**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-QSB**




xQUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      quarterly period ended June 30, 2006





o TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from __________ to __________





Commission
      File Number: 000-29611





THE
      CHILDREN’S INTERNET, INC.


(Exact
      name of small business issuer as specified in its charter)





Nevada
            20-1290331(State
                or other jurisdiction of
            (IRS
                Employerincorporation
                or organization)
            Identification
                No.)





5000
      Hopyard Rd., Suite 320, Pleasanton, California 94588


(Address
      of principal executive offices)





(925)
      737-0144


(Issuer's
      telephone number)








(Former
      name, former address and former fiscal year, if changed since last
      report)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (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 o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x





State
      the
      number of shares outstanding of each of the issuer’s classes of common
      equity:


As
      of
      July 31, 2006, there were 26,873,738 post-split shares of common stock issued
      and outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes o No x












**THE
        CHILDREN’S INTERNET, INC**
 
 **INDEX**
 PageNumberPART
                    I -FINANCIAL
                    INFORMATION
                
                1Item
                    1.
                
                Financial
                    Statements (Unaudited)
                
                1Unaudited
                    Balance Sheet - June 30, 2006
                
                1Unaudited
                    Statements of Operations - For the six months and three months
                    ended June
                    30, 2006 and 2005, and the period from inception to June 30,
                    2006
                
                2Unaudited
                    Statements of Cash Flows - For the six months ended June 30,
                    2006 and
                    2005, and the period from inception to June 30, 2006
                
                3Notes
                    to Unaudited Financial Statements
                
                4Item
                    2.
                
                Management's
                    Discussion and Analysis of FinancialConditions
                    and Plan of Operation
                
                12Item
                    3.
                
                Controls
                    and Procedures
                
                19PART
                    II-
                    OTHER INFORMATIONItem
                    1.
                
                Legal
                    Proceedings
                
                20Item
                    2.
                
                Unregistered
                    Sales of Equity Securities and Use of Proceeds
                
                22Item
                    6.
                
                Exhibits
                    and Reports on Form 8-K
                
                22SIGNATURES
                
                23









**PART
        I - FINANCIAL INFORMATION**
 
 **ITEM
        1.**  **FINANCIAL
        STATEMENTS**
 
 THE
        CHILDREN'S INTERNET, INC.
 (A
        Development Stage Company)
 BALANCE
        SHEET
 June
        30,
        2006
 (Unaudited)
  ASSETSCurrent
                        Assets:Cash
                    
                    $
                    2,498Deposit
                        held in escrow
                    
                    
                    37,378Prepaid
                        expenses
                    
                    
                    6,877Total
                        Current Assets
                    
                    
                    46,753Equipment:Equipment
                        at cost
                    
                    
                    12,196Accumulated
                        depreciation
                    
                    
                    (3,067
                    )Equipment,
                        net
                    
                    
                    9,129Other
                        Assets:Deferred
                        charges - Related company
                    
                    
                    5,669,964Deposit
                        - State Board of Equalization
                    
                    
                    2,000Deferred
                        tax asset (net of valuation allowance of  $
                        865,893)
                    
                    
                    —TOTAL
                        ASSETS
                    
                    $
                    5,727,846LIABILITIES
                        AND STOCKHOLDERS' EQUITYCurrent
                        Liabilities:Accounts
                        payable and accrued expenses
                    
                    $
                    381,936Accrued
                        officers' compensation
                    
                    
                    329,274Payroll
                        taxes payable
                    
                    
                    2,557Total
                        Current Liabilities
                    
                    
                    713,767Long-Term
                        Liabilities:Due
                        to parent company
                    
                    
                    805,227TOTAL
                        LIABILITIES
                    
                    
                    1,518,994COMMITMENTS
                        AND CONTINGENCIES (NOTES 1, 2 & 3)
                    
                    
                    —STOCKHOLDERS'
                        EQUITYPreferred
                        stock, $0.001 par value; 10,000,000 sharesauthorized;
                        zero shares issued and outstanding.
                    
                    
                    —Common
                        stock, $0.001 par value; 75,000,000 sharesauthorized;
                        26,873,738 shares issued and outstanding
                    
                    
                    26,874Additional
                        paid-in capital
                    
                    
                    7,919,566Deficit
                        accumulated during the development stage
                    
                    
                    (3,737,588
                    )TOTAL
                        STOCKHOLDERS' EQUITY
                    
                    
                    4,208,852TOTAL
                        LIABILITIES AND STOCKHOLDERS' EQUITY
                    
                    $
                    5,727,846


The
        accompanying notes are an integral part of the financial
        statements.
  1




THE
      CHILDREN'S INTERNET, INC


(A
        Development Stage Company)


STATEMENTS
        OF OPERATIONS


(Unaudited)




For
                the Three Months
            
            For
                the Six Months
            
            FromEnded
                June 30,
            
            Ended
                June 30,
            
            Inception2006
            
            2005
            
            2006
            
            2005
            
            to
                DateNET
                REVENUES
            
            $
            273
            
            $
            —
            
            $
            273
            
            $
            —
            
            $
            273COSTS
                OF REVENUES
            
            
            88
            
            
            —
            
            
            88
            
            
            —
            
            
            88Gross
                margin
            
            
            185
            
            
            —
            
            
            185
            
            
            —
            
            
            185OPERATING
                EXPENSESSales
                and marketing
            
            
            7,516
            
            
            1,800
            
            
            15,855
            
            
            2,417
            
            
            18,506General
                and administrative
            
            
            385,819
            
            
            294,858
            
            
            653,461
            
            
            776,463
            
            
            3,710,801Total
                operating expenses
            
            
            393,335
            
            
            296,658
            
            
            669,316
            
            
            778,880
            
            
            3,729,307Loss
                from operations
            
            
            (393,150
            )
            
            (296,658
            )
            
            (669,131
            )
            
            (778,880
            )
            
            (3,729,122
            )Interest
                expense
            
            
            2,797
            
            
            —
            
            
            4,466
            
            
            —
            
            
            4,466Loss
                before income taxes
            
            
            (395,947
            )
            
            (296,658
            )
            
            (673,597
            )
            
            (778,880
            )
            
            (3,733,588
            )Provision
                for income taxes
            
            
            800
            
            
            800
            
            
            800
            
            
            800
            
            
            4,000NET
                LOSS
            
            $
            (396,747
            )
            $
            (297,458
            )
            $
            (674,397
            )
            $
            (779,680
            )
            $
            (3,737,588
            )Net
                loss per common share, after giving retroactive effect to 2 for 1
                stock
                split on March 11, 2005-
                basic and diluted
            
            $
            (0.01
            )
            $
            (0.01
            )
            $
            (0.03
            )
            $
            (0.03
            )Shares
                used in computingbasic
                and diluted net lossper
                share
            
            
            26,861,909
            
            
            26,795,808
            
            
            26,860,034
            
            
            23,480,932




The
      accompanying notes are an integral part of the financial
      statements.




2




THE
        CHILDREN'S INTERNET, INC.
 (A
        Development Stage Company)
 STATEMENTS
        OF CASH FLOWS
 (Unaudited)
 For
                    the Six Months
                
                FromEnded
                    June 30,
                
                Inception2006
                
                2005
                
                to
                    DateCASH
                    FLOWS USED IN OPERATING ACTIVITIESNet
                    Loss
                
                $
                (674,397
                )
                $
                (779,680
                )
                $
                (3,737,588
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    on equipment
                
                
                2,191
                
                
                —
                
                
                3,067Amortization
                    of deferred charges
                
                
                36
                
                
                —
                
                
                36Stock
                    compensation to director
                
                
                —
                
                
                315,000
                
                
                315,000Stock
                    compensation to President
                
                
                39,167
                
                
                —
                
                
                39,167Shares
                    issued for services
                
                
                7,800
                
                
                106,000
                
                
                709,756Services
                    performed as capital contribution
                
                
                —
                
                
                —
                
                
                595,000Expenses
                    paid by former officer on behalf of company
                
                
                —
                
                
                —
                
                
                5,000Deposit
                    - State Board of Equalization
                
                
                (2,000
                )
                
                —
                
                
                (2,000
                )Increase
                    in current assets -Deposit
                    held in escrow
                
                
                —
                
                
                —
                
                
                (37,378
                )Prepaid
                    expenses
                
                
                (6,877
                )
                
                —
                
                
                (6,877
                )Increase
                    in current liabilities -Accounts
                    payable and accrued expenses
                
                
                200,236
                
                
                51,590
                
                
                384,493Accrued
                    officers' compensation
                
                
                149,274
                
                
                90,000
                
                
                329,274Net
                    cash used in operating activities
                
                
                (284,570
                )
                
                (217,090
                )
                
                (1,403,050
                )CASH
                    USED IN INVESTING ACTIVITIESAcquisition
                    of equipment
                
                
                (774
                )
                
                —
                
                
                (12,196
                )Net
                    cash used in investing activities
                
                
                (774
                )
                
                —
                
                
                (12,196
                )CASH
                    PROVIDED BY FINANCING ACTIVITIESIssuance
                    of common stock
                
                
                —
                
                
                456,912
                
                
                612,517Advances
                    from parent company
                
                
                183,993
                
                
                274,886
                
                
                1,262,139Parent
                    company advances converted to common stock
                
                
                —
                
                
                (456,912
                )
                
                (456,912
                )Net
                    cash provided by financing activities
                
                
                183,993
                
                
                274,886
                
                
                1,417,744Net
                    change in cash and cash equivalents
                
                
                (101,351
                )
                
                57,796
                
                
                2,498Cash
                    and cash equivalents - Beginning of period
                
                
                103,849
                
                
                —
                
                
                —Cash
                    and cash equivalents - End of period
                
                $
                2,498
                
                $
                57,796
                
                $
                2,498SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATIONCash
                    paid for interest
                
                $
                —
                
                $
                —
                
                $
                —Cash
                    paid for taxes
                
                $
                800
                
                $
                800
                
                $
                4,000
   The
        accompanying notes are an integral part of the financial
        statements.


3


THE
      CHILDREN'S INTERNET, INC.


(A
      Development Stage Company)


NOTES
      TO
      UNAUDITED FINANCIAL STATEMENTS


June
      30,
      2006





**NOTE
      1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
      POLICIES**





Business





The
      Children's Internet, Inc. (the Company) was incorporated under the laws of
      the
      State of Nevada on September 25, 1996 under the name D.W.C. Installations.
      At
      that date, 2,242,000 post-split shares were issued. The Company was primarily
      inactive until July 2002.





On
      July
      3, 2002, Shadrack Films, Inc. (the Parent Company) purchased 2,333,510 newly
      issued post-split shares of our common stock for $150,000, thereby obtaining
      a
      majority ownership interest and becoming the parent company. Total issued and
      outstanding shares were increased to 4,575,510 post-split shares as a result
      of
      this sale. Subsequently, on December 27, 2002, the Company’s name was changed to
      The Children’s Internet, Inc.





On
      October 11, 2002, 8,948,000 newly issued restricted post-split shares of common
      stock were issued as a debt financing fee, pursuant
      to an agreement with five shareholders holding a total of 2,237,000 freely
      tradable post-split shares. These shareholders agreed to pay to Two Dog Net,
      Inc. (TDN), a related party, the proceeds of the sales of an unspecified number
      of their shares to third parties, and in return these shareholders or their
      designees received four restricted shares for each of their original
      freely-tradable shares. TDN in turn agreed to loan a portion of the proceeds
      to
      Shadrack Films, Inc. to finance the ongoing operations of the Company. TDN
      retained the remainder of the proceeds to help fund development costs of The
      Children’s Internet system, which is the product the Company is bringing to the
      marketplace. In view of the $575,356 agreed upon value of the newly-issued
      shares given up by the Company to obtain this financing, no interest is charged
      on the amounts loaned. The total net proceeds of the shares sold under this
      agreement was $2,228,292, and as of June 30, 2006, $1,262,139 had been loaned
      to
      the Company by Shadrack Films, Inc.





On
      February 15, 2005, the Company’s Board of Directors authorized a 2 for 1 forward
      split of the Company’s issued and outstanding common stock to shareholders of
      record on March 7, 2005, to take the form of a 100% stock dividend. The
      effective date of the forward split on the OTC:BB was March 11,
      2005.





During
      the year ended December 31, 2005, an additional 13,334,628 restricted post-split
      shares of common stock were issued for conversion of debt and in payment of
      investor relation services as explained in Notes 2, 3 and 5 .





On
      June
      9, 2006, 15,600 shares were issued under a public relations consulting
      agreement, as explained in Note 5, bringing
      the total of
      the
      Company's issued and outstanding post-split shares to 26,873,738 at June 30,
      2006.





On
      January 1, 2006, the company adopted the stock-based compensation provisions
      of
      SFAS No. 123R, which establishes standards for the accounting for
      transactions in which an entity exchanges its equity instruments for goods
      and
      services. SFAS No. 123R eliminates the ability to account for
      share-based compensation transactions using Accounting Principles Board Opinion
      No. 25 and generally requires that such transactions be accounted for using
      a fair-value-based method.




4




Development
      Stage Enterprise





The
      Company is a development stage enterprise as defined by Statement of Financial
      Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development
      Stage Enterprises.” All losses accumulated since the inception of the Company
      have been considered as part of the Company’s development stage activities. The
      Company is devoting the majority of its efforts to activities focused
      on marketing The Children’s Internet® service and on
      financial planning, raising capital, developing sales strategies and new
      marketing materials and implementing its business plan. The Company is
      considered to be a development stage company even though its planned principal
      operations have commenced, because there have been no significant revenues
      earned by the Company to date.





Additionally,
      the Company is not a shell company as defined in Rule 12b-2 of the Exchange
      Act.





Revenue
      Recognition





In
      December 2003, the Securities and Exchange Commission (SEC) issued Staff
      Accounting Bulletin (SAB) No. 104 “Revenue Recognition, corrected copy” to
      revise and clarify SAB No. 101, “Revenue Recognition in Financial Statements”,
      issued in 1999 and 2000. Pursuant to these bulletins and the relevant generally
      accepted accounting principles, the Company recognizes revenue when services
      are
      rendered to subscribers under contractual obligation to pay monthly subscription
      amounts for such services. Prior to the three-month period ended June 30, 2006,
      no revenue was recognized.





Interim
      Financial Information





The
      accompanying unaudited interim financial statements have been prepared by the
      Company in accordance with accounting principles generally accepted in the
      United States of America pursuant to Regulation S-B of the Securities and
      Exchange Commission. Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted. Accordingly, these interim financial statements should
      be
      read in conjunction with the Company's audited financial statements and related
      notes as contained in the Company's Form 10-KSB for the year ended December
      31,
      2005. In the opinion of management, the interim financial statements reflect
      all
      adjustments, including normal recurring adjustments, necessary for fair
      presentation of the interim periods presented. The results of operations for
      the
      six months ended June 30, 2006 are not necessarily indicative of results of
      operations to be expected for the full year.




5




Going
      Concern





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business. As reflected in the
      accompanying financial statements, the Company had net losses and a negative
      cash flow from operations for the six months ended June 30, 2006. These factors
      raise substantial doubt about its ability to continue as a going concern. The
      ability of the Company to continue as a going concern is dependent on the
      Company’s ability to raise additional funds and implement its business plan. The
      financial statements do not include any adjustments that might be necessary
      if
      the Company is unable to continue as a going concern.





Reclassifications





For
      comparative purposes, certain amounts previously combined in the prior year’s
      Statements of Operations, have been reclassified to provide a more informative
      presentation when compared to the same periods for 2006.





The
      following summarizes the reclassifications of the previously reported amounts
      for 2005:





Three
                Months
              Ended
                June, 30 2005
            
            Six
                Months
              Ended
                June 30, 2005General
                and administrative expensesas
                originally reported
            
            $
            296,658
            
            $
            778,880Adjustment
            
            
            (1,800
            )
            
            (2,417
            )Restated
            
            $
            294,858
            
            $
            776,463Sales
                and marketing expensesas
                originally reported
            
            $
            —
            
            $
            —Adjustment
            
            
            1,800
            
            
            2,417Restated
            
            $
            1,800
            
            $
            2,417





**NOTE
      2 - RELATED PARTY TRANSACTIONS** ****




Services
      Provided




On
      February 15, 2005, the Company’s Board of Directors resolved that starting
      January 1, 2005, all salary due and payable to the Company's Chief Executive
      Officer, Chief Financial Officer, and Director, Sholeh Hamedani, would be
      accrued when earned. The decision will be made at the end of each year whether
      to make the payment in cash, shares of the Company’s restricted common stock, or
      a combination of both. As of the date of this report no decision has been made
      what method of payment Ms. Hamedani will take and it continues to be accrued.
      For each of the six-month periods ended June 30, 2006 and 2005, $90,000 was
      accrued and charged to General and Administrative Expense. Also, the salary
      of
      the Company’s President, William L. Arnold, has not been paid but is being
      accrued beginning May 1, 2006.




6




Advances




As
      of the
      date of this report, all of the Company’s funding has been through Shadrack
      Films, Inc., the Parent Company. The total amount advanced through June 30,
      2006
      was $1,262,139. In February 2005, the Company owed Shadrack Films, Inc., the
      parent company, approximately $457,000 representing loans made by Shadrack
      to
      the Company since activating the development stage on July 3, 2002 when it
      agreed to fund all of the Company’s operations. On February 15, 2005, the
      Company's Board of Directors authorized and approved the conversion of debt
      totaling $456,912 owed by the Company to Shadrack, into 13,054,628 post-split
      shares of the Registrant's restricted common stock at a conversion price of
      $.035 per post-split share.





Shadrack
      Films, Inc. is an entity owned and controlled by the Company's Chief Executive
      Officer, Chief  Financial
      Officer and Chairman of the Board, Sholeh Hamedani, who is the sole officer,
      director and shareholder of Shadrack. Shadrack also owned 2,333,510 post-split
      shares of the Company's common stock, of which it sold 1,277,150 of its
      restricted shares  in
      reliance on an exemption from registration pursuant to Section 4 (1-1/2) of
      the
      Securities Act of 1933, to approximately 130 investors between July 2004 and
      June 2005. In addition, Shadrack paid for services valued at $35,000 with 70,000
      restricted shares of the Company’s common stock. Together with the 13,054,628
      post-split shares issued upon conversion of the debt, Shadrack owns an aggregate
      of 14,040,988 post-split shares of the Company's common stock or 52.2% without
      giving effect to any presently exercisable options.





Beneficial
      Ownership





The
      Company, Shadrack and Two
      Dog
      Net, Inc. (TDN), are
      related parties, in that, the Company's Chief Executive Officer, Chief Financial
      Officer, and Director, Sholeh Hamedani, is the sole shareholder of Shadrack
      which as of June 30, 2006 owns 52.2% of the Company's common stock. Ms. Hamedani
      was President of TDN until she resigned on August 1, 2002 and is a 10%
      shareholder of TDN. In addition, the current President, Chairman and Founder
      of
      TDN, Nasser Hamedani, is the father of the Company’s Chief Executive Officer,
      Chief Financial Officer, and Director, Sholeh Hamedani.





Licensing
      Agreement





The
      Wholesale Sales and Marketing Agreement between the Company and Two Dog Net,
      Inc., dated March 3, 2003, is an exclusive and renewable five-year agreement
      for
      the Company to be the exclusive marketers of TDN’s proprietary and patent
      pending secure internet service for children pre-school to junior high called
      The Children's Internet®. Under the terms of the agreement, the agreement is
      automatically renewed for additional five-year periods on the same terms unless
      either party terminates by written notice to the other party no less than one
      year before the end of the term.




On
      February 15, 2005, the Company's Board of Directors authorized and approved
      an
      amendment to the Wholesale Sales and Marketing Agreement between the Company
      and
      Two Dog Net, Inc., dated March 3, 2003. The amended license agreement reduces
      the license fee for The Children's Internet® technology payable to TDN from
      $3.00 to $1.00 per monthly subscription. In consideration for the reduction
      of
      the fee, the Company granted TDN or its designees, an option to purchase the
      Company's currently restricted common stock as described below.




7




Stock
      Options Granted




As
      noted
      above, on February 15, 2005, the Company issued an option to purchase up to
      18,000,000 post-split shares of the Company's
      restricted common stock at
      an
      exercise price of $0.07 per
      share, and a fair value of $5,670,000.  The
      Option is exercisable, in whole or in part at any time and from time to time,
      for a period of five years from the date of grant. The Option also provides
      TDN
      with "piggyback" registration rights for all shares underlying the Option on
      any
      registration statement filed by the Company for a period of one year following
      any exercise of the Option.




Also
      on
      February 15, 2005, the Company’s Board of Directors granted Tyler Wheeler, the
      Company’s Chief Software Architect Consultant and a director, an option to
      purchase up to 1,000,000 post-split shares of the Company’s restricted common
      stock at an exercise price of $0.07, and a fair value of $315,000. The option
      is
      exercisable, in whole or in part at any time and from time to time, for a period
      of five years from the date of grant.




Both
      options to purchase Company shares were valued at $0.315 per share. Both of
      the
      above options were valued using the Black-Scholes option pricing model, which
      was developed for estimating the fair value of traded options, and taking into
      account that all of the exercisable shares are restricted.




**NOTE
      3 - COMMITMENTS AND CONTINGENCIES**





On
      November 24, 2004, Oswald & Yap, A Professional Corporation (“O&Y”),
      formerly counsel to the Company, filed a complaint in the Superior Court of
      California, County of Orange, Case No. 04CC11623, against the Company, seeking
      unpaid legal fees in the amount of $50,985 in connection with the legal
      representation of the Company. Subsequently the amount claimed of unpaid legal
      fees was reduced to $37,378 because it was discovered that O&Y did not
      properly credit all of the payments that were made by the Company to O&Y.
      The amount of $37,378 was deposited in an escrow account by the Company on
      July
      5, 2005. The complaint includes causes of action for breach of contract. The
      Company disputes the amounts claimed alleging that O&Y’s services were
      otherwise unsatisfactory. On May 5, 2005, O&Y submitted an Offer to
      Compromise for a $0 payment by the Company to O&Y in exchange for mutual
      releases which the Company rejected. ****





The
      Company filed a cross-complaint against O&Y alleging breach of contract,
      professional negligence, negligent representation, and breach of good faith
      and
      fiduciary duty. The Company is seeking damages in an unspecified amount for
      costs, legal fees and losses incurred. O&Y has vigorously disputed the
      claims set forth in the cross-complaint and has indicated its intention, should
      it prevail in its defense, to institute a malicious prosecution action against
      the Company, Nasser Hamedani, Sholeh Hamedani and Company counsel. Trial is
      set
      in the matter for November 13, 2006 in Department C16 of the Orange County
      Superior Court.





The
      cross-claim was filed in the Superior Court of California, County of Orange,
      Case No. 04CC11623 by TCI against O&Y, and the principal allegation is that
      O&Y was retained to assist its predecessor company in the purchase and
      acquisition of D.W.C. Installations with the expectation that D.W.C. had
      available free-trading shares such that TCI could immediately raise capital
      on
      the relevant markets and that in advising TCI through the purchase, O&Y
      failed to properly advise TCI as to the status of D.W.C. Installations and
      its
      shares which in fact were not free-trading. As a result of this conduct, TCI
      alleges damages in an unspecified amount but including purchase costs, extended
      operation costs, refiling costs, audit costs, legal fees, loan fees, lost market
      share, and costs for registration.




8




There
      is
      a contingent liability in connection with a Stock Purchase Agreement executed
      on
      October 11, 2002 between identified Shareholders and identified Purchasers.
      Under the terms of the Stock Purchase Agreement, a payment of $150,000 is due
      to
      be paid into escrow in part consideration for purchase of the stock of D.W.C.
      Installations, Inc. The payment date is designated as 90 days from the date
      that
      the Company’s [D.W.C. Installations, Inc., a Nevada Corporation] shares of
      common stock become quoted on the over-the-counter bulletin board system. The
      shares became quoted on the over-the-counter bulletin board system on December
      23, 2004. If this payment is not made, there could be exposure in connection
      with the identified shareholders’ efforts to collect the amounts allegedly
      due.





On
      February 25, 2005, the Company entered into a one-year agreement with Crosslink
      Financial Communications, Inc., a California corporation, for consulting
      services related to stockholder communications and public relations with
      existing shareholders, brokers, dealers and other investment professionals.
      The
      principal shareholder of Crosslink is William L. Arnold. As compensation for
      these services, Crosslink received 200,000 restricted post-split shares of
      the
      Company's common stock valued at $0.33 per share, monthly stock compensation
      of
      8,000 restricted post-split shares of common stock, and $5,000 per month from
      which Crosslink paid for complementary services (e.g., other mailing services,
      email services, data base extensions) of not less than $1,500 per month up
      to an
      average of $2,500 per month. During the year ended December 31, 2005, Crosslink
      received a total of 280,000 restricted post-split shares of the Company’s common
      stock under this agreement. The agreement with Crosslink Financial
      Communications, Inc. was terminated at the end of December 2005.





On
      December 30, 2005, William L. Arnold, the principal shareholder of Crosslink
      was
      appointed by the Chairman to act as President of the Company under an Executive
      Employment Agreement with the same date. Compensation includes a monthly salary
      of $10,000, of which $2,500 per month is deferred with 9% accrued interest
      until
      January 2007. The
      agreement also includes a
      combination of nonqualified and qualified stock options (the Stock Option).
      The
      Stock Option is for the purchase of up to 1,000,000 post-split shares at an
      option price of $0.55 per share, and expires on December 31, 2010. One half
      of
      the Stock Option vested immediately and the remaining 500,000 option shares
      will
      vest at the rate of 1/36 th each
      month until fully vested. Of the 500,000 option shares which vest immediately,
      360,000 are Incentive Stock Options (ISO’s). The remaining 640,000 option shares
      are non-qualified. Additionally the agreement includes a performance bonus of up to 50% of the
      annual salary to be paid on or before the sixtieth day following the
      close of the Company's fiscal year, provided that the Employee meets the
      performance standards as established by Board of Directors.  Although
      the President and the CEO of the Company have mutually agreed to extend the
      deadline to define the "Performance Standards" from June 30, 2006 to September
      30, 2006, $30,000 has been accrued as an expense for the six months ended June
      30, 2006. If the stock-based compensation provisions of SFAS No. 123R
      had been adopted prior to January 1, 2006, the fair value of the 500,000 shares
      which vested on December 30, 2005 under the Stock Option, would have been
      recorded at $235,000.





As
      previously disclosed by the Company on August 15, 2005, November 15, 2005,
      and
      January 3, 2006, that on July 19, 2005, the Company and its auditors and its
      former auditors received notice from the Office of Enforcement of the Securities
      and Exchange Commission stating that they had commenced an “informal inquiry” to
      determine if there have been “any violations of the federal securities laws” by
      the Company. On December 27, 2005, the Company received notice from the
      Securities and Exchange Commission that the Commission had elevated its
      inquiries to a formal investigation for possible violation of the securities
      laws resulting from the Company’s restatement of its financial statements for
      fiscal years 2002 and 2003 and certain interim periods in fiscal year
      2004.  On May 1, 2006, the Company was further informed by the San
      Francisco District Office of the Commission that it is going to ''recommend
      to
      the Commission that it authorize the staff to file a civil injunctive action
      in
      the United States District Court and/or cease-and-desist proceeding in an
      administrative action against The Children’s Internet” and its C.E.O., Sholeh
      Hamedani. The Commission will allege in its pleadings that the Company, its
      C.E.O. and other individuals, violated various sections and rules of the
      Securities Act of 1933 and the Securities Exchange Act of 1934. The Commission
      ''may seek injunctive relief or a cease and desist order, disgorgement, and
      civil monetary penalties'' against the Company as well as its C.E.O. being
      barred from serving as either a director or officer of the Company or of any
      public company in the future.




9


The
      Company is continuing to seek resolution of the staff’s investigation by virtue
      of settlement.  A potential settlement likely may include the Company
      and/or its Chief Executive Officer consenting, without admitting or denying
      the
      allegations, to a judgment alleging negligent, reckless, and intentional
      violations of the federal securities laws, and other sanctions including
      substantial penalties. These penalties could range from the Chief Executive
      Officer being barred from serving as either a director or officer of the Company
      to also including financial penalties and disgorgement of all profits derived
      by
      the Company and/or its Chief Executive Officer who raised approximately
      $2,722,000 through sale of Company stock by their nominees to third parties
      and/or sales by certain individuals of approximately $215,000 and/or sales
      by
      Shadrack who subsequently directly sold 1,277,150 shares for $753,000.





From
      inception, Shadrack, the parent company, has advanced to the Company
      approximately $1.3 million for operations. While the exact amount of the
      disgorgement of profits and/or penalties cannot be determined at this time,
      the
      ability to pay them by the Company or the Chief Executive Officer is a serious
      question. Any proposed settlement will be subject to the Commission’s
      approval.  The Company cannot predict the outcome of any settlement
      negotiations, the staff’s investigation, or the ultimate Commission action
      should these settlement negotiations fail. The Company does not yet have a
      settlement offer. Management and counsel to the Company are currently waiting
      to
      see if they will receive one from the Commission's staff. Additionally, there
      is
      no assurance that the Company will receive a settlement offer. Moreover, there
      is no assurance that their settlement offer (if any) will be acceptable to
      the
      Company and the prospect of litigation could ensue which could seriously
      compromise the Company's ability to achieve its goals.





On
      April
      7, 2005, the Company entered into an agreement with Convergys Customer
      Management Group Inc. of Cincinnati, Ohio to provide subscriber management
      services, including inbound telephone coverage 24/7, capturing caller
      information, providing toll-free numbers and daily reporting of orders and
      leads. The term of the agreement begins on April 7, 2005 and continues until
      the
      expiration of 30 days after either party gives the other party written notice
      of
      its intent to terminate. Under this agreement, inbound live phone services
      are
      billed at $0.75 per minute for the first million minutes annually, $0.732 for
      the second million minutes and $0.714 per minute thereafter. The minimum
      purchase commitment is $2,500 per month, which is waived for the first year
      of
      service. The Convergys relationship is established, but their services will
      not
      commence until the Infomercial marketing begins.




10


On
      August
      23, 2005, the Company signed a client services agreement with Mercury Media
      of
      Santa Monica, CA to exclusively manage the distribution of the Company’s
      television infomercials. Mercury Media is an advertising agency that specializes
      in purchasing airtime for different types of direct response advertising. The
      term of the contract is annual until terminated by either party by written
      notice of not less than 30 days. For media time bookings under this contract,
      the Company will pay a 10% commission on the gross amount charged by broadcast,
      satellite or cable television outlets. At the time of this report no media
      time
      has been booked. The Mercury Media relationship is established, but their
      services will not commence until the Infomercial marketing begins.





On
      April
      21, 2006, the Company announced that it had entered into a six-month consulting
      agreement with Karin Tobiason for public relations services. This agreement
      was
      terminated shortly thereafter. No services were performed under the agreement,
      and the initial payment of $5,000 was fully refunded.





On
      June
      9, 2006, the Company entered into a public relations consulting agreement with
      Brazer Communications of Mill Valley, CA to launch a media relations campaign
      to
      increase public awareness of the Company and its product. Under this agreement,
      overall fees are set at $4,700 per month for the contract period of six months
      ending on December 8, 2006. In addition to the monthly fees, on the date of
      the
      agreement 15,600 restricted post-split shares were awarded to two principals
      of
      Brazer Communications. The fair market value of these shares was $7,800, which
      was recorded as a prepaid expense to be amortized over the period of the
      agreement.




**NOTE
      4 - COMMON STOCK**





On
      February 15, 2005, the Company’s Board of Directors authorized a 2 for 1 forward
      split of the Company's issued and outstanding common stock to shareholders
      of
      record on March 7, 2005, in the form of a 100% stock dividend. The effective
      date of the forward split on the NASDAQ OTC: BB was March 11, 2005.





**NOTE
      5 - NON-MONETARY TRANSACTIONS**





Deferred
      Charge





As
      explained in Note 2, the Company’s Board of Directors granted an option to Two
      Dog Net, Inc. to purchase currently restricted common shares. This option was
      valued at $5,670,000. This amount has been recorded as a deferred charge and
      is
      being amortized into expense as subscription revenues are recognized, beginning
      with the three-month period ended June 30, 2006. This asset will be evaluated
      periodically by management to determine if any adjustment for impairment of
      value is required. During the three months ended June 30, 2006, $36 in
      amortization of the deferred charge was recorded as cost of
      revenues.





Conversion
      of Debt to Common Stock





As
      explained in Note 2, on
      February 15, 2005, the Company's Board of Directors authorized and approved
      the
      conversion of debt totaling $456,912 owed to Shadrack Films, Inc., the Parent
      Company, into 13,054,628 post-split shares of the Company’s restricted common
      stock at a conversion price of $.035 per post-split share.




11


Non-employee
      Compensation





As
      explained in Note 2, the Company’s Board of Directors granted an option to Tyler
      Wheeler, to purchase restricted common shares. This option was valued at
      $315,000. This amount has been recorded as an expense for services and is
      included with general and administrative expenses in the Company’s Statement of
      Operations for the six months ended June 30, 2005.





Stock-based
      Compensation





During
      the six months ended June 30, 2006, options to purchase 83,334 shares at $0.55
      per share, granted to William
      L. Arnold , became
      vested under his executive employment agreement based on his first six months
      of
      service as President of the Company. The
      vested options were valued at $39,167 using the Black-Scholes option pricing
      model based on the grant-date fair value in accordance with
      SFAS No. 123R.





As
      explained in Note 3, on June 9, 2006, 15,600 restricted post-split shares were
      awarded to two principals of Brazer Communications under a six-month contract
      to
      perform public relations consulting services for the Company. The fair market
      value of these shares was $7,800.





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
      OPERATION**





The
      following discussion and analysis should be read in conjunction with our
      financial statements, including the notes thereto, appearing elsewhere in this
      Report.





**Forward-Looking
      Statements**





The
      following information contains certain forward-looking statements of management
      of the Company. Forward-looking statements are statements that estimate the
      happening of future events and are not based on historical fact. Forward-looking
      statements may be identified by the use of forward-looking terminology, such
      as
“may," "could," "expect," "estimate," "anticipate," “plan,” "predict,"
      "probable," "possible," "should," "continue," or similar terms, variations
      of
      those terms or the negative of those terms. The forward-looking statements
      specified in the following information have been compiled by our management
      on
      the basis of assumptions made by management and considered by management to
      be
      reasonable. Our future operating results, however, are impossible to predict
      and
      no representation, guaranty, or warranty is to be inferred from those
      forward-looking statements.





**Critical
      Accounting Policies and Estimates**





The
      Company's financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States of America, which
      contemplate continuation of the Company as a going concern .
      The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      the disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual
      results could differ from those estimates.




12




**RESULTS
      OF OPERATIONS**





**Selected
      Financial Data**




The
      following selected statement of operations and balance sheet data for the period
      from September 25, 1996, the date of our inception, through June 30, 2006 and
      for the six months ended June 30, 2006 as compared to the six months ended
      June
      30, 2005 were derived from our financial statements and notes thereto included
      in this report which are unaudited. Historical results are not necessarily
      indicative of results that may be expected for any future period. The following
      data should be read in conjunction with "Plan of Operation" below, and our
      unaudited financial statements, including the related notes to the financial
      statements.




For
                the six months ended June 30, 2006
            
            For
                the six months ended June 30, 2005
            
            For
                the period from September 25, 1996 (inception) through
                June 30,2006**Statement
                of Operations Data**Net
                revenues
            
            $
            273
            
            $
            —
            
            $
            273Operating
                expenses
            
            $
            669,316
            
            $
            778,880
            
            $
            3,729,307Operating
                loss
            
            
            ($669,131
            )
            
            ($778,880
            )
            
            ($3,729,122
            )Net
                loss
            
            
            ($674,397
            )
            
            ($779,680
            )
            
            ($3,737,588
            )





As
                of June 30, 2006**Balance
                Sheet Data:**Total
                assets
            
            $
            5,727,846Total
                liabilities
            
            $
            1,518,994Total
                stockholders' equity
            
            $
            4,208,852





Our
      operating expenses decreased by $109,564 for the six months ended June 30,
      2006,
      as compared to the quarter ended June 30, 2005. The decrease was primarily
      due
      to decreases of $188,736 in officers and directors compensation and $129,728
      in
      investor relations expenses, offset by an increase in legal expenses of
      $209,815. The decrease in officers and directors compensation resulted primarily
      from more stock options granted during the six months ended June 30, 2005.
      The
      decrease in investor relations expense is because the principal of our former
      investor relations consulting firm, which received 232,000 restricted post-split
      shares valued at $106,000 during the six months ended June 30, 2005, has been
      performing these functions. The increase in legal expenses is due to the ongoing
      Oswald & Yap litigation and responding to the SEC inquiry.





**Plan
      of Operation** ****





This
      plan
      of operation contains forward-looking statements that involve risks,
      uncertainties, and assumptions. The actual results may differ materially from
      those anticipated in these forward-looking statements as a result of certain
      factors, including, but not limited to, those described elsewhere in this
      report.




13




On
      September 10, 2002, we entered into a License Agreement with Two Dog Net for
      an
      exclusive worldwide license to market and sell The Children’s Internet® service.
      We subsequently replaced the royalty and license agreement with a new Wholesale
      Sales & Marketing Agreement with the same effective date of September 10,
      2002. The new agreement provides for us to be the exclusive marketers of Two
      Dog
      Net’s proprietary and patent pending secure Internet service for pre-school to
      junior high school aged children called The Children’s Internet®. We further
      amended this agreement in February 2005 to decrease the per user fee to Two
      Dog
      Net from $3.00 to $1.00. In consideration for this decrease, Two Dog Net was
      granted an option to acquire 18,000,000 post-split shares of the Company’s
      restricted common stock at an exercise price of $.07 per share for five years
      from the date of grant. The shares underlying the option have “piggy back”
registration rights for a period of one year following any exercise of the
      option.




The
      Company released The Children’s Internet®, version 9.0, to the market on March
      2, 2006. The Company is the exclusive marketer and distributor of The Children's
      Internet® membership-based service created just for kids. In the August 2004
      issue of PC Magazine The Children's Internet® was ranked as Editors' Choice in
      the category of "Kids' Browsers and Services," and was voted number one over
      AOL, EarthLink and MSN Premium 9. We believe The Children's Internet® is the
      most comprehensive, smart solution to the problems inherent to a child’s
      unrestricted and unsupervised Internet access. We offer a protected online
      service and "educational super portal" specifically designed for children,
      pre-school to junior high, providing them with SAFE, real-time access to the
      World Wide Web; access to hundreds of thousands of the best pre-selected,
      pre-approved educational and entertaining web pages accessed through a secure
      propriety browser and search engine.




During
      2005 and 2006, the technology on which the product is based was updated and
      numerous features including secure e-mail, Family FavoritesTM, and more home
      rooms were added, as well as improving the overall functionality of the
      service.




We
      also
      created a “User Advisory Group” that served as critical advisors with respect to
      both content and technical aspects of the product. This group was disbanded
      in
      December 2005 after providing very valuable constructive commentary and with
      the
      understanding that the only components to be finalized were secure e-mail and
      an
      enhanced search engine. Those components have now been added.




Additionally,
      during 2005 and 2006, we identified and, where appropriate, contracted with
      third party companies to outsource non-strategic core competencies to provide
      administrative support services and effectively put in place the infrastructure
      to support the growth of the business. Convergys Corporation of Cincinnati,
      Ohio
      has been contracted to manage telemarketing and the order taking process, and
      Mercury Media of Santa Monica, California has been contracted to manage media
      placement. Neither of these companies has received any payment, nor have they
      begun to perform services for the Company, as of the date of this
      report.




14




**The
      Business Model**




The
      product has a suggested retail price of $9.95 per month with a 30-day free
      trial
      offer for the first month of service to the consumer. The user must already
      have
      internet access, either through dial-up, DSL or cable broadband. We utilize
      both
      retail and wholesale channels of distribution.




The
      Company will focus on establishing long term, value-driven relationships
      with:





·
            Parents
                and Kids


·
            The
                School Market: School Administrators and
                Teachers


·
            Major
                ISP’s such as Comcast, Yahoo, AOL,
                etc.


·
            Non-profit
                organizations such as religious groups, Boy Scouts and Girl Scouts,
                etc.


·
            ISP
                customers with an interest in protecting their families




With
      the
      product now launched and generating minimal revenues, we are affecting a broad
      based Sales and Marketing Plan. We will focus our sales and marketing programs
      on five distinct areas where we can produce revenue:




1.
            **Consumer
                Sales**-
                In March 2006, we began selling monthly subscriptions of the service
                directly to consumers via a nationwide Sales Agent program. We introduced
                a Sales Agent program on January 11, 2006 and began enrolling independent
                Sales Agents to sell subscriptions to The Children’s Internet® service on
                a commission only basis. A monthly commission of $2.00 per subscriber
                is
                paid to the sales agent and continues as long as the subscriber is
                enrolled with our service. These independent Sales Agents have introduced
                the product to some of the nations largest ISPs, retailers, merchandisers,
                and fast food companies. As of the date of this report, only minimal
                sales
                have been made.





Consumers
      may also acquire the product directly from the Company via our website at:
      www.thechildrensinternet.com.





2.
            **Wholesalers**-
                We are planning to sell The Children's Internet® to independent
                distributors, resellers and ISPs who will sell it as a value-added
                service
                to their current customer base. Targets would include companies such
                as
                Comcast, AT&T, EarthLink and the hundreds of “local” ISPs throughout
                the United States. In these situations, the business model changes
                dramatically as we would not be engaged in billing, collecting, customer
                service or level-one technical support.





3.
            **Charitable
                organizations-**We
                are planning to “partner” with non-profit organizations to have them
                market the product. Targets would include large religious organizations,
                various scout programs, Internet safety activists, law enforcement
                agencies, etc. Moreover, we offer any age-appropriate school, public
                or
                private, 20 free licenses for a year. From there, we expect Parent
                Teacher
                Associations to use the product as a fundraiser, deepening our penetration
                into the homes of children.







4.
            **Infomercials-**Subject to securing financing, the cornerstone of our consumer marketing
                plan is a national television advertising campaign which includes
                a
                30-minute infomercial that was produced over a two-year period of
                time by
                Two Dog Net. This infomercial will be re-edited and updated. We then
                intend to utilize the infomercial to launch the advertising and consumer
                marketing program to build brand recognition and to generate revenues
                from
                customer monthly subscriptions. We plan to first conduct a limited
                media
                test to identify what television stations in various geographical
                markets
                generate the most response. From the media test we will be able to
                build
                the media plan to launch the advertising campaign on a national basis
                thereafter and will be the basis for the ongoing infomercial media
                schedule.




15




5.
            **International marketing**-
              the Company has been approached by identified resellers in Europe and
              Mexico and will accommodate them as we are successful in the United
              States. Canada and Australia are obvious targets for development. A
              Spanish language version will ultimately open doors throughout Latin
              America and Spain.


**Channels
      of Distribution:**





The
      Children's Internet, Inc. will employ both direct and indirect sales channels.





Also
      subject to secure financing we will hire a direct sales force. The primary
      targets will be the largest Internet Service Providers as well as other national
      organizations that market to the most appropriate demographic for our service.
      We believe one or more of the largest ISPs in the United States will recognize
      the first mover advantage opportunity and will use The Children’s Internet to
      not only offer this much needed product to their existing customers, but also
      to
      take significant market share from their competition. We also believe that
      almost any company that markets to our demographic will want to seize the public
      relations good will that will accrue to any company offering our
      service.





The
      indirect channel, composed of non-salaried independent agents and wholesale
      distributors, will target a wide range of opportunities, from local charities
      to
      national organizations where they may have an influential contact. These
      agents/distributors will have the opportunity to employ secondary resellers
      to
      work for them, but we will not market using a multi-level marketing plan. The
      Company expects to have 30 sales agents by the end of 2006, growing to 100
      by
      the end of 2007.





**Future
      Products and Services**




In
      the
      future we anticipate generating revenues via advertising sold to the purveyors
      of children goods and services. We also intend to engage in the merchandising
      of
      The Children’s Internet® themed products, from clothing to toys to books, but
      for the foreseeable future we will focus strictly on the successful distribution
      of our core service.




**Market
      Share, Cash Flow and Profitability**




Although
      market data is not exact, and varies depending on the source, our plan is based
      on the belief that in the United States alone there are an approximately 48
      million homes with internet access with children under the age of 16. Our model,
      with a mix of business generated from the respective channels of distribution,
      indicates we can be cash flow positive and profitable with less than 0.5% of
      the
      market. During the quarter ended March 31, 2006, no subscription revenue was
      realized.




16




**LIQUIDITY
      AND RESOURCES**




As
      of
      June 30, 2006, we had net loss from inception of approximately $3,738,000.
      Of
      this amount, approximately $595,000 represents the estimated fair market value
      for the cost of wages, if paid, for the services rendered by our Chief Executive
      Officer and an outside consultant (we have recorded these amounts for the cost
      of wages, since they did not charge the Company, as additional paid in capital),
      $1,393,000 represents professional fees such as legal and accounting expenses,
      $575,000 represents a debt financing fee, $315,000 represents officers
      compensation for which an option to purchase common stock was issued, $329,000
      represents accrued officers compensation, and the balance of $531,000 consists
      primarily of payroll, occupancy and telecommunications costs including internet
      costs. To date, our parent company, Shadrack, has funded all of our expended
      costs.




Currently,
      we are dependent on funding from Shadrack for our current operations and for
      providing office space and utilities that for the six months ended June, 2006,
      averaged $23,500 per month in operating costs, exclusive of professional fees,
      salaries accrued but unpaid or paid by options or shares, and time donated
      by
      our staff. Through June 30, 2006, the amount funded by Shadrack totaled
      approximately $1,262,000. On June 30, 2006, the balance due to Shadrack was
      approximately $805,000. The difference of approximately $457,000 was converted
      to common stock on February 15, 2005, when the Company’s Board of Directors
      authorized the conversion of all debt owed to Shadrack into 13,054,628
      post-split shares of restricted common stock at a conversion price of $0.07
      per
      pre-split share. Shadrack is under no obligation to continue funding our
      operations and could stop at any time without notice. Furthermore, Shadrack
      currently has limited financial resources. Therefore, additional funding for
      the
      Company through Shadrack is dependent on Shadrack’s ability to raise funds in
      the future, for which there is no assurance.




Where
      practicable we plan to contract with third party companies to outsource all
      non-strategic core competencies to provide administrative support services
      such
      as level one technical support as well as to market The Children’s Internet®
Service. We believe this strategy will minimize the number of employees required
      to manage our intended growth through 2006. In connection with this strategy
      back on August 14, 2003 we entered into two agreements, an Independent Sales
      Agreement and a Licensing Agreement, with Infolink Communications, Ltd,
      ("Infolink"), a sales organization in the Internet Infrastructure industry.
      Infolink was hired to bring the Company wholesale distributors, mainly Internet
      Service Providers who will sell and market The Children's Internet service
      to
      their end users. To date Infolink has brought to us minimal wholesale
      distributors who have generated no revenues. However, since the product release
      of The Children’s Internet ® Version 9.0, Infolink has resumed its efforts to
      proactively engage wholesale distributors. Nonetheless, there is no assurance
      that we will be able to enter into additional arrangements for marketing and
      administrative support services.




On
      February 25, 2005, we entered into a Consulting Agreement with Crosslink
      Financial Communications, Inc., of which William L. Arnold is the principal
      shareholder. Crosslink represented the Company in stockholder communications
      and
      public relations with existing shareholders, brokers, dealers and other
      investment professionals as to the Company's current and proposed activities,
      and in consulting with management. For undertaking this engagement the Company
      agreed to issue a “Commencement Bonus” payable in the form of 200,000 restricted
      post-split shares of the Company's common stock. In addition, the Company agreed
      to a monthly stock compensation of 8,000 post-split shares of common stock
      every
      month on the contract anniversary date, and a cash fee of $5,000 per month
      for
      the term of the Agreement. Out of this fee, Crosslink paid for complementary
      services (e.g., other mailing services, email services, data base extensions)
      up
      to an average of $2,500 per month. The agreement, which was originally for
      a
      term commencing February 25, 2005 and ending twelve months thereafter, was
      terminated at the end of December 2005. On December 30, 2005, Mr. Arnold was
      hired as The Company’s full-time President.




17




On
      April
      7, 2005, the Company entered into an agreement with Convergys Customer
      Management Group Inc. of Cincinnati, Ohio to provide subscriber management
      services, including inbound telephone coverage 24/7, capturing caller
      information, providing toll-free numbers and daily reporting of orders and
      leads. The term of the agreement begins on April 7, 2005 and continues until
      the
      expiration of 30 days after either party gives the other party written notice
      of
      its intent to terminate. Under this agreement, inbound live phone services
      are
      billed at $0.75 per minute for the first million minutes annually, $0.732 for
      the second million minutes and $0.714 per minute thereafter. The minimum
      purchase commitment is $2,500 per month, which is waived for the first year
      of
      service. The Convergys relationship is established, but their services will
      not
      commence until the Infomercial marketing begins.




On
      August
      23, 2005, the Company signed a client services agreement with Mercury Media
      of
      Santa Monica, CA to exclusively manage the distribution of the Company’s
      television infomercials. Mercury Media is an advertising agency that specializes
      in purchasing airtime for different types of direct response advertising. The
      term of the contract is annual until terminated by either party by written
      notice of not less than 30 days. For media time bookings under this contract,
      the Company will pay a 10% commission on the gross amount charged by broadcast,
      satellite or cable television outlets. At the time of this report no media
      time
      has been booked. The Mercury Media relationship is established, but their
      services will not commence until the Infomercial marketing begins.





On
      April
      21, 2006, the Company announced that it had entered into a six-month consulting
      agreement with Karin Tobiason for public relations services. This agreement
      was
      terminated shortly thereafter. No services were performed under the agreement,
      and the initial payment of $5,000 was fully refunded.





On
      June
      9, 2006, the Company entered into a public relations consulting agreement with
      Brazer Communications of Mill Valley, CA to launch a media relations campaign
      to
      increase public awareness of the Company and its product. Under this agreement,
      overall fees are set at $4,700 per month for the contract period of six months
      ending on December 8, 2006. In addition to the monthly fees, on the date of
      the
      agreement 15,600 restricted post-split shares were awarded to two principals
      of
      Brazer Communications. The fair market value of these shares was $7,800, which
      was recorded as a prepaid expense to be amortized over the period of the
      agreement.




**Going
      Concern Uncertainty**





Through
      the date of this report, we have relied exclusively on loans from Shadrack
      to
      fund all of our expenses. However, there is no assurance that Shadrack will
      be
      able or willing to continue such funding indefinitely. We will be required
      to
      obtain additional funds through private placements of debt or equity securities
      or by other borrowing. We do not have any arrangements with potential investors
      or lenders to provide such funds and there is no assurance that such additional
      financing will be available when required in order to proceed with our business
      plan. Further, our ability to respond to competition or changes in the market
      place or to exploit opportunities will be significantly limited by lack of
      available capital financing. If we are unsuccessful in securing the additional
      capital needed to continue operations within the time required, we will not
      be
      in a position to continue operations. In this event, we would attempt to sell
      the Company or file for bankruptcy.




18




**Off-Balance
      Sheet Arrangements**





None.





**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**





**** DISCLOSURE
      CONTROLS AND PROCEDURES





(a)
            Restatement.





In
      the
      course of the due diligence for the Annual Report on Form 10-KSB of the Company
      for the fiscal year ended December 31, 2004, our management identified an
      agreement that the Company had entered into with five of our shareholders on
      October 11, 2002. This agreement provided that in consideration for the
      agreement of these shareholders to loan an affiliate of the Company proceeds
      from the sale of their shares of common stock of the Company to third parties,
      the Company would issue four shares of its restricted common stock for every
      one
      share owned. The aggregate number of shares of restricted common stock that
      the
      Company was obligated to issue pursuant to the agreement was 4,474,000 pre-split
      (8,948,000 post-split) shares. The agreement was not disclosed in any of the
      Company’s previous SEC filings or otherwise included as an exhibit as a result
      of an error of omission. In addition, the 4,474,000 pre-split (8,948,000
      post-split) shares to be issued were not included in any of the Company’s
      financial statements for the fiscal years ended December 31, 2003 or 2002,
      or in
      any interim reporting period through September 30, 2004.





Management
      brought this matter to the attention of its Board of Directors and the Board
      of
      Directors brought it to the attention of the Company’s independent auditor.
      After discussions with management, the Board of Directors determined that
      previously reported financial information for the Company be restated to reflect
      the agreement. In light of the expected restatement, the Company filed a Form
      8-K on April 21, 2005 under Item 4.02 (a) advising that due to an error, its
      previously issued financial statements for the fiscal years ended December
      31,
      2003 and 2002 and such interim periods covered thereby and for the interim
      periods in fiscal 2004 should no longer be relied upon.





(a)
            Evaluation
                of Disclosure Controls and Procedures and
                Remediation





In
      connection with the restatement, under the direction of our Chief Executive
      Officer and Controller, we have reevaluated our disclosure controls and
      procedures. We have identified a material weakness in our internal controls
      and
      procedures relating to the handling and disclosure of material agreements.
      In
      order to prevent the same kind of mistake noted above, the Company has
      implemented a new review system whereby all agreements which have a material
      effect on the Company will be reviewed by the Company’s President and outside
      counsel. Agreements will be forwarded by the President to the Company’s auditor
      which will keep copies in its files for reporting purposes. Additional copies
      will be forwarded to the Company’s accounting department where it will be logged
      and processed for follow-up. In addition to the above we will constantly monitor
      our procedures and when necessary hire outside consultants to make sure that
      the
      Company’s corporate compliance program is up to date with all SEC Rules and
      recommendations.




19




We
      believe that as of the date of this filing, the process enumerated above will
      remediate the current weaknesses that have been identified in our internal
      controls and procedures and further that with applicable training all relevant
      personnel will understand and apply the rules relating to disclosure of material
      agreements.





**PART
      II - OTHER INFORMATION**





**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





On
      November 24, 2004, Oswald & Yap, A Professional Corporation (“O&Y”),
      formerly counsel to the Company, filed a complaint in the Superior Court of
      California, County of Orange, Case No. 04CC11623, against the Company, seeking
      recovery of allegedly unpaid legal fees in the amount of $50,984.86 in
      connection with the legal representation of the Company. Subsequently the amount
      claimed of unpaid legal fees was reduced to $37,378.43 because it was discovered
      that O&Y did not properly credit all of the payments that were made by the
      Company to O&Y. The amount of $37,378.43 was deposited in an escrow account
      by the Company on July 5, 2005. The complaint includes causes of action for
      breach of contract. The Company disputes the amounts claimed alleging that
      O&Y’s services were otherwise unsatisfactory. On May 9, 2005, O&Y
      submitted an Offer to Compromise for a $0 payment by the Company to O&Y in
      exchange for mutual releases which the Company rejected. ****





The
      Company filed a cross-complaint against O&Y alleging breach of contract,
      professional negligence, negligent representation, and breach of good faith
      and
      fiduciary duty. The Company is seeking damages in an unspecified amount for
      costs, legal fees and losses incurred. O&Y has vigorously disputed the
      claims set forth in the cross-complaint and has indicated its intention, should
      it prevail in its defense, to institute a malicious prosecution action against
      the Company, Nasser Hamedani, Sholeh Hamedani and Company counsel. Trial is
      set
      in the matter for November 13, 2006 in Department C16 of the Orange County
      Superior court.





The
      cross-claim was filed in the Superior Court of California, County of Orange,
      Case No. 04CC11623 by TCI against O&Y, and the principal allegation is that
      O&Y was retained to assist its predecessor company in the purchase and
      acquisition of D.W.C. Installations with the expectation that D.W.C. had
      available free-trading shares such that TCI could immediately raise capital
      on
      the relevant markets and that in advising TCI through the purchase, O&Y
      failed to properly advise TCI as to the status of D.W.C. Installations and
      its
      shares which in fact were not free-trading. As a result of this conduct, TCI
      alleges damages in an unspecified amount but including purchase costs, extended
      operation costs, refiling costs, audit costs, legal fees, loan fees, lost market
      share, and costs for registration




There
      is
      a contingent liability in connection with a Stock Purchase Agreement executed
      on
      October 11, 2002 between identified Shareholders and identified Purchasers.
      Under the terms of Stock Purchase Agreement, a payment of $150,000 is due to
      be
      paid into escrow in part consideration for purchase of the stock of D.W.C.
      Installations, Inc. The payment date is designated as 90 days from the date
      that
      the Company’s [D.W.C. Installations, Inc., a Nevada Corporation] shares of
      common stock become quoted on the over-the-counter bulletin board system. The
      shares became quoted on the over-the-counter bulletin board system on December
      23, 2004. If this payment is not made, there could be exposure in connection
      with the identified shareholders’ efforts to collect the amounts allegedly due.




20




**SEC
      Investigation**





As
      previously disclosed by the Company on August 15, 2005, November 15, 2005,
      and
      January 3, 2006, that on July 19, 2005, the Company and its auditors and its
      former auditors received notice from the Office of Enforcement of the Securities
      and Exchange Commission stating that they had commenced an “informal inquiry” to
      determine if there have been “any violations of the federal securities laws” by
      the Company. On December 27, 2005, the Company received notice from the
      Securities and Exchange Commission that the Commission had elevated its
      inquiries to a formal investigation for possible violation of the securities
      laws resulting from the Company’s restatement of its financial statements for
      fiscal years 2002 and 2003 and certain interim periods in fiscal year 2004.
      On
      May 1, 2006, the Company was further informed by the San Francisco District
      Office of the Commission that it is going to ''recommend to the Commission
      that
      it authorize the staff to file a civil injunctive action in the United States
      District Court and/or cease-and-desist proceeding in an administrative action
      against The Children’s Internet” and its C.E.O., Sholeh Hamedani. The Commission
      will allege in it’s pleadings that the Company, its C.E.O. and other individuals
      violated various sections and rules of the Securities Act of 1933 and the
      Securities Exchange Act of 1934. The Commission ''may seek injunctive relief
      or
      a cease and desist order, disgorgement, and civil monetary penalties'' against
      the Company as well as its C.E.O. being barred from serving as either director
      or officer of the Company or of any public company in the future.





The
      Company is continuing to seek resolution of the staff’s investigation by virtue
      of settlement.  A potential settlement likely may include the Company
      and/or its Chief Executive Officer consenting, without admitting or denying
      the
      allegations, to a judgment alleging negligent, reckless, and intentional
      violations of the federal securities laws, and other sanctions including
      substantial penalties. These penalties could range from the Chief Executive
      Officer being barred from serving as either directors or officer of the Company
      to also including financial penalties and disgorgement of all profits derived
      by
      the Company and/or its Chief Executive Officer who raised approximately
      $2,722,000 through sale of Company stock by their nominees to third parties
      and/or sales by certain individuals of approximately $215,000 and/or sales
      by
      Shadrack who subsequently directly sold 1,277,150 post-split shares for
      $753,000.





From
      inception, Shadrack, the parent company, has advanced to the Company
      approximately $1.1 million for operations. While the exact amount of the
      disgorgement of profits and/or penalties can not be determined at this time,
      the
      ability to pay them by the Company or the Chief Executive Officer is a serious
      question. Any proposed settlement will be subject to the Commission’s
      approval.  The Company cannot predict the outcome of any settlement
      negotiations, the staff’s investigation, or the ultimate Commission action
      should these settlement negotiations fail. The Company does not yet have a
      settlement offer. Management and counsel to the Company are currently waiting
      to
      see if they will receive one from the Commission's staff. Additionally, there
      is
      no assurance that the Company will receive a settlement offer. Moreover, there
      is no assurance that their settlement offer (if any) will be acceptable to
      the
      Company and the prospect of litigation could ensue which could seriously
      compromise the Company's ability to achieve its goals.




21




We
      are
      not aware of any other pending or threatened litigation that could have a
      material adverse effect on our business.





**ITEM
      2.**  **UNREGISTRED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





The
      Company had no “Unregistered Sales of its securities during the period covered
      by this report.





**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**





The
      following documents are filed as part of this Report:





(a)  Exhibits:





No.
            Title31.1
            Certification
                of Chief Executive Officer Pursuant to the Securities Exchange Act
                of
                1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 200231.2
            Certification
                of Chief Financial Officer Pursuant to the Securities Exchange Act
                of
                1934, Rules 13a-14 and 15d-14, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 200232
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002





(b)
            Reports
                on Form 8-K:





On
      January 3, 2006, the Company filed a Current Report on Form 8-K reporting the
      receipt of a notice from the Securities and Exchange Commission regarding the
      change of the nature of its investigation of the Company from informal to
      formal.





On
      January 6, 2006, the Company filed a Current Report on Form 8-K reporting the
      Employment Agreement signed with William L. Arnold on December 30, 2005, to
      serve as President of The Children’s Internet, Inc.




On
      April
      21, 2006, the Company filed a Current Report on Form 8-K reporting a six-month
      consulting agreement with Karin Tobiason for public relations services. This
      agreement was terminated shortly thereafter. No services were performed under
      the agreement, and the initial payment of $5,000 was fully
      refunded.





On
      May 5,
      2006, the Company filed a Current Report on Form 8-K reporting the receipt
      of a
      notice from the San Francisco District Office of the Securities and Exchange
      Commission regarding its recommendation to the Commission that it authorize
      the
      staff to file a civil injunction in the U.S. District Court.




22





**SIGNATURES**




In
      accordance with the Exchange Act, the registrant caused this report to be signed
      on its behalf by the undersigned, duly authorized.




DATED: August 21, 2006
            
            
            The Children’s Internet, Inc./S/
              SHOLEH
              HAMEDANIBy:
              Sholeh HamedaniIts:
                Chief Executive Officer, and Chief Financial Officer (Principal Executive
                Officer, Principal Financial Officer and Principal Accounting Officer)




23