in accordance with the
terms of the contracts. In addition, the Company recognizes revenues in its
Physician Management Services division as medical services are rendered by
physicians under contract with the Company, in accordance with the Provincial
Health Insurance Plans. The Company bills and collects from these plans all fees
relating to medical services rendered by the physicians.

h)       Deferred Income Taxes

The Company follows the "asset and liability method" of accounting for deferred
income taxes under Canadian GAAP pursuant to which recognition is given to
deferred taxes on all "temporary differences" (differences between accounting
basis and tax basis of the Company's assets and liabilities) using tax rates
expected to apply to taxable income in the years in which temporary differences
are expected to be realized. The Company records deferred tax assets for the
future tax benefits of non-capital losses carried forward, less a provision for
any deferred tax assets where it is more likely than not that the asset will not
be realized.

The Company did not recognize future tax benefits in connection with capital
losses carried forward because it is not currently likely that the company would
realize these tax benefits.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

3.       BUSINESS ACQUISITIONS

The Company had purchased all the outstanding security of YFMC healthcare Inc.,
effective November 5, 1999. The Company has expensed integration costs
associated with the business combination with YFMC Healthcare Inc. There remains
$36,908 in restructuring costs accrued to be applied against the Ottawa leased
office space until such time that it is Sublette.

4.       BUSINESS DISPOSITIONS

During the fiscal year 2000, the Company disposed of its interests in three
unprofitable clinics namely, Spirotech, Britannia Urgent Care and JC Medical
Management Inc. resulting in a loss on disposition of $433,058.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

5.       ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>

                                             2000            1999
                                             ----            ----
<S>                                      <C>            <C>
Trade receivable                         $  2,076,243   $   2,526,370
Allowance for doubtful accounts              (72,260)        (72,670)
                                         ------------   -------------
                                         $  2,003,983   $   2,453,700
                                         ------------   -------------
</TABLE>

6.       CAPITAL ASSETS

<TABLE>
<CAPTION>

                                        2000                       1999
                         ------------------------------------   ----------
                                     Accumulated
                             Cost    Amortization       Net         Net
                             ----    ------------       ---         ---
<S>                      <C>          <C>          <C>          <C>
Furniture and fixtures   $  194,753   $  100,970   $   93,783   $  101,103
Medical equipment           391,014       89,032      301,982      393,307
Computer software           147,462      135,611       11,851       48,382
Computer hardware           439,614      278,506      161,108      213,146
Leasehold improvements    1,348,494      249,502    1,098,992    1,573,909
                         ----------   ----------   ----------   ----------
                         $2,521,337   $  853,621   $1,667,716   $2,329,847
                         ----------   ----------   ----------   ----------
</TABLE>

Amortization for the year amounted to $315,925 ($194,097 for December 31, 1999).

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

Note receivable

On June 29, 1998, the company purchased a note receivable, payable by the Estate
of Dr. Donald Munro ("Estate"). The security for the note includes the 150,000
shares of Common Shares of the company and any proceeds from the sale of the
Common Shares by the Estate must be applied to repay the note. The company
demanded repayment of the note on April 1, 1999.

7.       GOODWILL

<TABLE>
<CAPTION>

                                                       2000             1999
                                                       ----             ----
<S>                                                 <C>              <C>
Goodwill (net of accumulated amortization of
$853,622; $172,160 at December 31, 1999)            $ 1,837,275      $ 2,828,700
                                                    -----------      -----------
</TABLE>

8.       OTHER ASSETS

<TABLE>
<CAPTION>
                                                                                2000        1999
                                                                                ----        ----
<S>                                                                           <C>          <C>
Physician contracts (net of accumulated amortization of $155,607;
   $23,095 at December 31, 1999)                                              511,282      669,762

Deferred start-up costs (net of accumulated amortization of $89,161;
   $46,323 at December 31, 1999)                                              200,907      255,040

Deferred charges relating to proposed financing                                  --        143,851
Note receivable                                                                50,133       52,085
Due from related parties                                                       23,695        7,830
Software development costs (net of accumulated amortization of $694,520:
   NIL at December 31, 1999)                                                2,608,897
Loan to officer, unsecured, non-interest bearing, repayable
   over a five-year period commencing February, 2000                             --         41,571
Other                                                                                        6,929
                                                                           ----------   ----------
                                                                           $3,394,914   $1,177,068
                                                                           ----------   ----------
</TABLE>

9.       BANK INDEBTEDNESS

The Company has credit facilities providing a total of $1,567,676 in demand
operating lines of credit. The lines of credit bear interest at rates varying
from prime plus 0.5% to prime plus 1% per annum. As security for one operating
line, the Company has provided a first-ranking general assignment of accounts
receivable, a general security, an assignment of all risk insurance policies and
an assignment of key man life insurance of a director in the amount of $692,857.
As security on another operating line, YFMC Healthcare Inc., a wholly-owned
subsidiary of the Company, has provided a General Security Agreement. As
security on a third facility, YFMC Healthcare (Alberta) Inc., a wholly-owned
subsidiary of YFMC Healthcare Inc., has provided a General Security Agreement,
unlimited guarantee of advances from YFMC Healthcare Inc. and an endorsement of
fire insurance covering all office and equipment of YFMC Healthcare (Alberta)
Inc.

10.      DUE TO SHAREHOLDER

This amount is due on demand and bears interest at 6% per annum.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

11.      LONG -TERM DEBT

<TABLE>
<CAPTION>

                                                                                    2000        1999
                                                                                    ----        ----
<S>                                                                                <C>         <C>
Conmercial term loan payable, interest at prime + 2%, repayable in
   equal monthly installments of $6,979 principal and interest, due June 2003      144,285     203,094

Bank loan payable, interest at prime + 2.5%, repayable in equal monthly
   installments of $2,193 plus interest, due September 2003                                    148,903

Bank loan, interest at 10.9%, repayable in equal monthly installments of $2,431
   principal plus interest, secured by personal guarantee of a
   shareholder, due August 2003                                                     43,930      61,400

Promissory note payable, repayable in equal monthly installments of
   $2,778, due June 2002                                                            31,492      55,813

Non-revolving bank loan, interest at prime + 0.75%, repayable in equal monthly
   installments of $3,147 plus interest, secured by General Security Agreement,
   chattel mortgage and assignment of risk and key man life insurance               84,183      52,906

Loans payable, interest rates varying from prime to prime + 1.5%, due
   between April 2000 and August 2002                                               21,517      57,500

Obligations under capital lease                                                      4,693      70,894

Due to related parties                                                                          39,973
                                                                                   -------     -------
                                                                                   330,100     690,483

Less: current portion                                                             (145,721)   (172,145)
                                                                                   -------     -------
                                                                                   184,379     518,338
                                                                                   -------     -------
</TABLE>

The non-revolving bank loan is an available line of credit amounting to $666,900
for use in the acquisition of capital assets. At December 31, 2000, the Company
had drawn $121,154 against the facility.

12.      MINORITY INTEREST

During the year, a subsidiary Healthy Connect.com Inc., issued shares to
Harmonie Group, Inc. in consideration of acquiring cash and a software asset.
Med-Emerg International Inc. has recorded dilution gains on the sale of a
portion of its interest in this subsidiary as well as recognizing the minority's
share of the subsidiary's operating losses.

<PAGE>

13.      CAPITAL STOCK

AUTHORIZED

Unlimited number of the following classes of shares and warrants:

          Preference shares, voting, non-redeemable, non-retractable, having a
             cumulative dividend of US$0.27 per share, convertible to common
             shares;
          Class "A", redeemable, retractable, non-cumulative preferred
             shares;
          Class "B", redeemable, retractable, non-cumulative preferred
             shares;
          Special shares, issuable in series, with rights, privileges
             and restricitions to be fixed by the directors;
          Common shares
          Common shares purchase warrants, redeemable, entitling holder to
             purchase one share of common stock at a price of US$4.50 per share
             up to February 11, 2003.

ISSUED

<TABLE>
<CAPTION>

                                                2000         1999
                                                ----         ----
<S>                                          <C>          <C>
500,000 Preference shares                    $  445,717   $  445,717
6,531,88 Common shares (4,913,433 in 1999)    9,171,988    7,699,462
1,437,500 Common stock purchase warrants        106,111      106,111
                                             ----------   ----------
                                             $9,723,816   $8,251,290
                                             ----------   ----------
</TABLE>

<TABLE>
<CAPTION>

                                                              Common Shares
                                                        ------------------------
                                                           Number        Amount
                                                           ------        ------

<S>                                                      <C>            <C>
Balance, December 31, 1998                               3,096,544      5,430,002
   Shares repurchased and cancelled                         (1,000)        (1,542)
   Shares issued in connection with an acquisition       1,758,556      2,232,906
   Shares issued under stock option plan                    58,333         38,096
                                                         ---------    -----------

Balance, December 31, 1999                               4,912,433    $ 7,699,462

   Shares issued in return for services                    333,000        410,187
   Shares issued in connection with a private placement  1,082,500        853,480
   Shares issued under stock option plan                   155,554        110,429
   Shares issued as a dividend on preferred shares          48,395         98,430
                                                         ---------    -----------
Balance, December 31, 2000                               6,531,882    $ 9,171,988
                                                         ---------    -----------
                                                         ---------    -----------

                                                                   Warrants
                                                             --------------------
                                                               Number      Amount
                                                               ------      ------
<S>                                                          <C>         <C>
Balance, December 31, 1997                                        --     $    --
Warrants issued in connection with initial public offering   1,437,500     106,111
                                                             ---------     -------
Balance, December 31, 2000 and 1999                          1,437,500   $ 106,111
                                                             ---------     -------
                                                             ---------     -------
</TABLE>

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

(a)  Common Shares

In January 1997, the Company completed a private offering and sale of promissory
notes ("Bridge Notes") with a principal amount of $500,000. The Bridge Note
holders also received 125,000 common shares having an ascribed value of $2.05
per common share. The value ascribed to the common shares was accounted for as a
financing. Upon closing of the Offering, the Company repaid the principal
balance of $500,000 plus interest on the promissory notes. In addition, the
Company repaid $150,000 due to a director of the Company. Immediately preceding
the closing of the Offering, certain investors in the Company's January 1997
private offering surrendered for cancellation an aggregate of 62,500 common
shares. The effect of this event is a reduction in shareholders' equity of
$128,990 and an equal reduction of other assets.

At December 31, 1997, the Company had issued 50,000 common shares to a director
of the Company. The issuance of these shares was accounted for as compensation
expense of $100,400 as the related services were rendered by the director.

Concurrent with the closing of the Initial Public Offering on February 20, 1998,
the Company repurchased 37,456 Common Shares held by a director.

On February 20, 1998 the Company completed an Initial Public Offering (the
"Offering") of 1,250,000 shares of Common Stock and 1,437,500 Class A Redeemable
Common Stock Purchase Warrants for net initial public offering proceeds of
$3,921,464.

In October 1998, the Board of Directors approved the repurchase over a
three-month period of up to 5% of the outstanding common Shares of the Company.
The Company repurchased and cancelled 44,500 common shares for an aggregate cost
of $73,875. Share capital was reduced by $120,855 based on the assigned value
per share and contributed surplus was increased by $46,292.

On November 5, 1999 the Company completed the acquisition of YFMC Healthcare
Inc. ("YFMC"), as more fully described in Note 3 and issued 1,758,566 common
shares.

On November 5, 1999, the company signed an agreement with Tadeo E-Commerce Corp
to pay cash consideration plus 320,000 common shares having a market value of
US$400,000, for the development of a web sight for its subsidiary, Healthy
Connect.Com. These shares were to be delivered on the 7th month anniversary date
of the agreement.

On March 31, 2000 the Company issued a Private Placement Memorandum for equity
funding. During the year, the Company raised gross proceeds of $1,400,000 for
the issuance of 1,040,000 common shares. After deducting commissions and
financing costs, including the deferred financing costs as listed in Note 8
the Company will receive net proceeds of approximately $775,000.

On May 2, 2000 the Company raised $83,700 for the issuance of 42,500 common
shares through a private placement. On May 18 and November 15, 2000 a director
exercised stock options resulting in the issuance of 155,554 shares.

At December 31, 2000 the Company had issued 11,055 common shares to directors of
the Company. The issuance of these shares was accounted for as compensation
expense of $10,188 as the related services were rendered by the directors.

Quarterly dividends of $33,618 are payable either by cash or issue of
equivalent common shares to a director. The December 31, 1999 and March 31 and
June 30, 2000 quarterly dividends were paid out on November 13, 2000 on issuance
of 48,395 common shares. The September 30 and December 31,2000 quarterly
dividends were accrued in the accounts but not paid as at year end date.

On December 31, 2000, a director exercised stock options, resulting in the
issuance of 155,554 Common Shares.

(b)  Preference Shares

Each preferred share is convertible into one and one-half shares of common stock
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 Preferred Shares are
convertible at the option of the holder into such number of shares of the
Company's Common Shares as is equal to the ascribed value of $4,500,000 divided
by the then current market value of the Common Shares. The preferred shares are
entitled to receive a cumulative dividend of $0.27 per share payable in cash or
equivalent common shares based on their then quoted market value from the date
of closing of the initial public offering. The preference shares were, at the
time of their issue, redeemable and retractable by the holder. On October 24,
1997, the attributes of the shares were changed and the shares ceased to be
redeemable and retractable.

The December 31, 2000 quarterly dividends for the last two quarters in the
amount of $67, 236 have not been paid but have been accrued in the accounts.

On August 21, 1998, the shareholders approved a reduction in the stated capital
of the preferred shares. The issuance of the preferred shares was originally
recorded in the amount of $4,500,000, based on the value ascribed to the shares
translated at the exchange rate in effect at the date of issuance, and resulted
in a charge of $4,031,383 to retained earnings, which represents the excess of
the value ascribed to the preferred shares issued over the carrying value of the
common shares cancelled. In 1998, the Company reduced the stated capital of the
preferred shares by $4,031,383 and reduced the deficit by the same amount.

(c)   Warrants and Stock Option Plans

Under a stock option plan, a director was granted an option on November 1, 1996
to purchase 700,000 common shares of the Company at an exercise price of $0.75
per share. The difference of $934,033 between the fair market value of $2.05 per
share and the exercise price of $0.75 per share has been charged to earnings and
contributed surplus in 1996. On November 1, 1999 the Company entered into a
Consulting Agreement with the director to provide consulting services.
Compensation under the Consulting Agreement provides for the payment of the
consulting fee to the director by the exercise of his options on an equal basis
every quarter over the next three years with the original exercise price of
$0.75 per share charged to earnings as consulting

<PAGE>

services rendered. On December 31, 1999, 58,333 options were exercised.

In connection with the Initial Public Offering, the Company issued 1,437,500
Class A Redeemable Common Stock Purchase Warrants for gross proceeds of $0.10
per warrant. Each warrant entitles the holder to purchase one share of common
stock at a price of $4.50 for a four year period commencing one year from the
date of completion of the offering. In addition, the Underwriters were granted
warrants entitling the Underwriters to purchase up to 125,000 shares of Common
Stock and 125,000 warrants at a price per share of Common Stock or warrant equal
to 150% of the Initial Public Offering price.

During 1998, the Company granted warrants to purchase 125,000 shares of common
stock to a private investor. Each warrant entitles the holder to purchase one
share of common stock at a price of $4.65 for a one-year period following the
effective date of a registration statement to be filed with the Securities and
Exchange Commission to register the warrant stock.

On September 27, 1999, the Company granted to each of two officers options to
acquire 400,000 common shares at a price of $1.50 per share, of which 200,000
options to purchase common shares do not vest until certain performance criteria
are met.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

13.      CAPITAL STOCK (cont'd)

In connection with the November 1999 acquisition of YFMC Healthcare Inc., the
Company issued 44,585 Series A Warrants entitling the holders to purchase one
share of Med-Emerg common stock at $2.70, 44,585 Series B Warrants entitling the
holders to purchase one share of Med-Emerg common stock at $3.40, and for every
8 YFMC stock options, 1 option of Med-Emerg was issued at an exercise price of
$1.75 for a total of 64,785 options issued.

Pursuant to the Stock Option Plan approved by the Shareholders, options to
acquire an aggregate of 1,000,000 shares of common stock may be granted. The
Stock Option Plan is to provide for grants to employees, consultants and
directors of the Company to enable them to purchase shares. As at December 31,
2000, 364,100 options were still available to be granted under the Stock Option
Plan.

The following table summarizes the stock options granted by the Company:

<TABLE>
<CAPTION>
                                                                             Number of Shares
                                                 Option price             ------------------------
Expiry date                                     per share (US$)           2000             1999
-----------                                     ---------------           ----             ----
<S>                                                      <C>             <C>              <C>
Apr-02                                                   $2.50           157,600          176,500
Apr-02                                                   $4.25            16,200           19,400
Apr-02                                                   $0.75           486,113          641,667
Between September 2000
   and September 2003                                    $1.75            25,000           64,785
                                                 Between $1.25
Jan-04                                               and $1.87           242,500          340,000
Jul-04                                                   $1.50           400,000          800,000
Aug-04                                                   $1.85            12,500          100,000
                                                                       ---------        ---------
                                                                       1,339,913        2,140,852
                                                                       ---------        ---------
                                                                       ---------        ---------
</TABLE>

<TABLE>
<CAPTION>
                                                                          2000             1999
                                                                          ----             ----
<S>                                                                    <C>                <C>
Outstanding, beginning of year                                         2,140,852          926,500

                                Granted                                        -        1,304,785
                                Exercised                               (155,554)         (58,333)
                                Cancelled                               (645,385)         (32,100)
                                                                       ---------        ---------
Outstanding, end of year                                               1,339,913        2,140,852
                                                                       ---------        ---------
                                                                       ---------        ---------
</TABLE>

<PAGE>


14.      CONVERTIBLE DEBENTURE

In consideration of returning the JC Medical clinic to the original owner, the
convertible debenture of $405,371 held as security on this clinic was canceled.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

15.      CONTRIBUTED SURPLUS

<TABLE>
<CAPTION>
                                                                   2000               1999
                                                                   ----               ----
<S>                                                              <C>              <C>
Stock compensation - difference between fair market value
   and exercise price (note 9c)                                  $  982,098       $  934,033
Share repurchase - difference between cost per share and
   assigned value (note 9a)                                          52,286           46,292
Fair value of warrants and stock options issued in
   connection with the acquisition of YFMC Healthcare Inc.           45,017           41,775
                                                                 -----------      ----------
                                                                 $1,079,401       $1,022,100
                                                                 -----------      ----------
                                                                 -----------      ----------
</TABLE>

16.      DEFERRED INCOME TAXES

In fiscal 1998, the Company implemented the recommendations of CICA Handbook
Section 3465, Accounting for Income Taxes. Under the new recommendations, the
"asset and liability method" of accounting for deferred income taxes is used,
which gives recognition to deferred taxes on all "temporary differences"
(differences between accounting basis and tax basis of the Company's assets and
liabilities) using current enacted tax rates. In addition, the new
recommendations requires the Company to record all deferred tax assets,
including future tax benefits of capital losses carried forward, and to record a
"valuation allowance" for any deferred tax assets where it is more likely than
not that the asset will not be realized. Prior to the adoption of the new
recommendations, income tax expense was determined using the deferral method of
tax allocation. There was no material impact on the financial statements
resulting from this change.

The components of the future tax benefit classified by source of temporary
differences that gave rise to the benefit are as follows:

<TABLE>
<CAPTION>

                                                            2000          1999
                                                            ----          ----
<S>                                                     <C>            <C>
Accounting amortization in excess of tax depreciation   $(1,472,492)   $  (199,761)
Losses available to offset future income taxes            1,776,977      1,813,970
Share issue costs                                           356,896        663,926
Valuation allowance                                        (666,889)    (1,172,178)
                                                        -----------    -----------
Deferred income taxes                                   $    (5,508)   $ 1,105,958
                                                        -----------    -----------
                                                        -----------    -----------
</TABLE>

<PAGE>

At December 31, 2000, the Company has non-capital losses available for
carry-forward of $4,442,515. These losses expire between 2003 and 2005. In
addition, the Company has capital loss carry-forwards of approximately $245,415,
which may be applied against future taxable capital gains. No accounting
recognition has been given to the capital loss carry-forwards.

In connection with the acquisition of YFMC Healthcare Inc., the Company
determined that the fair market value of the capital assets was greater than the
tax value. The Company has recognized a liability for the temporary difference
in the amount of $452,762.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

17.      EARNINGS PER SHARE

<TABLE>
<CAPTION>

                                               2000          1999
                                               ----          ----
<S>                                          <C>           <C>
Net loss before preferred share dividend
   and goodwill, per share                   $  (0.25)     $  (0.21)
Goodwill, per share                             (0.08)        (0.05)
                                             --------      --------
Net loss before preferred share dividend,
   per share                                    (0.33)        (0.26)
Preferred share dividends, per share            (0.03)        (0.04)
                                             --------      --------
Basic and fully diluted loss, per share      $  (0.36)     $  (0.30)
                                             --------      --------
                                             --------      --------
</TABLE>

18.      NOTES TO THE STATEMENT OF CASH FLOWS

(i)      Changes in Non-Cash Working Capital Components

<TABLE>
<CAPTION>
                                                 2000           1999
                                                 ----           ----
<S>                                           <C>             <C>
Accounts receivable                           $ 449,717       $(522,234)
Prepaid expenses and other                       50,218          39,704
Accounts payable and accrued liabilities        732,623         325,999
Reserve for restructuring                      (319,981)        346,681
                                              ---------       ---------
                                              $ 912,577       $ 172,783
                                              ---------       ---------
                                              ---------       ---------
</TABLE>


(ii)    Interest and Income Taxes Paid

Operating activities reflect interest paid of $266,641 during the year ended
December 31, 2000 (December 31, 1999 - $44,494); and income taxes paid of $nil
during the year ended December 31, 1999 (December 31, 1998 - $nil).

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

19.     COMMITMENTS AND CONTINGENCIES

The Company is committed to payments under operating leases of its premises and
equipment totaling $1,895,262. Annual payments under operating leases are as
follows:

<TABLE>

                 <S>                <C>
                  2001               $   831,868
                  2002                   637,282
                  2003                   284,536
                  2004                   101,810
                  2005                    39,765
                                     -----------
                                     $ 1,895,262
                                     -----------
                                     -----------
</TABLE>

Obligations under capital lease of total $64,883. Annual payments under capital
leases are as follows:

<TABLE>

                  <S>                <C>
                  2001               $2,919
                  2002                1,691
                  2003                   83
                                     ------
                                     $4,693
                                     ------
                                     ------
</TABLE>

Rent and leasing expenses charged to operations for the year ended December 31,
2000 was $593,691 (December 31, 1999 - $192,773).

Contingent Liability

A letter of guarantee has been issued by the Company's bankers in the amount
of $13,333 for the lease payments on one of the clinics.

20.          FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The carrying value of accounts receivable, short-term investments, bank
indebtedness, and accounts payable approximates the fair value because of the
short-term maturities on these items.

The carrying amount of the long-term assets approximates the fair value of these
assets.

The fair value of the company's long-term debt is estimated on the quoted market
prices for the same or similar debt instruments. The fair value of the long-term
debt approximates the carrying value.

21.      SUBSEQUENT EVENTS

On February 13, 2001 a director received 486,112 common shares in
consideration of services rendered.

On March 8, 2001, Med-Emerg International Inc. was awarded the contract to
provide the entire civilian health care services for in-garrison support for
the Canadian Forces, Department of National Defence.

This management services contract, the largest of its kind in Canada, will
provide up to 400 medical personnel to all Canadian Forces Bases across
Canada. The contract, which is effective immediately extends through March
31, 2004. Through this agreement, MEII will recruit, schedule and manage
physicians, nurses, dentists, physiotherapists and other regulated healthcare
professionals to provide services as required by the Canadian Forces health
authority resident on each base. The total value of the contract is $61
million.

On March 15, 2001 Med-Emerg International Inc. and Schering Canada Inc., a
leading Canadian pharmaceutical supplier, entered into an agreement to have
MEII clinics provide special access Remicade TM infusion services to patients
suffering from Crohn's Disease and Rheumatoid Arthritis.

Under this agreement, MEII medical staff will provide all infusion services
for patients referred to Shering Canada Inc.'s Remicade TM program at clinic
locations across Canada.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

22.      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 applicable to the Company, with those in the
United States ("U.S. GAAP") during the periods presented except with respect to
the following:

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

22.      CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (cont'd)

Consolidated statements of operations

If United States GAAP were employed, net loss for the period would be adjusted
as follows:

<TABLE>
<CAPTION>

                                           2000              1999
                                          -----------------------------
<S>                                         <C>             <C>
Net loss based on Canadian GAAP             $(1,939,864)    $ (878,470)
Start-up costs amortized/(deferred)              54,133         35,720
Goodwill amortization                           (54,840)        (8,925)
Dilution gain                                (1,188,525)             -
                                          -----------------------------
Net loss based on United States GAAP        $ 3,129,096    $  (851,675)
                                          -----------------------------
Primary loss per share                      $     (0.49)    $    (0.25)
                                          -----------------------------
                                          -----------------------------
</TABLE>

If United States GAAP were employed, deficit, other assets, deferred start-up
costs, and total liabilities would be adjusted as follows:

<TABLE>
<CAPTION>

                                                                 2000                  1999
                                                          -----------------------------------------
<S>                                                              <C>                   <C>
Deficit based on Canadian GAAP                                   $(6,406,671)          $(4,335,566)
Start-up costs deferred                                             (200,907)             (255,040)
Goodwill amortization                                                (63,765)               (8,925)
Dilution gain                                                     (1,188,525)                    -
                                                          -----------------------------------------
                                                                 $(7,859,868)          $(4,599,531)
                                                          -----------------------------------------
                                                          -----------------------------------------

Other assets based on Canadian GAAP                              $ 3,394,914           $ 4,005,768
Start-up costs deferred                                             (200,907)             (255,040)
Goodwill on purchase of YFMC Healthcare Inc.                       1,033,032             1,087,872
                                                          ------------------------------------------
                                                                 $ 4,227,039           $ 4,838,600
                                                          ------------------------------------------
                                                          ------------------------------------------

Total liabilities based on Canadian GAAP                         $ 4,759,519           $ 4,836,005
Convertible debenture                                                      -               405,371
                                                          -----------------------------------------
                                                                 $ 4,759,519           $ 5,241,376
                                                          -----------------------------------------
                                                          -----------------------------------------
</TABLE>


(a)      Deferred Start-up Costs

Under Canadian GAAP, development and start-up costs, which meet certain
criteria, are deferred and amortized. Under United States GAAP, development and
start-up costs are expensed as incurred.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

22.      CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (cont'd)

(b)      Goodwill

Under U.S. GAAP, the purchase price of an acquisition involving the issuance of
shares 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 U.S. GAAP was $1.859. Under Canadian GAAP, the
purchase price is determined based on the share price on the date the
transaction is consummated. The share price used for the YFMC Healthcare Inc.
acquisition under Canadian GAAP was $1.25.

(c)      Dilution Gain

Under US GAAP, the gain realized on the issuance of the shares of a
subsidiary to third party at an amount greater than the net book value is
treated as additional paid in capital.

(d)      Convertible Debenture

Under U.S. GAAP, convertible debentures are presented as liabilities,
regardless of the attributes of the convertible debenture, and transferred to
equity upon conversion, whereas, under Canadian GAAP, the likelihood of
conversion to equity is considered in determining the classification between
liability or equity. As at December 31, 2000, the convertible debenture was
settled.

(e)      Earnings Per Share

U.S. GAAP requires common shares and warrants to purchase common shares, issued
or exercisable at prices below the initial public offering ("I.P.O.") price and
which were issued within one year prior to the initial filing of the
registration statement relating to the I.P.O., to be treated as if the common
shares were outstanding from the beginning of the period in the calculation of
weighted average number of common shares outstanding and loss per share, even
where such inclusion is anti-dilutive. Primary earnings per common share is
determined using the weighted average number of shares outstanding during the
year, adjusted to reflect the application of the treasury stock method for
outstanding options and warrants in accordance with U.S. GAAP.

(f)     Stock Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), was issued by the Financial Accounting Standards Board
in October 1995. SFAS 123 establishes financial accounting and reporting
standards for transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees, as well as stock-based employee
compensation plans. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are to be
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.

For those transactions described in note 9 and under SFAS 123:

-    the issuance of 125,000 common shares to promissory note holders resulted
     in a charge to income (finance expense) over the term of the related
     promissory note payable, at $2.05 per share equal to $256,250 of which
     $196,943 has been charged to earnings in the year ended December 31, 1997
     and $50,470 has been charged to earnings in the year ended December 31,
     1998.

As allowed by SFAS 123, the Company has decided to continue to use Accounting
Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" in
accounting for the Company's Stock Option Plan (the "Plan") for U.S. GAAP
purposes, pursuant to which there is no significant difference between U.S. and
Canadian GAAP in the accounting for the granting of options under the Plan.


<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

22.      CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (cont'd)

(g)      Shareholders' Equity

Under U.S. GAAP, loans issued to officers to acquire stock are presented as a
deduction from shareholders' equity (deficit).

Under Canadian GAAP, the detachable stock purchase warrants issued in
conjunction with the private stock offering on January 22, 1996 and subsequently
surrendered, all as described in note 13, have been given no recognition in the
financial statements.

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

The effect on shareholders' equity would be as follows:

<TABLE>
<CAPTION>

                                                                   2000                   1999              1998
                                                             ----------------------------------------------------------
<S>                                                                <C>                    <C>              <C>
Capital stock (as previously shown)                                $ 9,723,816            $ 8,251,290      $ 5,981,830
Captial stock issued on purchase of YFMC Healthcare Inc.             1,096,797              1,096,797                -
Ascribed fair value of share purchase warrants issued                  (36,406)               (36,406)         (36,406)
Dilution gain                                                        1,188,525                      -                -
                                                             ----------------------------------------------------------
Capital stock - U.S. GAAP                                           11,972,732              9,311,681        5,945,424
Share purchase loan to officer                                               -                (44,978)         (44,978)
                                                             ----------------------------------------------------------
Net capital stock - U.S. GAAP                                      $11,972,732            $ 9,266,683      $ 5,900,446
                                                             ----------------------------------------------------------
Convertible debenture (as previously shown)                        $         -            $   405,371      $   405,371
Convertible debenture included in long-term debt                             -               (405,371)        (405,371)
                                                             ----------------------------------------------------------
Convertible debenture - U.S. GAAP                                  $         -            $         -      $         -
                                                             ----------------------------------------------------------
Contributed surplus (as previoulsy shown)                          $ 1,079,401            $ 1,022,100      $   980,325
Share purchase warrants                                                 36,406                 36,406           36,406
                                                             ----------------------------------------------------------
Contributed surplus - U.S. GAAP                                    $ 1,115,807            $ 1,058,506      $ 1,016,731
                                                             ----------------------------------------------------------
Deficit - U.S. GAAP                                                $(7,859,868)           $(4,599,531)     $(3,597,589)
Cumulative translation adjustment                                      305,089                112,264                -
                                                             ----------------------------------------------------------
Shareholders equity (deficit) - U.S. GAAP                          $ 4,923,582            $ 5,613,394      $ 3,319,588
                                                             ----------------------------------------------------------
                                                             ----------------------------------------------------------
</TABLE>

(h)      Comprehensive Income

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130), was issued by the Financial Accounting Standards Board in
June 1997. SFAS 123 establishes standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS 130 is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier period provided for comparative purposes is
required.

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

22.      CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (cont'd)

<TABLE>
<CAPTION>

                                      2000            1999           1998
                                      ----            ----           ----
<S>                                 <C>             <C>             <C>

Net income (loss) (US GAAP)         $(3,129,096)    $(851,675)      $(283,007)
Foreign currency translation
   adjustment                          (192,825)       (4,565)       (181,810)
                                    -----------     ---------       ---------
Comprehensive income                $(3,321,921)    $ (856,24)      $(464,817)
                                    -----------     ---------       ---------
                                    -----------     ---------       ---------
</TABLE>

(i)    Under US GAAP, the gross revenue figures for 11,144,925 must be
       reflected net of physician costs.

23.      SEGMENTED INFORMATION

The Company operates under three divisions: Physician and Nurse Recruitment,
Physician Management Services and HealthyConnect.com. All of the Company's
operations are in Canada.

The Physician and Nurse Recruitment involves contracting 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 Physician Management Services division owns and manages medical clinic
facilities, which provide physicians with the ability to practice medicine in a
professionally managed environment. The clinics include family practice, walk-in
services, and other related services such as massage therapy and chiropractic
services.

The HealthyConnect.com division, created in 1998, involves electronically
linking clinical facilities and other healthcare service providers into a
network. This internet-based network will provide healthcare professionals and
consumers access to medical services, products, communications and information
tools.

Details are as follows:

<PAGE>

<TABLE>
<CAPTION>

                                                                                   2000
                                                        ---------------------------------------------------------
                                                         Physician     Physician
                                                          & Nurse     Management   HealthyConnect
                                                        Recruiting     Services          .com        Consolidated
                                                        ----------     --------          ----        ------------
<S>                                                        <C>          <C>            <C>          <C>
Revenue                                                    7,241,184    8,291,582                   $ 15,532,767
Gross margin                                               1,128,096    4,392,907                      5,521,004
Operating income before Corporate Overhead
   and Public Company-related costs                          814,175      457,534      (2,070,594)      (798,885)
Corporate Overhead                                          (419,158)    (479,961)              -       (899,118)
Operating loss before Public Company-related costs           395,017     (22,426)      (2,070,594)    (1,698,004)
Public-Company-related costs                                                                            (320,455)
Operating loss                                                                                        (2,018,459)
Assets employed at year end                                3,120,074    6,002,929               -      9,123,002
Depreciation and amortization                                513,778      850,168         272,031      1,635,977
Capital expenditures                                          16,421       83,998               -        100,420
</TABLE>

<TABLE>
<CAPTION>
                                                                                   1999
                                                        ---------------------------------------------------------
                                                         Physician     Physician
                                                          & Nurse     Management   HealthyConnect
                                                        Recruiting     Services          .com        Consolidated
                                                        ----------     --------          ----        ------------
<S>                                                       <C>          <C>             <C>           <C>
Revenue                                                   $7,831,708   $4,816,720      $        -    $12,648,428
Gross margin                                               1,303,184    2,468,105               -      3,771,289
Operating income before Corporate Overhead
   and Public Company-related costs                          818,215      468,805        (798,943)       488,076
Corporate Overhead                                          (570,434)    (350,833)              -       (921,267)
Operating loss before Public Company-related costs           247,781      117,972        (798,943)      (433,190)
Public-Company-related costs                                                                            (301,592)
Operating loss                                                                                          (734,782)
Assets employed at year end                                3,348,895    6,718,041               -     10,066,935
Depreciation and amortization                                108,984      252,349               -        361,333
Capital expenditures                                          97,650    1,720,048               -      1,817,699
</TABLE>

<TABLE>

<S>                                                           <C>
2000 year end rate                                            0.6669
2000 average rate                                             0.6569
1999 year end rate                                            0.6929
1999 average rate                                             0.6730
1998 year end rate                                            0.6531
1998 average rate                                             0.6743
1997 year end rate                                            0.6991
1997 average rate                                             0.7223
</TABLE>

<PAGE>

MED-EMERG INTERNATIONAL INC.

Notes to Consolidated Financial Statements
December 31, 2000 and 1999

24.      COMPARATIVE FIGURES

Certain figures in the 1999 financial statements have been reclassified to
conform with the basis of presentation in 2000.