UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the Quarterly
Period ended September 30, 2014
Commission File No. 033-28188
STRATEGIC
INTERNET INVESTMENTS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware |
84-1116458 |
State
of incorporation |
IRS
Employer Identification |
24 First Avenue East, STE C
P.O. Box 918
Kalispell, Montana 59903
Address of principal executive offices
406-552-1170
Registrant’s telephone number
Indicate by check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) |
Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Common
shares outstanding as of October 31, 2014: 36,359,391
Part
I – Financial Information
Forward Looking Statements.
This report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue”
or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
“Risk Factors” and the risks set out below, any of which may cause our or our
industry’s actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements.
These risks include, by way of
example and not in limitation:
-
results of initial feasibility,
pre-feasibility and feasibility studies, and the possibility that future real
estate development results will not be consistent with our expectations;
-
real estate development risks,
including risks related to accidents, equipment breakdowns, labour disputes
or other unanticipated difficulties or interruptions in development
construction;
-
the potential for delays in
development activities or the completion of feasibility studies;
-
risks related to the inherent
uncertainty of cost estimates and the potential for unexpected costs and
expenses;
-
risks related to commodity
price fluctuations;
-
the uncertainty of
profitability based upon our history of losses;
-
risks related to failure to
obtain adequate financing on a timely basis and on acceptable terms for our
planned development projects;
-
risks related to environmental
regulation and liability;
-
risks that the amounts reserved
or allocated for environmental compliance, reclamation, control measures,
monitoring and on-going maintenance may not be sufficient to cover such
costs;
-
risks related to tax
assessments;
-
political and regulatory risks
associated with real estate development; and
-
other risks and uncertainties
related to our prospects, properties and business strategy.
This list is not an exhaustive
list of the factors that may affect any of our forward-looking statements.
These and other factors should be considered carefully and readers should not
place undue reliance on our forward-looking statements.
The Company intends that such
forward-looking statements be subject to the Safe Harbors for such statements.
Forward looking statements are made based on management’s beliefs, estimates
and opinions on the date the statements are made and we undertake no obligation
to update forward-looking statements if these beliefs, estimates and opinions
or other circumstances should change. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our financial statements are
stated in United States dollars (US$) and are prepared in accordance with
United States Generally Accepted Accounting Principles.
In this report, unless otherwise
specified, all dollar amounts are expressed in United States dollars and all
references to “common stock” refer to the common shares in our capital stock. As used in this report, the terms “we”, “us”, “our”, the
“Company” and “Strategic” mean Strategic Internet Investments,
Incorporated, unless otherwise indicated.
1.
Financial Statements
STRATEGIC
INTERNET INVESTMENTS, INCORPORATED
INTERIM FINANCIAL
STATEMENTS
September 30, 2014
(Unaudited)
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
INTERIM BALANCE SHEETS
(Unaudited)
|
|
September 30,
2014
|
|
|
|
December 31,
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
Cash |
$ |
2,092 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$ |
2,092 |
|
|
$ |
3 |
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
Accounts payable |
$ |
86,400 |
|
$
|
|
91,380 |
|
Accounts payable – related party |
|
111,111 |
|
|
|
121,348 |
|
Accrued interest |
|
3,060 |
|
|
|
- |
|
Accrued interest – related party |
|
404,838 |
|
|
|
345,406 |
|
Convertible note payable |
|
50,000 |
|
|
|
- |
|
Loans and convertible notes payable- related party |
|
787,785 |
|
|
|
814,626 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
1,443,194 |
|
|
|
1,372,760 |
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
Capital Stock
|
|
|
|
|
|
|
|
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 36,359,391 (2013: 35,159,391) issued and outstanding |
|
36,359 |
|
|
|
35,159 |
|
Additional paid-in capital
|
|
11,857,533 |
|
|
|
11,808,733 |
|
Accumulated deficit
|
|
(13,335,192 |
) |
|
|
(13,216,847 |
) |
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT
|
|
(1,441,102 |
) |
|
|
(1,372,757 |
) |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
$ |
2,092 |
|
$
|
|
3 |
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and audit fees |
$ |
9,644 |
|
$ |
6,570 |
|
$ |
39,443 |
|
$ |
41,052 |
|
Communications |
|
247 |
|
|
131 |
|
|
670 |
|
|
1,733 |
|
Consulting fees |
|
- |
|
|
- |
|
|
- |
|
|
1,196,510 |
|
Legal fees |
|
- |
|
|
- |
|
|
344 |
|
|
806 |
|
Management fees |
|
1,000 |
|
|
4,800 |
|
|
13,302 |
|
|
122,750 |
|
Office and general |
|
355 |
|
|
182 |
|
|
749 |
|
|
930 |
|
Regulatory fees |
|
8,952 |
|
|
2,085 |
|
|
10,300 |
|
|
11,368 |
|
Transfer agent fees |
|
375 |
|
|
375 |
|
|
1,125 |
|
|
1,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(20,573 |
) |
|
(14,143 |
) |
|
(65,933 |
) |
|
(1,376,674 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
items
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
(21,827 |
) |
|
(18,581 |
) |
|
(62,492 |
) |
|
(53,812 |
) |
Gain (loss) on foreign exchange |
|
9,459 |
|
|
(4,980 |
) |
|
10,080 |
|
|
7,561 |
|
Loss on settlement of payables |
|
- |
|
|
- |
|
|
- |
|
|
(1,364,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period
|
$ |
(32,941 |
) |
$ |
(37,704 |
) |
$ |
(118,345 |
) |
$ |
(2,787,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
outstanding
|
|
36,359,391 |
|
|
35,159,391 |
|
|
35,625,325 |
|
|
33,671,284 |
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
INTERIM STATEMENTS OF CASH FLOWS
September 30, 2014
(Unaudited)
|
|
Nine months ended September 30, |
|
|
|
2014
|
|
|
2013
|
|
Operating
Activities
|
|
|
|
|
|
|
Net loss |
$ |
(118,345 |
) |
$ |
(2,787,682 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Loss on settlement of payables |
|
- |
|
|
1,364,757 |
|
Unrealized foreign exchange loss (gain) |
|
(2,913 |
) |
|
(2,078 |
) |
Stock-based compensation |
|
- |
|
|
1,302,110 |
|
Changes in non-cash item: |
|
|
|
|
|
|
Accounts payable |
|
(4,980 |
) |
|
(1,191 |
) |
Accounts payable - related party |
|
(10,237 |
) |
|
2,814 |
|
Accrued interest |
|
3,060 |
|
|
- |
|
Accrued interest - related party |
|
59,432 |
|
|
53,812 |
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
(73,983 |
) |
|
(67,458 |
) |
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
50,000 |
|
|
- |
|
Proceeds from loans and convertible notes |
|
50,000 |
|
|
98,610 |
|
Repayment of loans - related party |
|
(23,928 |
) |
|
(32,550 |
) |
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
76,072 |
|
|
66,060 |
|
|
|
|
|
|
|
|
Change
in cash during the period
|
|
2,089 |
|
|
(1,398 |
) |
|
|
|
|
|
|
|
Cash,
beginning of the period
|
|
3 |
|
|
1,937 |
|
|
|
|
|
|
|
|
Cash,
end of the period
|
$ |
2,092 |
|
$ |
539 |
|
|
|
|
|
|
|
|
Non-cash
financing and investing activities:
|
|
|
|
|
|
|
Shares
issued for conversion of debt
|
$ |
- |
|
$ |
367,434 |
|
Payment
of accounts payable by related party
|
$ |
- |
|
$ |
6,462 |
|
|
|
|
|
|
|
|
Supplementary
disclosure of cash flows:
|
|
|
|
|
|
|
Cash paid for Interest |
$ |
- |
|
$ |
- |
|
The accompanying notes are an integral part of these unaudited financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
|
The accompanying unaudited interim financial statements have been prepared by 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, 2013, included in the Company’s 10-K Annual Report as filed with the United States Securities and Exchange Commission. |
|
The results of operations for the period ended September 30, 2014 are not indicative of the results that may be expected for the full year. |
|
During the period ended September 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the company to remove the inception to date information and all references to development stage. |
|
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At September 30, 2014, the Company had not yet achieved profitable operations, has an accumulated deficit of $13,335,192 since its inception, has a working capital deficiency of $1,441,102 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. Management anticipates that it requires approximately $95,000 over the twelve months ended September 30, 2015 to continue operations as well as the Company estimates it will accrue interest expenses of $80,000 over the next 12 months on loans due to related parties. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totalling $1,443,194. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes. |
|
The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available. The Company has historically satisfied its capital needs primarily by issuing equity securities. Management plans to continue to provide for its capital needs during the twelve months ended September 30, 2015, by issuing equity securities and/or related party advances. |
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
3.
|
Loans and Convertible Notes Payable - Related Party
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
a) |
Loan
payable to a company controlled by a director of the Company plus accrued
interest of $14,101 (2013 - $12,332). The loan is unsecured, bearing
interest at 12% per annum and is repayable on demand.
|
$ |
6,802 |
|
$ |
6,802 |
|
|
|
|
|
|
|
|
|
|
|
b) |
Loans
payable to companies controlled by directors of the Company. The loans are
unsecured, non-interest bearing, and repayable upon demand.
|
|
362,008 |
|
|
388,849 |
|
|
|
|
|
|
|
|
|
|
|
c) |
Loan
payable to a company controlled by a director of the Company, plus accrued
interest payable of $156,656 (2013 - $133,837), pursuant to a Convertible
Loan Agreement. The loan is unsecured, bearing interest at 10% per annum and
is repayable on demand. The lender may at anytime convert the principal sum
into units of the Company. Each unit will consist of one common share plus
one common share purchase warrant. Each warrant is exercisable for a period
of 2 years from the date of conversion at a price ranging from $0.05 to
$0.23. The principal sum of $163,766 may be converted into 2,320,858 units.
Conversion of these loans and resulting associated warrants to equity will be
based on the conversion price set at the time the principal amount was drawn
ranging from $0.05 to $0.23. Upon conversion of this loan, the $73,685 fair
value of the warrants will be recognized as an interest expense and credited
to additional paid-in capital.
|
|
163,766 |
|
|
163,766 |
|
|
|
|
|
|
|
|
|
|
|
d) |
Loan
payable to a company controlled by a director of the Company, plus accrued
interest of $234,081 (2013 - $199,237), pursuant to a Convertible Loan
Agreement. The loan is unsecured, bearing interest at 10% per annum and is
repayable on demand. The lender may at anytime convert the principal sum
into units of the Company. Each unit will consist of one common share plus
one common share purchase warrant. Each warrant is exercisable for a period
of 2 years from the date of conversion at a price ranging from $0.05 to
$0.12. The principal sum of $255,209 may be converted into 4,526,436 units.
Conversion of this loan and resulting associated warrants to equity will be
based on the conversion price set at the time the principal amount was drawn
ranging from $0.05 to $0.12. Upon conversion of this loan, the $113,338 fair
value of the warrants will be recognized as an interest expense and credited
to additional paid-in capital.
|
|
255,209 |
|
|
255,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
787,785 |
|
$ |
814,626 |
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2014
(Unaudited)
4.
|
Convertible Note Payable
|
|
The Company entered into a convertible note agreement for $50,000. This loan is unsecured, bearing interest at 10% per annum, and is repayable at maturity on January 7, 2015. At any time prior to maturity, the lender may convert the principle amount of the loan into units of the Company, each unit consisting of one common share and one non-transferable share purchase warrant, at a conversion rate of $0.20 per unit. Each share purchase warrant entitles the holder to purchase one additional common share for a period of two years from the warrant issue date, at an exercise price of $0.20 during the first year, and $0.35 during the second year. As of September 30, 2014, $3,060 was accrued in interest on the note. |
|
During the nine months ended September 30, 2014, the Company issued 1,200,000 common shares for proceeds of $50,000. |
6.
|
Related Party Transactions
|
|
At September 30, 2014, accounts payable includes $111,111 due to directors, a company controlled by a director of the Company, and a company with directors in common, in respect of unpaid management fees, expenses incurred on behalf of the Company, and operating costs paid on behalf of the Company. |
|
At September 30, 2014, accrued interest includes $404,838 due to companies controlled by directors of the Company. |
|
Subsequent to September 30, 2014, the Company initiated a non-brokered private placement of 500,000 common shares priced at $0.08 per share and has received cash proceeds of $40,000. These shares have not yet been issued. |
2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
The following
discussion should be read in conjunction with our unaudited interim financial
statements and the related notes that appear elsewhere in this quarterly
report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this annual report.
Our unaudited interim financial
statements are stated in United States dollars and are prepared in accordance
with United States generally accepted accounting principles (“GAAP”).
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.
Plan of Operation
The Company has been
devoting its business efforts to real estate development projects located in
Europe and the Middle East. The Company will continue to explore new investment
opportunities, including real estate development projects, during its 2014
fiscal year.
On August 20, 2012,
Strategic Internet Investments, Incorporated (“SIII”) signed a Letter of Intent
(the "LOI") with G7 Entertainment Limited (“G7”), a private company
controlled by Mr. Abbas Salih, a director and officer of SIII. The LOI sets out
the terms and conditions that will allow SIII to acquire certain real estate
assets located in the United Kingdom (“UK”). The assets are held under contractual
rights by G7 as outlined within various Joint Venture Agreements (the "JV
Agreements ") between G7 and four UK corporations. The JV Agreements outline
the terms and conditions of the formation of a joint venture between G7 and the
respective real estate owners whereby G7 intends to facilitate the refinancing of
existing mortgages in exchange for a 60% interest in each Joint Venture, which
Joint Venture will hold title to the real estate assets. After completing
its due diligence on this investment opportunity, the Company decided not
to proceed with this investment and on June 11, 2014 notified G7 that it
was terminating the LOI.
On February 20, 2013, SIII
signed a Memorandum of Understanding (the "MOU") with the following
parties: Gary Keeley, Anjum Ahmed, Kevin O’Brien, Milton Thompson and G7
Entertainment Limited (“G7”), a non-arms length private British Columbia
Corporation majority controlled by Mr. Abbas Salih, a director and officer of
SIII. The MOU sets out the terms and conditions that will allow SIII to acquire
up to a majority 80% interest in a private company that will be formed as
Special Purpose Vehicle (the “SPV”), in return for funding up to USD $4 million
of the SPV’s initial business development. The SPV will acquire
the exclusive worldwide intellectual property (IP) licensing rights, permitting
it to design, manufacture (outsourced), market and license out secure RFiD
(Radio Frequency Identification) patented security authorization systems
developed and patented by Mr. Milton Thompson. The Company has decided not to
pursue this investment and has withdrawn from the MOU, effective February 19,
2014.
On June 10, 2014 SIII
entered into a Sales and Purchase Agreement (the “Agreement”) with PG Proje
Gelistirme Gayrimenkul Kiralama ve insaat A.S. (“PG”) and Star Leisure &
Entertainment Inc. (“Star Leisure”). This is a non-arm’s length transaction on
the basis that Mr. Abbas Salih is a controlling shareholder and Director of
both SIII and Star Leisure and will indirectly hold a minor interest in PG. PG
is the owner of certain retail real estate in Turkey, namely the Akcenter
Outlet and Shopping Center (the “Property”).
Star Leisure and SIII
(jointly the “Purchasers”) have agreed to organize funding to purchase the real
estate property of PG. The Purchasers intend to finance the acquisition price
of Euro 60,000,000 through a combination of, bank loans for up to 50% of the
acquisition price and by way of issuance of SIII equity. As funding has not
yet been fully secured for this transaction, there can be no assurances the
transaction will proceed and SIII management cautions investors of this risk.
Our
estimated cash expenses over the next twelve months are as follows:
Accounting,
audit, and legal fees
|
$ |
50,000 |
|
General
and administrative expenses
|
|
4,000 |
|
Interest
|
|
5,000 |
|
Management
fees
|
|
19,000 |
|
Regulatory
and transfer agent fees
|
|
17,000 |
|
|
$ |
95,000 |
|
The Company also estimates it
will continue to accrue interest expense of $80,000 over the next 12 months on
loans due to related parties. It is not anticipated the related party interest
will be paid in cash during 2014, and therefore interest has been excluded from
the above list of cash expenses.
To date we have funded our operations primarily with
loans from shareholders and issue new equity. In addition to funding the
Company’s general, administrative and corporate expenses the Company is
obligated to address its current obligations totalling $1,443,194. To the
extent that cash needs are not achieved from operating cash flow and existing
cash on hand, the Company will be required to raise necessary cash through
shareholder loans, equity issuances and/or other debt financing. Amounts raised
will be used to continue the development of the Company's investment
activities, and for other working capital purposes, which may be dilutive to
existing shareholders. The Company currently has no agreement in place to raise
funds for current liabilities and no guarantee can be given that we will be
able to raise funds for this purpose on terms acceptable to the company.
Failure to raise funds for general, administrative and corporate expenses and
current liabilities could result in a severe curtailment of the Company’s
operations.
Any advance in the
real estate development strategy set-out herein will require additional funds.
These funds may be raised through equity financing, debt financing or other
sources which may result in further dilution of the shareholders percentage
ownership in the company. See “Future Financing” below.
Results of Operations
During the quarter
ended September 30, 2014, the Company incurred general and administrative
expenses totaling $20,573 compared to $14,143 during the same period of the
previous year.
The volume of
transactions and business activities has changed little compared to the prior
year. The significant changes in our expenses for the three month period ended September
30, 2014 when compared to the three month period ended September 30, 2013 was
primarily due to:
a)
|
The 2014 accounting and audit fees is $9,644 compared to $6,570 in the 2013 period. The $3,074 increase in accounting and audit fees from 2013 to 2014 is mainly due to timing differences in the dates of the preparation of the 2013 annual 10-K report and audited financial statements, and both the March 31, 2014 and June 30, 2014 10-Q quarterly reports.
|
b)
|
Management fees relate to a director engaged in October 2012 to provide general management and administrative services. This director was partially remunerated by fees of $20 per hour for time spent directly managing the Company’s affairs. In addition, in January 2013, the Company agreed to pay another director/officer a management stipend. The management fees charged by these two directors for the period ended September 30, 2014 were $1,000 compared to $4,800 in the 2013 period.
|
c) |
Interest on loans increased by $3,246; this is attributed to the compounding effect of the quarterly interest calculation as the Company has not been making any payments on these debts. Plus interest incurred on a new $50,000 loan. |
d)
|
Regulatory fees relate to charges by EDGAR/SEDAR regulatory filing service providers for making submissions to the regulatory authorities, as well as fees paid to the regulators themselves. The 2014 Q3 period was $6,867 higher primarily due to a timing difference on the payment of certain regulatory reports.
|
The significant
changes in our expenses for the nine month period ended September 30, 2014 when
compared to the nine month period ended September 30, 2013 was primarily due
to:
a)
|
Consulting fees were nil compared to $1,196,510 in the 2013 period. In the 2013 period, the Company engaged two consultants in March 2013 to provide public relations and promotional services over a twelve month period. These consultants were remunerated by the issuance of restricted common shares. There were no new consulting agreements in the 2014 fiscal period.
|
b) |
Management fees relate to a director engaged to provide general management and administrative services. This director was partially remunerated by fees of $20 per hour for time spent directly managing the Company’s affairs. And in January 2013, the Company agreed to pay another director/officer a management stipend. The management fees charged by these two directors for the 2014 period were $13,302 compared to $17,150 in the 2013 period. In addition, during the comparative 2013 period, pursuant to a Management Services Agreement with a director, as partial remuneration for management services, the Company agreed to issue 320,000 common shares to the Director. The Company recognized share based compensation of $105,600 in 2013. These shares were issued on February 19, 2013; there was no similar issuances of shares in 2014. |
c)
|
Interest on loans increased by $8,680; this is attributed to the compounding effect of the quarterly interest calculation as the Company has not been making any payments on these debts. Plus interest incurred on a new $50,000 loan.
|
Funding for operating
and investing activities was provided by both non-interest and interest bearing
advances and loans from related parties, including directors of the Company,
and companies controlled by these directors; plus loans and equity investments
from third parties.
As of September 30,
2014, the Company had total current assets of $2,092 and total liabilities of $1,443,194.
The Company had cash of $2,092 and a working capital deficiency of $1,441,102 as
of September 30, 2014 compared to cash on hand of $3 and a working capital
deficiency of $1,372,757, for the year ended December 31, 2013. We anticipate
that we will incur approximately $95,000 for cash operating expenses, including
professional, legal and accounting expenses associated with our reporting
requirements under the Exchange Act during the next twelve months. In addition
to funding the Company’s general, administrative and corporate expenses the
Company is obligated to address its current obligations totaling $1,443,194. To
the extent that cash needs are not achieved from operating cash flow and
existing cash on hand, the Company will be required to raise necessary cash
through shareholder loans, equity issuances and/or other debt financing.
Amounts raised will be used to continue the development of the Company's
investment activities, and for other working capital purposes. Accordingly, we
will need to obtain additional financing in order to continue our planned
business activities.
Cash used in operating activities for the period ended
September 30, 2014 was $73,983 as compared to cash used by operating activities
for the same period in 2013 of $67,458. The increase in cash used in
operating activities was primarily due to a reduction in accounts payable.
The Company has the
following loans outstanding as of September 30, 2014:
A $6,802 loan is
payable to a company controlled by a director of the Company plus accrued
interest of $14,101. This loan is unsecured, bearing interest at 12% per annum
and is repayable on demand.
Loans totaling $362,008
are payable to companies controlled by directors of the Company. These loans
are unsecured, non-interest bearing, and repayable upon demand.
A $163,766 loan is
payable to a company controlled by a director of the Company, plus accrued
interest payable of $156,656 pursuant to a Convertible Loan Agreement. The
loan is unsecured, bearing interest at 10% per annum and is repayable on demand.
The lender may at anytime convert the principal sum into units of the Company.
Each unit will consist of one common share plus one common share purchase
warrant. The principal sum of $163,766 may be converted into 2,320,858 units.
Conversion of these loans and resulting associated warrants to equity will be
based on the conversion price set at the time the principal amount was drawn
ranging from $0.05 to $0.23.
A
$255,209 loan is payable to a company controlled by a director of the Company,
plus accrued interest of $234,081 pursuant to a Convertible Loan Agreement.
The loan is unsecured, bearing interest at 10% per annum and is repayable on
demand. The lender may at anytime convert the principal sum into units of the
Company. Each unit will consist of one common share plus one common share
purchase warrant. The principal sum of $255,209 may be converted into
4,526,436 units. Conversion of this loan and resulting associated warrants to
equity will be based on the conversion price set at the time the principal
amount was drawn ranging from $0.05 to $0.12.
A
$50,000 loan payable, plus accrued interest of $3,060, pursuant to a
Convertible Loan Agreement. This loan is unsecured, bearing interest at 10% per
annum, and is repayable at maturity on January 7, 2015. At any time prior to
maturity, the lender may convert the principle amount of the loan into units of
the Company, each unit consisting of one common share and one non-transferable
share purchase warrant, at a conversion rate of $0.20 per unit. Each share
purchase warrant entitles the holder to purchase one additional common share
for a period of two years from the warrant issue date, at an exercise price of
$0.20 during the first year, and $0.35 during the second year.
Going Concern
The unaudited financial statements accompanying this
report have been prepared on a going concern basis, which implies that our
company will continue to realize its assets and discharge its liabilities and
commitments in the normal course of business. Our company has not generated
revenues since inception and has never paid any cash dividends and is unlikely
to pay cash dividends or generate earnings in the immediate or foreseeable
future. The continuation of our company as a going concern is dependent upon
the continued financial support from related party advances, the ability of our
company to obtain necessary equity financing to achieve our operating
objectives, and the attainment of profitable operations. As of September 30,
2014, we had cash of $2,092 and we estimate that we will require approximately
$95,000 to fund our business operations over the next twelve months. In
addition to funding the Company’s general, administrative and corporate
expenses the Company is obligated to address its current obligations totalling $1,443,194.
To the extent that cash needs are not achieved from operating cash flow and
existing cash on hand, the Company will be required to raise necessary cash
through shareholder loans, equity issuances and/or other debt financing. Amounts
raised will be used to continue the development of the Company's investment
activities, and for other working capital purposes.
Accordingly, we do not have
sufficient funds for planned operations and we will be required to raise
additional funds for operations.
These
circumstances raise substantial doubt about our ability to continue as a going
concern, as described in the Note 2 of our September 30, 2014 unaudited
financial statements. The financial statements do not include any adjustments
that might result from the outcome of that uncertainty. The continuation of
our business is dependent upon us raising additional financial support. The
issuance of additional equity securities by us could result in a significant
dilution in the equity interests of our current stockholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments.
There are
no assurances that we will be able to obtain further funds required for our
continued operations. We are pursuing various financing alternatives to meet
our immediate and long-term financial requirements. There can be no assurance
that additional financing will be available to us when needed or, if available,
that it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will be forced to scale
down or perhaps even cease the operation of our business.
Future Financings
As of September
30, 2014,
we had cash of $2,092 and we estimate that we will require approximately $95,000
to fund our business operations over the next twelve months. In addition to
funding the Company’s general, administrative and corporate expenses the
Company is obligated to address its current obligations totaling $1,443,194.
Accordingly, we do not have sufficient funds for planned operations and we will
be required to raise additional funds for operations. We anticipate continuing
to rely on equity sales of our common shares or shareholder loans in order to
continue to fund our business operations. Issuances of additional shares will
result in dilution to our existing stockholders. There is no assurance that we
will achieve any additional sales of our equity securities or arrange for debt
or other financing to fund our planned activities.
Off-balance sheet arrangements
As of the date of this Report, the Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on the company's financial condition, change in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. The term "off-balance
sheet arrangement" generally means any transaction, agreement, or other
contractual arrangement to which an entity unconsolidated with the Company is a
party under which the Company has (i) any obligation arising under a guarantee
contract, derivative instrument or variable interest; or (ii) a retained or contingent
interest in assets transferred to such entity or similar arrangement that
serves as credit, liquidity or market risk support for such assets.
3.
Quantitative
and Qualitative Disclosures About Market Risk
The Company has
no market risk sensitive instruments.
4. Controls and
Procedures
As required by Rule
13(a)-15 under the Exchange Act, in connection with this quarterly report on
Form 10-Q, under the direction of our Chief Executive Officer and Chief
Financial Officer, we have evaluated our disclosure controls and procedures as
of September 30, 2014,
our disclosure controls and procedures were ineffective. As of the date of this
filing, we are still in the process of remediating such material weaknesses in
our internal controls and procedures. Additionally, we are currently inactive
as we seek new business opportunities.
It should be noted
that while our management believes our disclosure controls and procedures
provide a reasonable level of assurance, they do not expect that our disclosure
controls and procedures or internal controls will prevent all error and all
fraud. A control system, no matter how well conceived or operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of internal control is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
There were no changes
in our internal control over financial reporting during the period ended September
30, 2014 that have materially affected or are reasonably likely to materially
affect, our internal control over financial reporting.
Part II – Other Information
1. Legal Proceedings
On
January 24, 2013 a vendor filed a claim against the Company for unpaid filing
services invoices in the amount of Cdn$5,124.00, plus court costs of
Cdn$326.00. At a settlement hearing held on December 10, 2013, at the
Provincial Court of British Columbia (Small Claims) the Company agreed to pay
the vendor Cdn$5,300.00. This debt was paid in full during the period ended September
30, 2014.
We know of no other material,
active, or pending legal proceeding against our Company, nor are we involved as
a plaintiff in any material proceeding or pending litigation where such claim
or action involves damages for more than 10% of our current assets. There are
no proceedings in which any of our Company’s directors, officers, or
affiliates, or any registered or beneficial shareholders, is an adverse party
or has a material interest adverse to our company’s interest.
1.A
Risk Factors
Not applicable
2. Unregistered Sales of
Equity Securities
Sales of Securities
Without Registration Under the Securities Act of 1933
On August 10, 2003 the Company entered into a Convertible Loan Facility
Agreement with Star Leisure & Entertainment Inc. (“Star Leisure”), a
company controlled by a Director and Officer of Strategic, whereby the Company
would, from time to time, borrow operating funds from Star Leisure, at an
interest rate of 10%, repayable on demand. The lender has the right to convert
all or part of the principal sum into units at a conversion rate which is
calculated at a discount to the average closing market price for ten days
preceding a loan advance. Each unit consists of one common share of the Company
and one non-transferable share purchase warrant, expiring 2 years from the
conversion date, exercisable at the applicable conversion rate. On August 31,
2008 the Company entered into agreements to transfer previous advances and
accrued interest to convertible loans under the Convertible Loan Facility
Agreement. At September 30, 2014, the Star Leisure loan principal was $255,209.
The loan principal is convertible into 4,526,436 units at conversion price
ranging from $0.05 to $0.12 as set at the time the principal was borrowed.
Star Leisure has not converted any part of the principal sums advanced into
units as of September 30, 2014. This transaction is with an offshore non-U.S.
person; accordingly, these securities are exempt from registration pursuant to
Regulation S.
On May 5, 2006 the
Company entered into a Convertible Loan Facility Agreement with CMB Investments
Ltd. (“CMB”), a company controlled by a Director of Strategic, whereby the
Company would, from time to time, borrow operating funds from CMB, at an
interest rate of 10%, repayable on demand. The lender has the right to convert
all or part of the principal sum into units at a conversion rate which is
calculated at a discount to the average closing market price for ten days
preceding a loan advance. Each unit consists of one common share of the Company
and one share purchase warrant, expiring 2 years from the conversion date,
exercisable at the applicable conversion rate. At September 30, 2014, the CMB
loan principal was $163,766. The loan principal is convertible into 2,320,858
units. Conversion of this loan and associated warrants to equity will be at a
price ranging from $0.05 to $0.23. CMB has not converted any part of the
principal sums advanced into units as of September 30, 2014. This transaction
is with an offshore non-U.S. person; accordingly, these securities are exempt
from registration pursuant to Regulation S.
On October 15, 2012
the Company entered into three agreements to issue a total of 5,249,065
restricted common shares of the Company at $0.07 per share as settlement of
accounts payable due to a director of the Company, a company controlled by a
director of the Company, in respect of unpaid management and consulting fee
debts totaling $350,215, plus a $17,220 debt owed to an arm’s length creditor.
These shares were issued on February 19, 2013. These transactions are with
offshore non-U.S. persons; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.
On August 21, 2012 the
Company entered into a Management Services Agreement with a director (the
“Director”) and an arm’s length consultant (the “Consultant”), for a term of 12
months commencing on October 1, 2012. As partial remuneration for the
management and consulting services the Company agreed to issue 320,000
restricted common shares to the Director, and 480,000 restricted common shares
to the Consultant. These shares were issued on February 19, 2013. As part of
the same agreement, the directors and consultant also received 320,000 and
480,000 stock options respectively with an exercise price of $0.10 expiring
October 15, 2017.
On August 21, 2012 the
Company entered into a Consulting Services Agreement with an arm’s length
consultant (the “Consultant”), for a term of 12 months commencing on October 1,
2012. As partial remuneration for the consulting services the Company agreed to
issue 300,000 restricted common shares to the Consultant. These shares were
issued on February 19, 2013. As part of the same agreement, the consultant also
received 300,000 stock options with an exercise price of $0.10 expiring October
15, 2017.
On March 15, 2013 the
Company entered into two consulting services agreements for a term of 12 months
commencing on March 15, 2013. As remuneration for the consulting services the
Company agreed to issue 1,200,000 restricted common shares to the consultants.
These transactions are with offshore non-U.S. persons; accordingly, these
securities are exempt from registration pursuant to Regulation S, however they
are restricted under Rule 144. These shares were issued on May 9, 2013.
On January 5, 2014 the
Company entered into a Convertible Loan Agreement to borrow $50,000 operating
funds, at an interest rate of 10%, repayable at maturity on January 7, 2015. At
any time prior to maturity, the lender may convert the principle amount of the
loan into units of the Company, each unit consisting of one common share and
one non-transferable share purchase warrant, at a conversion rate of $0.20 per
unit. Each share purchase warrant is entitles the holder to purchase one
additional common share for at period of two years from the warrant issue date,
at an exercise price of $0.20 during the first year, and $0.35 during the
second year. This transaction is with an offshore non-U.S. person; accordingly,
these securities are exempt from registration pursuant to Regulation S.
On June 10, 2014 the
Company entered into a Subscription Agreement to issue 1,200,000 restricted
common shares for $50,000 cash. 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. These shares were
issued on July 17, 2014.
On October 10, 2014
the Company entered into a Subscription Agreement to issue 500,000 restricted
common shares for $40,000 cash. 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. These shares have not
yet been issued.
Purchase of Equity Securities by
the Issuer and Affiliated Purchasers
We did not purchase any of our
shares of common stock or other securities during the period ended September
30, 2014.
3. Defaults Upon Senior
Securities
–
None
4. Submission of Matters
to a Vote of Security Holders
–
None
5. Other Information
–
None
6. Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities 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:
|
December 18, 2014 |
|
/s/
Abbas Salih
|
|
|
|
Abbas
Salih, CEO, CFO, Director
|
Exhibit
31.1 (Amended)
CERTIFICATION
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I, Abbas Salih, certify that:
(1) I have reviewed this Form 10-Q Interim
Report for the period ended September 30, 2014 of Strategic Internet
Investments, Incorporated;
(2) Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
(3) Based on my knowledge, the financial
statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this
report;
(4) I am the registrant's sole certifying
officer, and I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed
under my supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over
financial reporting, or caused such internal control over financial reporting
to be designed under my supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in
the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting; and
(5) As the registrant's sole certifying
officer, I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
|
|
|
|
Date: |
December 18, 2014 |
|
/s/ Abbas Salih |
|
|
|
Abbas Salih, Director, CEO, CFO |
Exhibit
32.1
CERTIFICATION
Pursuant
to 18 U.S.C. Section 1350
As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of
Strategic Internet Investments, Incorporated (the "Company") on Form
10-Q for the period ending September 30, 2014 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"). I, Abbas
Salih, Director of the Company, certify, pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge and belief:
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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December 18, 2014 |
|
/s/ Abbas Salih
|
|
|
|
Abbas Salih, Director, CEO, CFO
|
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