**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-QSB**







**(MARK
      ONE)**




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




For
      the
      quarterly period ended October 31, 2005




x
            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: 63,197,503 shares of Common Stock, $0.001
      par
      value per share, outstanding as of December 14, 2005.




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 or Plan of
                Operation
            17Item
                3.
            Controls
                and Procedures
            26**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            27Item
                2.
            Unregistered
                Sales of Equity securities and Use of Proceeds
            27Item
                3.
            Defaults
                Upon Senior Securities
            27Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            28Item
                5
            Other
                Information
            28Item
                6.
            Exhibits
            28






-2-


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





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





STRATEGY
                  INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIESCONSOLIDATED
                  BALANCE SHEETS
  October
                  31,
              
              April
                  30,2005
              
              2005(Unaudited)
              
              (Audited)ASSETSCurrent
                  Assets:Cash
              
              $
              667,136
              
              $
              2,786,961Accounts
                  receivable
              
              
              95,196
              
              
              553,753Mortgage
                  notes receivable
              
              
              6,230,807
              
              
              6,230,807Loan
                  receivable
              
              
              900,000
              
              
              900,000Interest
                  receivable (includes $1,075,007
                  and $542,667 from related parties)
              
              
              1,951,105
              
              
              784,357Prepaid
                  expenses (includes $746,698 and $0 from related parties)
              
              
              1,553,734
              
              
              129,874Total
                  Current Assets
              
              
              11,397,978
              
              
              11,385,752Cash
                  - restricted
              
              
              32,313,103
              
              
              32,046,385Mortgage
                  notes receivable
              
              
              46,855,075
              
              
              23,000,000Mortgage
                  notes receivable - related parties
              
              
              8,000,000
              
              
              8,000,000Property
                  and equipment - net
              
              
              446,189
              
              
              84,920Other
                  assets (includes $450,000 and $0 from related parties)
              
              
              2,119,239
              
              
              253,571Goodwill
              
              
              596,532
              
              
              –Due
                  from affiliate
              
              
              2,132,095
              
              
              –Due
                  from related parties
              
              
              464,304
              
              
              256,049Total
                  Assets
              
              $
              104,324,515
              
              $
              75,026,677LIABILITIES
                  AND STOCKHOLDERS' DEFICIENCYCurrent
                  Liabilities:Long
                  term debt - current portion
              
              $
              6,054,488
              
              $
              7,000,000Accounts
                    payable and accrued liabilities (includes $34,928and
                    $6,302 from related parties)
              
              
              4,978,861
              
              
              1,745,385Note
                  and loans payable - related party
              
              
              728,933
              
              
              275,000Premium
                  advance
              
              
              100,000
              
              
              100,000Unearned
                  premiums
              
              
              6,692,743
              
              
              1,473,712Claims
                  reserves
              
              
              3,046,732
              
              
              1,547,258Due
                  to affiliate
              
              
              –
              
              
              206,433Total
                  Current Liabilities
              
              
              21,601,757
              
              
              12,347,788Long-term
                  liabilitiesRedeemable
                    Insured Preferred Stock Series A - net of issuance costsof
                    $1,780,289 and $2,216,279 (Liquidation preference
                    $50,000,000)
              
              
              42,315,892
              
              
              40,434,068Long-term
                  debt - net of current portion - net of discountof
                  $269,083 and $0
              
              
              50,058,585
              
              
              23,000,000Long-term
                  debt - related party
              
              
              1,250,000
              
              
              –
 Total
                    Long-term Liabilities
                
                
                93,624,477
                
                
                63,434,068Total
                    Liabilities
                
                
                115,226,234
                
                
                75,781,856ContingenciesStockholders'
                    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 authorized5,000
                      shares issued and outstanding)
                
                
                1,000,000
                
                
                1,000,000Common
                      stock ($.001 par value, 100,000,000 shares authorized63,197,503
                      shares issued and outstanding at October 31, 2005 and April
                      30,
                      2005)
                
                
                63,197
                
                
                63,197Additional
                    paid-in capital
                
                
                116,149,512
                
                
                117,595,346Less:
                    Notes receivable - subscriptions
                
                
                (104,231,610
                )
                
                (104,231,610
                )Deferred
                    compensation
                
                
                (78,242
                )
                
                (266,022
                )Currency
                    translation adjustment
                
                
                (108,696
                )
                
                (4,173
                )Accumulated
                    deficit
                
                
                (23,695,985
                )
                
                (14,912,022
                )Total
                    Stockholders' Deficiency
                
                
                (10,901,719
                )
                
                (755,179
                )Total
                    Liabilities and Stockholders' Deficiency
                
                $
                104,324,515
                
                $
                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 Six Months endedOctober
                  31,
              
              October
                  31,2005
              
              2004
              
              2005
              
              2004(Restated)
              
              
              
              (Restated)Revenue:Gross
                  written premium
              
              $
              5,704,698
              
              $
              753,992
              
              $
              5,997,895
              
              $
              753,992Less:
                  unearned premium
              
              
              5,098,914
              
              
              312,621
              
              
              5,210,823
              
              
              312,621Net
                  earned written premium
              
              
              605,784
              
              
              441,371
              
              
              787,072
              
              
              441,371Interest
                    income (includes $266,170, $0, $532,340and
                    $0 from related parties)
              
              
              1,542,573
              
              
              651,448
              
              
              2,971,169
              
              
              1,529,564Investment
                  income
              
              
              279,592
              
              
              –
              
              
              492,728
              
              
              –Total
                  revenue
              
              
              2,427,949
              
              
              1,092,819
              
              
              4,250,969
              
              
              1,970,935Claims
                  and Expenses:General
                  and administrative expenses
              
              
              3,435,661
              
              
              2,273,291
              
              
              6,175,723
              
              
              2,736,133Claims
                  reserve expense
              
              
              1,469,644
              
              
              –
              
              
              1,499,474
              
              
              –Brokerage
                  and acquisition costs (includes $39,300, $0, $39,300 and $0 from
                  related
                  parties)
              
              
              89,289
              
              
              129,711
              
              
              108,162
              
              
              129,711Amortization
                  of finance costs
              
              
              233,922
              
              
              –
              
              
              451,917
              
              
              –Depreciation
              
              
              20,669
              
              
              –
              
              
              31,011
              
              
              –Total
                  claims and expenses
              
              
              5,249,185
              
              
              2,403,002
              
              
              8,266,287
              
              
              2,865,844Loss
                  from operations
              
              
              (2,821,236
              )
              
              (1,310,183
              )
              
              (4,015,318
              )
              
              (894,909
              )Other
                  Income (Expense):Interest
                    expense (includes $22,583, $0, $28,626and
                    $0 from related parties)
              
              
              (2,500,556
              )
              
              –
              
              
              (4,822,771
              )
              
              –Minority
                  interest in loss of subsidiary
              
              
              33,051
              
              
              –
              
              
              54,126
              
              
              –Net
                  loss
              
              
              (5,288,741
              )
              
              (1,310,183
              )
              
              (8,783,963
              )
              
              (894,909
              )Deemed
                  dividend on Redeemable InsuredPreferred
                  Stock Series A
              
              
              722,917
              
              
              –
              
              
              1,445,834
              
              
              –Net
                  loss attributable to common stockholders
              
              $
              (6,011,658
              )
              $
              (1,310,183
              )
              $
              (10,229,797
              )
              $
              (894,909
              )Net
                  loss per common share:Basic
                  and diluted
              
              $
              (0.10
              )
              $
              (0.02
              )
              $
              (0.16
              )
              $
              (0.02
              )Basic
                    and diluted weighted average commonshares
                    outstanding
              
              
              63,197,503
              
              
              62,243,912
              
              
              63,197,503
              
              
              58,157,608
 
 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
        SIX MONTHS ENDED OCTOBER 31, 2005 AND 2004
 (Unaudited)


October
                31,2005
            
            2004(Restated)Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (8,783,963
            )
            $
            (894,909
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities:Amortization
                of finance costs
            
            
            451,917
            
            
            –Amortization
                of deferred stock based compensation
            
            
            187,780
            
            
            –Depreciation
            
            
            31,011Minority
                interest in loss of subsidiary
            
            
            (54,126
            )
            
            –Common
                stock issued for services rendered
            
            
            –
            
            
            1,511,998(Increase)
                decrease in:Accounts
                receivable
            
            
            458,557
            
            
            (75,000
            )Interest
                receivable
            
            
            (1,166,748
            )
            
            (1,529,564
            )Prepaid
                expenses
            
            
            (1,325,781
            )
            
            –Other
                assets
            
            
            (1,865,668
            )
            
            (15,000
            )Increase
                (decrease) in:Accounts
                payable and accrued liabilities
            
            
            2,715,984
            
            
            1,247,133Due
                from/to affiliate
            
            
            (2,338,528
            )
            
            –Unearned
                premiums
            
            
            5,219,031
            
            
            –Claims
                reserves
            
            
            1,499,474
            
            
            –Net
                cash provided by (used in) operating activities
            
            
            (4,971,060
            )
            
            244,658Cash
                Flows from Investing ActivitiesCash
                paid for mortgage notes receivable
            
            
            (27,000,000
            )
            
            –Repayments
                received on mortgage notes receivable
            
            
            3,144,925
            
            
            –Acquisitions
                of property and equipment
            
            
            (389,211
            )
            
            (28,575
            )Restricted
                cash - net activity
            
            
            (266,718
            )
            
            –Loans
                to related parties
            
            
            (208,255
            )
            
            –Acquisition
                of subsidiary
            
            
            (36,096
            )
            
            –Cash
                received in acquisition
            
            
            8,113
            
            
            15,678Net
                cash used in investing activities
            
            
            (24,747,242
            )
            
            (12,897
            )Cash
                Flows from Financing Activities:Proceeds
                from long-term debt
            
            
            27,000,000
            
            
            –Proceeds
                of long-term debt - related party
            
            
            1,250,000
            
            
            –Payment
                of finance costs
            
            
            (285,010
            )
            
            –Proceeds
                from note and loans payable - related party
            
            
            453,933
            
            
            –Payments
                of long-term debt
            
            
            (715,923
            )
            
            –Net
                cash provided by financing activities
            
            
            27,703,000
            
            
            –


Effect
                  of foreign currency translation
              
              
              (104,523
              )
              
              –Net
                  decrease in cash
              
              
              (2,119,825
              )
              
              231,761Cash
                  - beginning of period
              
              
              2,786,961
              
              
              184,000Cash
                  - end of period
              
              $
              667,136
              
              $
              415,761Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid during the period for:Interest
              
              $
              4,035,450
              
              $
              –Income
                  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
              
              $
              1,445,834
              
              $
              –
 
 The
                  accompanying notes are an integral part of these financial
                  statements.






-5-




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


1.
              THE
                  COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES





The
      Company





Strategy
      International Insurance Group, Inc. (the “Company”) is a holding company for an
      integrated group of insurance and finance-related businesses. The Company is
      organized as a multi-line insurer with a focus on credit and liability insurance
      in the fixed income and real estate industries predominately in North America.
      It also offers insurance related risk management solutions to users and
      providers of capital.




The
      Company is an integrated, international group of providers of specialty lines
      of
      insurance, reinsurance and structured risk solutions, focusing on credit
      enhancement, contingent insurance products, liability and other specialty
      insurance and reinsurance products related directly to the travel and leisure
      industries.  The Company received an Exempt Insurance License from the
      Supervisor of Insurance, Barbados, West Indies, on March 25, 2004, which
      authorizes the Company to engage in the following classes of insurance business
      globally from within Barbados: General insurance business; credit insurance;
      liability insurance; mortgage indemnity insurance; rental guarantee insurance;
      and reinsurance.




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
      for GBP20,000 ($36,096) and for the Company’s commitment to extend a working
      capital loan facility and underwriting support.






-6-




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


1.
              THE
                  COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)





The
      Company (Continued)




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 $8,783,963 for the six months ended
      October 31, 2005 and $14,958,708 for the year ended April 30, 2005, has a
      working capital deficit of $10,203,779 and $962,036 as of October 31, 2005
      and
      April 30, 2005, respectively, and has generated negative cash flows from
      operations. 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.






These
      conditions 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.




-7-




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


1.
              THE
                  COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)


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 October 31, 2005, its results
      of operations for the six and three months ended October 31, 2005 and 2004
      and
      its cash flows for the six months ended October 31, 2005 and 2004.




The
      statements of operations for the six months ended October 31, 2005 and 2004
      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.




Restatement




The
      2004
      statements of operations and cash flows were restated to correct the recording
      of 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
                $5,211,580 and $2,605,790 for the six and three months ended October
                31,
                2004, respectively.




2.
            To
                record the issuance of 799,999 shares of common stock for consulting
                services. The shares were valued at
                $1,511,998.




The
      effect of the restatement was to increase net income attributable to common
      stockholders by $3,699,582 ($.06 per share) for the six months ended October
      31,
      2004 and by $1,093,792 ($.02 per share) for the three months ended October
      31,
      2004.




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.




2005
            
            2004Warrants
                (weighted average)
            
            
            37,623,009
            
            
            –







-8-


STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


1.
              THE
                  COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)





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.




2.
            ACCOUNTS
                RECEIVABLE





At
      October 31, 2005 and April 30, 2005, one customer accounted for 100% of the
      Company’s accounts receivable.





3.
            SALES
                AND MAJOR CUSTOMERS





Net
      earned written premiums were earned in the following countries for the six
      months ended October 31, 2005:


Australia
              
              $
              2,295Canada
              
              
              34,202United
                  Kingdom
              
              
              236,454United
                  States of America
              
              
              196,500South
                  Korea
              
              
              89,391India
              
              
              228,230$
              787,072


The
      Company earned 30% of the its net earned written premiums from one
      customer




-9-





STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


4.
              MORTGAGE
                  NOTES RECEIVABLE





The
      Company has a mortgage note (“Mortgage”) with a real estate developer 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 $17,500,000 were taken under the Mortgage in the six months ended
      October 31, 2005. Interest is payable quarterly and the principal is due and
      payable on August 30, 2008.





The
      Company has another mortgage note with the same real estate developer in the
      amount of $9,500,000. Interest is payable quarterly and the principal is due
      and
      payable on April 5, 2009.





5.
            MORTGAGE
                NOTES RECEIVABLE - RELATED PARTIES





Mortgage
      notes receivable - related parties represent mortgages issued in November 2004
      to two entities that are controlled by a related party. 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
      October 31, 2005 and April 30, 2005, mortgage notes receivable amounted to
      $8,000,000. Mortgage interest receivable amounted to $1,075,007 and $542,667
      at
      July 31, 2005 and April 30, 2005, respectively. Interest income earned amounted
      to $532,340 and $0 for the six months ended October 31, 2005 and 2004,
      respectively, and $266,170 and $0 for the three months ended October 31, 2005
      and 2004, 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
      this
      time.





6.
            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 $17,500,000 were taken
      under the Mortgage in the six months ended October 31, 2005. 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.




-10-





STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


7.
              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 six months ended October 31, 2005, 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 corporate shareholders of the Company
      own
      approximately 32% of Lux. At October 31, 2005 and April 30, 2005, Lux owed
      the
      Company $359,294 and $11,490, respectively.





3. The
      Company
      has advanced monies to Reliant Warranty Home Corp. (“Reliant”). At October 31,
      2005, Reliant owed the Company $105,010.





4. The
      Company
      made cash advances to and received cash advances from a related entity. At
      October 31, 2005 and April 30, 2005, the Company was owed/(owed) $2,132,095
      and
      ($206,433), respectively.




Other
      Assets




The
      Company paid a $450,000 commission to an individual who has voting power for
      a
      corporate stockholder of the Company, relating to the Grupo Lakas S.A.
      investment (see Note 10 below). As the investment has not been consummated
      by
      October 31, 2005, such commission has been included in other assets on the
      consolidated balance sheet.




Note
      and
      Loans Payable - Related Party




Note
      and
      loans payable - related party consists of the following from a member of
      management:




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




2. Non-interest
      bearing demand loans totaling $353,933.




Interest
      Expense amounted to $10,397 and $0 for the six months ended October 31, 2005
      and
      2004, respectively, and $6,959 and $0 for the three months ended October 31,
      2005 and 2004, respectively. At October 31, 2005 and April 30, 2005, accrued
      interest amounted to $16,699 and $6,302, respectively.




-11-




STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


7.
              RELATED
                  PARTY TRANSACTIONS
                  (Continued)





Long-term
      Debt - Related Party





Long-term
      debt - related party consists of a promissory note bearing interest at prime
      in
      the amount of $1,250,000 issued to a corporation controlled by a member of
      management in July 2005. Interest is payable quarterly and principal is due
      and
      payable on or before July 14, 2008.




For
      the
      six and three months ended October 31, 2005, interest expense amounted to
      $18,229 and $15,624, respectively. At October 31, 2005, accrued interest
      amounted to $18,229.




8.
            STOCKHOLDERS’
                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, Strategy Holding and
      Strategy Insurance Limited 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 $217,995 and $435,990 for the three and six months ended July 31,
      2005, respectively.





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 $722,917 and $1,445,834 for the three
      and
      six months ended October 31, 2005, respectively, and is recorded as a deemed
      dividend.




-12-


STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


8.
              STOCKHOLDERS’
                  DEFICIENCY (CONTINUED)





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.





Preferred
      Stock - Strategy Insurance Limited (Barbados) (“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. The preferred stockholders’ agreements call for dividends
      to begin to accrue as of January 1, 2004.





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 has retained counsel in connection with this matter and it is the
      Company’s intent to commence an action against a number of defendants to recover
      the value of the notes receivable and appropriate damages.





At
      both
      October 31, 2005 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 October 31, 2005.




-13-





STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


8.
              STOCKHOLDERS’
                  DEFICIENCY (Continued)





Warrants





As
      described above, 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.
      We
      have filed a related registration statement with the Commission in January
      2005.
      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 October 2005 amounted
                to
                $2,250,000 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.




3.
            After
                the ninety day period, if the registration is not effective, the
                monthly
                penalty will be .75% and is payable in cash at month
                end.





4.
            This
                agreement expires January 31, 2006.





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 three and six months ended October
      31,
      2005, stock-based compensation amounted to $93,891 and $187,780,
      respectively.




-14-





STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


9.
              CONTINGENCIES




Litigation





HH
      Hairspray, LLC (“Hairspray”) sued us, in June 2005, 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. Strategy Finance and 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.





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.




10.
            OTHER
                MATTERS




The
      September 15, 2005 transaction described in the Form 10-QSB filed for the
      quarter ended July 31, 2005 between the Private Equity Management Group, Inc.,
      Genesis Voyager Equity Corporation and the Company was not consummated by
      October 15, 2005 by mutual agreement and the breakup fee of $2,000,000 was
      not
      payable.




-15-





STRATEGY
      INTERNATIONAL INSURANCE GROUP, INC. AND SUBSIDIARIES





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





OCTOBER
      31, 2005 AND 2004


(Continued)


10.
              OTHER
                  MATTERS (Continued)




On
      October 25, 2005, the Company and its Barbados insurance subsidiary, SIL,
      entered into a binding letter agreement (the “Letter Agreement”) with Grupo
      Lakas S.A., a Panamanian corporation (“Grupo Lakas”), pursuant to which Grupo
      Lakas agreed to make an investment through its wholly-owned Barbados subsidiary
      (the “Investor”), in shares of preferred stock (“Preferred Stock”) of our
      subsidiary, Strategy Holding Company Limited (“Strategy Holding”), having a
      value of $700 million (the “Investment”). The Letter Agreement provides that the
      Preferred Stock of Strategy Holding will pay (i) a dividend at an annual rate
      of
      3.43% (that is, $24 million) per annum, which will accrue and be payable on
      the
      last day of June and December in each year, commencing on June 30, 2006; as
      well
      as (ii) an additional dividend equal to 12% of the gross premium written by
      SIL,
      above $200 million, provided that such additional dividend will not exceed
      $60
      million in any year. The Letter Agreement further provides that the Preferred
      Stock will be perpetual and will be redeemable by Strategy Holding at its
      option, for an amount equal to $700 million plus accrued and unpaid dividends.




The
      Investor will pay the purchase price for the Preferred Stock by issuing to
      Strategy Holding a convertible promissory note (the “Note”) in the principal
      amount of $700 million. The Note will have a term of ten years, bear an annual
      interest rate of 3%, and will be collateralized by $900 million worth of
      marketable assets. The Note shall provide 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 capital
      base
      of SIL. We believe that the assets underlying the Note qualify as additional
      statutory capital for SIL under the Barbados Exempt Insurance Act, and the
      Letter 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 for a ruling confirming the same. In the event the
      Barbados Supervisor of Insurance does not provide a favorable ruling within
      ninety (90) days from the submission of the application by SIL, then either
      Grupo Lakas or we may opt out of, and unwind, any and all agreements entered
      into relating to the Investment.




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. We further agreed to pay a fee to Grupo Lakas or its designees
      in
      the amount of $2 million within ninety (90) days of receipt by SIL of the above
      ruling from the Barbados Supervisor of Insurance. 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.




-16-




**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 October 31, 2005. 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, to term “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 forw ard-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.




-17-





**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, a Barbados company, to
      which we sometimes refer in this quarterly report as SIL, 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, a Barbados company to which
      we
      sometimes refer in this quarterly report as Strategy Holding, 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;


·
              Credit
                  insurance;


·
            Liability
                insurance;


·
              Mortgage
                  indemnity insurance;


·
            Rental
                guarantee insurance; and


·
              Reinsurance.





As
      we
      disclosed in our 2005 Annual Report, following an improper discharge of the
      mortgages underlying the mortgage notes receivable in the amount of
      approximately $104 million, which was put in place in connection with the
      initial capitalization of Strategy Holding and then transferred to SIL, our
      management is now in the process of reassessing our business. Our management
      is
      taking appropriate measures to address the above development, and is, among
      other things, making efforts to recapitalize SIL. Until SIL receives additional
      capital, it will not write new insurance business on either an individual or
      program basis; however, its underwriting business should be unaffected by the
      above recent developments.





As
      disclosed in our 2005 Annual Report, on September 15, 2005, Strategy
      International, Strategy Holding and SIL entered into a binding letter of intent
      with a private equity group (collectively, the “Investor Group”) regarding the
      transactions described below (the “Transactions”).





Investor
      Group was to contribute (the “Investment”) to a subsidiary of SIL (the “SPV”)
      Investor Group’s beneficial interest in a portfolio of life settlement insurance
      policies (“Policies”) with a face value of U.S. $125,000,000 and an investment
      grade rating (the “Required Rating”), which policies are held for the benefit of
      Investor Group and shareholders in a series of trusts (the “Trusts”). The SPV
      will issue to Investor Group preferred shares (the “Preferred Shares”), which
      was to have cumulative dividends (the “Dividend Payments”) from January 16, 2006
      to January 15, 2016 of $11,250,000 per annum and thereafter of $22,500,000
      per
      annum. The Preferred Stock redeemable six and one half years after issuance,
      for
      $125,000,000 (the “Redemption Payment”), and if not redeemed by January 15,
      2016, management control of the SPV would have reverted to Investor Group.
      Strategy International would be required to procure credit default insurance
      policies (the “Insurance”) on the Policies, the Dividend Payments and the
      Redemption Payment by January 15, 2006, or Investor Group would have been able
      to exercise its rights as pledgee of the common stock of the SPV and Strategy
      International would have been required to pay Investor Group $5,812,500. All
      agreements relating to the transactions would then be deemed terminated. We
      have
      described a number of other terms and conditions of the proposed Transactions
      in
      our 2005 Annual Report. Importantly, if the Investment was not consummated
      by
      October 15, 2005, for any reason other than (1) upon Investor Group’s
      determination not to proceed, (2) Investor Group not negotiating in good faith
      and in a commercially reasonable manner, or (3) Investor Group has not satisfied
      its preconditions, Strategy International must pay Investor Group a break-up
      fee
      of $2,000,000.





The
      September 15, 2005 transaction described in the preceding paragraph
      and in the Form 10-QSB filed for the quarter ended July 31, 2005 between
      the Private Equity Management Group, Inc., Genesis Voyager Equity Corporation
      and the Company was not consummated by October 15, 2005 by mutual agreement
      and
      the breakup fee of $2,000,000 was not payable.





On
      October 25, 2005, the Company and its Barbados insurance subsidiary, SIL,
      entered into a binding letter agreement (the “Letter Agreement”) with Grupo
      Lakas S.A., a Panamanian corporation (“Grupo Lakas”), pursuant to which Grupo
      Lakas agreed to make an investment through its wholly-owned Barbados subsidiary
      (the “Investor”), in shares of preferred stock (“Preferred Stock”) of our
      subsidiary, Strategy Holding Company Limited (“Strategy Holding”), having a
      value of $700 million (the “Investment”). The Letter Agreement provides that the
      Preferred Stock of Strategy Holding will pay (i) a dividend at an annual rate
      of
      3.43% (that is, $24 million) per annum, which will accrue and be payable on
      the
      last day of June and December in each year, commencing on June 30, 2006; as
      well
      as (ii) an additional dividend equal to 12% of the gross premium written by
      SIL,
      above $200 million, provided that such additional dividend will not exceed
      $60
      million in any year. The Letter Agreement further provides that the Preferred
      Stock will be perpetual and will be redeemable by Strategy Holding at its
      option, for an amount equal to $700 million plus accrued and unpaid
      dividends.




-18-




The
      Investor will pay the purchase price for the Preferred Stock by issuing to
      Strategy Holding a convertible promissory note (the “Note”) in the principal
      amount of $700 million. The Note will have a term of ten years, bear an annual
      interest rate of 3%, and will be collateralized by $900 million worth of
      marketable assets. The Note shall provide 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 capital
      base
      of SIL. We believe that the assets underlying the Note qualify as additional
      statutory capital for SIL under the Barbados Exempt Insurance Act, and the
      Letter 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 for a ruling confirming the same. In the event the
      Barbados Supervisor of Insurance does not provide a favorable ruling within
      ninety (90) days from the submission of the application by SIL, then either
      Grupo Lakas or we may opt out of, and unwind, any and all agreements entered
      into relating to the Investment.





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. We further agreed to pay a fee to Grupo Lakas or its designees
      in
      the amount of $2 million within ninety (90) days of receipt by SIL of the above
      ruling from the Barbados Supervisor of Insurance. 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.





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 for GBP20,000
      ($36,096) through SIL and for the Company’s commitment to extend a working
      capital loan facility and underwriting support.





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.




-19-





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 to three timeshare projects: two in
      the
      United States and one in Canada.





SIL
      received its first premium income in September 2004.





**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.




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 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.




-20-





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.





*(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*





The
      Company has elected to follow Accounting Principles Board Opinion No. 25
“Accounting for Stock Issued to Employees” (“APB 25”) in accounting for options
      and warrants granted to its employees. Under APB 25, when the exercise price
      of
      the Company’s options or warrants equals or is above the market price of the
      underlying stock on the date of grant, no compensation expense is recognized.
      No
      options or warrants have been granted to employees through October 31, 2005.





Stock
      options and warrants granted to non-employees are recorded at their fair value,
      as determined in accordance with Financial Accounting Standards Board Statement
      No. 123 “Accounting for Stock Based Compensation” and Emerging Issues Task Force
      Consensus No. 96-18, and recognized over the related service period.





In
      December 2004, the FASB issued SFAS No. 123 (revised) "Share-Based Payment."
      This statement eliminates the alternative to account for share-based
      compensation transactions using APB 25 and will require that compensation
      expense be measured based on the grant-date fair value of the award and
      recognized over the requisite service period for awards that vest. The Statement
      is effective as of the beginning of the first interim or annual reporting period
      beginning after June 15, 2005. The Company does not expect the adoption of
      this
      Statement to have a material impact on its financial statements.





*(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.




-21-





*(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 October 31, 2005, its results
      of operations for the three and the six months ended October 31, 2005 and 2004
      and its cash flows for the three and the six months ended October 31, 2005
      and
      2004.





The
      statements of operations for the three and the six months ended October 31,
      2005
      and 2004 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 October 31, 2005 and 2004**





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





**Revenues**





*Net
      Earned Written Premiums*





The
      Company has completed its first full year of operations and did not generate
      any
      premiums until the quarter ended October 31, 2004. Gross premiums written in
      the
      quarter ended October 31, 2004 amounted to $753,992, those premiums were earned
      in Asia and Europe. Unearned premiums amounted to $312,621 so that net earned
      written premiums totaled $441,371. Gross premiums written in the quarter ended
      October 31, 2005 amounted to $5,704,698. Unearned premiums amounted to
      $5,098,914 so that net earned written premiums totaled $605,784. Insurance
      premiums were earned in the following countries as follows:


Australia
            
            $
            2,295Canada
            
            
            14,569United
                Kingdom
            
            
            119,495United
                States of America
            
            
            196,500South
                Korea
            
            
            44,695India
            
            
            228,230$
            605,784





*Interest
      and Investment Income*





In
      the
      quarter ended October 31, 2005, interest and investment income included income
      earned on mortgages, loans and interest on short-term investments. Interest
      on
      mortgages and loans amounted to $1,542,573. The Company invests its cash in
      short-term bank overnight notes. Investment income amounted to $279,592.





In
      2004,
      interest income only included amounts earned on mortgages.




-22-





**Claims
      and Expenses**





Claims
      and expenses totaled $5,249,185 in the quarter ended October 31, 2005 and
      $2,403,002 in the corresponding period in 2004 and included the following:





***General
      and Administrative Expenses***





In
      the
      quarter ended October 31, 2005, general and administrative expenses amounting
      to
      $3,435,661 included payroll and payroll taxes, office and occupancy expenses,
      professional, legal and accounting fees, consulting fees and services and
      $1,125,000 of liquidated damages relating to registration penalties as
      previously discussed more in details in (Note 8 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 the corresponding period in 2004, general
      and
      administrative expenses amounted to $2,273,291 and consisted primarily of
      consulting and professional fees.





***Claims
      Reserve Expense***





In
      the
      quarter ended October 31, 2005, the Company increased its reserve of 25% of
      the
      gross premiums written by $1,469,644.





**Other
      Income (Expense)**





*Interest
      Expense*





In
      the
      second fiscal quarter of 2005, interest expense amounted to $2,500,556.





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. The balance of the
      interest incurred was on various other short-term notes payable and long-term
      mortgage notes payable.





**Net
      Loss**





The
      net
      loss in the second fiscal quarter of 2005 amounted to $5,288,741 and the net
      loss in the corresponding period in 2004 was $1,310,183 for the reasons stated
      above.





**Results
      of Operations for the Six Months Ended October 31, 2005 and 2004**





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





**Revenues**





*Net
      Earned Written Premiums*





The
      Company has completed its first full year of operations and did not generate
      any
      premiums until the quarter ended October 31, 2004. Gross premiums written in
      the
      six months ended October 31, 2005 amounted to $753,992, those premiums were
      earned in Asia and Europe. Unearned premiums amounted to $312,621 so that net
      earned written premiums totaled $441,371. Gross premiums written in the six
      months ended October 31, 2005 amounted to $5,997,895. Unearned premiums amounted
      to $5,210,823 so that net earned written premiums totaled $787,072. Insurance
      premiums were earned in the following countries as follows:


Australia
            
            $
            2,295Canada
            
            
            34,202United
                Kingdom
            
            
            236,454United
                States of America
            
            
            196,500South
                Korea
            
            
            89,391India
            
            
            228,230$
            787,072






-23-





*Interest
      and Investment Income*





In
      the
      six months ended October 31, 2005, interest and investment income included
      income earned on mortgages, loans and interest on short-term investments.
      Interest on mortgages and loans amounted to $2,971,169. The Company invests
      its
      cash in short-term bank overnight notes. Investment income amounted to $492,728.





In
      2004,
      interest income only included amounts earned on mortgages.





**Claims
      and Expenses**





Claims
      and expenses totaled $8,266,287 in the six months ended October 31, 2005 and
      $2,865,844 in the corresponding period in 2004 and included the following:





***General
      and Administrative Expenses***





In
      the
      six months ended October 31, 2005, general and administrative expenses amounting
      to $6,175,723 included payroll and payroll taxes, office and occupancy expenses,
      professional, legal and accounting fees, consulting fees and services and
      $2,250,000 of liquidated damages relating to registration penalties as
      previously discussed more in details in (Note 8 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 the corresponding period in 2004, general
      and
      administrative expenses amounted to $2,736,133 and consisted primarily of
      consulting and professional fees.





***Claims
      Reserve Expense***





In
      the
      quarter ended October 31, 2005, the Company increased its reserve of 25% of
      the
      gross premiums written by $1,499,474.





**Other
      Income (Expense)**





*Interest
      Expense*





During
      the six months ended October 31, 2005, interest expense amounted to $4,822,771.





Interest
      on the Redeemable Insured Preferred Stock Series A totaled $2,500,000. 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. The balance of the
      interest incurred was on various other short-term notes payable and long-term
      mortgage notes payable.





**Net
      Loss**





The
      net
      loss during the six months ended October 31, 2005 amounted to $8,783,963 and
      the
      net loss in the corresponding period in 2004 was $894,909 for the reasons stated
      above.




-24-





**Liquidity
      and Capital Resources**





At
      October 31, 2005, we had cash of $667,136, a decrease of $2,119,825 from our
      balance at April 30, 2005 of $2,786,961. Cash used in operating activities
      amounted to $4,971,060. The primary reason for the decrease was to fund the
      net
      loss generated for the period. Cash provided from investing and financing
      activities amounted to $2,955,758. The primary reason for the increase was
      a
      loan we received 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. We also received
      another loan from another related party in the amount of $453,933 to pay other
      obligations.





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. As shown in our financial statements included
      as
      part of this quarterly report, for the six months ended October 31, 2005, we
      have incurred a net loss of $8,783,963 and had a working capital deficit of
      $10,203,779 as of October 31, 2005 and have generated negative cash flows from
      operations. Our ability to continue as a going concern is contingent upon our
      ability to effect the contemplated capitalization of SIL, our insurance
      subsidiary, to general sufficient revenues, and to obtain debt and/or equity
      financing to fund our operations and to follow through with our projected
      business plan. Our management has plans to seek additional capital through
      debt
      and/or equity financing, however, no assurance can be given as to the timing
      or
      our ability to receive such financing.





The
      Company has entered into a Letter Agreement whereby the Company will receive
      a
      Convertible Note Receivable in the amount of $700,000,000 and issue Preferred
      Stock equal to that amount. See the discussion of the transaction above within
      the Overview section. The increase in stockholders' equity will be based on
      the
      results of an independent valuation report, currently in progress.





Our
      operating subsidiary, SIL, has been the source of business income relating
      to
      insurance operations. At present, until SIL has completed the above mentioned
      transaction and received regulatory approval for such, 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 six months period ended
      October 31, 2005.





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 $3,046,732,
      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.




The
      Company has restricted cash amounting to $32.3 million at October 31,
      2005.  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 7 of the financial statements).




We
      are
      holding mortgage notes receivable from three companies totaling $46.8 million.
      Such mortgages provided capital in connection with such companies’ real estate
      development activities. Long-term debt totaling $50 million consists of
      mortgages notes issued to facilitate our investment in the mortgage notes
      receivable issued.




-25-





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 need
      to
      raise additional capital for SIL, it will not be quoting insurance until such
      additional capital is received as contemplated. 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.





**(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 period covered by this quarterly report (the “Evaluation Date”), 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 Evaluation Date, 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 believe these weaknesses are
      due to a material weakness in our internal control over financial reporting,
      which is more fully described under subsection (b) below.





**(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 second 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 October 31,
      2004, we have 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.




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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.





Change
      in
      internal controls over Financial Reporting. During the quarter ended October
      31,
      2005, 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.





**Lack
      of Adequate Accounting Staff**





During
      the quarterly period ended October 31, 2004, 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 October 31, 2004. 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.





**PART
      II - OTHER INFORMATION**





**ITEM
      1 - LEGAL PROCEEDINGS**





Our
      2005
      Annual Report contains a description of certain lawsuits in which we are
      currently involved. Other than such lawsuits, 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
      2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





Not
      applicable.





**ITEM
      3 - DEFAULTS UPON SENIOR SECURITIES**





Not
      applicable.






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**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





Not
      applicable.





**ITEM
      5 - OTHER INFORMATION**





(a)
            Not
                applicable.





(b)
            Furnish
                the information required by Item 401(g) of Regulation S-B.





Not
      applicable.




**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.






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**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: December
              15, 2005
            By:
            /s/ Steven
              StonhillName:   
                Steven Stonhill
              Title:     
                Chairman of the Board and Chief Executive
                Officer


Date: December
                  15, 2005
                By:
                /s/ Louis
                  LettieriName:   
                    Louis Lettieri
                  Title:     
                    Chief Financial
                    Officer
 -29-





**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.







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