---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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 June 30, 2004

STRATEGIC INTERNET INVESTMENTS, INCORPORATED
  (Small Business Issuer)

Delaware
  State of incorporation

84-1116458
  IRS Employer Identification

Suite 450, 650 West Georgia Street 
  Vancouver, BC Canada V6B 4N8
  Address of principal executive offices

604-684-8662
  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  ̈

Common shares outstanding as of July 31, 2004:18,699,960

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



STRATEGIC INTERNET INVESTMENTS, INCORPORATED
  (A Development Stage Company) 
  INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004
  (Stated in U.S. Dollars)
  (Unaudited)

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED
  (A Development Stage Company)
  INTERIM CONSOLIDATED BALANCE SHEETS 
  June 30, 2004 and December 31, 2003
  (Stated in U.S. Dollars)
  (Unaudited)

|                                                            |   | June 30,   |   |   | December 31, |  
|----------------------------------------------------------- | - | ---------- | - | - | ------------ | -
|ASSETS                                                      |   | 2004       |   |   | 2003         |  
|Current                                                     |   |            |   |   |              |  
|Cash                                                        | $ | 2,274      |   | $ | 346          |  
|Due from related party                                      |   | -          |   |   | 9,494        |  
|                                                           
|                                                            |   | 2,274      |   |   | 9,840        |  
|                                                           
|Capital assets                                              |   | 2,726      |   |   | 949          |  
|Deferred investment costs  Note 4                          |   | 99,210     |   |   | 99,210       |  
|                                                           
|                                                            | $ | 104,210    |   | $ | 109,999      |  
|                                                           
|                                                           
|LIABILITIES                                                 |   |            |   |   |              |  
|Current                                                     |   |            |   |   |              |  
|Accounts payable                                            | $ | 145,751    |   | $ | 189,852      |  
|Due to related parties                                      |   | 42,883     |   |   | 49,259       |  
|Current portion of loans payable  Note 5                   |   | 96,136     |   |   | 122,708      |  
|                                                           
|                                                            |   | 284,770    |   |   | 361,819      |  
|Loans payable  Note 5                                      |   | 218,287    |   |   | 114,689      |  
|                                                           
|                                                            |   | 503,057    |   |   | 476,508      |  
|                                                           
|STOCKHOLDERS' DEFICIENCY                                   
|Capital Stock  Notes 6 and 8                               |   |            |   |   |              |  
|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                                      |   |            |   |   |              |  
|18,379,960 outstanding (2003: 17,305,596
      outstanding) |   | 18,378     |   |   | 17,304       |  
|Additional paid-in capital                                  |   | 3,770,593  |   |   | 3,608,630    |  
|Contributed capital                                         |   | 312,877    |   |   | 294,027      |  
|Deficit accumulated during the development stage            |   | (4,500,893 | ) |   | (4,286,668   | )
|                                                           
|                                                            |   | (398,847   | ) |   | (366,509     | )
|                                                           
|                                                            | $ | 104,210    |   | $ | 109,999      |  

SEE ACCOMPANYING NOTES

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company) 
  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
  for the three and six months ended June 30, 2004 and 2003
  and February 28, 1989 (Date of Inception) to June 30, 2004 
  (Stated in US Dollars) 
  (Unaudited)

|                                    |   |                |   |   |                |   |   |                  |   |   |            |   |   | Cumulative     |  
|----------------------------------- | - | -------------- | - | - | -------------- | - | - | ---------------- | - | - | ---------- | - | - | -------------- | -
|                                    |   |                |   |   |                |   |   |                  |   |   |            |   |   | from February  |  
|                                    |   |                |   |   |                |   |   |                  |   |   |            |   |   | 28, 1989 (Date |  
|                                    |   | Three months   |   |   | Six months     |   |   | of Inception) to |  
|                                    |   | ended June 30, |   |   | ended June 30, |   |   | June 30,         |  
|                                    |   | 2004           |   |   | 2003           |   |   | 2004             |   |   | 2003       |   |   | 2004           |  
|General and Administrative Expenses |   |                |   |   |                |   |   |                  |   |   |            |   |   |                |  
|Accounting and audit fees           | $ | 19,526         |   | $ | 11,715         |   | $ | 21,678           |   | $ | 11,715     |   | $ | 99,705         |  
|Amortization                        |   | 220            |   |   | 102            |   |   | 292              |   |   | 204        |   |   | 2,371          |  
|Automobile                          |   | 565            |   |   | -              |   |   | 565              |   |   | -          |   |   | 565            |  
|Consulting fees                     |   | 8,055          |   |   | 42,424         |   |   | 9,555            |   |   | 63,424     |   |   | 1,935,579      |  
|Filing fees                         |   | 721            |   |   | 1,245          |   |   | 721              |   |   | 1,080      |   |   | 15,406         |  
|Interest                            |   | 5,132          |   |   | 1,672          |   |   | 9,924            |   |   | 3,027      |   |   | 24,984         |  
|Legal fees                          |   | 1,408          |   |   | 1,000          |   |   | 1,745            |   |   | 4,544      |   |   | 100,772        |  
|Investor relations                  |   | 8,858          |   |   | -              |   |   | 14,582           |   |   | -          |   |   | 65,084         |  
|Management fees                     |   | -              |   |   | -              |   |   | -                |   |   | -          |   |   | 112,000        |  
|Office and general expenses         |   | 4,240          |   |   | 4,143          |   |   | 5,384            |   |   | 4,361      |   |   | 119,899        |  
|Rent                                |   | 4,500          |   |   | -              |   |   | 9,053            |   |   | -          |   |   | 45,287         |  
|Telephone expenses                  |   | 3,001          |   |   | 2,226          |   |   | 6,239            |   |   | 4,862      |   |   | 49,508         |  
|Transfer agent fees                 |   | 2,244          |   |   | 1,742          |   |   | 3,384            |   |   | 2,724      |   |   | 29,492         |  
|Travel and promotion                |   | 35,612         |   |   | 18,167         |   |   | 62,503           |   |   | 18,167     |   |   | 111,067        |  
|Non-cash compensation charge        |   | 35,050         |   |   | -              |   |   | 68,600           |   |   | -          |   |   | 337,185        |  
|                                   
|Loss before the following:          |   | ( 129,132      | ) |   | ( 84,436       | ) |   | ( 214,225        | ) |   | ( 114,108  | ) |   | ( 3,048,904    | )
|Unauthorized distribution           |   | -              |   |   | -              |   |   | -                |   |   | -          |   |   | ( 69,116       | )
|Termination fee                     |   | -              |   |   | -              |   |   | -                |   |   | -          |   |   | ( 792,000      | )
|Gain on settlement of debt          |   | -              |   |   | -              |   |   | -                |   |   | -          |   |   | 15,464         |  
|Write-down of advances to related   |   |                |   |   |                |   |   |                  |   |   |            |   |   |                |  
|party                               |   | -              |   |   | -              |   |   | -                |   |   | -          |   |   | ( 606,337      | )
|                                   
|Net loss for the period             | $ | ( 129,132      | ) | $ | ( 84,436       | ) | $ | ( 214,225        | ) | $ | ( 114,108  | ) | $ | ( 4,500,893    | )
|                                   
|Basic loss per share                | $ | ( 0.01         | ) | $ | ( 0.01         | ) | $ | ( 0.01           | ) | $ | ( 0.01     | ) |   |                |  
|                                   
|Weighted average number of common   |   |                |   |   |                |   |   |                  |   |   |            |   |   |                |  
|shares outstanding                  |   | 17,433,080     |   |   | 16,094,607     |   |   | 17,791,090       |   |   | 15,720,790 |   |   |                |  

SEE ACCOMPANYING NOTES

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company)
  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
  for the six months ended June 30, 2004 and 2003
  and February 28, 1989 (Date of Inception) to June 30, 2004
  (Stated in US Dollars)
  (Unaudited)

|                                                        |   |                  |   |                  |          |   | Cumulative     |           
|------------------------------------------------------- | - | ---------------- | - | ---------------- | -------- | - | -------------- | ----------
|                                                        |   |                  |   |                  |          |   | from February  |           
|                                                        |   |                  |   |                  |          |   | 28, 1989 (Date |           
|                                                        |   | Six months ended |   | of Inception) to |         
|                                                        |   | June 30,         |   | June 30,         |         
|                                                        |   | 2004             |   |                  | 2003     |   | 2004           |           
|Cash flows used in operating activities:                |   |                  |   |                  |          |   |                |           
|Net loss                                                | $ | (214,225         | ) | $                | (114,108 | ) | $              | (4,500,893
|Adjustments to reconcile net loss to net cash           |   |                  |   |                  |          |   |                |           
|used in operations:                                     |   |                  |   |                  |          |   |                |           
|Amortization                                            |   | 292              |   |                  | 204      |   |                | 2,371     
|Consulting fees                                         |   | -                |   |                  | -        |   |                | 6,200     
|Gain on settlement of debt                              |   | -                |   |                  | -        |   |                | (15,464   
|Management fees                                         |   | -                |   |                  | -        |   |                | 7,000     
|Write-down of advances to
      related party           |   | -                |   |                  | -        |   |                | 606,337   
|Non-cash compensation charge                            |   | 68,600           |   |                  | -        |   |                | 337,185   
|Termination fees                                        |   | -                |   |                  | -        |   |                | 792,000   
|Issue of stock pursuant
      to a consulting agreement |   | -                |   |                  | 63,424   |   |                | 1,657,987 
|Changes in non-cash items:                              |   |                  |   |                  |          |   |                |           
|Due from related party                                  |   | -                |   |                  | -        |   |                | (615,831  
|Accounts payable                                        |   | (44,101          | ) |                  | (11,769  | ) |                | 422,555   
|Prepaid expense                                         |   | -                |   |                  | (234     | ) |                | 28,000    
|Due to related party                                    |   | 3,119            |   |                  | (55      | ) |                | 68,002    
|                                                       
|Net cash used in operating activities                   |   | (186,315         | ) |                  | (62,538  | ) |                | (1,204,551
|                                                       
|Cash flow used in investing activities                  |   |                  |   |                  |          |   |                |           
|Organization costs                                      |   | -                |   |                  | -        |   |                | (750      
|Acquisition of capital assets                           |   | (2,069           | ) |                  | -        |   |                | (4,347    
|Deferred investment cost                                |   | -                |   |                  | (34,210  | ) |                | (34,210   
|                                                       
|Net cash used in investing activities                   |   | (2,069           | ) |                  | (34,210  | ) |                | (39,307   

/Cont'd.

SEE ACCOMPANYING NOTES

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATEDContinued
  (A Development Stage Company)
  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
  for the six months ended June 30, 2004 and 2003
  and February 28, 1989 (Date of Inception) to June 30, 2004
  (Stated in US Dollars)
  (Unaudited)

|                                                   |   |                  |  |   |                  |  |   | Cumulative     |  
|-------------------------------------------------- | - | ---------------- |  | - | ---------------- |  | - | -------------- | -
|                                                   |   |                  |  |   |                  |  |   | from February  |  
|                                                   |   |                  |  |   |                  |  |   | 28, 1989 (Date |  
|                                                   |   | Six months ended |  |   | of Inception) to | 
|                                                   |   | June 30,         |  |   | June 30,         | 
|                                                   |   | 2004             |  |   | 2003             |  |   | 2004           |  
|Cash flows from financing activities:              |   |                  |  |   |                  |  |   |                |  
|Bank indebtedness                                  |   | -                |  |   | 1,216            |  |   | -              |  
|Loans payable                                      |   | 140,562          |  |   | 30,532           |  |   | 357,168        |  
|Proceeds from issuance of common stock             |   | 49,750           |  |   | 65,000           |  |   | 890,792        |  
|Payment of offering costs                          |   | -                |  |   | -                |  |   | ( 27,270       | )
|Contributed capital                                |   | -                |  |   | -                |  |   | 25,442         |  
|                                                  
|Net cash provided by financing activities          |   | 190,312          |  |   | 97,748           |  |   | 1,246,132      |  
|                                                  
|Net increase in cash                               |   | 1,928            |  |   | -                |  |   | 2,274          |  
|                                                  
|Cash, beginning of period                          |   | 346              |  |   | -                |  |   | -              |  
|                                                  
|Cash, end of period                                | $ | 2,274            |  | $ | -                |  | $ | 2,274          |  
|                                                  
|Supplementary disclosure of cash flow information: |   |                  |  |   |                  |  |   |                |  
|Cash paid for:                                     |   |                  |  |   |                  |  |   |                |  
|Interest                                           | $ | -                |  | $ | -                |  | $ | 6,651          |  
|                                                  
|Income taxes                                       | $ | -                |  | $ | -                |  | $ | -              |  
|                                                  
|                                                  
|Non-cash Transactions  Note 7                     |   |                  |  |   |                  |  |   |                |  

SEE ACCOMPANYING NOTES

---

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY 
  for the period from February 28, 1989 (Date of Inception) to June 30, 2004
  (Stated in U.S. Dollars )

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

---

Continued

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
  for the period from February 28, 1989 (Date of Inception) to June 30, 2004 
  (Stated in U.S. Dollars )

|                                       |  |                 |  |              |  |           |  |             |  |             |   |         |  | Deficit     |   |          |  
|-------------------------------------- |  | --------------- |  | ------------ |  | --------- |  | ----------- |  | ----------- | - | ------- |  | ----------- | - | -------- | -
|                                       |  |                 |  |              |  |           |  |             |  |             |   |         |  | Accumulated |   |          |  
|                                       |  |                 |  |              |  |           |  |             |  | Additional  |   |         |  | During the  |   |          |  
|                                       |  | Preferred Stock |  | Common Stock |  | Paid-in   |  | Contributed |  | Development |   |         | 
|                                       |  | Shares          |  | Par Value    |  | Shares    |  | Par Value   |  | Capital     |   | Capital |  | Stage       |   | Total    |  
|                                       |  |                 |  |              |  |           |  |             |  |             |   |         |  |             |   |          |  
|Balance, December 31, 1995             |  | -               |  | -            |  | 116,695   |  | 116         |  | 84,114      |   | 24,842  |  | (110,500    | ) | (1,428   | )
|Net loss                               |  | -               |  | -            |  | -         |  | -           |  | -           |   | -       |  | (9,068      | ) | (9,068   | )
|                                      
|Balance, December 31, 1996             |  | -               |  | -            |  | 116,895   |  | 116         |  | 84,114      |   | 24,842  |  | (119,568    | ) | (10,496  | )
|Issuance of stock for cash  at $0.011 |  | -               |  | -            |  | 2,000,000 |  | 2,000       |  | 19,300      |   | -       |  | -           |   | 21,300   |  
|Contributed capital                    |  | -               |  | -            |  | -         |  | -           |  | -           |   | 600     |  | -           |   | 600      |  
|Net loss                               |  | -               |  | -            |  | -         |  | -           |  | -           |   | -       |  | (22,261     | ) | (22,261  | )
|                                      
|Balance, December 31, 1997             |  | -               |  | -            |  | 2,116,695 |  | 2,116       |  | 103,414     |   | 25,442  |  | (141,829    | ) | (10,857  | )
|Issuance of stock for services         |  |                 |  |              |  |           |  |             |  |             |   |         |  |             |   |          |  
|rendered                               |  |                 |  |              |  |           |  |             |  |             |   |         |  |             |   |          |  
| at $0.001                            |  | -               |  | -            |  | 7,000,000 |  | 7,000       |  | -           |   | -       |  | -           |   | 7,000    |  
| at $0.01                             |  | -               |  | -            |  | 620,000   |  | 620         |  | 5,580       |   | -       |  | -           |   | 6,200    |  
|Net loss                               |  | -               |  | -            |  | -         |  | -           |  | -           |   | -       |  | (52,308     | ) | (52,308  | )
|                                      
|Balance, December 31, 1998             |  | -               |  | -            |  | 9,736,695 |  | 9,736       |  | 108,994     |   | 25,442  |  | (194,137    | ) | (49,965  | )
|Net loss                               |  | -               |  | -            |  | -         |  | -           |  | -           |   | -       |  | (35,995     | ) | (35,995  | )
|                                      
|Balance, December 31, 1999             |  | -               |  | -            |  | 9,736,695 |  | 9,736       |  | 108,994     |   | 25,442  |  | (230,132    | ) | (85,960  | )
|Issuance of stock 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   |  

SEE ACCOMPANYING NOTES

---

Continued

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY 
  for the period from February 28, 1989 (Date of Inception) to June 30, 2004 (Stated in U.S. Dollars )

|                                             |            |   |                 |   |              |            |           |        |             |           |             |         |         |             | Deficit     |            |           |  
|-------------------------------------------- | ---------- | - | --------------- | - | ------------ | ---------- | --------- | ------ | ----------- | --------- | ----------- | ------- | ------- | ----------- | ----------- | ---------- | --------- | -
|                                             |            |   |                 |   |              |            |           |        |             |           |             |         |         |             | Accumulated |            |           |  
|                                             |            |   |                 |   |              |            |           |        |             |           | Additional  |         |         |             | During the  |            |           |  
|                                             |            |   | Preferred Stock |   | Common Stock |            | Paid-in   |        | Contributed |           | Development |         |         |            
|                                             |            |   | Shares          |   | Par Value    |            | Shares    |        | Par Value   |           | Capital     |         | Capital |             | Stage       |            | Total     |  
|                                             |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |           |  
|Balance, December 31, 2000                   |            | - |                 | - |              | 10,920,029 |           | 10,919 |             | 447,811   |             | 104,149 |         | ( 566,563   | )           | ( 3,684    | )        
|Issuance of stock for services rendered      |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |          
|                                             |  at $0.50 |   | -               |   | -            |            | 328,356   |        | 328         |           | 163,851     |         | -       |             | -           |            | 164,179   |  
|                                             |  at $1.55 |   | -               |   | -            |            | 13,383    |        | 13          |           | 20,731      |         | -       |             | -           |            | 20,744    |  
|                                             |  at $3.50 |   | -               |   | -            |            | 366,667   |        | 367         |           | 1,282,964   |         | -       |             | -           |            | 1,283,331 |  
|Issuance of stock for cash pursuant
      to |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |          
|a private placement                          |  at $0.30 |   | -               |   | -            |            | 883,332   |        | 883         |           | 264,117     |         | -       |             | -           |            | 265,000   |  
|Issuance of stock for cash pursuant
      to |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |          
|the exercise of warrants                     |  at $2.00 |   | -               |   | -            |            | 28,800    |        | 29          |           | 57,571      |         | -       |             | -           |            | 57,600    |  
|Less: issue costs                            |            | - |                 | - |              | -          |           | -      |             | ( 17,858  | )           | -       |         | -           |             | ( 17,858   | )        
|Net loss                                     |            | - |                 | - |              | -          |           | -      |             | -         |             | -       |         | (2,296,406  | )           | (2,296,406 | )        
|Non-cash compensation charge                 |            | - |                 | - |              | -          |           | -      |             | -         |             | 136,378 |         | -           |             | 136,378    |          
|                                            
|Balance, December 31, 2001                   |            | - |                 | - |              | 12,540,567 |           | 12,539 |             | 2,219,187 |             | 240,527 |         | ( 2,862,969 | )           | ( 390,716  | )        
|Issuance of stock for prepaid                |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |          
|consulting                                   |  at $0.35 |   | -               |   | -            |            | 80,000    |        | 80          |           | 27,920      |         | -       |             | -           |            | 28,000    |  
|Issuance of stock for deferred               |            |   |                 |   |              |            |           |        |             |           |             |         |         |             |             |            |          
|investment costs                             |  at $0.05 |   | -               |   | -            |            | 1,300,000 |        | 1,300       |           | 63,700      |         | -       |             | -           |            | 65,000    |  
|Issuance of stock for services               |  at $0.05 |   | -               |   | -            |            | 100,000   |        | 100         |           | 4,900       |         | -       |             | -           |            | 5,000     |  
|                                             | at $0.055 |   | -               |   | -            |            | 60,000    |        | 60          |           | 3,240       |         | -       |             | -           |            | 3,300     |  
|                                             | at $0.10  |   | -               |   | -            |            | 105,000   |        | 105         |           | 10,395      |         | -       |             | -           |            | 10,500    |  
|                                             | at $0.148 |   | -               |   | -            |            | 27,000    |        | 27          |           | 3,973       |         | -       |             | -           |            | 4,000     |  
|                                             | at $0.20  |   | -               |   | -            |            | 175,000   |        | 175         |           | 34,825      |         | -       |             | -           |            | 35,000    |  
|                                             | at $0.209 |   | -               |   | -            |            | 17,143    |        | 17          |           | 3,583       |         | -       |             | -           |            | 3,600     |  
|                                             | at $0.35  |   | -               |   | -            |            | 120,000   |        | 120         |           | 41,880      |         | -       |             | -           |            | 42,000    |  
|Issuance of stock for debt                   |  at $0.20 |   | -               |   | -            |            | 458,135   |        | 458         |           | 91,169      |         | -       |             | -           |            | 91,627    |  
|                                             | at $0.209 |   | -               |   | -            |            | 222,751   |        | 223         |           | 46,156      |         | -       |             | -           |            | 46,379    |  
|Net loss                                     |            |   | -               |   | -            |            | -         |        | -           |           | -           |         | -       |             | ( 214,758   | )          | ( 214,758 | )

SEE ACCOMPANYING NOTES


/Cont'd.

---

Continued

STRATEGICINTERNETINVESTMENTS,INCORPORATED(A Development Stage Company)
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
  for the period from February 28, 1989 (Date of Inception) to June 30, 2004
  (Stated in U.S. Dollars )

|                                        |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   | Deficit     |   |   |            |  
|--------------------------------------- |  | --------------- |  | ------------ | --------- |  | ---------- |  | - | ----------- |  | - | ----------- |  | - | ------- | - | - | ----------- | - | - | ---------- | -
|                                        |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   | Accumulated |   |   |            |  
|                                        |  |                 |  |              |           |  |            |  |   |             |  |   | Additional  |  |   |         |   |   | During the  |   |   |            |  
|                                        |  | Preferred Stock |  | Common Stock |           |  | Paid-in    |  |   | Contributed |  |   | Development |  |   |         |  
|                                        |  | Shares          |  |              | Par Value |  | Shares     |  |   | Par Value   |  |   | Capital     |  |   | Capital |   |   | Stage       |   |   | Total      |  
|                                        |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   |             |   |   |            |  
|Balance, December 31, 2002              |  | -               |  |              | -         |  | 15,205,596 |  |   | 15,204      |  |   | 2,550,928   |  |   | 240,527 |   |   | (3,077,727  | ) |   | (271,068   | )
|Non-cash compensation charge            |  | -               |  |              | -         |  | -          |  |   | -           |  |   | -           |  |   | 53,500  |   |   | -           |   |   | 53,500     |  
|Issue of stock for services  at $0.14  |  | -               |  |              | -         |  | 1,450,000  |  |   | 1,450       |  |   | 201,550     |  |   | -       |   |   | -           |   |   | 203,000    |  
|Issue of stock for cash pursuant to a   |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   |             |   |   |            |  
|private placement  at $0.10            |  | -               |  |              | -         |  | 650,000    |  |   | 650         |  |   | 64,350      |  |   | -       |   |   | -           |   |   | 65,000     |  
|Net loss                                |  | -               |  |              | -         |  | -          |  |   | -           |  |   | -           |  |   | -       |   |   | 1,208,941   |   |   | (1,208,941 | )
|Issued for termination fee              |  | 198,000         |  |              | 198       |  | -          |  |   | -           |  |   | 791,802     |  |   | -       |   |   | -           |   |   | 792,000    |  
|                                       
|Balance, December 31, 2003              |  | 198,000         |  |              | 198       |  | 17,305,596 |  |   | 17,304      |  |   | 3,608,630   |  |   | 294,027 |   |   | (4,286,668  | ) |   | (366,509   | )
|Non-cash compensation charge            |  | -               |  |              | -         |  | -          |  |   | -           |  |   | -           |  |   | 68,600  |   |   | -           |   |   | 68,600     |  
|Stock-based compensation on exercise    |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   |             |   |   |            |  
|of options                              |  | -               |  |              | -         |  | -          |  |   | -           |  |   | 49,750      |  |   | (49,750 | ) |   | -           |   |   | -          |  
|Issue of stock for debt                 |  | -               |  |              | -         |  | 825,364    |  |   | 825         |  |   | 47,712      |  |   | -       |   |   | -           |   |   | 48,537     |  
|Issue of stock pursuant to the exercise |  |                 |  |              |           |  |            |  |   |             |  |   |             |  |   |         |   |   |             |   |   |            |  
|of share purchase options  at $0.25    |  | -               |  |              | -         |  | 199,000    |  |   | 199         |  |   | 49,551      |  |   | -       |   |   | -           |   |   | 49,750     |  
|Issuance of stock for debt  at $0.30   |  | -               |  |              | -         |  | 50,000     |  |   | 50          |  |   | 14,950      |  |   | -       |   |   | -           |   |   | 15,000     |  
|Net loss                                |  | -               |  |              | -         |  | -          |  |   | -           |  |   | -           |  |   | -       |   |   | (214,225    | ) |   | (214,225   | )
|                                       
|Balance, June 30, 2004                  |  | 198,000         |  | $            | 198       |  | 18,379,960 |  | $ | 18,378      |  | $ | 3,770,593   |  | $ | 312,877 |   | $ | (4,500,893  | ) | $ | (398,847   | )

SEE ACCOMPANYING NOTES

---

STRATEGIC INTERNET INVESTMENTS, INCORPORATED(A Development Stage Company) 
  NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 
  June 30, 2004 
  (Stated in U.S. Dollars)
  (Unaudited)

|Note 1 | Interim Reporting
      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, 2003, as filed with the United States Securities and Exchange Commission.
      The results of operations for the six months ended June
        30, 2004 are not indicative of the results that may be expected for the
        full year.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 2 | Continuance of Operations
      The financial statements have been prepared using generally
        accepted accounting principles in the United States of America applicable
        for a going concern which assumes that the Company will realize its assets
        and discharge its liabilities in the ordinary course of business. As at
        June 30, 2004, the Company has a working capital deficiency of $282,496,
        which is not sufficient to meet its planned business objectives or ongoing
        operations for the next fiscal year and has accumulated losses of $4,500,893
        since its inception. The ability of the Company to continue as a going
        concern is dependent upon arranging the necessary financing to meet its
        obligations and pay its liabilities arising from normal business operations
        when they come due.                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 3 | Principles of Consolidation
      These interim consolidated financial statements include
        the accounts of the Company and its wholly owned subsidiaries Strategic
        Internet Investment Canada Inc. and 3851630 Canada Inc. Both of these
        subsidiaries companies are dormant and were incorporated by the Company
        in March 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 4 | Deferred Investment Costs
      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. (Note 6).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

---

|Note 5 | Loans Payable  Note 6 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |   |             
|------ | ---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------- | ------- | - | ------------
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |   |             
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   | June 30, |         |   | December 31,
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   | 2004     |         |   | 2003        
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |   |             
|       | a)                     | Loan payable to a shareholder. This loan
      is unsecured, non-interest bearing and repayable on demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                    | $ | 13,837   |         | $ | 13,837      
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |  
|       | b)                     | Loan payable to companies controlled by directors
      of the Company is unsecured, non-interest bearing and repayable no later
      than July 15, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                    |   | 50,000   |         |   | 50,000      
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       | c)                     | Loan payable to a shareholder including accrued
      interest of $2,153 (2003: $1,992). The loan is unsecured, bears interest
      at 8% per annum and is repayable upon demand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                    |   | 8,351    |         |   | 8,027       
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |  
|       | d)                     | Loan payable to a company controlled by a shareholder, including
      accrued interest of $9,987 (2003: $5,820) pursuant to a Convertible Loan
      Agreement. Interest is calculated at 10% per annum. This loan matures on
      various dates to June 10, 2006. The lender may, at any time, 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.
      Any conversion by the Lender of the Loan and/or accrued interest into equity
      as contemplated under the Agreement shall occur at a discount, as specified
      below, to the ten (10) day average market closing price, calculated from
      the ten business days immediately preceding a loan draw date, (the "Average
      Price"), of the Borrowers common stock as quoted through the facilities
      of the OTC:BB. The Conversion Rate will be calculated as follows: |                                                                                                                                                    |   |          |         |   |             
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |  
|       |                        | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The Conversion Rate will be deemed to be $0.05 per unit for all Loan
      Draws where the Average Price is less than or equal to $0.10 per share; |   |          |         |   |             
|       |                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                    |   |          |         |  
|       |                        | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Average Price less than or equal to $0.25 per share and more than $0.10
      per share, discount is 40%;                                          |   |          |         |   |             
|      
|       |                        | iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Average Price less than or equal to $0.50 per share and more than $0.25
      per share, discount is 50%; and                                      |   |          |         |   |             
|      
|       |                        | iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Average price more than $0.50 per share discount will
      be 60%.                                                                                |   |          | 131,326 |   |             
|      

---

|Note 5 | Loans Payable  Note 6 
      (cont'd) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |          |   |   |             
|------ | --------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------- | - | - | ------------
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |          |   |   |             
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | June 30, |   |   | December 31,
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 2004     |   |   | 2003        
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |          |   |   |             
|       | e)                                      | Loan payable to a shareholder including accrued interest of $Nil (2002:
      $905). The loan is unsecured, bears interest at 10% per annum and was settled
      in May 2004 for 30,000 common shares at a deemed price of $0.30 per share.                                                                                                                                                                                                                                                                                                                                                                                 |  |   | -        |   |   | 14,821      
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |          |   |   |             
|       | f)                                      | Loans payable to a company controlled by a director of the Company, including
      accrued interest of $7,403 (2003: $2,149) pursuant to Convertible Loan Agreements.
      Interest is calculated at 10% per annum. The loans mature on various dates
      to January 31, 2006. The lender may at anytime convert the principal sum
      plus accrued interest into units of the Company. Each unit will consist
      of one common share plus one common share purchase warrant. Conversion of
      this loan and associated warrants to equity will be at various rates ranging
      from $0.13 to $0.24 per share. |  |   | 110,609  |   |   | 83,353      
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |          |   |   |             
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 314,423  |   |   | 237,397     
|       |                                         | Less: current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | ( 96,136 | ) |   | ( 122,708   
|       |                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $ | 218,287  |   | $ | 114,689     

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | The long-term portion of loans payable is repayable not later than June
      10, 2006.                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Note 6 | Capital Stock  Note 8
      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 either $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.

---

|Note 6 | Capital Stock  Note 8  (cont'd)
      Commitments
      Stock Option Plan
      The Company's board of directors approved an employee's
        stock option plan. The plan allows for the granting of share purchase
        options 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
      On February 5, 2004, the Company granted stock options
        to a consultant to the Company to purchase common shares of the Company
        at the closing price of the Company's common stock on the date of the
        grant. The options have been granted with a term of 5 years. The stock
        options vest over a period of one year.
      During the period ended June 30, 2004, the change in
        share purchase options outstanding is as follows:
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                                                       |  |                   |  |           |   | Weighted | 
| | --------------------------------------------------------------------- |  | ----------------- |  | --------- | - | -------- | 
| |                                                                       |  |                   |  |           |   | Average  | 
| |                                                                       |  |                   |  |           |   | Exercise | 
| |                                                                       |  | Expiry            |  | Shares    |   | Price    | 
| | Outstanding at beginning of period                                    |  | September 5, 2008 |  | 1,765,000 |   | $0.25    | 
| | Exercised during the period                                           |  |                   |  | ( 199,000 | ) | $0.25    | 
| | Granted during the period                                             |  | February 5, 2009  |  | 100,000   |   | $0.35    | 
| |                                                                       |  | April 15, 2009    |  | 25,000    |   | $0.63    | 
| |                                                                       |  |                   |  |           |   |          | 
| | Options outstanding at end of period                                  |  |                   |  | 1,691,000 |   | $0.26    | 
| |                                                                       |  |                   |  |           |   |          | 
| | At June 30, 2004, 1,457,000 share purchase options
      have vested. |  |                   |  |           |  

---

|Note 6 | Capital Stock  Note
        8  (cont'd)
      Commitments  (cont'd)
      Stock-based Compensation (cont'd)
      As the stock options have a graded vesting schedule, the total compensation
        cost recognized for the six months ended June 30, 2004 is as follows: | 
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       |                                                                                                                                                                                                                                                                                 | 
|       | Total non-cash                                                                                                                                                                                                                                                                  | 
|       | compensation charge vested                                                                                                                                                                                                                                                      | 
|       | Consultants' non-cash                                                                                                                                                                                                                                                           | 
|       | compensation charge                                                                                                                                                                                                                                                             | 
|       | recognized                                                                                                                                                                                                                                                                      | 
|       |                                                                                                                                                                                                                                                                                 | 
|       | Employee's non-cash                                                                                                                                                                                                                                                             | 
|       | compensation charge                                                                                                                                                                                                                                                             | 

---

|Note 6 | Capital Stock  Note
        8  (cont'd)
      Commitments  (cont'd)
      Stock-based Compensation  (cont'd)
      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:
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | Net loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       | Basic loss per                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

---

|Note 6 | Capital Stock  Note 8  (cont'd)
      Commitments  (cont'd)
      Stock-based Compensation  (cont'd)
      The fair value of each option grant was estimated on the date of the
        grant using the Black-Scholes option-pricing model with the following
        assumptions:
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                         |           | 
| | ----------------------- | --------- | 
| |                         | 2004      | 
| |                         |           | 
| | Expected dividend yield | 0.0%      | 
| | Expected volatility     | 141%-185% | 
| | Risk-free interest rate | 2%-2.88%  | 
| | Expected term in years  | 5         | 

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

Share Purchase Warrants

At June 30, 2004, the following share
  purchase warrants were outstanding:

| | Number      |  | Exercise |  | Expiry            | 
| | ----------- |  | -------- |  | ----------------- | 
| | of Warrants |  | Price    |  | Date              | 
| |             |  |          |  |                   | 
| | 643,716     |  | $0.05    |  | December 31, 2004 | 
| | 75,820      |  | $0.07    |  | February 5, 2005  | 
| | 27,760      |  | $0.10    |  | February 5, 2005  | 
| | 50,568      |  | $0.12    |  | March 5, 2005     | 
| | 27,500      |  | $0.08    |  | March 5, 2005     | 
| | 650,000     |  | $0.10    |  | March 13, 2005    | 
| |             |  |          |  |                   | 
| | 1,475,364   |  |          |  |                   | 

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

---

|Note 6 | Capital Stock 
        Note 8  (cont'd)
      Commitments  (cont'd)
      Acquisition of Gulf Star World Development W.L.L.
      By a letter of agreement dated July 11, 2002, amended
        October 10, 2002, May 10, 2003 and September 30, 2003, 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.
      To acquire 80% of Gulf Star, the Company must issue
        five million common shares at a price of $0.125 per share. The shares
        are to be issued over a three-year period as follows:
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      
|       | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      
|       | iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      
|       | iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      
|       | v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | In addition, the Company shall make cash
        payments to Star Leisure totalling $100,000 to cover a portion of hard
        costs accumulated by Star Leisure in progressing the Dream Island Project.
        During the year ended December 31, 2003, the Company paid $34,210 as partial
        payment toward the $100,000 payment. The remaining balance of $65,790
        is due on or before July 11, 2005. The Company has also agreed to reimburse
        Star Leisure and Jzala Investment Group (20% shareholder of Gulf Star)
        for costs to be verified that they may have incurred upon the project
        financing being fully secured and having released in sufficient amounts
        to commence the main construction.                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|Note 6 | Capital Stock  Note 8  (cont'd)
      Commitments  (cont'd)
      Acquisition of Gulf Star World Development W.L.L. 
        (cont'd)
      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 June 30, 2004, no value had been recorded for the shares
        as work had not commenced on the project and none of the shares have been
        released from escrow.
      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 are to be released on the basis of the progress of the
        Dredging and Reclamation Contract noted above. These shares have been
        recorded at their estimated fair value ($65,000) and have been deferred
        with other related investment costs pertaining to the acquisition of Gulf
        Star World Development W.L.L.
      Pursuant to an agreement dated October 20, 2003, the
        Company has 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
        will be released over time as work on the project progresses. At June
        30, 2004, no value had been recorded for the shares as work had not commenced
        on the project and none of the shares have been released from escrow.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Note 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 services provided to the Company
        during the following years:
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      |  |           |  |               |  |           |  |           | 
| | ---- |  | --------- |  | ------------- |  | --------- |  | --------- | 
| |      |  | Number of |  | Number of     |  | Price     |  |           | 
| |      |  | Preferred |  | Common Shares |  | Per Share |  | $         | 
| |      |  | Shares    |  |               |  |           |  |           | 
| |      |  |           |  |               |  |           |  |           | 
| | 1995 |  | -         |  | 50,000        |  | $0.03     |  | 1,500     | 
| | 1998 |  | -         |  | 7,000,000     |  | $0.001    |  | 7,000     | 
| | 1998 |  | -         |  | 620,000       |  | $0.01     |  | 6,200     | 
| | 2001 |  | -         |  | 233,333       |  | $0.50     |  | 116,667   | 
| | 2002 |  | -         |  | 680,886       |  | $0.12     |  | 138,006   | 
| | 2002 |  | -         |  | 1,380,000     |  | $0.07     |  | 93,000    | 
| | 2003 |  | -         |  | 1,450,000     |  | $0.14     |  | 203,000   | 
| | 2003 |  | 198,000   |  | -             |  | $4.00     |  | 792,000   | 
| | 2004 |  | -         |  | 825,314       |  | $0.06     |  | 48,537    | 
| | 2004 |  | -         |  | 50,000        |  | $0.30     |  | 15,000    | 
| |      |  |           |  |               |  |           |  |           | 
| |      |  | 198,000   |  | 12,289,583    |  |           |  | 1,420,910 | 

|       |                                                                  
|------ | -----------------------------------------------------------------
|Note 8 | Subsequent Events
      Subsequent to June 30, 2004, the Company:
|       |                                                                  
|       | i)                                                               
|      
|       | ii)                                                              
|      
|       | iii)                                                             
|      
|       | iv)                                                              
|      
|       | v)                                                               
|      

---

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 common shares outstanding of the Company were converted into an equal number
  of common shares of Strategic. The purpose of this merger was to change the
  corporate jurisdiction of the Company from Colorado to Delaware and to change
  the name of the Company. The surviving corporation of the merger is Strategic,
  a Delaware corporation.

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

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

The financial statements have been prepared on a going concern
  basis. The Company has accumulated a deficit of $4,500,893 since inception and
  at June 30, 2004 has a working capital deficiency of $282,496. 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.

On June 8, 2004 the Company entered into a Marketing, Promotion
  and Property Share Agreement (the 'Marketing Agreement') with AL Misehal Real
  Estate, Al Ayiri Real Estate and Khalil Ibrahim Ali Khan, (collectively the
  'Marketing Group'). The Marketing Group will market and sell, on a pre-sale
  basis, the future residential real estate of the Dream Island Project consisting
  of beach villas, and marina residences units. Proceeds from all pre-sales will
  be held in a joint escrow account and released to the project in stages based
  upon construction milestones being achieved. Al Misehal Real Estate of Damam,
  Kingdom of Saudi Arabia, has all necessary marketing experience and sales capabilities
  from initial sales contact though formal bid proposals and contract negotiations.
  Al Misehal

---

Real Estate offers an unrivalled service in project management,
  sales and marketing through in-house specialists and through partners in the
  Europe and the USA (www.almisehal.com). Al Ayiri Real Estate, Damam, Kingdom
  of Saudi Arabia is a privately owned business with experience in real estate
  marketing and sales within the Gulf Council States. Khalil Ibrahim Ali Khan
  is an individual residing in Al Kohbar with experience in real estate marketing
  and sales in Saudi Arabia.

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, near the beginning
  of October 2004, 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.
  It is anticipated that the island will be created upon the completion of dredging
  operations before the end of April 2005.

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

The Company's plan during the next quarter and for the balance
  of 2004 is to maintain the size and staffing of its Vancouver, British Columbia
  head office at the current levels. There are no plans to hire additional employees
  as administrative requirements at head office are now being adequately met by
  the efforts of the board members the full-time and temporary staff and consultants.
  Field operations and construction activities in Bahrain will be conducted through
  contracting and sub-contracting of work.

In May 2004, the Company entered into a share exchange agreement
  with Bayindir Faktoring Hizmetleri A.S. of Istanbul, Turkey ('Bayindir'). This
  agreement contemplated the Company providing working capital financing to Bayindir,
  and ultimately the acquisition of a controlling interest in Bayindir. This agreement
  has now lapsed, and the Company does not plan to pursue this investment any
  further.

3. Controls and Procedures

The Company's executive officers have concluded that the Company's
  disclosure controls and procedures are effective based upon their evaluation
  of such controls and procedures as of a date within 90 days prior to the filing
  of this Annual Report. There were no significant changes in the Company's internal
  control or in the other factors that could significantly affect the Company's
  internal controls subsequent to the date of their most recent evaluation.

PART II  OTHER INFORMATION

|1. | Legal Proceedings                                                        
|-- | -------------------------------------------------------------------------
|  
|   |  None                                                                   
|  
|2. | Changes in Securities                                                    
|  
|   | Sales of Securities Without Registration Under the Securities Act of 1933
|  

---

On November 15, 2002 the Company entered into a Convertible
    Loan Facility Agreement with Icon Management Ltd. ("Icon") whereby the Company
    would, from time to time, borrow operating funds from Icon, at an interest
    rate of ten percent (10%), repayable two years from the date the funds are
    advanced (the "maturity date"). The lender has the right to convert all or
    part of the principal sum and interest into units, each unit consisting of
    one common share of the Company and one non-transferable share purchase warrant,
    expiring on the maturity date, exercisable at the applicable conversion rate
    which is calculated at a discount to the average closing market price for
    ten days preceding a loan advance. At June 30, 2004, Icon had advanced a total
    of $121,639, plus accrued interest of $9,987, which can be converted into
    363,224 units, at various a conversion prices of $0.05 to $1.16 per unit.
    The principal sum and any accrued interest under the Convertible Loan Facility
    are repayable on various dates ranging from April 5, 2005 to June 6, 2006.
    During the period ended June 30, 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. 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. 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. On August 10, 2003 the Company entered into a Convertible
    Loan Facility Agreement with Star Leisure & Entertainment Inc. ("Star
    Leisure"), a company controlled by a Director and Officer of SIII, whereby
    the Company would, from time to time, borrow operating funds from Icon, at
    an interest rate of ten percent (10%), repayable two years from the date the
    funds are advanced (the "maturity date"). The lender has the right to convert
    all or part of the principal sum and interest into units, each unit consisting
    of one common share of the Company and one non-transferable share purchase
    warrant, expiring on the maturity date, exercisable at the applicable conversion
    rate which is calculated at a discount to the average closing market price
    for ten days preceding a loan advance. At June 30, 2004, Star Leisure had
    advanced a total of $103,206, plus accrued interest of $7,403, which can be
    converted into 588,694 units, at various a conversion prices of $0.13 to $0.24
    per unit. The principal sum and any accrued interest under the Convertible
    Loan Facility are repayable on various dates ranging from August 13, 2005
    to January 31, 2006. Star Leisure has not converted any part of the principal
    sums advanced or accrued interest into units as of June 30, 2004. This transaction
    is with an offshore non-U.S. person; accordingly, these securities are exempt
    from registration pursuant to Regulation S. On November 30, 2003, the Company issued 198,000 Class A
    Convertible Preferred Shares(1)at a deemed value of $4.00 per
    share to settle a termination fee of $792,000. This termination fee is to
    a former contractor who was to perform planning services for the Company that
    were subsequently assigned to another contractor. This transaction is with
    an offshore non-U.S. person; accordingly, these securities are exempt from
    registration pursuant to Regulation S.


---

On January 31, 2004, the Company issued 1,137,500 Class A
    Convertible Preferred Shares(1) at a deemed value of $4.00 per
    share, as payment for technical planning services to be performed by the Arkan
    Group for Projects of Dammam, Saudi Arabia. The total value of the technical
    planning services contract is $4,550,000. These shares were issued in escrow
    and will be released over time as work on the Dream Island Project progresses.
    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 $1.50 per share, for a total deemed consideration
    of $450,000, 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.


| | (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                    
|-- | ---------------------------------------------------
|  
|   | - None                                             
|  
|4. | Submission of Matters to a Vote of Security Holders
|  
|   | - None                                             
|  
|5. | Other Information                                  
|  
|   | - None                                             
|  
|6. | Exhibits                                           
|  

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

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

---

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,
      Incorporated
|----- | --------------- | --------------------------------------------------
|     
|Date: | August 20, 2004 | /s/ Ralph Shearing                                
|      |                 | Ralph Shearing, CEO, Director                     
|     
|Date: | August 20, 2004 | /s/ Abbas Salih                                   
|      |                 | Abbas Salih, CFO, Director                        

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