SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-29611
THE CHILDREN'S INTERNET, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 20-1290331
---------- -----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5000 Hopyard Rd., Suite 320, Pleasanton, California 94588
(Address of principal executive offices)
(925) 737-0144
(Issuer's telephone number)
------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of November 1, 2004, the number of shares of Common Stock issued and
outstanding was 2,287,755.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
THE CHILDREN'S INTERNET, INC
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION 1
Item 1. Financial Statements (Unaudited) 1
Unaudited Condensed Balance Sheet -September 30, 2004 1
Unaudited Condensed Statements of Operations - For the nine
months ended September 30, 2004 and 2003, and the period from
inception to September 30, 2004 2
Unaudited Condensed Statements of Stockholders' Deficit - For the nine
months ended September 30, 2004 and the period
from inception to September 30, 2004 3
Unaudited Condensed Statements of Cash Flows - For the nine months
ended September 30, 2004 and 2003, and the period from
inception to September 30, 2004 4
Notes to Unaudited Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Conditions and Plan of Operation 7
Item 3. Controls and Procedures 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE CHILDREN'S INTERNET, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
September 30,
2004
-----------
ASSETS
Current Assets Prepaid Rent $ 4,000
-----------
Total Current Assets 4,000
-----------
Non-Current Prepaid Rent 7,000
-----------
TOTAL ASSETS $ 11,000
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts Payable and Accrued Expenses $ 79,000
Due to Parent Company 377,000
-----------
Total Current Liabilities 456,000
-----------
456,000
-----------
STOCKHOLDERS' DEFICIT
Preferred 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;
2,287,755 shares issued outstanding 2,000
Additional paid-in capital 708,000
Deficit accumulated during the development stage (1,155,000)
-----------
TOTAL STOCKHOLDERS' DEFICIT (445,000)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 11,000
===========
The accompanying notes are an integral part of the financial statements.
1
THE CHILDREN'S INTERNET, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
For The Three Months For The Nine Months September 25, 1996
Ended Septemember 30, Ended September 30, (inception) to
--------------------------- ---------------------------- September 30,
2004 2003 2004 2003 2004
----------- ----------- ----------- ----------- -----------
REVENUE $ -- $ -- $ -- $ -- $ --
General Selling and
Administrative Expenses 123,000 138,000 312,000 374,000 (1,191,000)
----------- ----------- ----------- ----------- -----------
Operating Loss (123,000) (138,000) (312,000) (374,000) (1,191,000)
Other Income--Gain from
Forgiveness of Rent -- -- 36,000 -- 36,000
Provision for Income Taxes -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET LOSS $ (123,000) $ (138,000) $ (276,000) $ (374,000) $(1,155,000)
=========== =========== =========== =========== ===========
Net Loss per Common Share
- basic and diluted $ (0.05) $ (0.06) $ (0.12) $ (0.16) $ (0.79)
=========== =========== =========== =========== ===========
Weighted Average Number of Common
Shares Outstanding
- basic and diluted 2,287,755 2,287,755 2,287,755 2,287,755 1,454,129
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
2
THE CHILDREN'S INTERNET, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Accumulated
Common Stock Additional During
---------------------------- Paid-In the Development Stockholders'
Shares Amount Capital Stage Deficit
----------- ----------- ----------- ----------- -----------
Balance, September 25, 1996 -- $ -- $ -- $ -- $ --
Issuance of common stock
for cash on September 24, 1996
at $0.005 per share 1,121,000 1,000 4,000 -- 6,000
Net Loss (6,000) (6,000)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 1,121,000 1,000 4,000 (6,000) --
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 1,121,000 1,000 4,000 (6,000) --
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 1,121,000 1,000 4,000 (6,000) --
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 1,121,000 1,000 4,000 (6,000) --
Net Loss -- -- -- (3,000) (3,000)
Expenses paid by former
office on behalf of
company 3,000 3,000
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 1,121,000 1,000 7,000 (9,000) --
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 1,121,000 1,000 7,000 (9,000) --
Issuance of common stock
for cash on July 3, 2002
at $0.1286 per share 1,166,755 1,000 149,000 150,000
Expenses paid by former
officer on behalf
of company 2,000 2,000
Services performed as
capital contribution 125,000 125,000
Net Loss -- -- -- (392,000) (392,000)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 2,287,755 2,000 283,000 (401,000) (116,000)
Services performed as capital contribution 290,000 290,000
Net Loss -- -- -- (478,000) (478,000)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 2,287,755 2,000 573,000 (879,000) (304,000)
Services performed as capital contribution 135,000 135,000
Net Loss (276,000) (276,000)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2004 2,287,755 $ 2,000 $ 708,000 $(1,155,000) $ (445,000)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements.
3
THE CHILDREN'S INTERNET, INC.
(Formerly D.W.C. Installations)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
For The Nine Months September 25, 1996
Ended September 30, (inception) to
---------------------------- September 30,
2004 2003 2004
----------- ----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net Loss $ (276,000) $ (374,000) $(1,155,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Services performed as capital contribution 135,000 225,000 549,000
Expenses paid by former officer on behalf of company 5,000
Increase in Assets
Current and non-current prepaid rent (11,000) (11,000)
Increase in liabilities
Accounts payable and accrued expenses (20,000) 25,000 79,000
Due to Parent Company 172,000 124,000 377,000
----------- ----------- -----------
Net cash used in operating activities -- -- (156,000)
----------- ----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES:
Issuance of common stock 156,000
----------- ----------- -----------
Net cash provided by financing activities -- -- 156,000
----------- ----------- -----------
Net change in cash and cash equivalents -- -- --
Cash and cash equivalents - beginning of period -- -- --
----------- ----------- -----------
Cash and cash equivalents - end of period $ -- $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
4
THE CHILDREN'S INTERNET, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Children's Internet, Inc. (formerly D.W.C. Installations) ("Company") is
currently a development stage company under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 7. The Company was incorporated
under the laws of the State of Nevada on September 25, 1996.
On July 3, 2002, Shadrack Films, Inc. purchased 1,166,755 newly issued shares of
our common stock for $150,000, thereby obtaining a majority ownership interest
and becoming our parent company. Total issued and outstanding shares were
increased to 2,287,755 as a result of this sale.
Interim Financial Information
The accompanying unaudited interim financial statements have been prepared by
the Company in accordance with accounting principles generally accepted in the
United States of America pursuant to Regulation S-B of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. Accordingly, these interim financial statements should be
read in conjunction with the Company's audited financial statements and related
notes as contained in the Company's Form 10-KSB for the year ended December 31,
2003. In the opinion of management, the interim financial statements reflect all
adjustments, including normal recurring adjustments, necessary for fair
presentation of the interim periods presented. The results of operations for the
nine months ended September 30, 2004 are not necessarily indicative of results
of operations to be expected for the full year.
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, although the Company
has signed contracts establishing revenue sources, the Company has not generated
any revenues from these established sources of revenue. This factor raises
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 amount, or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence. It is management's objective to seek additional capital through the
sale of its securities. (See Note 3 - SB-2 Registration statement)
5
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company's principal office is leased by the parent company, Shadrack Films,
Inc. Shadrack Films pays for and provides the office space utilized by the
Company as well as pays for the Company's telecommunications and utility costs.
The Company has agreed to reimburse Shadrack Films for these costs and any other
direct costs paid on its behalf. As of September 30, 2004, the Company had
accrued a payable due to Shadrack Films of approximately $377,000 for such
costs.
In April 2004, the Company moved to a new office location and the monthly rent
approximates $3,600. The Company has Shadrack Film's verbal permission to use
this office space, but this permission is revocable at any time without prior
notice. These offices are 2,059 square feet and are leased by Shadrack Films
from the landlord, Principal Life Insurance Company, an Iowa corporation. From
March 22, 2004 until April 30, 2004, Shadrack Films received the office space on
a rent-free basis. From month two (May 2004) through thirteen the basic rent per
month is $3,603; for months fourteen through twenty-five, the basic rent per
month will be $3,706; and for months twenty-six through thirty-seven, the basic
rent per month will be $3,809 under a lease agreement that expires on May 1,
2007. Shadrack Films is responsible for making all rent payments to the
landlord, but the cost of these rent payments are being added to the balance of
the accrued account payable due to Shadrack Films for the expenses that Shadrack
Films has been paying on the Company's behalf.
The Company, Shadrack Films and Two Dog Net, Inc. (TDN) are related parties, in
that, the Company's President, Chief Executive Officer, Chief Financial Officer,
and Director, Sholeh Hamedani, is the sole shareholder of Shadrack which owns
51% of the Company's common stock. Ms. Hamedani was President of TDN until
August 1, 2002. In addition, the current President, Chairman and Founder of TDN,
Nasser Hamedani, is the father of the Company's President, Chief Executive
Officer, Chief Financial Officer, and Director, Sholeh Hamedani. The Company's
President, Chief Executive Officer, Chief Financial Officer, and Director,
Sholeh Hamedani, provided services to the Company at a fair market value of
$135,000 during the nine months ended September 30, 2004 and will not seek
payment for the services provided through that date.
On June 28, 2002, the Company entered into a Consulting Agreement with Alan
Schram. This agreement provides for Alan Schram to provide consulting services
to the Company. In return for his services, the agreement entitles Alan Schram
to receive 25,000 shares of the Company's common stock at the completion of the
agreement's four-month term. The consulting services have been accrued in other
expenses. The Company is currently in negotiations with Mr. Schram to settle its
obligations under the terms of this agreement. As of the date hereof, these
shares have not been issued. Alan Schram is the Company's former President,
Secretary, Chief Financial Officer and Director.
NOTE 3 - SB-2 REGISTRATION STATEMENT
On February 10, 2003, the Company filed a Form SB-2 Registration Statement
offering for sale up to a maximum of 4,000,000 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. Subsequently, on October 19, 2004, the Company filed a
post-effective amendment to the SB-2 Registration Statement to deregister the
4,000,000 shares. (See Note 6 - Subsequent Events)
6
NOTE 4 - GAIN FROM FORGIVENESS OF RENT
On February 13, 2004, the Company received notice that their landlord, Hill
Physicians Medical Group, Inc., had filed an unlawful detainer action against
the Company on February 6, 2004 in the Contra Costa County Superior Court as
case number WS04-0238. On February 19, 2004, the Company signed a Mutual
Settlement Agreement and Release. The effect of the release has been reflected
in the operating statements as a gain from forgiveness of rent for the nine
months ended September 30, 2004 in the approximate amount of $36,000.
NOTE 5 - ARBITRATION PROCEEDING
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 allegedly owed by the Company for accounting
services which are disputed by the Company. The parties are currently in
discussions to settle the matter and the Company has filed a request to continue
the arbitration and to respond to the demand by November 21, 2004.
NOTE 6 - SUBSEQUENT EVENTS
On October 19, 2004, the Company filed a post-effective amendment to the SB-2
Registration Statement to deregister the 4,000,000 shares of common stock it
intended to sell to the public through a direct public offering. The
post-effective amendment was declared effective by the SEC on October 25, 2004.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
The following discussion and analysis should be read in conjunction with our
financial statements, including the notes thereto, appearing elsewhere in this
Report.
Forward-Looking Statements
This quarterly report on Form 10-QSB contains statements relating to future
results of the Company (including certain projections and business trends) that
are "forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties, including but not limited to
changes in political and economic conditions; demand for and market acceptance
of new and existing products, as well as other risks and uncertainties detailed
from time to time in the filings of the Company with the Securities and Exchange
Commission.
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.
7
Selected Financial Data
The following selected statement of operations and balance sheet data for the
period from September 25, 1996, the date of our inception, through September 30,
2004 and for the nine months ended September 30, 2004 as compared to the nine
months ended September 30, 2003 were derived from our financial statements and
notes thereto included in this report which are unaudited. The difference
between the periods was partly due to the forgiveness of rent. 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" and our unaudited financial statements, including the related notes
to the financial statements.
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
For the period from
September 25, 1996
For the nine months For the nine months (inception) through
September 30, September 30, September 30,
2004 2003 2004
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
Statement of Operations Data
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
Net sales - -
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
Operating expenses: 312,000 374,000 1,191,000
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
Operating loss (312,000) (374,000) (1,191,000)
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
Net Loss (276,000) (374,000) (1,155,000)
- ---------------------------------------------- ---------------------- ----------------------- -----------------------
- ------------------------------------------------------- --------------------------------------------------------
As of September 30, 2004
- ------------------------------------------------------- --------------------------------------------------------
Balance Sheet Data:
- ------------------------------------------------------- --------------------------------------------------------
Total assets 11,000
- ------------------------------------------------------- --------------------------------------------------------
Current liabilities 456,000
- ------------------------------------------------------- --------------------------------------------------------
Total stockholders' deficit (445,000)
- ------------------------------------------------------- --------------------------------------------------------
Plan of Operation
The plan of operation should be read in conjunction with the Company's financial
statements, including the notes thereto, appearing elsewhere in this Report.
The following information contains certain forward-looking statements of
management of the Company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may," "could," "expect," "estimate," "anticipate," "plan,"
"predict," "probable," "possible," "should," "continue," or similar terms,
variations of those terms or the negative of those terms. The forward-looking
statements specified in the following information have been compiled by our
management on the basis of assumptions made by management and considered by
management to be reasonable. Our future operating results, however, are
impossible to predict and no representation, guaranty, or warranty is to be
inferred from those forward-looking statements.
Through a wholesale sales and marketing agreement with Two Dog Net, Inc. ("Two
Dog Net"), we are 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(R). We plan to introduce this
8
Internet service designed specifically for children that allows them to have
completely safe, unrestricted live access to the Internet. 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 by Two
Dog Net and is ready to air. We intend to utilize the infomercial to introduce
The Children's Internet(R) service to the public, as well as build brand
recognition and generate customer subscriptions. We plan to first conduct a
media test in the fourth quarter of 2004. We believe the results from the media
test will give us the platform to launch the advertising campaign on a national
basis thereafter.
In a Stock Purchase Agreement dated October 11, 2002, our original shareholders
sold 1,118,500 of their 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 President,
Chief Financial Officer, and a Director. Some of these purchasers resold their
shares to unrelated third parties. A portion of the proceeds received from the
stock sales by the purchasers was in turn loaned to Shadrack Films, Inc., our
parent company, to finance our initial operations thus far. These amounts are
reflected on the financial statements as "Due to Parent Company." Our President,
Chief Executive Officer, and one of our Directors, Sholeh Hamedani, is the sole
shareholder of our parent company, Shadrack Films, Inc.
As of September 30, 2004, we had an accumulated total net loss of approximately
$1,155,000. Of this amount, approximately $549,000 represents the estimated fair
market value for the cost of wages, if paid, for the services rendered by our
President, Chief Executive Officer and an outside consultant (we have recorded
these amounts for the cost of wages as contributed capital, since these
individuals did not charge the Company), $402,000 represents professional fees
such as legal and accounting expenses, and the balance of $204,000 consists
primarily of occupancy and telecommunications costs including internet costs. To
date, our parent company, Shadrack Films, has funded all of our expended costs.
Currently, we do not have any cash on hand and are dependent on funding from
Shadrack Films for our current operations and for providing office space and
utilities that, for the nine months ended September 30, 2004, averaged $9,000
per month in operating costs exclusive of professional fees and time donated by
employees. The accrued account payable due to Shadrack Films is an open account
payable. Currently, the accrued balance of this account is approximately
$377,000. Our parent company is under no obligation to continue to fund our
operations and could stop at any time without notice. We estimate that we need a
minimum of $180,000 in cash to continue our operations for the next twelve
months.
Our registration statement filed with the Securities and Exchange Commission
("SEC") was declared effective on May 5, 2004. This registration statement
registered 4,000,000 shares of our common stock to be sold by us at a price of
$2.00 per share in a direct public offering. We did not raise any funds in this
offering. We determined not to proceed with this offering and on October 19,
2004, we filed a post-effective amendment to the registration statement to
deregister all 4,000,000 shares. On October 25, 2004, the post-effective
amendment was declared effective by the SEC and only the 4,000,000 shares
registered by us were deregistered. We do not currently have any arrangements
for alternative financing.
Where practicable, we plan to contract with third party companies to market The
Children's Internet(R) Service as well as to provide administrative support
services such as billing and level one technical support. We have already
entered into two agreements with Infolink Communications, Ltd., a third party
company, for the marketing of our service. However, there is no assurance that
9
we will be able to enter into additional arrangements for marketing and
administrative support services.
Need for Additional Funds
We will need additional funds in the event Shadrack Films discontinues funding
our operations. We would attempt to raise these funds through additional private
placements or by borrowing money. 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
the business plan or that our ability to respond to competition or changes in
the marketplace or to exploit opportunities will not be 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.
We will continue to look to our parent company to fund operations and to
employees to donate their time. If our parent company, Shadrack Films, a company
controlled by Sholeh Hamedani, discontinues the funding of our operations and/or
if our key employees discontinue donating their time, 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 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer (the "Certifying
Officers") are responsible for establishing and maintaining disclosure controls
and procedures and internal controls and procedures for financial reporting for
the Company. The Certifying Officers have designed such disclosure controls and
procedures and internal controls and procedures for financial reporting to
ensure that material information is made known to them, particularly during the
period in which this report was prepared. The Certifying Officers have evaluated
the effectiveness of the Company's disclosure controls and procedures and
internal controls and procedures for financial reporting as of the end of the
period covered by this report and believe that the Company's disclosure controls
and procedures and internal controls and procedures for financial reporting are
effective based on the required evaluation. During the period covered by this
report, there were no changes in internal controls and procedures that
materially affected, or are reasonably likely to materially affect, the
Company's internal control and procedures over financial reporting.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 allegedly owed by the Company for accounting
services which is disputed by the Company. The parties are currently in
discussions to settle the matter and the Company has filed a request to continue
the arbitration and to respond to the demand by November 21, 2004. The Company
disputes the amount of the claim and will proceed with the arbitration if the
matter cannot be satisfactorily settled.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 5, 2004, the SEC declared our SB-2 registration statement effective. We
did not sell any of the 4,000,000 shares of common stock registered by us in the
SB-2 registration statement. On October 19, 2004, we filed a post-effective
amendment to the SB-2 registration statement to deregister only the 4,000,000
shares registered by us for sale to the public in a direct public offering. On
October 25, 2004, the SEC declared the post-effective amendment effective and
the 4,000,000 shares were deregistered. None of the 1,118,500 shares registered
on behalf of the selling stockholders were deregistered by the post-effective
amendment.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
1. The following Exhibits are filed herein:
No. Title
--- -----
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
11
2. Reports on Form 8-K filed:
On July 30, 2004, the Company filed a Current Report on Form 8-K
disclosing that it had changed independent auditors. On August 13,
2004 it filed an amendment to this report.
12
SIGNATURES
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, duly authorized.
DATED: November 15, 2004 The Children's Internet, Inc.
/S/ SHOLEH HAMEDANI
----------------------------------
By: Sholeh Hamedani
Its: President, Chief Executive Officer, and
Chief Financial Officer
(Principal Executive Officer, Principal
Financial Officer and Principal
Accounting Officer)
13