ITEM 1. BUSINESS
Form of Organization
The Company was incorporated in Colorado on February 28, 1989 as Jefferson Capital Corporation. Effective June 13, 1990 the Company changed its name to Ohio & Southwestern Energy Company. Effective July 1, 2001, the Company and Strategic Internet Investments, Incorporated (“Strategic” or “SIII”), an inactive Delaware corporation incorporated on March 2, 2001, were merged. All common shares outstanding of the Company were converted into an equal number of common shares of Strategic. The purpose of this merger was to change the corporate jurisdiction of the Company from Colorado to Delaware and to change the name of the Company. The surviving corporation of the merger is Strategic, a Delaware corporation.
Current Business
The Company is in the development stage, accordingly certain matters discussed herein are based on potential future circumstances and developments, which the Company anticipates, but which cannot be assured.
The Company has been devoting its business efforts to real estate development projects. The Company will continue to explore new investment opportunities, including real estate development projects, during its 2014 fiscal year.
On August 20, 2012, 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, the Company 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, president and CEO 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.
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.
Competition
We are a development stage company engaged in the acquisition of a prospective real estate property. As we currently do not own an interest in any real estate property, we compete with other companies for both the acquisition of prospective properties and the financing necessary to develop such properties.
We conduct our business in an environment that is highly competitive and unpredictable. In seeking out prospective properties, we have encountered intense competition in all aspects of our proposed business as we compete directly with other development stage companies as well as established international companies. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. Accordingly, these competitors may be able to spend greater amounts on the acquisition of prospective properties and on the development of such properties. In addition, they may be able to afford greater expertise in the development real estate properties. This competition could result in our competitors having real estate properties of greater quality and attracting prospective investors to finance the development of such properties on more favorable terms. As a result of this competition, we may become involved in an acquisition with more risk or obtain financing on less favorable terms.
Compliance with Government Regulation
We will not know the government regulations and the cost of compliance with such regulations with which we must comply until such time as we acquire an interest in a particular real estate property. If we are successful in acquiring a property interest, we will be required to comply with the regulations of governmental authorities and agencies applicable to the federal, state or provincial and local jurisdictions where the property is located. Development of real estate properties may require prior approval from applicable governmental regulatory agencies. There can be no assurance that such approvals will be obtained.
If our activities should advance to the point where we engage in real estate development operations, we could become subject to environmental regulations promulgated by federal, state or provincial, and local government agencies as applicable. Environmental legislation provides for restrictions and prohibitions on real estate development which could result in environmental liability. A breach or violation of such legislation may result in the imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental assessments are increasingly imposing higher standards, greater enforcement, fines and penalties for non-compliance. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies, directors, officers and employees. The cost of compliance in respect of environmental regulation has the potential to reduce the profitability of any future revenues that our company may generate.
Employees
The Company currently does not have any employees. All business activities and services are provided by the Company’s directors or consultants.
ITEM 2.
ITEM 2. PROPERTIES.
The Company does not directly or indirectly own or otherwise have any interest in any other real estate, property, capital assets, or leases of assets.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
On January 24, 2013 a vendor filed a claim against the Company for unpaid filing services invoices in the amount of $5,124.00, plus court costs of $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 $5,380.00. The full amount of this debt is included in accounts payable at December 31, 2013 and was paid in full in 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.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURE.
Not applicable.
Part II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Securities
The Company's common shares are quoted and traded on the US OTC Bulletin Board under the symbol "SIII". The range of high and low bid quotations for each quarter within the last two fiscal years, as reported by OTC Markets (www.otcmarkets.com), was as follows:
Year
Period
High(1)
Low(1)
First quarter
$0.18
$0.09
Second quarter
$0.20
$0.09
First quarter
$0.500
$0.120
Second quarter
$0.450
$0.120
Third quarter
$0.450
$0.050
Fourth quarter
$0.400
$0.200
First quarter
$0.015
$0.003
Second quarter
$0.012
$0.003
Third quarter
$0.200
$0.012
Fourth quarter
$0.260
$0.100
1. All prices rounded to 3rd decimal place.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.
Holders of our Common Stock
As of June 30, 2014, we have approximately 138 registered stockholders and 35,159,391 shares issued and outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our future dividend policy will be determined from time to time by our board of directors.
Securities authorized for issuance under equity compensation plans
2002 Stock Award Plan
In 2002, the Company’s board of directors approved a stock award plan. The plan provides both for the direct award or sale of shares, and for the grant of options to purchase shares. Shares may be awarded in consideration of services rendered to the Company. The Company may also grant a 30-day right to purchase shares at a price of not less than 90% of the fair market value of the shares.
Under the plan directors, employees and consultants may be granted incentive stock options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock. The total number of shares awarded under the plan must not exceed 15% of the outstanding common stock of the Company. Certain changes in the capital structure of the Company, such as a stock split or stock dividend, may result in an appropriate adjustment to the number and/or the price of shares issuable under the plan. The plan expires on July 1, 2017.
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 December 31, 2013, the Star Leisure loan principal was $255,209 and had accrued interest of $199,237. The loan principal is convertible into 4,526,436 units at conversion prices 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 December 31, 2013. 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 ten percent (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 December 31, 2013, the CMB loan principal was $163,766 and had accrued interest of $133,837. 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 as set at the time the principal was borrowed. CMB has not converted any part of the principal sums advanced into units as of December 31, 2013. 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 Agreements to issue 1,200,000 restricted common shares for $50,000 cash, which has been received by the Company. This transaction is with an 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 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 year ended December 31, 2013.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual 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 audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles (“GAAP”).
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.
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 the Company has funded its operations primarily with loans from shareholders and issuance of new equity. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,372,760. 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 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
Our operating results for the years ended December 31, 2013 and 2012 are summarized as follows:
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Percentage Increase
(Decrease)
Revenue
-
-
-
Expenses
$(1,461,889)
$(374,249)
219%
Other Income (Expense)
$(1,350,248)
$(1,807)
74,623%
Net Loss
$(2,812,137)
$(376,056)
294%
Revenues
We have had no operating revenues for the years ended December 31, 2013 and 2012. We anticipate that we will not generate any revenues for so long as we are a development stage company.
General and Administrative Expenses
The major components of our general and administrative expenses for the years ended December 31, 2013 and 2012 are outlined in the table below:
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Percentage Increase
(Decrease)
Accounting, audit fees, and legal fees
$ 48,922
$ 64,867
(25%)
Interest
72,863
66,143
10%
Management and consulting fees
1,320,260
226,655
334%
Office and communications
3,773
1,126
235%
Regulatory and transfer agent fees
16,071
15,458
4%
Total Operating Expenses
$1,461,889
$374,249
219%
The increase in our general and administrative expenses for the year ended December 31, 2013 was primarily due to:
e)
Regulatory and transfer agent fees increased $613 due to an increase in the fees charged by EDGAR/SEDAR regulatory filing service providers for making submissions to the regulatory authorities. This increased charges for submission of financial data in a new XBRL format as required by SEC regulations.
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.
LIQUIDITY AND WORKING CAPITAL
As of December 31, 2013, the Company had total current assets of $3 and total liabilities of $1,372,760. The Company had cash of $3 and a working capital deficiency of $1,372,757 as of December 31, 2013 compared to cash on hand of $1,937 and a working capital deficiency of $1,594,921 as of December 31, 2012. 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 $1,372,760. 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 year ended December 31, 2013 was $61,484 compared to cash used by operating activities for the same period in 2012 of $72,424. The decrease in cash used in operating activities was primarily due to the decrease in cash expenditures on accounting, audit, legal, and regulatory fees; partially offset by increases in communications and office expenses.
The Company has the following loans outstanding as of December 31, 2013:
A $6,802 loan is payable to a company controlled by a director of the Company plus accrued interest of $12,332. This loan is unsecured, bearing interest at 12% per annum and is repayable on demand.
Loans totaling $388,849 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 $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. 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 $156,497 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.
Going Concern
The audited 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 our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of June 30, 2014, we had cash of $12,084 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 $1,372,760. 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 subsequent to the year.
These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on the December 31, 2013 and 2012 financial statements which are included with this annual report. 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 June 30, 2014, we had cash of $12,084 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 $1,372,760. Accordingly, we do not have sufficient funds for planned operations and we will be required to raise additional funds for operations after that date. 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
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Employees
The Company currently has no employees. There are no plans to hire additional employees as administrative requirements at are now being adequately met by the efforts of the directors and consultants. Any land development and construction activities will be conducted through consultants and contractors.
New Accounting Standards
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Application of Critical Accounting Estimates
The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
The preparation of our financial statements requires management to make estimates and assumptions regarding future events. These estimates and assumptions affect the reported amounts of certain assets and liabilities, and disclosure of contingent liabilities.
Stock-based Compensation
The Company accounts for stock-based compensation using ASC 718 which requires public companies to recognize the cost of services received in exchange for equity instruments, based on the grant-date fair value of those instruments. The Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of the grant. Option valuation models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions can materially affect the fair value estimate. Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.
Convertible Instruments and Beneficial Conversion Feature
When the Company issues convertible instruments with detachable instruments, the proceeds of the issuance are allocated between the convertible instrument and other detachable instruments based on their relative fair values pursuant to ASC 470-20 “Application of Issue No. 98-5 to Certain Convertible Instruments. The resulting discount of the convertible instrument is amortized into income as interest expense over the term of the convertible instrument. As at December 31, 2013 and 2012, there were no convertible instruments with detachable instruments outstanding.
When the Company issues convertible debt securities with a non-detachable conversion feature that provides for an effective rate of conversion that is below market value on the commitment date, it is known as a beneficial conversion feature (“BCF”). The Company first assessed the convertible debt securities to determine if the embedded conversion feature meets the exemption criteria of paragraph 11(a) of ASC 815 “Accounting for Derivative Instruments and Hedging Activities”. The convertible debt securities outstanding as at December 31, 2013 and 2012, the embedded conversion features met the exemption criteria to be classified as equity instruments. Pursuant to ASC 470-20 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” , the conversion feature of the security that has characteristics of an equity instrument is measured at its intrinsic value at the commitment date and is recorded as additional paid in capital. A portion of the proceeds of the security issued is allocated to the conversion feature equal to its intrinsic value to a maximum of the amount allocated to the convertible instrument. The resulting discount of the debt instrument is amortized into income as interest expense using the effective interest rate over the term of the loan. However, due to demand nature of the convertible debt securities, the discount of the debt instrument was immediately expensed.
These accounting policies are applied consistently for all years presented. Our operating results would be affected if other alternatives were used. Information about the impact on our operating results is included in the notes to our financial statements.
Item 8.
Item 8. Financial Statements AND SUPPLEMENTARY DATA.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Strategic Internet Investments, Incorporated
Kalispell, Montana
We have audited the accompanying balance sheets of Strategic Internet Investments, Incorporated (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Strategic Internet Investments, Incorporated as of December 31, 2013 and 2012, and the results its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring net losses and has a working capital deficit. These conditions raise significant doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
July 8, 2014
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
BALANCE SHEETS
(Expressed in U.S. Dollars)
Nature of Operations and Ability to Continue as a Going Concern - Note 1
Commitments - Notes 3
Subsequent Events - Note 8
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
Non-cash Transactions - Note 5
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2013 and 2012
(Expressed in U.S. Dollars)
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
1.
Nature of Operations and Ability to Continue as a Going Concern
The Company is in the development stage and is devoting its efforts to exploring new investment opportunities, including real estate development projects.
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 December 31, 2013, the Company had not yet achieved profitable operations, has an accumulated deficit of $13,216,847 since its inception, has a working capital deficiency of $1,372,757 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 December 31, 2014 to continue operations and 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 totaling $1,372,760. 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 operations.
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 and/or related party advances. Management plans to continue to provide for its capital needs during the year ended December 31, 2014, by issuing equity securities and/or related party advances.
Summary of Significant Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may differ from those estimates.
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
Development Stage Company
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
Cash and Cash Equivalents
We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Income
Taxes. There are two major components of income tax expense, current and deferred. Current income tax expense approximates cash to be paid or refunded for taxes for the applicable period. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and liabilities.
A valuation allowance is established when, based on an evaluation of objective verifiable evidence, it is more likely than not that some portion or all of deferred tax assets will not be realized.
Basic and Diluted Loss Per Share
The basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any convertible preferred dividend and the after-tax amount of interest in the period associated with any convertible debt. The numerator is also adjusted for any other changes in income or loss that would result from the assumed conversion of these potential common shares. The if-converted method is used in calculating diluted loss per share for the convertible debentures. The treasury stock method is used in calculating diluted loss per share, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period.
Common share equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, and the dilutive effect of the assumed conversion of convertible debt and convertible preferred shares, using the if-converted method, only if the common stock equivalents are considered dilutive based upon the Company’s net loss position at the calculation date.
Foreign Currency Translation
Foreign currency transactions are translated into U.S. dollars, the functional and reporting currency, by the use of the exchange rate in effect at the date of the transaction, in accordance with ASC 830, Foreign Currency Matters. At each balance sheet date, recorded balances that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate. Any exchange gains or losses are included in the Statements of Operations.
Financial Instruments
The carrying value of cash, accounts payable, and loans payable approximates fair value because of the demand or short term to maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
As a basis for considering market participant assumptions in fair value measurements, ASC 820-10 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The fair value hierarchy, as defined by ASC 820-10, contains three levels of inputs that may be used to measure fair value as follows:
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the periods ended December 31, 2013 and 2012.
Stock-based Compensation
The Company accounts for stock-based compensation using ASC 718 which requires public companies to recognize the cost of services received in exchange for equity instruments, based on the grant-date fair value of those instruments. The Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of the grant. Option valuation models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions can materially affect the fair value estimate. Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.
Convertible Instruments and Beneficial Conversion Feature
When the Company issues convertible instruments with detachable instruments, the proceeds of the issuance are allocated between the convertible instrument and other detachable instruments based on their relative fair values. The resulting discount of the convertible instrument is amortized into income as interest expense over the term of the convertible instrument. As at December 31, 2013 and 2012, there were no convertible instruments with detachable instruments outstanding.
When the Company issues convertible debt securities with a non-detachable conversion feature that provides for an effective rate of conversion that is below market value on the commitment date, it is known as a beneficial conversion feature. For the convertible debt securities outstanding as at December 31, 2013 and 2012, the embedded conversion features met the exemption criteria to be classified as equity instruments. The conversion feature of the security that has characteristics of an equity instrument is measured at its intrinsic value at the commitment date and is recorded as additional paid in capital. A portion of the proceeds of the security issued is allocated to the conversion feature equal to its intrinsic value to a maximum of the amount allocated to the convertible instrument. The resulting discount of the debt instrument is amortized into income as interest expense using the effective interest rate over the term of the loan. However, due to demand nature of the convertible debt securities, the discount of the debt instrument was immediately expensed.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
New Accounting Standards
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
2.
Loans and convertible notes payable
December 31,
December 31,
a) Loan payable to a company controlled by a director of the Company plus accrued interest of $12,332 (2012 - $10,198). 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.
388,849
320,625
c) Loan payable to a company controlled by a director of the Company, plus accrued interest payable of $133,837 (2012 - $105,848), 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 $199,237 (2012 - $156,497), 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
$ 814,626
$ 746,402
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
Class A Convertible Preferred Shares
The aggregate liquidation value of the Class A convertible preferred shares is $792,000. A merger or consolidation of the Company that results in the Company’s stockholders immediately prior to the transaction not holding at least 50% of the voting power of the surviving entity shall be deemed a liquidation event.
The Company’s board of directors approved a stock option plan. Under the plan directors, employees and consultants may be granted options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock. The total number of options granted must not exceed 15% of the outstanding common stock of the Company. The plan expires on July 1, 2017.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
4.
Stock-based Compensation
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model with the following weighted average assumptions:
Expected dividend yield
0.0%
0.0%
Expected volatility
251%
248%
Risk-free Interest Rate
1.66%
0.67%
Expected term in years
The expected volatility is calculated based on the Company’s historical share price. The weighted average fair value of options granted during 2013 was $Nil (2012 - $0.23).
During 2013 and 2012, the change in share purchase options outstanding are as follows:
Options
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2011
3,125,000
$0.15
$ -
Granted during the year
1,200,000
$0.10
$ -
Cancelled during the year
(3,125,000)
$0.15
$ -
Options outstanding at December 31, 2012
1,200,000
$0.10
$ -
Granted during the year
2,940,000
$0.12
$ -
Options outstanding at December 31, 2013
4,140,000
$0.11
$ 372,600
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
Expiry Date
Exercise Price
Remaining Contractual Life
Number of Options
October 15, 2017
$0.10
3.79 years
1,200,000
January 16, 2018
$0.12
4.05 years
2,940,000
Total options outstanding
3.97 years
4,140,000
6.
Related Party Transactions
The Company was charged the following by stockholders, directors, by companies controlled by directors and/or stockholders of the Company, and by companies with directors in common:
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2013 and 2012
(Expressed in U.S. Dollars)
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income.
a)
Received a convertible loan of $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 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.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
Disagreements With Accountants on Accounting and Financial Disclosure
Not applicable
Item 9A.
Item 9A. Controls and Procedures.
Disclosure controls and procedures
As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10-K, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as of December 31, 2013, including the remedial actions discussed below, and we have concluded that, as of December 31, 2013, our disclosure controls and procedures were not effective.
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.
Internal control over financial reporting
Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer, the effectiveness of our internal control over financial reporting as of December 31, 2013.
Based on its evaluation under the framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of December 31, 2013, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Limitations on Effectiveness of Controls
Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and 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 a simple error or mistake. Additional 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 controls also 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.
Material Weaknesses Identified
In connection with the preparation of our financial statements for the year ended December 31, 2013, certain significant deficiencies in internal control became evident to management that represents material weaknesses, including:
a)
Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2013, we had limited personnel that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected;
b)
Insufficient corporate governance policies. Although we have corporate governance policies which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management; and
c)
Our company’s accounting personnel does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. In consultation with our auditors, management corrected any errors prior to the release of our company’s December 31, 2013 financial statements.
The Company believes these material weaknesses are partially mitigated by: the active involvement of senior management and the board of directors in all the affairs of the Company; open lines of communication within the Company; the present levels of activities and transactions within the Company being readily transparent; the thorough review of the Company’s financial statements by management, and the board of directors. However, these mitigating factors will not necessarily prevent the likelihood that a material misstatement will not occur as a result of the aforesaid weaknesses in the Company’s internal controls over financial reporting. A system of internal controls over financial reporting, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the internal controls over financial reporting are met.
Plan for Remediation of Material Weaknesses
We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2013 assessment of the effectiveness of our internal control over financial reporting.
Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:
We intend to continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2013 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Name and position
Age
Term
Business experience
during past 5 years
Other directorships
Abbas Salih
Chairman, President, CEO, CFO,
Director
March 7, 2001
to
Present
Director and officer of the Company.
None
Ralph Shearing
Director
March 7, 2001
to
Present
Director of the Company, and two natural resource exploration company.
Telson Resources Inc. and Birch Hill Gold Corp.; both are reporting issuers in Canada.
Fred Schultz
Director
August 20, 2012
to
Present
Director of the Company, and independent businessman
None
Dr. Ralf Zabel
Vice-president - International Business
Development and Operations
September 18, 2008
to
Present
Officer of the Company, and independent businessman
None
Abbas Salih, CEO, CFO, President, Director
Mr. Salih is a graduate of the Khartoum Technical Institute in the Sudan. He received his formal training while serving as a member of the Sudan Royal Air Force which included attendance at the British Royal Air Force Academy, Newton No. 9 in Nottingham, England, where he studied aircraft electronics and instrumentation.
Mr. Salih is a businessman and has conducted business in Europe, Middle East, and Canada most extensively in Germany and the Sudan, prior to 1994. Since 1992 Mr. Salih has been a senior officer and director to the issuer and currently resides in Dubai, UAE.
Ralph Shearing, Director
Mr. Shearing is a Professional Geologist, has extensive experience in the management of public companies. In addition to being a director of the Company, since 1986 he has been the President and Chief Executive Officer of Telson Resources Inc., and a Director of Birch Hill Gold Corp. Both Telson and Birch Hill are Canadian reporting issuers listed on the Toronto Venture Stock Exchange and their principal business activities consists of the acquisition and exploration of mineral properties. During the five years prior to September 2008, Mr. Shearing was the CEO and Secretary of the Company.
Fred Schultz, Director
Mr. Schultz is a businessman with 30 years of public relations and executive customer service in the United States. He is VP of Regal Barrington, a capital markets advisory firm and a member of the National Investor Relations Institute (NIRI). Mr. Schultz was instrumental in the 1999 opening of Regus Networks (formerly HQ Global Workplaces) in Carlsbad, CA as well as a consultant in the 2004 building of other executive office suites, Rancho Santa Fe Executive Suites in Encinitas, CA.
Dr. Ralf Zabel, Vice-president - International Business Development and Operations
Dr. Zabel is a resident of Germany and holds a Doctorate degree in Engineering from the University of Dresden, Germany. Dr. Zabel has held senior positions with Construction, Engineering and Architectural firms in German since 1986.
Term of Office
The directors serve until their successors are elected by the shareholders. Vacancies on the Board of Directors may be filled by appointment of the majority of the continuing directors. The executive officers serve at the discretion of the Board of Directors.
Family Relationships
There are no family relationships among directors, executive officers, officers or significant employees and any nominees chosen to hold these positions.
Significant Employees
We have no significant employees.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee
As at the date hereof, the Audit Committee is comprised of Ralph Shearing and Abbas Salih. Ralph Shearing is independent. All of the members of the Audit Committee are “financially literate”.
The text of the Audit Committee Charter is attached below:
Charter of the Audit Committee of the Board of Directors of Strategic Internet Investments, Incorporated (the “Company”)
Article 1 - Mandate and Responsibilities
The Audit Committee is appointed by the board of directors of the Company (the “Board”) to oversee the accounting and financial reporting process of the Company and audits of the financial statements of the Company. The Audit Committee’s primary duties and responsibilities are to:
(a)
recommend to the Board the external auditor to be nominated for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Company;
(b)
recommend to the Board the compensation of the external auditor;
(c)
oversee the work of the external auditor engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Company, including the resolution of disagreements between management and the external auditor regarding financial reporting;
(d)
pre-approve all non-audit services to be provided to the Company or its subsidiaries by the Company’s external auditor;
(e)
review the Company’s financial statements, 10-K (MD&A) and annual and interim earnings press releases before the Company publicly discloses this information;
(f)
be satisfied that adequate procedures are in place for the review of all other public disclosure of financial information extracted or derived from the Company’s financial statements, and to periodically assess the adequacy of those procedures;
(g)
establish procedures for:
i.
the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and
ii.
the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters; and
(h)
review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company.
The Board and management will ensure that the Audit Committee has adequate funding to fulfill its duties and responsibilities.
Audit Committee Oversight
Since the commencement of the Company’s most recently completed fiscal year, the Company’s Board of Directors has not failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.
Pre-Approval Policies and Procedures
The Company has not adopted specific policies and procedures for the engagement of non-audit services. The Audit Committee will review the engagement of non-audit services as required.
Audit Committee Financial Expert
Our board of directors has determined that it does not have an audit committee member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.
Corporate Governance
The following is a summary of the Company’s corporate governance policies.
Board of Directors
The Board, at present, is composed of two directors, one of whom is an executive officer of the Company and one of whom are considered to be “independent”, as that term is defined in applicable securities legislation. Mr. Ralph Shearing is considered to be an independent director. Mr. Abbas Salih, by reason of his being the President, CEO, and CFO of the Company, is not independent. In determining whether a director is independent, the Board chiefly considers whether the director has a relationship which could, or could be perceived to interfere with the director’s ability to objectively assess the performance of management.
The Board is responsible for approving long-term strategic plans and annual operating plans and budgets recommended by management. Board consideration and approval is also required for material contracts and business transactions, and all debt and equity financing transactions.
The Board delegates to management responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing the Company’s cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board also looks to management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.
Directorships
Certain of the directors of the Company are also directors of other registrant (or equivalent) in a jurisdiction or a foreign jurisdiction as follows:
Name of Director
Other registrant (or equivalent in a foreign jurisdiction)
Ralph Shearing
Telson Resources Inc. and Birch Hill Gold Corp
(Reporting issuers - Canada)
Abbas Salih
None
Fred Schultz
None
Orientation and Continuing Education
The Company has not yet developed an official orientation or training program for new directors. As required, new directors will have the opportunity to become familiar with the Company by meeting with the other directors and with officers and employees. Orientation activities will be tailored to the particular needs and experience of each director and the overall needs of the Board.
Ethical Business Conduct
The Board monitors the ethical conduct of the Company and ensures that it complies with applicable legal and regulatory requirements, such as those of relevant securities commissions and stock exchanges. The Board has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law, as well as the restrictions placed by applicable corporate legislation on the individual director’s participation in decisions of the Board in which the director has an interest, have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.
Nomination of Directors
The Board has not appointed a nominating committee because the Board fulfills these functions.
Compensation
The Board of Directors is responsible for determining all forms of compensation, including long-term incentive in the form of stock options, to be granted to the Chief Executive Officer of the Company and the directors, and for reviewing the Chief Executive Officer’s recommendations respecting compensation of the other officers of the Company, to ensure such arrangements reflect the responsibilities and risks associated with each position. When determining the compensation of its officers, the Board considers: i) recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; ii) providing fair and competitive compensation; iii) balancing the interests of management and the Company’s shareholders; and iv) rewarding performance, both on an individual basis and with respect to operations in general.
Committees of the Board of Directors
The Board has appointed an Audit Committee, the members of which are Ralph Shearing and Abbas Salih. A description of the function of the Audit Committee can be found in this under Item 15 - Principal Accountant Fees and Services.
The Board has not, as yet, adopted formal procedures for assessing the effectiveness of the Board, its Audit Committee or individual directors.
Code of Ethics
The Company has not adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a “code of ethics” as defined by applicable rules of the SEC.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The particulars of compensation paid to the following persons:
our principal executive officer;
each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2013; and
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year, who we will collectively refer to as the named executive officers, for our years ended December 31, 2013 and 2012, are set out in the summary compensation table.
Summary compensation table (aside from what is set out below, there is no other compensation to the individuals in respect of 2013 and 2012):
Option
Share Awards(2)
Name
Year
Awards(1)
and Other (7)
Total
Ralph Shearing, Director
$ Nil
$ Nil
$ Nil
$ 92,328 (3)
$ Nil
$ 92,328
Abbas Salih, CEO, CFO, Director
$ Nil
$ 14,950
$ 14,950
$ 37,440 (4)
$ Nil
$ 37,440
Fred Schultz, Director
$ Nil
$ 3,200
$ 3,200
$ 73,180 (5)
$ 24,460
$97,640
Dr. Ralf Zabel
Vice-president - International Business
Development and Operations
$ Nil
$ Nil
$ Nil
$ 3,120 (6)
$ Nil
$ 3,120
(1) The amount of the Option Awards represents the fair value of the stock options granted and recognized for financial reporting purposes during the year indicated. For a description of the methodology and assumptions used in valuing the option awards granted to our named executive officers and directors during the year ended December 31, 2013, please review Note 4 to the financial statements for the year ended December 31, 2013.
(2)
The amount of Share Awards is the fair value of common shares issued as remuneration to the named executive officers plus common shares issued as remuneration. For a description of the methodology and assumptions used in valuing the share awards granted to our named executive officers and directors during the year ended December 31, 2013, please review Note 4 to the financial statements for the year ended December 31, 2013. Share awards to Fred Schultz related to the Management Services Agreement dated August 21, 2012.
(7)
Other compensation represents the amounts charged by or paid to the named individuals with respect to management fees.
Management Contracts
On January 1, 2007 the Company entered into two Management Services Agreements with Abbas Salih, a director of the Company, and a company controlled by Ralph Shearing, a director of the Company. Under the terms of these agreements they were each paid $7,500 per month, plus taxes where applicable, for management services. Effective September 12, 2008, the agreement with the company controlled by Ralph Shearing was terminated. The agreement with Abbas Salih expired on December 31, 2008 and was not renewed.
The Company owed $350,215 pursuant to the two Management and Consulting Services Agreements. Pursuant to the terms of these agreements, if the Company is unable to pay for the services, the consultant may elect to settle any portion of outstanding amounts plus interest with units of the Company. Each unit shall consist of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company. The price for the units and warrants will be determined based on a discount to the 10 day average market price ranging from 50% to 60%, but no less than $0.05 per share. In October 2012, all parties to these Management Services Agreements agreed to waive the right to settle the outstanding debts arising from these agreements through the issuance of units. Instead, all parties agreed to settle these debts through the issuance of 5,003,065 restricted common shares at a price of $0.07 per share. These shares were issued on February 19, 2013.
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 services the Company agreed to issue 320,000 restricted common shares to the Director, and 480,000 restricted common shares to the Consultant. 25% of this obligation has been recognized in year ended December 31. 2012 and the remaining 75% will be recognized in the 2013 fiscal year. These shares were issued on February 19, 2013.
During the fiscal year ended December 31, 2013, directors and officers received compensation for acting in their capacities as a director or officer, in the amounts as shown above (see “Summary compensation table”). The directors and officers are reimbursed for any out-of-pocket expenses incurred by them on behalf of the Company.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time. We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
Outstanding Equity Awards at Fiscal Year-End
On July 1, 2002 the Company's Board of Directors adopted and approved a Stock Award Plan. The plan provides both for the direct award or sale of shares, and for the grant of options to purchase shares. Shares may be awarded in consideration of services rendered to the Company. The Company may also grant a 30-day right to purchase shares at a price of not less than 90% of the fair market value of the shares.
Under the plan directors, employees and consultants may be granted incentive stock options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock. Outside directors may be granted non-statutory stock options to purchase common stock of the Company at a price of not less than 85% of the fair market value of the stock.
The total number of shares awarded under the plan must not exceed 15% of the outstanding common stock of the Company. Certain changes in the capital structure of the Company, such as a stock split or stock dividend, may result in an appropriate adjustment to the number and/or the price of shares issuable under the plan. The plan expires on July 1, 2017.
The purpose of the Stock Option Plan is to advance the interests of the Company and its shareholders by affording key personnel in the Company an opportunity for investment in the Company and other incentive advantages inherent in stock ownership in the Company. Pursuant to the provisions of the Stock Option Plan, stock options will be granted only to key personnel of the Company, generally defined as a person designated by management upon whose judgment, initiative and efforts the Company may rely, including any director, officer, employee or consultant of the Company.
As of the date of this Annual Report, a total of 7 individual share purchase options have been granted to consultants, employees, directors, and officers to acquire a total of 4,140,000 common shares of the Company at a weighted average price of $0.11 per share.
The outstanding equity awards of the named executive officers, for our year ended December 31, 2013, are set out in the following outstanding equity awards table:
Name
Number of securities underlying unexercised options
# exercisable
Option
exercise price
Options expiration date
Abbas Salih
CEO, CFO, Director
1,200,000
$0.12
January 16, 2018
Ralph Shearing
Director
1,440,000
$0.12
January 16, 2018
Fred Schultz
Director
320,000
$0.10
October 15, 2017
Dr. Ralf Zabel
Vice-president - International Business Development and Operations
100,000
$0.10
October 15, 2017
All of these options were vested and exercisable on the date they were granted. None have been exercised.
Aggregated Options Exercised in the Year Ended December 31, 2013 and Year End Option Values
There were no stock options exercised during the year ended December 31, 2013.
Repricing of Options/SARS
There were no stock options re-priced during the year ended December 31, 2013.
Director Compensation
We reimburse our directors for expenses incurred in connection with attending board meetings. We did not pay any other director’s fees or other compensation for services rendered as a director for the fiscal year ended December 31, 2013.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors have been granted stock options, and may in the future receive additional stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. Other than stock options, no director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
As of March 31, 2014, there were 35,159,391 shares of our common stock outstanding. The following tables sets forth certain information known to us with respect to the beneficial ownership of our common stock as of that date by (i) each of our directors, (ii) each of our named executive officers, and (iii) all of our directors and executive officers as a group. Except as set forth in the tables below, there is no person known to us who beneficially owns more than 5% of our common stock.
Security ownership of certain beneficial owners and management
Title of class
Name and address of beneficial
owners(1)
Amount and nature of
beneficial ownership
Percentage
of class(2), (3)
Management
Common stock
Ralph Shearing
8,727,354 (indirect) (4)
16%
250-1090 W. Georgia St.
Vancouver, BC, Canada
Common stock
Abbas Salih
18,838,044 (indirect) (5)
35%
Nisar Square, Benyas Centre Office No. 207
P.O. Box 40088,
Dubai, United Arab Emirates
3,557,427 (direct) (5)
7%
Common stock
Fred Schultz
640,000 (direct) (6)
1%
1706 Serrano St.
Oceanside, CA 92054
Common stock
Ralf Zabel
160,000 (direct) (7)
*%
Shulstrasse 18 D-01723
Kesseldorf, Germany
Management total
31,922,825
59%
Beneficial owners
Common stock
Cede & Co.
9,163,765 (direct)
17%
PO Box 20, Bowling Green Stn.
New York, N.Y., U.S.A.
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
Changes in Control
None
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Transactions with related persons
No director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, since the beginning of our company’s fiscal year ended December 31, 2013, in which the amount involved in the transaction exceeded or exceeds the $120,000, except as described below.
The Company was charged by the following directors, officers, companies controlled by directors and/or stockholders of the Company, and by companies with directors in common:
At December 31, 2013, accounts payable includes $105,821 (2012 - $461,755) due to two directors of the Company and a company controlled by a director of the Company in respect of unpaid management fees and expenses incurred on behalf of the Company.
At December 31, 2013, accounts payable also includes $15,527 (2012 - $15,527) of expenses for operating costs paid on behalf of the Company by a company with directors in common.
The Company entered into two Management Services Agreements dated January 1, 2007 with a director and a company controlled by a director of the Company. Under the terms of these agreements they were each paid $7,500 per month, plus taxes where applicable, for management services. These agreements expired in 2008. At December 31, 2013 the Company owed $321,057 (2012 - $321,057) pursuant to the two Management Services Agreements. On February 19, 2013, the accounts payable arising from these agreements was settled by the issuance of common shares (Note 4(c)).
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 remuneration for the management services, the Company agreed to issue 320,000 restricted common shares to the Director, plus pay the Director $20 per hour for time spent on the affairs of the Company, pursuant to which the company has paid or accrued management fees of $3,200 (2012 - $2,060). For services received in December 31, 2012, the Company had recognized share based compensation of $18,400. As of December 31, 2012 the shares had not been issued. In addition, the Company agreed to grant the Director 320,000 share purchase options, and recognized compensation expense of $73,184.
During the year ended December 31, 2012, the company cancelled 1,200,000 and issued 1,440,000 stock options to a company controlled by a director. The total stock based compensation including modification expense to the company amounted to $92,328. The company also cancelled and re-issued 1,200,000 and 100,000 options to two directors respectively. The stock base compensation modification expense of the options to these directors amounted to $37,440, and $3,120 respectively during the year ended December 31, 2012. There was no similar transaction during the year ended December 31, 2013.
Director Independence
The Board, at present, is composed of three directors, one of whom is an executive officer of the Company and the other two are considered to be “independent”, as that term is defined in applicable securities legislation. Mr. Fred Schultz and Mr. Ralph Shearing are considered to be independent directors. Mr. Abbas Salih, by reason of his being the President, CEO, and CFO of the Company, is not. In determining whether a director is independent, the Board chiefly considers whether the director has a relationship which could, or could be perceived to, interfere with the director’s ability to objectively assess the performance of management.
Board of Directors
Our board of directors facilitates its exercise of independent supervision over management by endorsing the guidelines for responsibilities of the board as set out by regulatory authorities on corporate governance in the United States. Our board’s primary responsibilities are to supervise the management of our company, to establish an appropriate corporate governance system, and to set a tone of high professional and ethical standards.
The board is also responsible for:
selecting and assessing members of the Board;
choosing, assessing and compensating the Chief Executive Officer of our company, approving the compensation of all executive officers and ensuring that an orderly management succession plan exists;
reviewing and approving our company’s strategic plan, operating plan, capital budget and financial goals, and reviewing its performance against those plans;
adopting a code of conduct and a disclosure policy for our company, and monitoring performance against those policies;
ensuring the integrity of our company’s internal control and management information systems;
approving any major changes to our company’s capital structure, including significant investments or financing arrangements; and
reviewing and approving any other issues which, in the view of the Board or management, may require Board scrutiny.
Orientation and Continuing Education
We have an informal process to orient and educate new recruits to the board regarding their role of the board, our committees and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.
The board does not provide continuing education for its directors. Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as directors.
Nomination of Directors
The board is responsible for identifying new director nominees. In identifying candidates for membership on the board, the board takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the board. As part of the process, the board, together with management, is responsible for conducting background searches, and is empowered to retain search firms to assist in the nominations process. Once candidates have gone through a screening process and met with a number of the existing directors, they are formally put forward as nominees for approval by the board.
Assessments
The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs. However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit fees
The aggregate fees billed for the two most recently completed fiscal periods ended December 31, 2013 and December 31, 2012 for professional services rendered by BDO Canada LLP, Chartered Accountants, and Malone Bailey LLP, Certified Public Accountants, for the audit of our annual financial statements, quarterly reviews of our interim financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Year Ended
December 31, 2013
Year Ended
December 31, 2012
Audit Fees
$31,945
$45,633
Audit Related Fees
Nil
Nil
Tax Fees
Nil
Nil
All Other Fees
Nil
Nil
Total
$31,945
$46,633
In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year along with reviews of interim quarterly financial statements. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The board of directors has considered the nature and amount of fees billed by Malone Bailey LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Malone Bailey LLP.
PART IV
Item 15.
Item 15. Exhibits, financial statement schedules.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Strategic Internet Investments, Incorporated
Date:
July 8, 2014
/s/ Ralph Shearing
Ralph Shearing, Director
Date:
July 8, 2014
/s/ Abbas Salih
Abbas Salih, CEO, CFO, Director