**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**







**(MARK
      ONE)**




x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934




For
      the
      quarterly period ended January 31, 2006




o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT




For
      the
      transition period from ________ to __________.





**Commission
      file number 333- 106637**




**STRATEGY
                INTERNATIONAL INSURANCE GROUP, INC.****(Exact
                name of small business issuer as specified in its
                charter)**




Texas
            
            16-1644353(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification Number)200
                Yorkland Blvd., Suite 710
              Toronto,
                Ontario Canada M2J 5C1
              
              (416)
                496-9988(Address
                and telephone number of principal executive
                offices)





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 (or for such shorter period
      that the registrant was required to file such reports); and (2) has been subject
      to such filing requirements for the past 90 days.




Yes x No o




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




Yes o No x




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 64,327,503 shares of Common Stock, $0.001
      par
      value per share, outstanding as of March 29, 2006.




Transitional
      Small Business Disclosure Format (check one):




Yes o No x







**TABLE
      OF CONTENTS**





Numbers
            
            Page**PART
                I - FINANCIAL INFORMATION**Item
                1.
            Financial
                StatementsConsolidated
                Balance Sheets
            3Consolidated
                Statements of Operations
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            6Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            16Item
                3.
            Controls
                and Procedures
            25**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            27Item
                6.
            Exhibits
            27




2





**PART
      I.****FINANCIAL
      INFORMATION**





**ITEM
      1.****FINANCIAL
      STATEMENTS**




STRATEGY
        INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEETS




January
                31,
            
            April
                30,2006
            
            2005(Unaudited)
            
            (Audited)ASSETSCurrent
                Assets:Cash
            
            $
            444,383
            
            $
            2,786,961Accounts
                receivable
            
            
            449,032
            
            
            553,753Mortgage
                notes receivable
            
            
            6,230,807
            
            
            6,230,807Loan
                receivable
            
            
            900,000
            
            
            900,000InInterest
                receivable (includes $0 and $542,667 from related parties)
            
            
            2,525,795
            
            
            784,357Prepaid
                expenses and other current assets (includes $707,398 and $0 from
                related
                parties)
            
            
            1,145,489
            
            
            129,874Total
                Current Assets
            
            
            11,695,506
            
            
            11,385,752Cash
                - restricted
            
            
            32,603,803
            
            
            32,046,385Marketable
                securities
            
            
            351,589
            
            
            -Secured
                convertible note receivable
            
            
            533,134,862
            
            
            -Mortgage
                notes receivable
            
            
            66,947,049
            
            
            23,000,000Mortgage
                notes receivable - related parties
            
            
            8,000,000
            
            
            8,000,000Interest
                receivable - related parties
            
            
            1,341,177
            
            
            -Property
                and equipment - net
            
            
            509,614
            
            
            84,920Other
                assets
            
            
            1,954,651
            
            
            253,571Goodwill
            
            
            596,532
            
            
            -Due
                from related parties
            
            
            509,741
            
            
            256,049Total
                Assets
            
            $
            657,644,524
            
            $
            75,026,677LIABILITIES
                AND STOCKHOLDERS' DEFICIENCYCurrent
                Liabilities:Long
                term debt - current portion
            
            $
            5,021,250
            
            $
            7,000,000Preferred
                dividend payable
            
            
            387,589
            
            
            -Accounts
                payable and accrued liabilities (includes $109,073 and $6,302 from
                related
                parties)
            
            
            9,331,681
            
            
            1,745,385Note
                and loans payable - related party
            
            
            2,316,753
            
            
            275,000Premium
                advance
            
            
            -
            
            
            100,000Unearned
                premiums
            
            
            6,596,389
            
            
            1,473,712Claims
                reserves
            
            
            3,239,901
            
            
            1,547,258Due
                to affiliate
            
            
            6,428,929
            
            
            206,433Total
                Current Liabilities
            
            
            33,322,492
            
            
            12,347,788Long-term
                liabilitiesReeRedeemable
                Insured Preferred Stock Series A - net of issuance costs of $1,780,289
                and
                $2,216,279 (Liquidation preference $50,000,000)
            
            
            43,296,804
            
            
            40,434,068Long-term
                debt - net of current portion - net of issuance costs of $249,294
                and
                $0
            
            
            73,250,314
            
            
            23,000,000Long-term
                debt - related party
            
            
            1,250,000
            
            
            -


Total
                Long-term Liabilities
            
            
            117,797,118
            
            
            63,434,068Total
                Liabilities
            
            
            151,119,610
            
            
            75,781,856ContingenciesStockholders'
                Equity (Deficiency):10%
                Cumulative Class A Preferred stock ($.001 stated value, unlimited
                shares
                authorized, 47,670 issued and outstanding)
            
            
            48
            
            
            4810%
                Cumulative Class B Preferred stock ($.001 stated value, unlimited
                shares
                authorized, 56,562 issued and outstanding)
            
            
            57
            
            
            57Series
                B Preferred stock (no par value, unlimited shares authorized, 5,000
                shares
                issued and outstanding)
            
            
            1,000,000
            
            
            1,000,000Series
                D Preferred stock (no par value, unlimited shares authorized, 24
                shares
                issued and outstanding) (Redemption value $700,000,000)
            
            
            517,870,149
            
            
            -Common
                stock ($.001 par value, 100,000,000 shares authorized 64,227,503
                and
                63,197,503 shares issued and outstanding at January 31, 2006 and
                April 30,
                2005, respectively)
            
            
            64,227
            
            
            63,197Additional
                paid-in capital
            
            
            114,055,717
            
            
            117,595,346Less:
                Notes receivable - subscriptions
            
            
            (104,231,610
            )
            
            (104,231,610
            )Deferred
                compensation
            
            
            -
            
            
            (266,022
            )Currency
                translation adjustment
            
            
            (153,017
            )
            
            (4,173
            )Unrealized
                gain on marketable securities
            
            
            (351,589
            )
            
            -Accumulated
                deficit
            
            
            (22,432,246
            )
            
            (14,912,022
            )Total
                Stockholders' Equity (Deficiency)
            
            
            506,524,914
            
            
            (755,179
            )Total
                Liabilities and Stockholders' Equity (Deficiency)
            
            $
            657,644,524
            
            $
            75,026,677







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


3


STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(Unaudited)




For
                the Three Months ended
            
            For
                the Nine Months endedJanuary
                31,
            
            January
                31,2006
            
            2005
            
            2006
            
            2005(Restated)
            
            
            
            (Restated)Revenue:Gross
                written premium
            
            $
            772,677
            
            $
            1,512,087
            
            $
            6,770,572
            
            $
            1,953,458Less:
                Adjustments to unearned premium
            
            
            (96,354
            )
            
            -
            
            
            5,114,469
            
            
            -Net
                earned written premium
            
            
            869,031
            
            
            1,512,087
            
            
            1,656,103
            
            
            1,953,458Interest
                income (includes $266,170, $225,666, $798,510 and $225,666 from related
                parties)
            
            
            6,541,250
            
            
            963,050
            
            
            9,512,419
            
            
            2,492,614Investment
                income
            
            
            279,418
            
            
            -
            
            
            772,146
            
            
            -Total
                revenue
            
            
            7,689,699
            
            
            2,475,137
            
            
            11,940,668
            
            
            4,446,072Claims
                and Expenses:General
                and administrative expenses
            
            
            3,155,896
            
            
            4,300,744
            
            
            9,363,473
            
            
            7,036,877Claims
                reserve expense
            
            
            193,170
            
            
            -
            
            
            1,692,644
            
            
            -Bro
                Brokerage and acquisition costs (includes $39,300, $3,000,000, $78,600
                and
                $3,000,000 from related parties)
            
            
            76,545
            
            
            3,085,949
            
            
            184,707
            
            
            3,215,660Amortization
                of finance costs
            
            
            269,628
            
            
            181,663
            
            
            689,691
            
            
            181,663Depreciation
            
            
            51,390
            
            
            8,467
            
            
            82,401
            
            
            8,467Total
                claims and expenses
            
            
            3,746,629
            
            
            7,576,823
            
            
            12,012,916
            
            
            10,442,667Income
                (loss) from operations
            
            
            3,943,070
            
            
            (5,101,686
            )
            
            (72,248
            )
            
            (5,996,595
            )Other
                Income (Expense):Gain
                on foreign currency transactions
            
            
            157,279
            
            
            -
            
            
            157,279
            
            
            -Interest
                expense (includes $74,146, $2,865, $102,733 and $2,865 from related
                parties)
            
            
            (2,836,610
            )
            
            (2,099,638
            )
            
            (7,659,381
            )
            
            (2,099,638
            )Minority
                interest in loss of subsidiary
            
            
            -
            
            
            -
            
            
            54,126
            
            
            -Net
                income (loss)
            
            
            1,263,739
            
            
            (7,201,324
            )
            
            (7,520,224
            )
            
            (8,096,233
            )Deemed
                dividend on Redeemable InsuredPreferred
                Stock Series A
            
            
            722,917
            
            
            602,431
            
            
            2,168,751
            
            
            602,431Dividend
                on Preferred Stock Series D
            
            
            3,091,699
            
            
            -
            
            
            3,091,699
            
            
            -Dividend
                on 10% Cumulative Class A and Class B Preferred Stock
            
            
            -
            
            
            2,616,438
            
            
            -
            
            
            2,616,438Net
                loss attributable to common stockholders
            
            $
            (2,550,877
            )
            $
            (10,420,193
            )
            $
            (12,780,674
            )
            $
            (11,315,102
            )Net
                loss per common share:Basic
                and diluted
            
            $
            (0.04
            )
            $
            (0.17
            )
            $
            (0.20
            )
            $
            (0.19
            )Basic
                and diluted weighted average common shares outstanding
            
            
            63,376,633
            
            
            63,023,491
            
            
            63,257,213
            
            
            59,767,773




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




4




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


FOR
      THE
      NINE MONTHS ENDED JANUARY 31, 2006 AND 2005


(Unaudited)


January
                  31,2006
              
              2005(Restated)Cash
                  Flows from Operating Activities:Net
                  loss
              
              $
              (7,520,224
              )
              $
              (8,096,233
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Amortization
                  of finance costs
              
              
              689,691
              
              
              181,663Amortization
                  of deferred stock based compensation
              
              
              266,022
              
              
              14,889Amortization
                  of discount of secured convertible note receivable
              
              
              (1,834,862
              )
              
              -Depreciation
              
              
              82,401
              
              
              8,467Minority
                  interest in loss of subsidiary
              
              
              (54,126
              )
              
              -Common
                  stock issued for services rendered
              
              
              -
              
              
              2,804,930(Increase)
                  decrease in:Accounts
                  receivable
              
              
              104,721
              
              
              -Interest
                  receivable
              
              
              (5,774,436
              )
              
              (2,410,246
              )Prepaid
                  expenses
              
              
              (917,536
              )
              
              (75,000
              )Other
                  assets
              
              
              (1,292,080
              )
              
              (174,759
              )Increase
                  (decrease) in:Accounts
                  payable and accrued liabilities
              
              
              7,068,804
              
              
              715,532Due
                  from/to affiliate
              
              
              (3,777,504
              )
              
              -Premium
                  advance
              
              
              (100,000
              )
              
              -Unearned
                  premiums
              
              
              5,122,677
              
              
              -Claims
                  reserves
              
              
              1,692,643
              
              
              1,476,092Net
                  cash used in operating activities
              
              
              (6,243,809
              )
              
              (5,554,665
              )Cash
                  Flows from Investing ActivitiesCash
                  paid for mortgage notes receivable
              
              
              (49,659,375
              )
              
              (8,000,000
              )Repayments
                  received on mortgage notes receivable
              
              
              5,857,316
              
              
              -Acquisitions
                  of property and equipment
              
              
              (504,026
              )
              
              (35,761
              )Restricted
                  cash - net activity
              
              
              (557,418
              )
              
              (33,121,338
              )Loans
                  to related parties
              
              
              (253,692
              )
              
              (2,109,218
              )Acquisition
                  of subsidiary
              
              
              (36,096
              )
              
              -Cash
                  received in acquisition
              
              
              8,113
              
              
              15,230Net
                  cash used in investing activities
              
              
              (45,145,178
              )
              
              (43,251,087
              )Cash
                  Flows from Financing Activities:Proceeds
                  from long-term debt
              
              
              50,400,000
              
              
              7,000,000Proceeds
                  of long-term debt - related party
              
              
              1,250,000
              
              
              -Issuance
                  costs for Series D Preferred stock- net of affiliate consulting
                  fee
              
              
              (2,017,000
              )
              
              -Finance
                  costs of long-term debt
              
              
              (245,000
              )
              
              (2,615,937
              )Deferred
                  finance costs
              
              
              (100,000
              )
              
              -Proceeds
                  from note and loans payable - related party
              
              
              2,618,219
              
              
              275,000Repayments
                  of note and loans payable - related party
              
              
              (576,466
              )
              
              -Payments
                  of long-term debt
              
              
              (1,977,221
              )
              
              -Proceeds
                  from issuance of series B preferred stock
              
              
              -
              
              
              1,000,000Sale
                  of common stock warrants - net of issuance costs
              
              
              -
              
              
              7,125,858Issuance
                  of redeemable insured Preferred Stock Series A - net of issuance
                  costs
              
              
              -
              
              
              41,325,000Proceeds
                  from bridge loan
              
              
              -
              
              
              8,000,000Repayment
                  of bridge loan
              
              
              -
              
              
              (8,000,000
              )Dividends
                  paid
              
              
              -
              
              
              (2,616,438
              )Net
                  cash provided by financing activities
              
              
              49,352,532
              
              
              51,493,483Effect
                  of foreign currency translation
              
              
              (306,123
              )
              
              -Net
                  (decrease) increase in cash
              
              
              (2,342,578
              )
              
              2,687,731Cash
                  - beginning of period
              
              
              2,786,961
              
              
              184,000Cash
                  - end of period
              
              $
              444,383
              
              $
              2,871,731Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid during the period for:Interest
              
              $
              6,014,708
              
              $
              616,438Income
                  taxes
              
              $
              -
              
              $
              -Supplemental
                  Disclosures of non cash financing activities:Acquisition
                  of Forestre (Holdings) Limited
              
              $
              607,714
              
              $
              -Note
                  issued for insurance policy
              
              $
              98,079
              
              $
              -Deemed
                  dividend on Redeemable Insured PreferredStock
                  Series A
              
              $
              2,168,751
              
              $
              602,431Series
                  D Preferred stock issued in exchange for secured convertible note
                  receivable
              
              $
              531,300,000
              
              $
              -Common
                  stock issued for deferred finance costs
              
              $
              309,000
              
              $
              -Unrealized
                  gain on marketable securities
              
              $
              351,589
              
              $
              -Warrants
                  issued as compensation in connection with issuance os Seried D
                  Preferred
                  stock
              
              $
              1,412,851
              
              $
              -Accrued
                  dividend payable
              
              $
              3,091,699
              
              $
              -Common
                  stock issued for services
              
              $
              -
              
              $
              2,804,930Warrants
                  issued as compensation in connection with consulting
                  agreement
              
              $
              -
              
              $
              375,560


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




5




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


JANUARY
      31, 2006 AND 2005





1.
      THE
      COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
      Company





Strategy
      International Insurance Group, Inc.(the "Company" or "Strategy International")
      is a holding company of wholly-owned subsidiaries in insurance and related
      financing, real estate and energy areas. Strategy International’s predominant
      subsidiary is Strategy Insurance Limited ("SIL"), a Barbados company, an
      integrated, international provider of specialty lines of insurance, reinsurance
      and structured risk solutions, focusing on credit enhancement, contingency,
      liability and other specialty insurance and reinsurance. Strategy
      International has developed and intends to continue its efforts to
      develop the practice of introducing credit insurance programs in other
      areas, including construction and real estate development. SIL is a wholly-owned
      subsidiary of Strategy Holding Company Limited ("Strategy Holding"), a Barbados
      company, which in turn is a direct wholly-owned subsidiary of Strategy
      International. SIL received an Exempt Insurance License from the Ministry of
      Finance, Barbados, West Indies, on March 25, 2004, which authorizes SIL to
      engage in the following classes of insurance business from within
      Barbados:





o
            General
                insurance business;





o
            Credit
                insurance;





o
            Liability
                insurance;





o
            Mortgage
                indemnity insurance;





o
            Rental
                guarantee insurance; and





o
            Reinsurance.





The
      license is subject to annual renewal and has been renewed through December
      31,
      2006.





We
      have
      implemented a strategy to design, structure and sell a broad series of
      structured risk, specialty insurance and reinsurance platforms. The Company
      conducts its insurance and reinsurance operations principally through its
      subsidiaries incorporated throughout the world.  We have established
      offices in Wildey, Barbados, West Indies; London, England; and Toronto,
      Canada.  We will consider opening other offices as our business expands
      into different geographic areas.




On
      June
      24, 2005, the Company entered into a Shareholders Agreement with Forestre
      (Holdings) Limited (“ForestRe”), a private consulting firm registered in England
      and Wales, and certain stockholders (the “Stockholders”), pursuant to which the
      Company and the Stockholders agreed to cooperate in the management and
      development of an underwriting agency specializing in the provision of insurance
      for environment related concerns with specific interest in the coverage of
      standing timber, called ForestRe Limited. The Company provides the underwriting
      capacity to support the insurance program and the Stockholders provide the
      expertise in the class of business to make it a successful venture.





As
      part
      of this transaction, the Company acquired a 60% ownership interest in ForestRe
      in consideration for an investment of GBP20,000 ($36,096) and a working capital
      loan facility. ForestRe owns ForestRe Limited and Agro Forest Risk Management
      Limited. Together these companies design risk transfers mechanisms for small
      forest and plantation owners through out the world.


6


The
      acquisition of ForestRe has been accounted for as a purchase by the Company.
      In
      connection with the acquisition, the purchase price was allocated as
      follows:


Cash
              
              $
              8,113Property
                  and equipment
              
              
              3,069License
                  agreements and proprietary know how
              
              
              596,532Accounts
                  payable and other liabilities
              
              
              (571,618
              )$
              36,096





The
      Company accounts for goodwill in accordance with Statement of Financial
      Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142),
      which addresses the financial accounting and reporting standards for goodwill
      and other intangible assets subsequent to their acquisition. This accounting
      standard requires that goodwill no longer be amortized, and instead, be tested
      for impairment on a periodic basis.





Going
      Concern




The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern. As shown in the accompanying financial statements,
      the Company has incurred a net loss of $7,520,224 for the nine months ended
      January 31, 2006 and $14,958,708 for the year ended April 30, 2005, has a
      working capital deficit of $20,285,809 and $962,036 as of January 31, 2006
      and
      April 30, 2005, respectively, and has generated negative cash flows from
      operations. In addition, in September 2005, the Company voluntarily withdrew
      from writing new business as a result of the unauthorized discharge of certain
      mortgages resulting in a loss of regulatory capital (see Note 9) **.** The
      future of the Company is dependent upon its ability to generate sufficient
      revenues and to obtain debt and/or equity financing to fund its operations
      and
      to follow through on its projected business plan. Management has plans to seek
      additional capital through debt and/or equity financing. The financial
      statements do not include any adjustments relating to the recoverability and
      classification of recorded assets, or the amounts of and classification of
      liabilities that might be necessary in the event the Company cannot continue
      its
      existence.




In
      December 2005, the Company successfully completed a transaction that raised
      new
      equity capital of approximately $518 million for its wholly-owned Barbados
      subsidiary, Strategy Holding Company Limited ("Holding") **** (see
      Notes 4 and 9). **** While
      this transaction added significant new capital, the investment consisted of
      non-cash assets not readily convertible to cash. In February 2006, the Company
      requested approval from the office of the Supervisor of Insurance and Finance
      of
      Barbados to have this contributed capital allowed as regulatory capital for
      its
      insurance subsidiary, SIL.




The
      Company believes it will be successful in receiving this approval and recommence
      its business plan and insurance operation and find additional ways to utilize
      the non-cash assets for the future benefit of its operations. **** However,
      there can be no assurance that we will be successful in doing so. The ability
      of
      the Company **** to
      utilize or convert the non-cash assets into working capital and/or receive
      approval of such non-cash assets as regulatory capital, **** therefore
      continues to raise substantial doubt about the Company's ability to continue
      as
      a going concern. These financial statements do not include any adjustments
      that
      might arise from such uncertainty.





Interim
      Presentation





The
      April
      30, 2005 balance sheet data was derived from audited financial statements but
      does not include all disclosures required by generally accepted accounting
      principles. In the opinion of management, the accompanying unaudited financial
      statements contain all normal and recurring adjustments necessary to present
      fairly the financial position of the Company as of January 31, 2006, its results
      of operations for the nine and three months ended January 31, 2006 and 2005
      and
      its cash flows for the nine months ended January 31, 2006 and 2005.





The
      statements of operations for the nine months ended January 31, 2006 and 2005
      are
      not necessarily indicative of the results for the full year.





While
      the
      Company believes that the disclosures presented are adequate to make the
      information not misleading, these financial statements should be read in
      conjunction with the financial statements and accompanying notes included in
      the
      Company's annual report on Form 10-KSB for the year ended April 30, 2005.





7


Restatement





During
      the audit of the financial statements as of and for the year ended April 30,
      2005, it was discovered that certain transactions were not properly recorded
      within the quarters, however were reflected within the year end financial
      statements. The Company has therefore restated the statements of operations
      for
      the nine and three months ended January 31, 2005 and the statement of cash
      flows
      for the nine months ended January 31, 2005 to properly reflect transactions
      within the proper quarters for the following:





1.
            To
                reverse the accrual of unpaid cumulative dividends on the 10% Cumulative
                Class A and Class B preferred stock. Accrued dividends amounted to
                $5,200,932 for the nine months ended January 31,
                2005.


2.
            To
                record a deemed dividend on Redeemable Insured Preferred Stock Series
                A in
                the amount of $602,431 for the nine and three months ended January
                31,
                2005 and to reclassify interest expense recorded as dividends in
                the
                amount of $1,033,055 for the nine and three months ended January
                31,
                2005.


3.
            To
                record the issuance of 977,503 and 177,504 shares of common stock
                for
                consulting services for the nine and three months ended January 31,
                2005,
                respectively. Consulting services amounted to $1,829,930 and $317,932
                for
                the nine and three months ended January 31, 2005, respectively.


4.
            To
                record the issuance of 750,000 shares of common stock for interest
                in the
                nine and three months ended January 31, 2005. The shares were valued
                at
                $975,000.


5.
            To
                decrease the amortization of finance costs of Redeemable Insured
                Preferred
                Stock Series A by $83,073 for the nine and three months ended January
                31,
                2005.


6.
            To
                reclassify unamortized finance costs to consulting expense in the
                amount
                of $938,000 for the nine and three months ended January 31,
                2005.


7.
            To
                accrue consulting expenses in the amount of $120,833 for the nine
                and
                three months ended January 31,
                2005.


8.
            To
                accrue interest on a related party note payable in the amount of
                $2,865
                for the nine and three months ended January 31,
                2005.


9.
            To
                record the amortization of deferred stock based compensation of $14,889
                for the nine and three months ended January 31,
                2005.





The
      effect of the restatement was to increase net loss by $3,798,444 ($.06 per
      share) for the nine months ended January 31, 2005, increase net loss by
      $2,286,446 ($.04 per share) for the three months ended January 31, 2005,
      decrease net loss attributable to common stockholders by $1,833,163 ($.03 per
      share) for the nine months ended January 31, 2005 and increase net loss
      attributable to common stockholders by $1,866,419 ($.03 per share) for the
      three
      months ended January 31, 2005.





Earnings
      (Loss) Per Share





The
      Company computes earnings or loss per share in accordance with Statement of
      Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”). Basic
      earnings per share is computed by dividing income available to common
      stockholders by the weighted average number of common shares outstanding.
      Diluted earnings per share reflect the potential dilution that could occur
      if
      securities or other agreements to issue common stock were exercised or converted
      into common stock, only in the periods in which the effect is dilutive. The
      following securities have been excluded from the calculation of net loss per
      share, as their effect would be antidilutive.





2006
            
            2005Warrants
                (weighted average)
            
            
            38,830,663
            
            
            8,173,606





Recent
      Accounting Pronouncements **





In
      December 2004, the FASB issued SFAS No. 123 (R), “Share-based Payment,” which
      replaced SFAB No.123, Accounting for Stock-based Compensation” (“SFAS No. 123”),
      and supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock
      Issued to Employees” (“APB No. 25”). SFAS 123 (R) requires companies to
      recognize in their statement of income the grant-date fair value of stock
      options and other equity-based compensation issued to employees. This SFAS
      is
      effective for most public companies for interim and annual reporting periods
      beginning after June 15, 2005. Grant-date fair value will be determined using
      one of two acceptable valuation models. This Standard requires that compensation
      expense for most equity-based awards be recognized over the requisite service
      period, usually the vesting period; while compensation expense for
      liability-based awards (those usually settled in cash rather than stock) be
      re-measured to fair-value at each balance sheet date until the award is settled.
      The Standard also provides guidance as to the accounting treatment for income
      taxes related to such compensation cost, as well as transition issues related
      to
      adopting the new Standard. The adoption of SFAS No. 123 (R) had no impact on
      the
      Company’s results of operations for the nine months ended January 31,
      2006.





8


In
      May
      2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial Statements”
("SFAS 154"). SFAS 154 provides guidance on the accounting for and reporting
      of
      accounting changes and error corrections. It establishes, unless impracticable,
      retrospective application as the required method for reporting a change in
      accounting principle in the absence of explicit transition requirements specific
      to the newly adopted accounting principle. SFAS 154 also provides guidance
      for
      determining whether retrospective application of a change in accounting
      principle is impracticable and for reporting a change when retrospective
      application is impracticable. The provisions of SFAS 154 are effective for
      accounting changes and corrections of errors made in fiscal periods beginning
      after December 15, 2005. The adoption of the provisions of SFAS 154 is not
      expected to have a material impact on the Company’s financial position or
      results of operations.





2.
      ACCOUNTS RECEIVABLE





At
      January 31, 2006 and April 30, 2005, three customers and one customer accounted
      for 100% of the Company’s accounts receivable, respectively.





3.
      SALES
      AND MAJOR CUSTOMERS





Net
      earned written premiums were earned in the following countries for the nine
      and
      three months ended January 31, 2006:


Nine
                  Months
              
              Three
                  MonthsEnded
              
              EndedJanuary
                  31, 2006
              
              January
                  31, 2006Australia
              
              $
              9,180
              
              $
              6,885Canada
              
              
              51,278
              
              
              17,076United
                  Kingdom
              
              
              371,448
              
              
              134,994United
                  States of America
              
              
              405,418
              
              
              208,918South
                  Korea
              
              
              134,089
              
              
              44,698India
              
              
              684,690
              
              
              456,460$
              1,656,103
              
              $
              869,031





Net
      earned written premiums resulted from policies entered into prior to the
      Company’s voluntary withdrawal from writing new business in September 2005, due
      to the unauthorized discharge of certain mortgages, resulting in a loss of
      regulatory capital (see Note 9).





The
      Company earned 88% and 91% of its net earned written premiums from three
      customers for the nine and three months ended January 31, 2006,
      respectively.





4.
      SECURED CONVERTIBLE NOTE RECEIVABLE





On
      December 14, 2005, the Company and Holding concluded a Capital Investment
      transaction outlined in the binding letter agreement entered into on October
      25,
      2005 (the “Master Investment Agreement”) with Grupo Lakas S.A., a Panamanian
      corporation (“Grupo Lakas” or "Investor"), Panama
      Peat S.A., a Panamanian corporation (“Panama Peat”) and Changuinola Peat S.A., a
      Panamanian corporation .
      Pursuant to the Master Investment Agreement, Grupo Lakas made an investment
      with
      a face value of $700,000,000 (the “Investment”) in Holding by issuing to
      Holding, a promissory note in the original principal amount of $700,000,000
      (the
“Note”). In consideration for making the investment in Holding, Holding has
      issued to Grupo Lakas, Series D Preferred stock ("Series D Preferred") (see
      Note
      9).





9


The
      obligations of Grupo Lakas under the Note are secured by bearer peat
      certificates (the “Peat Certificates”) representing the right to obtain peat, a
      pre-coal stage organic material used as energy or for horticultural use, from
      the Changuinola Peat Deposit of Northwestern Panama. The peat has an estimated
      value within a range of $760 million to $1.71 billion. The value of the peat
      was
      based on a report prepared by independent third party experts. The range
      represents the fact that there are several viable market channels that are
      possible to market the peat. The Peat Certificates were issued by Panama Peat
      and pledged to Holding by Grupo Lakas.





The
      Note
      is due and payable on December 15, 2015 and bears a nominal rate of interest
      of
      3% per annum. Holding valued the Note under the provisions of APB No. 21
      "Interest on Receivables and Payables", which states in part that the rate
      of
      interest of a transaction should approximate the rate which would have resulted
      if an independent borrower and an independent lender had negotiated a similar
      transaction under comparable terms and conditions. The Company determined that
      the appropriate rate of interest should be 5.76%, which approximates LIBOR
      plus
      1% at the date of issuance. As such, the Note was initially valued at $531.3
      million. The discount on the Note is being accreted over the term of the
      Note.





The
      Note
      provides that at any time and from time to time, the Company (and its assigns)
      shall have the right, in the sole discretion thereof, to convert (the
“Conversion Right”) the Peat Certificates and/or the underlying peat
      constituting collateral for the Note to cash proceeds, such cash proceeds to
      be
      applied as a deemed prepayment of the outstanding principal balance of, and
      accrued interest on, the Note (and such amounts shall be applied to either
      the
      outstanding interest or principal balance, as determined by the Company in
      its
      sole discretion). The Company (or its assigns) may from time to time, at its
      sole discretion, sell or assign one or more of the Peat Certificates, and/or
      may
      mine, or cause to be mined, all or any of the peat evidenced by any such Peat
      Certificate, in accordance with the terms of the relevant Peat
      Concession.




The
      Company has classified the Note received for the issuance of preferred stock
      as
      an asset. The classification of the secured note receivable is dependent upon
      the adequacy of the underlying collateral. The note receivable is classified
      as
      an asset in the Company’s balance sheet as the Company has received a security
      interest in the peat certificates and underlying collateral and the fair value
      of the peat certificates and/or the underlying fair value of the peat is equal
      to or greater than the value of the secured Note.




Holding
      has agreed to contribute the assets underlying the Note to SIL,
      a
      subsidiary of Holding, in an
      effort to increase the statutory and regulatory capital base of SIL. The
      management of SIL believes that the assets underlying the Note qualify as
      additional capital for SIL under the Barbados Exempt Insurance Act. The original
      Master Investment Agreement requires SIL, within sixty (60) days from the
      execution and delivery of the Letter Agreement, to make an application to the
      Barbados Supervisor of Insurance and Finance (the "Supervisor") for a ruling
      confirming the same. Such application was made in February 2006 but the
      Supervisor has yet to rule on the application. The Agreement called for the
      Company to pay a facility activation fee of $2,000,000 to Grupo Lakas (or its
      designees) in the event of the regulatory approval within ninety (90) days
      of
      such approval. The Original Master Agreement further provided that in the event
      the Supervisor does not provide a favorable ruling within ninety (90) days
      from
      the submission of the application by SIL, then all transactions contemplated
      under the Master Investment Agreement will unwind.





On
      March
      23, 2006, the Master Investment Agreement was amended by the Company and Grupo
      Lakas, waiving the condition of the regulatory approval of the Supervisor.
      In
      consideration of the amendment, the parties have agreed to provide that the
      facility activation fee of $2,000,000 shall be paid, regardless of regulatory
      approval, as follows - (a) $250,000 within 48 hours of the execution of the
      amendment and (b) the remaining $1,750,000 to be paid in full within sixty
      (60) days of the execution of the amendment. As a result, the facility
      activation fee has been accrued and offset against the value of the Series
      D
      Preferred (see Note 9).





As
      additional consideration for the Investment, the Company issued a warrant to
      Grupo Lakas (or its assigns) for the purchase of shares of the common stock
      of
      the Company pursuant to the terms of a warrant agreement (the "Warrant") (see
      Note 9).





5.
      MORTGAGE NOTES RECEIVABLE





Mortgage
      activity for the nine months ended January 31, 2006 is as follows:





The
      Company has mortgages with a real estate developer as follows:





a.
            A
                mortgage note (“Mortgage”) for up to a maximum of $23,500,000. Advances
                taken under the Mortgage bear interest at 3% over prime with a minimum
                of
                8% and are secured by the property. Advances totaling approximately
                $19,600,000 were taken under the Mortgage. Interest is payable quarterly
                and the principal is due and payable on August 30,
                2008.


b.
            A
                mortgage note in the amount of $9,500,000. The mortgage bears interest
                at
                3% over prime with a minimum of 8% and is secured by the property.
                Interest is payable quarterly and the principal is due and payable
                on
                April 5, 2009.


c.
            Second
                mortgage notes of $8.275 million, $6.625 million and $3.5 million,
                totaling $18,400,000, issued on January 26, 2006 to three entities
                (see
                Note 7). The mortgages bear interest at a rate of 15% per annum and
                are
                secured by the respective properties. Interest is payable quarterly
                and
                the principal is due and payable in April 2010. The three notes also
                provide for partial pay downs upon the sale of time share units of
                each
                project. There also are exit fees of $4,000,000, $3,375,000 and
                $1,725,000, respectively, required to be paid to the Company above
                the
                principal amounts of the notes. Each note also provides that the
                Company
                will receive 45% of any excess profits over and above these amounts
                on an
                individual project basis.





10


The
      Company has a mortgage with another real estate developer in the amount of
      C$2,700,000 ($2,352,510 at January 31, 2006). The mortgage bears interest at
      the
      rate of 10% per annum and is secured by the property. Principal is due and
      payable on November 24, 2007.





In
      February 2006, mortgage notes receivable totaling $6,230,807 were
      repaid.





6.
      MORTGAGE NOTES RECEIVABLE - RELATED PARTIES





On
      October 27, 2004, mortgages were issued to two entities that are controlled
      by
      an  individual
      with voting powers for a stockholder. The mortgages total $8,000,000, bear
      interest at a rate of 13.2% per annum and are secured by the respective
      properties. Interest is payable monthly and the principal is due on demand.
      The
      notes have been classified as long-term as it is management’s intent not to
      demand payment in the next twelve months.





At
      January 31, 2006 and April 30, 2005, mortgage notes receivable amounted to
      $8,000,000. Mortgage interest receivable amounted to $1,341,177 and $542,667
      at
      January 31, 2006 and April 30, 2005, respectively. Interest income earned
      amounted to $798,510 and $225,666 for the nine months ended January 31, 2006
      and
      2005, respectively, and $266,170 and $225,666 for the nine and three months
      ended January 31, 2006 and 2005, respectively.





At
      April
      30, 2005, the entities were in default of the mortgages as they were not making
      interest payments as required. The Company agreed to defer such receipts at
      that
      time. As the Company has not received any interest payments since the issuance
      of the notes, the Company has classified the interest receivable as long-term
      at
      January 31, 2006.





7.
      LONG-TERM DEBT





The
      Company has a mortgage note (“Mortgage”) for up to a maximum of $23,500,000.
      Advances taken under the Mortgage bear interest at 3% over prime with a minimum
      of 8% and are secured by the property. Advances totaling $22,500,000 were taken
      under the Mortgage in the nine months ended January 31, 2006. In addition,
      $1
      million of other promissory notes were refinanced under this Mortgage. Interest
      is payable quarterly and principal is due and payable on August 30,
      2008.





During
      this quarter, the Company entered into a loan agreement ("Agreement") with
      a
      private investment company, to obtain financing in the amount of $29,000,000,
      the proceeds of which were primarily to be utilized to fund $18,400,000 for
      second mortgage financing for three properties (see Note 5). As of January
      31,
      2006, the Company received $18,400,000 of the loan proceeds. The Agreement
      provides that the loans will bear interest at the rate of 10% per annum, payable
      semi-annually beginning in July 2006 until maturity on or before January 24,
      2009. The principal is due on January 24, 2009. The Agreement also calls for
      the
      funding of $5,800,000 interest reserve, $2,741,250 for an insurance
      securitization the Company is obligated to provide and $2,058,750 for fees
      and
      working capital to the Company. To date, the Company has received $20,458,750.
      The Agreement also provides that an affiliate of the private investment company
      will receive a fee equal to $9,000,000 on a priority basis from the proceeds
      the
      Company receives, after the Company receives $31,900,000 from the three projects
      the Agreement is funding.





In
      February 2006, mortgage notes totaling $5,000,000 were repaid.





8.
      RELATED PARTY TRANSACTIONS





Due
      from
      Related Parties





1.
      As
      part of the Shareholders Agreement with ForestRe (see Note 1), The Company
      has
      provided ForestRe with a line of credit up to a maximum of $2,000,000. Advances
      against the line may be taken from February 1, 2005 through January 31, 2006.
      The advances bear no interest and are payable based on positive accumulated
      cash
      flow of the affiliate as determined by the affiliate’s board of directors but no
      later than December 31. 2010.





As
      ForestRe was acquired during the nine months ended January 31, 2006, any monies
      owed to the Company would eliminate in consolidation. At April 30, 2005, amounts
      owed to the Company under the line totaled $244,559.





2.
      The
      Company has advanced monies to Lux Group, Inc. (“Lux”). Lux is a related entity
      as two individuals with voting powers for two stockholders own approximately
      32%
      of Lux. At January 31, 2006 and April 30, 2005, Lux owed the Company $362,641
      and $11,490, respectively.





11


3.
      The
      Company has received notes from Reliant Warranty Home Corp. (“Reliant”). The
      notes bear interest at a rate of 10% per annum. Interest and principal are
      due
      on demand. At January 31, 2006, Reliant owed the Company $147,100.





4.
      The
      Company made cash advances to and received cash advances from RS Group of
      Companies, Inc. ("RS Group"), a related entity with which the Company has
      entered into a letter agreement to acquire (see Note 11). In addition, the
      Company signed a consulting agreement relating to the Grupo Lakas Investment
      (see Notes 4 and 9), whereby the Company agreed to pay the lesser of 2% of
      the
      Investment or $10,000,000. A $10,000,000 fee was recorded as a cost of issuance
      and charged against the value of the Series D Preferred stock. In 2005, the
      Company paid a $3,000,000 commission in connection with the placement of
      financial guarantee insurance for the repayment of dividends and the liquidation
      preference of Redeemable Insured Series A Preferred of Strategy Real Estate
      Investments Ltd. At January 31, 2006 and April 30, 2005, the Company owed
      $6,428,929 and $206,433, respectively.





Note
      and
      Loans Payable - Related Party





Note
      and
      loans payable - related party consists of the following from an individual
      with
      voting powers for one of the Company's stockholders:





1.
      A 5%
      promissory note in the amount of $275,000 issued in November 2004. Principal
      and
      interest are due on demand.





2.
      Advances totaling $2,041,753. The advances are due on demand and bear interest
      at a rate of 5% per annum.





Interest
      expense amounted to $68,918 and $2,901 for the nine months ended January 31,
      2006 and 2005, respectively, and $58,521 and $2,901 for the three months ended
      January 31, 2006 and 2005, respectively. At January 31, 2006 and April 30,
      2005,
      accrued interest amounted to $75,219 and $6,302, respectively.





Long-term
      Debt - Related Party





Long-term
      debt - related party consists of a promissory note issued in July 2005, bearing
      interest at prime, in the amount of $1,250,000, issued to a corporation
      controlled by an individual with voting powers for one of the Company's
      stockholders. Interest is payable quarterly and principal is due and payable
      on
      or before July 14, 2008.





For
      the
      nine and three months ended January 31, 2006, interest expense amounted to
      $33,855 and $15,625, respectively. At January 31, 2006, accrued interest
      amounted to $33,855.





9.
      STOCKHOLDERS’ EQUITY (DEFICIENCY)





Redeemable
      Insured Series A Preferred - Strategy Real Estate Investments Ltd.
      (“SREI”)





The
      Series A Preferred shares pay dividends at an annual rate of ten percent (10%),
      which shall be paid quarterly. Upon the occurrence of certain events of default
      (as set forth in the Articles of Incorporation of SREI), the Series A
      liquidation preference and all accrued and unpaid dividends thereon shall become
      immediately payable. The Series A Preferred will be subject to mandatory
      redemption by SREI in November 2007 at the full liquidation preference, net
      of
      all appropriate Canadian withholding and income tax, plus all accrued and unpaid
      dividends.





Subject
      to certain exceptions, payments of the liquidation preference and all dividends
      up to a maximum of $65 million is insured with an insurance company with an
      "A-"
      rating by AM Best’s over the three (3) year period they will be outstanding
      pursuant to a Contingent Guarantee Policy. The insurance company then reinsured
      its risk to the Company. The insurance company remains primarily liable to
      the
      Series A preferred shareholders for payment of the liquidation preference and
      dividends as per the Contingent Guarantee Policy terms, however the Company
      would be obligated under the reinsurance contract to repay the insurance company
      for any claim losses incurred. In addition, the Company, Holding and SIL have
      guaranteed payment of the dividends and liquidation preference.





In
      connection with the sale of Series A Preferred, the Company recorded the
      allocated gross proceeds of $41,325,000 as long-term debt in accordance with
      SFAS 150 “Accounting for Equity Instruments with Both Debt and Equity
      Characteristics”. In addition, the Company allocated issuance costs of
      $3,391,195 against such proceeds. Such costs are being amortized over thirty-six
      (36) months, the term of the Series A Preferred. Amortization of finance costs
      amounted to $653,985 and $217,995 for the nine and three months ended January
      31, 2006, respectively, and $181,663 and $181,663 for the nine and three months
      ended January 31, 2005, respectively.





12


The
      liquidation preference of the Series A Preferred is $50,000,000. The difference
      between the liquidation preference and the allocated gross proceeds ($8,675,000)
      is being amortized over thirty-six (36) months, the term of the Series A
      Preferred. The accretion amounted to $2,168,751 and $722,917 for the nine and
      three months ended January 31, 2006, respectively, and $602,431 and $602,431
      for
      the nine and three months ended January 31, 2005, and is recorded as a deemed
      dividend.





See
      Note
      10 relating to litigation on this matter.





Series
      B
      Preferred - SREI





Each
      share of Series B Preferred of SREI entitles its holder to receive a pro rata
      share of five percent (5%) of the gross sales (the "Gross Sales Interest")
      from
      each of the five (5) SPEs in which SREI invests. Payments of the Gross Sales
      Interest shall be made from time to time after the sale of each project by
      the
      SPEs to a third party for monetary consideration. SREI will receive the Gross
      Sales Interest (which will be paid out to the holders of shares of Series B
      Preferred) pursuant to Participation Agreements between SREI and each of the
      five (5) SPEs. The shares of Series B Preferred of SREI are not redeemable
      and
      they will continue to receive the Gross Sales Interest for as long as they
      are
      outstanding. No dividends (other than payment of the Gross Sales Interest)
      will
      be payable on the shares of Series B Preferred. The Company, Strategy Holding
      Company Limited and Strategy Insurance Limited have guaranteed payment of the
      Gross Sales Interest.





See
      Note
      10 relating to litigation on this matter.





Preferred
      Stock - Strategy Insurance Limited (“SIL”)





In
      February 2004, SIL issued 47,670 shares of non-voting 10% Cumulative Class
      A
      Preference Shares Series 1 having a redemption value of forty-seven million
      six
      hundred and seventy thousand and eighty-four ** dollars
      ($47,670,084.00) and 56,561.5 shares of non-voting 10% Cumulative Class B
      Preferred Stock having a redemption value of Fifty-Six Million Five Hundred
      and
      Sixty One Thousand Five Hundred and Twenty-Six dollars ** ($56,561,526.00),
      and received mortgage notes receivable totaling CAN$139,600,000 in consideration
      for these issuances.





Notes
      Receivable - Subscriptions





In
      February 2004, the Company received, as consideration for its issuance of both
      the SIL Class A and Class B 10% cumulative preferred stock, 2.5% mortgage notes
      totaling CAN$139,500,000. Interest is payable quarterly and the principal is
      due
      on March 31, 2014.





During
      August 2005, the Company became aware that the mortgages underlying these notes
      were discharged in October 2004 without the Company’s knowledge, consent or
      without receiving consideration. As a result of the discharges, the notes became
      unsecured. As such, generally accepted accounting principles requires that
      the
      notes receivable be reflected as contra-equity rather than as assets. The
      Company believes it has a cause of action to seek a legal remedy to recover
      the
      value of the notes receivable and is currently in the process of considering
      such an action subject to the availability of funds for legal costs.





At
      both
      January 31, 2006 and April 30, 2005, notes receivable - subscriptions amounted
      to $104,231,610. The Company has not received any interest payments on the
      2.5%
      mortgages through January 31, 2006.





See
      Note
      10 relating to litigation on this matter.





Preferred
      Stock - Strategy Holding Company Limited (“Holding”)





As
      described in Note 4, the Company and Holding concluded a Capital Investment
      transaction with Grupo Lakas et al. Pursuant to the Master Investment Agreement,
      Grupo Lakas made an investment with a face value of $700,000,000 in Holding
      by
      issuing a Note in the original principal amount of US$700,000,000. In
      consideration for making the Investment, Holding has issued to Grupo Lakas,
      Series D Preferred.





The
      Series D Preferred pays (i) a dividend payable out of realized profits or
      surplus of Holding at an annual rate of 3.43% ($24,000,000) per annum, which
      will accrue and be payable on the last day of June and December in each year,
      commencing on June 30, 2006; and (ii) an additional dividend equal to 12% of
      the
      gross premium written by Strategy Insurance Limited ("SIL"), a subsidiary of
      Holding, above $200,000,000, provided that such additional dividend will not
      exceed $60,000,000 in any year.





The
      Series D Preferred was valued at the net discounted value of the Note,
      $531,300,000, net of issuance costs of $13,429,851. Issuance costs include
      a
      charge of $10,000,000 under a consulting agreement with a related
      entity  whereby
      the Company agreed to pay the lesser of 2% of the Investment or $10,000,000
      (see
      Note 8).




13


Separately,
      the Letter Agreement provides that, in connection with the Investment, for
      as
      long as more than 50% of the Preferred Stock remains outstanding, the holder
      of
      the Preferred Stock will be entitled to appoint two directors to the Company’s
      board of directors.





Common
      stock





On
      January 10, 2006 the Company entered into a Letter of Intent with Nexxus One
      Holding Ltd. ("Nexxus"), a Switzerland based private financial services firm,
      under which Nexxus agreed to provide $100 million in new equity
      capital.





Under
      the
      terms of the letter, the Company will issue 1,030,000 shares of its common
      stock
      in exchange for Nexxus issuing an investment grade NAIC equity admissible bond
      in the amount of $100 million. This bond will be a five-year 5.5% Global Note
      issued by Nexxus One Capital Trust of Switzerland, secured by a diversified
      portfolio of AA/AAA rated municipal bonds. The Company and Nexxus agree to
      use
      their best efforts to complete the transaction in a timely manner.





As
      part
      of the transaction the Company issued Nexxus 1,030,000 shares of common stock
      as
      a commitment fee. The shares were valued at $309,000. In addition, the Company
      paid Nexxus a fee of $100,000 for costs relating to the proposed transaction.
      Total costs of $409,000 have been reflected as deferred issuance costs and
      included in other assets in the balance sheet.





The
      Letter of Intent was amended on February 23, 2006 to provide that the Companies
      will use their best efforts to complete the transaction by March 31,
      2006.





Warrants





Unit
      Sale - SREI





Warrants
      to purchase 29,992,202 shares of common stock were sold as part of the sale
      of
      Units. The warrants expire on November 16, 2007. Each warrant allows its holder
      to exercise the warrant into a number of shares of common stock equal to the
      quotient obtained by dividing (a) the liquidation preference of the Series
      A
      Shares owned by such investor plus any accrued and unpaid dividends thereon
      by
      (b) the then applicable set price. The initial set price is $1.6671.





We
      are
      obligated to register for resale the shares of common stock issuable upon
      exercise of the warrants pursuant to a registration rights agreement dated
      November 16, 2004 between the registrant and the purchasers named therein.
      Pursuant to the registration rights agreement, we are subject to liquidated
      damages, payable in cash to each purchaser as follows:





1.
            A
                penalty equal to .75% per month with .25% payable in cash at month
                end and
                .50% deferred. The penalty began accruing April 1, 2005. The registration
                penalty for the months of April 2005 through January 2006 amounted
                to
                $3,375,000 and such amount has been accrued. The cash portion of
                the
                penalty for the months of April 2005 through August 2005 totaling
                $625,000
                was paid.


2.
            The
                deferred monthly penalty is payable on December 31, 2005 but such
                payment
                has not been made.


3.
            This
                agreement expired January 31, 2006.





See
      Note
      10 relating to litigation on this matter.





Grupo
      Lakas





As
      described in Note 4, the Company issued to Grupo Lakas or its assigns, a Warrant
      to acquire 6,944,009 shares of our common stock at an exercise price of $1.75
      per share. The Warrant was valued at $1,412,851 using the Black-Scholes model. Grupo
      Lakas may exercise the Warrant at any time after the date on which the Company
      shall have effected an increase of its authorized shares of common stock by
      at
      least 6,950,000, to provide for an authorized number of shares adequate to
      issue
      up to 6,944,009 of voting, fully paid and nonassessed shares of the common
      stock
      of the Company, until 5:00 p.m., E.S.T. on the second anniversary of the date
      of
      such increase. The
      Company agreed that the Investor will have a right to demand registration of
      shares of the common stock underlying the Warrant if such shares are not
      registered within one (1) year from their issuance date.





Maxim
      Group, LLC





In
      connection with a consulting agreement with Maxim Group, LLC effective on
      January 18, 2005, the Company issued 500,000 warrants exercisable at $2.00.
      All
      warrants expire on January 17, 2010. The warrants were valued at $375,560. Such
      amount was recorded as deferred compensation and is being amortized over the
      life of the consulting agreement. For the nine and three months ended January
      31, 2006, stock-based compensation amounted to $266,022 and $78,242,
      respectively, and $14,889 and $14,889 for the nine and three months ended
      January 31, 2005, respectively.





14


10.
      CONTINGENCIES





Litigation





During
      February 2006, the Company, SREI and individual officers of the Company and
      its
      subsidiaries were named in a complaint filed by individual investors of SREI
      (the "Complaint"). The Complaint was filed in the US District Court Southern
      District of New York and alleges amongst other things, misrepresentation on
      behalf of the Company and individuals to induce the investors into investing
      $50,000,000 in Series A Preferred and Series B Preferred shares of SREI during
      November 2004. The Complaint further charges that the Company filed and reported
      financial statements that they knew were materially misrepresented, that the
      Company failed to have effectively registered the shares of common stock
      underlying the warrants issued as part of their investment and other charges
      of
      misrepresentation or failure to disclose information.





The
      controversy surrounding this matter stems from information obtained by the
      investors in the Company's Form 10-KSB filed on September 16, 2005 for the
      year
      ended April 30, 2005. The Company disclosed in this filing that on or about
      August 2005, we first became aware that the mortgages underlying the February
      2004 capital investment of $104 million were erroneously discharged during
      October 2004, prior to the SREI investment. The Complaint alleges that the
      Company knowingly withheld this information.





The
      Company believes that we have complied with all regulatory reporting
      requirements, and that we are not in default of any material aspect of the
      agreement. It is further our understanding and belief that many of the
      allegations against the individuals as contained in the complaint are either
      immaterial or factually inaccurate and misleading.





The
      Company denies these allegations, and disputes the charges relating to the
      registration statement and other assertions and intends to vigorously defend
      this matter. The Company has retained council on this matter and intends to
      file
      an answer to the Company by its required date of April 30, 2006.





In
      June
      2005, HH Hairspray, LLC (“Hairspray”) filed a lawsuit against us in the Circuit
      Court of the 15 th Judicial
      Circuit in and for Palm Beach, Florida, for breach of contract relating to
      a
      Loan, Security and Pledge Agreement (the “Loan Agreement”), dated as of March
      31, 2005, between Hairspray, LLC and Strategy Resort Financing, Inc. (“Strategy
      Finance”), one of our subsidiaries. SIL, another one of our subsidiaries, are
      also named in the lawsuit. The complaint alleges that Strategy Finance breached
      an implied representation that it had the financial capability to fund
      $6,900,000 to Hairspray, as called for by the Loan Agreement, and that we
      allowed Strategy Finance to so represent. In the complaint, Hairspray alleges
      that the full amount was not received and demands judgment for damages, costs
      and fees and specific performance. The lawsuit was settled in February 2006,
      whereby the Company issued 100,000 shares of common stock. The shares were
      valued at $30,000. Such amount has been accrued and is included in accounts
      payable and accrued liabilities.





John
      Lepire and Ludger Limited, LLC (together, the “Plaintiffs”) initially sued a
      number of defendants, including, one of the brokers we work with namely Aon
      Corporation, without naming our company as a defendant, in the Superior Court
      of
      California, County of Los Angeles, in July 2004. ****** In
      March
      2005 the Plaintiffs filed an amendment to their original complaint identifying
      our company as a defendant. That complaint includes causes of action for unfair
      competition, wrongful termination, conversion, fraud, breach of contract, breach
      of implied covenant of good faith and fair dealing, breach of fiduciary duty,
      negligent misrepresentation, intentional misrepresentation, misappropriation
      of
      trade secrets and injunctive relief. The Plaintiffs allege that they created
      an
      insurance product called “SafeLease” and that the defendants infringed the
      rights of the Plaintiffs in that product through sales and marketing of products
      that Plaintiffs consider substantially similar or identical to SafeLease. The
      complaint seeks injunctive relief and unspecified monetary damages. This case
      is
      currently in its discovery phase. A trial date has not yet been set for this
      case. We intend to vigorously defend the allegations made in this complaint.
      Our
      management believes that the Plaintiff’s allegations are without
      merit.





There
      is
      no other pending litigation or other material claims or actions that we are
      aware of.





11.
      PROPOSED ACQUISITION





On
      December 31, 2005, the Company entered into a letter agreement (the “Agreement”)
      with RS Group, pursuant to which the Company confirmed its intent to enter
      into
      a merger transaction. In such transaction, RS Group will merge with and into
      the
      Company or an affiliate, subsidiary or successor entity thereof (the “Merger
      Entity”), whereby the Merger Entity would be the surviving entity in the merger
      (the “Merger”). The Agreement contemplates that each of the holders of issued
      and outstanding stock of RS Group of any and all classes (“RS Stock”) will
      receive in the Merger, in exchange for every three shares of RS Stock held
      thereby, two shares of common stock of the Merger Entity (“Merger Stock”). Any
      and all issued and outstanding subscriptions, options, warrants, rights, calls,
      commitments, conversion rights, rights of exchange, plans or other agreements
      of
      any character providing for the purchase, issuance, transfer or sale of any
      stock or other any equity securities (“Equity Rights”) of RS Group will be
      exchanged for comparable Equity Rights of the Merger Entity, based on the same
      exchange of three shares (or right to acquire shares) of RS Stock for two shares
      of Merger Stock. The consummation of the Merger is subject to the negotiation
      and execution of a definitive merger agreement and other definitive documents
      provided for in the Agreement, and the satisfaction of the closing conditions
      specified therein, including receipt of satisfactory fairness opinions.





15





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





The
      following discussion should be read in conjunction with the information
      contained in our condensed consolidated financial statements and the notes
      thereto appearing elsewhere in this quarterly report, and in conjunction with
      the Management's Discussion and Analysis set forth in (1) our annual report
      on
      Form 10-KSB for the year ended April 30, 2005, which we filed with the
      Commission on September 16, 2005 (which is also being incorporated by reference
      herein) (such report, the “2005 Annual Report”), and (2) our quarterly report on
      Form 10-QSB for the quarter ended January 31, 2006. Specific reference is made
      to the 2005 Annual Report with respect to all information in the 2005 Annual
      Report which is referred to in this quarterly report.





As
      used
      in this quarterly report, the terms “we”, “us”, “our”, “Strategy International”,
      the “Company” or “our company” refer to Strategy International Insurance Group,
      Inc., a Texas corporation.





**Preliminary
      Note Regarding Forward-Looking Statements**





This
      quarterly report and the documents incorporated herein by reference contain
      forward-looking statements within the meaning of the federal securities laws,
      which generally include the plans and objectives of management for future
      operations, including plans and objectives relating to our future economic
      performance and our current beliefs regarding revenues we might earn if we
      are
      successful in implementing our business strategies. The forward-looking
      statements and associated risks may include, relate to or be qualified by other
      important factors. You can identify forward-looking statements generally by
      the
      use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“intends,” “plans,” “should,” “could,” “seeks,” “pro forma,” “anticipates,”
“estimates,” “continues,” or other variations of those terms, including their
      use in the negative, or by discussions of strategies, opportunities, plans
      or
      intentions. You may find these forward-looking statements in this Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations, as well as throughout this quarterly report. A number of factors
      could cause results to differ materially from those anticipated by
      forward-looking statements.





These
      forward-looking statements necessarily depend upon assumptions and estimates
      that may prove to be incorrect. Although we believe that the assumptions and
      estimates reflected in the forward-looking statements are reasonable, we cannot
      guarantee that we will achieve our plans, intentions or expectations. The
      forward-looking statements involve known and unknown risks, uncertainties and
      other factors that may cause actual results to differ in significant ways from
      any future results expressed or implied by the forward-looking statements.





Any
      of
      the factors described in this quarterly report, including in this Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations, as well as in our 2005 Annual Report, could cause our financial
      results, including our net income (loss) or growth in net income (loss) to
      differ materially from prior results, which in turn could, among other things,
      cause the price of our common stock to fluctuate substantially. We base the
      forward-looking statements on information currently available to us, and we
      assume no obligation to update them.





In
      addition, readers are also advised to refer to the information contained in
      our
      filings with the Commission, especially on Forms 10-KSB, 10-QSB and 8-K, in
      which we discuss in more detail various important factors that could cause
      actual results to differ from expected or historic results. It is not possible
      to foresee or identify all such factors. As such, investors should not consider
      any list of such factors to be an exhaustive statement of all risks and
      uncertainties or potentially inaccurate assumptions.




**Overview**





Strategy
      International is a holding company of wholly-owned subsidiaries in insurance
      and
      related financing, real estate and energy areas. Strategy International’s
      predominant subsidiary is Strategy Insurance Limited ("SIL"), a Barbados
      company, an integrated, international provider of specialty lines of insurance,
      reinsurance and structured risk solutions, focusing on credit enhancement,
      contingency, liability and other specialty insurance and reinsurance. Strategy
      International has developed and intends to continue its efforts to
      develop the practice of introducing credit insurance programs in other
      areas, including construction and real estate development. SIL is a wholly-owned
      subsidiary of Strategy Holding Company Limited ("Strategy Holding"), a Barbados
      company, which in turn is a direct wholly-owned subsidiary of Strategy
      International. SIL received an Exempt Insurance License from the Ministry of
      Finance, Barbados, West Indies, on March 25, 2004, which authorizes SIL to
      engage in the following classes of insurance business from within
      Barbados:





·
            General
                insurance business;





16


·
            Credit
                insurance;





·
            Liability
                insurance;





·
            Mortgage
                indemnity insurance;





·
            Rental
                guarantee insurance; and





·
            Reinsurance.





The
      license is subject to annual renewal and has been renewed through December
      31,
      2006.





As
      we
      disclosed in our 2005 Annual Report, there was an improper discharge of the
      mortgages underlying the mortgage notes receivable in the amount of
      approximately $104 million. Such mortgages were issued in connection with the
      initial capitalization of Strategy Holding and then transferred to SIL (see
      Note
      9 of the Financial Statements). Until SIL receives regulatory approval for
      the
      capital investment transaction which the Company concluded in December 2005,
      it
      will not write new insurance business on either an individual or program basis.
      However, our underwriting business should be unaffected by the above recent
      developments.





On
      December 14, 2005, the Company and Strategy Holding concluded a Capital
      Investment transaction outlined in the binding letter agreement entered into
      on
      October 25, 2005 (the “Master Investment Agreement”) with Grupo Lakas S.A., a
      Panamanian corporation (“Grupo Lakas” or "Investor"), Panama
      Peat S.A., a Panamanian corporation (“Panama Peat”) and Changuinola Peat S.A., a
      Panamanian corporation .
      Pursuant to the Master Investment Agreement, Grupo Lakas made an investment
      with
      a face value of $700,000,000 (the “Investment”) in Strategy Holding by issuing
      to Strategy Holding, a promissory note in the original principal amount of
      $700,000,000 (the “Note”). In consideration for making the investment in
      Strategy Holding, Strategy Holding has issued to Grupo Lakas, Series D Preferred
      stock ("Series D Preferred").





The
      obligations of Grupo Lakas under the Note are secured by bearer peat
      certificates (the “Peat Certificates”) representing the right to obtain peat, a
      pre-coal stage organic material used as energy or for horticultural use, from
      the Changuinola Peat Deposit of Northwestern Panama. The peat has an estimated
      value within a range of $760 million to $1.71 billion. The value of the peat
      was
      based on a report prepared by independent third party experts. The range
      represents the fact that there are several viable market channels that are
      possible to market the peat. The Peat Certificates were issued by Panama Peat
      and pledged to Strategy Holding by Grupo Lakas.





The
      Series D Preferred pays (i) a dividend payable out of realized profits or
      surplus of Strategy Holding at an annual rate of 3.43% ($24,000,000) per annum,
      which will accrue and be payable on the last day of June and December in each
      year, commencing on June 30, 2006; and (ii) an additional dividend equal to
      12%
      of the gross premium written by SIL above $200,000,000, provided that such
      additional dividend will not exceed $60,000,000 in any year.





The
      Note
      is due and payable on December 15, 2015 and bears interest at a rate of 3%
      per
      annum. The Note provides that at any time and from time to time, the Company
      (and its assigns) shall have the right, in the sole discretion thereof, to
      convert (the “Conversion Right”) the Peat Certificates and/or the underlying
      peat constituting collateral for the Note to cash proceeds, such cash proceeds
      to be applied as a deemed prepayment of the outstanding principal balance of,
      and accrued interest on, the Note (and such amounts shall be applied to either
      the outstanding interest or principal balance, as determined by the Company
      in
      its sole discretion). The Company (or its assigns) may from time to time, at
      its
      sole discretion, sell or assign one or more of the Peat Certificates, and/or
      may
      mine, or cause to be mined, all or any of the peat evidenced by any such Peat
      Certificate, in accordance with the terms of the relevant Peat
      Concession.





Strategy Holding
      has agreed to contribute the assets underlying the Note to SIL in
      an
      effort to increase the statutory and regulatory capital base of SIL. The
      management of SIL believes that the assets underlying the Note qualify as
      additional capital for SIL under the Barbados Exempt Insurance Act. The original
      Master Investment Agreement requires SIL, within sixty (60) days from the
      execution and delivery of the Letter Agreement, to make an application to the
      Barbados Supervisor of Insurance and Finance (the "Supervisor") for a ruling
      confirming the same. Such application was made in February 2006 but the
      Supervisor has yet to rule on the application. The Agreement called for the
      Company to pay a facility activation fee of $2,000,000 to Grupo Lakas (or its
      designees) in the event of the regulatory approval within ninety (90) days
      of
      such approval. The original Master Agreement further provided that in the event
      the Supervisor does not provide a favorable ruling within ninety (90) days
      from
      the submission of the application by SIL, then all transactions contemplated
      under the Master Investment Agreement will unwind.





On
      March
      23, 2006, the Master Investment Agreement was amended by the Company and Grupo
      Lakas, waiving the condition of the regulatory approval of the Supervisor.
      In
      consideration of the amendment, the parties have agreed to provide that the
      facility activation fee of $2,000,000 shall be paid, regardless of regulatory
      approval, as follows - (a) $250,000 within 48 hours of the execution of the
      amendment and (b) the remaining $1,750,000 to be paid in full within sixty
      (60) days of the execution of the amendment.





17


As
      additional consideration for making the Investment, we agreed to issue to Grupo
      Lakas or its assigns warrants to acquire approximately 7 million shares of
      our
      common stock, exercisable for a period of two (2) years from the issue date
      at
      an exercise price of $1.75 per share. We agreed that the Investor will have
      a
      right to demand registration of shares of our common stock underlying the
      warrants if such shares are not registered within one (1) year from their
      issuance date.





Separately,
      the Letter Agreement provides that, in connection with the Investment, for
      as
      long as more than 50% of the Preferred Stock remains outstanding, the holder
      of
      the Preferred Stock will be entitled to appoint two directors to our board
      of
      directors.





SIL
      operates through its underwriting office in Barbados and through its two
      wholly-owned subsidiaries which provide marketing and administrative support,
      Strategy Insurance (Canada) Limited based in Toronto, Canada, and Strategy
      Underwriting Agency Limited, based in London, England. SIL received its first
      premium income in September 2004.





On
      June
      24, 2005, through SIL, the Company concluded a Shareholders Agreement with
      ForestRe (Holdings) Limited, (“ForestRe”), a private consulting firm registered
      in England and Wales, and certain stockholders of ForestRe (the
“Stockholders”), pursuant to which the Company and the Stockholders agreed to
      cooperate in the management and development of an underwriting agency
      specializing in the provision of insurance for environment related concerns
      with
      specific interest in the coverage of standing timber, called ForestRe Limited.
      The Company provides the underwriting capacity to support the insurance program
      and the Stockholders provide the expertise in the class of business. As part
      of
      this transaction, we acquired a 60% ownership interest in ForestRe in
      consideration for GBP20,000 ($36,096) through SIL and a working capital loan
      facility.





As
      a
      result, in addition to its wholly-owned subsidiaries, SIL currently has a
      majority ownership in ForestRe, which is based in London, England. The ForestRe
      team has been underwriting in this area for several years and includes some
      of
      the world’s authorities in forestry risk assessment, financing and insurance. We
      expect that the insurance offered by ForestRe will help drive investment into
      forestry by reducing risk for owners, banks and investors.




Other
      businesses of the Company include the following:





Strategy
      Energy Corporation, a corporation incorporated in the Province of Ontario,
      Canada, is involved in the financing and evaluation of alternative energy
      projects. Strategy Energy’s primary technology focus is on wind farms, biomass
      facilities and large-scale solar energy production with a secondary focus on
      small-scale hydro plants.





Strategy
      Investments, LLC, a Florida limited liability company, has been established
      to
      provide financing to the travel and leisure industries.





Strategy
      Resort Financing, Inc. is a Florida corporation and our subsidiary, which has
      provided financing of approximately $67 million to three timeshare projects,
      two
      in the United States and one in Canada. See the “Liquidity and Capital
      Resources” section for a more detailed discussion.





**Proposed
      Acquisition**





On
      December 31, 2005, the Company entered into a letter agreement (the “Agreement”)
      with RS Group, pursuant to which the Company confirmed its intent to enter
      into
      a merger transaction. In such transaction, RS Group will merge with and into
      the
      Company or an affiliate, subsidiary or successor entity thereof (the “Merger
      Entity”), whereby the Merger Entity would be the surviving entity in the merger
      (the “Merger”). The Agreement contemplates that each of the holders of issued
      and outstanding stock of RS Group of any and all classes (“RS Stock”) will
      receive in the Merger, in exchange for every three shares of RS Stock held
      thereby, two shares of common stock of the Merger Entity (“Merger Stock”). Any
      and all issued and outstanding subscriptions, options, warrants, rights, calls,
      commitments, conversion rights, rights of exchange, plans or other agreements
      of
      any character providing for the purchase, issuance, transfer or sale of any
      stock or other any equity securities (“Equity Rights”) of RS Group will be
      exchanged for comparable Equity Rights of the Merger Entity, based on the same
      exchange of three shares (or right to acquire shares) of RS Stock for two shares
      of Merger Stock. The consummation of the Merger is subject to the negotiation
      and execution of a definitive merger agreement and other definitive documents
      provided for in the Agreement, and the satisfaction of the closing conditions
      specified therein, including receipt of satisfactory fairness opinions.





**Critical
      Accounting Policies and Estimates**





We
      prepare our consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America. As such, some
      accounting policies have a significant impact on the amounts reported in these
      financial statements. A summary of those significant accounting policies can
      be
      found under the heading “The Company and Summary of Significant Accounting
      Policies” in our consolidated audited financial statements included in Item 7 of
      our 2005 Annual Report.




18


The
      preparation of these financial statements requires the use of estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amount of revenues and expenses during the reporting
      period. Management periodically evaluates the estimates and judgments made.
      Management bases its estimates and judgments on historical experience and on
      various factors that are believed to be reasonable under the circumstances.
      Actual results may differ from these estimates as a result of different
      assumptions or conditions.





We
      have
      identified below certain critical accounting policies that affect the more
      significant judgments and estimates used in the preparation of our consolidated
      financial statements and are thus most important to the portrayal of our current
      financial condition and results of operations.





*(a)*
            *Revenue
                Recognition*





Income
      on
      premiums will be recognized as written upon inception of the policy. For
      multi-year policies written which are payable in annual installments, due to
      the
      ability of the insured/reinsured to commute or cancel coverage within the term
      of the policy, only the annual premium will be included as written at policy
      inception. The remaining annual premiums will be included as written at each
      successive anniversary date within the multi-year term.





Premiums
      written will be primarily earned on a daily pro-rata basis over the terms of
      the
      policies to which they relate. Accordingly, unearned premiums will represent
      the
      portion of premiums written which is applicable to the unexpired portion of
      the
      policies in force. Reinsurance premiums assumed will be estimated based on
      information provided by ceding companies. The information used in establishing
      these estimates is reviewed and subsequent adjustments are recorded in the
      period in which they are determined. These premiums are earned over the terms
      of
      the related reinsurance contracts.





*(b)*
            *Policy
                Acquisition Costs*





Policy
      acquisition costs will consist of commissions, premium taxes, underwriting
      and
      other costs that vary with and are primarily related to the production of
      premiums. Acquisition costs are deferred and amortized over the period in which
      the related premiums are earned. To the extent that future policy revenues
      on
      existing policies are not adequate to cover related costs and expenses, deferred
      policy acquisition costs will be charged to earnings.





The
      Company will consider anticipated investment income in determining whether
      a
      premium deficiency exists.





*(c)*
            *Claims
                Reserve*





Unpaid
      losses and loss expenses will consist of a provision for outstanding losses
      and
      loss expenses and a provision for losses incurred but not reported (IBNR).
      As
      with premiums, current year losses will be as reported. Provisions for
      outstanding losses and loss expenses are valued on claim adjusters’ evaluations,
      with additional provisions made where the ceding company’s management considers
      necessary. The IBNR component of the reported losses is established by ceding
      company management in consultation with its actuaries based on a combination
      of
      company and industry data.





A
      liability will be established for the estimated unpaid losses and loss expenses
      of the Company under the terms of, and with respect to, its policies and
      agreements.





The
      process of establishing reserves is a complex and imprecise process, requiring
      the use of informed estimates and judgments. Estimates and judgments may be
      revised as additional experience and other data become available and are
      reviewed, as new or improved methodologies are developed or as current laws
      change. Any such revisions could result in future changes in estimates of losses
      or reinsurance recoverable, and would be reflected in the Company’s results of
      operations in the period in which the estimates are changed.





Reported
      losses and loss expenses on direct business will be valued on claim adjusters’
evaluation, with additional provisions made where management considers these
      necessary. The IBNR provision is primarily established by management in
      conjunction with the consulting actuaries based on the application of a
      combination of company and industry data. Any difference between the estimated
      amounts and the actual settlements will be reflected in the results of the
      year
      in which they are determined.





Future
      developments may result in losses and loss expenses significantly greater or
      less than the reserve provided.





19


*(d)*
            *Restricted
                Cash*





Restricted
      cash represents funds to be invested in special purpose residential real estate
      properties (“SPEs”) in Canada, being developed by the Lux Group Inc. (“Lux”).





*(e)*
            *Stock-Based
                Compensation*





In
      December 2004, the FASB issued SFAS No. 123 (R), “Share-based Payment,” which
      replaced SFAB No.123, Accounting for Stock-based Compensation” (“SFAS No. 123”),
      and supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock
      Issued to Employees” (“APB No. 25”). SFAS 123 (R) requires companies to
      recognize in their statement of income the grant-date fair value of stock
      options and other equity-based compensation issued to employees. This SFAS
      is
      effective for most public companies for interim and annual reporting periods
      beginning after June 15, 2005. Grant-date fair value will be determined using
      one of two acceptable valuation models. This Standard requires that compensation
      expense for most equity-based awards be recognized over the requisite service
      period, usually the vesting period; while compensation expense for
      liability-based awards (those usually settled in cash rather than stock) be
      re-measured to fair-value at each balance sheet date until the award is settled.
      The Standard also provides guidance as to the accounting treatment for income
      taxes related to such compensation cost, as well as transition issues related
      to
      adopting the new Standard. The adoption of SFAS No. 123 (R) had no impact on
      the
      Company’s results of operations for the nine months ended January 31,
      2006.





*(f)*
            *Recent
                Accounting Pronouncement*





In
      May
      2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections, a replacement of APB Opinion No. 20, Accounting Changes and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial Statements”
(“SFAS 154”). SFAS 154 provides guidance on the accounting for and reporting of
      accounting changes and error corrections. It establishes, unless impracticable,
      retrospective application as the required method for reporting a change in
      accounting principle in the absence of explicit transition requirements specific
      to the newly adopted accounting principle. SFAS 154 also provides guidance
      for
      determining whether retrospective application of a change in accounting
      principle is impracticable and for reporting a change when retrospective
      application is impracticable. The provisions of SFAS 154 are effective for
      accounting changes and corrections of errors made in fiscal periods beginning
      after December 15, 2005. The adoption of the provisions of SFAS 154 is not
      expected to have a material impact on the Company’s financial position or
      results of operations.





In
      March
      2005, the Securities and Exchange Commission announced that the compliance
      date
      for non-accelerated filers pursuant to Section 404 of the Sarbanes-Oxley Act
      have been extended. Under the latest extension, a company that is not required
      to file its annual and quarterly reports on an accelerated basis must begin
      to
      comply with the internal control over financial reporting requirements for
      its
      first fiscal year ending on or after July 15, 2006. The Commission similarly
      has
      extended the compliance date for these companies relating to requirements
      regarding evaluation of internal control over financial reporting and management
      certification requirements. The Company will be required to comply with Section
      404 of the Sarbanes-Oxley Act beginning on May 1, 2007.




*(g)*
            *Interim
                Presentation*




The
      April
      30, 2005 balance sheet data was derived from audited financial statements but
      does not include all disclosures required by generally accepted accounting
      principles. In the opinion of management, the accompanying unaudited financial
      statements contain all normal and recurring adjustments necessary to present
      fairly the financial position of the Company as of January 31, 2006, its results
      of operations for the three and the nine months ended January 31, 2006 and
      2005
      and its cash flows for the three and the nine months ended January 31, 2006
      and
      2005.





The
      statements of operations for the three and the nine months ended January 31,
      2006 and 2005 are not necessarily indicative of the results for the full year.





While
      the
      Company believes that the disclosures presented are adequate to make the
      information not misleading, these financial statements should be read in
      conjunction with the financial statements and accompanying notes included in
      the
      Company's annual report on Form 10-KSB for the year ended April 30, 2005.





**Results
      of Operations for the Three Months Ended January 31, 2006 and
      2005**





The
      following is a discussion and analysis of our results of operations for the
      above periods:





20


**Revenues**





*Net
      Earned Written Premiums*





Net
      earned written premiums for the three months ended January 31, 2006 ("Fiscal
      2006") amounted to $869,031 compared to $1,512,087 for the three months ended
      January 31, 2005 ("Fiscal 2005"), a decrease of $643,056 or 43%. Net premiums
      decreased in part due to the Company voluntarily withdrawing from writing new
      business as a result of the unauthorized discharge of certain mortgages
      resulting in a loss of regulatory capital. Net earned written premiums in 2006
      were earned in the following countries:




Australia
            
            $
            6,885Canada
            
            
            17,076United
                Kingdom
            
            
            134,994United
                States of America
            
            
            208,918South
                Korea
            
            
            44,698India
            
            
            456,460$
            869,031





*Interest
      and Investment Income*





For
      Fiscal 2006, interest and investment income totaled $6,820,668 and included
      interest and accretion income from the secured convertible note issued by Grupo
      Lakas on December 14, 2005 of approximately $4.5 million and interest on
      mortgages of approximately $2 million. The Company also earned approximately
      $280,000 from short term investments as it invests its cash in short-term bank
      overnight notes. For Fiscal 2005, the interest and investment income amounted
      to
      $963,050, and it consisted primarily of interest earned on
      mortgages.





**Claims
      and Expenses**





Claims
      and expenses totaled $3,746,629 in Fiscal 2006 and $7,576,823 in Fiscal 2005
      and
      included the following:





***General
      and Administrative Expenses***





In
      Fiscal
      2006, general and administrative expenses amounted to $3,155,896 and included
      payroll and payroll taxes, office and occupancy expenses, professional, legal
      and accounting fees and consulting fees and services. In addition, general
      and
      administrative expenses included a charge of $1,125,000 for liquidated damages
      relating to registration penalties as further discussed in Note 9 of the
      Financial Statements.




Consulting
      fees and services included services provided for specialized expertise in
      various areas including sales and marketing, actuarial work, technological
      development as well as for management expertise to assist in designing and
      launching our various programs.





In
      Fiscal
      2005, general and administrative expenses amounted to $4,300,744 and included
      payroll and payroll taxes, office and occupancy expenses, professional, legal
      and accounting fees and consulting fees and services. Consulting services
      included the issuance of 177,504 shares of common stock for services valued
      at
      $317,932 and $938,000 for various finance consulting services relating to loans
      received in Fiscal 2005.





***Claims
      Reserve Expense***





In
      Fiscal
      2006, the Company increased its reserve of 25% of the gross premiums written
      by
      $193,170.





***Brokerage
      and Acquisition Costs***





In
      Fiscal
      2005, the Company paid a $3,000,000 commission to RS Group, a related entity,
      in
      connection with the placement of financial guarantee insurance for the repayment
      of dividends and the liquidation preference of Redeemable Insured Series A
      Preferred of Strategy Real Estate Investments Ltd.





21


**Other
      Income (Expense)**





*Interest
      Expense*





In
      Fiscal
      2006, interest expense amounted to $2,836,610.  Interest
      on the Redeemable Insured Preferred Stock Series A totaled $1,250,000. Such
      preferred stock was accounted for as a long-term liability under U.S. generally
      accepted accounting principles as it has a mandatory redemption feature. As
      such, all dividends paid are treated as interest expense. Interest incurred
      on
      various other short-term notes payable and long-term mortgage notes payable
      amounted to $1,637,464. Interest incurred on related party notes and loans
      payable amounted to $74,146.





In
      Fiscal
      2005, interest expense amounted to $2,099,638.  Interest
      on the Redeemable Insured Preferred Stock Series A totaled $1,033,055. In
      addition, the Company issued 750,000 shares of common stock during the quarter
      in connection with an $8 million bridge loan. The shares were valued at
      $975,000. Interest incurred on related party notes and loans payable amounted
      to
      $2,865.





**Dividends**





The
      deemed dividend on Redeemable Insured Preferred Stock Series A represents the
      difference between the liquidation preference and the allocated gross proceeds
      in the amount of $8,675,000, which is being amortized over thirty-six (36)
      months, the term of the Series A Preferred. The accretion amounted to $722,917
      and $602,431 for the three months ended January 31, 2006 and 2005,
      respectively.





Dividends
      paid and/or accrued for other preferred stock issuances amounted to $3,091,699
      and $2,626,438 for the three months ended January 31, 2006.





**Net
      Loss Available to Common Stockholders**





Net
      loss
      available to common stockholders in Fiscal 2006 amounted to $2,550,877 ($.04
      per
      share) and $10,420,193 ($.17 per share) in Fiscal 2005 for the reasons stated
      above.





**Results
      of Operations for the Nine Months Ended January 31, 2006 and 2005**





The
      following is a discussion and analysis of our results of operations for the
      above periods:





**Revenues**





*Net
      Earned Written Premiums*





Net
      earned written premiums for the nine months ended January 31, 2006 ("Fiscal
      2006") amounted to $1,656,103 compared to $1,953,458 for the nine months ended
      January 31, 2005 ("Fiscal 2005"), a decrease of $297,355 or 15%. Net premiums
      decreased in part due to the Company voluntarily withdrawing from writing new
      business as a result of the unauthorized discharge of certain mortgages
      resulting in a loss of regulatory capital. Insurance premiums were earned in
      the
      following countries as follows:




Australia
            
            $
            9,180Canada
            
            
            51,278United
                Kingdom
            
            
            371,448United
                States of America
            
            
            405,418South
                Korea
            
            
            134,089India
            
            
            684,690$
            869,031





*Interest
      and Investment Income*





For
      Fiscal 2006, interest and investment income totaled $10,284,565 and included
      interest and accretion income from the secured convertible note issued by Grupo
      Lakas on December 14, 2005 of approximately $4.5 million and interest on
      mortgages of approximately $4.1 million. The Company also earned approximately
      $772,000 from short term investments as it invests its cash in short-term bank
      overnight notes. For Fiscal 2005, the interest and investment income amounted
      to
      $2,492,614, and it consisted primarily of interest earned on
      mortgages.





22


**Claims
      and Expenses**





Claims
      and expenses totaled $12,012,916 in Fiscal 2006 and $10,442,667 in the Fiscal
      2005 and included the following:





***General
      and Administrative Expenses***





In
      Fiscal 2006, general and administrative expenses amounting to $9,363,473
      included payroll and payroll taxes, office and occupancy expenses, professional,
      legal and accounting fees and consulting fees and services. In addition, general
      and administrative expenses included a charge of $3,375,000 for liquidated
      damages relating to registration penalties as further discussed in Note 9 of
      the
      Financial Statements.





Consulting
      fees and services included services provided for specialized expertise in
      various areas including sales and marketing, actuarial work, technological
      development as well as for management expertise to assist in designing and
      launching our various programs. In Fiscal 2006, consulting expenses amounted
      to
      approximately $1.8 million.





In
      Fiscal
      2005, general and administrative expenses amounted to $7,036,877 and included
      payroll and payroll taxes, office and occupancy expenses, professional, legal
      and accounting fees and consulting fees and services. Consulting services,
      in
      the amount of approximately $3.9 million, included the issuance of 977,503
      shares of common stock for services valued at $1,829,930 and $938,000 for
      various finance consulting services relating to loans received in Fiscal
      2005.





***Claims
      Reserve Expense***





In
      Fiscal
      2006, the Company increased its reserve of 25% of the gross premiums written
      by
      $1,692,644.





***Brokerage
      and Acquisition Costs***





In
      Fiscal
      2005, the Company paid a $3,000,000 commission to RS Group, a related entity,
      in
      connection with the placement of financial guarantee insurance for the repayment
      of dividends and the liquidation preference of Redeemable Insured Series A
      Preferred of Strategy Real Estate Investments Ltd.





**Other
      Income (Expense)**





*Interest
      Expense*





In
      Fiscal
      2006, interest expense amounted to $7,659,381.  Interest
      on the Redeemable Insured Preferred Stock Series A totaled $3,750,000. Such
      preferred stock was accounted for as a long-term liability under U.S. generally
      accepted accounting principles as it has a mandatory redemption feature. As
      such, all dividends paid are treated as interest expense. Interest incurred
      on
      various other short-term notes payable and long-term mortgage notes payable
      amounted to $3,806,608. Interest incurred on related party notes and loans
      payable amounted to $102,733.





In
      Fiscal
      2005, interest expense amounted to $2,099,638.  Interest
      on the Redeemable Insured Preferred Stock Series A totaled $1,033,055. In
      addition, the Company issued 750,000 shares of common stock in connection with
      an $8 million bridge loan. The shares were valued at $975,000. Interest incurred
      on related party notes and loans payable amounted to $2,865.





**Dividends**





The
      deemed dividend on Redeemable Insured Preferred Stock Series A represents the
      difference between the liquidation preference and the allocated gross proceeds
      in the amount of $8,675,000, which is being amortized over thirty-six (36)
      months, the term of the Series A Preferred. The accretion amounted to $2,168,751
      and $602,431 for Fiscal 2006 and Fiscal 2005, respectively.





Dividends
      paid and/or accrued for other preferred stock issuances amounted to $3,091,699
      and $2,626,438 for Fiscal 2006 and Fiscal 2005, respectively.





23





**Net
      Loss Available to Common Stockholders**





Net
      loss
      available to common stockholders in Fiscal 2006 amounted to $12,780,674 ($.20
      per share) and $11,315,102 ($.19 per share) in Fiscal 2005 for the reasons
      stated above.





**Liquidity
      and Capital Resources**





At
      January 31, 2006, we had cash of $444,383, a decrease of $2,342,578 from our
      balance at April 30, 2005 of $2,786,961.





Cash
      used
      in operating activities amounted to $6,243,809. The primary reason for the
      decrease was to fund the loss for the period.




Cash
      used
      in investing activities amounted to $45,145,178. The Company provided mortgage
      loans of $50 million to three companies at interest rates up to 15%. Such
      mortgages provided capital in connection with such companies’ real estate
      development activities. The mortgages are due at various dates through April
      2010 and are secured by the respective properties. Payments totaling $5.9
      million were received during Fiscal 2006 and an additional $6.2 million was
      received in February 2006. In addition, the Company loaned various related
      parties $254,000 and purchased property and equipment totaling
      $504,000.





Cash
      provided by financing activities amounted to $49,352,532. The Company issued
      mortgage loans of $50 million at interest rates up to 10.25%. These mortgages
      were issued to facilitate our investment in the mortgage notes receivable
      issued. The mortgages are due at various dates through January 2009 and are
      secured by the respective properties. The Company received a loan from a related
      party in the amount of $1,250,000. The proceeds of the loan were used to pay
      a
      quarterly dividend payment due to the holders of the Redeemable Insured Series
      A
      Preferred Stock of Holdings. The loan bears interest at prime and is payable
      on
      or before July 2008. We also received loans from another related party in the
      amount of $2 million. The loans are due on demand and bear interest at 5% per
      annum. During Fiscal 2006, total payments of debt amounted to $2 million. In
      addition, payments totaling $5 million were made in February 2006.





In
      connection with the issuance of Series D Preferred as part of the Grupo Lakas
      Investment, the Company incurred issuance costs totaling
      $12,017,000. T he
      Company signed a consulting agreement with RS Group, a related
      party, whereby the Company agreed to pay the lesser of 2% of the Investment
      or $10,000,000. A $10,000,000 fee was recorded as a cost of issuance and charged
      against the value of the Series D Preferred stock.





The
      Company had restricted cash amounting to $32.6 million at January 31,
      2006.  Such cash represents funds to be invested, through the placement of
      mortgages in special purpose residential real estate properties in Canada. 
The properties are being developed by the Lux Group, Inc., a related party
      (see
      Note 8 of the financial statements). At January 31, 2006, mortgages issued
      amounted to $8,000,000.





As
      disclosed in our 2005 Annual Report, our auditors have issued a “going concern”
qualification as part of their opinion in the audit report relating to our
      audited financial statements. The accompanying financial statements have been
      prepared assuming the Company will continue as a going concern. As shown in
      the
      accompanying financial statements, the Company has incurred a net loss of
      $7,520,224 for the nine months ended January 31, 2006 and $14,958,708 for the
      year ended April 30, 2005, has a working capital deficit of $20,285,809 and
      $962,036 as of January 31, 2006 and April 30, 2005, respectively, and has
      generated negative cash flows from operations. In addition, in September 2005,
      the Company voluntarily withdrew from writing new business as a result of the
      unauthorized discharge of certain mortgages resulting in a loss of regulatory
      capital **.** The
      future of the Company is dependent upon its ability to generate sufficient
      revenues and to obtain debt and/or equity financing to fund its operations
      and
      to follow through on its projected business plan. Management has plans to seek
      additional capital through debt and/or equity financing. The financial
      statements do not include any adjustments relating to the recoverability and
      classification of recorded assets, or the amounts of and classification of
      liabilities that might be necessary in the event the Company cannot continue
      its
      existence.




In
      December 2005, the Company successfully completed a transaction that raised
      new
      equity capital of approximately $518 million for its wholly-owned Barbados
      subsidiary, Strategy Holding. **** While
      this transaction added significant new capital, the investment consisted of
      non-cash assets not readily convertible to cash. In February 2006, the Company
      requested approval from the office of the Supervisor of Insurance and Finance
      of
      Barbados to have this contributed capital allowed as regulatory capital for
      its
      insurance subsidiary, SIL.




The
      Company believes it will be successful in receiving this approval and recommence
      its business plan and insurance operation and find additional ways to utilize
      the non-cash assets for the future benefit of its operations. **** However,
      there can be no assurance that we will be successful in doing so. The ability
      of
      the Company **** to
      utilize or convert the non-cash assets into working capital and/or receive
      approval of such non-cash assets as regulatory capital **** therefore
      continues to raise substantial doubt about the Company's ability to continue
      as
      a going concern. These financial statements do not include any adjustments
      that
      might arise from such uncertainty.




24


On
      December 14, 2005, the Company and Strategy Holding concluded a Capital
      Investment transaction outlined in the binding letter agreement entered into
      on
      October 25, 2005 with Grupo Lakas S.A., Panama
      Peat S.A., and Changuinola Peat S.A., a Panamanian corporation .
      Pursuant to the Master Investment Agreement, Grupo Lakas made an investment
      with
      a face value of $700,000,000 in Strategy Holding by issuing to Strategy Holding,
      a promissory note in the original principal amount of $700,000,000. See the
      discussion of the transaction above within the Overview section. The increase
      in
      stockholders' equity is based on the results of an independent valuation
      report.





Our
      operating subsidiary, SIL, has been the source of business income relating
      to
      insurance operations. At present, until SIL has received regulatory approval
      for
      the new capital, it will not write new insurance business on either an
      individual or program basis; however, its underwriting business should be
      unaffected. Premiums have been sporadic through our first full fiscal year
      ended
      April 30, 2005 and the nine months period ended January 31, 2006.





With
      respect to the nature of our business, claims are not likely to impact our
      liquidity position in the near future. These policies extend over varying
      lengths of time and claims can be made, in certain cases, only at the end of
      the
      policy periods when losses and related claims can be ascertained.





From
      an
      investment perspective, this allows us to define more accurately when funds
      may
      be required to pay out claims, thus providing an opportunity to match investment
      periods with anticipated claim dates.





As
      discussed elsewhere in this quarterly report and in our 2005 Annual Report,
      it
      is difficult for us to accurately estimate the loss reserves. In recognition
      of
      the need to set aside funds for potential claims, a reserve of $3,239,901,
      representing 25% of gross premiums written since our inception, has been
      created. This is effectively our IBNR.





We
      are a
      new company providing insurance, through SIL, to niche markets. However, as
      noted above, SIL will not write any new insurance business until we have been
      able to provide additional capital to SIL.





Generally,
      underwriting management ascertains at the inception of each policy what losses
      might arise on each particular piece of business. Policy pricing (premium)
      and
      requisite loss reserves are determined at that point in time. As SIL develops
      more of an operating history, it will be in a better position to more accurately
      calculate our loss reserves.





Our
      operating expenses are currently approximately $550,000 per month. In order
      to
      meet the Company’s future cash requirements we will be dependent upon our
      ability to raise additional capital, achieve profitable operations and/or
      continue to obtain working capital loans or advances from management and related
      parties. In addition, in an effort to ensure that we have access to sufficient
      funds to meet our needs, from time to time we may attempt to raise financing
      through some combination of commercial bank borrowings or the private or public
      sale of equity or debt securities. However, future equity or debt financings
      may
      not be available to us at all, or, if available, may not be on favorable terms.
      We cannot assure you that these efforts, together with items described above,
      will be sufficient to fund our growth, or that external funding will be
      available to us at favorable interest rates or at all. If we are unable to
      obtain financing in the future, we will continue to develop our business on
      a
      reduced scale based on the capital resources that may be available to us.





SIL
      began
      quoting on possible insurance business immediately following the receipt of
      permission to operate from the Ministry of Finance (Barbados) on March 26,
      2004.
      The nature of the insurance business is such that individual pieces of business
      can take many months to negotiate and come to fruition. In view of our recent
      capital infusion for SIL, it will not be quoting insurance until such additional
      capital is approved as regulatory capital by the Barbados Ministry of Insurance
      and Finance. SIL will continue to support its existing business. It is difficult
      to predict at this early stage in our development what proportion of business
      quoted will generate revenues because we do not have a sufficient history by
      which to accurately estimate such numbers.





**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet financing arrangements within the meaning of Item 303(c)
      of
      Regulation S-B.





**ITEM
      3. CONTROL AND PROCEDURES.**





Disclosure
      controls and procedures are controls and procedures that are designed to ensure
      that information required to be disclosed in our reports filed or submitted
      under the Securities Exchange Act is recorded, processed, summarized and
      reported within the time periods specified in the Commission’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed in
      our
      reports filed under the Securities Exchange Act is accumulated and communicated
      to management, including our principal executive officer and our principal
      financial officer, as appropriate, to allow timely decisions regarding required
      disclosure.





25


**(a)**
            **Evaluation
                of Disclosure Controls and
                Procedures.**





We
      merged
      with and into CI Sell Cars, Inc. in June 2004. We are currently developing
      our
      business and implementing systems of internal and disclosure controls. As of
      the
      end of the quarterly period ended January 31, 2005, we carried out an
      evaluation, under the supervision and with the participation of our management,
      including our Chief Executive Officer and President, and our Chief Financial
      Officer, of the effectiveness of the design and operation of our disclosure
      controls and procedures pursuant to Rule 13a-15 under the Securities Exchange
      Act. Based upon this evaluation, our Chief Executive Officer and our Chief
      Financial Officer concluded that, as of the end of the quarterly period ended
      January 31, 2005, our disclosure controls and procedures were not effective,
      under Rule 13a-15, to ensure timely reporting with the Commission and to ensure
      that our management is timely alerted to material information relating to our
      company during the period when its periodic reports are being prepared. We
      believed that these weaknesses were due to a material weakness in our internal
      control over financial reporting, which is more fully described under subsection
      (b) below.





As
      of the
      end of the period covered by this report, we carried out an evaluation under
      the
      supervision and the participation of management including our Chief Executive
      Officer and Chief Financial Officer, of the effectiveness of our disclosure
      controls and procedures. Based on the foregoing, our Chief Executive Officer
      and
      Chief Financial Officer concluded that our disclosure controls and procedures
      were effective.





**(b)**
            **Changes
                in Internal Controls over Financial
                Reporting.**





As
      required by Rule 13a-15(d), our Chief Executive Officer and Chief Financial
      Officer also conducted an evaluation of our internal controls over financial
      reporting to determine whether any changes occurred during the third fiscal
      quarter that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.





During
      the preparation of our financial statements as of and for the quarterly period
      ended January 31, 2005, we concluded that the system of disclosure controls
      and
      procedures then in effect was not effective because of our lack of an adequate
      accounting staff, as more fully described below. As a result of this conclusion,
      we initiated the changes in our internal controls over financial reporting,
      also
      described below.





**Lack
      of Adequate Accounting Staff**





During
      the quarterly period ended January 31, 2005, we had insufficient numbers of
      internal personnel possessing the appropriate knowledge, experience and training
      in applying US GAAP and in reporting financial information in accordance with
      the requirements of the Commission. Insufficient controls over dissemination
      of
      information regarding non-routine and complex transactions to our accounting
      staff by our management, as well as incorrect treatment and lack of proper
      analysis of such transactions by our accounting staff resulted. This weakness
      resulted in material adjustments proposed by our independent registered
      accountants with respect to our financial statements for our quarterly period
      ended January 31, 2005. Such adjustments have been recorded in our books and
      are
      reflected in our financial statements found under “Item 1. Financial
      Statements.”





Effective
      February 1, 2005, we hired a new Chief Financial Officer, together with two
      additional accounting and control staff members, with the appropriate knowledge,
      experience and training in applying US GAAP and in reporting financial
      information in accordance with the requirements of the Commission. We are
      implementing additional control policies and procedures to resolve the above
      mentioned internal control weakness. We plan to retain one or two independent
      non-employee directors, who would form a majority of the audit committee to
      be
      designated by our board of directors. Such audit committee will have the
      responsibility to oversee our accounting and financial reporting processes
      and
      to communicate with our independent registered accounting firm.





Our
      management and our board of directors are fully committed to the review and
      evaluation of our procedures and policies designed to assure effective internal
      control over financial reporting. We feel that the additions to our accounting
      and control staff, together with the expected creation of an independent audit
      committee, will improve the quality of future period financial reporting.





During
      the quarter ended January 31, 2006, there have been no changes in our internal
      controls over financial reporting that have materially affected, or are
      reasonably likely to materially affect these controls.





26


**PART
      II - OTHER INFORMATION**





**ITEM
      1 - LEGAL PROCEEDINGS**





During
      February 2006, the Company, SREI and individual officers of the Company and
      its
      subsidiaries were named in a complaint filed by individual investors of SREI
      (the "Complaint"). The Complaint was filed in the US District Court Southern
      District of New York and alleges amongst other things, misrepresentation on
      behalf of the Company and individuals to induce the investors into investing
      $50,000,000 in Series A Preferred and Series B Preferred shares of SREI during
      November 2004. The Complaint further charges that the Company filed and reported
      financial statements that they knew were materially misrepresented, that the
      Company failed to have effectively registered the shares of common stock
      underlying the warrants issued as part of their investment and other charges
      of
      misrepresentation or failure to disclose information.





The
      controversy surrounding this matter stems from information obtained by the
      investors in the Company's Form 10-KSB filed on September 16, 2005 for the
      year
      ended April 30, 2005. The Company disclosed in this filing that on or about
      August 2005, we first became aware that the mortgages underlying the February
      2004 capital investment of $104 million were erroneously discharged during
      October 2004, prior to the SREI investment. The Complaint alleges that the
      Company knowingly withheld this information.





The
      Company believes that we have complied with all regulatory reporting
      requirements, and that we are not in default of any material aspect of the
      agreement. It is further our understanding and belief that many of the
      allegations against the individuals as contained in the complaint are either
      immaterial or factually inaccurate and misleading.





The
      Company denies these allegations, and disputes the charges relating to the
      registration statement and other assertions and intends to vigorously defend
      this matter. The Company has retained council on this matter and intends to
      file
      an answer to the Company by its required date of April 30, 2006.





In
      June
      2005, HH Hairspray, LLC (“Hairspray”) filed a lawsuit against us in the Circuit
      Court of the 15 th Judicial
      Circuit in and for Palm Beach, Florida, for breach of contract relating to
      a
      Loan, Security and Pledge Agreement (the “Loan Agreement”), dated as of March
      31, 2005, between Hairspray, LLC and Strategy Resort Financing, Inc. (“Strategy
      Finance”), one of our subsidiaries. SIL, another one of our subsidiaries, are
      also named in the lawsuit. The complaint alleges that Strategy Finance breached
      an implied representation that it had the financial capability to fund
      $6,900,000 to Hairspray, as called for by the Loan Agreement, and that we
      allowed Strategy Finance to so represent. In the complaint, Hairspray alleges
      that the full amount was not received and demands judgment for damages, costs
      and fees and specific performance. The lawsuit was settled in February 2006,
      whereby the Company issued 100,000 shares of common stock. The shares were
      valued at $30,000. Such amount has been accrued and is included in accounts
      payable and accrued liabilities.





Our
      2005
      Annual Report contains a description of certain lawsuits in which we are
      currently involved. Other than such lawsuits, the lawsuits mentioned above
      and
      other than immaterial claims in the ordinary course, to our knowledge, we are
      currently not involved in any litigation that we believe could have a materially
      adverse effect on our financial condition or results of operations.





**ITEM
      6 - EXHIBITS**





The
      following exhibits are being filed as part of this quarterly report:





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 and Rule 13a-14(a)/15d-14(a) of the Securities Exchange
                Act of
                1934.31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 and Rule 13a-14(a)/15d-14(a) of the Securities Exchange
                Act of
                1934.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




27





**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly authorized.




**STRATEGY
                INTERNATIONAL INSURANCE GROUP, INC.**Date: March
                31, 2006
            By:
            /s/ Steven
                StonhillName: Steven
                StonhillTitle: Chairman
                of the Board and Chief Executive
                Officer


Date: March
                31, 2006
            By:
            /s/ Louis
                LettieriName: Louis
                LettieriTitle: Chief
                Financial Officer




28





**EXHIBIT
      INDEX**





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 and Rule 13a-14(a)/15d-14(a) of the Securities Exchange
                Act of
                1934.31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002 and Rule 13a-14(a)/15d-14(a) of the Securities Exchange
                Act of
                1934.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




29