10QSB/A 1 j10qsba93002.txt 10QSB/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A Amendment No. 1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 [ ] 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 88-0370247 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2401 Crow Canyon Rd., Suite 201, San Ramon, CA 94583 (Address of principal executive offices) (925) 362-9306 (Issuer's telephone number) N/A (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, 2002, the number of shares of Common Stock issued and outstanding was 2,287,755. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] THIS QUARTERLY REPORT ON FORM 10-QSB/A IS BEING FILED FOR THE PURPOSE OF AMENDING AND RESTATING PARTS OF OUR QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 2002 TO REFLECT THE RESTATEMENT OF OUR CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2002. THESE REVISIONS HAVE BEEN MADE REGARDING THE REPLACEMENT OF THE LICENSE AND TECHNOLOGY AGREEMENT WITH TWO DOG NET, INC. WITH A WHOLESALES SALES AND MARKETING AGREEMENT. ALL PORTIONS OF THE QUARTERLY REPORT ON FORM 10-QSB THAT ARE EFFECTED BY THESE REVISIONS HAVE BEEN ADJUSTED ACCORDINGLY. ALL INFORMATION IN THIS QUARTERLY REPORT ON FORM 10-QSB/A IS AS OF THE DATE OF OUR QUARTERLY REPORT ON FORM 10-QSB, NOVEMBER 12, 2002, AND DOES NOT REFLECT ANY SUBSEQUENT INFORMATION OR EVENTS OTHER THAN THE RESTATEMENT. D.W.C. INSTALLATIONS INDEX Page Number PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 1 Balance Sheet - September 30, 2002 1 Statements of Operations - For the nine months and three months ended September 30, 2002 and 2001, and the period from inception to September 30, 2002 2 Statements of Stockholders' Deficit - For the nine months ended September 30, 2002 and the period from inception to September 30, 2002 3 Statements of Cash Flows - For the nine months and three months ended September 30, 2002 and 2001 and the period from inception to September 30, 2002 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 7 Item 3. Controls and Procedures 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings 8 Item 2. Changes in Securities 8 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 10 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS THIS QUARTERLY REPORT ON FORM 10-QSB/A IS BEING FILED FOR THE PURPOSE OF AMENDING AND RESTATING PARTS OF OUR QUARTERLY REPORT ON FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 2002 TO REFLECT THE RESTATEMENT OF OUR CONDENSED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2002. THESE REVISIONS HAVE BEEN MADE REGARDING THE REPLACEMENT OF THE LICENSE AND TECHNOLOGY AGREEMENT WITH TWO DOG NET, INC. WITH A WHOLESALES SALES AND MARKETING AGREEMENT. ALL PORTIONS OF THE QUARTERLY REPORT ON FORM 10-QSB THAT ARE EFFECTED BY THESE REVISIONS HAVE BEEN ADJUSTED ACCORDINGLY. ALL INFORMATION IN THIS QUARTERLY REPORT ON FORM 10-QSB/A IS AS OF THE DATE OF OUR QUARTERLY REPORT ON FORM 10-QSB, NOVEMBER 12, 2002, AND DOES NOT REFLECT ANY SUBSEQUENT INFORMATION OR EVENTS OTHER THAN THE RESTATEMENT.

D.W.C. INSTALLATIONS (A Development Stage Company) UNAUDITED CONDENSED BALANCE SHEET September 30, 2002 --------- ASSETS TOTAL ASSETS $ - ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable and accrued expenses 82,896 Due to parent company 27,832 --------- Total current liabilities 110,728 --------- 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 and outstanding 2,288 Additional paid-in capital 158,317 Deficit accumulated during the development stage (271,333) --------- TOTAL STOCKHOLDERS' DEFICIT (110,728) --------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ - ========= The accompanying notes are an integral part of the financial statements.

1

D.W.C. INSTALLATIONS (A Development Stage Company) UNAUDITED CONDENSED STATEMENTS OF OPERATIONS For the Period For The Three For The Nine September 25, 1996 Months Ended Months Ended, (inception) to 2002 2001 2002 2001 September 30, 2002 REVENUE $- $- $- $- $- General selling and 247,776 - 262,728 - 271,333 administrative expenses ------- ------- -------- -------- --------- Operating loss before (247,776) - (262,728) - (271,333) provision for income taxes Provision for income taxes - - - - - ------- ------- -------- -------- --------- NET LOSS $(247,776) $- $(262,728) $- $(271,333) ======= ======= ======== ======== ========= Net loss per common share - basic and diluted $(0.11) $- $(0.17) $- $(0.23) ======= ======= ======== ======== ========= Weighted average number of common shares outstanding - basic and diluted 2,249,709 1,121,000 1,501,371 1,121,000 1,168,941 ======= ======= ======== ======== ========= The accompanying notes are an integral part of the financial statements.

2

D.W.C. INSTALLATIONS (A Development Stage Company) UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT Deficit Accumulated During the Development Stage Common Additional Stockholders' Stock Paid-In Deficit Capital Shares Amount Balance, September 25, 1996 - $ - $ - - $ - ---------- ------ ------ -------- ------- Issuance of common stock for cash on September 24, 1996 at $0.005 per share 1,121,000 1,121 4,484 - 5,605 Net Loss (5,605) (5,605) ---------- ------ ------ -------- ------- Balance, December 31, 1996 1,121,000 1,121 4,484 (5,605) - Net Loss - - - - - ---------- ------ ------ -------- ------- Balance, December 31, 1997 1,121,000 1,121 4,484 (5,605) - Net Loss - - - - - ---------- ------ ------ -------- ------- Balance, December 31, 1998 1,121,000 1,121 4,484 (5,605) - Net Loss - - - - - ---------- ------ ------ -------- ------- Balance, December 31, 1999 1,121,000 1,121 4,484 (5,605) - Net Loss - - - (3,000) (3,000) Expenses paid by former officer on behalf of 3,000 3,000 company ---------- ------ ------ -------- ------- Balance, December 31, 2000 1,121,000 1,121 7,484 (8,605) - Net Loss - - - - - ---------- ------ ------ -------- ------- Balance, December 31, 2001 1,121,000 1,121 7,484 (8,605) - Issuance of common stock for cash on July 3, 2002 at $0.1286 per share 1,166,755 1,167 148,833 - 150,000 Expenses paid by former officer on behalf of 2,000 2,000 company- - - - - - Services performed as capital contribution - Net Loss - - - (262,728) (262,728) ---------- ------ ------ -------- ------- Balance, September 30, 2002 2,287,755 2,288 158,317 (271,333) (110,728) ---------- ------ ------ -------- ------- The accompanying notes are an integral part of the financial statements.

3

D.W.C. INSTALLATIONS (A Development Stage Company) UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS For the Period For The Nine Months September 25, 1996 Ended September 30, (inception) 2002 2001 September 30, 2002 CASH FLOWS USED IN OPERATING ACTIVITIES: Net Loss $(262,728) $ - $ (271,333) Adjustments to reconcile net loss to net cash used in operating activities: Increase (decrease) in liabilities Accounts payable and accrued expenses 82,896 - 82,896 Due to parent company 27,832 - 27,832 -------- ------- -------- Net cash used in operating activities (152,000) - (160,605) CASH PROVIDED BY FINANCING ACTIVITIES: Contribution by officer 2,000 - 5,000 Issuance of common stock 150,000 - 155,605 -------- ------- -------- Net cash provided by financing activities 152,000 - 160,605 -------- ------- -------- CASH USED FOR INVESTMENT ACTIVITIES: Net change in cash and cash equivalents - - - Cash and cash equivalents - beginning of period - - - -------- ------ ------- Cash and cash equivalents - end of period $ - $ - $ - ======== ====== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year - Interest paid $ - $ - $ - ======== ====== ======= Income taxes paid $ - $ - $ - ======== ====== ======= The accompanying notes are an integral part of the financial statements.

4 D.W.C. INSTALLATIONS (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS September 30, 2002 (unaudited) NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations -------------------------- 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, the Company entered into a Plan of Reorganization and Acquisition Agreement with The Children's Internet, Inc. ("TCI") a California Corporation. Pursuant to the Plan, TCI purchased 1,166,755 shares of the Company's common stock for a price of $150,000 of newly issued shares of the Company. Total issued and outstanding shares were increased to 2,287,755 as a result of this sale. As a result of this transaction, the Company became a majority-owned subsidiary of TCI. Basis of Presentation --------------------- The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying financial statements reflect all adjustments (consisting of normal recurring accruals), which are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2002. These financial statements should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. 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 a contract establishing an initial revenue source, the Company has no 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, 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 a merger with an existing operating company. 5 NOTE 2 - RESTATEMENT The financial statements for the period ending September 30, 2002 were restated to reflect the replacement of the license and technology agreement with Two Dog Net, Inc. with a wholesales sales and marketing agreement. The financial statements for the three and nine months ended September 30, 2002 have been restated to properly reflect the replacement agreement. This restatement resulted in the following changes: Three months Nine months Ended Ended September 30, 2002 Net Loss, as previously reported $(300,894) $(315,846) Restatement 53,118 53,118 ---------- ---------- Net Loss, as restated $(247,776) $(262,728) ========== ========== Net Loss per share, as previously reported $(0.13) $(0.21) Restatement 0.02 0.04 ---------- ---------- Net Loss per share, as restated $(0.11) $(0.17) ========== ========== 6 NOTE 3 - SALES AND MARKETING AGREEMENT On September 10, 2002, the Company entered into a renewable five year royalty and licensing agreement with Two Dog Net, Inc. ("TDN"). Under the terms of that license agreement with TDN, in addition to the monthly royalty payment due, the Company was required to pay an additional $2,000,000 no later than September 10, 2004. The Company capitalized this amount for the technology license and established an amortization period of three years, the expected useful life of the license. On November 5, 2002, the Company exchanged two million shares of its Series A Convertible Preferred Stock for the long term debt owed. The original agreement did not reflect the true intent of the parties and on March 3, 2003, the Company replaced the royalty and license agreement with a wholesale sales & marketing agreement with the same effective date of September 10, 2002. The new agreement was for an exclusive and renewable five year wholesale sales and marketing agreement with Two Dog Net, Inc. ("TDN") to be the exclusive marketers of their proprietary and patent pending secured internet service for children pre-school to junior high called The Children's Internet(TM) and an internet dial - up service. Under the terms of the agreement, the Company can continue the agreement for an additional five years 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. Under the terms of the sales and marketing agreement with TDN, the Company will pay TDN a fee per month per subscriber for the services subscribed. The effect of the change was to remove long term debt and an intangible asset net of accumulated amortization from the balance sheet and to reduce the net loss for the three months ended September 30, 2002 by the amount of the amortization ($55,556) and to reduce stockholders' deficit at September 30, 2002 by a like amount. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. OVERVIEW D.W.C. Installations is a development stage company that has not commenced any operations from inception to date. On July 3, 2002, The Children's Internet, Inc. purchased a majority of the outstanding shares of the Company. PLAN OF OPERATION On September 10, 2002,the Company entered into a License Agreement with Two Dog Net, Inc. for an exclusive worldwide license to market and sell The Children's Internet(TM) service. The Company was required to pay Two Dog Net a monthly royalty payment of 7% of net sales of The Children's Internet(TM) product. The Company acquired the license for $2,000,000 required to be paid no later than September 10, 2004. The Company paid $15,500 of this amount during the quarter ended September 30, 2002. On November 5, 2002, the Company amended the License Agreement with Two Dog Net to agree to issue two million shares of our Series A Convertible Preferred Stock in exchange for the long term debt owed to Two Dog Net of $1,984,500 to reduce the Company's long-term debt. However these two million shares were never issued and on March 3, 2003, the Company and Two Dog Net 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 the Company the exclusive worldwide right to market, sell, and distribute The Children's Internet(TM) service and wholesale dial-up Internet service of of Two Dog Net. The Company will pay Two Dog Net a per user charge $3.00 per month for each user accessing The Children's Internet(TM) 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. 7 The Company will be introducing the first, fully comprehensive Internet service designed specifically for children that allows them to have completely safe, unrestricted live access to the World Wide Web. The Children's Internet(TM) allows real time access to pre - selected educational resources and entertaining Web sites all within its safe, "protective bubble." The proprietary, patent-pending security software, SafeZone Technology(TM) offers unprecedented security against Internet predators and Internet content that is inappropriate for children. Not only does it provide secure, affordable live Internet access, it also provides secure e-mail and chat, homework help, games, news, super portals to educational resources and access to millions of web pages that have been pre-approved for educational and entertaining values. During fiscal 2003, the Company plans to conduct a limited initial media test to introduce its services to the public at large via a 30-minute infomercial. The results from the media test will serve as a basis for the ongoing media plan to launch the infomercial on a national basis thereafter. The Company plans to outsource all non- strategic core competencies. By following this strategy, the Company intends to minimize the number of employees required to manage the intended growth through 2003 and believes the increase in employees will be less than ten. The Company has identified the ability to bring a marketing message to the consumer quickly and effectively as its core strategic competence. The Company has financed its operations since inception from the sale of equity. In order to implement the strategic marketing plan and sales plan and to meet the Company's anticipated working capital needs, during the next nine months, $500,000 in funds will need to be raised. Additional funds may also be required in order to proceed with the business plan outlined above. These funds would be raised through additional private placements or other financial arrangements including debt or equity. There is no assurance that such additional financing will be available when required in order to proceed with the business plan or that the Company's ability to respond to competition or changes in the market place or to exploit opportunities will not be limited by lack of available capital financing. If the Company is unsuccessful in securing the additional capital needed to continue operations within the time required, the Company will not be in a position to continue operations. ITEM 3. CONTROLS AND PROCEDURES. Our Chief Executive Officer, President, and Chief Financial Officer (the "Certifying Officers") are responsible for establishing and maintaining disclosure controls and procedures for the Company. The Certifying Officers have designed such disclosure controls and procedures 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 within 90 days of the date of this report and believe that the Company's disclosure controls and procedures are effective based on the required evaluation. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS To the best knowledge of management, there are no legal proceedings pending or threatened against the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On or about July 3, 2002, we issued 1,166,755 shares of common stock to The Children's Internet, Inc. This transaction is described in our Information Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder filed on August 9, 2002, and our Current Report on Form 8-K filed with the SEC on July 18, 2002. There was no underwriter involved in this issuance and no commissions were paid to any person in connection with this issuance. The issuance was exempt from the registration provisions of the Securities Act of 1933, as amended, pursuant to Section 4(2). 8 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 10.1 Amendment to License Agreement with Two Dog Net, Inc., dated November 5, 2002* 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 * Incorporated by reference from the Company's Quarterly Report on Form 10-QSB for the period ended September 30, 2002, filed on November 14, 2002 (SEC File No. 000-29611). 2. During the quarterly period ended June 30, 2002, we filed the following Current Reports on Form 8-K with the SEC: Date of Filing Description July 18, 2002 Change in control of registrant September 12, 2002 License Agreement with Two Dog Net, Inc. 9 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 21, 2003 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) 10