**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-KSB**








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





For
      the
      fiscal year ended December 31, 2005





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.**


(Name
      of
      small business issuer in its charter)





Nevada
            
            20-1290331(State
                or other jurisdiction
                of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)5000
                Hopyard Rd, Suite 320 Pleasanton,
                CA
            
            94588(Address
                of principal executive
                offices)
            
            (Zip
                Code)




Issuer's
      telephone number: (925)
      737-0144





Securities
      registered under Section 12(b) of the
      Exchange Act: None





Securities
      registered under Section 12(g) of the
      Exchange Act:





Common
      Stock, $.001 par value


(Title
      of
      class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.


o





**Note** -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligation under
      those Sections.





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 periods
      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





i


Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B contained in this form, and no disclosure will 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-KSB or any amendment
      to
      this Form 10-KSB.


x





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





For
      the
      fiscal year ended December 31, 2005, the Company’s revenue was
      $0.00.





As
      of
      March 31, 2006, the aggregate market value of the common equity held by
      non-affiliates computed by reference to the closing price at which the common
      equity was sold, was $8,074,805.





As
      of
      March 31, 2006, there were 26,858,138 post-split shares of the Company’s common
      stock outstanding.








ii


**TABLE
                  OF CONTENTS****Page****PART
                  I**ITEM
                  1
              DESCRIPTION
                  OF BUSINESS
              1ITEM
                  2
              DESCRIPTION
                  OF PROPERTY
              6ITEM
                  3
              LEGAL
                  PROCEEDINGS
              6ITEM
                  4
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              8**PART
                  II**ITEM
                  5
              MARKET
                  FOR THE REGISTRANT’S COMMON EQUITY AND RELATEDSTOCKHOLDER
                  MATTERS
              8ITEM
                  6
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
                  AND PLAN OF OPERATIONS
              10ITEM
                  7
              FINANCIAL
                  STATEMENTS
              15ITEM
                  8
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING
                  AND FINANCIAL DISCLOSURE
              15ITEM
                  8A
              CONTROLS
                  AND PROCEDURES
              16**PART
                  III**ITEM
                  9
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS & CONTROL PERSONS; COMPLIANCE WITH
                  SECTION 16(A) OF THE EXCHANGE ACT
              17ITEM
                  10
              EXECUTIVE
                  COMPENSATION
              19ITEM
                  11
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              20ITEM
                  12
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              21**PART
                  IV**ITEM
                  13
              EXHIBITS
              22ITEM
                  14
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              23SIGNATURES
              25







iii


**PART
      I**





**ALL
      SHARE AMOUNTS REFLECT THE COMPANY’S 2:1 FORWARD SPLIT OF ITS ISSUED AND
      OUTSTANDING SHARES OF COMMON STOCK AS DECLARED EFFECTIVE BY NASDAQ ON MARCH
      11,
      2005 UNLESS OTHERWISE INDICATED.**





**Forward-Looking
      Statements**





Certain
      portions of this Annual Report on Form 10-KSB contain “forward-looking
      statements”. Such forward-looking statements involve known and unknown risks,
      uncertainties and other factors, which may cause the actual results, performance
      or achievements of The Children’s Internet, Inc. (the Company) to be materially
      different from any future results, performance, or achievements expressed or
      implied by such forward-looking statements, including that the Company’s lack of
      revenue is not necessarily indicative of its future revenue levels or future
      financial performance. The Company’s future operating results are dependent upon
      many factors, including but not limited to: (i) whether the Company is able
      to
      obtain sufficient funding to fund its operations and business; (ii) whether
      the
      Company is able to build the management and human resources and infrastructure
      necessary to support the growth of its business; (iii) competitive factors
      and
      developments in the industry in which the Company competes; (iv) intellectual
      property protection; and (v) any economic conditions that would negatively
      affect the Company’s business and expansion plans.





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS.**





**Business
      Development**




We
      were
      incorporated in the State of Nevada on September 25, 1996 as D.W.C.
      Installations, Inc. We changed our name to The Children’s Internet, Inc. on
      December 27, 2002. We are a development stage company and currently have no
      revenues, only minimal assets, and have incurred losses since our
      inception.




On
      July
      3, 2002, Shadrack Films, Inc. (“Shadrack”) purchased 2,333,510 newly issued
      post-split shares of our common stock for $150,000, thereby obtaining a majority
      ownership interest and becoming our parent company. Our Chief Executive Officer
      and one of our directors, Sholeh Hamedani, is the sole officer, director and
      shareholder of Shadrack.




On
      September 10, 2002, we entered into a License Agreement with Two Dog Net, Inc.
      (“Two Dog Net”) to acquire a worldwide exclusive license to market and sell The
      Children’s Internet® service. We were required to pay Two Dog Net a monthly
      royalty payment of 7% of net sales of The Children's Internet® product. We
      acquired the license for $2,000,000 required to be paid no later than September
      10, 2004.





This
      original agreement did not reflect the intent of the parties and on March 3,
      2003, we replaced the License Agreement with a Wholesale Sales & Marketing
      Agreement with the same effective date of September 10, 2002. This Wholesale
      Sales and Marketing Agreement gives us the exclusive worldwide right to market,
      sell, and distribute The Children’s Internet® service and wholesale dial-up
      Internet service of Two Dog Net. We agreed to pay Two Dog Net a per user charge
      of $3.00 per month for each subscriber accessing The Children’s Internet®
service. The Wholesale Sales & Marketing Agreement has a term of five years
      and renews for additional five year terms automatically unless either we or
      Two
      Dog Net give written notice of termination of the agreement not less than one
      year before the end of any five year term. We are moving ahead with marketing
      The Children’s Internet® but have no plans to offer dial-up services, as allowed
      by our agreement with Two Dog Net.


1




In
      February 2005, we amended the Wholesale Sales & Marketing Agreement reducing
      the per user charge from $3.00 to $1.00 paid per month. In consideration for
      this decrease, on February 15, 2005, the Company granted Two Dog Net, or its
      designees an option (the “Option”) to acquire up to 18,000,000 post-split shares
      of our restricted common stock at a price of $0.07 per share, exercisable in
      whole or in part at any time for five years from the date of grant. The Option
      also provides for “piggy back’ 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.




Our
      Chief
      Executive Officer, and one of our directors, Sholeh Hamedani, was President
      of
      Two Dog Net until she resigned on August 1, 2002. Ms. Hamedani, a co-founder,
      also owns approximately 10% of the total outstanding shares of common stock
      of
      Two Dog Net. Ms. Hamedani’s father, Nasser Hamedani, is the current President,
      Chairman and majority shareholder of Two Dog Net. See Item 12, “Certain
      Relationships and Related Transactions.”





**Principal
      products or services and their markets**





The
      Children's Internet Ò offers
      access to pre-selected and pre-approved educational and entertaining age
      appropriate web pages as well as secure e-mail, homework help, games, news,
      super portals to learning activities and educational resources all within,
      a
      protected online environment. We believe that the proprietary, patent-pending
      security software, SafeZone Technology®, offers security against Internet
      predators and Internet content that is inappropriate for children. The target
      market for The Children’s Internet Ò is the
      48 million children on-line in 2002 (Report from Internet Commerce &
Communications Division, Information Technology Association of America,
      February, 2002), as well as America’s schools, which are connected to the
      Internet. The rate of general Internet use in the United States is expected
      to
      grow by 2 million new users per month . (Report
      from Internet Commerce & Communications Division, Information Technology
      Association of America, February, 2002.) Nearly two-thirds (62%) of US families
      have computers at home, but roughly 1 out of 5 (17%) of those with computers
      do
      not have Internet access due to safety concerns.  (Report
      from Internet Commerce & Communications Division, Information Technology
      Association of America, February, 2002)  A third
      of parents with kids in grades K-5 say they have, or will, use the Internet
      as a
      learning tool at home with their child. Nearly 56 percent of parents are
      concerned that their kids view only age-appropriate content when logging on
      from
      the classroom. (Consumer Internet Barometer study done in 3 rd quarter
      of 2005) Risk of exposure to pornography and online predators is a growing
      danger. The number of pornographic websites has increased by 140% to 372 million
      web pages and continues to grow. Child pornography requests online have
      accumulated to 43 billion per year. (Pew Internet and American Life Project
      study 2005)





2


**Competition**





In
      the
      past five years, competition in our market segment of protective software and
      secure online browsers and services for children ages pre-school to junior
      high
      has significantly declined as many of the companies providing these services
      and
      products have gone out of business. However, the market for Internet products
      and services is still highly competitive and there is no substantial barrier
      to
      entry in these markets. Although we currently believe that the diverse segments
      of the Internet market provide opportunities for more than one supplier of
      products and services similar to ours, it is possible that a single supplier
      may
      dominate one or more market segments.





Our
      management believes that the principal competitive factors in our market are
      brand recognition, ease of use, comprehensiveness of available content,
      customization by the consumer, quality and responsiveness of search results,
      the
      availability of high-quality, focused value added services, and required
      technology to offer access to end users with few interruptions. Competition
      among current and future suppliers of Internet navigational and informational
      services, high-traffic websites and ISPs could result in significant price
      competition and reductions in revenues. There can be no assurance that we will
      be able to compete successfully.





We
      compete with other providers of security software, information and community
      services. Many companies offer competitive products or services addressing
      filtering of Internet content, including, among others, Net Nanny (Net Nanny
      Software, Inc.), Cyber Patrol (The Learning Company), Cyber Snoop (Pearl
      Software, Inc.), Cyber Sentinel (Security Software Systems, Inc.), Cybersitter
      97 (Solid Oak Software, Inc.), SurfWatch (SurfWatch Software, Inc.), Clever
      Island (Alfy, Inc.) and 8e6 Home (Log On Data, Inc.). Inc.). In addition, we
      compete with online services such as Yahooligans! (Yahoo!), an Internet
      navigator designed for children in grades K-12; America Online (America Online,
      Inc.), which offers parental control options for Internet access; and Disney's
      Blast Online, which also offers child-oriented Internet navigation. These
      companies already have an established market presence, and are far ahead of
      us
      in gaining market share. Also, entities that sponsor or maintain high-traffic
      websites or that provide an initial point of entry for Internet users, such
      as
      the Regional Bell Operating Companies or commercial online services such as
      the
      Microsoft Network (“MSN”) and America Online (“AOL”), currently offer and could
      further develop, acquire or license Internet search and navigation functions
      that could compete with our product.





Many
      of
      our existing competitors, as well as a number of potential new competitors,
      have
      significantly greater financial, technical, marketing and distribution
      resources. In addition, providers of Internet tools and services may be acquired
      by, receive investments from, or enter into other commercial relationships
      with
      larger, well-established and well-financed companies, such as Microsoft or
      AOL.
      Greater competition resulting from such relationships could have a material
      adverse effect on our business, operating results and financial condition.





**Sources
      and availability of raw materials and principal suppliers**





We
      currently offer one product, The
      Children’s Internet® service ,
      through
      our agreement with Two Dog Net .
      Because
      our plan is to initially focus on establishing a base of subscribers to the
      primary service, we currently do not have plans to offer dial-up Internet
      service as allowed by our agreement with Two Dog Net. A ny
      events
      adversely affecting Two Dog Net will also affect us as we are entirely dependent
      on our agreement with Two Dog Net for any revenues. If Two Dog Net were to
      cease
      its operations, we would need to find alternative sources of revenues, which
      we
      may be unable to do. In such an event, we could be forced to cease operations
      entirely.





3


We
      are
      also dependent upon private third party providers such as EmeryTech Data Center
      to host our servers and provide the principal Internet connections for The
      Children’s Internet®. Any disruption in the Internet access provided by
      third-party providers or any failure of third-party providers to handle higher
      volumes of user traffic could have a material adverse effect on our business,
      operating results, and financial condition.





**Dependence
      on one or a few major customers**





Since
      our
      recent product launch in March of 2006 we have acquired minimal retail
      customers, but do not have any major customers.





**Intellectual
      property**





Our
      success is dependent on the proprietary technology developed by Two Dog Net
      that
      we market and sell. Two Dog Net owns the proprietary technology underlying
      The
      Children’s Internet® service. We do not have any patents, pending or otherwise.
      The following is a list of the intellectual property we have the exclusive
      rights to use from Two Dog Net:





|· | “The
              Children's Internet®" registered
              trademark;
|- | ----------------------------------------------------------------------------

|· | “SafeZone
              Technology®” registered trademark;
|- | ----------------------------------------------------------

|· | The
              SafeZone Technology® software patent application pending;
              and
|- | ---------------------------------------------------------------------------------------------

|· | “Two
              Dog NetTM” trademark.
|- | ---------------------------------------



“Children’s
      Internet” is a trademark of Two Dog Net and was registered with the U.S. Patent
      and Trademark Office on October 9, 2001 as Registration Number Serial Number
      75378450. We do not hold any registered service marks or
      trademarks.




Two
      Dog
      Net filed U.S. Patent Application No. 08/971,447 for the SafeZone Technology®
software on or about December 1, 1997 and, on or about November 20, 2000, filed
      a continuation application. They have advised us that there is no assurance
      that
      the patent will ever be issued and that the patent application process may
      continue through the year 2006.




Despite
      our efforts to protect our proprietary rights, unauthorized parties may attempt
      to copy aspects of products or to obtain and use information that we regard
      as
      proprietary. Policing unauthorized use of our products is difficult, and while
      we cannot determine the extent to which piracy of our software products exists,
      such piracy can be expected to be a persistent problem, particularly in
      international markets and as a result of the growing use of the Internet. Some
      courts have held that shrink-wrap licenses, because they are not signed by
      the
      licensee, are not enforceable. In addition, there can be no assurance that
      patent applications filed by Two Dog Net will result in patents being issued,
      and any patents that may be issued to it in the future, will afford protection
      against competitors with similar technology; nor can there be any assurance
      that
      patents issued to Two Dog Net will not be infringed upon or designed around
      by
      others or that others will not obtain patents that we would need to license
      or
      design around. Impairment of our intellectual property rights could negatively
      affect our business or could allow competitors to minimize any advantage that
      our proprietary technology may give us.




4


**Government
      approval and effect of existing or probable governmental regulations on the
      Business**





Due
      to
      the increasing popularity and use of the Internet, laws and regulations with
      respect to the Internet may be adopted at federal, state and local levels,
      covering issues such as user privacy, freedom of expression, pricing,
      characteristics and quality of products and services, taxation, advertising,
      intellectual property rights, information security and the convergence of
      traditional telecommunications services with Internet communications. We cannot
      predict the nature of future legislation and the manner in which government
      authorities may interpret and enforce that legislation. As a result, we could
      be
      subject to potential liability under future legislation, which in turn could
      restrict our operations or cause additional expenses or losses. For example,
      if
      legislation were adopted in the U.S. or internationally that makes transacting
      business over the Internet less favorable or otherwise curtails the growth
      of
      the Internet, this could reduce demand for our products and services and reduce
      sales and profits.





In
      addition, applicability to the Internet of existing laws governing issues such
      as property ownership, copyright and other intellectual property issues,
      taxation, libel, obscenity and personal privacy is uncertain. These laws
      generally pre-date the advent of the Internet and related technologies and,
      as a
      result, do not consider or address the unique issues of the Internet and related
      technologies. Changes to laws intended to address these issues could create
      uncertainty in the marketplace, reducing demand for our services or increasing
      the cost of doing business as a result of litigation costs or increased service
      delivery costs.





**Research
      and Development**





Based
      on
      our agreement with Two Dog Net, we will continue to look to Two Dog Net for
      research and development and will continue to rely on Two Dog Net to keep The
      Children’s Internet Ò technology current. To date, all of the research and development efforts have
      been performed by Two Dog Net.





Over
      the
      course of the past eight years, Two Dog Net has been focused on the development
      of SafeZone Technology®, The Children’s Internet Ò **,** and the
      creation of unique user interfaces and feature functionality for The Children’s
      Internet Ò .
      In the
      future, in association with Two Dog Net, we will explore ways to leverage our
      current knowledge on compatible product enhancements. For example, some of
      the
      development may focus on interactive learning systems, a parent’s portal,
      multiple participant interactive games for children, a companion product to
      The
      Children’s Internet Ò aimed at
      the teen market, and on-line books.





We
      will
      only begin development of new products after we have successfully launched
      The
      Children’s Internet Ò and feel
      comfortable that the research and development effort will not dilute our focus
      and resources from the success of The Children’s Internet Ò .





**Staff
      and Consultants**





We
      currently have five individuals serving as our full-time staff: Sholeh Hamedani,
      Roaya Hamedani, Tyler Wheeler, John Heinke and Bill Arnold. On December 30,
      2005, we hired Bill Arnold as our full-time president. Bill Arnold had served
      as
      our Investor Relations consultant during the last ten months of 2005, through
      Crosslink Financial Communications, Inc. as discussed in the following
      paragraph. During 2006, we anticipate hiring additional staff. Except for Sholeh
      Hamedani and Bill Arnold, the services of our staff have been provided to the
      Company through the Parent Company or Two Dog Net, Inc. without charge. We
      hire
      independent contractors on an “as needed” basis only. We have no collective
      bargaining agreements.





5


On
      February 25, 2005 we entered into a Consulting Agreement with Crosslink
      Financial Communications, Inc., of which Bill Arnold is the principal
      shareholder. The agreement, which was originally for a 12 month term commencing
      February 25, 2005. The agreement was terminated at the end of December 2005
      after Bill Arnold was named President of the Company. 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 issued to Crosslink 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, never less than $1,500 per month. During the months of
      March through December 2005, Crosslink received an additional 80,000 restricted
      post-split shares, bringing their total remuneration to 280,000 shares and
      $50,000.00 under this agreement.





**ITEM
      2. DESCRIPTION OF PROPERTY**





Our
      parent company, Shadrack, has agreed to allow us to operate from its offices
      located at 5000 Hopyard Rd., Suite 320, Pleasanton, CA 94588 under a
      verbal lease revocable at any time without prior notice. These offices are
      2,059
      square feet and are leased by Shadrack from Principal Life Insurance Company,
      an
      Iowa corporation. From March 22, 2004 until April 30, 2004, we occupied the
      office space on a rent-free basis. From month two (May 2004) through 13 the
      basic rent per month was $3,603,
      for months 14 through 25 the
      basic
      rent per month is $3,706
      and for months 26 through 37 the
      basic
      rent per month will be $3,809 under a lease agreement that expires on May 1,
      2007.





**ITEM
      3. 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.





6


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.





On
      September 30, 2004 the Company received a demand for arbitration from its former
      auditor, Stonefield Josephson, relating to the collection of approximately
      $21,700 in fees owed by the Company for accounting services which were disputed
      by the Company. The parties settled their dispute and on November 30, 2004
      entered into a Settlement Agreement and Mutual General Release, which was
      executed on December 10, 2004. Pursuant to the Settlement Agreement the Company
      agreed to pay Stonefield Josephson the sum of $15,500 in two installments.
      Subsequently, on January 18, 2005 the first installment of $7,750 was paid
      and
      the second and final installment of $7,750 was paid on March 4,
      2005.





The
      Company is subject to a claim by Stonefield Josephson, Inc., the former
      accountants for the Company, seeking reimbursement costs for legal fees spent
      in
      connection with the Securities and Exchange Commission inquiry of the Company.
      Stonefield Josephson, Inc.’s claim seeks recovery of $29,412.74. The Company
      disputes any amounts owed because of a settlement agreement entered into between
      the respective parties in December 2004 effectively terminating their
      relationship. No formal legal proceedings have been initiated.





On
      May
      23, 2005, the Company announced that it had been informally advised by the
      National Association of Securities Dealers, Inc. (NASDAQ) that its request
      for a
      hearing relating to the continued listing of the Company's common stock on
      the
      Over the Counter Bulletin Board (OTC:BB) was granted. The date of the hearing
      was set for June 9, 2005. The Company’s annual report on 10-KSB was filed prior
      to the hearing time, and subsequently the temporary suffix “E” was removed from
      the Company’s trading symbol on June 29, 2005 and the Company continues to be
      listed on the OTC:BB.




**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.
      The
      inquiry is non-public and is not to be construed as stated to the Company by
      the
      Commission is not an indication by anyone that any violation of law has occurred
      nor should it be considered a reflection upon any person, entity or security.





7


The
      Company is currently seeking resolution of the staff’s investigation by virtue
      of settlement.  A potential settlement likely may include the Company
      and/or its principals 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 current key members of management
      being barred from serving as either directors or officers of the Company to
      also
      including financial penalties and disgorgement of all profits derived by the
      Company and/or its principals who raised approximately $2,722,000 through sale
      of Company stock by their nominees to third parties  and/or s ales
      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, 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 is a serious question. Any proposed
      settlement will be subject to the Commission’s approval.  The Company
      cannot predict the outcome of these 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.





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





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.





**PART
      II**




**ITEM
      5.**  **MARKET
      FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**




The
      Company's common stock was approved for trading in the OTC Bulletin Board on
      December 23, 2004 under the trading symbol CITC.OB. Actual trading of our shares
      began on February 23, 2005. The following are the approximate high and low
      closing bid quotations on the OTC Bulletin Board since the first quarterly
      period of trading as reported on the online resources of Market Watch and Yahoo!
      Finance:





8




Period
              
              High
                  Closing Bid
              
              Low
                  Closing Bid1stQuarter 2005
              
              $
              6.35
              
              $
              1.752ndQuarter 2005
              
              $
              8.40
              
              $
              1.373rdQuarter 2005
              
              $
              1.61
              
              $
              0.584thQuarter 2005
              
              $
              0.75
              
              $
              0.421stQuarter 2006
              
              $
              1.15
              
              $
              0.43


**Holders**




As
      of
      March 31, 2006, there were 304 shareholders of record. The Company's transfer
      agent is Transfer Online, 317 SW Alder Street, 2nd Floor, Portland, OR
      97204.




**Dividend
      Policy**




The
      Company has not paid any cash dividends on its Common Stock since its inception
      and does not anticipate or contemplate paying cash dividends in the foreseeable
      future.




**Shares
      Issued During Fiscal 2005**




The
      Company issued post-split 13,334,628 restricted shares during the 2005 fiscal
      year. 13,054,628 post-split shares were
      issued in the conversion of debt owed by the Company to Shadrack Films, Inc.
      (the Parent Company) as explained in Item 6 under the heading “Plan of
      Operation”. 280,000
      shares were issued to Crosslink Financial Communications, Inc., as discussed
      previously in Item 1 under the heading “Staff and Consultants”. The Company did
      not issue any shares during the 2004 fiscal year.




**Other
      Matters**




In
      a
      Stock Purchase Agreement dated October 11, 2002, our original shareholders
      sold
      their 2,237,000 post-split shares of our common stock to various purchasers,
      two
      of whom are related parties to our management, Nasser Hamedani, Sholeh
      Hamedani’s father, and Soraiya Hamedani, Sholeh Hamedani’s sister. Some of these
      purchasers were introduced to the original shareholders by Sholeh Hamedani,
      our
      Chief Executive Officer, Chief Financial Officer, and Chairman. Some of these
      purchasers resold their shares to unrelated third parties. Some of the proceeds
      received from the sales of the purchaser’s stock was loaned to Two Dog Net who,
      in turn, loaned a portion of the proceeds to Shadrack, our parent company,
      to
      finance our operations. These amounts are reflected on the financial statements
      as “Due to Parent Company”. Our Chief Executive Officer, and one of our
      directors, Sholeh Hamedani, is the sole shareholder of Shadrack, our parent
      company.





Pursuant
      to the Stock Purchase Agreement dated October 11, 2002, the Company entered
      into
      a subsequent agreement with five shareholders, none of whom was an affiliate
      of
      the Company, to issue four shares of its restricted common stock in exchange
      for
      every one freely tradable share owned by the five shareholders as a
      debt financing fee .
      No
      stock certificates for the 8,948,000 post-split shares were issued by the
      Company until the second quarter of 2005, nor accounted for in its financial
      statements or disclosed in SEC filings prior to our Annual Report on Form 10-KSB
      for the year ended December 31, 2004.




9


**ITEM
      6.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
      OPERATIONS.**




**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.





**Selected
      Financial Data**




The
      following selected financial data for the period from September 25, 1996, the
      date of our inception, through December 31, 2005 and for the fiscal year ended
      December 31, 2005 were derived from our financial statements and notes thereto
      included in this annual report which are audited. 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 audited financial statements, including the related
      footnotes.





For
                the year
              ended
                December 31,
              2005
            
            For
                the period from September 25, 1996 (inception) through December 31,
                2005**Statement
                of Operations Data:**Net
                sales
            
            $
            0
            
            $
            0Operating
                expenses
            
            $
            1,257,057
            
            $
            3,059,991Operating
                loss
            
            
            ($1,257,057
            )
            
            ($3,059,991
            )Net
                Loss
            
            
            ($1,257,857
            )
            
            ($3,063,991
            )





As
                of December 31, 2005**Balance
                Sheet Data:**Total
                assets
            
            $
            5,821,773Current
                liabilities
            
            $
            364,257Long-Term
                Liabilities
            
            $
            621,234Total
                stockholders' equity
            
            $
            4,836,282





**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.





10




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 secured 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 the technology on which the product is based was updated and numerous
      additional features like secure e-mail were added and the functionality of
      the
      service was improved.




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 email and
      an
      enhanced search engine. Those components have now been added.




Additionally
      during 2005 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. These outsource providers will handle telemarketing
      and
      the order taking process and media placement.




**The
      Business Model**




The
      product sells for $9.95 per month 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.




11


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**-
              We are 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 already demonstrated the
              ability to introduce the product to some of the nations largest ISPs,
              retailers, merchandisers and fast food companies.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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





|**2.** | **Wholesalers**-
              We 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
              will “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 fund raiser, 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.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12





|**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. As well, we 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.




As
      of
      December 31, 2005, we had net loss from inception of approximately $3,063,000.
      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), $1,049,000 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, $180,000
      represents accrued officers compensation, and the balance of $349,000 consists
      primarily of occupancy and telecommunications costs including internet costs.
      To
      date, our parent company, Shadrack, has funded all of our expended
      costs.




13


Currently,
      we are dependent on funding from Shadrack for our current operations and for
      providing office space and utilities that for the year ended December 31, 2005,
      averaged $10,900 per month in operating costs, exclusive of professional fees,
      time donated by our staff and officers’ time paid by a stock option or accrued
      during the year 2005. Through December 31, 2005, the amount funded by Shadrack
      totaled approximately $1,078,000. On December 31, 2005, the balance due to
      Shadrack was approximately $621,000. 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
      share. Shadrack is under no obligation to continue funding our operations and
      could stop at any time without notice.




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.




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 Bill 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, Bill Arnold was
      hired as The Company’s full-time President.




14


On
      May 5,
      2004, our registration statement on Form SB-2 (“SB-2”) was declared effective by
      the SEC. The SB-2 registered 2,237,000 post-split shares for resale by our
      selling shareholders and an additional 8,000,000 post-split shares were
      registered for public sale directly by us. We had planned on using the proceeds,
      if any, from the sale of the shares registered for sale by us to fund the
      Company’s business plans and operations. However, we decided to de-register the
      8,000,000 post-split shares and on October 19, 2004 we filed a post-effective
      amendment to the SB-2, which was declared effective by the SEC on October 25,
      2004. As a result, we did not realize any of the anticipated funding we may
      have
      received from the sale of these shares. Since such time, we have not had any
      financing except from loans received from Shadrack.




**Going
      Concern Uncertainty**





Since
      our
      anticipated offering of new shares to the public was terminated, we have relied
      exclusively on loans from Shadrack to fund all of our expenses. 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.




**Off-Balance
      Sheet Arrangements**





None.





**ITEM
      7.**  **FINANCIAL
      STATEMENTS.**




The
      financial statements required to be filed pursuant to this Item 7 begin on
      page
      F-1 of this report.





**ITEM
      8.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**




Effective
      July 16, 2004, the Company’s Board of Directors dismissed Stonefield Josephson,
      Inc. ("Stonefield") as its independent auditor for the fiscal year ended
      December 31, 2004 and approved the engagement of Marc Lumer & Company,
      Certified Public Accountants ("Lumer") as Stonefield's replacement. The decision
      to change auditors was approved by the Company's Board of Directors.





During
      the prior fiscal year, Stonefield’s report on the Company’s financial statements
      of the first quarter of 2004 did not contain an adverse opinion or a disclaimer
      of opinion, nor were the reports qualified or modified except as to uncertainty
      with respect to going concern, audit scope, or accounting principles. During
      the
      prior two fiscal years ended December 31, 2002 and December 31, 2003, and the
      subsequent interim period through July 16, 2004, there were no disagreements
      with Stonefield on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure which, if not resolved
      to
      the satisfaction of Stonefield would have caused Stonefield to make reference
      to
      the matter in their reports. There were no "reportable events", as that term
      is
      described in Item 304(a)(1)(v) of Regulation S-K.





15




**ITEM
      8A. 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.





|(b) | 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.





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.




16


**ITEM
      8B. OTHER INFORMATION**





None.


**PART
      III**




**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a)
      OF THE EXCHANGE ACT.**




Our
      directors and executive officers are as follows:





Name
            
            Age
            
            PositionSholeh
                Hamedani
            
            38
            
            Chief
                Executive Officer, Chief Financial Officer, Chairman of the Board
                of
                DirectorsJamshid
                Ghosseiri
            
            66
            
            Secretary,
                DirectorTyler
                Wheeler
            
            35
            
            DirectorRoger
                Campos, Esq.
            
            59
            
            DirectorDale
                Boehm
            
            37
            
            DirectorWilliam
                L. Arnold
            
            59
            
            President





**Ms.
      Sholeh Hamedani** has
      been
      our Chief Executive Officer, Chief Financial Officer and Chairman of the Board
      since August 23, 2002. From May 2002 through the present, she has served as
      the
      President, CEO and founder of Shadrack Films, Inc., our parent company. From
      July 1995 to August 2002, she was President and co-founder of Two Dog Net,
      a
      security solutions provider and software developer and an affiliate of the
      Company. She was responsible for managing product development of new
      technologies, as well as creating and implementing their marketing strategies.
      Ms. Hamedani’s experience includes local and national advertising campaigns on
      television, radio and print, as well as producing, scripting and directing
      educational video programs and television infomercials. Prior to Two Dog Net,
      Ms. Hamedani was part of the founding team at SyberVision Systems in the
      Production and TV Media Department from 1985 to 1989.





**Mr.
      William L. Arnold** has been
      President of the Company since December 30, 2005. Mr. Arnold has nearly 30
      years
      of senior management experience in companies ranging from startups to Fortune
      500 companies. After serving in senior level general management positions,
      including President of its second largest subsidiary, at Fortune 500 U. S.
      Leasing International. Subsequently he was President of LeasePartners, Inc.
      and
      later President of MicroResources, Inc. Prior to joining The Children's
      Internet, he co-founded Crosslink Financial Communications, Inc., specializing
      in consulting with microcap companies with respect to issues ranging from
      product positioning and sales management to conveying their value proposition
      to
      Wall Street. He has a history of successful implementation of leveraged business
      relationships with companies such as IBM, Hewlett-Packard, Merrill Lynch and
      Discovercard, making him highly qualified to both develop a field sales presence
      and negotiate and close the large-scale relationships the company will pursue.
      Mr. Arnold has an MBA from Auburn University.








17


**Mr.
      Jamshid Ghosseiri** has
      been
      a director since August 23, 2002 and Secretary since January 2, 2003. From
      January 9, 1989 through the present, he has served as Chief of the Microbiology
      Department at Mt. Diablo Medical Center. Mr. Ghosseiri has over 36 years of
      experience in the field of clinical microbiology and research in infectious
      diseases. He received a B.S. from San Jose State University in 1966 and
      completed his Post Graduate Studies in Infectious Diseases at Stanford
      University in 1969.





**Mr.
      Tyler Wheeler** has
      been
      our Chief Software Architect and a director since August 23, 2002. He co-founded
      Micro Tech Systems in 1989. In 1993, he and his father founded Integrative
      Systems, Inc., a hardware and software computer consulting firm. From January
      1996 to August 2002, Mr. Wheeler served as Vice President of Technology at
      Two
      Dog Net. Mr. Wheeler completed a B.A. in Finance and Business Law at California
      State University, Fresno in 1996.





**Mr.
      Roger Campos, Esq.** has
      been
      a director since August 23, 2002. Mr. Campos received his B.A. in 1969 from
      the
      University of California at Santa Barbara and received his J.D. (law) degree
      in
      June 1972 from the United States International University (San Diego, CA).
      From
      February 2002 through the present, he has served as President and CEO of the
      Minority Business Roundtable, a national membership organization, based in
      Washington DC, for CEOs of the nation’s largest minority-owned companies. From
      January 2000 to February 2002, Mr. Campos was Executive Director of the Minority
      Business Roundtable. From January 1997 to January 2000, he served as Vice
      President of government relations for the Hispanic Association of Colleges
      and
      Universities. Mr. Campos provides consulting services in the areas of
      contracting, marketing, and business transactions.





**Mr.
      Dale Boehm** has
      been
      a director since August 23, 2002. From September 2002 through the present,
      Mr.
      Boehm is the Founder and President of Caspian Technology Concepts, a consulting
      firm specializing in network management services. Previous to this, Mr. Boehm
      served as Director of Sales at Qwest Telecommunications, Inc from July 2001
      continuing until August 2002 where he was responsible for 90+ direct reports
      and
      all of the revenue in the National Accounts division in Illinois and Wisconsin.
      From December 2000 to July 2001, Mr. Boehm was the Regional Vice President
      of
      Central Region Sales at One Secure Inc., a managed security services provider
      enabling clients to co-manage firewalls. Mr. Boehm received his Certificate
      of
      Telecommunications Analysis from the University of Wisconsin-Milwaukee in 1994.




**Key
      Staff**




**John
      J. Heinke, C.P.A.** has
      been
      our Controller since September 2004. He received his B.A. Degree in Economics
      from California State University, Chico, and became a Certified Public
      Accountant in the District of Columbia in 1967. From 1996 to 2004, he was
      Accounting Manager at HighSoft, Inc., a software development company and
      reseller of computer products and services. Previously, Mr. Heinke served as
      Controller of SyberVision Systems where he directed the accounting and
      management information systems, as SyberVision grew from a startup to a $100
      million company in four years. Other experience includes managing  the
      accounting for a $1.7 billion investment portfolio at Prudential’s Real Estate
      Investment Department in San Francisco from 1978 through 1982. Previously,
      he
      was with Price Waterhouse, serving as Manager of the El Salvador office from
      1974 through 1977.





Directors
      are elected to serve until the next annual meeting of stockholders or until
      their successors have been elected. Officers are appointed to serve until the
      meeting of the Board of Directors following the next annual meeting of
      stockholders.




18


**Meetings
      of The Board of Directors and Information Regarding
      Committees**





There
      currently are no committees of the Board of Directors. The Board of Directors
      met twice during the year 2005, on February 22, 2005 and on April 20, 2005,
      to
      manage various company issues.





**Compliance
      with Section 16(a) of the Exchange Act**




Section
      16(a) of the Securities Exchange Act of 1934 requires our directors and
      officers, as well as persons who own more than 10% of our common stock
      ("Reporting Persons") to file reports of ownership and changes in ownership
      on
      Forms 3, 4 and 5 with the Securities and Exchange Commission. The Company
      believes that all Reporting Persons have complied on a timely basis with all
      filing requirements applicable to them.




**ITEM
      10.**  **EXECUTIVE
      COMPENSATION.**




**General
      Compensation Discussion**





All
      decisions regarding compensation for our executive officers and executive
      compensation programs are reviewed, discussed, and approved by the Board of
      Directors. All compensation decisions are determined following a detailed review
      and assessment of external competitive data, the individual’s contributions to
      our success, any significant changes in role or responsibility, and internal
      equity of pay relationships.





**Summary
      Compensation Table**





The
      following table sets forth the total compensation earned by or paid to the
      executive officers for the last three fiscal years.


ANNUAL
                COMPENSATION
            
            LONG
                TERM COMPENSATIONAwards
            
            PayoutsName
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
                ($)
            
            Other
                Annual Compen-sation
              ($)
            
            Restricted
                Stock Awards ($)
            
            Securities
                Underlying Options/
              SARs
              (#)
            
            LTIP
              Payouts
              ($)
            
            All
                Other Compensation ($)Sholeh
                Hamedani, CEO, CFO
            
            
            2003
              2004
              2005
            
            $
              $
            180,0001180,0001
              180,0002
            
            $
              $
              $
            0
              0
              0
            
            $
              $
              $
            0
              0
              0
            
            $
              $
              $
            0
              0
              0
            
            
            -0-
              -0-
              -0-
            
            $
              $
              $
            0
              0
              0
            
            $
              $
              $
            0
              0
              0






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 if all the
      options were to be converted. 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 was 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 acquirable shares are restricted.





1
      The officer did not charge the Company for her
      services - this amount was the estimated fair market value for comparable
      services and was recorded as additional paid in capital as of December 31,
      2003
      and 2004.


2
      The officer’s salary was accrued but has not
      been paid through the date of this report.




19





No
      other
      options or SARs (Stock Appreciation Rights) were granted to any directors or
      executive officers during 2004 and 2005.




**Employment
      and Related Agreements**





William
      L. Arnold was appointed by the Chairman to act as the President of the Company
      beginning December 30, 2005, under an Executive Employment Agreement executed
      on
      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 performance bonus of up to 50% of the annual salary
      and 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, which was more than the closing
      market price of $0.48 on the date of the agreement. One half of the Stock Option
      vests 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.





**Compensation
      of Directors**





Directors
      of the Company do not receive any cash compensation, but are entitled to
      reimbursement of their reasonable expenses incurred in attending directors'
      meetings.




**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS.**




The
      following table sets forth information with respect to the number of shares
      of
      common stock beneficially owned by (i) each of our directors, (ii) each our
      executive officers, (iii) all executive officers and directors as a group,
      and
      (iv) each shareholder known by us to be a beneficial owner of more than 5%
      of
      any class of our voting securities as of March 31, 2006.





20


Name
            
            Number
                of Post-Split Shares
            
            Percentage
                Beneficially OwnedSholeh
                Hamedani, CEO, CFO, Director3
            
            
            14,040,988
            
            
            52.3
            %Jamshid
                Ghosseiri, Ph.D., Secretary, Director
            
            
            -0-
            
            
            -0-Tyler
                Wheeler, CTO, Director
            
            
            1,000,000
            
            
            3.6
            %Roger
                Campos, Esq., Director
            
            
            -0-
            
            
            -0-Dale
                Boehm, Director
            
            
            -0-
            
            
            -0-All
                Officers and Directors as a group (5 people)
            
            
            15,040,988
            
            
            54.0
            %Shadrack
                Films, Inc.3,
                5
            
            
            14,040,988
            
            
            52.3
            %Two
                Dog Net, Inc.
            
            
            18,000,0004
            
            
            39.3
            %




**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.**




Our
      Chief
      Executive Officer, and one of our Chairman, Sholeh Hamedani, is the sole
      officer, director and shareholder of our parent company, Shadrack. Ms. Hamedani
      was also President of Two Dog Net, the owner of The Children’s Internet®
technology until she resigned on August 1, 2002. Ms. Hamedani also owns
      approximately 10% of the total outstanding shares of common stock of Two Dog
      Net.




Ms.
      Hamedani’s father, Nasser Hamedani, is the current President, Chairman and
      majority shareholder of Two Dog Net.




On
      July
      3, 2002, we entered into a Plan of Reorganization and Acquisition agreement
      with
      Shadrack thereby obtaining a majority ownership interest and becoming our parent
      company. Pursuant to the agreement, we sold 2,333,510 newly issued post-split
      shares of our common stock to Shadrack in exchange for an aggregate purchase
      price of $150,000. Sholeh Hamedani is the sole officer, director and shareholder
      of Shadrack.




On
      September 10, 2002, we entered into a License Agreement with Two Dog Net to
      license Children’s Internet® technology and intellectual property. We paid
      $15,500 in cash to Two Dog Net in consideration for the License Agreement.
      This
      agreement was subsequently cancelled and on March 3, 2003, we entered into
      a new
      Wholesale Sales & Marketing Agreement with Two Dog Net. Under the terms of
      this agreement, we were to pay Two Dog Net $3.00 per month for each user
      accessing The Children’s Internet® service. The Agreement also provides that we
      will pay Two Dog Net $3.79 per month for each user accessing Internet dial-up
      service, but we have no plans to offer dial-up service. On February 15, 2005
      the
      Company’s Board of Directors granted Two Dog Net an option to purchase
      18,000,000 post-split shares of restricted common stock at an exercise price
      of
      $.07 per share exercisable for five years. The option was granted in
      consideration of amending the Wholesale Sales & Marketing Agreement reducing
      the per user charge from $3.00 to $1.00.







3
      Except as otherwise indicated, we believe that
      the beneficial owners of common stock listed above, based on information
      furnished by such owners, have sole investment and voting power with respect
      to
      such shares, subject to community property laws where applicable. Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities. Shares of common
      stock subject to options or warrants currently exercisable, or exercisable
      within 60 days, are deemed outstanding for purposes of computing the percentage
      of the person holding such options or warrants, but are not deemed outstanding
      for purposes of computing the percentage of any other person.


4  Shares
      of common stock subject to options granted and currently exercisable, but not
      exercised as of March 31, 2006.


5
      Consists of 14,040,988 post-split shares of common stock owned by Shadrack
      Films, Inc. formerly known as The Children’s Internet, Inc., a California
      corporation, of which Sholeh Hamedani is the sole
      shareholder.





21


In
      a
      Stock Purchase Agreement dated October 11, 2002 and in reliance on an exemption
      from registration pursuant to Section 4(1) of the Securities Act of 1933, our
      original shareholders sold 2,237,000 of their post-split shares of our common
      stock to various purchasers, two of who are related to our management, Nasser
      Hamedani, Sholeh Hamedani’s father, and Soraiya Hamedani, Sholeh Hamedani’s
      sister. Some of these purchasers were introduced to the original shareholders
      by
      Sholeh Hamedani, our President, Chief Financial Officer, and Director. Some
      of
      these purchasers resold their shares to unrelated third parties, relying on
      an
      exemption from registration pursuant to Section 4(1) of the Securities Act
      of
      1933. The proceeds received from the stock sale was loaned to Two Dog Net who,
      in turn, loaned a portion of such proceeds to Shadrack, and Shadrack loaned
      a
      portion of these funds to the Company to finance our operations. These amounts
      are reflected on the financial statements as “Due to Parent Company.” The
      original shareholders received their shares from us in reliance on the exemption
      from registration pursuant to Section 4(2) of the Securities Act of 1933.





On
      February 15, 2005, the Company’s Board of Directors agreed to convert the debt
      owed to Shadrack of $456,912 into 13,054,628 post-split shares of restricted
      common stock at a conversion price of $0.07 per pre-split share based upon
      the
      only sale by the Company of shares of its common stock on July 3,
      2002.








**ITEM
      13.**  **EXHIBITS**





**Exhibits**





|3.1 | Articles
              of Incorporation, dated September 25, 19966
|--- | ------------------------------------------------------------------

|3.2 | Certificate
              of Amendment of Articles of Incorporation, dated February 10,
              20006
|--- | -----------------------------------------------------------------------------------------------------------

|3.3 | Certificate
              of Amendment of Articles of Incorporation, dated December 27,
              20026
|--- | -----------------------------------------------------------------------------------------------------------

|3.4 | Certificate
              of Designation of Series A Preferred Stock, dated November 8,
              20026
|--- | -----------------------------------------------------------------------------------------------------------

|3.5 | Bylaws6
|--- | -------

|10.1 | Plan
              of Reorganization and Acquisition, July 3, 20026
|---- | -------------------------------------------------------------------

|10.2 | Consulting
              Agreement with Alan Schram, dated June 28, 20026
|---- | -------------------------------------------------------------------------

|10.3 | License
              Agreement dated September 10, 20026
|---- | ---------------------------------------------------------

|10.4 | Amendment
              to License Agreement, dated November 5, 20026
|---- | ---------------------------------------------------------------------

|10.5 | Wholesale
              Sales & Marketing Agreement, dated March 3, 20037
|---- | -------------------------------------------------------------------------

|10.6 | Stock
              Purchase Agreement, dated October 11, 20028
|---- | ---------------------------------------------------------------






6  Incorporated by reference from the Company's
      Registration Statement on Form SB-2, filed on February 10, 2003, as amended
      (Registration No. 333-103072).


7 Incorporated by reference from the Company's Annual
      Report on Form 10-KSB for the fiscal year ended December 31, 2002, filed on
      March 31, 2003 (SEC File No. 000-29611).


8 Incorporated by reference from Amendment 2 to the
      Company's Registration Statement on Form SB-2, filed on September 11, 2003,
      as
      amended (Registration No. 333-103072).


9 Incorporated by reference to the Company's Quarterly
      Report on Form 10-QSB for the quarter ended June 30, 2003 (File No. 000-29611)
      filed on EDGAR August 14, 2003.


22


|10.7 | Co-Location
              Agreement, dated July 11, 20039
|---- | ---------------------------------------------------------

10.8
            Independent
                Sales Agreement with Infolink, dated August 14, 20038


|10.9 | Licensing
              Agreement with Infolink, dated August 14, 20038
|---- | -----------------------------------------------------------------------

|10.10 | Co-Location
              Agreement, dated September 26,
              200310
|----- | -----------------------------------------------------------------------------

|10.11 | Exhibit
              number 10.11 not used
|----- | -------------------------------------------

|10.12 | Agreement
              between the Company and Crosslink Financial Communications dated February
              25, 200511
|----- | --------------------------------------------------------------------------------------------------------------------------

|10.13 | Loan
              Agreement, dated October 11,
              200212
|----- | --------------------------------------------------------------------

31.1
            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 2002


31.2
            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 2002


32
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.**





Marc
      Lumer & Company has been the Company’s independent auditor beginning with
      the second quarter of 2004. Stonefield Josephson, Inc. was the Company’s
      independent auditor during the first quarter of 2004.




**Audit
      Fees**





Marc
      Lumer & Co has billed aggregate fees of approximately $108,000 and $12,000
      in the years ended December 31, 2005 and 2004, respectively, for professional
      services rendered in the audit of the Company's annual financial statements
      including the review of the Company’s Quarterly Reports
      on Form 10-QSB. Services in the year ended December 31, 2004 included the review
      of the Company’s Quarterly Reports on Form 10-QSB for the second and third
      quarters of 2004. Services in the year ended December 31, 2005 included review
      of the Company’s Quarterly Reports on Form 10-QSB and the examination of the
      restated financial statements of the years ended December 31, 2003 and 2002,
      as
      well as the audit of Company's annual financial statements for the year ended
      December 31, 2004.





Stonefield
      Josephson, Inc. billed aggregate fees of approximately $21,000 during the year
      ended December 31, 2004, for professional services rendered for the audit of
      the
      Company's annual financial statements and review of the financial statements
      included in the Company’s Quarterly Reports on Form 10-QSB and on Form SB-2
      Registration Statement. The final $15,500 of fees owed to Stonefield Josephson
      for services performed in 2004, was paid during the first quarter of
      2005.








10
      Incorporated by reference to the Company's
      Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (File No.
      000-29611) filed on EDGAR August 15, 2005.


12
      Incorporated by reference from the Company's
      ANnual Report on Form 10-KSB for the fiscal year ended December 31, 2004, filed
      on June 9, 2005 (SEC File No. 000-29611).


13
      Incorporated by reference to the Conpany's
      Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (File No.
      000-29611) filed on EDGAR August 15, 2005.





23




**Tax
      Fees**





Su-Gene,
      Inc. provided professional services in preparing the income tax returns for
      the
      Company and for advice on tax compliance and tax planning, for which
      approximately $1,100 and $2,000 was billed during 2005 and 2004,
      respectively.





Marc
      Lumer & Company and Stonefield Josephson, Inc. did not provide or bill for
      any professional services during the two years ended December 31, 2005 in
      connection with tax advise, tax compliance or tax planning.




**All
      Other Fees**





Neither
      Marc Lumer & Company nor Stonefield Josephson provided any other
      professional services for the Company during the years ended December 2005
      and
      2004.





24





**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant caused this report to be signed on its behalf by the
      undersigned, duly authorized.




THE
              CHILDREN’S
              INTERNET, INC.DATED:
              April 17, 2006
            By:
            /s/ Sholeh
              HamedaniSholeh
              HamedaniChief
                Executive Officer, Director
              (Principal Executive
                Officer)


DATED:
              April 17, 2006
            By:
            /s/ Sholeh
              HamedaniSholeh
              HamedaniChief
              Financial Officer, Director





(Principal
      Financial Officer and Principal Accounting Officer). In accordance with the
      Securities Exchange Act of 1934, this Report has been signed by the following
      persons on behalf of the registrant in the capacities and on the dates
      indicated.




Signature
              
              Title
              
              Date/s/Jamshid
                  Ghosseiri
              
              Secretary,
                  Director
              
              April
                  18, 2006Jamshid
                  Ghosseiri/s/Tyler
                  Wheeler
              
              Director
              
              April
                  18, 2006Tyler
                  Wheeler/s/Roger Campos
              
              Director
              
              April
                  18, 2006Roger
                  Campos/s/Dale
                  Boehm
              
              Director
              
              April
                  18, 2006Dale
                  Boehm





25


INDEPENDENT
      AUDITOR’S REPORT





TO
      THE
      BOARD OF DIRECTORS AND STOCKHOLDERS OF


THE
      CHILDREN’S INTERNET, INC




We
      have
      audited the accompanying balance sheets of The Children’s Internet, Inc.
      (formerly DWC Installations) (a Development Stage Company) as of December 31,
      2005 and the related statements of operations, stockholders’ equity (deficit), and cash
      flows for each of the two years ended December 31, 2005 and 2004 and the period
      from September 25 1996 (inception) to December 31, 2005. These financial
      statements and the schedules are the responsibility of the Company’s management.
      Our responsibility is to express an opinion on these financial statements and
      schedules based on our audit.




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 the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The
      Company has determined that it 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, 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 Children’s Internet, Inc. (formerly DWC Installations) (a
      Development Stage Company) as of December 31, 2005 for each of the two years
      ended December 31, 2005 and 2004 and the period from September 25 1996
      (inception) to December 31, 2005 **,** 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 suffered recurring losses from operations that
      raise
      substantial doubt about its ability to continue as a going concern. Management’s
      plans in regard to these matters are also described in Note 1. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.









/s/
      Marc
      Lumer & Company




San
      Francisco, California




April
      14,
      2006








THE
                  CHILDREN'S INTERNET, INC.(A
                  Development Stage Company)BALANCE
                  SHEETS
 December
                  31,2005
              
              2004ASSETSCurrent
                  Assets:Cash
              
              $
              103,849
              
              $
              -Deposit
                  Held in Escrow
              
              
              37,378
              
              
              -Total
                  Current Assets
              
              
              141,227
              
              
              -Equipment:Equipment
                  at Cost
              
              
              11,422
              
              
              -Accumulated
                  Depreciation
              
              
              (876
              )
              
              -Book
                  value of Equipment
              
              
              10,546
              
              
              -Other
                  Assets:Deferred
                  Charges - Related Company
              
              
              5,670,000
              
              
              -Deferred
                  Tax Asset, net of valuation allowance of$635,853
                  (2005) and $213,119 (2004)
              
              
              -
              
              
              -TOTAL
                  ASSETS
              
              $
              5,821,773
              
              $
              -LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  Liabilities:Accounts
                  Payable and Accrued Expenses
              
              $
              181,939
              
              $
              76,243Accrued
                  Officer's Salary
              
              
              180,000
              
              
              -Due
                  to Parent Company
              
              
              -
              
              
              395,490Taxes
                  Payable
              
              
              2,318
              
              
              2,640Total
                  Current Liabilities
              
              
              364,257
              
              
              474,373Long-Term
                  Liabilities:Due
                  to Parent Company
              
              
              621,234
              
              
              -TOTAL
                  LIABILITIES
              
              
              985,491
              
              
              474,373COMMITMENTS
                  AND CONTINGENCIES (NOTES 3 & 5)STOCKHOLDERS'
                  EQUITYPreferred
                  Stock, $0.001 par value; 10,000,000 shares authorized;
                  zero shares
                issued
                  and outstanding.
              
              
              -
              
              
              -Common
                  stock, $0.001 par value; 75,000,000 shares authorized;
                  26,858,138 shares (2005)
                and
                  13,523,510 shares
                  (2004), issued and outstanding
              
              
              26,858
              
              
              13,524Additional
                  paid-in capital
              
              
              7,872,615
              
              
              1,317,437Deficit
                  accumulated during the development stage
              
              
              (3,063,191
              )
              
              (1,805,334
              )TOTAL
                  STOCKHOLDERS' EQUITY (DEFICIT)
              
              
              4,836,282
              
              
              (474,373
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              5,821,773
              
              $
              -
  The
                  accompanying notes are an integral part of the financial
                  statements.




1




THE
                  CHILDREN'S INTERNET, INC.(A
                  Development Stage Company)STATEMENTS
                  OF OPERATIONSFor
                  the Year
              
              FromEnded
                  December 31,
              
              Inception2005
              
              2004
              
              to
                  DateREVENUE
              
              $
              -
              
              $
              -
              
              $
              -General
                  and Administrative Expenses
              
              
              1,257,057
              
              
              379,979
              
              
              3,059,991Operating
                  Loss before provision forincome
                  taxes
              
              
              (1,257,057
              )
              
              (379,979
              )
              
              (3,059,991
              )Provision
                  for Income Taxes
              
              
              800
              
              
              800
              
              
              3,200NET
                  LOSS
              
              $
              (1,257,857
              )
              $
              (380,779
              )
              
              (3,063,191
              )Net
                  Loss per Common Share-
                  basic and diluted
              
              $
              (0.05
              )
              $
              (0.03
              )
              $
              (0.41
              )Weighted
                  Average Number ofCommon
                  Shares Outstanding-
                  basic and diluted
              
              
              25,170,154
              
              
              13,523,510
              
              
              7,494,363The
                  accompanying notes are an integral part of the financial
                  statements.





2


THE
                  CHILDREN'S INTERNET, INC.(A
                  Development Stage Company)STATEMENTS
                  OF STOCKHOLDERS' EQUITY (DEFICIT)DeficitCommon
                  Stock, after giving
              
              
              
              Accumulatedduring
                  the
              
              Stockholders'
                  Equity (Deficit)retroactive
                  effect to 2 for 1
              
              Additional
              
              Developmentstock
                  split on March 11, 2005
              
              Paid-In
                  Capital
              
              StageShares
              
              AmountBalance,
                  December 31, 2001
              
              
              2,242,000
              
              $
              2,242
              
              $
              6,363
              
              $
              (8,605
              )
              $
              -Issuance
                  of common stock for cashon
                  July 3, 2002 at $0.0643 perpost-split
                  share to activate thedevelopment
                  stage
              
              
              2,333,510
              
              
              2,334
              
              
              147,666
              
              
              -
              
              
              150,000Issuance
                  of common stock for debtfinancing
                  fee on October 11, 2002at
                  $0.0643 per post-split share
              
              
              8,948,000
              
              
              8,948
              
              
              566,408
              
              
              -
              
              
              575,356Expenses
                  paid by former officer onbehalf
                  of the Company
              
              
              -
              
              
              -
              
              
              2,000
              
              
              -
              
              
              2,000Services
                  performed as capital contribution
              
              
              -
              
              
              -
              
              
              125,000
              
              
              -
              
              
              125,000Net
                  Loss (restated)
              
              
              
              
              
              
              
              
              
              
              
              (966,894
              )
              
              (966,894
              )Balance,
                  December 31, 2002
              
              
              13,523,510
              
              
              13,524
              
              
              847,437
              
              
              (975,499
              )
              
              (114,538
              )Services
                  performed as capital contribution
              
              
              -
              
              
              -
              
              
              290,000
              
              
              -
              
              
              290,000Net
                  Loss (restated)
              
              
              -
              
              
              -
              
              
              -
              
              
              (449,056
              )
              
              (449,056
              )Balance,
                  December 31, 2003
              
              
              13,523,510
              
              
              13,524
              
              
              1,137,437
              
              
              (1,424,555
              )
              
              (273,594
              )Services
                  performed as capital contribution
              
              
              -
              
              
              -
              
              
              180,000
              
              
              -
              
              
              180,000Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (380,779
              )
              
              (380,779
              )Balance,
                  December 31, 2004
              
              
              13,523,510
              
              
              13,524
              
              
              1,317,437
              
              
              (1,805,334
              )
              
              (474,373
              )Issuance
                  of common stock in exchangefor
                  debt to parent company on 2/15/05at
                  $0.035 per post-split share
              
              
              13,054,628
              
              
              13,054
              
              
              443,858
              
              
              -
              
              
              456,912Option
                  to purchase 18,000,000 post-splitshares
                  at an exercise price of $0.07 pershare
                  granted to Two Dog Net, Inc. on2/15/05,
                  valued at $0.315 per share
              
              
              -
              
              
              -
              
              
              5,670,000
              
              
              -
              
              
              5,670,000Option
                  to purchase 1,000,000 post-splitshares
                  at an exercise price of $0.07 pershare
                  granted to Tyler Wheeler on2/15/05,
                  valued at $0.315 per share
              
              
              -
              
              
              -
              
              
              315,000
              
              
              -
              
              
              315,000Issuance
                  of common stock for consultingservices
                  by Crosslink Financial Communi-cations,
                  Inc. on 2/25/05 at $0.33 perpost-split
                  share
              
              
              200,000
              
              
              200
              
              
              65,800
              
              
              -
              
              
              66,000Issuance
                  of common stock for consultingservices
                  by Crosslink Financial Communi-cations,
                  Inc. - 8,000 shares on the 25th ofeach
                  month from March through December2005
                  at an average of $0.76 per share
              
              
              80,000
              
              
              80
              
              
              60,520
              
              
              -
              
              
              60,600Net
                  Loss
              
              
              
              
              
              -
              
              
              -
              
              
              (1,257,857
              )
              
              (1,257,857
              )Balance,
                  December 31, 2005
              
              
              26,858,138
              
              $
              26,858
              
              $
              7,872,615
              
              $
              (3,063,191
              )
              $
              4,836,282The
                  accompanying notes are an integral part of the financial
                  statements.
 3
  THE
                  CHILDREN'S INTERNET, INC.(A
                  Development Stage Company)STATEMENTS
                  OF CASH FLOWSFor
                  the YearEnded
                  December 31,
              
              Inception2005
              
              2004
              
              to
                  DateCASH
                  FLOWS USED IN OPERATING ACTIVITIES:Net
                  Loss
              
              $
              (1,257,857
              )
              $
              (380,779
              )
              $
              (3,063,191
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                  on equipment
              
              
              876
              
              
              -
              
              
              876Stock
                  option compensation to director
              
              
              315,000
              
              
              -
              
              
              315,000Shares
                  issued for services
              
              
              126,600
              
              
              -
              
              
              701,956Services
                  performed as capital contribution
              
              
              -
              
              
              180,000
              
              
              595,000Expenses
                  paid by former officer on behalf of company
              
              
              -
              
              
              -
              
              
              5,000Increase
                  in current assetsDeposit
                  held in escrow
              
              
              (37,378
              )
              
              -
              
              
              (37,378
              )Increase
                  in current liabilities -Accounts
                  payable and accrued expenses
              
              
              105,374
              
              
              13,451
              
              
              184,257Accrued
                  officer's salary
              
              
              180,000
              
              
              -
              
              
              180,000Net
                  cash used in operating activities
              
              
              (567,385
              )
              
              (187,328
              )
              
              (1,118,480
              )CASH
                  USED IN INVESTING ACTIVITIES:Acquisition
                  of equipment
              
              
              (11,422
              )
              
              -
              
              
              (11,422
              )Net
                  cash provided by investing activities
              
              
              (11,422
              )
              
              -
              
              
              (11,422
              )CASH
                  PROVIDED BY FINANCING ACTIVITIES:Issuance
                  of common stock
              
              
              -
              
              
              -
              
              
              155,605Advances
                  from parent company, net
              
              
              682,656
              
              
              187,328
              
              
              1,078,146Net
                  cash provided by financing activities
              
              
              682,656
              
              
              187,328
              
              
              1,233,751Net
                  change in cash and cash equivalents
              
              
              103,849
              
              
              -
              
              
              103,849Cash
                  and cash equivalents - beginning of period
              
              
              -
              
              
              -
              
              
              -Cash
                  and cash equivalents - end of period
              
              $
              103,849
              
              $
              -
              
              $
              103,849The
                  accompanying notes are an integral part of the financial
                  statements.
 4


THE
      CHILDREN'S INTERNET, INC.


(A
      Development Stage Company)


NOTES
      TO
      FINANCIAL STATEMENTS


December
      31, 2005





**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 December 31, 2005 and 2004, $1,078,146
      and
      $395,490, respectively, 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 as explained in Notes 3 and 5, bringing
      the
      total of
      the
      Company's issued and outstanding post-split shares to 26,858,138 at December
      31,
      2005.





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.




5


Basis
                of Presentation
              
              The
                accompanying financial statements have been prepared in conformity
                with
                accounting principles generally accepted in the United States, which
                contemplate continuation of the Company as a going concern. At present,
                the Company has not generated any revenues from these established
                sources
                of revenue and has had net losses and negative cash flow since its
                inception. These factors raise substantial doubt about the Company's
                ability to continue as a going concern. Without realization of additional
                capital or established revenue sources, it would be unlikely for
                the
                Company to continue as a going concern. The financial statements
                do not
                include any adjustments relating to the recoverability and classification
                of recorded asset amounts, or amounts and classification of liabilities
                that might be necessary should the Company be unable to continue
                in
                existence.Use
                of Estimates
              
              The
                preparation of financial statement in conformity with accounting
                principals generally accepted in the United States requires management
                to
                make estimates and assumptions that affect the reported amounts of
                assets
                and liabilities and disclosure of contingent assets and liabilities
                at the
                date of the financial statements and the reported amounts of revenue
                and
                expenses during the reporting period. Actual results could differ
                from
                those estimates. During 2002 through 2004, the Company estimated
                the fair
                market value of thecost
                of wages, if paid, for the services rendered by its Chief Executive
                Officer and an outside consultant.
              
              Cash
                and Cash Equivalents
              
              The
                Company considers all highly liquid investments purchased with original
                maturities of three months or less to be cash equivalents. There
                were no
                cash equivalents as of December 31, 2005 and 2004.
              
              Fair
                Value of Financial Instruments
              
              The
                carrying amounts of financial instruments, including accounts payable
                and
                accrued expenses, professional fees, and payable to related parties
                approximate fair value as of December 31,
                2005.





Property
      and Equipment





Property
      and equipment are recorded at cost, less accumulated depreciation. In accordance
      with FASB 144, the Company reviews its long-lived assets for impairment.
      Whenever events or changes in circumstances indicate that the carrying amount
      of
      the assets might not be recovered through undiscounted future cash flows, such
      losses are recognized in the statement of operations.





The
      cost
      of property and equipment is depreciated over the remaining useful lives of
      the
      assets, all of which currently are based on a three-year life. Depreciation
      is
      computed using the straight-line method for financial reporting, and at
      accelerated rates under the Modified Accelerated Cost Recovery System (MACRS)
      for income tax purposes. Expenditures for maintenance and repairs are expensed
      when incurred, while betterments are capitalized. Gains and losses on the sale
      of property and equipment are reflected in the statement of
      operations.





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 years ended December 31, as
      follows:


2005
            
            2004Net
                loss
            
            $
            1,257,857
            
            $
            380,779Cash
                flow from operations
            
            $
            (567,385
            )
            $
            (187,328
            )





The
      Company is being investigated by the Securities and Exchange Commission as
      explained in Note 5. 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.





6


Income
      Taxes





Income
      taxes are provided for based on the liability method of accounting pursuant
      to
      SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes, if any,
      are
      recorded to reflect the tax consequences on future years of differences between
      the tax bases of assets and liabilities and their financial reporting amounts
      at
      each year-end.





Valuation
      allowances are provided against assets that may not be realized. Deferred tax
      assets and liabilities are measured using the enacted tax rates expected to
      apply to taxable income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
      that
      includes the enactment date.





Loss
      Per Share





SFAS
      No.
      128, "Earnings (Loss) Per Share", requires the presentation of basic loss per
      share and diluted loss per share. The computation of basic loss per share is
      computed by dividing loss available to common stockholders by the weighted
      average number of outstanding common shares during the period. Diluted loss
      per
      share gives effect to all dilutive potential common shares outstanding during
      the period. As of December 31, 2005, the Company had 19,000,000 potentially
      dilutive post-split common shares outstanding, but has not included these shares
      in its computation of loss per share because doing so would decrease the loss
      per share, which is antidilutive and is not permitted by SFAS No.
      128.





Comprehensive
      Income





As
      of
      December 31, 2005, the Company had no items that represent comprehensive income
      and therefore, has not included a Statement of Comprehensive Income in the
      accompanying financial statements.








Segment
      Reporting





The
      Company identifies its operating segments based on how management internally
      evaluates separate financial information (if available), business activities
      and
      management responsibility. The Company believes it operates in a single business
      segment. Through December 31, 2005 there have been no foreign
      operations.





Reclassifications





Certain
      prior year amounts have been reclassified to conform to the current year
      presentation. These reclassifications did not have an impact on previously
      reported financial position, cash flows or results of operations.





7


New
                Accounting Pronouncements
              
              In
                December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
                Assets”, an amendment of APB Opinion No. 29. SFAS No 153 eliminates the
                exception from fair value measurement for nonmonetary exchanges of
                similar
                productive assets in paragraph 21(b) of APB Opinion No. 29, “Accounting
                for Nonmonetary Transactions,” and replaces it with an exception for
                exchanges that do not have commercial substance. This Statement specifies
                that a nonmonetary exchange has commercial substance if future cash
                flows
                of the entity are expected to change significantly as a result of
                the
                exchange, and is effective for nonmonetary asset exchanges occurring
                in
                fiscal periods beginning after June 15, 2005.The
                Company does not expect the adoption of SFAS No. 153to have a material
                impact on the Company’s future financial position, cash flows or results
                of operations.
              
              In
                December  2004, the FASB issued SFAS No. 123R, “Share-Based
                Payment*.*”
                SFAS No. 123R addresses the accounting for share-based payment
                transactions in which an enterprise receives employee services in
                exchange
                for (a) equity instruments of the enterprise or (b) liabilities
                that are based on the fair value of the enterprise’s equity instruments or
                that may be settled by the issuance of such equity instruments.
                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.  The Company is required to adopt
                SFAS No. 123(R) in the third quarter of fiscal 2005, beginning
                July 1, 2005.  The Company has implemented this pronouncement,
                which included its application in fair valuing options granted in
                February
                2005.
              
              In
                May 2005, the FASB issued SFAS No. 154,“Accounting
                Changes and Error Corrections, a replacement of APB Opinion No. 20
                and
                FASB Statement No. 3”. SFAS No. 154 requires retrospective application to
                prior period financial statements for changes in accounting principle,
                unless it is impracticable to determine either the period-specific
                effects
                or the cumulative effect of the change. SFAS No. 154 also requires
                that
                retrospective application of a change in accounting principle be
                limited
                to the direct effects of the change. Indirect effects of a change
                in
                accounting principle should be recognized in the period of the accounting
                change. SFAS No. 154 will become effective for the Company’s fiscal year
                beginning January 1, 2006. The impact of SFAS No. 154 will depend
                on the
                nature and extent of any voluntary accounting changes and correction
                of
                errors after the effective date, but management does not expect this
                pronouncement to have a material impact on the Company’s current results
                of operations, financial condition or cash flows.




**NOTE
      2 - PROPERTY AND EQUIPMENT**





The
      following is a summary of property and equipment - at cost, less accumulated
      depreciation. Depreciation on these assets is based on a 3-year life. The
      majority of the office furniture and equipment utilized by the Company is owned
      by Two Dog Net, Inc. and provided to the Company free of charge.




2005
              
              2006Computer
                  Hardware
              
              $
              6,281
              
              $
              0Computer
                  Software
              
              
              2,393
              
              
              011,422
              
              $
              0Less:
                  Accumulated Depreciation
              
              
              876
              
              
              0Total
              
              $
              10,546
              
              $
              0




8


**NOTE
        3 - RELATED PARTY TRANSACTIONS**
  Leases
  The
        Parent Company leases the office space utilized by the Company and has provided
        the funds for the lease payments. The basic rent includes utilities and
        janitorial services, and under Shadrack’s current lease agreement is $3,603 per
        month through April 2005, $3,706 per month from May 2005 through April 2006,
        and
        $3,809 per month from May 2006 through April 2007. Annual rent expense was
        as
        follows:
   Year
              
              Amount2005
              
              $
                  44,6292004
              
              $
                  28,734
  Services
        Provided
  On
        January 26, 2005, the Company’s Board of Directors resolved that starting
        January 1, 2005, all salary due and payable to the Company's President, 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. Accordingly, for the year ended December
        31,
        2005, $180,000 has been accrued and charged to General and Administrative
        Expense. During the year ended December 31, 2004, Sholeh Hamedani provided
        services to the Company at a fair market value of $180,000, which was
        contributed to Additional Paid-in Capital. Accordingly, she will not seek
        payment for the services provided during that period.
  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 December
        31,
        2005 and 2004 was $1,078,146 and $395,490, respectively. In February 2005,
        the
        Company owed Shadrack 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 which was based upon the only recorded direct
        sale of
        shares by the Company to date which occurred in July of 2002.
  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 52.3% 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 December 31, 2005 owns 52.3% 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 secured 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.
  9
 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..
  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 if all
        the
        options were to be converted. 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 based on a fair market value of $0.315
        per post-split 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
      4 - SB-2 REGISTRATION STATEMENT**





On
      February 10, 2003, the Company filed a Form SB-2 Registration Statement offering
      for sale of up to a maximum of 8,000,000 post-split shares of the Company's
      common stock directly to the public. The Company received notification from
      the
      SEC that their SB-2 Registration Statement No. 333-103072 was declared effective
      on May 5, 2004. On October 19, 2004 the Company filed a post-effective amendment
      to the SB-2 deregistering the 8,000,000 post-split shares. The post-effective
      amendment was declared effective by the SEC on October 25, 2004.





**NOTE
      5 - 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 $37,378.43 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 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





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.




On
      September 30, 2003, the Company signed a 13-month colocation agreement to house
      the Company's search engine, servers and related equipment. For the years ended
      December 31, 2005 and 2004, the total amount paid was $34,800 for each
      year. **** The
      Company has continued under this agreement on a month to month
      basis.





On
      September 30, 2004, the Company received a demand for arbitration from its
      former auditor, Stonefield Josephson, relating to the collection of
      approximately $21,700 in fees owed by the Company for accounting services that
      were disputed by the Company. The parties settled their dispute and on November
      30, 2004 entered into a Settlement Agreement and Mutual General Release, which
      was executed on December 10, 2004. Pursuant to the Settlement Agreement the
      Company agreed to pay Stonefield Josephson the sum of $15,500 in two
      installments. Subsequently, on January 18, 2005 the first installment of $7,750
      was paid and the second and final installment of $7,750 was paid on March 4,
      2005.





The
      Company is subject to a claim by Stonefield Josephson, Inc. seeking
      reimbursement costs for legal fees spent in connection with the Securities
      and
      Exchange Commission inquiry of the Company. Stonefield Josephson, Inc.’s claim
      seeks recovery of $29,413. The Company disputes any amounts owed because of
      a
      settlement agreement entered into between the respective parties in December
      2004 effectively terminating their relationship. No formal legal proceedings
      have been initiated.





10


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.
      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 as of
      December 31, 2005, and William L. Arnold, the principal shareholder of Crosslink
      was appointed President of the Company, as explained in Note 10.





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.  The inquiry is non-public and is not to be construed as stated to
      the Company by the Commission is not an indication by anyone that any violation
      of law has occurred nor should it be considered a reflection upon any person,
      entity or security.





The
      Company is currently seeking resolution of the staff’s investigation by virtue
      of settlement.  A potential settlement likely may include the Company
      and/or its principals 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 current key members of management
      being barred from serving as either directors or officers of the Company to
      also
      including financial penalties and disgorgement of all profits derived by the
      Company and/or its principals 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, 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 is a serious question. Any proposed
      settlement will be subject to the Commission’s approval.  The Company
      cannot predict the outcome of these 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
      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.





**NOTE
      6 - 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.





11


**NOTE
      7 - INCOME TAX** ES





The
      significant components of the company’s deferred tax assets are as follows:




December
                31,2005
              
              2004Deferred
                  tax assets:Net
                  operating loss carryforwards
              
              $
              635,853
              
              $
              213,119Less
                  -Valuation allowance
              
              
              (635,853
              )
              
              (213,119
              )Net
                  deferred tax assets
              
              $
              -
              
              $
              -




For
      the
      year ended December 31, 2005, the valuation allowance was increased by $422,734
      due to uncertainties surrounding the realization of the deferred tax assets,
      resulting from the Company’s net loss of $1,257,857 for the year and an
      accumulated deficit of $3,063,191 at December 31, 2005.





The
      provision (benefit) for income taxes differs from the provision (benefit) amount
      computed by applying the statutory federal tax rate (34%) to the taxable loss
      due to the following:




2005
              
              2004Computed
                  expected tax benefits
              
              $
              422,734
              
              $
              68,264Increase
                  in valuation allowance
              
              
              (422,734
              )
              
              (68,264
              )Provision
                  (benefit) for income tax
              
              $
              -
              
              $
              -


As
      of
      December 31, 2005, the Company had a net operating loss carryforward for federal
      income tax purposes of $1,870,155. This net operating loss carryforward will
      begin to expire in 2022. The valuation allowance has been estimated in an amount
      equal to the projected future benefit of the loss carryforward due to the
      assumption the Company may not generate sufficient income to utilize the future
      tax benefit.





State
      Franchise Taxes have been recorded as an expense. All returns due have been
      filed and the 2005 tax was paid when due. The Company made a provision of $2,318
      as of December 31, 2005, for the actual amount due for 2002 through 2004, which
      was paid in full on January 26, 2006.





**NOTE
      8 - NON-MONETARY TRANSACTIONS**





Deferred
      Charge





As
      explained in Note 3, 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
      will be amortized into expense as subscription revenues are recognized. As
      subscription income becomes effective, this asset will be evaluated periodically
      by management to determine if any adjustment for impairment of value is
      required.





Conversion
      of Debt to Common Stock





As
      explained in Note 3, 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





Non-employee
      Compensation





As
      explained in Note 3, 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 year ended December 31, 2005.


12








**NOTE
      9 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)**





Summarized
      unaudited financial information for the years ended December 31, 2005 and 2004
      are noted below:


**2005****Dec.
                    31**
                
                **Sept.
                    30**
                
                **June
                    30**
                
                **March
                    31**Net
                    Revenues
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Gross
                    Profit
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Net
                    (loss)
                
                $
                (270,832
                )
                $
                (207,345
                )
                $
                (297,458
                )
                $
                (482,222
                )Net
                    (loss) per share - basic and diluted
                
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.02
                )**2004****Dec.
                    31**
                
                
                **Sept.
                    30**
                
                
                **June
                    30**
                
                
                **March
                    31**Net
                    Revenues
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Gross
                    Profit
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Net
                    (loss)
                
                $
                (93,329
                )
                $
                (105,181
                )
                $
                (85,678
                )
                $
                (96,591
                )Net
                    (loss) per share - basic and diluted
                
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.01
                )




**NOTE
      10 - SUBSEQUENT EVENTS**





An
      agreement with Crosslink Financial Communications, Inc. for various investor
      relations services, which is further explained in Note 5, was terminated as
      of
      December 31, 2005. William L. Arnold, the principal shareholder of Crosslink
      was
      appointed by the Chairman to act as President of the Company beginning on
      December 30, 2005, 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 performance bonus of up to 50% of the annual salary and a combination
      of nonqualified and qualified stock options (the Stock Option). The Stock Option
      is for the purchase of up to 1,000,000 restricted post-split shares at an option
      price of $0.55 per share, which was more than the closing market price of $0.48
      on the date of the agreement. One half of the Stock Option vests 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.