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**UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION**
  Washington, 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, 2004

**Strategic Internet Investments, Incorporated**

|State of incorporation:                                                    | Delaware                          
|-------------------------------------------------------------------------- | ----------------------------------
|                                                                           |                                   
|IRS Employer Identification:                                               | 84-1116458                        
|                                                                           |                                   
|Address of principal executive offices:                                    | Suite 450, 650 West Georgia Street
|                                                                           | Vancouver, BC                     
|                                                                           | Canada V6B 4N8                    
|                                                                           |                                   
|Issuer’s telephone number                                                  | 604-684-8662                      
|                                                                           |                                   
|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 toItem 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
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Issuer’s revenues for its most recent fiscal year.                    | Nil          | 
|--------------------------------------------------------------------- | ------------ | 
|Aggregate market value of the voting common equity held
      by non- |              | 
|affiliates as of February 28, 2005:                                   | $ 10,272,058 | 
|Common shares outstanding as of March 31, 2005:                       | 25,053,799   | 

|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

2

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Part II

|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 Stockgroup
        Media Inc.
  (www.stockhouse.com), was as follows:

| | Year | Period         |   | High |  |   | Low  | 
| | ---- | -------------- | - | ---- |  | - | ---- | 
| |      |                |   |      |  |   |      | 
| | 2005 | First quarter  | $ | 0.95 |  | $ | 0.35 | 
| |      |                |   |      |  |   |      | 
| | 2004 | First quarter  | $ | 0.74 |  | $ | 0.27 | 
| |      | Second quarter | $ | 2.50 |  | $ | 0.63 | 
| |      | Third quarter  | $ | 1.95 |  | $ | 1.20 | 
| |      | Fourth quarter | $ | 1.55 |  | $ | 0.40 | 
| |      |                |   |      |  |   |      | 
| | 2003 | First quarter  | $ | 0.25 |  | $ | 0.06 | 
| |      | Second quarter | $ | 0.25 |  | $ | 0.08 | 
| |      | Third quarter  | $ | 0.49 |  | $ | 0.21 | 
| |      | Fourth quarter | $ | 0.65 |  | $ | 0.42 | 

| | These quotations reflect inter-dealer prices, without retail mark-up,
    mark-down, or commission and may not represent actual transactions.                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Holders of common equity 
As at December 31, 2004 there were approximately 50 holders of record of the
  common shares of Strategic.                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Dividends
        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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Subsequent to December 31, 2004, the directors declared a 20% stock
    dividend payable to the shareholders of record as of March 4, 2005.                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Securities authorized for issuance under equity compensation plans                                                                                                                                                                                                                                                                                                                                             

| | Equity Compensation Plan Information |                       |   |                             |  |  |                  | 
| | ------------------------------------ | --------------------- | - | --------------------------- |  |  | ---------------- | 
| |                                      | Number of securities  |   |                             |  |  | Number of        | 
| |                                      | to be issued upon     |   | Weighted average            |  |  | securities       | 
| |                                      | exercise of           |   | exercise price of           |  |  | remaining        | 
| |                                      | outstanding options,  |   | outstanding options,        |  |  | available for    | 
| | Plan category                        | warrants, and rights. |   | warrants,
      and rights. |  |  | future issuance. | 
| |                                      |                       |   |                             |  |  |                  | 
| | Equity compensation plans            |                       |   |                             |  |  |                  | 
| | approved by security holders         | -                     |   | -                           |  |  | -                | 
| |                                      |                       |   |                             |  |  |                  | 
| | Equity compensation plans not        |                       |   |                             |  |  |                  | 
| | approved by security holders         | 1,775,000             | $ | 0.27                        |  |  | 865,900          | 
| |                                      |                       |   |                             |  |  |                  | 
| | Total                                | 1,775,000             | $ | 0.27                        |  |  | 865,900          | 

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. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Sales of Securities Without Registration Under the Securities Act
    of 1933                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 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.
  At December 31, 2004, Icon had advanced a total of $227,139, plus accrued
  interest of $20,914, which can be converted into 555,858 units, at various
  a conversion prices of $0.05 to $0.80 per unit. The principal sum and
  any accrued interest under the Convertible Loan Facility are repayable on various
  dates ranging from April 5, 2005 to October 16, 2006. 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. These transactions
  are with an offshore non-U.S. person; accordingly, these securities are exempt
  from registration
  pursuant to Regulation S.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Subsequent to December 31, 2004, Icon converted
        the remaining principal balance of $227,139 plus accrued interest to January 31, 2005 into
        635,901 units. Icon also exercised warrants to purchase a further 103,580
    shares for cash proceeds of $8,043.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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. 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.                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Subsequent to December 31, 2004, the investor exercised
        the remaining warrants to purchase a further 330,000 shares for cash
    proceeds of $33,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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 SIII, 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. At December
        31, 2004, Star Leisure had advanced a total of $103,206, plus accrued
        interest of $13,033, which can be converted into 588,694 units, at
        various a conversion prices of $0.13 to $0.24 per unit. The principal
        sum and any accrued interest under the Convertible Loan Facility are
        repayable on various dates ranging from August 13, 2005 to January 31,
        2006. Star
        Leisure has not converted any part of the principal sums advanced or
        accrued interest into units as of December 31, 2004. 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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

5

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|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | On March 11, 2005, the Company issued
        4,120,643 common 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%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The financial statements
        have been prepared on a going concern basis. The Company has accumulated
        a deficit of $4,803,992 since inception and at December 31, 2004 has
        a working capital deficiency of $236,269. 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

6

---

| | 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.                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | On June 8, 2004 the Company entered into a Marketing, Promotion and
        Property Share Agreement (the 'Marketing Agreement') with AL Misehal Real
        Estate, Al Ayiri Real Estate and Khalil Ibrahim Ali Khan, (collectively
        the 'Marketing Group'). The Marketing Group was to market and sell, on
        a pre-sale basis, the future residential real estate of the Dream Island
        Project consisting of beach villas, and marina residences units. This agreement
    was terminated in December 2004.                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company's plan during the next quarter and for the balance of 2005
        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.                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | In May 2004, the Company entered into a share exchange agreement with
        Bayindir Faktoring Hizmetleri A.S. of Istanbul, Turkey ('Bayindir'). This
        agreement contemplated the Company providing working capital financing
        to Bayindir, and ultimately the acquisition of a controlling interest in
        Bayindir. This agreement has now lapsed, and the Company does not plan
    to pursue this investment any further.                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 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                                                                                                                                                                                                                                                                                                                                                   

7

---

| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 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, 2004 AND 2003

(Stated in U.S. Dollars)



9

---

|A PARTNERSHIP of INCORPORATED PROFESSIONALS | AMISANO HANSON       
|------------------------------------------- | ---------------------
|                                            | CHARTERED ACCOUNTANTS

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, 2004 and 2003 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, 2004 and for the period from inception of the development stage, February 28, 1989 to December 31, 2004. 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, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the two year period ended December 31, 2004 and for the period from inception of the development stage, February 28, 1989 to December 31, 2004, 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, and 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”     
|----------------- | ---------------------
|March 23, 2005    | Chartered Accountants

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

F-1

---

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

|                                                      |   | December 31, |  
|----------------------------------------------------- | - | ------------ | -
|                                                      |   | 2004         |  
|ASSETS                                                |   |              |  
|                                                      |   |              |  
|Current                                               |   |              |  
|Cash                                                  | $ | 22,987       |  
|Prepaid expenses                                      |   | 64,030       |  
|Due from related party                                |   | -            |  
|                                                      |   |              |  
|                                                      |   | 87,017       |  
|                                                      |   |              |  
|Equipment – Note 3                                    |   | 2,286        |  
|Deferred investment costs – Note 4                    |   | 34,210       |  
|                                                      |   |              |  
|                                                      | $ | 123,513      |  
|                                                      |   |              |  
|LIABILITIES                                           |   |              |  
|                                                      |   |              |  
|Current                                               |   |              |  
|Accounts payable – Note 11                            | $ | 110,836      |  
|Due to related parties                                |   | 28,752       |  
|Current portion of loans payable – Notes 5 and 11     |   | 183,698      |  
|                                                      |   |              |  
|                                                      |   | 323,286      |  
|Loans payable – Notes 5 and 11                        |   | 236,137      |  
|                                                      |   |              |  
|                                                      |   | 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          |  
|Class B Preferred stock, $0.001 par value             |   |              |  
|10,000,000 authorized, none outstanding               |   |              |  
|Common stock, $0.001 par value                        |   |              |  
|100,000,000 authorized                                |   |              |  
|18,972,675 outstanding (2003: 17,305,596 outstanding) |   | 18,971       |  
|Additional paid-in capital                            |   | 3,937,186    |  
|Contributed capital                                   |   | 411,727      |  
|Deficit accumulated during the development stage      |   | (4,803,992   | )
|                                                      |   |              |  
|                                                      |   | (435,910     | )
|                                                      |   |              |  
|                                                      | $ | 123,513      |  

SEE ACCOMPANYING NOTES
  F-2

---

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, |  
|                                      |   | 2004                     |   |   | 2003         |   |   | 2004             |  
|                                      |   |                          |   |   |              |   |   |                  |  
|General and Administrative Expenses   |   |                          |   |   |              |   |   |                  |  
|Accounting and audit fees             | $ | 38,093                   |   | $ | 33,870       |   | $ | 116,120          |  
|Amortization                          |   | 732                      |   |   | 407          |   |   | 2,811            |  
|Automobile                            |   | 565                      |   |   | -            |   |   | 565              |  
|Business Promotion                    |   | 213                      |   |   | -            |   |   | 213              |  
|Communications                        |   | 13,234                   |   |   | 18,074       |   |   | 56,503           |  
|Consulting fees – Note 8              |   | 124,765                  |   |   | 232,520      |   |   | 2,050,789        |  
|Interest – Note 8                     |   | 36,074                   |   |   | 9,399        |   |   | 51,134           |  
|Investor relations                    |   | 26,350                   |   |   | -            |   |   | 76,852           |  
|Legal fees                            |   | 15,386                   |   |   | 2,553        |   |   | 114,413          |  
|Management fees – Note 8              |   | 932                      |   |   | -            |   |   | 112,932          |  
|Office and general – Note 8           |   | 17,613                   |   |   | 13,016       |   |   | 132,128          |  
|Regulatory fees                       |   | 1,602                    |   |   | 3,185        |   |   | 16,287           |  
|Rent – Note 8                         |   | 18,533                   |   |   | 10,239       |   |   | 54,767           |  
|Transfer agent fees                   |   | 7,031                    |   |   | 5,362        |   |   | 33,139           |  
|Travel                                |   | 51,154                   |   |   | 34,816       |   |   | 99,718           |  
|Non-cash compensation charge – Note 6 |   | 161,450                  |   |   | 53,500       |   |   | 430,035          |  
|                                      |   |                          |   |   |              |   |   |                  |  
|Loss before the following:            |   | (513,727                 | ) |   | (416,941     | ) |   | (3,348,406       | )
|                                      |   |                          |   |   |              |   |   |                  |  
|Unauthorized distribution             |   | -                        |   |   | -            |   |   | (69,116          | )
|Termination fee – Note 7              |   | -                        |   |   | (792,000     | ) |   | (792,000         | )
|Loss on foreign exchange              |   | (3,597                   | ) |   | -            |   |   | (3,597           | )
|Gain on settlement of debt            |   | -                        |   |   | -            |   |   | 15,464           |  
|Write-down of advances to             |   |                          |   |   |              |   |   |                  |  
|related party                         |   | -                        |   |   | -            |   |   | (606,337         | )
|                                      |   |                          |   |   |              |   |   |                  |  
|Net loss for the period               | $ | (517,324                 | ) | $ | (1,208,941   | ) | $ | (4,803,992       | )
|                                      |   |                          |   |   |              |   |   |                  |  
|Basic loss per share                  | $ | (0.03                    | ) | $ | (0.07        | ) |   |                  |  
|                                      |   |                          |   |   |              |   |   |                  |  
|Weighted average number of common     |   |                          |   |   |              |   |   |                  |  
|shares outstanding                    |   | 18,460,876               |   |   | 16,513,952   |   |   |                  |  

SEE ACCOMPANYING NOTES 
  F-3

---

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, |           
|                                                         |                          | 2004     |   |              | 2003       |   |   | 2004          |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Operating Activities                                     |                          |          |   |              |            |   |   |               |  
|Net loss for the period                                  | $                        | (517,324 | ) | $            | (1,208,941 | ) | $ | (4,803,992    | )
|Adjustments to reconcile net loss to net
      cash used |                          |          |   |              |            |   |   |               |  
|in operating
      activities:                           |                          |          |   |              |            |   |   |               |  
|Amortization                                             |                          | 732      |   |              | 407        |   |   | 2,811         |  
|Consulting
      fees                                    |                          | 80,000   |   |              | 203,000    |   |   | 1,744,187     |  
|Gain on settlement
      of debt                         |                          | -        |   |              | -          |   |   | (15,464       | )
|Management
      fees                                    |                          | -        |   |              | -          |   |   | 7,000         |  
|Write-down
      of advances to related party            |                          | -        |   |              | -          |   |   | 606,337       |  
|Non-cash compensation
      charge                       |                          | 161,450  |   |              | 53,500     |   |   | 430,035       |  
|Termination
      fees                                   |                          | -        |   |              | 792,000    |   |   | 792,000       |  
|Changes in non-cash items:                               |                          |          |   |              |            |   |   |               |  
|Prepaid expenses                                         |                          | (1,530   | ) |              | 28,000     |   |   | 26,470        |  
|Accounts payable                                         |                          | (79,016  | ) |              | (13,395    | ) |   | 366,849       |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Net cash used in operating activities                    |                          | (355,688 | ) |              | (145,429   | ) |   | (843,767      | )
|                                                         |                          |          |   |              |            |   |   |               |  
|Investing Activities                                     |                          |          |   |              |            |   |   |               |  
|Organization costs                                       |                          | -        |   |              | -          |   |   | (750          | )
|Acquisition of capital assets                            |                          | (2,069   | ) |              | -          |   |   | (4,347        | )
|Deferred investment costs                                |                          | -        |   |              | (34,210    | ) |   | (34,210       | )
|Due to/from related parties,
      net                   |                          | (11,013  | ) |              | (9,549     | ) |   | (561,961      | )
|                                                         |                          |          |   |              |            |   |   |               |  
|Net cash used in investing activities                    |                          | (13,082  | ) |              | (43,759    | ) |   | (601,268      | )
|                                                         |                          |          |   |              |            |   |   |               |  
|Financing Activities                                     |                          |          |   |              |            |   |   |               |  
|Bank indebtedness                                        |                          | -        |   |              | (19        | ) |   | -             |  
|Loans payable                                            |                          | 275,975  |   |              | 124,553    |   |   | 513,372       |  
|Proceeds from issuance of common stock                   |                          | 115,436  |   |              | 65,000     |   |   | 956,478       |  
|Payment of offering costs                                |                          | -        |   |              | -          |   |   | (27,270       | )
|Contributed capital                                      |                          | -        |   |              | -          |   |   | 25,442        |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Net cash provided in financing activities                |                          | 391,411  |   |              | 189,534    |   |   | 1,468,022     |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Increase in cash during the period                       |                          | 22,641   |   |              | 346        |   |   | 22,987        |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Cash, beginning of the period                            |                          | 346      |   |              | -          |   |   | -             |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Cash, end of the period                                  | $                        | 22,987   |   | $            | 346        |   | $ | 22,987        |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Supplementary disclosure of cash flows:                  |                          |          |   |              |            |   |   |               |  
|Cash paid for Interest                                   | $                        | -        |   | $            | 990        |   | $ | 5,661         |  
|                                                         |                          |          |   |              |            |   |   |               |  
|Cash paid for Income taxes                               | $                        | -        |   | $            | -          |   | $ | -             |  
|Non-cash Transactions
      – Note 7                     |                          |          |   |              |            |   |   |               |  

SEE ACCOMPANYING NOTES
  F-4

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For the period from
February 28, 1989
(Date of Inception) to December 31, 2004
(Stated in U.S. Dollars)

|                                     |                 |  |              |                 |         |        |  |             |                 |   |             |  |   |         |  |   | Deficit     |   |   |         |  
|------------------------------------ | --------------- |  | ------------ | --------------- | ------- | ------ |  | ----------- | --------------- | - | ----------- |  | - | ------- |  | - | ----------- | - | - | ------- | -
|                                     |                 |  |              |                 |         |        |  |             |                 |   |             |  |   |         |  |   | Accumulated |   |   |         |  
|                                     |                 |  |              |                 |         |        |  |             |                 |   | Additional  |  |   |         |  |   | During the  |   |   |         |  
|                                     | Preferred Stock |  | Common Stock |                 | Paid-In |        |  | Contributed |                 |   | Development |  |   |         | 
|                                     | Shares          |  |              | Par
      Value |         | Shares |  |             | Par
      Value |   | Capital     |  |   | 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 | )




SEE ACCOMPANYING NOTES
  F-5

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For the period from
February 28, 1989 (Date of Inception) to December 31, 2004
(Stated in U.S. Dollars)

|                                    |                 |           |              |           |           |  |             |             |         | Deficit     |   |          |  
|----------------------------------- | --------------- | --------- | ------------ | --------- | --------- |  | ----------- | ----------- | ------- | ----------- | - | -------- | -
|                                    |                 |           |              |           |           |  |             |             |         | Accumulated |   |          |  
|                                    |                 |           |              |           |           |  | Additional  |             |         | During the  |   |          |  
|                                    | Preferred Stock |           | Common Stock |           | Paid-In   |  | Contributed | Development |         |             |  
|                                    | Shares          | Par Value |              | Shares    | Par Value |  | Capital     |             | Capital | Stage       |   | Total    |  
|                                    |                 |           |              |           |           |  |             |             |         |             |   |          |  
|Balance, December 31, 1995          | -               | -         |              | 116,695   | 116       |  | 84,114      |             | 24,842  | (110,500    | ) | (1,428   | )
|Net loss                            | -               | -         |              | -         | -         |  | -           |             | -       | (9,068      | ) | (9,068   | )
|                                    |                 |           |              |           |           |  |             |             |         |             |   |          |  
|Balance December 31, 1996           | -               | -         |              | 116,895   | 116       |  | 84,114      |             | 24,842  | (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     |  | 103,414     |             | 25,442  | (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     |  | 108,994     |             | 25,442  | (194,137    | ) | (49,965  | )
|Net loss                            | -               | -         |              | -         | -         |  | -           |             | -       | (35,995     | ) | (35,995  | )
|                                    |                 |           |              |           |           |  |             |             |         |             |   |          |  
|Balance, December 31, 1999          | -               | -         |              | 9,736,695 | 9,736     |  | 108,994     |             | 25,442  | (230,132    | ) | (85,960  | )
|Issuance of stock 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   |  




SEE ACCOMPANYING NOTES
  F-6

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
For the period from
February 28, 1989 (Date of Inception) to December 31, 2004
(Stated in U.S. Dollars)

|                                                        |                 |           |              |            |           |  |             |   |             |  | Deficit     |   |            |  
|------------------------------------------------------- | --------------- | --------- | ------------ | ---------- | --------- |  | ----------- | - | ----------- |  | ----------- | - | ---------- | -
|                                                        |                 |           |              |            |           |  |             |   |             |  | Accumulated |   |            |  
|                                                        |                 |           |              |            |           |  | Additional  |   |             |  | During the  |   |            |  
|                                                        | Preferred Stock |           | Common Stock |            | Paid-In   |  | Contributed |   | Development |  |             |  
|                                                        | Shares          | Par Value |              | Shares     | Par Value |  | Capital     |   | Capital     |  | Stage       |   | Total      |  
|                                                        |                 |           |              |            |           |  |             |   |             |  |             |   |            |  
|Balance December 31, 2000                               | -               | -         |              | 10,920,029 | 10,919    |  | 447,811     |   | 104,149     |  | (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 for cash 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    |  | 2,219,187   |   | 240,527     |  | (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   | )




SEE ACCOMPANYING NOTES
  F-7

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
  
  For the period from February 28, 1989 (Date of Inception) to December 31, 2004
  (Stated in U.S. Dollars)

|                                                                |                 |   |              |  |            |         |   |           |             |   |            |             |   |         |   |   | Deficit     |   |   |            |  
|--------------------------------------------------------------- | --------------- | - | ------------ |  | ---------- | ------- | - | --------- | ----------- | - | ---------- | ----------- | - | ------- | - | - | ----------- | - | - | ---------- | -
|                                                                |                 |   |              |  |            |         |   |           |             |   |            |             |   |         |   |   | Accumulated |   |   |            |  
|                                                                |                 |   |              |  |            |         |   |           |             |   | Additional |             |   |         |   |   | During the  |   |   |            |  
|                                                                | Preferred Stock |   | Common Stock |  |            | Paid-In |   |           | Contributed |   |            | Development |   |         |   |  
|                                                                | Shares          |   | Par Value    |  | Shares     |         |   | Par Value |             |   | Capital    |             |   | Capital |   |   | Stage       |   |   | Total      |  
|                                                                |                 |   |              |  |            |         |   |           |             |   |            |             |   |         |   |   |             |   |   |            |  
|Balance, December 31, 2002                                      | -               |   | -            |  | 15,205,596 |         |   | 15,204    |             |   | 2,550,928  |             |   | 240,527 |   |   | (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                  | -               |   | -            |  | 650,000    |         |   | 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    |             |   | 3,608,630  |             |   | 294,027 |   |   | (4,286,668  | ) |   | (366,509   | )
|Non-cash compensation charge                                    | -               |   | -            |  | -          |         |   | -         |             |   | -          |             |   | 161,450 |   |   | -           |   |   | 161,450    |  
|Stock-based compensation on the exercise
      of               |                 |   |              |  |            |         |   |           |             |   |            |             |   |         |   |   |             |   |   |            |  
|options                                                         | -               |   | -            |  | -          |         |   | -         |             |   | 43,750     |             |   | (43,750 | ) |   | -           |   |   | -          |  
|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 $0.35 | -               |   | -            |  | 350,000    |         |   | 350       |             |   | 122,150    |             |   | -       |   |   | -           |   |   | 122,500    |  
|–at
      $2.00                                                 | -               |   | -            |  | 10,000     |         |   | 10        |             |   | 19,990     |             |   | -       |   |   | -           |   |   | 20,000     |  
|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   | )
|                                                                |                 |   |              |  |            |         |   |           |             |   |            |             |   |         |   |   |             |   |   |            |  
|Balance, December 31, 2004                                      | 198,000         | $ | 198          |  | 18,972,675 |         | $ | 18,971    |             | $ | 3,937,186  |             | $ | 411,727 |   | $ | (4,803,992  | ) | $ | (435,910   | )

SEE ACCOMPANYING NOTES
  F-8

---

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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   | These financial statements have been prepared on
        a going concern basis. The Company has accumulated a deficit of $4,803,992
        since inception, has not yet attained profitable operations and at December
        31, 2004 has a working capital deficiency of $236,269. 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 and raise substantial
        doubt that the Company will be able to continue as a going concern. 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, 2005 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-9

---

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.                                                                                                                                                                                                                                                                                                                                               
|  
|   | 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.                                                                                                                                                                                                                                                                                                              

F-10

---

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)                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | 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.
|  
|   | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | The Company has elected to account for stock-based
        compensation following APB No. 25, “Accounting for Stock Issued
        to Employees”, and provide the disclosures required under FAS No.
        123, “Accounting for Stock-based Compensation”, as amended
        by FAS No. 148, “Accounting for Stock-based Compensation – Transition
        and Disclosure, amendment of FAS Statement No. 123”.                                                 
|  
|   | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   | Management does not believe that any recently issued,
        but not yet effective accounting standards if currently adopted could
        have a material effect on the accompanying financial statements.                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                    |   |       |  |   | 2004         |  |   |       |  |   |       |  |   | 2003         |  |   |     | 
| | ------------------ | - | ----- |  | - | ------------ |  | - | ----- |  | - | ----- |  | - | ------------ |  | - | --- | 
| |                    |   |       |  |   | Accumulated  |  |   |       |  |   |       |  |   | Accumulated  |  |   |     | 
| |                    |   | Cost  |  |   | amortization |  |   | Net   |  |   | Cost  |  |   | amortization |  |   | Net | 
| |                    |   |       |  |   |              |  |   |       |  |   |       |  |   |              |  |   |     | 
| | Computer equipment | $ | 4,348 |  | $ | 2,062        |  | $ | 2,286 |  | $ | 2,278 |  | $ | 1,329        |  | $ | 949 | 

|4. | Deferred Investment Costs– Note 6                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Deferred investment costs consist of payments to reimburse
        Star Leisure and Entertainment Inc. with respect to the acquisition of
        Gulf Star World Development W.L.L. The 2003 comparative amount also included
        consultant’s fees.

F-11

---

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, |  
| | -- | ----------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |    |                                                                               |   | 2004         |   |   | 2003         |  
| |    |                                                                               |   |              |   |   |              |  
| | a) | Loan payable to a shareholder. This loan is unsecured, non-interest           |   |              |   |   |              |  
| |    | bearing and repayable on demand.                                              | $ | -            |   | $ | 13,837       |  
| |    |                                                                               |   |              |   |   |              |  
| | b) | Loan payable to a company controlled by a director of the
      Company       |   |              |   |   |              |  
| |    | including accrued interest of $9,198 (2003: Nil) The loan
      is unsecured, |   |              |   |   |              |  
| |    | bearing interest at 12% per annum and is repayable no later
      than        |   |              |   |   |              |  
| |    | August 12, 2005.                                                              |   | 29,198       |   |   | 50,000       |  
| |    |                                                                               |   |              |   |   |              |  
| | c) | Loan payable to a company controlled by a director of the
      Company       |   |              |   |   |              |  
| |    | including accrued interest of $52 (2003: Nil) 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$21,267.                                                         |   | 17,652       |   |   | -            |  
| |    |                                                                               |   |              |   |   |              |  
| | d) | Loan payable to a shareholder including accrued interest of
      $2,658      |   |              |   |   |              |  
| |    | (2003: $1,992). The loan is unsecured, bears interest
      at 8% per         |   |              |   |   |              |  
| |    | annum and is repayable upon demand.                                           |   | 8,693        |   |   | 8,027        |  
| |    |                                                                               |   |              |   |   |              |  
| | e) | Loans payable to a company controlled by a shareholder of
      the           |   |              |   |   |              |  
| |    | Company, including accrued interest of $20,914 (2003:
      $5,820),          |   |              |   |   |              |  
| |    | pursuant to Convertible Loan Agreements. Interest is calculated
      at      |   |              |   |   |              |  
| |    | 10% per annum. The loans mature on various dates to October
      16,         |   |              |   |   |              |  
| |    | 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.                      |   |              |   |   |              |  
| |    | Conversion of this loan and associated warrants to equity
      will be at    |   |              |   |   |              |  
| |    | various rates ranging from $0.05 to $0.80 per share.                          |   | 248,053      |   |   | 67,359       |  
| |    |                                                                               |   |              |   |   |              |  
| | f) | Loan payable to a shareholder including accrued interest of
      $ Nil       |   |              |   |   |              |  
| |    | (2003: $905). The loan was unsecured, bears interest at
      10% per         |   |              |   |   |              |  
| |    | annum and was settled in May 2004 for 30,000 common shares
      at           |   |              |   |   |              |  
| |    | $0.30 per share.                                                              |   | -            |   |   | 14,821       |  
| |    |                                                                               |   |              |   |   |              |  
| | g) | Loans payable to a company controlled by a director of the
      Company,     |   |              |   |   |              |  
| |    | including accrued interest of $13,033 (2003: $2,149),
      pursuant to       |   |              |   |   |              |  
| |    | Convertible Loan Agreements. Interest is calculated at 10%
      per          |   |              |   |   |              |  
| |    | annum. The loans mature on various dates to January 31, 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. Conversion of this
      loan and     |   |              |   |   |              |  
| |    | associated warrants to equity will be at various rates ranging
      from     |   |              |   |   |              |  
| |    | $0.13 to $0.24 per share.                                                     |   | 116,239      |   |   | 83,353       |  
| |    |                                                                               |   |              |   |   |              |  
| |    |                                                                               |   | 419,835      |   |   | 237,397      |  
| |    | Less: current portion                                                         |   | (183,698     | ) |   | (122,708     | )
| |    |                                                                               |   |              |   |   |              |  
| |    |                                                                               | $ | 236,137      |   | $ | 114,689      |  

F-12

---

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        | 
| |                                         | Expiry            | Shares    |   | Exercise Price | 
| |                                         |                   |           |   |                | 
| | Options outstanding at December 31,2002 |                   | 265,000   |   | $0.50          | 
| | Cancelled during the year               |                   | (265,000  | ) | $0.50          | 
| | Granted during the year                 | September 5, 2008 | 1,765,000 |   | $0.25          | 
| |                                         |                   |           |   |                | 
| | Options outstanding at December 31,2003 |                   | 1,765,000 |   | $0.25          | 
| | Exercised during the year               |                   | (205,000  | ) | $0.25          | 
| | Granted during the year                 | February 5, 2009  | 100,000   |   | $0.35          | 
| |                                         | April 15, 2009    | 25,000    |   | $0.63          | 
| |                                         | July 8, 2009      | 90,000    |   | $0.40          | 
| |                                         |                   |           |   |                | 
| | Options outstanding at December 31,2004 |                   | 1,775,000 |   | $0.27          | 

At December 31, 2004, of the total outstanding share purchase options; 1,691,000
(2003 – 706,000) were exercisable.

F-13

---

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)                                                                                                                                                                                                                                                        
|  
|   | For the options granted during the year ending December
          31, 2004, the total non-cash compensation charge determined is $120,900
          (2003 - $441,250). As 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, |  
| |                                                      |   | 2004                    |   |   | 2003         |   |   | 2004            |  
| |                                                      |   |                         |   |   |              |   |   |                 |  
| | Total non-cash compensation charge vested            | $ | 354,350                 |   | $ | 176,500      |   | $ | 924,357         |  
| | Employee’s non-cash compensation charge              |   | (192,900                | ) |   | (123,000     | ) |   | (494,322        | )
| |                                                      |   |                         |   |   |              |   |   |                 |  
| | Consultants’ non-cash compensation charge recognized | $ | 161,450                 |   | $ | 53,500       |   | $ | 430,035         |  

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, |  
| |                                    |   | 2004                    |   |   | 2003         |   |   | 2004            |  
| |                                    |   |                         |   |   |              |   |   |                 |  
| | Net loss – as reported             | $ | (517,324                | ) | $ | (1,208,941   | ) | $ | (4,803,992      | )
| |                                    |   |                         |   |   |              |   |   |                 |  
| | Net loss – pro-forma               | $ | (710,224                | ) | $ | (1,331,941   | ) | $ | (5,298,314      | )
| |                                    |   |                         |   |   |              |   |   |                 |  
| | Basic loss per share – as reported | $ | (0.03                   | ) | $ | (0.07        | ) |   |                 |  
| |                                    |   |                         |   |   |              |   |   |                 |  
| | Basic loss per share – pro-forma   | $ | (0.04                   | ) | $ | (0.08        | ) |   |                 |  

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

| |                                     |   | 2004    |  |   | 2003      | 
| | ----------------------------------- | - | ------- |  | - | --------- | 
| |                                     |   |         |  |   |           | 
| | Weighted average fair value         | $ | 0.56    |  | $ | 0.25      | 
| | Total options granted               |   | 215,000 |  |   | 1,765,000 | 
| | Total fair value of options granted | $ | 120,900 |  | $ | 441,250   | 

F-14

---

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:
|  

| |                         | 2004        |  | 2003 | 
| | ----------------------- | ----------- |  | ---- | 
| |                         |             |  |      | 
| | Expected dividend yield | 0.0%        |  | 0.0% | 
| | Expected volatility     | 142% - 191% |  | 252% | 
| | Risk-free Interest Rate | 2% - 2.88%  |  | 4.5% | 
| | Expected term in years  | 5           |  | 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, 2004, the following share purchase warrants
    were outstanding:

| | Number of Warrants |  | Exercise Price |  | Expiry Date      | 
| | ------------------ |  | -------------- |  | ---------------- | 
| |                    |  |                |  |                  | 
| | 75,820             |  | $0.07          |  | February 1, 2005 | 
| | 27,760             |  | $0.10          |  | February 1, 2005 | 
| | 50,568             |  | $0.12          |  | March 1, 2005    | 
| | 27,500             |  | $0.08          |  | March 1, 2005    | 
| | 330,000            |  | $0.10          |  | March 13, 2005   | 
| |                    |  |                |  |                  | 
| | 511,648            |  |                |  |                  | 

Each warrant entitles the holder thereof the right to purchase one common share
at the prices as indicated above.

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, and June 30, 2004 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 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.

F-15

---

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   | 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 July 11, 2005. 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, 2004, 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.                                                                                                                                                                                                                                                                                                                                                                                                    

F-16

---

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

|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           |   |   | Average Price |  |   |           |  
| | ---- | ------------------------ | ---------------- |  | ------------------- | - | - | ------------- |  | - | --------- | -
| |      |                          | Preferred Shares |  | Common
      Shares |   |   | Per Share     |  |   | Total     |  
| |      |                          |                  |  |                     |   |   |               |  |   |           |  
| | 1995 | Consulting fee           | -                |  | 50,000              |   | $ | 0.03          |  | $ | 1,500     |  
| | 1998 | Management fee           | -                |  | 7,000,000           |   | $ | 0.001         |  |   | 7,000     |  
| | 1998 | Consulting fee           | -                |  | 620,000             |   | $ | 0.01          |  |   | 6,200     |  
| | 2000 | Finders fee              | -                |  | 50,000              |   | $ | 0.001         |  |   | 50        |  
| | 2001 | Consulting fee           | -                |  | 233,333             |   | $ | 0.50          |  |   | 116,667   |  
| | 2001 | Consulting fee           | -                |  | 95,023              |   | $ | 0.50          |  |   | 47,512    |  
| | 2001 | Consulting fee           | -                |  | 13,383              |   | $ | 1.55          |  |   | 20,744    |  
| | 2001 | Consulting fee           | -                |  | 366,667             |   | $ | 3.50          |  |   | 1,283,331 |  
| | 2002 | Deferred investment cost | -                |  | 1,300,000           |   | $ | 0.05          |  |   | 65,000    |  
| | 2002 | Consulting fee           | -                |  | 604,143             |   | $ | 0.17          |  |   | 103,400   |  
| | 2002 | Debt settlement          | -                |  | 458,135             |   | $ | 0.20          |  |   | 91,627    |  
| | 2002 | Debt settlement          | -                |  | 222,751             |   | $ | 0.209         |  |   | 46,379    |  
| | 2002 | Consulting fee           | -                |  | 1,380,000           |   | $ | 0.07          |  |   | 93,000    |  
| | 2003 | Consulting fee           | -                |  | 1,450,000           |   | $ | 0.14          |  |   | 203,000   |  
| | 2003 | Termination fee          | 198,000          |  | -                   |   | $ | 4.00          |  |   | 792,000   |  
| | 2004 | Loan conversion          | -                |  | 825,364             |   | $ | 0.06          |  |   | 48,537    |  
| | 2004 | Loan settlement          | -                |  | 563,000             |   | $ | 0.05          |  |   | 30,000    |  
| | 2004 | Loan settlement          | -                |  | 50,000              |   | $ | 0.30          |  |   | 15,000    |  
| | 2004 | Consulting fee           | -                |  | 10,000              |   | $ | 2.00          |  |   | 20,000    |  
| | 2004 | Consulting fee           | -                |  | 350,000             |   | $ | 0.35          |  |   | 122,500   |  
| | 2004 | Deferred investment      |                  |  |                     |   |   |               |  |   |           |  
| |      | cost (cancellation)      | -                |  | (1,300,000          | ) | $ | 0.05          |  |   | (65,000   | )
| |      |                          |                  |  |                     |   |   |               |  |   |           |  
| |      |                          | 198,000          |  | 14,341,799          |   |   |               |  | $ | 3,048,447 |  

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

F-17

---

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
        and 6                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | 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, | 
| |                    |   | 2004                    |  |   | 2003         |  |   | 2004            | 
| |                    |   |                         |  |   |              |  |   |                 | 
| | Consulting fees    | $ | -                       |  | $ | -            |  | $ | 35,670          | 
| | Interest           |   | 20,134                  |  |   | 2,445        |  |   | 23,274          | 
| | Management fees    |   | 932                     |  |   | -            |  |   | 112,932         | 
| | Office and general |   | -                       |  |   | 3,925        |  |   | 26,944          | 
| | Rent               |   | 18,533                  |  |   | 10,239       |  |   | 49,384          | 
| |                    |   |                         |  |   |              |  |   |                 | 
| |                    | $ | 39,599                  |  | $ | 16,609       |  | $ | 248,204         | 

| | Deferred investment costs at December 31, 2004 included $34,210
        (2003: $34,210) charged by a related company in respect to a cash
        payment required pursuant to an acquisition agreement (Note 6).                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                  
| | These charges were measured by the exchange amount,
        which is the amount agreed upon by the transacting parties.                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                  
| | The December 31, 2003 amount due from related party
        is comprised of advances to a company with which the Company has a director
        in common.                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                  
| | At December 31, 2004, accounts payable includes $69
        (2003: $71,181) due to directors of the Company and companies controlled
        by directors of the Company in respect of unpaid management fees.                                                                                   
| |                                                                                                                                                                                                                                                                                                  
| | At December 31, 2004 and 2003, 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 a 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:
|  

| |                                            |   | 2004       |   |   | 2003        |  
| | ------------------------------------------ | - | ---------- | - | - | ----------- | -
| | Net tax operating loss carryforward        | $ | 1,637,005  |   | $ | 1,462,587   |  
| | Net tax capital loss carryforward          |   | 103,077    |   |   | 103,077     |  
| | Gross deferred tax assets                  |   | 1,740,082  |   |   | 1,565,664   |  
| | Valuation allowance for deferred tax asset |   | (1,740,082 | ) |   | ( 1,565,664 | )
| | Balance at December 31, 2004               | $ | -          |   | $ | -           |  

F-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)

|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, 2004, the Company has net operating
        loss carryforwards which expire commencing in 2010 totalling approximately $4,814,720.
        The Company has a capital loss carryforward which expires in 2006, totalling
        approximately $606,000. The potential tax benefits of these losses
        have not been recorded in the financial statements.
|   
|11. | Subsequent Events                                                                                                                                                                                                                                                                                                                                                             
|   
|    | Subsequent to December 31, 2004, the Company:                                                                                                                                                                                                                                                                                                                                 
|   
|    | a)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | b)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | c)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | d)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | e)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | f)                                                                                                                                                                                                                                                                                                                                                                            
|   
|    | g)                                                                                                                                                                                                                                                                                                                                                                            

F-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)

|11. | Subsequent Events– (cont’d)                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------
|   
|    | h)                                                                                                                              
|   
|    | i)                                                                                                                              
|   
|12. | Comparative Figures                                                                                                             
|   
|    | Certain of the comparative figures have been reclassified
      to conform with the presentation adopted for the current period.

F-20

---

|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  | March 7, 2001 | Director and officer of both | Soho Resources Corp., and   
| | President, CEO, | to            | the Company, and two         | Mantle Minerals Inc.; both  
| | Director        | Present       | natural resource exploration | reporting issuers in Canada.
| |                 |               | companies.                   |                             
| |                 |               |                              |                             
| | Abbas Salih     | March 7, 2001 | Director and officer of the  | None                        
| | Chairman,       | to            | Company.                     |                             
| | Secretary, CFO, | Present       |                              |                             
| | Director        |               |                              |                             

| | Significant employees
      None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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 proceedings 
        As 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
          Act 
        Section 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,
        2004.                                                                                                                                                                                                                                                                                                                                                                                     

10

---

|10. | Executive Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the fiscal year ended December 31, 2004, 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 1,775,000 common shares
        of the Company at a weighted average price of $0.27 per share. The
        President and the Secretary of the Company have each been granted 600,000
        share purchase options each under the Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Subsequent to the fiscal year end, the Company issued
        a 20% stock dividend. The effect of this dividend is to increase the
        number of outstanding share purchase options to 2,130,000 exercisable
        at a weighted average price of $0.23 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| | Summary compensation table
| | --------------------------

| |                |      | Annual Compensation       | Long Term Compensation       
| | -------------- | ---- | ------------------------- | -----------------------------
| | Name           | Year | Other annual compensation | Securities underlying options
| |                |      |                           |                              
| | Ralph Shearing |      |                           |                              
| | CEO, Director  | 2004 | $932                      | -                            
| |                | 2003 | -                         | 600,000 share options        
| |                | 2002 | -                         | -                            
| |                |      |                           |                              
| | Abbas Salih    |      |                           |                              
| | CFO, Director  | 2004 | -                         | -                            
| |                | 2003 | -                         | 600,000 share options        
| |                | 2002 | -                         | -                            

11

---

| | 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  | 600,000 / nil share options    | $150,000/ nil                
| |                |                                |                              
| | Abbas Salih    |                                |                              
| | CFO, Director  | 600,000 / nil share options    | $150,000/ 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.                | 6,463,722 (direct)      | 26%       
| |  |                | New York, N.Y., U.S.A.    |                         |           
| |  |                |                           |                         |           
| |  | Common stock   | P. Chung                  | 2,347,605 (indirect)(1) | 12%       
| |  |                | Vancouver, BC, Canada     |                         |           

| | (1) | The beneficial owner also has the right to acquire a further 30,000 (36,000
      post-dividend) shares through the exercise of stock options and 713,969
      (856,763 post-dividend) shares through the exercise of warrants.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Security ownership of management
| | --------------------------------

| |  |                |                           | Amount and nature of | Percentage
| |  | -------------- | ------------------------- | -------------------- | ----------
| |  | Title of class | Name of beneficial owners | beneficial ownership |           
| |  |                |                           |                      |           
| |  | Common stock   | Ralph Shearing            | Nil (1)              | 3%        
| |  |                | Vancouver, BC, Canada     |                      |           
| |  |                |                           |                      |           
| |  | Common stock   | Abbas Salih               | 9,785,172 (2)        | 44%       
| |  |                | Vancouver, BC, Canada     |                      |           

| | (1) | The beneficial owner has the right to acquire 600,000
        (720,000 post-dividend) shares through the exercise of stock options.                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | The beneficial owner also has the right to acquire
        a further 600,000 (720,000 post-dividend) shares through the exercise
        of stock options and 1,177,388 (1,412,866 post-dividend) 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 and 6 of this Annual Report.

12

---

|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)
      Certification of CEO | Exhibit 31.1      
| | 601-(32)      | Section 1350 Certification of CEO                   | Exhibit 32.1      
| | 601-(31)      | Rule 13a-14(a)/15d-14(a)
      Certification of CFO | Exhibit
      31.2
| | 601-(32)      | Section 1350 Certification of CFO                   | Exhibit 32.2      

| |  | Note  1 | Incorporated by reference to Form  10-KSB  Annual
| |  | ------- | -------------------------------------------------
| |  |         | Report for the year ending December  31,  2001   
| |  | Note  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, 2004 and
        2003, the Company incurred approximately $11,000 and $10,000
        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 $10,250 (2003: $8,950) 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.

13

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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: March 31, 2005 |                                             
|                     |                                             
|                     |                                             
|                     |                                             

|Date: March 31, 2005 |  | /s/  Abbas Salih          
|-------------------- |  | --------------------------
|                     |  |                           
|                     |  | Abbas Salih, CFO, Director

14

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