SECURITIES EXCHANGE COMMISSION
  Washington, D.C. 20549

FORM 10 - QSB

Quarterly Report Under Section 13
  or 15(d) of
  The Securities Exchange Act of 1934

|For the Quarter Ended: September 30, 2002 | Commission File
        Number: 33-28188
|----------------------------------------- | ----------------------------------------

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (Exact name of Registrant as specified in its charter)

|Delaware                 |  | 84-1116458                    
|------------------------ |  | ------------------------------
|(State of Incorporation) |  | (I.R.S. Employer              
|                         |  | Identification
        Number)

Suite 450 - 650 West Georgia Street,
  Vancouver, B.C. Canada V6B 4N8
  (Address of Principal Executive Offices)      (Postal
  Code)

Registrant's Telephone Number, including
  area code: (604) 684-8662

Indicate by check mark whether the
  Registrant (1) has filed all reports required to be filed under Section 13 or
  15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period that the Registrant was required to file such reports),
  and (2) has been subject to the filing requirements for at least the past 90
  days.

Yes  X   No    ______

Indicate the number of shares outstanding
  of each of the Issuer's classes of common stock, as of the end of the Period.

13,688,596 as at September 30, 2002



---

**PART 1 - FINANCIAL INFORMATION**

|**ITEM 1.** | **FINANCIAL STATEMENTS (UNAUDITED)**
|----------- | ------------------------------------
|            |                                     
|            | i)                                  
|            | ii)                                 
|            | iii)                                
|            | iv)                                 
|            | v)                                  
|            |                                     
|**ITEM 2.** | **MANAGEMENT'S PLAN OF OPERATION**  

Plan of Operation

As at September 30, 2002, the Company
  remained in the development stage as no revenues were generated from its operations
  in the third quarter and, in total, for the first nine months of fiscal 2002.
  During the nine month period ended September 30, 2002, the Company recorded
  a net loss of $67,513, or $0.005 per share. The comparable loss for the period
  ended September 30, 2001 was $422,086 or approximately $0.08 per share. This
  significant decrease in operating costs compared to the third quarter of fiscal
  2001 has resulted from the decision by management to abandon its plan of reorganization
  under the Agreement and Plan of Arrangement with Canarab Technology Limited.
  In accordance with this decision, the Company will not be proceeding to acquire
  any further equity interests in Strategic Profits Inc. ("SPI"), the private
  Vancouver based e-commerce service provider and on-line transactional company
  formed in 1994. The Company, to date, has advanced a total of $606,337 to SPI
  for which it has acquired an equity interest of approximately 28%.

The Company had a working capital
  deficit of $296,509 and a cash balance of $183 at the end of the period. On
  July 9, 2002 the Company issued 1,148,029 shares to three creditors and four
  consultants at an offering price of $0.20 per share in settlement of $104,106
  in outstanding liabilities and in full payment of consulting fees due under
  existing contracts. No public share offerings are planned for the remainder
  of the year, in view of the current equity market conditions. Working capital
  requirements will continue to be met through internal and private sources in
  the form of loans, the exercise of stock options under the 2002 Stock Award
  Plan, the exercise of all or a portion of the 350,000 share purchase warrants
  which remain outstanding or by private placements of the Company's shares.

During the previous quarter the
  Company entered into two consulting and advisory agreements with companies located
  in British Columbia who specialize in sourcing and researching business opportunities
  in the internet or e -commerce field. This was done in conjunction with management's
  efforts to identity potential acquisition or merger candidates which have commenced
  operations and which have developed or acquired the rights to a recognizable
  and proven product line.



---

A number of enterprises were identified
  and analyzed which resulted in a recommendation being put forward and a preliminary
  agreement in the form of a Letter of Understanding("LOU") being completed with
  Aegis Systems Inc. of Vernon, B.C. on July 30, 2002. Aegis Systems Inc. is the
  international marketing arm of Ultra Information Systems Inc.("UIS"), a Delaware
  corporation which owns the 'Skyhook' suite of software and internet security
  products. These products provide secure digital communications, data security
  and absolute user authentication. After further discussions, the LOU was supplemented
  by a Letter of Intent("LOI") on August 22, 2002 with UIS wherein the Company
  was granted the right to acquire 3,500,000 Series A Convertible Preferred Shares
  of UIS at a price of $1.00 per share convertible on a 1:1 basis into common
  shares of UIS under a Series A Preferred Share Agreement. This preferred share
  purchase would represent an initial 30% interest in the outstanding capital
  of UIS. Further to the LOI, the Company was granted the option to acquire additional
  equity interest in UIS up to a maximum of 51% at the current market price.

The terms of the Share Purchase
  are, $100,000 payable by September 1, 2002 and the balance of $3,400,000 on
  or before September 30, 2002. To date, no payments have been made by the Company
  to UIS under this Share Purchase Agreement. The parties to the Agreement recognize
  and understand the difficulties for public companies to fundraise in the current
  market environment and have agreed verbally to cooperate in pursuing the completion
  of this Agreement. Pending the Company's efforts to raise sufficient funds to
  complete the required payments, the Agreement will remain in force as to all
  terms and conditions with the exception of the option granted to the Company
  to acquire up to a maximum of 51% of UIS. This option will now be at the discretion
  of the Board of UIS to accept for exercise.

The Board of Directors of the Company,
  and in particular, Mr. Abbas Salih have considerable knowledge and experience
  in the transaction of business in the Middle Eastern regions. Mr. Abbas Salih
  has undertaken numerous projects in the Middle East and Eastern Europe and over
  the last 20 years has established extensive ties with business and investment
  groups in this area. It is for this reason that the Company will begin the marketing
  of the UIS product line with Aegis Systems Inc. in selected countries in the
  Middle East by forming partnerships with existing companies with which the Board
  is familiar through previous business dealings.

To focus and capitalize on the experience
  of the Board of Directors in the Middle Eastern region, the Company entered
  into a Letter Agreement on July 11, 2002 with Star Leisure & Entertainment
  Inc., a British Columbia corporation controlled by Mr. Abbas Salih, Chairman
  and Director, to purchase 80% of the outstanding shares of Gulf Star World Development
  W.L.L., a Bahrain corporation. Gulf Star holds 100% of the rights to develop
  a integrated resort, entertainment, hotel and real estate project located at
  Manama, Bahrain known as 'Dream Island'. This project to be constructed on a
  man-made island off the north-eastern coast of Manama Bahrain approximately
  165,000 square metres in size will be an all-inclusive tourist and residential
  resort destination for local residents of the surrounding areas and for international
  travelers. It will contain luxury apartments and villas for sale or rent and
  timeshare ownership, a four star hotel complex, full tourist and recreational
  facilities including shopping and retail, restaurants, sports facilities and
  a health club and full support facilities and services. The Company will earn
  its 80% interest in Gulf Star by issuing 5,000,000 escrowed shares to be earned
  out of escrow at progressive stages of development of the project over a three-year
  period. The Company must also pay to Star Leisure $100,000 within three months
  of the date of the Letter Agreement and re-imburse Star Leisure certain hard
  costs associated with the start-up and development of the project at such time
  as the project financing has been fully secured and commencement of the main
  construction of the 'Dream Island' Project has been funded.



---




On August 2, 2002 a Dredging and
  Reclamation contract was signed between Robodh Contracting Establishment of
  Manama, Bahrain and Star Leisure & Entertainment Inc. of Vancouver, B.C.
  which sets out the terms and conditions for construction of the manmade island
  in Bahrain. On August 21, 2002 all benefits and obligations under this contract
  were assigned to Strategic Internet Investments, Incorporated("SIII"). The contract
  originally stipulated that Robodh would subscribe for and be issued 1,268,750
  convertible preferred shares of SIII at at price of $4.00 per share for a total
  face value of $5, 075,000 in exchange for providing certain construction services
  pertaining to the dredging and reclamation requirements for the "Dream Island"
  Project. The specific terms and conditions of the preferred share purchase and
  construction services are contained in a Subscription Agreement between Robodh
  and SIII, currently being amended to increase the number of shares issued to
  Robodh as additional compensation for their agreement to construct the bridge
  which will provide the causeway entrance to the island from the mainland and
  to finalize the conversion terms of the preferred shares.

This Subscription Agreement is being
  amended to increase the number of shares issued to Robodh as additional compensation
  for their agreement to construct the bridge which will provide the causeway
  entrance to the island from the mainland.

Preliminary site engineering and
  surveying work on the "Dream Island" Project has commenced in preparation for
  the beginning of dredging and reclamation of the man-made island which will
  form the foundation for construction of the facilities.

On July 10, 2002 the Company retained
  the services of Crescent Fund, Inc., a Texas corporation located in New York
  city, to provide investor relations and capital funding services. This agreement
  was terminated on October 28, 2002 by the Company.



CAUTIONARY STATEMENT FOR PURPOSES
  OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
  ACT OF 1955.

The Company has sought to identify
  what it believes to be the most significant risks to its business, but cannot
  predict whether or to what extent any of such risks may be realized nor can
  there be any assurances that the Company has identified all possible risks that
  might arise. Investors should carefully consider all such risk factors before
  making an investment decision with respect to the Company's stock.

From time to time, the Company will
  make written and oral forward-looking statements about matters that involve
  risk and uncertainties that could cause actual results to differ materially
  from projected results.

Many of these factors are beyond
  the Company's ability to control and predict. Investors should carefully consider
  all such risk factors before making an investment decision with respect to the
  Company's stock.

Investors are cautioned not to
  place undue reliance upon forward-looking statements. The Company disclaims
  any intent or obligation to update its forward-looking statements, whether as
  a result of receiving new information, the occurrence of future events, or otherwise.



---

The Company's common stock is currently
  quoted on the NASD OTC Bulletin Board under the ticker symbol SIII. As of September
  30, 2002, there were 13,688,596 shares of common stock outstanding. There can
  be no assurance that a trading market will be sustained in the future. Factors
  such as, but not limited to, technological innovations, new products, acquisitions
  or strategic alliances entered into by the Company or its competitors, failure
  to meet security analysts' expectations, government regulatory action, patent
  or proprietary rights developments, and market conditions for technology stocks
  in general could have a material effect on the volatility of the Company's stock
  price.

**PART II - OTHER INFORMATION**

|ITEM 1. | Legal Proceedings                                        
|------- | ---------------------------------------------------------
|        |                                                          
|        | None                                                     
|        |                                                          
|ITEM 2. | Changes in Securities                                    
|        |                                                          
|        | (a)                                                      
|        |                                                          
|        | (b)                                                      
|        |                                                          
|        | (c)                                                      
|        |                                                          
|        | (d)                                                      
|        | .                                                        
|ITEM 3. | Defaults Upon Senior Securities                          
|        |                                                          
|        | None                                                     
|        |                                                          
|ITEM 4. | Submission of Matters to a Vote of
      Security Holders
|        |                                                          
|        | None                                                     
|       
|ITEM 5. | Other Information                                        
|        |                                                          
|        | None                                                     
|        |                                                          
|ITEM 6. | Exhibits and Reports on Form 8-K                         
|        |                                                          
|        | (a)                                                      
|        |                                                          
|        | (b)                                                      
|        |                                                          
|        |                                                          



---

**SIGNATURES**

In accordance with the requirements
  of the Securities and Exchange Act of 1934, the Registrant has duly caused this
  Report to be signed on its behalf by the undersigned, thereunto duly authorized.

|      |                         |  | **STRATEGIC
        INTERNET INVESTMENTS, INCORPORATED**
|----- | ----------------------- |  | --------------------------------------------------------
|      |                         |  |                                                         
|Date: | November
      21, 2002 |  |                                                         
|      |                         |  |                                                         
|      |                         |  |                                                         
|      |                         |  |                                                         
|      |                         |  |                                                         
|      |                         |  |                                                         





---



**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED**

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL
  STATEMENTS

September 30, 2002

(Stated in US Dollars)

(Unaudited)





---

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) INTERIM CONSOLIDATED BALANCE SHEETS September 30, 2002 and December 31, 2001
  (Stated in US Dollars) (Unaudited)

|                                                         |   | September 30, |   |   | December 31, |  
|-------------------------------------------------------- | - | ------------- | - | - | ------------ | -
|****                                                     |   | 2002          |   |   | 2001         |  
|**ASSETS**                                               |  
|Current                                                  |   |               |   |   |              |  
|Cash                                                     | $ | 183           |   | $ | 56           |  
|Prepaid
        expenses  Note 4                        |   | 35,733        |   |   | -            |  
|                                                         |   |               |   |   |              |  
|                                                         |   | 35,916        |   |   | 56           |  
|Capital
        assets                                   |   | 1,533         |   |   | 1,937        |  
|                                                         |   |               |   |   |              |  
|                                                         | $ | 37,449        |   | $ | 1,993        |  
|                                                         |   |               |   |   |              |  
|**LIABILITIES**                                          |  
|                                                         |   |               |   |   |              |  
|Current                                                  |   |               |   |   |              |  
|Accounts
        payable                                 | $ | 197,248       |   | $ | 265,442      |  
|Due
        to related parties                           |   | 64,068        |   |   | 56,580       |  
|Loans
        payable                                    |   | 71,109        |   |   | 70,687       |  
|                                                         |   |               |   |   |              |  
|                                                         |   | 332,425       |   |   | 392,709      |  
|                                                         |   |               |   |   |              |  
|**STOCKHOLDERS
        DEFICIENCY**                     |  
|                                                         |   |               |   |   |              |  
|Capital Stock
         Notes 5, 7 and 8                 |   |               |   |   |              |  
|Class
        A Preferred stock, $0.001 par value        |   |               |   |   |              |  
|10,000,000
        authorized, none outstanding          |   |               |   |   |              |  
|Class
        B Preferred stock, $0.001 par value        |   |               |   |   |              |  
|10,000,000
        authorized, none outstanding          |   |               |   |   |              |  
|Common
        stock, $0.001 par value                   |   |               |   |   |              |  
|100,000,000
        author ized                          |   |               |   |   |              |  
|13,688,596
        outstanding                           |   | 2,461,332     |   |   | 2,231,726    |  
|Contributed capital                                      |   | 240,527       |   |   | 240,527      |  
|Share subscriptions                                      |   | 5,077         |   |   | -            |  
|Deficit accumulated
        during the development stage |   | (3,001,912    | ) |   | (2,862,969   | )
|                                                         |   |               |   |   |              |  
|                                                         |   | (294,976      | ) |   | (390,716     | )
|                                                         |   |               |   |   |              |  
|                                                         | $ | 37,449        |   | $ | 1,993        |  
|                                                         |   |               |   |   |              |  

SEE ACCOMPANYING NOTES

---

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
  for the three and nine months ended September 30, 2002 and 2001
  and February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   | Cumulative     |  
|--------------------------------------- | - | --------------------------- | - | - | --------------------------- | - | - | ------------------------ | - | - | ---------- | - | - | -------------- | -
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   | from February  |  
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   | 28, 1989 (Date |  
|                                        |   | Three months                |   |   | Nine months                 |   |   | of Inception)
        to |  
|                                        |   | ended September
        30, |   |   | ended September
        30, |   |   | September 30,            |  
|                                        |   | 2002                        |   |   | 2001                        |   |   | 2002                     |   |   | 2001       |   |   | 2002           |  
|General and Administrative Expenses     |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|Accounting
      and audit fees         | $ | 1,862                       |   | $ | 4,701                       |   | $ | 4,387                    |   | $ | 11,927     |   | $ | 37,942         |  
|Amortization                            |   | 124                         |   |   | 85                          |   |   | 404                      |   |   | 256        |   |   | 1,495          |  
|Consulting
      fees                   |   | 55,867                      |   |   | 371,657                     |   |   | 109,368                  |   |   | 1,111,396  |   |   | 1,640,971      |  
|Filing
      fees                       |   | 370                         |   |   | 470                         |   |   | 1,822                    |   |   | 2,389      |   |   | 10,759         |  
|Legal
      fees                        |   | 2,502                       |   |   | 1,935                       |   |   | 8,994                    |   |   | 17,769     |   |   | 93,391         |  
|Investor
      relations                |   | -                           |   |   | 10,812                      |   |   | -                        |   |   | 50,502     |   |   | 50,502         |  
|Management
      fees                   |   | -                           |   |   | 21,000                      |   |   | -                        |   |   | 63,000     |   |   | 112,000        |  
|Office
      and general expenses       |   | 1,726                       |   |   | 6,554                       |   |   | 4,331                    |   |   | 16,589     |   |   | 101,763        |  
|Rent                                    |   | 1,904                       |   |   | 1,526                       |   |   | 3,450                    |   |   | 4,652      |   |   | 24,062         |  
|Telephone
      expense                 |   | 2,352                       |   |   | 2,847                       |   |   | 3,143                    |   |   | 6,985      |   |   | 22,054         |  
|Transfer
      agent fees               |   | 806                         |   |   | 499                         |   |   | 3,044                    |   |   | 4,984      |   |   | 18,151         |  
|Travel
      and promotion              |   | -                           |   |   | -                           |   |   | -                        |   |   | 4,938      |   |   | 13,748         |  
|Non-cash
      compensation charge      |   | -                           |   |   | -                           |   |   | -                        |   |   | -          |   |   | 215,085        |  
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|Loss before the following:              |   | (67,513                     | ) |   | (422,086                    | ) |   | (138,943                 | ) |   | (1,295,387 | ) |   | (2,341,923     | )
|Unauthorized
      distribution         |   | -                           |   |   | -                           |   |   | -                        |   |   | -          |   |   | (69,116        | )
|Gain
      on settlement of debt        |   | -                           |   |   | -                           |   |   | -                        |   |   | -          |   |   | 15,464         |  
|Write-down
      of advances to related |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|party                                   |   | -                           |   |   | -                           |   |   | -                        |   |   | -          |   |   | (606,337       | )
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|Net loss for the period                 | $ | (67,513                     | ) | $ | (422,086                    | ) | $ | (138,943                 | ) | $ | (1,295,387 | ) | $ | ( 3,001,912    | )
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|Basic loss per share                    | $ | (0.00                       | ) | $ | (0.03                       | ) | $ | (0.01                    | ) | $ | (0.11      | ) |   |                |  
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|Weighted average number of common       |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  
|shares
      outstanding                |   | 13,601,246                  |   |   | 12,082,415                  |   |   | 12,898,012               |   |   | 11,855,061 |   |   |                |  
|                                        |   |                             |   |   |                             |   |   |                          |   |   |            |   |   |                |  

SEE ACCOMPANYING NOTES

---

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) INTERIM CONSOLIDATED STATEMENT OFSTOCKHOLDERS EQUITY (DEFICIENCY)
  for the period from February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

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

SEE ACCOMPANYING NOTES

---

**** Continued

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED**(A Development Stage Company) INTERIM CONSOLIDATED STATEMENT OFSTOCKHOLDERS EQUITY (DEFICIENCY)
  for the period from February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  | Deficit     |   |  |         |  
|------------------------------------------------------ | -------------------- |  |  | ----------- |  |  | ------- |  |  | ------------- |  |  | ----------- | - |  | ------- | -
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  | Accumulated |   |  |         |  
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  | During the  |   |  |         |  
|                                                       | Common
        Stock |  |  | Contributed |  |  | Share   |  |  | Development   |  |  |             |  
|                                                       | Shares               |  |  | Amount      |  |  | Capital |  |  | Subscriptions |  |  | Stage       |   |  | Total   |  
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|Balance, December 31, 1994                             | 66,695               |  |  | 82,730      |  |  | -       |  |  | -             |  |  | (93,765     | ) |  | (11,035 | )
|Issuances
      of stock for services                  |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|rendered
       at $0.03 per share                    | 50,000               |  |  | 1,500       |  |  | -       |  |  | -             |  |  | -           |   |  | 1,500   |  
|Contributed
      capital                              | -                    |  |  | -           |  |  | 24,842  |  |  | -             |  |  | -           |   |  | 24,842  |  
|Net loss                                               | -                    |  |  | -           |  |  | -       |  |  | -             |  |  | (16,735     | ) |  | (16,735 | )
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|Balance, December 31, 1995                             | 116,695              |  |  | 84,230      |  |  | 24,842  |  |  | -             |  |  | (110,500    | ) |  | (1,428  | )
|Net loss                                               | -                    |  |  | -           |  |  | -       |  |  | -             |  |  | (9,068      | ) |  | (9,068  | )
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|Balance, December 31, 1996                             | 116,895              |  |  | 84,230      |  |  | 24,842  |  |  | -             |  |  | (119,568    | ) |  | (10,496 | )
|Issuance
      of stock for cash  at $0.011 per share | 2,000,000            |  |  | 21,300      |  |  | -       |  |  | -             |  |  | -           |   |  | 21,300  |  
|Contributed
      capital                              | -                    |  |  | -           |  |  | 600     |  |  | -             |  |  | -           |   |  | 600     |  
|Net loss                                               | -                    |  |  | -           |  |  | -       |  |  | -             |  |  | (22,261     | ) |  | (22,261 | )
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|Balance, December 31, 1997                             | 2,116,695            |  |  | 105,530     |  |  | 25,442  |  |  | -             |  |  | (141,829    | ) |  | (10,857 | )
|Issuance
      of stock for services rendered          |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|
      at $0.001 per share                            | 7,000,000            |  |  | 7,000       |  |  | -       |  |  | -             |  |  | -           |   |  | 7,000   |  
|
      at $0.01 per share                             | 620,000              |  |  | 6,200       |  |  | -       |  |  | -             |  |  | -           |   |  | 6,200   |  
|Net loss                                               | -                    |  |  | -           |  |  | -       |  |  | -             |  |  | (52,308     | ) |  | (52,308 | )
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|                                                       |                      |  |  |             |  |  |         |  |  |               |  |  |             |   |  |         |  
|/contd.                                               |                     

SEE ACCOMPANYING NOTES

---

**** Continued

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED**(A Development Stage Company) INTERIM CONSOLIDATED STATEMENT OFSTOCKHOLDERS EQUITY (DEFICIENCY)
  for the period from February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  | Deficit     |   |  |            |  
|------------------------------------------------------------ | ------------------ |  |  | ----------- | - |  | ------- |  |  | ------------- |  |  | ----------- | - |  | ---------- | -
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  | Accumulated |   |  |            |  
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  | During the  |   |  |            |  
|                                                             | Common
      Stock |  |  | Contributed |   |  | Share   |  |  | Development   |  |  |             |  
|                                                             | Shares             |  |  | Amount      |   |  | Capital |  |  | Subscriptions |  |  | Stage       |   |  | Total      |  
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|Balance, December 31, 1998                                   | 9,736,695          |  |  | 118,730     |   |  | 25,442  |  |  | -             |  |  | (194,137    | ) |  | (49,965    | )
|Net loss                                                     | -                  |  |  | -           |   |  | -       |  |  | -             |  |  | (35,995     | ) |  | (35,995    | )
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|Balance, December 31, 1999                                   | 9,736,695          |  |  | 118,730     |   |  | 25,442  |  |  | -             |  |  | (230,132    | ) |  | (85,960    | )
|Issuance of stock
      for cash pursuant to a private       |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|placement 
      at$0.30                                    | 1,133,334          |  |  | 340,000     |   |  | -       |  |  | -             |  |  | -           |   |  | 340,000    |  
|Issue of stock
      for finders fee                         | 50,000             |  |  | -           |   |  | -       |  |  | -             |  |  | -           |   |  | -          |  
|Net loss                                                     | -                  |  |  | -           |   |  | -       |  |  | -             |  |  | (336,431    | ) |  | (336,431   | )
|Non-cash compensation
      charge                           | -                  |  |  | -           |   |  | 78,707  |  |  | -             |  |  | -           |   |  | 78,707     |  
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|Balance, December 31, 2000                                   | 10,920,029         |  |  | 458,730     |   |  | 104,149 |  |  | -             |  |  | (566,563    | ) |  | (3,684     | )
|Issuance of stock
      for services rendered  at $0.50     | 328,356            |  |  | 164,179     |   |  | -       |  |  | -             |  |  | -           |   |  | 164,179    |  
|
      at $1.55                                             | 13,383             |  |  | 20,744      |   |  | -       |  |  | -             |  |  | -           |   |  | 20,744     |  
|
      at $3.50                                             | 366,667            |  |  | 1,283,331   |   |  | -       |  |  | -             |  |  | -           |   |  | 1,283,331  |  
|Issuance of stock
      for cash pursuant to a private       |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|placement  at$0.30                                          | 883,332            |  |  | 265,000     |   |  | -       |  |  | -             |  |  | -           |   |  | 265,000    |  
|Issuance of stock
      for cash pursuant to the exercise of |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|warrants
       at $2.00                                    | 28,800             |  |  | 57,600      |   |  | -       |  |  | -             |  |  | -           |   |  | 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    |  
|                                                             |                    |  |  |             |   |  |         |  |  |               |  |  |             |   |  |            |  
|/contd.                                                     |                   

SEE ACCOMPANYING NOTES

---



**** Continued

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED**(A Development Stage Company) INTERIM CONSOLIDATED STATEMENT OFSTOCKHOLDERS EQUITY (DEFICIENCY)
  for the period from February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)



|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   | Deficit     |   |   |          |  
|-------------------------------------------------------- | ------------------ |  | - | ----------- |  | - | ------- |  | - | ------------- |  | - | ----------- | - | - | -------- | -
|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   | Accumulated |   |   |          |  
|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   | During the  |   |   |          |  
|                                                         | Common
      Stock |  |   | Contributed |  |   | Share   |  |   | Development   |  |   |             |  
|                                                         | Shares             |  |   | Amount      |  |   | Capital |  |   | Subscriptions |  |   | Stage       |   |   | Total    |  
|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   |             |   |   |          |  
|Balance, December 31, 2001                               | 12,540,567         |  |   | 2,231,726   |  |   | 240,527 |  |   | -             |  |   | (2,862,969  | ) |   | (390,716 | )
|Issuance of stock for services rendered
       at $0.20 | 1,148,029          |  |   | 229,606     |  |   | -       |  |   | -             |  |   | -           |   |   | 229,606  |  
|Share subscriptions                                      | -                  |  |   | -           |  |   | -       |  |   | 5,077         |  |   | -           |   |   | 5,077    |  
|Net loss for the period                                  | -                  |  |   | -           |  |   | -       |  |   | -             |  |   | (138,943    | ) |   | (138,943 | )
|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   |             |   |   |          |  
|Balance, September 30, 2002                              | 13,688,596         |  | $ | 2,461,332   |  | $ | 240,527 |  | $ | 5,077         |  | $ | (3,001,912  | ) | $ | (294,976 | )
|                                                         |                    |  |   |             |  |   |         |  |   |               |  |   |             |   |   |          |  

SEE ACCOMPANYING NOTES

---

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
  for the three and nine months ended September 30, 2002 and 2001
  and February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 | Cumulative       |  
|--------------------------------------- | - | --------------------------- | - | - | --------------------------- | - | - | ------------- | - | - | ---------- | - | --------------- | ---------------- | -
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 | from February    |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 | 28,
        1989 |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   | (Date of Incep- |                 
|                                        |   | Three
        months        |   |   | Nine months                 |   |   | tion) to      |  
|                                        |   | ended
        September 30, |   |   | ended September
        30, |   |   | September 30, |  
|                                        |   | 2002                        |   |   | 2001                        |   |   | 2002          |   |   | 2001       |   |                 | 2002             |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Cash flows used in operating            |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|activities:                             |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Net
      loss                          | $ | (67,513                     | ) | $ | (422,086                    | ) | $ | (138,943      | ) | $ | (1,295,387 | ) | $               | (3,001,912       | )
|Adjustments
      to reconcile net loss |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|to
      net cash used in operations:   |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Amortization                            |   | 124                         |   |   | 85                          |   |   | 404           |   |   | 256        |   |                 | 1,495            |  
|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      |   | -                           |   |   | -                           |   |   | -             |   |   | -          |   |                 | 215,085          |  
|Issue
      of stock pursuant to a      |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|consulting
      agreement              |   | 54,267                      |   |   | 350,004                     |   |   | 54,267        |   |   | 933,335    |   |                 | 1,337,598        |  
|Issue
      of stock for services       |   | -                           |   |   | -                           |   |   | -             |   |   | -          |   |                 | 68,256           |  
|Changes
      in non-cash items:        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Advance
      to related party          |   | -                           |   |   | (109,713                    | ) |   |               |   |   | (281,339   | ) |                 | (606,337         | )
|Accounts
      payable                  |   | 17,537                      |   |   | 68,418                      |   |   | 71,412        |   |   | 316,736    |   |                 | 470,486          |  
|Due
      to related party              |   | 423                         |   |   | 333                         |   |   | 7,488         |   |   | (26,323    | ) |                 | 64,068           |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Net cash provided by (used in)          |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|operating
      activities              |   | 4,838                       |   |   | (112,959                    | ) |   | (5,372        | ) |   | (352,722   | ) |                 | (847,188         | )
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Cash flow used in investing             |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|activities                              |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Organization
      costs                |   | -                           |   |   | -                           |   |   | -             |   |   | -          |   |                 | (750             | )
|Acquisition
      of capital assets     |   | -                           |   |   | -                           |   |   | -             |   |   | (2,279     | ) |                 | (2,279           | )
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|Net cash used in investing activities   |   | -                           |   |   | -                           |   |   | -             |   |   | (2,279     | ) |                 | (3,029           | )
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|                                        |   |                             |   |   |                             |   |   |               |   |   |            |   |                 |                  |  
|/Contd.                               

SEE ACCOMPANYING NOTES

---

Continued

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) INTERIM CONSOLIDATED STATEMENTS OF CASH FLOW
  for the three and nine months ended September 30, 2002 and 2001
  and February 28, 1989 (Date of Inception) to September 30, 2002
  (Stated in US Dollars) (Unaudited)

|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 | Cumulative       |  
|------------------------------------- | - | ------------------- | - | - | ------------------- |  | - | --------------------- |  | - | ------- |  | --------------- | ---------------- | -
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 | from February    |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 | 28,
        1989 |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  | (Date of Incep- |                 
|                                      |   | Three months        |   |   | Nine months         |  |   | tion)
        to      | 
|                                      |   | ended September 30, |   |   | ended September 30, |  |   | September
        30, | 
|                                      |   | 2002                |   |   | 2001                |  |   | 2002                  |  |   | 2001    |  |                 | 2002             |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Cash flows from financing activities: |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Loans payable                         |   | (9,855              | ) |   | 44,368              |  |   | 422                   |  |   | 70,551  |  |                 | 71,109           |  
|Proceeds from
      issuance of       |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|common
      stock                    |   | -                   |   |   | 90,000              |  |   | -                     |  |   | 304,743 |  |                 | 776,042          |  
|Payment of offering
      costs       |   | -                   |   |   | -                   |  |   | -                     |  |   | -       |  |                 | (27,270          | )
|Contributed capital                   |   | -                   |   |   | -                   |  |   | -                     |  |   | -       |  |                 | 25,442           |  
|Share subscriptions                   |   | 5,077               |   |   | -                   |  |   | 5,077                 |  |   | -       |  |                 | 5,077            |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Net cash provided by (used in)        |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|financing activities                  |   | (4,778              | ) |   | 134,368             |  |   | 5,499                 |  |   | 375,294 |  |                 | 850,400          |  
|Net increase in cash                  |   | 60                  |   |   | 21,409              |  |   | 127                   |  |   | 20,293  |  |                 | 183              |  
|Cash, beginning of period             |   | 123                 |   |   | 265                 |  |   | 56                    |  |   | 1,381   |  |                 | -                |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Cash, end of period                   | $ | 183                 |   | $ | 21,674              |  | $ | 183                   |  | $ | 21,674  |  | $               | 183              |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Supplementary disclosureof cash       |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|flow information:                     |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Cash paid for:                        |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Interest                              | $ | -                   |   | $ | -                   |  | $ | -                     |  | $ | -       |  |                 |                  |  
|                                      |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  
|Income
      taxes                    | $ | -                   |   | $ | -                   |  | $ | -                     |  | $ | -       |  |                 |                  |  
|Non-cash Transactions  Note
      6  |   |                     |   |   |                     |  |   |                       |  |   |         |  |                 |                  |  

SEE ACCOMPANYING NOTES

---

**STRATEGIC INTERNET INVESTMENTS,
  INCORPORATED** (A Development Stage Company) NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  September 30, 2002 
  (Stated in US Dollars) (Unaudited)

Note 1          Interim
  Reporting

> While the information presented
>       in the accompanying interim nine months financial statements is unaudited,
>       it includes all adjustments which are, in the opinion of management, necessary
>       to present fairly the financial position, results of operations and cash
>       flows for the interim periods presented. All adjustments are of a normal
>       recurring nature. It is suggested that these interim financial statements
>       be read in conjunction with the Companys December 31, 2001 annual
>       financia l statements.

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 September 30, 2002, the Company has a working
>       capital deficiency of $296,509, which is not sufficient to meet its planned
>       business objectives or ongoing operations for the next fiscal year. The
>       Company has accumulated losses of $3,001,912 since its commencement. Its
>       ability to continue as a going concern is dependent upon the ability of
>       the Company to obtain 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 8351630 Canada Inc. The subsidiary
>       companies were incorporated by the Company in March 2001 and are dormant.

Note 4          Prepaid
  Expenses  Note 8

> Included in prepaid expenses
>       is $35,733 of prepaid consulting fees. These consulting fees were paid by
>       way of the issuance of a total of 178,665 common shares at $0.20 per share
>       and represent the unvested portion thereof.

Note 5          Capital
  Stock  Notes 7 and 8

> Commitments
>     Share Purchase Warrants
>     At September 30, 2002, there
>       were 350,000 share purchase warrants outstanding entitling the holders thereof
>       the right to purchase one common share at $0.70 per share for each warrant
>       held. These warrants expire on September 11, 2003.

---

Strategic Internet Investments,
  Incorporated(A Development Stage Company) Notes to the Interim Consolidated Financial Statements
  September 30, 2002
  (Stated in US Dollars) (Unaudited)

Note 5          Capital
  Stock  Notes 7 and 8  (contd)

> Commitments  (contd)
>     Stock Options
>     At September 30, 2002, there
>       were a total of 380,000 share purchase options outstanding, as to an officer,
>       directors and employees, 270,000, and as to consultants, 110,000, entitling
>       the holders thereof the right to purchase one common share for each option
>       held at $0.50 per share. These options expire on October 23, 2005.

Note 6          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     |  | Price             |  |        
| | ---- |  | --------------------- |  | ----------------- |  | -------
| |      |  | Common
        Shares |  | Per
        Share |  | $      
| |      |  |                       |  |                   |  |        
| | 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 |  | 1,148,029             |  | $0.20             |  | 229,606
| |      |  |                       |  |                   |  |        
| |      |  | 9,051,362             |  |                   |  | 360,973
| |      |  |                       |  |                   |  |        

> These amounts have been excluded from the statement
>       of cash flows.

Note 7          Commitments

> i) By a Letter Agreement dated
>       July 11, 2002, with Star Leisure & Entertainment Inc. (Star Leisure),
>       a related company based in British Columbia, the Company agreed to purchase
>       80% of the outstanding share capital of Gulf Star World Development W.L.L.
>       (Gulf Star), a Bahrain Corporation. Gulf Star holds 100% of
>       the rights to develop an integrated real estate and tourism project on an
>       island off the north-eastern coast of Manama, Bahrain. The Company will
>       earn its 80% interest in Gulf Star by issuing 5,000,000 escrow shares to
>       be earned out on the basis of stages of development of the project over
>       a three year period. The Company must also formulate a comprehensive funding
>       plan on a best efforts basis to secure the necessary debt/or equity financing
>       to complete the project. The Company has further agreed to pay to Star Leisure
>       US$100,000 within three months of the date of the Letter Agreement (unpaid)
>       to re-imburse Star Leisure for a portion of its preliminary start-up and
>       development costs including engineers, design, administrative and professional
>       work. The Company also has agreed to re-imburse

---

Strategic Internet Investments,
  Incorporated(A Development Stage Company) Notes to the Interim Consolidated Financial Statements
  September 30, 2002
  (Stated in US Dollars) (Unaudited)

Note 7          Commitments
  (contd)

| | i)  | (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      | Star Leisure and Jzala
        Investment Group (20% shareholder of Gulf Star) for hard 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;                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ii)  | By an Assignment
        Agreement dated August 9, 2002, Star Leisure has assigned to the Company
        all benefits and obligations under a dredging and reclamation construction
        contract (Dredging Contract), to begin construction of the
        man-made island for the real estate and tourism project noted above. Under
        the terms of the Dredging Contract the Company will be obligated to issue
        $5,075,000 face value Series A Convertible Preferred Shares as full payment.

Note 8          Subsequent
  Events  Note 4

| | i)  | The Company terminated
        a consulting agreement with 50,000 common shares remaining to be vested
        to a consultant at $0.20 per share. These shares were previously issued
        and will be cancelled.                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                         
| | ii) | On July 10, 2002, the Company
        entered into a promotion and capital funding agreement with Crescent Fund
        Inc. (Crescent), a Texas corporation located in New York,
        New York. This agreement was terminated on October 28, 2002.



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