---

UNITED STATES**SECURITIES AND EXCHANGE COMMISSION**
  Washington, D.C. 20549

FORM 10-QSB

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

For the Quarterly Period ended September 30,
2006

Commission File No. 033-28188

**STRATEGIC INTERNET INVESTMENTS,
INCORPORATED**Small Business Issuer:

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

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months,
and (2) has been subject to such filing requirements for the past 90 days. Yes
(X)No (   )

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). 
  Yes (X)No (   )

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

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

---

PART I  FINANCIAL INFORMATION

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

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

1. Financial Statements

1

---



STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2006

(Stated in U.S. Dollars)

(Unaudited)



F-1

---

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

|                                                                  |   | September 30, |   |   | December 31, |  
|----------------------------------------------------------------- | - | ------------- | - | - | ------------ | -
|                                                                  |   | 2006          |   |   | 2005         |  
|                                                                  |   |               |   |   |              |  
|ASSETS                                                            |   |               |   |   |              |  
|                                                                  |   |               |   |   |              |  
|Current                                                           |   |               |   |   |              |  
|Cash                                                              | $ | 334           |   | $ | 581          |  
|Prepaid expenses                                                  |   | -             |   |   | 141,667      |  
|                                                                  |   |               |   |   |              |  
|                                                                  |   | 334           |   |   | 142,248      |  
|                                                                  |   |               |   |   |              |  
|Equipment                                                         |   | -             |   |   | 1,601        |  
|Deferred investment costs  Notes 4, 6 and 8                      |   | 1             |   |   | 1            |  
|                                                                  |   |               |   |   |              |  
|                                                                  | $ | 335           |   | $ | 143,850      |  
|                                                                  |   |               |   |   |              |  
|                                                                  |   |               |   |   |              |  
|LIABILITIES                                                       |   |               |   |   |              |  
|                                                                  |   |               |   |   |              |  
|Current                                                           |   |               |   |   |              |  
|Accounts payable  Note
      8                                   | $ | 101,870       |   | $ | 108,022      |  
|Due to related parties  Note 8                                   |   | 68,896        |   |   | 50,991       |  
|Loans payable  Note 5                                            |   | 304,721       |   |   | 199,304      |  
|                                                                  |   |               |   |   |              |  
|                                                                  |   | 475,487       |   |   | 358,317      |  
|Beneficial
      conversion feature on convertible loans  Note 5 |   | 332,496       |   |   | -            |  
|                                                                  |   |               |   |   |              |  
|                                                                  |   | 807,983       |   |   | 358,317      |  
|                                                                  |   |               |   |   |              |  
|STOCKHOLDERS DEFICIENCY                                          |   |               |   |   |              |  
|                                                                  |   |               |   |   |              |  
|Capital Stock  Notes 5, 6 and 9                                  |   |               |   |   |              |  
|Class A Convertible
      Preferred stock, $0.001 par value       |   |               |   |   |              |  
|10,000,000
      authorized, 198,000 outstanding                  |   | 198           |   |   | 198          |  
|Class B Preferred
      stock, $0.001 par value                   |   |               |   |   |              |  
|10,000,000
      authorized, none outstanding                     |   |               |   |   |              |  
|Common stock, $0.001
      par value                              |   |               |   |   |              |  
|100,000,000
      authorized                                      |   |               |   |   |              |  
|25,660,326 outstanding                                            |   | 25,659        |   |   | 25,659       |  
|Additional paid-in capital                                        |   | 7,720,356     |   |   | 7,720,356    |  
|Deficit accumulated during the development stage                  |   | (8,553,861    | ) |   | (7,960,680   | )
|                                                                  |   |               |   |   |              |  
|                                                                  |   | (807,648      | ) |   | (214,467     | )
|                                                                  |   |               |   |   |              |  
|                                                                  | $ | 335           |   | $ | 143,850      |  

SEE ACCOMPANYING NOTES

F-2

---

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

Cumulativefrom February28, 1989 (DateThree months ended
    
    
      Nine months ended
    
    
      of Inception) toSeptember 30,
    
    
      September 30,
    
    
      September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
      2006General and Administrative
      ExpensesAccounting and audit fees
    $
    10,363
    
    $
    10,423
    
    $
    28,405
    
    $
    42,664
    
    $
      195,752Amortization
    
    -
    
    
    171
    
    
    120
    
    
    514
    
    
      3,616Automobile
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      565Business
      promotion
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      213Communications
    
    641
    
    
    7,298
    
    
    2,858
    
    
    21,947
    
    
      98,998Consulting fees  Note 8
    
    48,342
    
    
    27,313
    
    
    161,396
    
    
    140,438
    
    
      2,426,268Interest  Note 8
    
    6,586
    
    
    3,736
    
    
    15,986
    
    
    17,084
    
    
      87,951Investor
      relations
    
    -
    
    
    285
    
    
    -
    
    
    12,402
    
    
      91,385Legal fees
    
    -
    
    
    354
    
    
    5,272
    
    
    20,754
    
    
      154,839Management fees  Note 8
    
    15,900
    
    
    17,992
    
    
    26,400
    
    
    40,441
    
    
      179,772Office and general  Note
      8
    
    188
    
    
    2,081
    
    
    1,014
    
    
    3,867
    
    
      138,365Regulatory fees
    
    410
    
    
    494
    
    
    2,551
    
    
    1,787
    
    
      21,231Rent  Note 8
    
    5,340
    
    
    4,980
    
    
    15,878
    
    
    14,695
    
    
      90,455Transfer
      agent fees
    
    125
    
    
    877
    
    
    990
    
    
    4,272
    
    
      38,972Travel
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      103,478Non-cash compensation charge
    
    -
    
    
    6,300
    
    
    -
    
    
    25,700
    
    
      455,735Loss before the following:
    
    (87,895
    )
    
    (82,304
    )
    
    (260,870
    )
    
    (346,565
    )
    
      (4,087,595
    )Beneficial conversion feature  Note 5
    
    (332,496
    )
    
    -
    
    
    (332,496
    )
    
    -
    
    
      (332,496
    )Gain (loss) on foreign
      exchange
    
    38
    
    
    (4,474
    )
    
    (8,103
    )
    
    (4,648
    )
    
      (16,442
    )Gain on
      settlement of debt
    
    -
    
    
    -
    
    
    9,769
    
    
    -
    
    
      25,233Loss on disposal of
      equipment
    
    -
    
    
    -
    
    
    (1,481
    )
    
    -
    
    
      (1,481
    )Termination fee
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      (792,000
    )Unauthorized distribution
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      (69,116
    )Write-down of advances torelated party
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      (606,337
    )Write-down of deferred investmentcosts
       Note 4
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      (34,209
    )Net
      loss for the period
    $
    (420,353
    )
    $
    (86,778
    )
    $
    (593,181
    )
    $
    (351,213
    )
    $
      (5,914,443
    )Basic loss per share
    $
    (0.02
    )
    $
    (0.00
    )
    $
    (0.02
    )
    $
    (0.01
    )Weighted average number of commonshares outstanding
    
    25,660,326
    
    
    24,860,326
    
    
    25,660,326
    
    
    23,613,756


SEE ACCOMPANYING NOTES

F-3

---

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

|                                                         |   |                   |   |   |                        |   |   | Cumulative from   |  
|-------------------------------------------------------- | - | ----------------- | - | - | ---------------------- | - | - | ----------------- | -
|                                                         |   |                   |   |   |                        |   |   | February 28, 1989 |  
|                                                         |   | Nine months ended |   |   | (Date of Inception) to |  
|                                                         |   | September 30,     |   |   | September 30,          |  
|                                                         |   | 2006              |   |   | 2005                   |   |   | 2006              |  
|Operating Activities                                     |   |                   |   |   |                        |   |   |                   |  
|Net loss for the
      period                            | $ | (593,181          | ) | $ | (351,213               | ) | $ | (5,914,443        | )
|Adjustments to reconcile net
      loss to net cash used |   |                   |   |   |                        |   |   |                   |  
|in operating
      activities:                           |   |                   |   |   |                        |   |   |                   |  
|Amortization                                             |   | 120               |   |   | 514                    |   |   | 3,616             |  
|Beneficial conversion feature                            |   | 332,496           |   |   | -                      |   |   | 332,496           |  
|Communications                                           |   | -                 |   |   | 12,000                 |   |   | 28,000            |  
|Consulting fees                                          |   | 141,667           |   |   | 140,438                |   |   | 2,286,554         |  
|Gain on settlement of debt                               |   | (9,769            | ) |   | -                      |   |   | (25,233           | )
|Legal fees                                               |   | -                 |   |   | 8,617                  |   |   | 25,000            |  
|Management fees                                          |   | -                 |   |   | -                      |   |   | 7,000             |  
|Write-down of advances to related party                  |   | -                 |   |   | -                      |   |   | 606,337           |  
|Write-down of deferred investment costs                  |   | -                 |   |   | -                      |   |   | 34,209            |  
|Loss on disposal of equipment                            |   | 1,481             |   |   | -                      |   |   | 1,481             |  
|Non-cash compensation charge                             |   | -                 |   |   | 25,700                 |   |   | 455,735           |  
|Termination fees                                         |   | -                 |   |   | -                      |   |   | 792,000           |  
|Changes in non-cash items:                               |   |                   |   |   |                        |   |   |                   |  
|Prepaid expenses                                         |   | -                 |   |   | 2,780                  |   |   | -                 |  
|Accounts
      payable                                   |   | (6,152            | ) |   | 36,690                 |   |   | 255,340           |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Net
      cash used in operating activities              |   | (133,338          | ) |   | (124,474               | ) |   | (1,111,908        | )
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Investing Activities                                     |   |                   |   |   |                        |   |   |                   |  
|Organization
      costs                                 |   | -                 |   |   | -                      |   |   | (750              | )
|Acquisition of capital assets                            |   | -                 |   |   | -                      |   |   | (4,347            | )
|Deferred
      investment costs                          |   | -                 |   |   | -                      |   |   | (34,210           | )
|Advances to related party                                |   | -                 |   |   | -                      |   |   | (606,337          | )
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Net
      cash used in investing activities              |   | -                 |   |   | -                      |   |   | (645,644          | )
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Financing Activities                                     |   |                   |   |   |                        |   |   |                   |  
|Increase in due
      to related parties, net            |   | 17,905            |   |   | 17,125                 |   |   | 68,896            |  
|Loans payable                                            |   | 115,186           |   |   | 8,973                  |   |   | 658,187           |  
|Proceeds from
      issuance of common stock             |   | -                 |   |   | 76,153                 |   |   | 1,032,631         |  
|Payment of offering costs                                |   | -                 |   |   | -                      |   |   | (27,270           | )
|Additional paid-in capital                               |   | -                 |   |   | -                      |   |   | 25,442            |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Net cash provided by financing activities                |   | 133,091           |   |   | 102,251                |   |   | 1,757,886         |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Increase (decrease) in cash
      during the period      |   | (247              | ) |   | (22,223                | ) |   | 334               |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Cash, beginning of the period                            |   | 581               |   |   | 22,987                 |   |   | -                 |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Cash, end of the period                                  | $ | 334               |   | $ | 764                    |   | $ | 334               |  
|                                                         |   |                   |   |   |                        |   |   |                   |  
|Supplementary disclosure
      of cash flows:            |   |                   |   |   |                        |   |   |                   |  
|Cash paid for Interest                                   | $ | -                 |   | $ | 10,403                 |   | $ | 17,054            |  
|Non-cash Transactions  Note
      7                     |   |                   |   |   |                        |   |   |                   |  

SEE ACCOMPANYING NOTES

F-4

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development
Stage Company) INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
For the period from February 28, 1989 (Date of Inception) to September 30,
2006 (Stated in U.S. Dollars) (Unaudited)

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

Contd

SEE ACCOMPANYING NOTES

F-5

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development
Stage Company) INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
For the period from February 28, 1989 (Date of Inception) to September 30,
2006 (Stated in U.S. Dollars) (Unaudited)

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

Contd

SEE ACCOMPANYING NOTES

F-6

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development
Stage Company) INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
For the period from February 28, 1989 (Date of Inception) to September 30,
2006 (Stated in U.S. Dollars) (Unaudited)

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

Contd

SEE ACCOMPANYING NOTES

F-7

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development
Stage Company) INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
For the period from February 28, 1989 (Date of Inception) to September 30,
2006 (Stated in U.S. Dollars) (Unaudited)

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

Contd

SEE ACCOMPANYING NOTES

F-8

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development
Stage Company) INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIENCY
For the period from February 28, 1989 (Date of Inception) to September 30,
2006 (Stated in U.S. Dollars) (Unaudited)

|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   | Deficit     |   |   |          |  
|------------------------------------------------------ |  | --------------- |  | - | ------------ |  |  | ---------- |  | - | ----------- |  | - | ---------- |  | - | ----------- | - | - | -------- | -
|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   | Accumulated |   |   |          |  
|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   | Additional |  |   | During the  |   |   |          |  
|                                                       |  | Preferred Stock |  |   | Common Stock |  |  | Paid-In    |  |   | Development |  |   |            | 
|                                                       |  | Shares          |  |   | Par Value    |  |  | Shares     |  |   | Par Value   |  |   | Capital    |  |   | Stage       |   |   | Total    |  
|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   |             |   |   |          |  
|Balance, December 31, 2004                             |  | 198,000         |  | $ | 198          |  |  | 18,972,675 |  | $ | 18,971      |  | $ | 4,348,913  |  | $ | (4,803,992  | ) | $ | (435,910 | )
|Non-cash compensation charge                           |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | 25,700     |  |   | -           |   |   | 25,700   |  
|Issue of stock for cash pursuant
      to the exercise |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   |             |   |   |          |  
|of share purchase
      warrants      at $0.07        |  | -               |  |   | -            |  |  | 75,820     |  |   | 76          |  |   | 5,232      |  |   | -           |   |   | 5,308    |  
| at $0.10                                             |  | -               |  |   | -            |  |  | 357,760    |  |   | 357         |  |   | 35,418     |  |   | -           |   |   | 35,775   |  
| at
      $0.11                                       |  | -               |  |   | -            |  |  | 299,724    |  |   | 300         |  |   | 31,270     |  |   | -           |   |   | 31,570   |  
| at $0.21                                             |  | -               |  |   | -            |  |  | 16,803     |  |   | 17          |  |   | 3,483      |  |   | -           |   |   | 3,500    |  
|Issue of stock for debt           
       at $0.39    |  | -               |  |   | -            |  |  | 635,901    |  |   | 636         |  |   | 249,524    |  |   | -           |   |   | 250,160  |  
|Issuance of stock for
      services  at $0.25        |  | -               |  |   | -            |  |  | 950,000    |  |   | 950         |  |   | 236,550    |  |   | -           |   |   | 237,500  |  
| at $0.36                                             |  | -               |  |   | -            |  |  | 100,000    |  |   | 100         |  |   | 35,900     |  |   | -           |   |   | 36,000   |  
| at $0.50                                             |  | -               |  |   | -            |  |  | 121,000    |  |   | 121         |  |   | 60,379     |  |   | -           |   |   | 60,500   |  
| at $0.54                                             |  | -               |  |   | -            |  |  | 20,000     |  |   | 20          |  |   | 10,680     |  |   | -           |   |   | 10,700   |  
| at $0.84                                             |  | -               |  |   | -            |  |  | 50,000     |  |   | 50          |  |   | 41,950     |  |   | -           |   |   | 42,000   |  
|Issuance of stock dividend     
       at $0.65       |  | -               |  |   | -            |  |  | 4,060,643  |  |   | 4,061       |  |   | 2,635,357  |  |   | (2,639,418  | ) |   | -        |  
|Net loss                                               |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | -          |  |   | (517,270    | ) |   | (517,270 | )
|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   |             |   |   |          |  
|Balance, December 31, 2005                             |  | 198,000         |  |   | 198          |  |  | 25,660,326 |  |   | 25,659      |  |   | 7,720,356  |  |   | (7,960,680  | ) |   | (214,467 | )
|Net loss                                               |  | -               |  |   | -            |  |  | -          |  |   | -           |  |   | -          |  |   | (593,181    | ) |   | (593,181 | )
|                                                       |  |                 |  |   |              |  |  |            |  |   |             |  |   |            |  |   |             |   |   |          |  
|Balance, September 30, 2006                            |  | 198,000         |  | $ | 198          |  |  | 25,660,326 |  | $ | 25,659      |  | $ | 7,720,356  |  | $ | (8,553,861  | ) | $ | (807,648 | )

SEE ACCOMPANYING NOTES

F-9

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|1. | Interim Reporting and Continuance of
    Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company is in the development stage and is devoting
      its efforts to developing The Dream Island Resort project in Manama,
      Bahrain. The Dream Island Resort project will be an integrated resort,
      entertainment, hotel and real estate facility to be built on a 41 acre
      man-made island off the north eastern coast of Manama, Bahrain (Note
      6).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The accompanying unaudited interim financial statements
      have been prepared by Strategic Internet Investments, Incorporated (the
      Company) pursuant to the rules and regulations of the United States
      Securities and Exchange Commission. Certain information and disclosures
      normally included in annual financial statements prepared in accordance
      with accounting principles generally accepted in the United States of
      America have been condensed or omitted pursuant to such rules and
      regulations. In the opinion of management, all adjustments and disclosures
      necessary for a fair presentation of these financial statements have been
      included. Such adjustments consist of normal recurring adjustments. These
      interim financial statements should be read in conjunction with the annual
      audited financial statements of the Company for the fiscal year ended
      December 31, 2005, as filed with the United States Securities and Exchange
      Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The results of operations for the nine months ended
      September 30, 2006 are not indicative of the results that may be expected
      for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These financial statements have been prepared in
      accordance with generally accepted accounting principles applicable to a
      going concern, which assumes that the Company will be able to meet its
      obligations and continue its operations for its next twelve months.
      Realization values may be substantially different from carrying values as
      shown and these financial statements do not give effect to adjustments
      that would be necessary to the carrying values and classification of
      assets and liabilities should the Company be unable to continue as a going
      concern. At September 30, 2006, the Company had not yet achieved
      profitable operations, has accumulated losses of $8,553,861 since its
      inception, has a working capital deficiency of $475,153 and expects to
      incur further losses in the development of its business, all of which
      casts substantial doubt about the Companys ability to continue as a going
      concern. The Companys ability to continue as a going concern is dependent
      upon its ability to generate future profitable operations and/or to obtain
      the necessary financing to meet its obligations and repay its liabilities
      arising from normal business operations when they come due. Management has
      no formal plan in place to address this concern but considers that the
      Company will be able to obtain additional funds by equity financing and/or
      related party advances, however there is no assurance of additional
      funding being available. The Company has historically satisfied its
      capital needs primarily by issuing equity securities. Management plans to
      continue to provide for its capital needs during the year ended December
      31, 2006 by issuing equity securities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | Additional Significant Accounting Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Beneficial Conversion Feature                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | When the Company incurs convertible debt that provides
      for a rate of conversion that is below market value, it is known as a
      beneficial conversion feature (BCF). Pursuant to SFAS No. 133,
      Accounting for Derivative Instruments and Hedging Activities, the
      conversion feature of the note is separately accounted for as a liability
      based on its fair value because the economic characteristics and risks of
      the conversion feature are not clearly and closely related to the economic
      characteristics of the host debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-10

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|3. | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   | These interim consolidated financial statements included
      the accounts of the Company and its wholly- owned subsidiaries Strategic
      Internet Investment Canada Inc. and 3851630 Canada Inc. Both of these
      subsidiary companies are dormant and were incorporated by the Company in
      March 2001. All significant inter-company transactions were
    eliminated.
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|4. | Deferred Investment Costs Note 6                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|   | Deferred investment costs consist of consultants fees
      and payments to reimburse Star Leisure and Entertainment Inc. with respect
      to the acquisition of Gulf Star World Development W.L.L., net of a write-
      down to a nominal value of $1.00.                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                     
|5. | Loans Payable                                                                                                                                                                                                                                                                                                                                                                       

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | September 30, |  |   | December 31, | 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- |  | - | ------------ | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | 2006          |  |   | 2005         | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |  |   |              | 
| | a) | Loan payable to a
      company controlled by a director of the Company including accrued
      interest of $1,311(December 31, 2005: $406) The loan is unsecured,
      bearing interest at 12% per annum and is repayable on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $ | 8,112         |  | $ | 7,426        | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |  |   |              | 
| | b) | Loan payable to a
      shareholder including accrued interest of $3,734(December 31, 2005:
      $3,376) was forgiven by the lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | -             |  |   | 9,411        | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |  |   |              | 
| | c) | Loans payable to
      companies controlled by directors of the Company. The loans are
      unsecured, non-interest bearing, repayable upon demand, in Canadian
      funds in the amount of Cdn$19,520.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 17,568        |  |   | 44,638       | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |  |   |              | 
| | d) | Loan payable to a
      company controlled by a director of the Company including accrued
      interest of $998(December 31, 2005: $732) The loan is unsecured,
      bearing interest at 10% per annum and is repayable upon demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | -             |  |   | 9,522        | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               |  |   |              | 
| | e) | Loans payable to
      a company controlled by a director of the Company, including accrued
      interest of $2,626(December 31, 2005: $Nil), pursuant to Convertible
      Loan Agreements. Interest is calculated at 10% per annum and is
      repayable upon demand. The lender may at anytime prior to maturity
      convert the principal sum plus accrued interest into units of the
      Company. Each unit will consist of one common share plus one common
      share purchase warrant. The principal sum of $86,366 may be
      converted into 772,858 units. Conversion of these loans and
      associated warrants to equity will be at an average price of 0.11
      per share. An amount of $233,683 was recognized during the three
      months ended September 30, 2006 as the fair value of the beneficial
      conversion feature of these loans. |   | 88,993        |  |   | -            | 

/contd

F-11

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|5. | Loans Payable  (contd)
|-- | ------------------------

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | September 30, |  |   | December 31, | 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- |  | - | ------------ | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2006          |  |   | 2005         | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |  |   |              | 
| | f) | Loans payable to
      a company controlled by a director of the Company, including accrued
      interest of $37,142 (December 31, 2005: $25,100), pursuant to
      Convertible Loan Agreements. Interest is calculated at 10% per annum
      and is repayable upon demand. Prior to expiry, the lender may at
      anytime convert the principal sum plus accrued interest into units of
      the Company. Each unit will consist of one common share plus one
      common share purchase warrant. The principal sum of $49,700 may be
      converted by the lender at anytime into 416,248 units. Each unit
      will consist of one common share plus one common share purchase
      warrant. Conversion of this loan and associated warrants to equity
      will be at an average price of $0.12 per share. The lenders rights to
      convert the remaining balance of these loans into units of the Company
      have expired. An amount of $98,813 was recognized during the three
      months ended September 30, 2006 as the fair value of the beneficial
      conversion feature of these loans. |   | 190,048       |  |   | 128,307      | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |  |   |              | 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $ | 304,721       |  | $ | 199,304      | 

|6 | Capital Stock Notes 5 and 9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | Class A Convertible Preferred Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | The Class A convertible preferred shares have a par value
      of $0.001 and are convertible to common shares at $4.00 per share during
      the first 180 days following issuance, and thereafter at the average of
      twenty consecutive days closing prices, but shall not be less than $1.50
      per share or greater than $6.00 per share. The Company has the right to
      redeem its Class A convertible preferred stock at any time by paying to
      the holders thereof the sum of $4 per share.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | The Companys board of directors approved a stock option
      plan. Under the plan directors, employees and consultants may be granted
      options to purchase common stock of the Company at a price of not less
      than 100% of the fair market value of the stock. The total number of
      options granted must not exceed 15% of the outstanding common stock of the
      Company. The plan expires on July 1, 2017.                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  | The Company granted share purchase options to directors,
      employees, and consultants of the Company at the closing price of the
      Companys common stock on the date of the grants. The options have been
      granted with a term of 5 years. The stock options are exercisable at 20%
      on the date of grant, and then 20% every three months thereafter, such
      that they are fully exercisable after a period of one year from the date
      of grant.                                       

F-12

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|6 | Capital Stock Notes 5 and 9  (contd)
      Commitments  (contd)
      Stock-based Compensation  (contd)
|- | --------------------------------------------------------------------------------------------------------------
|  |                                                                                                               
|  | As at September 30, 2006, share purchase options
      outstanding are as follows:                            

| |                                                 |                    |           | Weighted      
| | ----------------------------------------------- | ------------------ | --------- | --------------
| |                                                 |                    |           | Average       
| |                                                 | Expiry             | Shares    | Exercise Price
| |                                                 |                    |           |               
| |                                                 | September 5, 2008  | 1,752,000 | $0.21         
| |                                                 | February 5, 2009   | 120,000   | $0.29         
| |                                                 | April 15, 2009     | 30,000    | $0.53         
| |                                                 | July 8,
      2009 | 108,000   | $0.33         
| |                                                 |                    |           |               
| | Options
      outstanding at September 30, 2006 |                    | 2,010,000 | $0.22         

At September 30, 2006, all of the
outstanding share purchase options were exercisable.

As no options were granted during the
period ending September 30, 2006, the total non-cash compensation charge
determined is NIL (2005 - NIL). The stock options have a graded vesting
schedule, the total compensation cost recognized is as follows:

Cumulative fromFebruary 28,1989(Date ofThree months ended
      
      
      Nine months ended
      
      
      Inception) toSeptember 30,
      
      
      September 30,
      
      
      September 30,2006
      
      
      2005
      
      
      2006
      
      
      2005
      
      
      2006Total non-cash compensationcharge vested
      
      -
      
      $
      6,300
      
      
      -
      
      $
      31,300
      
      $
      955,657Employees non-cashcompensation charge
      
      -
      
      
      -
      
      
      -
      
      
      (5,600
      )
      
      (499,922
      )Consultants non-cash compensationcharge recognized
      
      -
      
      $
      6,300
      
      
      -
      
      $
      25,700
      
      $
      455,735


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

F-13

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|6 | Capital Stock Notes 5 and 9  (contd)
      Commitments  (contd)
      Stock-based Compensation 
(contd)
|- | --------------------------------------------------------------------------------------------------------------

| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   | Cumulative     |  
| | -------------------- | ----------- |  | - | ------------------ | - | - | ----------------- | - | - | ---------------- | - | - | -------- | - | - | -------------- | -
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   | from February  |  
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   | 28, 1989 (Date |  
| |                      |             |  |   | Three months ended |   |   | Nine months ended |   |   | of Inception) to |  
| |                      |             |  |   | September 30,      |   |   | September 30,     |   |   | September 30,    |  
| |                      |             |  |   | 2006               |   |   | 2005              |   |   | 2006             |   |   | 2005     |   |   | 2006           |  
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   |                |  
| | Net loss             | As reported |  | $ | (420,353           | ) | $ | (86,778           | ) | $ | (593,181         | ) | $ | (351,213 | ) | $ | (5,581,947     | )
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   |                |  
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   |                |  
| |                      | Pro-forma   |  | $ | (420,353           | ) | $ | (86,778           | ) | $ | (593,181         | ) | $ | (356,813 | ) | $ | (6,081,869     | )
| |                      |             |  |   |                    |   |   |                   |   |   |                  |   |   |          |   |   |                |  
| | Basic loss per share | As reported |  | $ | (0.02              | ) | $ | (0.00             | ) | $ | (0.02            | ) | $ | (0.01    | ) |   | -              |  
| |                      | Pro-forma   |  | $ | (0.02              | ) | $ | (0.00             | ) | $ | (0.02            | ) | $ | (0.02    | ) |   | -              |  

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

Share Purchase Warrants

At September 30, 2006, the following
share purchase warrants were outstanding:

Number of Warrants
    Exercise Price
    Expiry Date21,510
    $0.44
    October 1, 200696,047
    $0.24
    January 31, 2007117,557


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

Acquisition of Gulf Star World
Development W.L.L.

By a letter of agreement dated July 11,
2002, amended October 10, 2002, May 10, 2003, September 30, 2003, June 30, 2004,
July 11, 2005 and August 9, 2006, the Company agreed to purchase 80% of the
outstanding shares of Gulf Star World Development W.L.L. (Gulf Star), a
Bahrain corporation, from Star Leisure & Entertainment Inc. (Star
Leisure). Star Leisure is controlled by a director of the Company and is based
in British Columbia, Canada. Gulf Star is the 100% owner and developer of the
residential and tourist project known as the Dream Island Resort, located on the
north coast of Bahrain at Manama City.

F-14

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|6. | Capital Stock Notes 5 and 9  (contd)                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                 
|   | Commitments  (contd)                                                                                                                                                          
|   |                                                                                                                                                                                 
|   | Acquisition of Gulf Star World Development W.L.L. 
      (contd)                                                                                                              
|   |                                                                                                                                                                                 
|   | To acquire 80% of Gulf Star, the Company must issue five
      million common shares at $0.125 per share. The shares are to be issued
      over a three-year period as follows:

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

In addition, the Company shall make
cash payments to Star Leisure totaling $100,000 to cover a portion of hard costs
accumulated by Star Leisure in progressing the Dream Island Project. During the
year ended December 31, 2003, the Company paid $34,210 as partial payment toward
the $100,000 payment. The remaining balance of $65,790 is due on or before
August 31, 2007. The Company has also agreed to reimburse Star Leisure and Jzala
Investment Group (20% shareholder of Gulf Star) for costs to be verified that
they may have incurred upon the project financing being fully secured and having
released in sufficient amounts to commence the main construction.

On August 9, 2002, the Company entered
into an assignment agreement, whereby the Company was assigned all rights and
obligations under a Dredging and Reclamation Contract entered into by Star
Leisure pertaining to the construction of The Dream Island Resort project. Under
the terms of the Dredging and Reclamation contract, the Company issued 1,268,750
Class A Convertible Preferred shares, with a deemed value of $5,075,000, as full
payment due under this contract. These shares were issued in escrow, and will be
released in stages as the dredging contract progresses. At September 30, 2006,
no value has been recorded for the shares, as although work has commenced on the
Dream Island Project, there has not yet been sufficient progress to warrant a
release of escrowed shares. An agents fee of 0.5% of the value of the shares
released will be payable.

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

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

F-15

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

|6. | Capital Stock Notes 5 and 9  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Commitments  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Acquisition of Gulf Star World Development W.L.L. 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On March 13, 2006, the Ministry of Finance, Bahrain
      (MOFB) notified Gulf Star that due to a lack of progress and failure to
      advance the project in a timely basis, the MOFB intends to seek
      termination of the lease contract for the Dream Island site and have Gulf
      Star pay all associated expenses incurred for the enforcement thereof. In
      addition, the MOFB has indicated that it reserves the right to claim
      damages towards all losses it has incurred and all gains denied. The
      Company, Gulf Star, and Star Leisure intend to oppose the action by the
      MOFB. However, due to the uncertainty of the future viability of the Dream
      Island project, management has written-down the associated deferred
      investment costs to a nominal value of $1.00.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|7. | Non-Cash Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Investing and financing activities that do not have a
      direct impact on cash flows are excluded from the statement of cash flows.
      The Company issued common shares for settlement of debts, convertible
      loans, and for services provided to the Company during the following
      years:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                              | Number
      of |  | Number
      of |   | Weighted        |  |   |           |  
| | -------------------------------------------- | --------------- |  | --------------- | - | --------------- |  | - | --------- | -
| |                                              | Preferred       |  | Common          |   | Average Price   |  |   |           |  
| |                                              | Shares          |  | Shares          |   | Per
      Share |  |   | Total     |  
| |                                              |                 |  |                 |   |                 |  |   |           |  
| | 1995 Consulting fee                          | -               |  | 50,000          |   | $0.03           |  | $ | 1,500     |  
| | 1998 Management fee                          | -               |  | 7,000,000       |   | $0.001          |  |   | 7,000     |  
| | 1998 Consulting fee                          | -               |  | 620,000         |   | $0.01           |  |   | 6,200     |  
| | 2000 Finders fee                             | -               |  | 50,000          |   | $0.001          |  |   | 50        |  
| | 2001 Consulting fee                          | -               |  | 708,406         |   | $2.07           |  |   | 1,468,254 |  
| | 2002 Deferred investment cost                | -               |  | 1,300,000       |   | $0.05           |  |   | 65,000    |  
| | 2002 Consulting fee                          | -               |  | 684,143         |   | $0.19           |  |   | 131,400   |  
| | 2002 Debt settlement                         | -               |  | 680,886         |   | $0.20           |  |   | 138,006   |  
| | 2003 Consulting fee                          | -               |  | 1,450,000       |   | $0.14           |  |   | 203,000   |  
| | 2003 Termination fee                         | 198,000         |  | -               |   | $4.00           |  |   | 792,000   |  
| | 2004 Loan conversion                         | -               |  | 825,364         |   | $0.06           |  |   | 48,537    |  
| | 2004 Loan settlement                         | -               |  | 613,000         |   | $0.07           |  |   | 45,000    |  
| | 2004 Consulting fee                          | -               |  | 360,000         |   | $0.40           |  |   | 142,500   |  
| | 2004 Deferred investment cost (cancellation) | -               |  | (1,300,000      | ) | $0.05           |  |   | (65,000   | )
| | 2005 Communications                          | -               |  | 56,000          |   | $0.50           |  |   | 28,000    |  
| | 2005 Consulting fees                         | -               |  | 1,135,000       |   | $0.29           |  |   | 333,700   |  
| | 2005 Legal fees                              | -               |  | 50,000          |   | $0.50           |  |   | 25,000    |  
| | 2005 Loan conversion                         | -               |  | 635,901         |   | $0.39           |  |   | 250,160   |  
| | 2005 Stock dividend                          | -               |  | 4,120,643       |   | $0.64           |  |   | 2,678,418 |  
| |                                              |                 |  |                 |   |                 |  |   |           |  
| |                                              | 198,000         |  | 19,039,343      |   |                 |  | $ | 6,298,725 |  

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

F-16

---

**STRATEGIC INTERNET INVESTMENTS, INCORPORATED**(A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS September 30, 2006 (Stated in U.S. Dollars)
(unaudited)

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

Cumulative
        fromFebruary 28,1989 (Date ofThree months ended
    
    
      Nine months ended
    
    
      Inception) toSeptember 30,
    
    
      September 30,
    
    
      September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
      2006Consulting fees
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
      35,670Interest
    
    6,586
    
    
    3,736
    
    
    15,986
    
    
    14,977
    
    
      57,944Management fees
    
    15,900
    
    
    -
    
    
    26,400
    
    
    -
    
    
      179,772Office and general
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
      26,944Rent
    
    5,340
    
    
    4,980
    
    
    15,878
    
    
    14,695
    
    
      85,072$
    27,826
    
    $
    8,716
    
    $
    58,264
    
    $
    29,672
    
    $
      385,402


|   | Deferred investment costs at September 30, 2006, included
      $1 (December 31, 2005: $1) charged by a related company in respect to a
      cash payment required pursuant to an acquisition agreement (Note
  6).                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                
|   | At September 30, 2006, accounts payable includes $15,900
      (December 31, 2005: $4,837) due to directors of the Company and companies
      controlled by directors of the Company in respect of unpaid management
      fees and expenses incurred on behalf of the Company.                               
|   |                                                                                                                                                                                                                                                                                                                
|   | At September 30, 2006 and December 31, 2005, due to
      related parties are comprised of expenses for operating costs paid on
      behalf of the Company by companies with directors in common. These amounts
      are non-interest bearing, unsecured and there are no specific terms for
      repayment.
|   |                                                                                                                                                                                                                                                                                                                
|9. | Subsequent Events                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                
|   | Subsequent to September 30, 2006:                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                
|   | a)                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                
|   | b)                                                                                                                                                                                                                                                                                                             

F-17

---

|2. | Plan of Operation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company is in the development stage, accordingly
        certain matters discussed herein are based on potential future circumstances
        and developments, which the Company anticipates, but which cannot be assured.
        The Company is currently devoting its efforts to developing The Dream
        Island Resort project in Manama, Bahrain. The Dream Island Resort project
        will be an integrated resort, entertainment, hotel and real estate facility
        to be built on a 41 acre man-made island off the north eastern coast of
        Manama, Bahrain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company was incorporated in Colorado on February
        28, 1989 as Jefferson Capital Corporation. Effective June 13, 1990 the
        Company changed its name to Ohio & Southwestern Energy Company. Effective
        July 1, 2001, the Company and Strategic Internet Investments, Incorporated
        (Strategic), an inactive Delaware corporation incorporated
        on March 2, 2001, were merged. All outstanding common shares of the Company
        were converted into an equal number of common shares of Strategic. The
        purpose of this merger was to change the corporate jurisdiction of the
        Company from Colorado to Delaware and to change the name of the Company.
        The surviving corporation of the merger is Strategic, a Delaware corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company has an agreement to purchase 80% of the
        outstanding shares of Gulf Star World Development W.L.L. (Gulf Star),
        a Bahrain corporation, from Star Leisure & Entertainment Inc. (Star
        Leisure). Star Leisure is controlled by a director of the Company
        and is based in British Columbia, Canada. Gulf Star is the 100% owner
        and developer of the Dream Island Resort project.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | To acquire 80% of Gulf Star, the Company must issue
        five million common shares at a price of $0.125 per share. The shares
        are to be issued over a three year period based on construction progress.
        In addition, the Company shall make cash payments to Star Leisure totaling
        $100,000 to cover a portion of hard costs accumulated by Star Leisure
        in progressing the Dream Island Project. In 2003 the Company had paid
        $34,210, with the balance of $65,790 to be paid by August 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | On March 13, 2006, the Ministry of Finance, Bahrain
        (MOFB) notified Gulf Star that due to a lack of progress and
        failure to advance the project in a timely basis, the MOFB intends to
        seek termination of the lease contract for the Dream Island site. The
        Company, Gulf Star, and Star Leisure intend to oppose the action by the
        MOFB. However, due to the uncertainty of the future viability of the Dream
        Island project, management has written-down the associated deferred development
        costs to a nominal value of $1.00 at December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The financial statements have been prepared on a going
        concern basis. The Company has accumulated a deficit of $8,553,861 since
        inception, and at September 30, 2006 has a working capital deficiency
        of $475,153. Its ability to continue as a going concern is dependent upon
        the ability of the Company to generate profitable operations in the future
        and/or to obtain the necessary financing to meet its obligations and repay
        its liabilities arising from normal business operations when they come
        due. The outcome of these matters cannot be predicted with any certainty
        at this time. The Company has historically satisfied its capital needs
        primarily by issuing equity securities. Management plans to continue to
        provide for its capital needs during the next twelve months by issuing
        equity securities, private placements, loans, and debentures convertible
        into equity. Additional operating capital could be obtained through the
        potential exercise of management and director stock options and/or exercise
        of outstanding stock purchase warrants. The Company remains at the development
        stage, as there were no revenues during the past fiscal year.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Dream Island project in Bahrain, the Company's principal
        business, will require, over the next twenty to twenty-four months, a
        significant amount of investment capital to be secured to ensure that
        all stages of development can proceed and be completed on schedule and
        on budget. The highest percentage of the funding requirements will be
        met through senior debt instruments with banking, investment and construction
        institutions and through government financing incentives and concessions.
        Further financing will be achieved through the pre-selling of the real
        estate units, villas and apartments, to be constructed as part of the
        Dream Island complex.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

2

---

|   | The first stage of the project, dredging and reclamation of the 41 acre man-made island site, has been paid by the issuance to Robodh Contracting Establishment, Manama, Bahrain, of 1,268,750 Class A Convertible Preferred Shares in
the capital of the Company at a deemed price of $4.00 per share. The total value of the Dredging and Reclamation Works contract is $5,075,000.                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | In August 2004, construction commenced on the Dream Island Project. This initial phase of work consists of the construction of a temporary causeway to provide access from the coast to the offshore site of the future island
location. Large haulage trucks have begun transporting and dumping quarry stone to create the temporary causeway from which access will be gained to the island site. Once the temporary causeway has been completed, work will commence on the creation
of the Dream Island perimeter of the future offshore island. Thereafter, reclamation dredging operations will commence to move sand into the perimeter thereby creating the Dream Island site.                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Management believes that the close connections and contacts it has made in the Middle East, especially the efforts of its Chairman, Mr. Abbas Salih, who has been stationed predominately in Saudi Arabia and Bahrain for the past
year to oversee the project, will be of immense value in completing other essential contracts during the course of this project.                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | In December 2004, the Company signed a Letter Of Intent (the "LOI") with G7 Entertainment Ltd. (G7), a British Columbia, Canada registered corporation. G7 is controlled by directors of the Company. The LOI outlines the
general terms and conditions which will govern a more definitive agreement to be entered into between the Company and G7, relating to the engagement of the Company as a financial partner in certain motion picture production ventures to be carried on
by G7. Under the LOI, G7 has appointed the Company as the exclusive agent of G7 for the purposes of facilitating financing to meet that portion of G7's film production budgets that is not met through non-equity financing such as presales, subsidies
or other similar non-debt financial programs.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | It is the intent of the parties that the Company will, subject to such transactions being qualified or eligible under applicable securities laws, receive financing funds as a private placement investment in the Company and to
issue common shares of the Company in respect therefore, at a price per share to be agreed to by the Company and the participating investors. The Company will, in turn, advance the required films equity funding to G7.                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | All funds advanced by the Company to G7 will be advanced to purchase a participating equity interest in certain film(s). The amount of participating interest in each film to be purchased by the Company will be negotiated on a
case-by-case basis. In addition, the Company will also be entitled to receive options (also to be negotiated on a case-by-case basis) entitling the Company to purchase a greater participating interest in a film, up to an aggregate of fifty percent,
with such option being exercisable by the Company through the issuance of common shares of the Company or as negotiated by the parties by the payment of cash, or some combination of cash and common shares of the Company.                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company's plan during the next quarter and for the balance of 2006 is to maintain the size and staffing of its Vancouver, British Columbia head office at the current levels. There are no plans to hire additional employees as
administrative requirements at head office are now being adequately met by the efforts of the board members the full-time and temporary staff and consultants. Field operations and construction activities in Bahrain will be conducted through
contracting and sub-contracting of work.                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3. | Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company's chief executive officer and chief financial officer evaluated the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon the evaluation, the Company's
chief executive officer and chief financial officer concluded that the Company's disclosure controls and procedures are effective.                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During the quarterly period covered by this report, there were no changes in the Company's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal
controls over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

3

---

PART II  OTHER INFORMATION

|1. | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |  None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2. | Changes in Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | Sales of Securities Without Registration Under the Securities
        Act of 1933                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On March 11, 2005, the Company issued 4,060,643 common
        shares, net of escrowed shares, pursuant to a common stock dividend declared
        by the Board of Directors on February 14, 2005, payable to the shareholders
        of record as of March 4, 2005. In connection with this stock dividend,
        pursuant to the terms of stock option, convertible debenture, and stock
        warrant agreements the number of units or shares issuable under those
        agreements shall be increased by 20% and the exercise or conversion price
        shall be decreased by 20%. These shares are restricted under Rule 144.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On November 15, 2002 the Company entered into a Convertible
        Loan Facility Agreement with Icon Management Ltd. (Icon) whereby
        the Company would, from time to time, borrow operating funds from Icon,
        at an interest rate of ten percent (10%), repayable on demand. The lender
        has the right to convert all or part of the principal sum and interest
        into units at a conversion rate which is calculated at a discount to the
        average closing market price for ten days preceding a loan advance or
        conversion of interest. Each unit consists of one common share of the
        Company and one non-transferable share purchase warrant, expiring 2 years
        from the conversion date, exercisable at the applicable conversion rate.
        Certain loans made under this agreement had specific maturity dates, thereby
        limiting to 2 years the lenders right to convert all or part of
        the principal sum into units. During the year ended December 31, 2004,
        Icon converted $48,537 of the loan into 825,364 units of the Company,
        including warrants exercisable at an average price of $0.06 per share,
        expiring at various dates between December 31, 2004 and March 31, 2006.
        On December 31, 2004, Icon exercised warrants to purchase 643,715 shares.
        During the year ended December 31, 2005, Icon fully converted the remaining
        $227,140 of the loan plus all the accrued interest of $23,020, into 635,901
        units of the Company, including warrants exercisable at an average price
        of $0.39 per share, expiring at various dates between April 1, 2005 and
        January 31, 2007. During the year ended December 31, 2005, Icon also exercised
        warrants to purchase a further 420,107 shares for cash proceeds of $43,153.
        This transaction is with an offshore non-U.S. person; accordingly, these
        securities are exempt from registration pursuant to Regulation S.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On January 31, 2003, the Company issued 1,268,750 Class
        A Convertible Preferred Shares(1), at a deemed value of $4.00
        per share, as payment for the dredging and reclamation services to be
        performed by Robodh Contracting Establishment of Manama, Bahrain. The
        total value of the Dredging and Reclamation Works contract is $5,075,000.
        These shares were issued in escrow and will be released over time as work
        on the Dream Island Project dredging progresses. This transaction is with
        an offshore non-U.S. person; accordingly, these securities are exempt
        from registration pursuant to Regulation S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | On March 13, 2003 the Company completed an offering
        of 650,000 units of its share capital to one accredited investor at a
        price of $0.10 per unit, each unit consisting of one share of common stock
        and one common stock share purchase warrant. Each common stock purchase
        warrant gives the investor the right to purchase one additional share
        of common stock at any time during the first two years at a price of $0.10
        per share. Total cash proceeds of $65,000 were allocated to working capital.
        In July 2004, the 320,000 warrants were exercised, and 320,000 shares
        were issued for cash proceeds of $32,000. During the period ended September
        30, 2005, the investor exercised the remaining warrants to purchase a
        further 330,000 shares for cash proceeds of $33,000. These shares were
        issued pursuant to an exemption from registration under Section 4(6) of
        the Securities Act of 1933. Sale or transfer of the shares by the investor
        shall be in accordance with the provisions of Regulation S, or pursuant
        to registration under the Securities Act of 1933 or pursuant to an available
        exemption from registration. This transaction is with an offshore non-U.S.
        person; accordingly, these securities are exempt from registration pursuant
        to Regulation S.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

4

---

On August 10, 2003 the Company entered
into a Convertible Loan Facility Agreement with Star Leisure & Entertainment
Inc. (Star Leisure), a company controlled by a Director and Officer of
Strategic, whereby the Company would, from time to time, borrow operating funds
from Star Leisure, at an interest rate of ten percent (10%), repayable on
demand. The lender has the right to convert all or part of the principal sum and
interest into units at a conversion rate which is calculated at a discount to
the average closing market price for ten days preceding a loan advance or
conversion of interest. Each unit consists of one common share of the Company
and one non-transferable share purchase warrant, expiring 2 years from the
conversion date, exercisable at the applicable conversion rate. Certain loans
made under this agreement had specific maturity dates, thereby limiting to 2
years the lenders right to convert all or part of the principal sum into units.
As of January 31, 2006, all of the loans matured, and the right to convert this
principal amount into units expired. Under the terms of the Convertible Loan
Facility Agreement, any loans that mature without being converted or repaid
become due on demand. The lender retains the right to convert the total accrued
interest of $37,142 into units. Star Leisure has not converted any part of the
principal sums advanced or accrued interest into units as of September 30, 2006.
During the period ended September 30, 2006, pursuant to this agreement, the
Company received loan proceeds of $49,700, which is due on demand and is
convertible anytime into 416,248 units of the Company. Conversion of this loan
and associated warrants to equity will be at a rate of $0.12 per share. At
September 30, 2006, Star Leisure had advanced a total of $152,906 and accrued
interest of $37,142. This transaction is with an offshore non-U.S. person;
accordingly, these securities are exempt from registration pursuant to
Regulation S.

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

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

The Company also issued 300,000 common
shares in August 2004, at a deemed price of $0.38 per share, for a total deemed
consideration of $112,500, pursuant a Promotional and Capital Funding Agreement
for financial and investor relation services. These shares are held in escrow
and are to be released subject to the Company obtaining certain future financial
goals. This transaction is with an offshore non-U.S. person; accordingly, these
securities are exempt from registration pursuant to Regulation S, however they
are restricted under Rule 144. In June 2005, this agreement was terminated, and
the escrowed 300,000 common shares, and escrowed 60,000 common dividend shares
were returned for cancellation.

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

In August 2004 work commenced on the
  Dream Island Project, however there has not yet been sufficient progress to
  warrant a release of any of the escrowed shares. In January 2005, the Company
  issued 141,000 common shares at a deemed price of $.50 per share, for a total
  deemed consideration of $70,500, pursuant to various consulting agreements for
  legal, computer, and financial services. These transactions are with offshore
  non-U.S. persons; accordingly, these securities are exempt from registration
  pursuant to Regulation S.

5

---

In November 2004, the Company issued
350,000 common shares at a deemed price of $0.35 per share, for a total deemed
consideration of $122,500, pursuant a Promotional and Capital Funding Agreement
for financial and investor relation services. This transaction is with an
offshore non-U.S. person; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.

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

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

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

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

On May 5, 2006 the Company entered into
a Convertible Loan Facility Agreement with CMB Investments Ltd. (CMB), a
company controlled by a Director and Officer of Strategic, whereby the Company
would, from time to time, borrow operating funds from CMB, at an interest rate
of ten percent (10%), repayable on demand. The lender has the right to convert
all or part of the principal sum and interest into units at a conversion rate
which is calculated at a discount to the average closing market price for ten
days preceding a loan advance or conversion of interest. Each unit consists of
one common share of the Company and one share purchase warrant, expiring 2 years
from the conversion date, exercisable at the applicable conversion rate. During
the period ended September 30, 2006; loans, accrued interest, cash advances and
accounts payable, were consolidated under this new agreement, resulting in a new
convertible loans payable in the amount of $65,507. At September 30, 2006, the
CMB loan principal was $86,366 and had accrued interest of $2,626. The loan
principal is convertible into 772,858 units. Conversion of this loan and
associated warrants to equity will be at a rate of $0.11 per share. This
transaction is with an offshore non-U.S. person; accordingly, these securities
are exempt from registration pursuant to Regulation S.

On October 11, 2006 the Company
completed a private placement of 200,000 common shares at $0.40 per share for
total proceeds of $80,000. In connection with this financing, the Company will
pay cash of $3,000 and issued 100,000 common shares as finders fee. This
transaction is with an offshore non-U.S. person; accordingly, these securities
are exempt from registration pursuant to Regulation S.

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

|3. | Defaults Upon Senior Securities                          
|-- | ---------------------------------------------------------
|   |                                                          
|   | -                                                        
|   |                                                          
|4. | Submission of Matters to a Vote of Security
      Holders
|   |                                                          
|   | -                                                        

6

---

|5. | Other Information
|-- | -----------------
|   |                  
|   | -                
|   |                  
|6. | Exhibits         

Table ofExhibit Items
      Description
      Exhibit601-3(i)
      Articles of Incorporation
      Note 1601-(3)(ii)
      Bylaws
      Note 1601-(3)(iii)
      Certificate of Amendment
      Note 1601-(10)
      Stock Award Plan
      Note 2601-(31)
      Rule 13a-14(a)/15d-14(a)
        Certifications
      Exhibit 31.1601-(31)
      Rule 13a-14(a)/15d-14(a) Certifications
      Exhibit 31.2601-(32)
      Section 1350 Certifications
      Exhibit 32.1601-(32)
      Section 1350 Certifications
      Exhibit 32.2


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


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.

Strategic Internet Investments,
      IncorporatedDate: October 31, 2006
      */s/
        Ralph Shearing*Ralph Shearing, CEO, DirectorDate: October 31, 2006
      */s/
        Abbas Salih*Abbas Salih, CFO, Director 7


---