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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF1934

For the fiscal year ended December 31, 2005

**Strategic Internet Investments, Incorporated**Small Business
Issuer:

|**Delaware**                                  | 84-1116458                  
|--------------------------------------------- | ----------------------------
|State of incorporation:                       | IRS Employer Identification:
|                                              |                             
|**Suite 250, 1090 West Georgia
      Street** |                             
|**Vancouver, BC**                             |                             
|**Canada V6E 3V7**                            | **604-684-8662**            
|Address of principal executive offices:       | Issuers telephone number   

Securities registered under Section 12(b) of the Exchange Act:
**None**

Securities registered under Section 12(g) of the Exchange Act:
**None**

Check whether the issuer (1) filed all reports required to be
  filed by Section 13 or 15(d) of the Exchange Act during
  the past 12 months, and (2) has been subject to such filing requirements for
  the past 90 days. Yes xNo
   ̈

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in 
  this form, and no disclosure will 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-KSB
  or any amendment to this 
  Form 10-KSB. x

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). 
  Yes xNo  ̈

Issuers revenues for its most recent fiscal year.
**Nil**

Aggregate market value of the voting common equity held by
non-affiliates as of April 30, 2006: **$4,105,652**

Common shares outstanding as of April 30, 2006:
**25,660,326**

Transitional Small Business Disclosure Format. Yes ( )No
( X)

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Statements made in this report that are not historical or
current facts are "forward-looking statements" made pursuant to the Safe Harbor
Provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Securities Exchange Act of 1934. These statements often can be
identified by the use of terms such as "may", "will", "expect", "believe",
"anticipate", "estimate", "approximate" or "continue" or the negative
thereof.

The Company intends that such forward-looking statements be
subject to the Safe Harbors for such statements. The Company wishes to caution
readers not to place undue reliance upon any such forward-looking statement,
which speak only as of the date made. Any forward-looking statement represents
management's best judgment as to what may occur in the future. However,
forward-looking statements are subject to risks, uncertainties and important
factors beyond the control of the Company that could cause actual results and
events to differ materially from historical results of operations and events and
those presently anticipated or projected. The Company disclaims any obligation
to subsequently revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

PART I

|1. | Description of Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company was incorporated in Colorado on February 28,
      1989 as Jefferson Capital Corporation. Effective June 13, 1990 the Company
      changed its name to Ohio & Southwestern Energy Company. Effective July
      1, 2001, the Company and Strategic Internet Investments, Incorporated
      (Strategic), an inactive Delaware corporation incorporated on March 2,
      2001, were merged. All common shares outstanding of the Company were
      converted into an equal number of common shares of Strategic. The purpose
      of this merger was to change the corporate jurisdiction of the Company
      from Colorado to Delaware and to change the name of the Company. The
      surviving corporation of the merger is Strategic, a Delaware
      corporation.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company is in the development stage, accordingly
      certain matters discussed herein are based on potential future
      circumstances and developments, which the Company anticipates, but which
      cannot be assured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company is currently devoting its efforts to
      developing The Dream Island Resort project in Manama, Bahrain. The Dream
      Island Resort project will be an integrated resort, entertainment, hotel
      and real estate facility to be built on a 41 acre man-made island off the
      north eastern coast of Manama, Bahrain.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (See Plan of Operation below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | Description of Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company maintains an office in rented premises
      located in Vancouver, BC, Canada. The Companys equipment consists of
      computer equipment, which is generally located in the Companys office,
      but may be transported elsewhere as needed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Except as described above, the Company does not directly
      or indirectly own or otherwise have any interest in any other real
      estate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Management is not aware of any legal proceedings pending
      or contemplated against the Company, its directors or officers or any of
      its affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | Submission of Matters to a Vote of Security
      Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | No matters were submitted during the fiscal year covered
      by this report to a vote of security holders of the Company, through the
      solicitation of proxies or otherwise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Part II

2

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|5. | Market for Common Equity and Related Stockholder
      Matters                                                                                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                      
|   | Market information                                                                                                                                                                                                                                                                   
|   | The Company's common shares are quoted and traded on the
      US OTC Bulletin Board under the symbol "SIII". The range of high and low
      bid quotations for each quarter within the last two fiscal years, as
      reported by Yahoo Finance (www.yahoo.com), was as
  follows:

Year
    Period
    High
    Low2006
    First quarter
    $0.37
    $0.162005
    First quarter
    $0.95
    $0.35Second quarter
    $0.64
    $0.23Third quarter
    $0.50
    $0.16Fourth quarter
    $0.50
    $0.212004
    First quarter
    $0.74
    $0.27Second quarter
    $2.50
    $0.63Third quarter
    $1.95
    $1.20Fourth quarter
    $1.55
    $0.40


These quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may not represent
actual transactions.

Holders of common equityAs
at December 31, 2005 there were approximately 100 holders of record of the
common shares of Strategic.

DividendsOn March 11, 2005,
the Company issued 4,060,643 common shares, net of escrowed shares, pursuant to
a common stock dividend declared by the Board of Directors on February 14, 2005,
payable to the shareholders of record as of March 4, 2005. In connection with
this stock dividend, pursuant to the terms of stock option, convertible
debenture, and stock warrant agreements the number of units or shares issuable
under those agreements shall be increased by 20% and the exercise or conversion
price shall be decreased by 20%. These shares are restricted under Rule 144.

Except for the above mentioned stock
dividend, the Company has not declared or paid per share cash distributions or
dividends on its common stock in the last two fiscal years. Future distributions
or dividends on the common stock, if any, will be determined by the Company's
Board of Directors and will depend upon the Company's results of operations,
financial condition, capital requirements and other factors.

Securities authorized for issuance
under equity compensation plans

| | Equity Compensation Plan Information |                       |                      
| | ------------------------------------ | --------------------- | ---------------------
| |                                      | Number of securities  |                      
| |                                      | to be issued upon     | Weighted average     
| |                                      | exercise of           | exercise price of    
| |                                      | outstanding options,  | outstanding options, 
| | Plan category                        | warrants, and rights. | warrants, and rights.
| |                                      |                       |                      
| | Equity compensation plans            |                       |                      
| | approved by
      security holders   | -                     | -                    
| |                                      |                       |                      
| | Equity compensation plans not        |                       |                      
| | approved by
      security holders   | 2,010,000             | $0.22                
| |                                      |                       |                      
| | Total                                | 2,010,000             | $0.22                

3

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2002 Stock Award Plan In
2002, the Companys board of directors approved a stock award plan. The plan
provides both for the direct award or sale of shares, and for the grant of
options to purchase shares. Shares may be awarded in consideration of services
rendered to the Company. The Company may also grant a 30-day right to purchase
shares at a price of not less than 90% of the fair market value of the
shares.

Under the plan directors, employees and
consultants may be granted incentive stock options to purchase common stock of
the Company at a price of not less than 100% of the fair market value of the
stock. The total number of shares awarded under the plan must not exceed 15% of
the outstanding common stock of the Company. Certain changes in the capital
structure of the Company, such as a stock split or stock dividend, may result in
an appropriate adjustment to the number and/or the price of shares issuable
under the plan. The plan expires on July 1, 2017.

Sales of Securities Without
Registration Under the Securities Act of 1933On March 11, 2005, the
Company issued 4,060,643 common shares, net of escrowed shares, pursuant to a
common stock dividend declared by the Board of Directors on February 14, 2005,
payable to the shareholders of record as of March 4, 2005. In connection with
this stock dividend, pursuant to the terms of stock option, convertible
debenture, and stock warrant agreements the number of units or shares issuable
under those agreements shall be increased by 20% and the exercise or conversion
price shall be decreased by 20%. These shares are restricted under Rule 144.

On November 15, 2002 the Company
entered into a Convertible Loan Facility Agreement with Icon Management Ltd.
(Icon) whereby the Company would, from time to time, borrow operating funds
from Icon, at an interest rate of ten percent (10%), repayable two years from
the date the funds are advanced (the maturity date). The lender has the right
to convert all or part of the principal sum and interest into units, each unit
consisting of one common share of the Company and one non-transferable share
purchase warrant, expiring on the maturity date, exercisable at the applicable
conversion rate which is calculated at a discount to the average closing market
price for ten days preceding a loan advance. During the year ended December 31,
2004, Icon converted $48,537 of the loan into 825,364 units of the Company,
including warrants exercisable at an average price of $0.06 per share, expiring
at various dates between December 31, 2004 and March 31, 2006. On December 31,
2004, Icon exercised warrants to purchase 643,715 shares. During the year ended
December 31, 2005, Icon converted $227,140 of the loan plus accrued interest of
$23,020, into 635,901 units of the Company, including warrants exercisable at an
average price of $0.39 per share, expiring at various dates between April 1,
2005 and January 31, 2007. During the period ended September 30, 2005, Icon also
exercised warrants to purchase a further 420,107 shares for cash proceeds of
$43,153. This transaction is with an offshore non-U.S. person; accordingly,
these securities are exempt from registration pursuant to Regulation S.

On January 31, 2003, the Company issued
1,268,750 Class A Convertible Preferred Shares(1), at a deemed value
of $4.00 per share, as payment for the dredging and reclamation services to be
performed by Robodh Contracting Establishment of Manama, Bahrain. The total
value of the Dredging and Reclamation Works contract is $5,075,000. These shares
were issued in escrow and will be released over time as work on the Dream Island
Project dredging progresses. This transaction is with an offshore non-U.S.
person; accordingly, these securities are exempt from registration pursuant to
Regulation S.

On March 13, 2003 the Company completed
  an offering of 650,000 units of its share capital to one accredited investor
  at a price of $0.10 per unit, each unit consisting of one share of common stock
  and one common stock share purchase warrant. Each common stock purchase warrant
  gives the investor the right to purchase one additional share of common stock
  at any time during the first two years at a price of $0.10 per share. Total
  cash proceeds of $65,000 were allocated to working capital. In July 2004, 320,000
  of the warrants were exercised, and 320,000 shares were issued for cash proceeds
  of $32,000. During the year ended December 31, 2005, the investor exercised
  the remaining warrants to purchase a further 330,000 shares for cash proceeds
  of $33,000. These shares were issued pursuant to an exemption from registration
  under Section 4(6) of the Securities Act of 1933. Sale or transfer of the shares
  by the investor shall be in accordance with the provisions of Regulation S,
  or pursuant to registration under the Securities Act of 1933 or pursuant to
  an available exemption from registration. This transaction is with an offshore
  non-U.S. person; accordingly, these securities are exempt from registration
  pursuant to Regulation S.

4

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On August 10, 2003 the Company entered
into a Convertible Loan Facility Agreement with Star Leisure & Entertainment
Inc. (Star Leisure), a company controlled by a Director and Officer of
Strategic, whereby the Company would, from time to time, borrow operating funds
from Star Leisure, at an interest rate of ten percent (10%), repayable two years
from the date the funds are advanced (the maturity date). The lender has the
right to convert all or part of the principal sum and interest into units, each
unit consisting of one common share of the Company and one non-transferable
share purchase warrant, expiring on the maturity date, exercisable at the
applicable conversion rate which is calculated at a discount to the average
closing market price for ten days preceding a loan advance. At December 31,
2005, Star Leisure had advanced a total of $103,206 and accrued interest of
$25,100. During the year ended December 31, 2005, $81,206 of the loans matured,
and the right to convert this principal amount into units expired. Under the
terms of the Convertible Loan Facility Agreement, any loans that mature without
being converted or repaid become due on demand. At December 31, 2005 there
remained loan principal of $22,000 eligible for conversion into 114,783 units,
at a conversion prices of $0.19, post-stock dividend. The lender retains the
right to convert the total accrued interest of $25,100 into units. The $47,100
principal sum and any accrued interest under the Convertible Loan Facility are
repayable on January 31, 2006. Star Leisure has not converted any part of the
principal sums advanced or accrued interest into units as of December 31, 2005.
Subsequent to the period end, a further $22,000 of the loans matured without
being converted, and a further $49,700 was loaned to the Company. This
transaction is with an offshore non-U.S. person; accordingly, these securities
are exempt from registration pursuant to Regulation S.

On November 30, 2003, the Company
issued 198,000 Class A Convertible Preferred Shares(1)at a deemed
value of $4.00 per share to settle a termination fee of $792,000. This
termination fee is to a former contractor who was to perform planning services
for the Company that were subsequently assigned to another contractor. This
transaction is with an offshore non-U.S. person; accordingly, these securities
are exempt from registration pursuant to Regulation S.

On January 31, 2004, the Company issued
1,137,500 Class A Convertible Preferred Shares(1) at a deemed value
of $4.00 per share, as payment for technical planning services to be performed
by the Arkan Group for Projects of Dammam, Saudi Arabia. The total value of the
technical planning services contract is $4,550,000. These shares were issued in
escrow and were to be released over time as work on the Dream Island Project
progressed. In December 2004 this contract was terminated, and the escrowed
shares were cancelled. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S.

In August 2004, the Company issued
10,000 common shares at a deemed price of $2.00 per share, for a total deemed
consideration of $20,000, pursuant to a Consulting Services Agreement for
financial consulting. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S, however they are restricted under Rule 144.

The Company also issued 300,000 common
shares in August 2004, at a deemed price of $0.38 per share, for a total deemed
consideration of $112,500, pursuant a Promotional and Capital Funding Agreement
for financial and investor relation services. These shares are held in escrow
and are to be released subject to the Company obtaining certain future financial
goals. This transaction is with an offshore non-U.S. person; accordingly, these
securities are exempt from registration pursuant to Regulation S, however they
are restricted under Rule 144.

The Company issued an additional
563,000 common shares in August 2004, as a $30,000 partial settlement of a loan
from Canarab Acquisitions Inc. (Canarab), a company controlled by a director. In
2001, Canarab secured a loan on behalf of the Company, and the lender received
as fees and collateral 563,000 shares of the Company that were owned by Canarab.
The lender subsequently applied the collateral shares as payment of the
outstanding loan. Accordingly, the Company issued 563,000 common shares to
Canarab as reimbursement for those shares forfeited to the lender. This
transaction is with an offshore non-U.S. person; accordingly, these securities
are exempt from registration pursuant to Regulation S, however they are
restricted under Rule 144.

In November 2004, the Company issued
  350,000 common shares at a deemed price of $0.35 per share, for a total deemed
  consideration of $122,500, pursuant a Promotional and Capital Funding Agreement
  for financial and investor relation services. This transaction is with an offshore
  non-U.S. person; accordingly, these

5

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securities are exempt from registration
pursuant to Regulation S, however they are restricted under Rule 144.

In August 2004, the Company issued
10,000 common shares at a deemed price of $2.00 per share, for a total deemed
consideration of $20,000, pursuant to a Consulting Services Agreement for
financial consulting. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S, however they are restricted under Rule 144.

In January 2005, the Company issued
141,000 common shares at a deemed price of $.50 per share, for a total deemed
consideration of $70,500, pursuant to various consulting agreements for legal,
computer, and financial services. These transactions are with offshore non-U.S.
persons; accordingly, these securities are exempt from registration pursuant to
Regulation S.

The Company issued 50,000 common shares
in January 2005, at a deemed price of $0.84 per share, for a total deemed
consideration of $42,000, pursuant a Promotional and Capital Funding Agreement
for financial and investor relation services. This transaction is with an
offshore non-U.S. person; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.

The Company also issued 400,000 common
shares in January 2005, at a deemed price of $0.25 per share, for a total deemed
consideration of $100,000, pursuant a Promotional and Capital Funding Agreement
for financial and investor relation services. Of these shares, 250,000 are held
in escrow and are to be released subject to the Company obtaining certain future
financial goals. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S, however they are restricted under Rule 144.

In March 2005 the Company entered into
a Promotional and Capital Funding Agreement for financial and investor relation
services. Pursuant to this agreement, the Company issued 100,000 common shares
in May 2005, at a deemed price of $0.36 per share, for a total deemed
consideration of $36,000. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S, however they are restricted under Rule 144.

In December 2005 the Company entered
into three Consulting Agreements for public relations and promotional services.
Pursuant to these agreements, the Company issued 800,000 common shares at a
deemed price of $0.25 per share, for a total deemed consideration of $200,000.
These transactions are with offshore non-U.S. persons; accordingly, these
securities are exempt from registration pursuant to Regulation S, however they
are restricted under Rule 144.

On May 5, 2006 the Company entered into
a Convertible Loan Facility Agreement with CMB Investments Ltd. (CMB), a
company controlled by a Director and Officer of Strategic, whereby the Company
would, from time to time, borrow operating funds from CMB, at an interest rate
of ten percent (10%), repayable two years from the date the funds are advanced
(the maturity date). The lender has the right to convert all or part of the
principal sum and interest into units, each unit consisting of one common share
of the Company and one non-transferable share purchase warrant, expiring on the
maturity date, exercisable at the applicable conversion rate which is calculated
at a discount to the average closing market price for ten days preceding a loan
advance. This transaction is with an offshore non-U.S. person; accordingly,
these securities are exempt from registration pursuant to Regulation S.

In August 2004 work commenced on the
Dream Island Project, however there has not yet been sufficient progress to
warrant a release of any of the escrowed shares.

(1) Refer to the Notes of the
Consolidated Financial Statements for the Class A Convertible Preferred Shares
terms of conversion and rights.

|6. | Plan of Operation                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Plan of Operation                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has an agreement to purchase 80% of the
      outstanding shares of Gulf Star World Development W.L.L. (Gulf Star), a
      Bahrain corporation, from Star Leisure & Entertainment Inc. (Star
      Leisure). Star Leisure is controlled by a director of the Company and is
      based in British Columbia, Canada. Gulf Star is the 100% owner and
      developer of the Dream Island Resort project.

6

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To acquire 80% of Gulf Star, the
Company must issue five million common shares at a price of $0.125 per share.
The shares are to be issued over a three year period based on construction
progress. In addition, the Company shall make cash payments to Star Leisure
totaling $100,000 to cover a portion of hard costs accumulated by Star Leisure
in progressing the Dream Island Project. At December 31, 2003 the Company had
paid $34,210, with the balance of $65,790 to be paid by July 11, 2005.

Subsequent to December 31, 2005, the
Ministry of Finance, Bahrain (MOFB) notified Gulf Star that due to a lack of
progress and failure to advance the project in a timely basis, the MOFB intends
to seek termination of the lease contract for the Dream Island site. The
Company, Gulf Star, and Star Leisure intend to oppose the action by the MOFB.
However, due to the uncertainty of the future viability of the Dream Island
project, management has written-down the associated deferred development costs
to a nominal value of $1.00 at December 31, 2005.

The financial statements have been
prepared on a going concern basis. The Company has accumulated a deficit of
$7,960,680 since inception and at December 31, 2005 has a working capital
deficiency of $357,736. Its ability to continue as a going concern is dependent
upon the ability of the Company to generate profitable operations in the future
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due. The
outcome of these matters cannot be predicted with any certainty at this time.
The Company has historically satisfied its capital needs primarily by issuing
equity securities. Management plans to continue to provide for its capital needs
during the next twelve months by issuing equity securities, private placements,
loans, and debentures convertible into equity. Additional operating capital
could be obtained through the potential exercise of management and director
stock options and/or exercise of outstanding stock purchase warrants. The
Company remains at the development stage, as there were no revenues during the
past fiscal year.

The Dream Island project in Bahrain,
the Company's principal business, will require, over the next twenty to
twenty-four months, a significant amount of investment capital to be secured to
ensure that all stages of development can proceed and be completed on schedule
and on budget. The highest percentage of the funding requirements will be met
through senior debt instruments with banking, investment and construction
institutions and through government financing incentives and concessions.
Further financing will be achieved through the pre-selling of the real estate
units, villas and apartments, to be constructed as part of the Dream Island
complex.

The first stage of the project,
dredging and reclamation of the 41 acre man-made island site, has been paid by
the issuance to Robodh Contracting Establishment, Manama, Bahrain, of 1,268,750
Class A Convertible Preferred Shares in the capital of the Company at a deemed
price of $4.00 per share. The total value of the Dredging and Reclamation Works
contract is $5,075,000.

In August 2004, construction commenced
on the Dream Island Project. This initial phase of work consists of the
construction of a temporary causeway to provide access from the coast to the
offshore site of the future island location. Large haulage trucks have begun
transporting and dumping quarry stone to create the temporary causeway from
which access will be gained to the island site. Once the temporary causeway has
been completed, work will commence on the creation of the Dream Island perimeter
of the future offshore island. Thereafter, reclamation dredging operations will
commence to move sand into the perimeter thereby creating the Dream Island site.

Management believes that the close
connections and contacts it has made in the Middle East, especially the efforts
of its Chairman, Mr. Abbas Salih, who has been stationed predominately in Saudi
Arabia and Bahrain for the past year to oversee the project, will be of immense
value in completing other essential contracts during the course of this
project.

In December 2004, the Company signed
  a Letter Of Intent (the "LOI") with G7 Limited, a Doha, Qatar registered corporation.
  G7 is an affiliated party to the Company. The LOI outlines the general terms
  and conditions which will govern a more definitive agreement to be entered into
  between the Company and G7, relating to the engagement of the Company as a financial
  partner in certain motion picture production ventures to be carried on by G7.
  Under the LOI, G7 has appointed the Company as the exclusive agent of G7 for
  the purposes of facilitating financing to meet that portion of G7's film production
  budgets that is not met through non-equity financing such as presales, subsidies
  or other similar non-debt financial programs.

7

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It is the intent of the parties that
the Company will, subject to such transactions being qualified or eligible under
applicable securities laws, receive financing funds as a private placement
investment in the Company and to issue common shares of the Company in respect
therefore, at a price per share to be agreed to by the Company and the
participating investors. The Company will, in turn, advance the required films
equity funding to G7.

All funds advanced by the Company to G7
will be advanced to purchase a participating equity interest in certain film(s).
The amount of participating interest in each film to be purchased by the Company
will be negotiated on a case-by-case basis. In addition, the Company will also
be entitled to receive options (also to be negotiated on a case-by-case basis)
entitling the Company to purchase a greater participating interest in a film, up
to an aggregate of fifty percent, with such option being exercisable by the
Company through the issuance of common shares of the Company or as negotiated by
the parties by the payment of cash, or some combination of cash and common
shares of the Company.

The Company's plan during the next
quarter and for the balance of 2006 is to maintain the size and staffing of its
Vancouver, British Columbia head office at the current levels. There are no
plans to hire additional employees as administrative requirements at head office
are now being adequately met by the efforts of the board members the full-time
and temporary staff and consultants. Field operations and construction
activities in Bahrain will be conducted through contracting and sub-contracting
of work.

Off-balance sheet
arrangements

As of the date of this Annual Report,
  the Company does not have any off-balance sheet arrangements that have or are
  reasonably likely to have a current or future effect on the company's financial
  condition, change in financial condition, revenues or expenses, results of operations,
  liquidity, capital expenditures or capital resources that are material to investors.
  The term "off-balance sheet arrangement" generally means any transaction, agreement,
  or other contractual arrangement to which an entity unconsolidated with the
  Company is a party under which the Company has (i) any obligation arising under
  a guarantee contract, derivative instrument or variable interest; or (ii) a
  retained or contingent interest in assets transferred to such entity or similar
  arrangement that serves as credit, liquidity or market risk support for such
  assets.

8

---

|7. | Financial Statements
|-- | --------------------

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005 AND 2004

(Stated in U.S. Dollars)

9

---

|A PARTNERSHIPof
      INCORPORATEDPROFESSIONALS | AMISANOHANSON       
|----------------------------------------------- | --------------------
|                                                | CHARTEREDACCOUNTANTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Stockholders,Strategic Internet Investments,
Incorporated (A Development Stage Company)

We have audited the accompanying consolidated balance sheets of
Strategic Internet Investments, Incorporated (A Development Stage Company) and
subsidiaries as of December 31, 2005 and 2004 and the related consolidated
statements of operations, cash flows and stockholders deficiency for each of
the years in the two year period ended December 31, 2005 and for the period from
inception of the development stage, February 28, 1989 to December 31, 2005.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform an audit to obtain reasonable
assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Strategic Internet Investments, Incorporated and subsidiaries as of
December 31, 2005 and 2004, and the results of their operations and their cash
flows for each of the years in the two year period ended December 31, 2005 and
for the period from inception of the development stage, February 28, 1989 to
December 31, 2005, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements referred to
above have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the Company is in
the development stage, has no established source of revenue and is dependent on
its ability to raise capital from shareholders or other sources to sustain
operations. These factors, along with other matters as set forth in Note 1,
raise substantial doubt that the Company will be able to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

|Vancouver, Canada | AMISANO HANSON     
|----------------- | ---------------------
|May 9, 2006       | Chartered Accountants

750 WEST PENDER STREET, SUITE 604
    TELEPHONE: 604-689-0188VANCOUVER CANADA
    FACSIMILE: 604-689-9773V6C 2T7
    E-MAIL: amishan@telus.net 10


---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company) CONSOLIDATED BALANCE SHEETS(Stated in U.S.
Dollars)

|                                                            |   | December 31, |   |   | December 31, |  
|----------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                            |   | 2005         |   |   | 2004         |  
|                                                            |   |              |   |   |              |  
|ASSETS                                                      |   |              |   |   |              |  
|                                                            |   |              |   |   |              |  
|Current                                                     |   |              |   |   |              |  
|Cash                                                        | $ | 581          |   | $ | 22,987       |  
|Prepaid expenses                                            |   | 141,667      |   |   | 64,030       |  
|                                                            |   |              |   |   |              |  
|                                                            |   | 142,248      |   |   | 87,017       |  
|                                                            |   |              |   |   |              |  
|Equipment  Note 3                                          |   | 1,601        |   |   | 2,286        |  
|Deferred investment costs  Notes 4 and 6                   |   | 1            |   |   | 34,210       |  
|                                                            |   |              |   |   |              |  
|                                                            | $ | 143,850      |   | $ | 123,513      |  
|                                                            |   |              |   |   |              |  
|                                                            |   |              |   |   |              |  
|LIABILITIES                                                 |   |              |   |   |              |  
|                                                            |   |              |   |   |              |  
|Current                                                     |   |              |   |   |              |  
|Accounts payable 
      Note 8                             | $ | 108,022      |   | $ | 110,836      |  
|Due to related parties  Note 8                             |   | 50,991       |   |   | 28,752       |  
|Current portion of loans payable  Notes 5 and
      11     |   | 199,304      |   |   | 183,698      |  
|                                                            |   |              |   |   |              |  
|                                                            |   | 358,317      |   |   | 323,286      |  
|Loans payable  Notes 5 and 11                              |   | -            |   |   | 236,137      |  
|                                                            |   |              |   |   |              |  
|                                                            |   | 358,317      |   |   | 559,423      |  
|                                                            |   |              |   |   |              |  
|STOCKHOLDERS
      DEFICIENCY                              |   |              |   |   |              |  
|                                                            |   |              |   |   |              |  
|Capital Stock  Notes 5, 6, 8
      and 11                  |   |              |   |   |              |  
|Class A
      Convertible Preferred stock, $0.001 par value |   |              |   |   |              |  
|10,000,000 authorized, 198,000 outstanding                  |   | 198          |   |   | 198          |  
|Class B Preferred
      stock, $0.001 par value             |   |              |   |   |              |  
|10,000,000 authorized, none outstanding                     |   |              |   |   |              |  
|Common stock,
      $0.001 par value                        |   |              |   |   |              |  
|100,000,000 authorized                                      |   |              |   |   |              |  
|25,660,326 outstanding (2004: 18,972,675 outstanding)       |   | 25,659       |   |   | 18,971       |  
|Additional paid-in capital                                  |   | 7,720,356    |   |   | 4,348,913    |  
|Deficit accumulated during the development stage            |   | (7,960,680   | ) |   | (4,803,992   | )
|                                                            |   |              |   |   |              |  
|                                                            |   | (214,467     | ) |   | (435,910     | )
|                                                            |   |              |   |   |              |  
|                                                            | $ | 143,850      |   | $ | 123,513      |  
|                                                            |   |              |   |   |              |  
|Nature and Continuance of Operations  Note 1               |   |              |   |   |              |  
|Commitments  Notes 5, 6 and 11                             |   |              |   |   |              |  
|Subsequent Events  Notes 6 and 11                          |   |              |   |   |              |  

SEE ACCOMPANYING NOTES

11

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF OPERATIONS (Stated
in U.S. Dollars)

|                                          |   |                          |   |   |              |   |   | Cumulative       |  
|----------------------------------------- | - | ------------------------ | - | - | ------------ | - | - | ---------------- | -
|                                          |   |                          |   |   |              |   |   | from February    |  
|                                          |   |                          |   |   |              |   |   | 28, 1989(Date    |  
|                                          |   |                          |   |   |              |   |   | of Inception) to |  
|                                          |   | Years ended December 31, |   |   | December 31, |  
|                                          |   | 2005                     |   |   | 2004         |   |   | 2005             |  
|                                          |   |                          |   |   |              |   |   |                  |  
|General and Administrative
      Expenses |   |                          |   |   |              |   |   |                  |  
|Accounting and audit fees                 | $ | 51,227                   |   | $ | 38,093       |   | $ | 167,347          |  
|Amortization                              |   | 685                      |   |   | 732          |   |   | 3,496            |  
|Automobile                                |   | -                        |   |   | 565          |   |   | 565              |  
|Business
      Promotion                  |   | -                        |   |   | 213          |   |   | 213              |  
|Communications                            |   | 39,637                   |   |   | 13,234       |   |   | 96,140           |  
|Consulting fees  Note 8                  |   | 214,083                  |   |   | 124,765      |   |   | 2,264,872        |  
|Interest  Note 8                         |   | 20,831                   |   |   | 36,074       |   |   | 71,965           |  
|Investor
      relations                  |   | 14,533                   |   |   | 26,350       |   |   | 91,385           |  
|Legal fees                                |   | 35,154                   |   |   | 15,386       |   |   | 149,567          |  
|Management fees  Note 8                  |   | 40,440                   |   |   | 932          |   |   | 153,372          |  
|Office and general  Note
      8         |   | 5,223                    |   |   | 17,613       |   |   | 137,351          |  
|Regulatory fees                           |   | 2,393                    |   |   | 1,602        |   |   | 18,680           |  
|Rent  Note 8                             |   | 19,810                   |   |   | 18,533       |   |   | 74,577           |  
|Transfer
      agent fees                 |   | 4,843                    |   |   | 7,031        |   |   | 37,982           |  
|Travel                                    |   | 3,760                    |   |   | 51,154       |   |   | 103,478          |  
|Non-cash compensation charge  Note 6     |   | 25,700                   |   |   | 161,450      |   |   | 455,735          |  
|                                          |   |                          |   |   |              |   |   |                  |  
|Loss before the following:                |   | (478,319                 | ) |   | (513,727     | ) |   | (3,826,725       | )
|                                          |   |                          |   |   |              |   |   |                  |  
|Unauthorized distribution                 |   | -                        |   |   | -            |   |   | (69,116          | )
|Termination fee  Note 7                  |   | -                        |   |   | -            |   |   | (792,000         | )
|Loss on
      foreign exchange            |   | (4,742                   | ) |   | (3,597       | ) |   | (8,339           | )
|Gain on settlement of
      debt          |   | -                        |   |   | -            |   |   | 15,464           |  
|Write-down of deferred investment         |   |                          |   |   |              |   |   |                  |  
|costs  Note 6                            |   | (34,209                  | ) |   | -            |   |   | (34,209          | )
|Write-down of advances to                 |   |                          |   |   |              |   |   |                  |  
|related party                             |   | -                        |   |   | -            |   |   | (606,337         | )
|                                          |   |                          |   |   |              |   |   |                  |  
|Net
      loss for the period             | $ | (517,270                 | ) | $ | (517,324     | ) | $ | (5,321,262       | )
|                                          |   |                          |   |   |              |   |   |                  |  
|Basic loss per share                      | $ | (0.02                    | ) | $ | (0.03        | ) |   |                  |  
|                                          |   |                          |   |   |              |   |   |                  |  
|Weighted average number of common         |   |                          |   |   |              |   |   |                  |  
|shares outstanding                        |   | 23,984,947               |   |   | 18,460,876   |   |   |                  |  

SEE ACCOMPANYING NOTES

12

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated
in U.S. Dollars)

|                                                         |   |                          |   |   |              |   |   | Cumulative from        |  
|-------------------------------------------------------- | - | ------------------------ | - | - | ------------ | - | - | ---------------------- | -
|                                                         |   |                          |   |   |              |   |   | February 28, 1989      |  
|                                                         |   |                          |   |   |              |   |   | (Date of Inception) to |  
|                                                         |   | Years ended December 31, |   |   | December 31, |  
|                                                         |   | 2005                     |   |   | 2004         |   |   | 2005                   |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Operating Activities                                     |   |                          |   |   |              |   |   |                        |  
|Net loss for the period                                  | $ | (517,270                 | ) | $ | (517,324     | ) | $ | (5,321,262             | )
|Adjustments to
      reconcile net loss to net cash used |   |                          |   |   |              |   |   |                        |  
|in operating
      activities:                           |   |                          |   |   |              |   |   |                        |  
|Amortization                                             |   | 685                      |   |   | 732          |   |   | 3,496                  |  
|Communications                                           |   | 28,000                   |   |   | -            |   |   | 28,000                 |  
|Consulting fees                                          |   | 214,083                  |   |   | 81,250       |   |   | 2,144,887              |  
|Gain on settlement of debt                               |   | -                        |   |   | -            |   |   | (15,464                | )
|Legal fees                                               |   | 23,015                   |   |   | -            |   |   | 25,000                 |  
|Management fees                                          |   | -                        |   |   | -            |   |   | 7,000                  |  
|Write-down of advances to related party                  |   | -                        |   |   | -            |   |   | 606,337                |  
|Write-down of deferred investment costs                  |   | 34,209                   |   |   | -            |   |   | 34,209                 |  
|Non-cash compensation charge                             |   | 25,700                   |   |   | 161,450      |   |   | 455,735                |  
|Termination fees                                         |   | -                        |   |   | -            |   |   | 792,000                |  
|Changes in
      non-cash items:                         |   |                          |   |   |              |   |   |                        |  
|Prepaid expenses                                         |   | 2,780                    |   |   | (2,780       | ) |   | -                      |  
|Accounts
      payable                                   |   | 38,371                   |   |   | (79,016      | ) |   | 261,492                |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Net cash used in operating activities                    |   | (150,427                 | ) |   | (366,701     | ) |   | (978,570               | )
|                                                         |   |                          |   |   |              |   |   |                        |  
|Investing Activities                                     |   |                          |   |   |              |   |   |                        |  
|Organization costs                                       |   | -                        |   |   | -            |   |   | (750                   | )
|Acquisition of capital
      assets                      |   | -                        |   |   | (2,069       | ) |   | (4,347                 | )
|Deferred investment costs                                |   | -                        |   |   | -            |   |   | (34,210                | )
|Advances to related
      party                          |   | -                        |   |   | -            |   |   | (606,337               | )
|Due to/from related parties, net                         |   | 22,239                   |   |   | (11,013      | ) |   | 50,991                 |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Net
      cash used in investing activities              |   | 22,239                   |   |   | (2,069       | ) |   | (594,653               | )
|                                                         |   |                          |   |   |              |   |   |                        |  
|Financing Activities                                     |   |                          |   |   |              |   |   |                        |  
|Loans payable                                            |   | 29,629                   |   |   | 275,975      |   |   | 543,001                |  
|Proceeds from issuance of common stock                   |   | 76,153                   |   |   | 115,436      |   |   | 1,032,631              |  
|Payment of offering
      costs                          |   | -                        |   |   | -            |   |   | (27,270                | )
|Additional paid-in capital                               |   | -                        |   |   | -            |   |   | 25,442                 |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Net
      cash provided by financing activities          |   | 105,782                  |   |   | 391,411      |   |   | 1,573,804              |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Increase (decrease) in cash during the period            |   | (22,406                  | ) |   | 22,641       |   |   | 581                    |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Cash, beginning of the period                            |   | 22,987                   |   |   | 346          |   |   | -                      |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Cash, end of the period                                  | $ | 581                      |   | $ | 22,987       |   | $ | 581                    |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Supplementary disclosure of cash
      flows:            |   |                          |   |   |              |   |   |                        |  
|Cash paid for Interest                                   | $ | 10,403                   |   | $ | -            |   | $ | 17,054                 |  
|                                                         |   |                          |   |   |              |   |   |                        |  
|Non-cash Transactions  Note
      7                     |   |                          |   |   |              |   |   |                        |  

SEE ACCOMPANYING NOTES

13

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIENCY For the period from February 28, 1989 (Date of Inception) to
December 31, 2005 (Stated in U.S. Dollars)

|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   | Deficit     |   |   |         |  
|----------------------------------------------------- |  | --------------- |  | - | --------------- |  |  | ------- |  | - | --------------- |  | - | ---------- |  | - | ----------- | - | - | ------- | -
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   | Accumulated |   |   |         |  
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   | Additional |  |   | During the  |   |   |         |  
|                                                      |  | Preferred Stock |  |   | Common Stock    |  |  | Paid-In |  |   | Development     |  |   |            | 
|                                                      |  | Shares          |  |   | Par
      Value |  |  | Shares  |  |   | Par
      Value |  |   | Capital    |  |   | Stage       |   |   | Total   |  
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance, February 28, 1989                            |  | -               |  | $ | -               |  |  | -       |  | $ | -               |  | $ | -          |  | $ | -           |   | $ | -       |  
|Issuance of stock to insiders on                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|March 7,
      1989                
        at $0.30 |  | -               |  |   | -               |  |  | 33,347  |  |   | 33              |  |   | 9,967      |  |   | -           |   |   | 10,000  |  
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance December 31, 1989                             |  | -               |  |   | -               |  |  | 33,347  |  |   | 33              |  |   | 9,967      |  |   | -           |   |   | 10,000  |  
|Issuance of stock during public                       |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|offering for
      $3.00 per share, net of            |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|offering costs of $27,270                             |  | -               |  |   | -               |  |  | 33,348  |  |   | 33              |  |   | 72,697     |  |   | -           |   |   | 72,730  |  
|Net loss                                              |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (84,159     | ) |   | (84,159 | )
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance, December 31, 1990                            |  | -               |  |   | -               |  |  | 66,695  |  |   | 66              |  |   | 82,664     |  |   | (84,159     | ) |   | (1,429  | )
|Net
      loss                                        |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (3,416      | ) |   | (3,416  | )
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance, December 31, 1991                            |  | -               |  |   | -               |  |  | 66,695  |  |   | 66              |  |   | 82,664     |  |   | (85,575     | ) |   | (4,845  | )
|Net loss                                              |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (2,713      | ) |   | (2,713  | )
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance, December 31, 1992                            |  | -               |  |   | -               |  |  | 66,695  |  |   | 66              |  |   | 82,664     |  |   | (90,288     | ) |   | (7,558  | )
|Net
      loss                                        |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (1,614      | ) |   | (1,614  | )
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance, December 31, 1993                            |  | -               |  |   | -               |  |  | 66,695  |  |   | 66              |  |   | 82,664     |  |   | (91,902     | ) |   | (9,172  | )
|Net loss                                              |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (1,863      | ) |   | (1,863  | )
|                                                      |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|Balance December 31, 1994                             |  | -               |  |   | -               |  |  | 66,695  |  |   | 66              |  |   | 82,664     |  |   | (93,765     | ) |   | (11,035 | )
|Issuance of stock for services                        |  |                 |  |   |                 |  |  |         |  |   |                 |  |   |            |  |   |             |   |   |         |  
|rendered                    
       at $0.03         |  | -               |  |   | -               |  |  | 50,000  |  |   | 50              |  |   | 1,450      |  |   | -           |   |   | 1,500   |  
|Contributed capital                                   |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | 24,842     |  |   | -           |   |   | 24,842  |  
|Net loss                                              |  | -               |  |   | -               |  |  | -       |  |   | -               |  |   | -          |  |   | (16,735     | ) |   | (16,735 | )

Contd

SEE ACCOMPANYING NOTES

14

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIENCY For the period from February 28, 1989 (Date of Inception) to
December 31, 2005(Stated in U.S. Dollars)

|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  | Deficit     |   |  |          |  
|----------------------------------------------- | --------------- |  |  | ------------ |  |  | --------- |  |  | ----------- |  |  | ---------- | - |  | ----------- | - |  | -------- | -
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  | Accumulated |   |  |          |  
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  | Additional |   |  | During the  |   |  |          |  
|                                                | Preferred Stock |  |  | Common Stock |  |  | Paid-In   |  |  | Development |  |  |            |  
|                                                | Shares          |  |  | Par Value    |  |  | Shares    |  |  | Par Value   |  |  | Capital    |   |  | Stage       |   |  | Total    |  
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|Balance, December 31, 1995                      | -               |  |  | -            |  |  | 116,695   |  |  | 116         |  |  | 108,956    |   |  | (110,500    | ) |  | (1,428   | )
|Net loss                                        | -               |  |  | -            |  |  | -         |  |  | -           |  |  | -          |   |  | (9,068      | ) |  | (9,068   | )
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|Balance December 31, 1996                       | -               |  |  | -            |  |  | 116,895   |  |  | 116         |  |  | 108,956    |   |  | (119,568    | ) |  | (10,496  | )
|Issuance of stock for cash     
       - $0.011 | -               |  |  | -            |  |  | 2,000,000 |  |  | 2,000       |  |  | 19,300     |   |  | -           |   |  | 21,300   |  
|Contributed capital                             | -               |  |  | -            |  |  | -         |  |  | -           |  |  | 600        |   |  | -           |   |  | 600      |  
|Net loss                                        | -               |  |  | -            |  |  | -         |  |  | -           |  |  | -          |   |  | (22,261     | ) |  | (22,261  | )
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|Balance, December 31, 1997                      | -               |  |  | -            |  |  | 2,116,695 |  |  | 2,116       |  |  | 128,856    |   |  | (141,829    | ) |  | (10,857  | )
|Issuance of stock services                      |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|-
      at $0.001                               | -               |  |  | -            |  |  | 7,000,000 |  |  | 7,000       |  |  | -          |   |  | -           |   |  | 7,000    |  
|-
      at $0.01                                | -               |  |  | -            |  |  | 620,000   |  |  | 620         |  |  | 5,580      |   |  | -           |   |  | 6,200    |  
|Net loss                                        | -               |  |  | -            |  |  | -         |  |  | -           |  |  | -          |   |  | (52,308     | ) |  | (52,308  | )
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|Balance, December 31, 1998                      | -               |  |  | -            |  |  | 9,736,695 |  |  | 9,736       |  |  | 134,436    |   |  | (194,137    | ) |  | (49,965  | )
|Net loss                                        | -               |  |  | -            |  |  | -         |  |  | -           |  |  | -          |   |  | (35,995     | ) |  | (35,995  | )
|                                                |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|Balance, December 31, 1999                      | -               |  |  | -            |  |  | 9,736,695 |  |  | 9,736       |  |  | 134,436    |   |  | (230,132    | ) |  | (85,960  | )
|Issuance of stock for cash                      |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|pursuant to a private placement                 |                 |  |  |              |  |  |           |  |  |             |  |  |            |   |  |             |   |  |          |  
|
      at $0.30                                | -               |  |  | -            |  |  | 1,133,334 |  |  | 1,133       |  |  | 338,867    |   |  | -           |   |  | 340,000  |  
|Issue of stock for finders fee                  | -               |  |  | -            |  |  | 50,000    |  |  | 50          |  |  | (50        | ) |  | -           |   |  | -        |  
|Net loss                                        | -               |  |  | -            |  |  | -         |  |  | -           |  |  | -          |   |  | (336,431    | ) |  | (336,431 | )
|Non-cash compensation charge                    | -               |  |  | -            |  |  | -         |  |  | -           |  |  | 78,707     |   |  | -           |   |  | 78,707   |  

Contd

SEE ACCOMPANYING NOTES

15

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIENCY For the period from February 28, 1989 (Date of Inception) to
December 31, 2005 (Stated in U.S. Dollars)

|                                                          |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  | Deficit     |   |  |            |  
|--------------------------------------------------------- |  | --------------- |  |  | --------------- |  |  | ---------- |  |  | --------------- |  |  | ---------- | - |  | ----------- | - |  | ---------- | -
|                                                          |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  | Accumulated |   |  |            |  
|                                                          |  |                 |  |  |                 |  |  |            |  |  |                 |  |  | Additional |   |  | During the  |   |  |            |  
|                                                          |  | Preferred Stock |  |  | Common Stock    |  |  | Paid-In    |  |  | Development     |  |  |            |  
|                                                          |  | Shares          |  |  | Par
      Value |  |  | Shares     |  |  | Par
      Value |  |  | Capital    |   |  | Stage       |   |  | Total      |  
|                                                          |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  |             |   |  |            |  
|Balance December 31, 2000                                 |  | -               |  |  | -               |  |  | 10,920,029 |  |  | 10,919          |  |  | 551,960    |   |  | (566,563    | ) |  | (3,684     | )
|Issuance of stock for services - at $0.50                 |  | -               |  |  | -               |  |  | 328,356    |  |  | 328             |  |  | 163,851    |   |  | -           |   |  | 164,179    |  
|- at $1.55                                                |  | -               |  |  | -               |  |  | 13,383     |  |  | 13              |  |  | 20,731     |   |  | -           |   |  | 20,744     |  
|-
      at $3.50                                          |  | -               |  |  | -               |  |  | 366,667    |  |  | 367             |  |  | 1,282,964  |   |  | -           |   |  | 1,283,331  |  
|Issuance of stock for cash
      pursuant to a            |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  |             |   |  |            |  
|private placement            -
      at $0.30             |  | -               |  |  | -               |  |  | 883,332    |  |  | 883             |  |  | 264,117    |   |  | -           |   |  | 265,000    |  
|Issuance of stock pursuant to
      the                   |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  |             |   |  |            |  
|exercise of warrants        
      - at $2.00             |  | -               |  |  | -               |  |  | 28,800     |  |  | 29              |  |  | 57,571     |   |  | -           |   |  | 57,600     |  
|Less: Issue costs                                         |  | -               |  |  | -               |  |  | -          |  |  | -               |  |  | (17,858    | ) |  | -           |   |  | (17,858    | )
|Net loss                                                  |  | -               |  |  | -               |  |  | -          |  |  | -               |  |  | -          |   |  | (2,296,406  | ) |  | (2,296,406 | )
|Non-cash compensation charge                              |  | -               |  |  | -               |  |  | -          |  |  | -               |  |  | 136,378    |   |  | -           |   |  | 136,378    |  
|                                                          |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  |             |   |  |            |  
|Balance, December 31, 2001                                |  | -               |  |  | -               |  |  | 12,540,567 |  |  | 12,539          |  |  | 2,459,714  |   |  | (2,862,969  | ) |  | (390,716   | )
|Issuance of stock for prepaid consulting                  |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  | -           |   |  |            |  
|-
      at $0.35                                          |  | -               |  |  | -               |  |  | 80,000     |  |  | 80              |  |  | 27,920     |   |  | -           |   |  | 28,000     |  
|Issuance of stock for deferred investment                 |  |                 |  |  |                 |  |  |            |  |  |                 |  |  |            |   |  |             |   |  |            |  
|costs                                   
      - at $0.05 |  | -               |  |  | -               |  |  | 1,300,000  |  |  | 1,300           |  |  | 63,700     |   |  | -           |   |  | 65,000     |  
|Issuance of stock for services - at $0.05                 |  | -               |  |  | -               |  |  | 100,000    |  |  | 100             |  |  | 4,900      |   |  | -           |   |  | 5,000      |  
|-
      at $0.055                                         |  | -               |  |  | -               |  |  | 60,000     |  |  | 60              |  |  | 3,240      |   |  | -           |   |  | 3,300      |  
|-
      at $0.10                                          |  | -               |  |  | -               |  |  | 105,000    |  |  | 105             |  |  | 10,395     |   |  | -           |   |  | 10,500     |  
|-
      at $0.148                                         |  | -               |  |  | -               |  |  | 27,000     |  |  | 27              |  |  | 3,973      |   |  | -           |   |  | 4,000      |  
|-
      at $0.20                                          |  | -               |  |  | -               |  |  | 175,000    |  |  | 175             |  |  | 34,825     |   |  | -           |   |  | 35,000     |  
|-
      at $0.209                                         |  | -               |  |  | -               |  |  | 17,143     |  |  | 17              |  |  | 3,583      |   |  | -           |   |  | 3,600      |  
|-
      at $0.35                                          |  | -               |  |  | -               |  |  | 120,000    |  |  | 120             |  |  | 41,880     |   |  | -           |   |  | 42,000     |  
|Issuance of stock for
      debt          - at $0.20      |  | -               |  |  | -               |  |  | 458,135    |  |  | 458             |  |  | 91,169     |   |  | -           |   |  | 91,627     |  
|-
      at $0.209                                         |  | -               |  |  | -               |  |  | 222,751    |  |  | 223             |  |  | 46,156     |   |  | -           |   |  | 46,379     |  
|Net loss                                                  |  | -               |  |  | -               |  |  | -          |  |  | -               |  |  | -          |   |  | (214,758    | ) |  | (214,758   | )

Contd

SEE ACCOMPANYING NOTES

16

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIENCY For the period from February 28, 1989 (Date of Inception) to
December 31, 2005 (Stated in U.S. Dollars)

|                                                          |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  | Deficit     |   |  |            |  
|--------------------------------------------------------- |  | --------------- |  |  | ------------ |  |  | ---------- | - |  | ----------- | - |  | ---------- | - |  | ----------- | - |  | ---------- | -
|                                                          |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  | Accumulated |   |  |            |  
|                                                          |  |                 |  |  |              |  |  |            |   |  |             |   |  | Additional |   |  | During the  |   |  |            |  
|                                                          |  | Preferred Stock |  |  | Common Stock |  |  | Paid-In    |   |  | Development |   |  |            |  
|                                                          |  | Shares          |  |  | Par Value    |  |  | Shares     |   |  | Par Value   |   |  | Capital    |   |  | Stage       |   |  | Total      |  
|                                                          |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|Balance, December 31, 2002                                |  | -               |  |  | -            |  |  | 15,205,596 |   |  | 15,204      |   |  | 2,791,455  |   |  | (3,077,727  | ) |  | (271,068   | )
|Non-cash compensation charge                              |  | -               |  |  | -            |  |  | -          |   |  | -           |   |  | 53,500     |   |  | -           |   |  | 53,500     |  
|Issue of stock for services    
       at $0.14          |  | -               |  |  | -            |  |  | 1,450,000  |   |  | 1,450       |   |  | 201,550    |   |  | -           |   |  | 203,000    |  
|Issue of stock for cash pursuant to a private             |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|placement                 
       at $0.10               |  | -               |  |  | -            |  |  | 65,000     |   |  | 650         |   |  | 64,350     |   |  | -           |   |  | 65,000     |  
|Net loss                                                  |  | -               |  |  | -            |  |  | -          |   |  | -           |   |  | -          |   |  | (1,208,941  | ) |  | (1,208,941 | )
|Issued for termination fee     - at $4.00                 |  | 198,000         |  |  | 198          |  |  | -          |   |  | -           |   |  | 791,802    |   |  | -           |   |  | 792,000    |  
|                                                          |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|Balance, December 31, 2003                                |  | 198,000         |  |  | 198          |  |  | 17,305,596 |   |  | 17,304      |   |  | 3,902,657  |   |  | (4,286,668  | ) |  | (366,509   | )
|Non-cash compensation charge                              |  | -               |  |  | -            |  |  | -          |   |  | -           |   |  | 161,450    |   |  | -           |   |  | 161,450    |  
|Issue of stock for cash pursuant to the exercise
      of |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|share purchase warrants  at $0.10                        |  | -               |  |  | -            |  |  | 320,000    |   |  | 320         |   |  | 31,680     |   |  | -           |   |  | 32,000     |  
| at $0.05                                                |  | -               |  |  | -            |  |  | 643,715    |   |  | 644         |   |  | 31,542     |   |  | -           |   |  | 32,186     |  
|Issue of stock for cash pursuant to the exercise of       |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|share purchase options         
      at $0.25           |  | -               |  |  | -            |  |  | 205,000    |   |  | 205         |   |  | 51,045     |   |  | -           |   |  | 51,250     |  
|Issue of stock for debt               
      at $0.05    |  | -               |  |  | -            |  |  | 563,000    |   |  | 563         |   |  | 29,437     |   |  | -           |   |  | 30,000     |  
|
      at $0.06                                          |  | -               |  |  | -            |  |  | 825,364    |   |  | 825         |   |  | 47,712     |   |  | -           |   |  | 48,537     |  
|
      at $0.30                                          |  | -               |  |  | -            |  |  | 50,000     |   |  | 50          |   |  | 14,950     |   |  | -           |   |  | 15,000     |  
|Issuance of stock for services  
       at $2.00         |  | -               |  |  | -            |  |  | 10,000     |   |  | 10          |   |  | 19,990     |   |  | -           |   |  | 20,000     |  
|
      at $0.35                                          |  | -               |  |  | -            |  |  | 350,000    |   |  | 350         |   |  | 122,150    |   |  | -           |   |  | 122,500    |  
|Cancellation of stock
      issued for deferred           |  |                 |  |  |              |  |  |            |   |  |             |   |  |            |   |  |             |   |  |            |  
|Investment costs                    
        at $0.05    |  |                 |  |  |              |  |  | (1,300,000 | ) |  | (1,300      | ) |  | (63,700    | ) |  | -           |   |  | (65,000    | )
|Net loss                                                  |  | -               |  |  | -            |  |  | -          |   |  | -           |   |  | -          |   |  | (517,324    | ) |  | (517,324   | )

Contd

SEE ACCOMPANYING NOTES

17

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A
Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
DEFICIENCY For the period from February 28, 1989 (Date of Inception) to
December 31, 2005 (Stated in U.S. Dollars)

|                                                          |  |                 |  |   |              |  |  |            |  |   |                 |  |   |            |  |   | Deficit     |   |   |          |  
|--------------------------------------------------------- |  | --------------- |  | - | ------------ |  |  | ---------- |  | - | --------------- |  | - | ---------- |  | - | ----------- | - | - | -------- | -
|                                                          |  |                 |  |   |              |  |  |            |  |   |                 |  |   |            |  |   | Accumulated |   |   |          |  
|                                                          |  |                 |  |   |              |  |  |            |  |   |                 |  |   | Additional |  |   | During the  |   |   |          |  
|                                                          |  | Preferred Stock |  |   | Common Stock |  |  | Paid-In    |  |   | Development     |  |   |            | 
|                                                          |  | Shares          |  |   | Par Value    |  |  | Shares     |  |   | Par
      Value |  |   | Capital    |  |   | Stage       |   |   | Total    |  
|                                                          |  |                 |  |   |              |  |  |            |  |   |                 |  |   |            |  |   |             |   |   |          |  
|Balance, December 31, 2004                                |  | 198,000         |  | $ | 198          |  |  | 18,972,675 |  | $ | 18,971          |  | $ | 4,348,913  |  | $ | (4,803,992  | ) | $ | (435,910 | )
|Non-cash compensation charge                              |  | -               |  |   | -            |  |  | -          |  |   | -               |  |   | 25,700     |  |   | -           |   |   | 25,700   |  
|Issue of stock for cash
      pursuant to the exercise of |  |                 |  |   |              |  |  |            |  |   |                 |  |   |            |  |   |             |   |   |          |  
|share purchase warrants      
      at $0.07             |  | -               |  |   | -            |  |  | 75,820     |  |   | 76              |  |   | 5,232      |  |   | -           |   |   | 5,308    |  
|
      at $0.10                                          |  | -               |  |   | -            |  |  | 357,760    |  |   | 357             |  |   | 35,418     |  |   | -           |   |   | 35,775   |  
|
      at $0.11                                          |  | -               |  |   | -            |  |  | 299,724    |  |   | 300             |  |   | 31,270     |  |   | -           |   |   | 31,570   |  
|
      at $0.21                                          |  | -               |  |   | -            |  |  | 16,803     |  |   | 17              |  |   | 3,483      |  |   | -           |   |   | 3,500    |  
|Issue of stock for debt           
      at $0.39        |  | -               |  |   | -            |  |  | 635,901    |  |   | 636             |  |   | 249,524    |  |   | -           |   |   | 250,160  |  
|Issuance of stock for services 
       at $0.25          |  | -               |  |   | -            |  |  | 950,000    |  |   | 950             |  |   | 236,550    |  |   | -           |   |   | 237,500  |  
|
      at $0.36                                          |  | -               |  |   | -            |  |  | 100,000    |  |   | 100             |  |   | 35,900     |  |   | -           |   |   | 36,000   |  
|
      at $0.50                                          |  | -               |  |   | -            |  |  | 121,000    |  |   | 121             |  |   | 60,379     |  |   | -           |   |   | 60,500   |  
|
      at $0.54                                          |  | -               |  |   | -            |  |  | 20,000     |  |   | 20              |  |   | 10,680     |  |   | -           |   |   | 10,700   |  
|
      at $0.84                                          |  | -               |  |   | -            |  |  | 50,000     |  |   | 50              |  |   | 41,950     |  |   | -           |   |   | 42,000   |  
|Issuance of stock dividend    
       at $0.65           |  | -               |  |   | -            |  |  | 4,060,643  |  |   | 4,061           |  |   | 2,635,357  |  |   | (2,639,418  | ) |   | -        |  
|Net loss                                                  |  | -               |  |   | -            |  |  | -          |  |   | -               |  |   | -          |  |   | (517,270    | ) |   | (517,270 | )
|                                                          |  |                 |  |   |              |  |  |            |  |   |                 |  |   |            |  |   |             |   |   |          |  
|Balance, December 31, 2005                                |  | 198,000         |  | $ | 198          |  |  | 25,660,326 |  | $ | 25,659          |  | $ | 7,720,356  |  | $ | (7,960,680  | ) | $ | (214,467 | )

SEE ACCOMPANYING NOTES

18

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|1. | Nature and Continuance of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company is in the development stage and is devoting
      its efforts to developing The Dream Island Resort project in Manama,
      Bahrain. The Dream Island Resort project will be an integrated resort,
      entertainment, hotel and real estate facility to be built on a 41 acre
      man-made island off the north eastern coast of Manama, Bahrain (Note
      6).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These financial statements have been prepared in
      accordance with generally accepted accounting principles applicable to a
      going concern, which assumes that the Company will be able to meet its
      obligations and continue its operations for its next fiscal year.
      Realization values may be substantially different from carrying values as
      shown and these financial statements do not give effect to adjustments
      that would be necessary to the carrying values and classification of
      assets and liabilities should the Company be unable to continue as a going
      concern. At December 31, 2005, the Company had not yet achieved profitable
      operations, has accumulated losses of $7,960,680 since its inception, has
      a working capital deficiency of $216,069 and expects to incur further
      losses in the development of its business, all of which casts substantial
      doubt about the Companys ability to continue as a going concern. The
      Companys ability to continue as a going concern is dependent upon its
      ability to generate future profitable operations and/or to obtain the
      necessary financing to meet its obligations and repay its liabilities
      arising from normal business operations when they come due. Management has
      no formal plan in place to address this concern but considers that the
      Company will be able to obtain additional funds by equity financing and/or
      related party advances, however there is no assurance of additional
      funding being available. The Company has historically satisfied its
      capital needs primarily by issuing equity securities. Management plans to
      continue to provide for its capital needs during the year ended December
      31, 2006 by issuing equity securities. These financial statements do not
      include any adjustments to the amount and classification of assets and
      liabilities that may be necessary should the Company be unable to continue
      as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company was incorporated in Colorado on February 28,
      1989 as Jefferson Capital Corporation. Effective June 13, 1990 the Company
      changed its name to Ohio & Southwestern Energy Company. Effective July
      1, 2001, the Company and Strategic Internet Investments, Incorporated
      (Strategic), an inactive Delaware corporation incorporated on March 2,
      2001, were merged. All common shares outstanding of the Company were
      converted into an equal number of common shares of Strategic. The purpose
      of this merger was to change the corporate jurisdiction of the Company
      from Colorado to Delaware and to change the name of the Company. The
      surviving corporation of the merger is Strategic, a Delaware
      corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | Summary of Significant Accounting
  Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The consolidated financial statements of the Company have
      been prepared in accordance with accounting principles generally accepted
      in the United States of America. Because a precise determination of many
      assets and liabilities is dependent upon future events, the preparation of
      financial statements for a period necessarily involves the use of
      estimates, which have been made using careful judgment. Actual results may
      differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The consolidated financial statements have, in
      managements opinion, been properly prepared within the framework of the
      significant accounting policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | These consolidated financial statements included the
      accounts of the Company and its wholly-owned subsidiaries Strategic
      Internet Investment Canada Inc. and 3851630 Canada Inc. Both of these
      subsidiary companies are dormant and were incorporated by the Company in
      March 2001. All significant inter- company transactions were
      eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

19

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|2. | Summary of Significant Accounting Policies
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Development Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company is a development stage company as defined in
      Statement of Financial Accounting Standards (FAS) No. 7. The Company is
      devoting substantially all of its present efforts to establish a new
      business and none of its planned principal operations have commenced. All
      losses accumulated since inception have been considered as part of the
      Companys development stage activities.                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Equipment and Amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Equipment is recorded at cost and consists of computer
      equipment. The Company provides for amortization using the declining
      balance method at the rate of 30% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Deferred Investment Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Deferred investment costs are recorded at cost and
      represent preliminary costs incurred with respect to the acquisition of an
      investment. These costs will be deferred until the Company completes the
      acquisition, at which time, the costs will be added to the cost of the
      investment. These costs will be written-off if the Company does not
      complete the acquisition or written down to its net realizable value if it
      is determined that there is an impairment of its value.                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company follows FAS No. 109, Accounting for Income
      Taxes which requires the use of the asset and liability method of
      accounting of income taxes. Under the assets and liability method of FAS
      No. 109, deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to temporary differences between the
      financial statements carrying amounts of existing assets and liabilities
      and loss carry forwards and their respective tax bases. Deferred tax
      assets and liabilities are measured using enacted tax rates expected to
      apply to taxable income in the years in which those temporary differences
      are expected to be recovered or settled.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Basic Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company reports basic loss per share in accordance
      with FAS No. 128, Earnings Per Share. Basic loss per share is computed
      using the weighted average number of shares outstanding during the years.
      Diluted loss per share has not been provided, as it would be
      antidilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Foreign currency transactions are translated into U.S.
      dollars, the functional and reporting currency, by the use of the exchange
      rate in effect at then date of the transaction, in accordance with FAS No.
      52, Foreign Currency Translation. At each balance sheet date, recorded
      balances that are denominated in a currency other than U.S. dollars are
      adjusted to reflect the current exchange rate.                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The carrying value of cash, accounts payable, due to/from
      related parties and loans payable approximates fair value because of the
      short maturity of these instruments. The long-term portion of loans
      payable also approximates fair value. Unless otherwise noted, it is
      managements opinion that the Company is not exposed to significant
      interest, currency or credit risks arising from these financial
      instruments.                                                                                                                                                                                                                                                                                 

20

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|2. | Summary of Significant Accounting Policies
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has elected to apply the intrinsic value
      method of APB No. 25, Accounting for Stock Issued to Employees (APB
      25) and related interpretations in accounting for its stock options on
      options granted to employees and directors. Under APB 25, compensation
      expense is only recorded to the extent that the exercise price is less
      than the market value of the underlying stock on the measurement date,
      which is usually the date of grant. Stock-based compensation for employees
      is recognized on an accelerated basis over the vesting period of the
      individual options. Stock options granted to non-employees are accounted
      for under Statement of Financial Accounting Standards (FAS) No. 123
      Accounting for Stock-based Compensation and are recognized at the fair
      value of the options as determined by an option pricing model as the
      related services are provided and the options earned. Pro forma fair value
      information with respect to options granted to employees and directors is
      disclosed in accordance with FAS 123.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | In December 31, 2004, the FASB issued FAS 123R
      Share-based Payment, a revision to FAS 123. FAS 123R replaces existing
      requirements under FAS 123 and APB 25, and requires public companies to
      recognize the cost of employee services received in exchange for equity
      instruments, based on the grant- date fair value of those instruments,
      with limited exceptions. FAS 123R also affects the pattern in which
      compensation cost is recognized, the accounting for employee share
      purchase plans and the accounting for income tax effects of share-based
      payment transactions. For small business filers, FAS 123R will be
      effective for interim or annual periods beginning after December 15, 2005.
      Early adoption is permitted in periods in which financial statements have
      not yet been issued. The Company expects to adopt FAS on January 1, 2006.
      As permitted by FAS 123, the Company currently accounts for share-based
      payments to employees using APB 25s intrinsic value method. Accordingly,
      the adoption of FAS 123Rs fair value method may have a significant impact
      on our statement of operation, although it will have no impact on our
      overall financial position. The impact of adoption of FAS 123R cannot be
      predicted at this time because it will depend on levels of share-based
      payments granted in the future. However, had we adopted FAS 123R in prior
      periods, the impact of that standard would have approximated the impact of
      FAS 123 as described in the disclosure of pro forma net income and
      earnings per share in Note 6 to our consolidated financial
    statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3. | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

2005
    
    2004Accumulated
    
    
    
    AccumulatedCost
    amortization
    Net
    
    Cost
    amortization
    NetComputer equipment
    $4,348
    $2,747
    $1,601
    
    $4,348
    $2,062
    $2,286


|4. | Deferred Investment Costs Note 6                                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                
|   | Deferred investment costs consist of consultants fees
      and payments to reimburse Star Leisure and Entertainment Inc. with respect
      to the acquisition of Gulf Star World Development W.L.L., net of a write-
      down to a nominal value of $1.00.

21

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|5. | Loans Payable  Note 11
|-- | -----------------------

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | December 31, |   |   | December 31, |  
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2005         |   |   | 2004         |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | a) | Loan payable
        to a company controlled by a director of the Company including accrued
        interest of $406 (2004: $9,198) The loan is unsecured, bearing interest
        at 12% per annum and is repayable on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $ | 7,426        |   | $ | 29,198       |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | b) | Loan payable
        to a shareholder including accrued interest of $3,376 (2004: $2,658 ).
        The loan is unsecured, bears interest at 8% per annum and is repayable
        upon demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 9,411        |   |   | 8,693        |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | c) | Loans payable
        to companies controlled by directors of the Company. The loans are unsecured,
        non-interest bearing, repayable upon demand, in Canadian funds in the
        amount of Cdn$52,026.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 44,638       |   |   | -            |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | d) | Loan payable
        to a company controlled by a director of the Company including accrued
        interest of $732 (2004: $52) The loan is unsecured, bearing interest at
        10% per annum and is repayable upon demand. This loan and accrued interest
        is payable in Canadian funds in the amount of Cdn$11,070.                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 9,522        |   |   | 17,652       |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | e) | Loans payable
        to a company controlled by a shareholder of the Company, including accrued
        interest payable of $NIL (2004: 20,914 ), pursuant to Convertible Loan
        Agreements. Interest is calculated at 10% per annum. The loans mature
        on various dates to September 23, 2006. The lender may at anytime convert
        the principal sum plus accrued interest into units of the Company. Each
        unit will consist of one common share plus one common share purchase warrant.
        In January 2005 this loan and accrued interest was converted into 635,901
        units at an average price of $0.39 per share.                                                                                             |   | -            |   |   | 248,053      |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| | f) | Loans payable to a company controlled
        by a director of the Company, including accrued interest of $25,100 (2004:
        $13,033), pursuant to, and secured by, Convertible Loan Agreements. Interest
        is calculated at 10% per annum. $42,000 of the loans are due on demand
        and $61,206 of the loans mature on various dates to January 31, 2006.
        The lender may at anytime convert $61,206 of the principal sum plus all
        of the accrued interest into units of the Company. Each unit will consist
        of one common share plus one common share purchase warrant. Conversion
        of this loan and associated warrants to equity will be at various rates
        ranging from 0.17 to $0.20 per share. |   | 128,307      |   |   | 116,239      |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 199,304      |   |   | 419,835      |  
| |    | Less:
      current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | (199,304     | ) |   | (183,698     | )
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |              |   |   |              |  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $ | -            |   | $ | 236,137      |  

Pursuant to the terms of the Convertible Loan Agreements, the
exercise price and number of shares were adjusted as a result of a 20% stock
dividend granted by the Company on March 4, 2005.

22

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|6. | Capital Stock Notes 5, 8 and 11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Class A Convertible Preferred Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Class A convertible preferred shares have a par value
      of $0.001 and are convertible to common shares at $4.00 per share during
      the first 180 days following issuance, and thereafter at the average of
      twenty consecutive days closing prices, but shall not be less than $1.50
      per share or greater than $6.00 per share. The Company has the right to
      redeem its Class A convertible preferred stock at any time by paying to
      the holders thereof the sum of $4 per share.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Companys board of directors approved a stock option
      plan. Under the plan directors, employees and consultants may be granted
      options to purchase common stock of the Company at a price of not less
      than 100% of the fair market value of the stock. The total number of
      options granted must not exceed 15% of the outstanding common stock of the
      Company. The plan expires on July 1, 2017.                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company granted share purchase options to directors,
      employees, and consultants of the Company at the closing price of the
      Companys common stock on the date of the grants. The options have been
      granted with a term of 5 years. The stock options are exercisable at 20%
      on the date of grant, and then 20% every three months thereafter, such
      that they are fully exercisable after a period of one year from the date
      of grant.                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During the previous two years, the change in share
      purchase options outstanding are as follows:                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                                            |  |           |   |   | Weighted       | 
| | -------------------------------------------------------------------------- |  | --------- | - | - | -------------- | 
| |                                                                            |  |           |   |   | Average        | 
| |                                                                            |  | Shares    |   |   | Exercise Price | 
| |                                                                            |  |           |   |   |                | 
| | Options outstanding at December 31,2003                                    |  | 1,765,000 |   | $ | 0.25           | 
| | Exercised during the year                                                  |  | (205,000  | ) | $ | 0.25           | 
| | Granted during the year                                                    |  | 100,000   |   | $ | 0.35           | 
| |                                                                            |  | 25,000    |   | $ | 0.63           | 
| |                                                                            |  | 90,000    |   | $ | 0.40           | 
| |                                                                            |  |           |   |   |                | 
| | Options outstanding at December 31, 2004                                   |  | 1,775,000 |   | $ | 0.27           | 
| |                                                                            |  |           |   |   |                | 
| | Options outstanding at December 31, 2004
      Adjusted for stock dividend |  | 2,130,000 |   | $ | 0.22           | 
| |                                                                            |  |           |   |   |                | 
| | Cancelled during the year                                                  |  | (120,000  | ) | $ | 0.21           | 
| |                                                                            |  |           |   |   |                | 
| | Options outstanding at December 31,2005                                    |  | 2,010,000 |   | $ | 0.22           | 

Pursuant to the terms of the Stock Option Plan, the exercise price and
      number of shares were adjusted as a result of a 20% stock dividend granted
      by the Company on March 4, 2005. At December 31, 2005, of the total outstanding share purchase options,
      2,010,000 (2004  2,029,200; post dividend adjustment) were exercisable.


23

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|6. | Capital Stock Notes 5, 8 and 11 
  (contd)                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                           
|   | Commitments  (contd)                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                           
|   | Stock-based Compensation  (contd)                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                           
|   | As no options were granted during the year ending
      December 31, 2005, the total non-cash compensation charge determined is
      NIL (2004 - $120,900). The stock options have a graded vesting schedule,
      the total compensation cost recognized is as
follows:

| |                                                      |   |                         |   |   |              |   |   | Cumulative from |  
| | ---------------------------------------------------- | - | ----------------------- | - | - | ------------ | - | - | --------------- | -
| |                                                      |   |                         |   |   |              |   |   | February 28,    |  
| |                                                      |   |                         |   |   |              |   |   | 1989(Date of    |  
| |                                                      |   |                         |   |   |              |   |   | Inception) to   |  
| |                                                      |   | Year ended December 31, |   |   | December 31, |  
| |                                                      |   | 2005                    |   |   | 2004         |   |   | 2005            |  
| |                                                      |   |                         |   |   |              |   |   |                 |  
| | Total non-cash compensation
      charge vested      | $ | 31,300                  |   | $ | 354,350      |   | $ | 955,657         |  
| | Employees non-cash compensation charge              |   | (5,600                  | ) |   | (192,900     | ) |   | (499,922        | )
| |                                                      |   |                         |   |   |              |   |   |                 |  
| | Consultants non-cash compensation charge recognized | $ | 25,700                  |   | $ | 161,450      |   | $ | 455,735         |  

Under SFAS No. 123, if the Company
elects to follow APBO No. 25, in respect to the employees stock options, it is
required to present pro-forma information as to the effect on income and
earnings per share as if the Company had accounted for its employee stock
options under the fair value method of that statement. Had compensation cost
been determined based on the fair value at the grant dates for those options
issued to officers, directors and employees, the Companys net loss and loss per
share would have been adjusted to the pro-forma amounts indicated below:

| |                                          |   |                         |   |   |              |   |   | Cumulative from |  
| | ---------------------------------------- | - | ----------------------- | - | - | ------------ | - | - | --------------- | -
| |                                          |   |                         |   |   |              |   |   | February 28,    |  
| |                                          |   |                         |   |   |              |   |   | 1989 (Date of   |  
| |                                          |   |                         |   |   |              |   |   | Inception) to   |  
| |                                          |   | Year ended December 31, |   |   | December 31, |  
| |                                          |   | 2005                    |   |   | 2004         |   |   | 2005            |  
| |                                          |   |                         |   |   |              |   |   |                 |  
| | Net loss  as reported                   | $ | (517,270                | ) | $ | (517,324     | ) | $ | (5,321,262      | )
| |                                          |   |                         |   |   |              |   |   |                 |  
| | Net loss  pro-forma                     | $ | (522,870                | ) | $ | (710,224     | ) | $ | (5,821,184      | )
| |                                          |   |                         |   |   |              |   |   |                 |  
| | Basic loss per share  as
      reported | $ | (0.02                   | ) | $ | (0.03        | ) |   |                 |  
| |                                          |   |                         |   |   |              |   |   |                 |  
| | Basic loss per share 
      pro-forma   | $ | (0.02                   | ) | $ | (0.04        | ) |   |                 |  

The weighted average fair value at date
of grant of the options granted were as follows:

| |                                                        |  | 2005 |  |   | 2004    | 
| | ------------------------------------------------------ |  | ---- |  | - | ------- | 
| |                                                        |  |      |  |   |         | 
| | Weighted average fair value                            |  | -    |  | $ | 0.56    | 
| | Total options granted (post dividend
      adjustment) |  | -    |  |   | 258,000 | 
| | Total fair value of options
      granted              |  | -    |  | $ | 120,900 | 

24

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|6. | Capital Stock Notes 5, 8 and 11 
  (contd)                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                    
|   | Commitments  (contd)                                                                                                                                             
|   |                                                                                                                                                                    
|   | Stock-based Compensation  (contd)                                                                                                                                
|   |                                                                                                                                                                    
|   | The fair value of each option grant was estimated on the
      date of the grant using the Black-Scholes option pricing model with the
      following assumptions:

2005
    2004Expected dividend yield
    -
    0.0%Expected volatility
    -
    142% - 191%Risk-free Interest Rate
    -
    2% - 2.88%Expected term in years
    -
    5


The Black-Scholes option pricing model
requires the input of highly subjective assumptions including the expected price
volatility. Changes in the subjective input assumptions can materially affect
the fair value estimate and therefore the Black-Scholes model does not
necessarily provide a reliable single measure of the fair value of the Companys
share purchase options.

Share Purchase Warrants

At December 31, 2005, the following
share purchase warrants were outstanding:

Number of
      Warrants
    Exercise Price
    Expiry
      Date9,592
    $0.21
    February 1, 2006114,428
    $0.23
    March 1, 200643,500
    $0.25
    April 1, 200610,126
    $0.50
    May 1, 200655,264
    $0.63
    May 1, 200622,500
    $0.67
    June 1, 2006131,507
    $0.61
    July 1, 20068,824
    $0.57
    July 1, 200626,939
    $0.41
    September 1, 200621,510
    $0.44
    October 1, 200696,047
    $0.24
    January 31, 2007540,237


Pursuant to the terms of the share
purchase warrants, the exercise price and number of shares were adjusted as a
result of a 20% stock dividend granted by the Company on March 4, 2005.

Each warrant entitles the holder
thereof the right to purchase one common share at the prices as indicated above.
Subsequent to December 31, 2005, 232,910 warrants exercisable at $0.21 to $0.63
per share expired unexercised.

Acquisition of Gulf Star World
Development W.L.L.By a letter of agreement dated July 11, 2002, amended
October 10, 2002, May 10, 2003 and September 30, 2003, June 30, 2004 and July
11, 2005 the Company agreed to purchase 80% of the outstanding shares of Gulf
Star World Development W.L.L. (Gulf Star), a Bahrain corporation, from Star
Leisure & Entertainment Inc. (Star Leisure). Star Leisure is controlled by
a director of the Company and is based in

25

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|6. | Capital Stock Notes 5, 8 and 11 
  (contd)                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                               
|   | Commitments  (contd)                                                                                                                                                                                        
|   |                                                                                                                                                                                                               
|   | Acquisition of Gulf Star World Development W.L.L. 
      (contd)                                                                                                                                            
|   |                                                                                                                                                                                                               
|   | British Columbia, Canada. Gulf Star is the 100% owner and
      developer of the residential and tourist project known as the Dream Island
      Resort, located on the north coast of Bahrain at Manama City.
|   |                                                                                                                                                                                                               
|   | To acquire 80% of Gulf Star, the Company must issue five
      million common shares at a price of $0.125 per share. The shares are to be
      issued over a three-year period as follows:                   

| | a) | 1,000,000 allotted shares issued to Star Leisure upon
      completion of dredging works (estimated cost of dredging contract is
      $4,500,000);                                         
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | 1,000,000 allotted shares issued to Star Leisure upon
      completion of final planning and design works (estimated planning contract
      cost is $8,000,000);                           
| | c) | 1,000,000 allotted shares issued to Star Leisure upon the
      Company securing full funding in a combination of debt and/or equity that
      allows main resort construction to commence;
| | d) | 1,000,000 allotted shares issued to Star Leisure upon
      completion of 50% of resort construction; and                                                                                   
| | e) | 1,000,000 allotted shares issued to Star Leisure upon
      resort being opened for business at the start of
  operations.                                                                  

In addition, the Company shall make
cash payments to Star Leisure totaling $100,000 to cover a portion of hard costs
accumulated by Star Leisure in progressing the Dream Island Project. During the
year ended December 31, 2003, the Company paid $34,210 as partial payment toward
the $100,000 payment. The remaining balance of $65,790 is due on or before
August 31, 2006. The Company has also agreed to reimburse Star Leisure and Jzala
Investment Group (20% shareholder of Gulf Star) for costs to be verified that
they may have incurred upon the project financing being fully secured and having
released in sufficient amounts to commence the main construction.

On August 9, 2002, the Company entered
into an assignment agreement, whereby the Company was assigned all rights and
obligations under a Dredging and Reclamation Contract entered into by Star
Leisure pertaining to the construction of The Dream Island Resort project. Under
the terms of the Dredging and Reclamation contract, the Company issued 1,268,750
Class A Convertible Preferred shares, with a deemed value of $5,075,000, as full
payment due under this contract. These shares were issued in escrow, and will be
released in stages as the dredging contract progresses. At December 31, 2005, no
value has been recorded for the shares, as although work has commenced on the
Dream Island Project, there has not yet been sufficient progress to warrant a
release of escrowed shares. An agents fee of 0.5% of the value of the shares
released will be payable.

The Company also engaged a consultant
to act as an advisor in respect to the above noted acquisition. The company
issued 1,300,000 common shares during the year ended December 31, 2002, which
were deposited into escrow and were to be released on the basis of the progress
of the Dredging and Reclamation Contract noted above. During the year ended
December 31, 2002, these shares were recorded at their estimated fair value of
$65,000, and had been deferred with other related investment costs pertaining to
the acquisition of Gulf Star. During the year ended December 31, 2004 the
agreement with this consultant was terminated, and the 1,300,000 common shares
were returned to the Company for cancellation.

Pursuant to an agreement dated October
20, 2003, during the year ended December 31, 2004 the Company issued 1,137,500
Class A convertible preferred shares of the Company at a deemed value of $4 per
share for Technical Planning services for the Dream Island Project. These shares
were issued in escrow, and were to be released over time as work on the project
progressed. In December 2004 this agreement was terminated, and the 1,137,500
preferred shares were returned to the Company for cancellation.

26

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|6. | Capital Stock Notes 5, 8 and 11 
  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Commitments  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Acquisition of Gulf Star World Development W.L.L. 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Subsequent to December 31, 2005, the Ministry of Finance,
      Bahrain (MOFB) notified Gulf Star that due to a lack of progress and
      failure to advance the project in a timely basis, the MOFB intends to seek
      termination of the lease contract for the Dream Island site and have Gulf
      Star pay all associated expenses incurred for the enforcement thereof. In
      addition, the MOFB has indicated that it reserves the right to claim
      damages towards all losses it has incurred and all gains denied. The
      Company, Gulf Star, and Star Leisure intend to oppose the action by the
      MOFB. However, due to the uncertainty of the future viability of the Dream
      Island project, management has written-down the associated deferred
      investment costs to a nominal value of $1.00.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | Non-Cash Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Investing and financing activities that do not have a
      direct impact on cash flows are excluded from the statement of cash flows.
      The Company issued common shares for settlement of debts, convertible
      loans, and for services provided to the Company during the following
      years:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Number of
      
      
      Number of
      
      
      WeightedPreferred
      
      
      Common
      
      
      Average PriceShares
      
      
      Shares
      
      
      Per
        Share
      
      
      Total1995
    Consulting fee
    
    -
    
    
    50,000
    
    $
    0.03
    
    $
    15001998
    Management fee
    
    -
    
    
    7,000,000
    
    $
    0.001
    
    
    7,0001998
    Consulting fee
    
    -
    
    
    620,000
    
    $
    0.01
    
    
    6,2002000
    Finders fee
    
    -
    
    
    50,000
    
    $
    0.001
    
    
    502001
    Consulting fee
    
    -
    
    
    708,406
    
    $
    2.07
    
    
    1,468,2542002
    Deferred investment cost
    
    -
    
    
    1,300,000
    
    $
    0.05
    
    
    65,0002002
    Consulting fee
    
    -
    
    
    604,143
    
    $
    0.17
    
    
    103,4002002
    Consulting fee
    
    -
    
    
    1,380,000
    
    $
    0.07
    
    
    93,0002002
    Debt settlement
    
    -
    
    
    680,886
    
    $
    0.20
    
    
    138,0062003
    Consulting fee
    
    -
    
    
    1,450,000
    
    $
    0.14
    
    
    203,0002003
    Termination fee
    
    198,000
    
    
    -
    
    $
    4.00
    
    
    792,0002004
    Loan conversion
    
    -
    
    
    825,364
    
    $
    0.06
    
    
    48,5372004
    Loan settlement
    
    -
    
    
    613,000
    
    $
    0.07
    
    
    45,0002004
    Consulting fee
    
    -
    
    
    360,000
    
    $
    0.40
    
    
    142,5002004
    Deferred
      investment cost (cancellation)
    
    -
    
    
    (1,300,000
    )
    $
    0.05
    
    
    (65,000
    )2005
    Communications
    
    -
    
    
    56,000
    
    $
    0.50
    
    
    28,0002005
    Consulting fees
    
    -
    
    
    1,135,000
    
    $
    0.29
    
    
    333,7002005
    Legal fees
    
    -
    
    
    50,000
    
    $
    0.50
    
    
    25,0002005
    Loan conversion
    
    -
    
    
    635,901
    
    $
    0.39
    
    
    250,1602005
    Stock dividend
    
    -
    
    
    4,120,643
    
    $
    0.65
    
    
    2,678,418198,000
    
    
    19,039,343
    
    
    
    
    $
    6,298,725


These amounts have been excluded from
the statements of cash flows.

27

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|8. | Related Party Transactions Notes 5, 6 and
    11                                                                                                                                                
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                  
|   | The Company was charged the following by shareholders,
      directors, by companies controlled by directors and/or shareholders of the
      Company, and by companies with directors in
common:

| |                    |   |                         |  |   |              |  |   | Cumulative from | 
| | ------------------ | - | ----------------------- |  | - | ------------ |  | - | --------------- | 
| |                    |   |                         |  |   |              |  |   | February 28,    | 
| |                    |   |                         |  |   |              |  |   | 1989 (Date of   | 
| |                    |   |                         |  |   |              |  |   | Inception) to   | 
| |                    |   | Year ended December 31, |  |   | December 31, | 
| |                    |   | 2005                    |  |   | 2004         |  |   | 2005            | 
| |                    |   |                         |  |   |              |  |   |                 | 
| | Consulting fees    | $ | -                       |  | $ | -            |  | $ | 35,670          | 
| | Interest           |   | 18,684                  |  |   | 20,134       |  |   | 41,958          | 
| | Management fees    |   | 40,440                  |  |   | 932          |  |   | 153,372         | 
| | Office and general |   | -                       |  |   | -            |  |   | 26,944          | 
| | Rent               |   | 19,810                  |  |   | 18,533       |  |   | 69,194          | 
| |                    |   |                         |  |   |              |  |   |                 | 
| |                    | $ | 78,934                  |  | $ | 39,599       |  | $ | 327,138         | 

Deferred investment costs at December
31, 2005 included $1 (2004: $34,210) charged by a related company in respect to
a cash payment required pursuant to an acquisition agreement (Note 6).

At December 31, 2005, accounts payable
includes $4,837 (2004: $69) due to directors of the Company and companies
controlled by directors of the Company in respect of unpaid management fees and
expenses incurred on behalf of the Company.

At December 31, 2005 and 2004, due to
related parties are comprised of expenses for operating costs paid on behalf of
the Company by companies with directors in common. These amounts are
non-interest bearing, unsecured and there are no specific terms for
repayment.

At December 31, 2004, the Company
issued 563,000 common shares to settle $30,000 of loans payable due to a company
controlled by directors of the Company.

|9. | Deferred Tax Assets                                                                                  
|-- | -----------------------------------------------------------------------------------------------------
|   |                                                                                                      
|   | The following table summarizes the significant components
      of the Companys deferred tax assets:

| |                                                  |   | 2005       |   |   | 2004       |  
| | ------------------------------------------------ | - | ---------- | - | - | ---------- | -
| | Net tax operating loss carryforward              | $ | 2,637,554  |   | $ | 1,637,005  |  
| | Net tax capital
      loss carryforward          |   | 103,077    |   |   | 103,077    |  
| | Gross deferred tax assets                        |   | 2,740,631  |   |   | 1,740,082  |  
| | Valuation
      allowance for deferred tax asset |   | (2,740,631 | ) |   | (1,740,082 | )
| | Balance at December 31, 2005                     | $ | -          |   | $ | -          |  

28

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  December 31, 2004 and 2003
  (Stated in U.S. Dollars)

|9.  | Deferred Tax Assets (contd)                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | The amount taken into income as deferred tax assets must
      reflect that portion of the income tax loss carryforwards which is likely
      to be realized from future operations. The Company has chosen to provide
      an allowance of 100% against all available income tax loss carryforwards,
      regardless of their time of expiry.                   
|    |                                                                                                                                                                                                                                                                                                                                                                     
|10. | Income Taxes                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | At December 31, 2005, the Company has net operating loss
      carryforwards which expire commencing in 2010 totaling approximately
      $7,355,000. The Company has a capital loss carryforward which expires in
      2006, totaling approximately $606,000. The potential tax benefits of these
      losses have not been recorded in the financial statements.
|    |                                                                                                                                                                                                                                                                                                                                                                     
|11. | Subsequent Events Note 6                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | i)                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | ii)                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                     
|12. | Comparative Figures                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                     
|    | Certain of the comparative figures have been reclassified
      to conform with the presentation adopted for the current
  period.                                                                                                                                                                                                                                  

29

---

|8. | Changes In and Disagreements With Accountants on
        Accounting and Financial Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | There have been no changes in or disagreements with
        accountants on accounting and financial disclosure.                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Controls and procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company's executive officers have concluded that
        the Company's disclosure controls and procedures are effective based upon
        their evaluation of such controls and procedures as of a date within 90
        days prior to the filing of this Annual Report. There were no significant
        changes in the Company's internal control or in the other factors that
        could significantly affect the Company's internal controls subsequent
        to the date of their most recent evaluation.

Part III

|9. | Directors, Executive Officers, Promoters and Control
      Persons
|-- | ------------------------------------------------------------------

Directors and Executive Officers

| | Name and                                                    |                          | Business experience                                                                             |                                                                                        
| | ----------------------------------------------------------- | ------------------------ | ----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------
| | position                                                    | Term                     | during
      past 5 years                                                                       | Other
      directorships                                                              
| |                                                             |                          |                                                                                                 |                                                                                        
| | Ralph Shearing
       President, CEO, Director              | March 7, 2001 to Present | Director and officer of both the Company, and two natural
      resource exploration companies. | Soho Resources Corp., and Mantle Minerals Inc.; both
      reporting issuers in Canada.
| |                                                             |                          |                                                                                                 |                                                                                        
| | Abbas Salih 
      Chairman, Secretary, CFO,
      Director | March 7, 2001 to Present | Director and officer of the Company.                                                            | None                                                                                   

Significant employeesNone

Family relationshipsThere
are no family relationships among directors, executive officers, officers or
significant employees and any nominees chosen to hold these positions.

Involvement in certain legal
proceedingsAs of the date of this Annual Report no director, executive
officer, promoter or control person or any nominee for these positions is or has
been the subject of any legal proceeding in any court of jurisdiction concerning
(i)any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer at the time of the bankruptcy, or
within two years prior to that time; (ii) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offences) within the past five years; (iii) being
subject to any order, judgment or decree permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodities Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).

Compliance with Section 16(a) of the
  Exchange ActSection 16(a) of the Exchange Act requires the Company's directors and officers,
  and the persons who beneficially own more than ten percent (10%) of Company's
  common stock, to file reports of ownership and changes in ownership with the
  Securities and Exchange Commission. Copies of all filed reports are required
  to be furnished to the Company by each reporting person. Based solely upon a
  review of Forms 3 and 4 (and amendments thereto) and Forms 5 (and amendments
  thereto) and the written representations of the reporting persons, it is the
  Company's belief and understanding that all such persons have fully complied
  with the applicable filing requirements under the Act during the fiscal year
  ended December 31, 2005.

30

---

|10. | Executive Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | During the fiscal year ended December 31, 2005, directors
      and officers received compensation for acting in their capacities as a
      director or officer, in the amounts as shown below (see Summary
      compensation table). The directors and officers are reimbursed for any
      out-of-pocket expenses incurred by them on behalf of the Company. The
      Company currently has no pension plan, health plan, income profit sharing
      or other similar plan. There are no compensatory plans or arrangements,
      with respect to any former or present executive officer of the Company
      which result or will result from the resignation, retirement or other
      termination of such officer's employment with the Company or from a change
      of control of the Company or a change in the officer's responsibilities
      following a change in control.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | On July 1, 2002 the Company's Board of Directors adopted
      and approved a Stock Award Plan. The plan provides both for the direct
      award or sale of shares, and for the grant of options to purchase shares.
      Shares may be awarded in consideration of services rendered to the
      Company. The Company may also grant a 30- day right to purchase shares at
      a price of not less than 90% of the fair market value of the
  shares.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Under the plan directors, employees and consultants may
      be granted incentive stock options to purchase common stock of the Company
      at a price of not less than 100% of the fair market value of the stock.
      Outside directors may be granted non-statutory stock options to purchase
      common stock of the Company at a price of not less than 85% of the fair
      market value of the stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The total number of shares awarded under the plan must
      not exceed 15% of the outstanding common stock of the Company. Certain
      changes in the capital structure of the Company, such as a stock split or
      stock dividend, may result in an appropriate adjustment to the number
      and/or the price of shares issuable under the plan. The plan expires on
      July 1, 2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The purpose of the Stock Option Plan is to advance the
      interests of the Company and its shareholders by affording key personnel
      in the Company an opportunity for investment in the Company and other
      incentive advantages inherent in stock ownership in the Company. Pursuant
      to the provisions of the Stock Option Plan, stock options will be granted
      only to key personnel of the Company, generally defined as a person
      designated by management upon whose judgment, initiative and efforts the
      Company may rely, including any director, officer, employee or consultant
      of the Company.                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | As of the date of this Annual Report, a total of 12
      employees including consultants, directors and officers have been granted
      share purchase options to acquire a total of 2,010,000 common shares of
      the Company at a weighted average price of $0.22 per share. The President
      and the Secretary of the Company have each been granted 720,000 share
      purchase options each under the Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Pursuant to the terms of the stock award plan, the number
      of shares under option and their exercise price has been adjusted as a
      result of the 20% stock dividend declared by the Board of Directors on
      February 14, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Summary compensation table

| |                |      | Annual Compensation       | Long Term Compensation       
| | -------------- | ---- | ------------------------- | -----------------------------
| | Name           | Year | Other annual compensation | Securities underlying options
| |                |      |                           |                              
| | Ralph Shearing |      |                           |                              
| | CEO, Director  | 2005 | -                         | -                            
| |                | 2004 | $932                      | -                            
| |                | 2003 | -                         | 720,000 share options (1)    
| |                |      |                           |                              
| | Abbas Salih    |      |                           |                              
| | CFO, Director  | 2005 | $40,440                   | -                            
| |                | 2004 | -                         | -                            
| |                | 2003 | -                         | 720,000 share options (1)    

| | (1) | Post-stock dividend; 600,000 share options pre-stock
      dividend.
| | --- | --------------------------------------------------------------------

31

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Aggregated fiscal year end option
values

| |                | Number of securities           |                              
| | -------------- | ------------------------------ | -----------------------------
| |                | underlying unexercised options | Value of unexercised in-the- 
| |                | at fiscal year end             | money options fiscal year end
| | Name           | exercisable / unexercisable    | exercisable / unexercisable  
| |                |                                |                              
| | Ralph Shearing |                                |                              
| | CEO, Director  | 720,000 / nil share options    | $116,424 / nil               
| |                |                                |                              
| | Abbas Salih    |                                |                              
| | CFO, Director  | 720,000 / nil share options    | $116,424 / nil               

|11. | Security Ownership of Certain Beneficial Owners and
      Management
|--- | --------------------------------------------------------------------
|    |                                                                     
|    | Security ownership of certain beneficial
    owners                 

| |                |                                 | Amount and nature of     | Percentage    
| | -------------- | ------------------------------- | ------------------------ | --------------
| | Title of class | Name
      of beneficial owners | beneficial ownership     | of
      class
| |                |                                 |                          |               
| | Common stock   | Cede & Co.                      | 7,153,667 (direct)       | 28%           
| |                | New York, N.Y., U.S.A.          |                          |               
| |                |                                 |                          |               
| | Common stock   | P. Chung                        | 2,339,132 (indirect) (1) | 11%           
| |                | Vancouver, BC, Canada           |                          |               

| | (1) | The beneficial owner also has the right to acquire a
      further 36,000 shares through the exercise of stock options and 540,236
      shares through the exercise of warrants.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Security ownership of
management

Amount and nature of
    PercentageTitle of class
    Name
      of beneficial owners
    beneficial ownershipCommon stock
      Ralph Shearing
      Nil (1)
      3%Vancouver, BC, CanadaCommon stock
      Abbas Salih
      9,785,172 (2)
      42%Vancouver, BC, Canada


| | (1) | The beneficial owner has the right to acquire 720,000
      shares through the exercise of stock options.                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The beneficial owner also has the right to acquire a
      further 720,000 shares through the exercise of stock options and 229,566
      shares through the conversion of outstanding loans into units, each unit
      consisting of one common share of the Company and one non-transferable
      share purchase warrant.

|12. | Certain Relationships and Related
    Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The officers and directors of the Company are engaged in
      other businesses, either individually or through partnerships or
      corporations in which they may have an interest, hold an office or serve
      on the Boards of Directors. Certain conflicts of interest may arise
      between the Company and the respective officers and directors. Such
      conflicts can be resolved through the exercise by such officers and
      directors of judgment consistent with their fiduciary duties to the
      Company. It is the intent of the officers and directors to resolve any
      such conflicts in the best interest of the Company and to allocate
      sufficient of their time to the affairs of the Company in order to fully
      and competently carry out their duties and responsibilities. Certain
      financial related party transactions are adequately explained in items 5,
      6, and 7 of this Annual Report.

32

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|13. | Exhibits
|--- | --------

| | Table of      |                                               |                   
| | ------------- | --------------------------------------------- | ------------------
| | Exhibit Items | Description                                   | Exhibit           
| |               |                                               |                   
| | 601-3(i)      | Articles of Incorporation                     | Note 1            
| | 601-(3)(ii)   | Bylaws                                        | Note 1            
| | 601-(3)(iii)  | Certificate of Amendment                      | Note 1            
| | 601-(10)      | Stock Award Plan                              | Note 2            
| | 601-(31)      | Rule
      13a-14(a)/15d-14(a) Certifications | Exhibit
      31.1
| | 601-(31)      | Rule 13a-14(a)/15d-14(a) Certifications       | Exhibit 31.2      
| | 601-(32)      | Section
      1350 Certifications             | Exhibit
      32.1
| | 601-(32)      | Section 1350 Certifications                   | Exhibit 32.2      

Note 1:
    Incorporated by reference to Form 10-KSBAnnual
      Report for the year ending December 31, 2001Note 2:
    Incorporated by reference to Form 10-KSB Annual
      Report for the year ending December 31, 2002


|14. | Principal Accountant Fees and Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Audit Fees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | During the fiscal years ended December 31, 2005 and 2004,
      the Company incurred approximately $16,600 and $11,000 respectively in
      fees to Amisano Hanson, Chartered Accountants, for professional services
      rendered in connection with the audit of the Company's financial
      statements and approximately $12,950 (2004: $10,250) for review of the
      Company's quarterly financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Audit-Related Fees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Tax Fees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | All Other Fees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Audit Committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | As of this Annual Report, the Company has not appointed
      members to an audit committee. The board of directors has conducted the
      respective role of an audit committee. When established, the audit
      committee's primary function will be to provide advice with respect to the
      Company's financial matters and to assist the board of directors in
      fulfilling its responsibility to oversee finance, accounting, tax and
      legal compliance matters. The audit committee will (i) serve as an
      independent and objective party to monitor the Company's financial
      reporting process and internal control systems; (ii) review and appraise
      the audit efforts of the Company's independent accountants; (iii) evaluate
      the Company's quarterly financial performance as well as its compliance
      with laws and regulations; (iv) oversee management's establishment and
      enforcement of financial policies and business practices; and, (v) provide
      an open avenue of communication among the independent accountants,
      management and the board of directors.

33

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SIGNATURES

In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|      |              |  | Strategic Internet Investments,
      Incorporated
|----- | ------------ |  | --------------------------------------------------
|      |              |  |                                                   
|Date: | May 17, 2006 |  | /s/
      Ralph Shearing                          
|      |              |  | Ralph Shearing, CEO, Director                     
|      |              |  |                                                   
|Date: | May 17, 2006 |  | /s/
      Abbas Salih                             
|      |              |  | Abbas Salih, CFO, Director                        

34

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