[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
Yes [ ] No [X]
Indicate by checkmark whether the registrant has (1)
filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to
submit and post such files).
Yes [X] No [ ]
Indicate
by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
[X]
Indicate by checkmark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [X] No [ ]
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:
$8,071,878 based on a price of $0.20 per share, being the price the
common equity last sold on June 30, 2015 as quoted on the OTC Bulletin Board.
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
YEARS:
Indicate by check mark whether
the registrant has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
N/A
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
40,359,391 common
shares issued and outstanding as of February 29, 2016
.
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980).
Not Applicable
PART I
Forward Looking Statements.
This
annual report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue”
or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled “Risk
Factors” and the risks set out below, any of which may cause our or our
industry’s actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking
statements. These risks include, by way of example and not in limitation:
-
results of initial feasibility,
pre-feasibility and feasibility studies, and the possibility that future real
estate development results will not be consistent with our expectations;
-
real estate development risks,
including risks related to accidents, equipment breakdowns, labour disputes
or other unanticipated difficulties or interruptions in development
construction;
-
the potential for delays in
development activities or the completion of feasibility studies;
-
risks related to the inherent
uncertainty of cost estimates and the potential for unexpected costs and
expenses;
-
risks related to commodity
price fluctuations;
-
the uncertainty of profitability
based upon our history of losses;
-
risks related to failure to
obtain adequate financing on a timely basis and on acceptable terms for our
planned development projects;
-
risks related to environmental
regulation and liability;
-
risks that the amounts reserved
or allocated for environmental compliance, reclamation, control measures,
monitoring and on-going maintenance may not be sufficient to cover such
costs;
-
risks related to tax
assessments;
-
political and regulatory risks
associated with real estate development; and
-
other risks and uncertainties
related to our prospects, properties and business strategy.
This list is not an exhaustive list of the factors that
may affect any of our forward-looking statements. These and other factors
should be considered carefully and readers should not place undue reliance on
our forward-looking statements.
The Company intends that such forward-looking statements
be subject to the Safe Harbors for such statements. Forward looking statements
are made based on management’s beliefs, estimates and opinions on the date the
statements are made and we undertake no obligation to update forward-looking
statements if these beliefs, estimates and opinions or other circumstances
should change. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our
financial statements are stated in United States dollars (US$) and are prepared
in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to “common
stock” refer to the common shares in our capital stock. As used in this annual report, the terms “we”, “us”, “our”, the “Company”,
“Strategic”, and “SIII” mean Strategic Internet Investments,
Incorporated, unless otherwise indicated.
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 located
in Europe and the Middle East. The Company will continue to explore new
investment opportunities, including real estate development projects, during
its 2016 fiscal year.
On June 10, 2014 SIII entered
into a Sale and Purchase Agreement (the “Akcenter Agreement”) with PG Proje
Gelistirme Gayrimenkul A.S. and Star Leisure & Entertainment Inc. to
acquire certain retail real estate in Turkey, namely the Akcenter Outlet and
Shopping Center (the ”Akcenter Property”). This Akcenter Agreement was
cancelled by mutual consent, and replaced by a new restated Sale and Purchase
Agreement (the “Restated Akcenter Agreement”), effective November 3, 2014.
The Restated Akcenter Agreement
was entered into between SIII and ARIS Foreign Trade and Construction Inc.
(“ARIS”) and Muzaffer Mithat Ataman (“Ataman”) and PG Proje Gelistirme
Gayrimenkul A.S. (“PG”). ARIS and Ataman are jointly the “First Party”; and
ARIS, Ataman, and PG are jointly the “Sellers”. The First Party is the owner,
or where not the direct owner, represents the owners through Power of Attorney,
of the Akcenter Property.
SIII is desirous of purchasing
the Akcenter Property by either acquiring 100% of PG or 100% of the Akcenter
Property as more particularly described within the Restated Akcenter Agreement.
The Sellers agree to accept Convertible Debenture Securities of SIII, issued
and deposited into trust, as full payment of the purchase price for the
Akcenter Property as more particularly described within the Restated Akcenter
Agreement. PG will accept title transfer of the Akcenter Property and act as
the Akcenter Property’s registered owner and property manager, and will hold
certain Convertible Securities of SIII, registered in its name and deposited
into trust, for and on behalf of the Sellers. The Restated Akcenter Agreement
can be viewed in its entirety by visiting SIII’s web site at the following
address:
www.siiincorporated.com/images/Legal/2014/Amended_Agreement_Akcenter_11032014.pdf
This is a non-arm’s length
transaction based on the fact that Mr. Abbas Salih is the President, Director
and CEO as well as the controlling shareholder of SIII and indirectly holds a
minority interest in PG.
Any funding that maybe required
to complete the Akcenter Property transaction has not yet been fully secured,
there can be no assurances the transaction will proceed and SIII management
cautions investors of this risk.
On September 30, 2015 SIII entered
into a Conditional Sale and Purchase Agreement (the “Skytower Agreement”) for
the purchase of the Skytower Hotel Atayol, with Atayol Otelcilik Isletmecilik
Turizm Insaat vd Ticaret A.S., (hereinafter “Atayol”), Najibi Investment
Incorporation (hereinafter “Najibi”), G7 Entertainment Incorporated,
(hereinafter “G7”), Royaltun General Trading LLC., (hereinafter “Royaltun”),
and Soha Investment Inc., (hereinafter “Soha) (jointly hereinafter the
“Seller’s”)
Within the Skytower Agreement,
Atayol declares that it is the 100% owner of certain Real Estate located in
Akcakoca Turkey known as the Skytower Hotel Atayol (the “Skytower Property”),
and has entered into a Joint Venture Agreement (the “JV Agreement”) dated July
22, 2015 among the parties making up the Seller. The JV Agreement provides
that shareholders of Najibi, G7, Royaltun and Soha are to provide financial
assistance to Atayol in exchange for Atayol transferring 100% of the Skytower
Property into a newly formed Special Purpose Vehicle (the “SPV’) that the
Sellers will control by own common shares ownership.
The Skytower Agreement contemplates
that SIII will purchase up to 100% of the Skytower Property, either directly or
through a staged purchase of the SPV at the “Purchase Price”, which is defined
within the Skytower Agreement to be the lower of the net appraised value of the
Skytower Property as determined by a mutually acceptable, fully independent,
professional valuator experienced in hotel real estate valuation appraisal
within the jurisdiction of the Skytower Property location or alternatively,
Atayol’s estimated value of US $50,000,000 minus deduction of all associated Skytower
Property debt.
Under the Skytower Agreement the
parties have agreed that SIII will, upon completion of due diligence and the
contemplated property valuation referred to above, finance the Purchase Price
through the issuance, of Convertible Debenture Securities of SIII with deemed
value equal to the Purchase Price. Each Convertible Debenture is to have a
deemed value of US$100,000 and is convertible into common share of SIII at US$1.00
per share. The convertible debentures will be issued into the name of the SPV
and delivered to a mutually acceptable Escrow Agent which agent will administer
the convertible debenture under the terms of the convertible debenture and an
escrow agreement to be implemented among the parties.
It is the intent of certain
parties within the Seller’s group to market the convertible debentures to their
business contacts and associates whom are sophisticated and accredited
investors, within the Middle East and Turkey and when, and if, the debentures
are purchased by these third parties, the debenture will be converted into
shares and the proceeds distributed amongst the shareholders of the SPV and the
pro rata share of the Skytower Property or the SPV will be transferred to SIII.
The closing of the Agreement is
subject to the acceptable completion of due diligence by SIII.
This is a non-arm’s length
transaction on the basis that Mr. Abbas Salih is an insider of SIII as well as
some members of the Sellers.
Any funding that maybe required
to complete the Skytower Property transaction has not yet been fully secured,
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. 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. LEGAL PROCEEDINGS.
We know of no 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.
Mine Safety Disclosure.
Not applicable.
PART II
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
|
Low
|
|
|
|
|
|
|
|
|
2015
|
First quarter
|
$0.27
|
$0.10
|
|
|
|
Second quarter
|
$0.25
|
$0.10
|
|
|
|
Third quarter
|
$0.23
|
$0.05
|
|
|
|
Fourth quarter
|
$0.15
|
$0.05
|
|
|
|
|
|
|
|
|
2014
|
First quarter
|
$0.18
|
$0.09
|
|
|
|
Second quarter
|
$0.16
|
$0.09
|
|
|
|
Third quarter
|
$0.35
|
$0.15
|
|
|
|
Fourth quarter
|
$0.27
|
$0.16
|
|
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 January 31, 2016, we have approximately 140 registered stockholders and 40,359,391
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
|
Equity Compensation Plan Information
|
|
Plan category
|
Number of
securities to be issued upon exercise
of outstanding
options, warrants, and rights.
|
Weighted average
exercise price of outstanding options, warrants, and rights.
|
Number of
securities remaining available for
future issuance.
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
-
|
-
|
-
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
4,140,000
|
$0.11
|
1,913,909
|
|
|
|
|
|
|
Total
|
4,140,000
|
$0.11
|
1,913,909
|
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, 2015, the Star Leisure loan principal was $255,209 and had accrued interest
of $298,488. 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, 2015. 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, 2015, the CMB
loan principal was $163,766 and had accrued interest of $198,835. 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, 2015. 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 or on demand
after that date. At any time, 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 20, 2014 the Company
issued 1,200,000 restricted common shares for $50,000 cash. This transaction is
with an offshore non-U.S. person; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.
On November 13, 2014 the Company
issued 500,000 restricted common shares for $40,000 cash. This transaction is
with an offshore non-U.S. person; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.
On February 13, 2015 the Company
issued 1,500,000 restricted common shares for $80,000 cash. This transaction is
with an offshore non-U.S. person; accordingly, these securities are exempt from
registration pursuant to Regulation S, however they are restricted under Rule
144.
On June 25, 2015 the Company
issued 2,000,000 restricted common shares for $160,000 cash. This transaction
is with an offshore non-U.S. person; accordingly, these securities are exempt
from registration pursuant to Regulation S, however they are restricted under
Rule 144.
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, 2015.
ITEM 6. SELECTED
FINANCIAL DATA.
Not Applicable.
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 2016 fiscal year.
Our estimated cash
expenses over the next twelve months are as follows:
|
Accounting, audit, and legal fees
|
$
|
40,000
|
|
|
General and administrative expenses
|
|
7,000
|
|
|
Interest
|
|
6,000
|
|
|
Management fees
|
|
55,000
|
|
|
Regulatory and transfer agent fees
|
|
14,000
|
|
|
Rent
|
|
6,000
|
|
|
|
$
|
128,000
|
|
The Company also estimates it will continue to accrue
interest expense of $98,000 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 2016, 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
$1,432,442. 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, 2015 and 2014 are summarized as
follows:
|
Year Ended
December 31, 2015
|
Year Ended
December 31, 2014
|
Percentage
Increase
(Decrease)
|
Revenue
|
-
|
-
|
-
|
Expenses
|
$ (147,095)
|
$ (76,611)
|
92%
|
Other Income (Expense)
|
$ (81,823)
|
$ (92,352)
|
(11%)
|
Net Loss
|
$(228,918)
|
$(168,963)
|
35%
|
Revenues
We have had no
operating revenues for the years ended December 31, 2015 and 2014. We
anticipate that we will not generate any revenues for so long as we are a
development stage company.
General and Administrative Expenses
The components of our general and administrative expenses
for the years ended December 31, 2015 and 2014 are outlined in the table below:
|
|
|
Years ended
December 31,
|
Percentage
Increase
(Decrease)
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
Communications
|
$
|
-
|
|
$
|
871
|
(100%)
|
|
|
Consulting fees
|
|
34,000
|
|
|
-
|
-
|
|
|
Management fees
|
|
53,000
|
|
|
14,302
|
271%
|
|
|
Office and general
|
|
6,937
|
|
|
1,205
|
476%
|
|
|
Professional fees
|
|
33,693
|
|
|
46,239
|
(27%)
|
|
|
Regulatory fees
|
|
11,749
|
|
|
12,494
|
(6%)
|
|
|
Rent
|
|
5,826
|
|
|
-
|
-
|
|
|
Transfer agent fees
|
|
1,890
|
|
|
1,500
|
26%
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
$
|
(147,095
|
)
|
$
|
(76,611)
|
92%
|
|
During the year ended December 31,
2015, the Company incurred general and administrative expenses totaling
$147,095 compared to $76,611 in the previous year.
The significant
changes in our expenses for the year ended December 31, 2015 when compared to
the year ended December 31, 2014 was primarily due to:
|
a)
|
Consulting fees relate to two agreements entered into in June 2015 with two consultants engaged to provide the Company with business development services. The fees for the December 31, 2015 period were $34,000; there were no similar agreements in the comparative 2014 period.
|
|
b)
|
Management fees relate to a director engaged in October 2012 to provide general management and administrative services. This director was remunerated by fees of $20 per hour for time spent directly managing the Company’s affairs; he charged the Company $4,000 in each of the twelve month periods ending December 31, 2015 and 2014.
In addition, in January 2013, the Company agreed to pay another director/officer a periodic management stipend. During the period ended December 31, 2015 this director was paid $49,000 compared to $10,302 in the 2014 period.
|
|
c)
|
Office and general expense relates to costs in a workplace shared with a related company. These shared costs include secretarial services, office supplies, printing, photocopier, parking, and telephone expenses. The related company was paid $5,670 in 2015; there were no similar payments in the comparative 2014 period.
|
|
d)
|
Professional fees include accounting, audit, and legal services. The 2015 accounting and audit fees decreased $6,645 due to lower charges by the Company’s auditors for the 2014 year-end audit and 2015 quarterly reviews. Legal fees from a prior period were over-estimated by $6,000, this charge was reversed in the current period. Actual legal fees incurred during the December 31, 2015 period were $997 compared to $898 in the 2014 period.
|
|
e)
|
Rent is for office space where the Company is sub-letting an office along with a related company. There were no similar charges in the comparative 2014 period.
|
|
f)
|
Regulatory fees for the 2014 period were $745 higher primarily due to penalties charged relating to the late submission of certain regulatory reports. There were no similar late fees in the 2015 period.
|
|
g)
|
Interest on loans increased by $9,714; this is attributed to the compounding effect of the quarterly interest calculation as the Company has not been making any payments on these debts. However, there was an overall decrease in interest expense because the 2014 interest expense also included $22,826 amortization of the beneficial conversion feature on a $50,000 convertible loan. There was no similar amount recorded in 2015.
|
Funding for
operating and investing activities was provided by both non-interest and
interest bearing advances and loans from related parties, including directors
of the Company, and companies controlled by these directors; plus loans and
equity investments from third parties.
LIQUIDITY AND WORKING CAPITAL
As of December
31, 2015, the Company had total current assets of $14,630 and total liabilities
of $1,432,442. The Company had cash of $14,630 and a working capital deficiency
of $1,417,812 as of December 31, 2015 compared to cash on hand of $1,324 and a
working capital deficiency of $1,428,894 as of December 31, 2014. We anticipate
that we will incur approximately $128,000 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 $1,432,442.
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, 2015 was $203,370 compared
to cash used by operating activities for the same period in 2014 of $108,208. The
increase in cash used in operating activities was primarily due to the decreases
in related party accounts payable, plus an increase in cash expenses for
consulting fees, management fees, office, and rent.
The Company has the following
loans outstanding as of December 31, 2015:
A $6,802 loan is
payable to a company controlled by a director of the Company plus accrued
interest of $17,437. This loan is unsecured, bearing interest at 12% per annum
and is repayable on demand.
Loans totaling $326,949
are payable to companies controlled by a director and a former director 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 former director of the Company, plus accrued
interest payable of $198,835 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 $298,488 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.
On January 5, 2014 Company
entered into a Convertible Loan Agreement and issued a convertible note for
$50,000. This loan is unsecured, bearing interest at 10% per annum, and was
repayable at maturity on January 7, 2015, or on demand after that date. At any
time, the lender may convert the principle amount of the loan into units of the
Company, each unit consisting of one common share and one non-transferable
share purchase warrant, at a conversion rate of $0.20 per unit. Each share
purchase warrant entitles the holder to purchase one additional common share
for a period of two years from the warrant issue date, at an exercise price of
$0.20 during the first year, and $0.35 during the second year. As of December
31, 2015, $10,106 was accrued in interest on the note.
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 December
31, 2015, we had cash of $14,630 and we estimate that we will require
approximately $128,000 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 $1,432,442. 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, 2015 and 2014
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 December 31, 2015,
we had cash of $14,630 and we estimate that we will require approximately $128,000
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 $1,432,442. 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, 2015
and 2014, 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, 2015 and 2014, 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. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
STRATEGIC INTERNET
INVESTMENTS, INCORPORATED
FINANCIAL
STATEMENTS
December
31, 2015 and 2014
(
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, 2015 and 2014, 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, 2015 and 2014, 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
March 24, 2016
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
BALANCE SHEETS
(
Expressed in U.S. Dollars
)
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Cash
|
$
|
14,630
|
|
$
|
1,324
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
14,630
|
|
$
|
1,324
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Accounts payable
|
$
|
84,123
|
|
$
|
79,442
|
|
Accounts payable - related party
|
|
20,727
|
|
|
90,472
|
|
Accrued interest
|
|
10,106
|
|
|
4,399
|
|
Accrued interest - related party
|
|
514,760
|
|
|
425,880
|
|
Convertible loan payable
|
|
50,000
|
|
|
50,000
|
|
Loans and convertible notes payable - related party
|
|
752,726
|
|
|
780,025
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
1,432,442
|
|
|
1,430,218
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
Capital Stock
|
|
|
|
|
|
|
Class A Convertible Preferred stock, $0.001 par value 10,000,000 authorized, 198,000 outstanding
|
|
198
|
|
|
198
|
|
Class B Preferred stock, $0.001 par value 10,000,000 authorized, none outstanding
|
|
-
|
|
|
-
|
|
Common stock, $0.001 par value 100,000,000 authorized 40,359,391 (2014: 36,859,391) issued and outstanding
|
|
40,359
|
|
|
36,859
|
|
Additional paid-in capital
|
|
12,156,359
|
|
|
11,919,859
|
|
Accumulated deficit
|
|
(13,614,728
|
)
|
|
(13,385,810
|
)
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT
|
|
(1,417,812
|
)
|
|
(1,428,894
|
)
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT AND LIABILITIES
|
$
|
14,630
|
|
$
|
1,324
|
|
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
STATEMENTS OF OPERATIONS
(
Expressed in U.S. Dollars
)
|
|
Years ended
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
|
|
|
|
Communications
|
$
|
-
|
|
$
|
871
|
|
Consulting fees
|
|
34,000
|
|
|
-
|
|
Management fees
|
|
53,000
|
|
|
14,302
|
|
Office and general
|
|
6,937
|
|
|
1,205
|
|
Professional fees
|
|
33,693
|
|
|
46,239
|
|
Regulatory fees
|
|
11,749
|
|
|
12,494
|
|
Rent
|
|
5,826
|
|
|
-
|
|
Transfer agent fees
|
|
1,890
|
|
|
1,500
|
|
|
|
|
|
|
|
|
Operating loss
|
|
(147,095
|
)
|
|
(76,611
|
)
|
|
|
|
|
|
|
|
Other income and expense
|
|
|
|
|
|
|
Interest
|
|
(94,587
|
)
|
|
(107,699
|
)
|
Gain on foreign exchange
|
|
12,764
|
|
|
15,347
|
|
|
|
|
|
|
|
|
Net loss for the year
|
$
|
(228,918
|
)
|
$
|
(168,963
|
)
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
39,223,775
|
|
|
35,778,843
|
|
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
STATEMENTS OF CASH FLOWS
(
Expressed in U.S. Dollars
)
|
|
Years ended
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Operating Activities
|
|
|
|
|
|
|
Net loss for the period
|
$
|
(228,918
|
)
|
$
|
(168,963
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
Loss on settlement of payables
|
|
-
|
|
|
-
|
|
Unrealized foreign exchange gain
|
|
(3,975
|
)
|
|
(4,130
|
)
|
Amortization of debt discount
|
|
-
|
|
|
22,826
|
|
Changes in non-cash item:
|
|
|
|
|
|
|
Accounts payable
|
|
4,681
|
|
|
(11,938
|
)
|
Accounts payable – related party
|
|
(69,745
|
)
|
|
(30,876
|
)
|
Accrued interest
|
|
5,707
|
|
|
4,399
|
|
Accrued interest – related party
|
|
88,880
|
|
|
80,474
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
(203,370
|
)
|
|
(108,208
|
)
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
240,000
|
|
|
90,000
|
|
Proceeds from convertible note
|
|
-
|
|
|
50,000
|
|
Payments on related party loans
|
|
(23,324
|
)
|
|
(30,471
|
)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
216,676
|
|
|
109,529
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash during the period
|
|
13,306
|
|
|
1,321
|
|
|
|
|
|
|
|
|
Cash, beginning of the period
|
|
1,324
|
|
|
3
|
|
|
|
|
|
|
|
|
Cash, end of the period
|
$
|
14,630
|
|
$
|
1,324
|
|
|
|
|
|
|
|
|
Non-cash financing and investing activities:
|
|
|
|
|
|
|
Debt discount from beneficial conversion feature
|
$
|
-
|
|
$
|
22,826
|
|
|
|
|
|
|
|
|
Supplementary disclosure of cash flows:
|
|
|
|
|
|
|
Cash paid for Interest
|
$
|
-
|
|
$
|
-
|
|
Cash paid for Taxes
|
$
|
-
|
|
$
|
-
|
|
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, 2015 and 2014
(
Expressed in U.S. Dollars
)
|
|
Class A Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Stock
|
|
|
Par Value
|
|
|
Stock
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2013
|
|
198,000
|
|
$
|
198
|
|
|
35,159,391
|
|
$
|
35,159
|
|
$
|
11,808,733
|
|
$
|
(13,216,847
|
)
|
$
|
(1,372,757
|
)
|
Issuance of stock for cash
|
|
-
|
|
|
-
|
|
|
1,700,000
|
|
|
1,700
|
|
|
88,300
|
|
|
-
|
|
|
90,000
|
|
Beneficial conversion feature on convertible loan
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,826
|
|
|
-
|
|
|
22,826
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(168,963
|
)
|
|
(168,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2014
|
|
198,000
|
|
$
|
198
|
|
|
36,859,391
|
|
$
|
36,859
|
|
$
|
11,919,859
|
|
$
|
(13,385,810
|
)
|
$
|
(1,428,894
|
)
|
Issuance of stock for cash
|
|
-
|
|
|
-
|
|
|
3,500,000
|
|
|
3,500
|
|
|
236,500
|
|
|
-
|
|
|
240,000
|
|
Net loss
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(228,918
|
)
|
|
(228,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2015
|
|
198,000
|
|
$
|
198
|
|
|
40,359,391
|
|
$
|
40,359
|
|
$
|
12,156,359
|
|
$
|
(13,614,728
|
)
|
$
|
(1,417,812
|
)
|
The accompanying notes are an integral part of the financial statements.
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
1.
|
Nature of Operations and Ability to Continue as a Going Concern
|
|
The Company 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, 2015, the Company had not yet achieved profitable operations, has an accumulated deficit of $13,614,728 since its inception, has a working capital deficiency of $1,417,812 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 $128,000 over the twelve months ended December 31, 2016 to continue operations and estimates it will accrue interest expenses of $98,000 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 $1,432,442. 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, 2016, 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
|
|
In the year ending December 31, 2013, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.
|
|
Cash and Cash Equivalents
|
|
The Company classifies all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
|
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.
|
|
At December 31, 2015, the Company had 18,862,588 (2014 – 18,362,588) common share equivalents in respect to convertible preferred shares, stock options, and convertible debt. Because the Company incurred a loss, diluted loss per share is the same as basic loss per share.
|
|
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.
|
|
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.
|
|
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).
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
|
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, 2015 and 2014.
|
|
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, 2015 and 2014, 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, 2015 and 2014, 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.
|
|
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
2.
|
Convertible loan payable
|
|
On January 5, 2014 Company entered into a Convertible Loan Agreement and issued a convertible note for $50,000. This loan is unsecured, bearing interest at 10% per annum, and was repayable at maturity on January 7, 2015, or on demand after that date. At any time, the lender may convert the principle amount of the loan into units of the Company, each unit consisting of one common share and one non-transferable share purchase warrant, at a conversion rate of $0.20 per unit. Each share purchase warrant entitles the holder to purchase one additional common share for a period of two years from the warrant issue date, at an exercise price of $0.20 during the first year, and $0.35 during the second year. As of December 31, 2015, $10,106 was accrued in interest on the note.
|
|
The Company calculated a beneficial conversion feature on the convertible note of $22,826, and this amount was fully amortized to interest expense during the year ended December 31, 2014. Upon conversion of this loan, the $42,000 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
|
|
The fair value of the warrants was estimated at the date the convertible note was issued using the Black-Scholes valuation model. The Black-Scholes 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 warrants.
|
|
The fair value of the warrants was estimated with the following assumptions:
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Expected dividend yield
|
|
-
|
|
|
-
|
|
|
Expected volatility
|
|
-
|
|
|
254%
|
|
|
Risk-free Interest Rate
|
|
-
|
|
|
0.27%
|
|
|
Expected term in years
|
|
-
|
|
|
1.5
|
|
|
The expected volatility is calculated based on the Company’s historical share price.
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable – face value
|
$
|
50,000
|
|
$
|
50,000
|
|
|
Less: beneficial conversion feature
|
|
-
|
|
|
(22,826
|
)
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
27,174
|
|
|
Amortization of beneficial conversion
feature
|
|
-
|
|
|
22,826
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
$
|
50,000
|
|
$
|
50,000
|
|
|
The amortization of the beneficial conversion feature is included in interest expense.
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
3.
|
Loans and convertible notes payable – related party
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
Loan payable to a company controlled by a director of the
Company plus accrued interest of $17,437 (2014 - $14,734). 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 a director and a
former director of the Company. The loans are unsecured, non-interest
bearing, and repayable upon demand.
|
|
326,949
|
|
|
354,248
|
|
|
|
|
|
|
|
|
|
|
|
c)
|
Loan payable to a company controlled by a former director of
the Company, plus accrued interest payable of $198,835 (2014 - $164,732),
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 $298,488 (2014 - $246,414), 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
752,726
|
|
$
|
780,025
|
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
|
Class A Convertible Preferred Shares
|
|
The Class A convertible preferred shares issued in 2003 have a par value of $0.001 and are convertible to common shares at $4.00 per share during the first 180 days following issuance, and thereafter at the average of twenty consecutive days closing prices, but shall not be less than $1.50 per share or greater than $6.00 per share. The Company has the right to redeem its Class A convertible preferred stock at any time by paying to the holders thereof the sum of $4 per share.
|
|
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.
|
|
During 2015 and 2014, the Company issued common shares as follows:
|
|
a)
|
On July 17, 2014, the Company issued 1,200,000 common shares for cash proceeds of $50,000.
|
|
b)
|
On November 13, 2014, the Company issued 500,000 common shares for cash proceeds of $40,000.
|
|
c)
|
On February 13, 2015, the Company issued 1,500,000 common shares for cash proceeds of $80,000.
|
|
d)
|
On June 25, 2015, the Company issued 2,000,000 common shares for cash proceeds of $160,000.
|
|
No options were granted and no compensation expense was recorded during 2014 and 2015.
|
|
As at December 31, 2015, the Company had share purchase options outstanding as follows:
|
|
Expiry Date
|
Exercise Price
|
Remaining
Contractual Life
|
Number of Options
|
|
|
|
|
|
|
October 15, 2017
|
$0.10
|
1.79 years
|
1,200,000
|
|
January 16, 2018
|
$0.12
|
2.05 years
|
2,940,000
|
|
|
|
|
|
|
Total options outstanding
|
|
1.97 years
|
4,140,000
|
|
At December 31, 2015 and 2014 all of the outstanding share purchase options were exercisable.
|
STRATEGIC INTERNET INVESTMENTS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2015 and 2014
(
Expressed in U.S. Dollars
)
5.
|
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:
|
|
|
|
Year ended December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
88,880
|
|
$
|
80,474
|
|
|
Management fees
|
|
53,000
|
|
|
14,302
|
|
|
|
|
|
|
|
|
|
|
Total related party
transactions
|
$
|
141,880
|
|
$
|
94,776
|
|
|
At December 31, 2015, accounts payable includes $5,200 (2014 - $74,945) due to two directors, a former director, 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, 2015, accounts payable also includes $15,527 (2014 - $15,527) of expenses for operating costs paid on behalf of the Company by a company with directors in common.
|
|
On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”). As remuneration for the management services, the Company agreed to 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 $4,000 (2014 - $4,000).
|
|
The tax effects of temporary differences that give rise to deferred tax assets at December 31, 2015 and 2014 are presented below:
|
|
|
|
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Net tax operating loss carryforwards
|
$
|
2,303,000
|
|
$
|
2,223,000
|
|
|
Valuation allowance for
deferred tax asset
|
|
(2,303,000
|
)
|
|
(2,223,000
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
$
|
-
|
|
|
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.
|
|
At December 31, 2015, the Company has estimated accumulated net operating losses of approximately $6,580,000 (2014 - $6,351,000) which may be carried forward to reduce taxation income in future years. The non-operating losses expire from 2018 to 2034.
|
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. 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, 2014, including the
remedial actions discussed below, and we have concluded that, as of December
31, 2015, 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, 2015.
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, 2015, 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, 2015, 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, 2015, 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 has corrected material errors, if any, prior to the release of our company’s December 31, 2015 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 when they are
reasonable and cost-effective. We intend to consider the results of our
remediation efforts and related testing as part of our year-end 2015 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, 2015 that have materially affected or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER
INFORMATION.
None.
PART
III
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
|
69
|
March 7, 2001
to
Present
|
Director and officer of the Company.
|
None
|
|
|
|
|
|
Ralph Shearing
former Director
|
59
|
March 7, 2001
to December 4, 2015
|
Director of the Company, and a natural resource
exploration company.
|
Telson Resources Inc. a Reporting Issuer in Canada and Discovery
Gold Corporation a Registrant in the U.S.A.
|
|
|
|
|
|
Fred Schultz
Director
|
56
|
August 20, 2012
to
Present
|
Director of the Company, and independent businessman
|
None
|
|
|
|
|
|
Dr. Ralf Zabel
Director
Vice-president - International Business Development and
Operations
|
55
|
January 18, 2016
to
Present
September 18, 2008
to
Present
|
Director and 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, former 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., a director of
Discovery Gold Corporation, and formerly a Director of Birch Hill Gold Corp.
Both Telson and Birch Hill are Canadian reporting issuers listed on the Toronto
Venture Stock Exchange and Discovery Gold Corporation is a Registrant on the
U.S.A. OTC Markets. All three companies are primarily engaged in 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. Mr.
Shearing resigned as a director of the Company effective December 4, 2015.
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, Director, 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
Germany since 1986. He was appointed a director of the Company effective
January 18, 2016.
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 Abbas Salih, Fred Schultz, and Ralf Zabel. Fred
Schultz 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 three directors, two of whom are executive officers of the Company
and one of whom are considered to be “independent”, as that term is defined in
applicable securities legislation. Mr. Fred Schultz 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. Dr. Ralf Zabel, by reason of
his being Vice-president - International Business Development and Operations,
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 (former director)
|
Telson Resources Inc. (Reporting Issuer – Canada)
Discovery Gold Corporation (Registrant – U.S.A.)
|
|
|
Abbas Salih
|
None
|
|
|
Fred Schultz
|
None
|
|
|
Ralf Zabel
|
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 Abbas Salih, Fred Schultz, and Ralf Zabel.
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. 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, 2015; 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, 2015 and 2014, 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 2015 and 2014):
|
|
Option
|
Share Awards
(2)
|
|
Name
|
Year
|
Awards
(1)
|
and Other
(3)
|
Total
|
|
|
|
|
|
Abbas Salih, CEO, CFO, Director
|
2015
|
$ Nil
|
$ 49,000
|
$ 49,000
|
|
2014
|
$ Nil
|
$ 10,302
|
$ 10,302
|
|
|
|
|
|
Fred Schultz, Director
|
2015
|
$ Nil
|
$ 4,000
|
$ 4,000
|
|
2014
|
$ Nil
|
$ 4,000
|
$ 4,000
|
|
|
|
|
|
Dr. Ralf Zabel, Director, Vice-president - International
Business Development and Operations
|
2015
|
$ Nil
|
$ Nil
|
$ Nil
|
|
2014
|
$ Nil
|
$ Nil
|
$ Nil
|
|
|
|
|
|
Ralph Shearing, former Director
|
2015
|
$ Nil
|
$ Nil
|
$ Nil
|
|
2014
|
$ Nil
|
$ Nil
|
$ Nil
|
(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, please review Notes 1 and 4 to the financial statements for the year ended December 31, 2015. No options were granted during the 2015 year.
|
(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, please review Notes 1 and 4 to the financial statements for the year ended December 31, 2015. No Share Awards were granted during the 2015 year.
|
(3)
|
Other compensation represents the amounts charged by or paid to the named individuals with respect to management fees.
|
Management Contracts
On August 21, 2012 the Company
entered into a Management Services Agreement with a director (the “Director”).
As remuneration for the management services, the Company agreed to 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 $4,000 (2014 - $4,000).
During the
fiscal year ended December 31, 2015, directors and officers received management
fees as compensation for providing management services to the Company 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, 2015, 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
former Director
|
1,440,000
|
$0.12
|
January 16, 2018
|
|
|
|
|
|
|
|
|
Fred Schultz
Director
|
320,000
|
$0.10
|
October 15, 2017
|
|
|
|
|
|
|
|
|
Dr. Ralf Zabel
Director, 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, 2015 and Year End Option
Values
There
were no stock options exercised during the year ended December 31, 2015.
Repricing
of Options/SARS
There were no stock options
re-priced during the year ended December 31, 2015.
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, 2015.
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. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
As of January 29, 2016, there
were 40,359,391
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
|
Abbas Salih
|
18,838,044 (indirect)
(5)
|
32%
|
|
Jood Palace Hotel
36-A Street Off Al Rigga Road,
PO Box 42211
Deira, Dubai, UAE
|
3,557,427 (direct)
(5)
|
6%
|
|
|
|
|
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
|
|
23,195,471
|
41%
|
|
|
|
|
Beneficial owners
|
|
|
|
Common stock
|
Cede & Co.
|
9,163,765 (direct)
|
16%
|
|
PO Box 20, Bowling Green Stn.
|
|
|
|
New York, N.Y., U.S.A.
|
|
|
|
|
|
|
Common stock
|
Ralph Shearing
(8)
|
8,727,354 (indirect)
(4)
|
15%
|
|
450-1090 W. Georgia St.
|
|
|
|
Vancouver, BC, Canada
|
|
|
|
|
|
|
Common stock
|
John Martin Stewart Phillips
|
3,500,000 (direct)
|
6%
|
|
Mahe, Penrhiw Pistyll Lane
New Quay, Ceredigion
Wales, UK
|
|
|
(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.
|
(2)
|
The percentage of class is based on 40,359,391 shares of common stock issued and outstanding as of January 31, 2016, plus shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of January 31, 2016.
|
(4)
|
The beneficial owner has the right to acquire 1,440,000 shares through the exercise of stock options and 2,320,858 units through the conversion of outstanding loans into units, each unit consisting of one common share of the Company and one share purchase warrant.
|
(5)
|
The beneficial owner also has the right to acquire a further 1,200,000 shares through the exercise of stock options and 4,526,436 units through the conversion of outstanding loans into units, each unit consisting of one common share of the Company and one share purchase warrant.
|
(6)
|
The beneficial owner has the right to acquire 320,000 shares through the exercise of stock options.
|
(7)
|
The beneficial owner has the right to acquire 100,000 shares through the exercise of stock options.
|
(8)
|
Mr. Shearing resigned as a director of the Company effective December 4, 2015.
|
Changes in Control
None
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, 2015, in which the amount
involved in the transaction exceeded or exceeds the $120,000, except as
described below.
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:
|
|
|
Year ended December 31,
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$ 88,880
|
|
$ 80,474
|
|
|
|
|
|
Management fees
|
53,000
|
|
14,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total related party
transactions
|
$ 141,880
|
|
$ 94,776
|
|
|
|
At December 31, 2015, accounts
payable includes $5,200 (2014 - $74,945) due to two directors, a former director,
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, 2015, accounts
payable also includes $15,527 (2014 - $15,527) of expenses for operating costs
paid on behalf of the Company by a company with directors in common.
On August 21, 2012 the Company
entered into a Management Services Agreement with a director (the “Director”).
As remuneration for the management services, the Company agreed to 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 $4,000 (2014 - $4,000).
Director
Independence
The Board, at present, is
composed of three directors, two of whom is an executive officer of the Company
and the other one are considered to be “independent”, as that term is defined
in applicable securities legislation. Mr. Fred Schultz 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. Dr. Ralf Zabel, by reason of his being Vice-president
- International Business Development and Operations, 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.
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. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit fees
The aggregate fees
billed for the two most recently completed fiscal periods ended December 31, 2015
and 2014 for professional services rendered by 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,
2015
|
Year Ended
December 31,
2014
|
|
|
Audit Fees
|
$24,000
|
$31,955
|
|
|
Audit Related Fees
|
Nil
|
Nil
|
|
|
Tax Fees
|
Nil
|
Nil
|
|
|
All Other Fees
|
Nil
|
Nil
|
|
|
Total
|
$24,000
|
$31,955
|
|
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.