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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

                                      (MARK ONE)

ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                          to                         

Commission File Number: 1-13861

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.

Indicate by check mark whether registrant is an accelerated filer (as defined in Exchange Act Rule 12(b)-2).

The aggregate market value of the shares of Common Stock (based upon the closing sales price of the Company's Common Stock as reported on the OTC Bulletin Board on September 30, 2004) of the registrant held by non-affiliates was approximately US$32,052,000.

As of September 30, 2004, 58,277,696 shares of the registrant's Common Stock were outstanding.

(All figures in US dollars unless otherwise indicated.)

MED-EMERG INTERNATIONAL INC.

SEPTEMBER 30, 2004 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

PART I: FINANCIAL INFORMATION

ITEM 1.    CONDENSED FINANCIAL STATEMENTS

Consolidated Balance Sheets as at September 30, 2004 (unaudited) and December 31, 2003 (audited)

Consolidated Statements of Operations and Deficit for the three and nine months ended September 30, 2004 and 2003 (unaudited)

Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2004 and 2003 (unaudited)

Notes to Unaudited Consolidated Financial Statements

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MED-EMERG INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEET

As at September 30, 2004 (unaudited) and December 31, 2003 (audited)
(in US$)

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

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MED-EMERG INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

Three and nine months ended September 30, 2004 and 2003 (unaudited)
(in US$)

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

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MED-EMERG INTERNATIONAL INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Three and nine months ended September 30, 2004 and 2003 (unaudited)
(in US$)

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

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MED-EMERG INTERNATIONAL INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Nine months ended September 30, 2004 and 2003

1.    ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

        The Company's operations were divided into five units during the 2003 fiscal year. Subsequent to 2003 the Company is no longer actively involved in the Medical Clinics business. MEII's four remaining business units are: Institutional Staffing, Government Healthcare Services (including Department of National Defence), Infusion Services and Healthcare Consulting.

        For Institutional Staffing, the Company provides emergency department physician and nurse recruitment, staffing and administrative support services to hospitals and federal corrections facilities, on a contractual basis, and physician and nurse practitioners to select long-term facilities in Ontario, British Columbia and Nova Scotia. At September 30, 2004, the Company had 28 contracts for physician staffing and 8 contracts for nurse staffing.

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

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

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

2.    BASIS OF PRESENTATION

        These unaudited consolidated financial statements consolidate, with minority interest, the accounts of MEII and all wholly — and partially-owned subsidiaries of MEII. The unaudited 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 10.

        In the opinion of management, the unaudited interim consolidated financial statements follow the same accounting policies and methods of application as the most recent audited annual financial statements.

        Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.

        These unaudited consolidated financial statements are condensed, and do not include all disclosures required for annual financial statements, which are contained in the notes to the Company's audited consolidated financial statements filed as part of the Company's December 31, 2003 Form 10K. These unaudited consolidated financial statements, footnote disclosures and other information should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003.

        All intercompany accounts and transactions have been eliminated on consolidation.

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3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   Use of estimates

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

(b)   Long-term investments

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

(c)   Impairment charges

        At least annually and when events and circumstances warrant a review, the Company evaluates the carrying value of its assets for potential impairment. An impairment loss is recognized when the estimated net realizable value of any asset is less than its carrying value. Any impairment in assets is written down and charged to earnings in the year.

(d)   Revenue recognition

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

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

(1)

Institutional Staffing:

        Revenue is reported on a gross basis.

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

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

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(2)

Government Healthcare Services (Includes Department of National Defence ("DND")):

        Revenue is reported on a gross basis.

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

        Under the terms of the contract, MEII has the responsibility to hire medical personnel and support staff and where necessary provide appropriate training and supervision of the work performed at the respective bases across Canada. MEII bills DND for the work performed by these individuals and in turns pays the medical personnel and support staff based on the terms of the respective contracts signed with them.

(3)

Infusion Services:

        Revenue is reported on a gross basis.

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

(4)

Healthcare Consulting:

        Revenue is reported on a gross basis.

(e)   Foreign currency translation

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

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

(f)    Stock compensation

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

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4.    LONG-TERM DEBT

        The amount of $922,341 pertains to the long term portion of the Goods and Services Tax which is payable over a period of five years, as per an agreement between the Company and the Canada Revenue Agency ("CRA"). An amount of $22,587 ($30,000 CDN) is payable monthly and is reviewable every six months. Accordingly, the current portion of this debt has been classified under Accounts payable and accrued liabilities. The CRA will register a Lien under the Personal Property Security Act with the Province of Ontario to secure its position.

5.    CAPITAL STOCK

        On June 15, 2004, the Company issued 39,360,272 common shares for US$4,500,000. As a condition of the transaction, Preference Shares, 50% of which are indirectly held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common shares; and unpaid preference share dividends, in the amount of US$ 563,477, were forgiven.

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

        The Investors received 43,708,272 common shares of MEII, of which 39,360,272 were purchased from the Company for US$4,500,000 and 4,348,000 were purchased directly from the Preference Shareholder for $500,000. Closing costs including legal, travel and due diligence costs for the equity financing amounted to $592,285, and have been expensed during the second quarter.

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

6.    CONTRIBUTED SURPLUS

        During the first quarter of 2004, 100,000 options were granted with an exercise price of $0.50 per option. The options vested immediately and are available for a term of five years expiring on January 30, 2009. Due to the issuance of new options the fair value amounting to $39,740 has been determined using an option pricing model (Black Scholes) as per section 3870 of the CICA handbook. This amount has been credited to contributed surplus.

        During the second quarter of 2004, 250,000 options were granted to an employee with an exercise price of $0.115 per option. Options for 125,000 shares shall be exercisable on the first anniversary and options for the remaining 125,000 would be exercisable on the second anniversary of the employment agreement. Due to the issuance of new options, the fair value amounting to $5,706 has been determined for the second quarter, using an option pricing model (Black Scholes) as per section 3870 of the CICA handbook. The corresponding amount for the third quarter is $26,034. These amounts have been credited to contributed surplus.

        Management options amounting to 1,000,000 each were granted to two employees, and 150,000 each to two other employees, at an exercise price of $0.115 per option. The vesting of these options is subject to a future earnings hurdle test. Since the earnings test is in a future period, no expense is recognized in the current quarter.

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        During the first quarter of 2003, the terms of warrants were amended entitling each warrant holder to purchase one share of common stock at a price of $0.50 (previously $4.50). Due to this amendment, the fair value amounting to $733,627 had been determined, and was credited to contributed surplus.

7.    CONVERTIBLE DEBENTURES

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

        The above debentures will be accreted to their principal values at the rate of 45% per annum on the net present values shown. During the first nine months of 2004, an amount of $83,854 was accreted to principal with corresponding charge to retained earnings.

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8.    ELIMINATION OF DEFICIT

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

9.    RELATED PARTY TRANSACTIONS

        Closing costs including legal, travel and due diligence costs amounting to $592,285 have been paid to GHW, a related party, and other third parties (note 5).

        Unpaid preference share dividends amounting to $563,477 have been forgiven by Dr. Ramesh Zacharias, a related party (note 5).

10.    CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES

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

(a)   Deficit

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

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

(b)   Shareholders' equity (deficit)

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

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

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

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(c)   Comprehensive loss

        Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), establishes standards for reporting and display of comprehensive loss and its components in the financial statements. Under U.S. GAAP, the comprehensive loss for the nine months ended September 30, 2004 and 2003 would be adjusted as follows:

11.    ECONOMIC DEPENDENCE

        Approximately 80% of revenue and 53% of gross margin is derived from one customer, DND, (72% of revenue and 45% of gross margin during the first nine months of 2003). Receivables for this customer amounted to 71% of total receivables as at September 30, 2004 (87% of total receivables as at September 30, 2003). The loss of a material amount of revenue to this customer could have a material adverse effect on operations of the Company.

12.    CONTINGENT LIABILITIES

        (i)    YMFC HealthCare Inc., a wholly owned subsidiary of the Company, is in receipt of a letter from Canada Revenue Agency ("CRA") dated April 30, 2001, adjusting YFMC's Goods and Services Tax returns for the period from December 31, 1992, to December 31, 1996. The total amount claimed by CRA for this period is $249,000. In the event that YFMC is ultimately found liable, the Company intends to claim an indemnity for such amount against the directors and certain named principals of YFMC pursuant to the Company's rights under the purchase agreement for YFMC executed on August 10, 1999. The Company's legal counsel has advised that CRA does not intend to pursue YFMC for these amounts.

        (ii)    There is uncertainty with respect to the Company's liability for Goods and Services tax (GST) and Harmonized Sales Tax (HST) pertaining to certain services, which it provides, and with respect to the Company's liability for Workers Safety and Insurance Board premiums pertaining to its contract with PGWSC. The measurement of this uncertainty is not determinable and accordingly no provision has been made in respect thereof in these financial statements.

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

13.    COMPARATIVE FIGURES

        Certain figures in the 2003 financial statements have been reclassified and restated to conform with the basis of presentation in 2004.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

OVERVIEW

        MEII is a Canadian Company (OTCC:MDER) founded in 1983 by Dr. Ramesh Zacharias in response to a shortage of emergency physicians in rural Ontario hospitals.

        Based in Ontario, Canada, MEII 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 room physicians and nurses for hospitals in Canada. Though emergency-related services are still an important component of the Company's business, MEII has expanded to offer a wide variety of medical services including non-hospital staffing, healthcare staffing, the recruitment and staffing of various healthcare professionals to fulfill a contract with the Department of National Defence ("DND"), contracts with leading pharmaceutical companies, to provide infusion services to patients and a range of healthcare consulting services.

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

        In these challenging times, opportunities exist for a company that is willing to deliver innovative solutions within the confines of the Canada Health Act.

        The Company currently employs more than 1,000 professional staff including physicians, dentists, pharmacists, nurses and 23 other categories of regulated health professionals who provide clinical services to:

•

rural and urban hospitals including academic teaching centers;



•

long-term care facilities;



•

correctional facilities;



•

all Canadian Forces bases medical and pharmacy facilities; and



•

mental health facilities.

        The following are some relevant statistics.

•

One in ten physicians in Ontario have been associated with MEII at some point in their career.



•

The Company has provided more than two million hours of physician and nurse coverage in Ontario.



•

It is estimated that 10% of Ontario's residents have been treated by a MEII provider in a public healthcare facility.



•

The Company was the first to pioneer the use of expanded role nurses in a non-hospital environment at Pearson International Airport. This innovative model has become the standard for integrated primary healthcare delivery across the province. In fact, one of MEII's clients recently won an award from the Ministry of Health for "Innovation in Primary Healthcare", using the service delivery model developed by the Company.

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        In addition to its staffing business, the Company provides intravenous infusion services for pharmaceutical companies in conveniently located community-based clinics in Ontario and British Columbia.

        As a result of its experience, MEII has been involved as a consultant to a number of significant healthcare initiatives in Canada including:

•

staffing of Department of National Defence bases Borden and Gagetown with healthcare personnel during the Kosovo refugee crisis;



•

staffing of SARS hospitals during the SARS crisis in Toronto;



•

primary care renewal design for Province of Saskatchewan;



•

primary care project evaluation for Province of Newfoundland/Labrador; and



•

healthcare human resource planning project for the Atlantic provinces.

        With over 2,500 healthcare providers in its roster, MEII has built its reputation and infrastructure in recruiting and retaining professionals from across Canada. The recent equity investment from a group of Canadian and International investors provides an international recruiting presence and capability to its Canadian healthcare operations.

        The Company is positioned to build on its industry leadership by providing integrated professional management services in the delivery of healthcare to the healthcare consumer. The Company's operations are divided into four units: Institutional Staffing, Government Healthcare Services, Infusion Services, and Healthcare Consulting Services.

INSTITUTIONAL STAFFING

        The Company provides ER physicians and Intensive Care Unit ("ICU") nurse staffing services to approximately 36 hospitals in Ontario, British Columbia and Nova Scotia, including a mix of rural and urban facilities and tertiary care centers. In 1991, the Company introduced registered nurses into its staffing mix, when it developed a cost-effective model for the Lester B. Pearson International Airport utilizing "expanded role" registered nurses. The Company went on to launch a business devoted entirely to the provision of emergency trained registered nurses to hospitals in 1997. During the first nine months of 2004, the institutional staffing unit provided approximately 41,500 hours of physician and 6,900 hours of nursing coverage respectively. The Company pays its physicians on an hourly or sessional basis, and receives a monthly administrative fee from each hospital.

Institutional Staffing Operations

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

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

        The recruitment and certifying of credentials of qualified independent contract physicians and nurses are a central aspect of the Company's operations. Full-time employees of the Company are dedicated to this task.

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

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        Time Scheduling.    The scheduling of physician and nurse hours is performed daily, weekly or monthly. 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 attention by MEII's staff.

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

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

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

GOVERNMENT HEALTHCARE SERVICES

Department of National Defence ("DND")

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

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

INFUSION SERVICES

        MEII continues to develop its Integrated Infusion Service, which provides clients/patients with a safe, comfortable and convenient infusion care setting to ensure the optimal administration of special drug therapies. In addition to providing infusions of Remicade™ (Schering Plough) to patients with Crohn's disease and rheumatoid arthritis, MEII has recently signed an agreement to supply Zometa™ (Novartis) for treating cancer patients with bone metastases.

        Infusion Services is comprised of a team of dedicated health care providers and coordinators that manage individualized plans for each client/patient ensuring compliance to prescribed therapies for optimal health outcomes. MEII has alliances with many key healthcare groups forming a unique team focused on a "continuum of care" delivering the best service to patients and the prescribing physicians. Each infusion clinic follows rigorous standard operating procedures ensuring a consistent, highly professional infusion service.

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HEALTHCARE CONSULTING

        Over the years, MEII has developed significant experience in international and domestic healthcare consulting. Currently the Company is involved with several provincial governments, advising on a variety of issues related to primary care staffing, training and integrated service delivery models. MEII is also advising several aboriginal communities with regards to healthcare infrastructure and delivery issues. MEII relies on a broad network of industry professionals to augment its resident expertise. The Company thereby ensures that industry leading minds and experience are brought to bear in all situations.

RESULTS OF OPERATIONS

NET LOSS

        The Company reported a net loss of $542,778 for the nine months ended September 30, 2004 compared to a net loss of $1,562,022 for the nine months ended September 30, 2003. The loss amounted to $0.02 per share for continuing operations and $0.00 loss for discontinued operations for the nine months ended September 30, 2004 compared with a loss of $0.25 per share for continuing operations and $0.08 gain per share for discontinued operations for the nine months ended September 30, 2003. The Company reported a net loss of $234,864 for the three months ended September 30, 2004 compared to a net gain of $114,715 for the three months ended September 30, 2003. The main reasons for the decrease in loss during the first nine months of 2004 is the lower amount of non-cash Stock compensation expense recorded, and the lower amounts of Interest and financing expenses. Furthermore, the Company has implemented their strategic plan of realigning the business units and the consolidation and closure of non-performing medical clinics. MEII continues to pursue profitable contracts that are consistent with its current operating strategy.

REVENUE

        The Company's revenue for the nine months ended September 30, 2004 decreased to $34,827,797, compared to $ 41,914,477 for the nine months ended September 30, 2003 or by 17%. The Company's revenue for the three months ended September 30, 2004 decreased to $11,704,989, compared to $14,297,671 for the three months ended September 30, 2003 or by 18%.

        This revenue decline was mainly attributable to the Institutional Staffing Division and the Government Healthcare Services Division.

        Revenue from the Institutional Staffing Division decreased significantly to $5,519,131 for the nine months ended September 30, 2004 compared to $10,744,233 for the nine months ended September 30, 2003 a decrease of approximately 49%. This is due to the loss of the one-time revenue generated in 2003 due to the SARS outbreak.

        Revenue from the Government Healthcare Services Division amounted to $27,921,872 for the nine months ended September 30, 2004 compared to $30,532,365 for the nine months ended September 30, 2003. As at September 30, 2004, the Company provided approximately 735 medical personnel at DND bases across Canada, compared to 814 as at September 30, 2003.

        Revenue from the Infusion Services Division increased to $801,726 for the nine months ended September 30, 2004 compared to $623,446 for the nine months ended September 30, 2003 an increase of approximately 29%. This increase is due to the increase in Remicade infusions.

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GROSS MARGIN

        Gross Margin (revenue less direct costs) for the nine months ended September 30, 2004 decreased to $3,501,825 compared to $3,897,559 for the nine months ended September 30, 2003, a decrease of approximately 10%. Gross margin for the three months ended September 30, 2004 decreased to $1,148,196 compared to $1,417,336 for the three months ended September 30, 2003, a decrease of approximately 19%. This decrease in gross margin was due to the Institutional Staffing division experiencing lower volumes, as mentioned above.

        Physician fees and direct costs, primarily fees paid to contract physicians and other healthcare workers remained comparable to the prior period at approximately 90%.

OPERATING EXPENSES

        Operating expenses from continuing operations totaled $4,078,767 for the nine months ended September 30, 2004 compared to $3,632,507 for the nine months ended September 30, 2003, an increase of approximately 12%. Operating expenses from continuing operations totaled $1,183,482 for the three months ended September 30, 2004 compared to $1,196,277 for the three months ended September 30, 2003, a decrease of approximately 1%. The year-to-date increase results mainly from the one-time impact of the closing costs of $592,285 associated with the equity financing. Also associated with the equity financing, the Company recognized a one-time benefit of $563,477, due to the forgiveness of unpaid accrued preferred share dividends. There was an increase in salaries and benefits and travel and marketing as compared to the prior period. There has been a decrease in General and administration costs during the first nine months of 2004.

AMORTIZATION AND INTEREST

        Interest and financing costs decreased from $515,668 for the nine months ended September 30, 2003 to $330,931 for the nine months ended September 30, 2004. Interest and financing costs decreased from $174,368 for the three months ended September 30, 2003 to $129,412 for the three months ended September 30, 2004. This is due to the fact that the company negotiated lower borrowing rates on its loan facilities, and repaid the secured debenture. Further, with the recent equity financing, the Company has reduced its reliance on banks and other financial institutions.

INCOME TAXES

        The Company has loss carry forwards of approximately $7.5 million to be applied against future corporate income taxes. This benefit has not been reflected in these statements.

LIQUIDITY AND CAPITAL RESOURCES

        On June 15, 2004, the Company issued 39,360,272 common shares for US$4,500,000. As a condition of the transaction, Preference Shares, 50% of which are indirectly held by Dr. Zacharias, the CEO of MEII, were converted into 9,348,000 common shares; and unpaid preference share dividends, in the amount of US$ 563,477, were forgiven.

        The investment resulted from the previously announced letter of intent signed by Med-Emerg and Global Healthcare Workforce Limited ("GHW") of London, UK.

        The Investors received 43,708,272 common shares of Med-Emerg, of which 39,360,272 were purchased from the Company for US$4,500,000 and 4,348,000 were purchased directly from the Preference Shareholder for US$500,000.

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

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.    CONTROLS AND PROCEDURES

        Included on the signature page of this report is the Certification that is required under Section 302 of the Sarbanes-Oxley Act of 2002. This section of the report contains information concerning the controls evaluation referred to in the Section 302 Certifications and the information contained herein should be read in conjunction with the Certification.

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

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

        The Company's chief executive officer and chief financial officer, after supervising and participating in an evaluation of the effectiveness of the Company's internal and disclosure controls and procedures during the nine months ended September 30, 2004 (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company's internal and disclosure controls and procedures were effective.

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

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PART II:    OTHER INFORMATION

ITEM 5.    EXHIBITS AND REPORTS OF FORM 8-K

(a)

Exhibits

Exhibit 31    Rule 13a-14(a)/15d-14(a) Certifications.

Exhibit 32.1    Certification by the Chief Executive Officer Relating to a Periodic Report Containing Financial Statements.*

Exhibit 32.2    Certification by the Chief Financial Officer Relating to a Periodic Report Containing Financial Statements.*

Exhibit 31

CERTIFICATIONS

I, Dr. Ramesh Zacharias, certify that:

1.

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

2.

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

3.

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

4.

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

a)

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

b)

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

c)

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

5.

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

a)

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

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b)

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

Date: November 12, 2004

I, William Danis, certify that:

1.

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

2.

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

3.

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

4.

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

a)

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

b)

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

c)

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

5.

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

a)

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

b)

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

Date: November 12, 2004

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Exhibit 32.1

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

        In connection with the Quarterly Report of Med-Emerg International Inc. (the "Company") on Form 10-Q for the period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dr. Ramesh Zacharias Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1)

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

2)

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

Dated: November 12, 2004

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Exhibit 32.2

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

        In connection with the Quarterly Report of Med-Emerg International Inc. (the "Company") on Form 10-Q for the period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William Danis Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1)

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

2)

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

Dated: November 12, 2004

(b)

Reports on Form 8-K

None.

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

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Schwartz Levitsky Feldman llp
C H A R T E R E D     A C C O U N T A N T S
T O R O N T O ,     M O N T R E A L,    O T T A W A

The Board of Directors
Med-Emerg International Inc.

        The consolidated financial statements of Med-Emerg International Inc. included in its Form 10Q for the quarter ended September 30, 2004 reflect the effects of a quasi-reorganization of the company. The company underwent the quasi-reorganization as a result of a change in management. As a result of the quasi-reorganization, it was determined that the values of the companies assets and liabilities did not require adjustment and the accumulated deficit has been reclassified to offset contributed surplus and capital stock. We conclude that such quasi-reorganization is preferable in your circumstances.

                    1167 Caledonia Road
                    Toronto, Ontario M6A 2X1
                    Tel: 416 785 5353
                    Fax: 416 785 5663

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SIGNATURES

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

Date: November 12, 2004

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QuickLinks

ITEM 1. CONDENSED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES

ITEM 5. EXHIBITS AND REPORTS OF FORM 8-K
Exhibit 31

Exhibit 32.1
Exhibit 32.2