BUSINESS OF THE COMPANY

COMPANY OVERVIEW

We were incorporated in the State of Nevada on September 25, 1996 as D.W.C. Installations. On July 3, 2002, Shadrack Films, Inc., a company controlled by Sholeh Hamedani, 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.

We were dormant and had no operations since inception until September 10, 2002 when we entered into a royalty and license agreement with Two Dog Net, Inc. to be the exclusive distributors of The Children's Internet(R) software.

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 September 10, 2002, we entered into a License Agreement with Two Dog Net, Inc. for an exclusive worldwide license to market and sell The Children's Internet(R) service. However, because the September 10, 2002 royalty and license agreement did not reflect the true intent of the parties on March 3, 2003, we 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. to be the exclusive worldwide marketers of their proprietary and patent pending secured internet service for children pre-school to junior high called The Children's Internet (R) and an internet dial-up service. We are moving ahead with marketing The Children's Internet(R) but have no plans to offer dial-up services, as allowed by our agreement with Two Dog Net.

Our President, Chief Executive Officer, and one of our Directors, Sholeh Hamedani, was President of Two Dog Net, Inc. until August 1, 2002. Ms. Hamedani also owns approximately 10% of the total outstanding shares of Common Stock of Two Dog Net, Inc. Ms. Hamedani is also the sole shareholder of our parent company, Shadrack Films, Inc. Ms. Hamedani's father, Nasser Hamedani, is the current President, Chairman and majority shareholder of Two Dog Net, Inc.

The Children's Internet(R) 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, protected online environment. We believe that the proprietary, patent-pending security software, Safe Zone Technology(R), offers security against Internet predators and Internet content that is inappropriate for children. The target market for The Children's Internet(R) 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) Surveys tell us that 85% of all parents with children under 11 years of age have expressed concern for their child's safety on the Internet by overseeing each and every click and 45% of all parents feel the Internet is critical for educational purposes. (Greenfield Online, Inc. April 1999)

INDUSTRY BACKGROUND

THE INTERNET

The Internet is a worldwide series of inter-connected computer networks, which enables commercial organizations, educational institutions, government agencies and individuals to communicate freely, access and share information, and conduct business remotely.

The very openness of the Internet means that transmitted information and data stored in connected hosts are exposed to other users who are able, in the absence of effective security measures, to gain access to inappropriate data. This fundamental weakness mandates that organizations and individuals weigh security, productivity and censorship concerns against the perceived commercial opportunities presented by millions of Internet users. Today with more than 48 million children on line each day, the Internet, by its very nature of open access to the world, is becoming increasingly dangerous place for children to roam freely and in some extreme cases even deadly. (Report from Internet Commerce & Communications Division, Information Technology Association of America, February, 2002)

THE CHILDREN'S INTERNET(R)

The Children's Internet(R) offers educational and entertainment value of the Internet in a child's quest for academic achievement, social enrichment, and communication, while locking out the dangers. We believe that The Children's Internet(R) will help to reconcile parents' fear that the Internet could harm their children with the feeling that their children need the Internet for all of its benefits.

The Children's Internet(R) is a dedicated Internet Service Provider entirely and exclusively for children grades pre-school through junior high. It provides Internet access to a broad base of pre-approved entertaining and educational content. Additionally, by simply utilizing the Family Favorites feature, parents can easily customize their children's access based on their family's beliefs, individual needs and interests by adding other websites from outside of The Children's Internet(R).

The Children's Internet(R) uses the proprietary Safe Zone Technology(R) to provide a:

- Controlled and secure environment that is safe for children

- An security product that is easy to install and to use

- Internet communications for children including secure e-mail
- Fun, entertaining, age appropriate children's content
- A user-friendly customized browser that is easy to navigate
- An educationally based Internet search engine

The Children's Internet(R) has age-appropriate content for each of four different age groups:

- 3 to 5 year olds;

- 6 to 8 year olds;
- 9 to 11 year olds; and,
- 12 to 14 year olds.

OUR WEBSITE

Our corporate website is www.thechildrensinternet.com. Our website functions as a promotional and sales tool where we provide product information, post press releases, provide an online inquiry form where the public can request a "free 30-Day trial" of The Children's Internet, and see a fully animated, interactive demonstration of the product.

KIDSAFENET.COM

Our product was previously promoted by WWW.KIDSSAFENET.COM, a web site owned and operated by Tim Nash who was an independent authorized distributor of The Children's Internet(R). However, on July 15, 2003, Mr. Nash terminated his distributorship with us and has taken down his web site, WWW.KIDSSAFENET.COM. Mr. Nash is also one of our shareholders. We do not have any authorized distributors of our product at this time.

CHILDREN ONLINE

Nearly three-quarters of adults (71%) are extremely concerned about children's Internet habits and believe that careful adults' supervision is needed. (Pathfinder Study by Arbitron NewMedia. July 1999.) Fifty-six percent of adult non-users agree that the Internet is a dangerous thing. (Pew Internet & American Life Project "The Ever-Shifting Internet Population" April 16, 2003.)

A Grunwald Associates survey found ("Children, Families, and the Internet 2000," June 2000 Grunwald Associates):

- Children spend between 6 and 10.5 hours per week on the Web.
- Only 41% of parents set up computers to limit where their children travel on the Internet.
- 89% of sites collect personal information from children.
- Only 23% of websites tell children to ask their parents before giving out family information.
- 64% of US families have computers at home
- 3/4 of all US teenagers are currently online

One in 5 children who use the Internet to socialize reported being approached for "cybersex" and 1 in 4 children have received unwanted exposure to sexual pictures online. ("Report Statistical Highlight," National Center for Missing and Exploited Children, Crimes Against Children, Research Center and Office of Juvenile Justice and Delinquency Prevention, June, 2000.) The increasing amount of content devoted to harmful and unwholesome subjects can keep children from learning and using this necessary, exciting and resourceful technology.

In addition to these statistics, the online pornography industry continues to thrive with some calculations estimating that there are more than 12 million web pages devoted to pornography. ("Accessibility of Information on the Web," Lawrence and Giles, NATURE, July 1999, p. 107.) Websites promoting hate, child pornography, illegal activity and violence are increasingly abundant

as well. Between the months of February 2001 to July 2001 there was a 345% increase in child pornography websites. (N2H2, Inc. press release, August, 2001.) In spite of law enforcement agencies across the country stepping up their efforts to stop predators from using the Internet to communicate and attempt to lure children from their homes, there are hundreds of cases of cyber-crimes against minors. Another alarming statistic which proves that children need to be protected while online is that children spent 64.9% more time on pornography sites than they did on game sites in September 2000. (Source: "The NetValue Report on Minors Online." BUSINESS WIRE. (taken from study by NetValue, Internet activity measurement service) December 19,2000.) It is clear that children need protection and guidance when using the Internet.

AT SCHOOLS

In addition to the inherent need for safe Internet access for consumers' use at home, schools are mandated by law to implement Internet security measures for their students. On January 8, 2002, President Bush signed into law the "No Child Left Behind Act of 2001," re-defining the federal role in K-12 education based on some basic principles: safe Internet access, stronger accountability for results, enhanced collaboration between teachers and parents, and improved academic achievement. These main points are backed by $26.5 billion in federal funding through 2006. School districts will have to submit annual "report cards" showing a school's achievement through standardized test scores and validate teachers' technological qualifications. The law stipulates that the "staff will be replaced" - if the achievement results are not improved by 2006.

INTERNET SECURITY FOR CHILDREN

The Internet provides easy access to a vast array of information resources and services in addition to enabling communication between people and organizations around the world. Unfortunately, this feature of the Internet can pose serious problems for children and their parents. Left unprotected, children can access sites that are not appropriate for them. Many parents have serious concerns about their children accessing sites that contain pornography, profanity, violence, extreme political views, racism and information on subjects such as manufacturing explosives or drugs. Statistics confirm that nearly 2/3 of U.S. families with children under the age of 18 are more likely to access the Internet (62%) (Internet COMMERCE & COMMUNICATIONS DIVISION; Information Technology Association of America, February 2002) Of parents with computers, roughly one out of five (17%) report they do not have Internet access due to safety concerns for their families. (Jupiter Communication survey, June 1999) Parents are also concerned that their children may enter unsupervised chat rooms where children can be exposed to objectionable language or ideas. These unsafe chat rooms can be havens for sinister individuals who prey on children by disguising themselves as another child.

Parents have relatively few good options available to them for protecting their children from harmful materials on the Internet. Parents have attempted to address their concerns over Internet security for their children in a number of ways:

- Constant parental monitoring;

- Prohibiting Internet access;

- Commercially available filtering and blocking software; and

- Limiting access to only children's sites.

While there are currently a number of Internet products on the market for children, none of these approaches give a realistic or total solution. All of these approaches have serious drawbacks for both children and their parents.

The constant vigilance required of parents to monitor all of their children's Internet activities poses tremendous challenges to parents. Parents cannot always available to monitor children's Internet access at those times when children want or need to be on-line. This creates frustration for both parents and children and can have the unintentional effect of limiting children's access to the Internet.

Total denial of Internet access is an effective means of keeping children safe from harmful materials on the Internet. Unfortunately, it also denies children access to the many benefits that the Internet has to offer. Therefore, the tactic of denying Internet access can prove to be crippling to the enrichment of children's knowledge by eliminating this increasingly valuable resource. It also inhibits the development of their skills essential in a technologically based society.

We believe that most parents would allow their children to have access to this unique resource if their security concerns were adequately addressed.

Filtering and blocking software attempts to prevent the user from accessing websites that have pre-defined objectionable words or phrases. These programs can be purchased by consumers and loaded onto a personal computer. Depending on the vendor, filtering and blocking software varies greatly in its ability to block undesirable material. Some of the problems with these software programs are:

1. The security interfaces are generally fairly simple to bypass, allowing the child to exit the program at will. For example, some filtering programs can be bypassed simply by typing in the URL address of any site on the Internet.

2. Filtering and blocking programs do not have the capability of successfully evaluating sites for appropriate content. Educational sites are sometimes blocked because of a misinterpretation of content by the software's logic program. For example, a search for information on breast cancer would routinely be filtered out since the word "breast" is within the text and hence blocked by the filtering software.

3. The company creating the software arbitrarily establishes keywords and topics. The values of the software maker may not reflect the values of the purchaser. Depending on the religious/political/social leanings of the company, the child may be prohibited from accessing relevant/appropriate information.

4. Filtering programs are incapable of matching the dynamics of the Internet. Each of these software packages relies on a static database of key search terms that are stored on the user's system. As websites are added to the Internet or are changed, these databases must be updated. The present rate of update is only once per month for many programs, which limits their ability to block new websites. Also, these products are incapable of evaluating photographic content.

5. Another security flaw is that most files are stored on the user's computer, which allows the possibility for tampering or removal of files in an effort to bypass the security program. Such tampering can cause the system to malfunction. Computer savvy children can also modify activity logs, thus eliminating evidence of sites visited.

6. Some ISPs or on-line services such as AOL offer security software. Most of these features can be easily by-passed by simply turning off the child security feature.

There are several Internet services that are focused on children. These sites generally have significant limitations with respect to child security:

1. Content Sites. These sites contain content directed toward children but do not necessarily provide security. Some of the major sites, such as Disney and Nickelodeon's Noggin, utilize proprietary characters and products and stress co-marketing between their Internet sites and their television and movie offerings but lack security features. Other minor sites offer original children's content but also lack security features or search engines.

2. Children's Search Engines. Children's search engines enable children to search for Internet resources from a pre-selected database of children's sites. These search engines do not offer a security feature. As a result, children have access to the Internet at large and can access sites that contain objectionable material. Other search engines have a large selection of prescreened sites, but offer no categorization of content by age.

3. Closed Sites. These sites offer original content and access to a limited number of partners' Internet sites. However, these sites have no Internet access and, therefore, children cannot take advantage of the relevant, timely information offered in a real-time Internet environment.

4. E-Commerce Sites. These sites are designed to sell products or services to children. They contain neither security features or search engines.

Another option available to parents is to access the Internet through a secure ISP. A secure ISP uses filtering software, which prevents the user from accessing offensive materials. The software resides on the ISP server rather than on the user's computer, which prevents the user from disabling the software. This approach restricts not only children but their parents' use of the Internet as well. We believe that the inability of parents to customize the filtering software to allow them to have greater Internet access than their children is a significant drawback to the secure ISP. The secure ISP also suffers from many of the same weaknesses inherent in filtering and blocking software.

LACK OF COMPREHENSIVE INTERNET PRODUCTS FOR CHILDREN

Current Internet product offerings for children are either single faceted or lack one or more of the major features which children and parents want in an Internet service. We believe that an effective security feature is the cornerstone of a successful Internet product offering for children. Most parents view security as their primary concern when evaluating Internet usage for their young children.

On the other hand, we believe children have a different set of needs and interests when they access the Internet. Children want an Internet environment that is fun, entertaining, easy to use and

contains specific Internet functionality. We believe children want Internet content to be as entertaining as the content they get from television and personal computer software programs. We believe they want to be able to communicate with their friends on-line via e-mail and chat rooms. We believe they also want to be able to search the Internet to help them with their schoolwork or just for fun. As anyone who has used an Internet search engine is aware, the search process can be difficult and time consuming. We believe the frustration level for children when they are faced with the prospect of reviewing hundreds of irrelevant or non-age appropriate sites can be overwhelming.

While there are currently a number of Internet products on the market for children, none of them provides the comprehensive solution that parents and children are seeking. To our knowledge, all currently available products lack one or more of the following essential features that parents demand and that children want:

- An effective security feature that requires little technology skill to use or install
- Internet communications for children including e-mail and chat
- Fun, entertaining children's content
- Content that is appropriate for a child's age level
- An Internet search engine that is easy for children to use

We believe that the absence of a comprehensive Internet product for children has provided an opportunity for a company, like ours that can deliver a product, which meets the unfulfilled needs of this very large and rapidly growing market of children Internet users. We believe the proprietary Safe Zone Technology(R) does provide the most comprehensive and effective solution available today that parents and children are seeking.

TWO DOG NET, INC.

Since 1996, Two Dog Net, Inc. a Utah corporation, has been developing The Children's Internet(R) service and Safe Zone Technology(R) to provide site content, navigation tools, and security designed especially for children and their families. The Children's Internet(R) service is designed to allow children to access the Internet in a safe environment that emphasizes educating children and developing their Internet navigation skills. Two Dog Net has developed and tested the user interface for the two primary aspects of the system: the Internet service's content areas that allows users to search a wide range of topics while teaching Internet navigation skills and the search engine that allows users to perform direct searches only to pre-approved sites on the Internet. The Children's Internet(R) service also provides users with tools for customizing the scope of Internet access for each family member.

OUR STRATEGY

A RICH AND DYNAMIC ENVIRONMENT

Our strategy for attracting new subscribers and retaining existing ones is to provide a dynamic environment that continually enhances the users' experience. A key aspect of this strategy is to deliver rich content and search capabilities coupled with fast download times. We believe that all users, and children in particular, will stay interested in the content matter and search results and therefore spend more time in the Internet environment if download times are fast and responsive.

The time users spend on the system will directly impact the value of the areas of the website where sponsors and advertisers are presented.

Rich and entertaining content often involves incorporating multi-media files within web pages. However, these features typically increase download times as compared to text pages or simple graphics. To obtain fast download times, we provide this graphical content to our subscribers via the installation CD-ROM. The CD-Rom will interface with the Two Dog Net website to create a multimedia and interactive Internet environment, enabling users to enjoy an enriched multi-media experience that includes new original content such as games and instructional content with audio, video, and animation.

PROVIDE A SAFE INTERNET EXPERIENCE

In addition to the content provided by The Children's Internet (R) environment, the user can use the Children's Internet search engine to visit pre-approved sites. However, the system is not limited to these pre-approved sites. It is also designed to allow authorized users, e.g. parents, to customize the portal by utilizing the Family Favorites feature to add sites from the Internet-at-large to the sites available to his or her family. Such modifications will be user-specific, i.e. no other subscriber will be affected by any other subscriber's customized changes. Customers cannot remove pre-approved sites from the search engine at this time and we do not intend to add this feature in the near future. We believe that it is not necessary for customers to remove pre-approved sites because the pre-approved sites in the search engine are based on standards set by a recognized educational curriculum and are not offensive or harmful in nature.

PROMOTE PRODUCT AWARENESS

We plan to invest heavily in mass media and public relations to create product awareness in order to build a large user base. In addition to the subscription revenue generated, the number of users and the growth rate of the user base, along with the user time spent on the system, are the key elements in determining the value of the advertising space on our system's web pages. Accordingly, we plan to pursue an aggressive marketing strategy to continuously promote awareness of The Children's Internet (R).

SAFE ZONE TECHNOLOGY(R)-SECURITY SOFTWARE

The Children's Internet(R) uses proprietary patent pending Safe Zone Technology(R). This technology, proprietary to Two Dog Net, offers a number of distinct benefits:

- Provides online security by controlling all online access to only The Children's Internet(R)environment (until unlocked by an adult with a password).
- Allows access only to pre-approved Internet sites, protecting the child from the hazards of the Internet.
- Provides parents with the ability to customize the system for their children.
- Allows secure e-mail, secure private chat and a proprietary, child-friendly search engine to function within the security of the system.
- Denies children access to the home PC operating system so those children cannot disable security. Even with its multiple set of features and security, it remains simple for an

authorized adult with a password to unlock the security in seconds to access their own Internet application and operating system.

SAFE ZONE TECHNOLOGY(R) IS MADE UP OF THREE COMPONENTS:

SAFESOCK - This interface is used to connect the customer to The Children's Internet(R). It is the core piece of security between the three major components of our product: 1) the customer's personal computer 2) the Internet and 3) The Children's Internet(R). When the user requests a communication connection to the Internet it starts the authentication process to gain access to the Internet. This user must enter his/her password to validate their level of access. This level of security is part of the initial login process that the security controls before there is a valid network connection. This prevents any user from logging on to the network and gaining any access without proper security. The Browser module controls Web sites that can be accessed. Access is granted via positive authorization, which is determined by querying lists of pre-approved Web sites. If an individual site is not pre-approved, it is not accessible. The SafeSock "inclusive" approach collects, aggregates, and reviews the "good" sites that are then put on the WHITE LIST of pre-approved sites which is the principle difference on how Safe Zone Technology(R) differs from most competing systems that uses an exclusive authorization system or blocking and filtering systems. Under the "exclusive" system any sites that have not been deemed inappropriate and are not on the unacceptable list or BLACK LIST are assumed to be child-appropriate and accessible. Relying solely on the black list approach is not reliable simply because it does not account for new inappropriate sites that are added to the Internet on a daily basis. In addition this approach is not effective against the trickery of pornographers who create pornographic sites with domain names of innocuous terms commonly searched for by kids such as "toys" or "games". The painstaking process of filtering and blocking out sites and maintaining such a product has proven to deplete resources of such competing companies.

SOCKWATCH - This module runs unobserved on a client computer, monitors the sites that are being browsed as well as other general Internet activity, and creates a log of visited files on the parent's computer. Parents and educators can view the logged information at a later time. Logged information will be able to provide authorized persons the ability to recreate Web-browsing sessions that occurred. The SockWatch Plug-in (a software package that is installed or "plugged-in" into a computer) will initially allow users to maintain activity logs on their home computer.

SOCKSURF - This module is a low-level TCP/IP (Transmission Control Protocol / Internet Protocol) socket interface to programs that have been written to run on the SafeSock Internet server. It mainly involves the user interface programs on the browser Client-side (Remote Computer for the User) and the Server-side
(Company's Internal Server that is running the Safe Zone Technology(R)
application) and the related Internet communications protocol that will convey user-entered information to the SafeSock server. It also involves the communications between the Client and Server that allows the Family Favorites feature of the browser to verify Web sites that are appropriate for an individual user of the SafeSock service. Safe Zone Technology(R) is the default security software for The Children's Internet(R). Safe Zone Technology(R) loads below the Windows(R) operating system to protect the home PC with the secure Web browser, 128-bit cryptography and security system. Until the application is "unlocked" by an adult with an authorized password, the user cannot access the Internet through any other browser (i.e.: Internet Explorer or AOL), children can only access the Internet through The Children's Internet(R). Because The Children's Internet(R) controls the desktop, the child cannot bypass the security in order to surf the general Internet because the desktop is

locked down by SafeZone Technology(R) and it also restricts access to the control panel (except by password), which is where most other security products are easily disabled.

Safe Zone Technology(R) protects the home PC and networked environments. It is built at the control level of network communications and it's the interface between the operating environment of the PC and the servers that control this access at The Children's Internet(R). Safe Zone Technology(R) was designed to improve efficiency, security, and the speed of existing communication by locking this control at the radius interface to the network and behind the Window's environment to eliminate security holes and redundancies, while still allowing its user flexibility and control to customize the content according to their desires.

Safe Zone Technology(R) does not use static filtering or blocking techniques. Instead, Safe Zone Technolgy(R) literally "locks down" a computer so that it will only access pre-approved material. This pre-approved content is stored and accessed from one of our servers, so even if a website is changed to include inappropriate content, our users will only be able to access the approved content. Once a site has been reviewed and approved, its content is made part of the pre-approved database and stays locked into the search engine until the automated monitoring program detects a change to the site, at which time that site is re-reviewed before it is either deleted from our search engine if those changes are not approved or the changed content is made accessible to our users if it is approved. Parents can easily exit The Children's Internet(R) to enter the Internet at large through the use of a password. However, the Safe Zone Technology(R)functions as the default security, so each time someone starts up the computer, it automatically guides users to the Internet through The Children's Internet(R) and the computer is in safe mode.

The materials the customers access in Safe Zone are content aggregated from third party websites. The Children's Internet functions as an Internet search engine that was specifically designed to be focused on children's content and as such is "locked" and secured to only link to pre-approved "child safe" age appropriate content. As a search engine, The Children's Internet can include websites on the Internet appropriate for children in its indexed directory without entering into contractual relationships with the owners of these websites.

ENTERTAINING, FUN AND EDUCATIONAL CONTENT AND FEATURES

In addition to its live aggregated Web content and security, The Children's Internet(R) is personalized and age specific. We have clustered our content and graphical interfaces into four different age groups, 3 to 5 year olds, 6 to 8 year olds, 9 to 11 year olds and 12 to 14 year olds. Each age group has fun and innovative themes from which to choose. The personalization features allow children to design The Children's Internet(R) to fit their individual personalities.

The Children's Internet delivers age-appropriate content for each of our four age groups and is aggregating the highest quality live websites for children within these groups. Each child can customize his or her Internet environment by choosing from a selection of age specific homerooms. A large selection of homerooms has been developed to match the varied interests and likes of children from themes such as a tree house or a space age homeroom. From the homeroom, a child can access all the proprietary features of The Children's Internet(R), including:

- POPULAR CHILDREN'S WEBSITES. Two Dog Net is continuously aggregating the top quality websites for children to include in The Children's Internet(R). Children can surf freely within the service and get access to the best learning resources and popular websites designed just for them.

- E-BUDDS(TM). This is our secure e-mail where children can send and receive e-mail messages from their friends and family. Although secure, E-budds(TM) is not restricted only to users of The Children's Internet(R). Parents must add desired e-mail addresses to their secure database profile before their child can send e-mail to or receive e-mail from those addresses, but those addresses can be from any email system (hotmail, mindspring, aol, etc.).

- AFTER SCHOOL LOUNGE. Children can link to some of the best resources and homework help sites on the web.

- NEWS STAND. This feature provides children with topics of interest to choose from with links to pre-approved news sites. Topics, which are chosen uniquely for each age group, include subjects such as cartoons, sports, fashion, book club, entertainment, music and what's hot - what's not.

- CUSTOMIZABLE GRAPHICAL CALENDAR. This feature offers the children their own personal daily planner that keeps track of their school schedule, vacations, birthdays, special events and other activities. There is also a feature that explains the meaning of the holidays of each month.

- DAILY GRAB BAG. A host of our colorful characters deliver humorous or esteem building messages, jokes, riddles or interesting trivia each day - customized for each age group.

- FUN FACTS OF THE DAY. Daily changing educational facts that are delivered by animated characters in short cartoon segments developed specifically for each age group.

- GAME PORTAL. A portal for children to select from a variety of Internet games appropriate for their age group that are entertaining and educational.

- SURVEYS. Children can answer survey questions, such as, "What is your favorite food? - a) pizza, b) hamburgers, c) burritos or d) spaghetti" and receive instant feedback on how other children in their age group have responded.

- INCENTIVE SYSTEM. We reward children for partaking in the activities we offer such as answering surveys, learning from the fun facts or surfing the Web. Children collect our cyber coins that we call Diggers and can use them to purchase selected gifts. The more coins they collect and save the better the gift selection.

- STORYTIME. This feature is one of our portals that provides our younger children, ages 3 to 8, access to books on-line at unaffiliated third-party websites. Some of the book selections on these websites that we link to will read to the children while others are fun

for parents or older siblings to read along with the younger child.

- FAMILY FAVORITES. By simply utilizing the Family Favorites feature, parents can easily customize their children's access based on their family's beliefs, individual needs and interests by adding other websites from outside The Children's Internet(R) while still maintaining total security.

- TOPIC BASED LINKS. We have organized children's web pages and sites into a major children's portal with topic-based links to general children's sites, topics of interest such as entertainment, music, sports, movies, health, fashion and educational topics including government, history, literature, etc. We will continually add new content and features to The Children's Internet(R) to ensure that our service is fresh and inviting for our users and to constantly stay ahead of potential competitors.

- MULTI-CULTURAL INFORMATION. We intend for The Children's Internet(R) to be a multi-cultural place where children can learn other languages and experience different cultures all within a safe, age specific, Internet community.

- DISTINCT CHARACTERS. Appearing throughout The Children's Internet(R) are our mascots, Bango and Baxter, our protector and companion dogs. Each age level also features its own unique characters to enhance the child's experience. These proprietary cartoon characters provide a familiar companion to the child throughout the environment as the child explores areas of interest. In addition, our characters are designed to "grow" with the user as he or she progresses to the next age group within The Children's Internet(R).

- SEARCH ENGINE. The Children's Internet(R) search engine is designed to provide children with a fun, safe, easy to use and educational means to access thousands of age-appropriate sites on the Internet.

The search engine utilizes graphical interfaces, which are specifically designed for each of our four age categories. Each child can choose from a number of search themes, designed for their age group, from which to explore the Internet. Theme pages offer children three ways to perform an Internet search.

The first is the GRAPHICAL SEARCH, which uses animated graphical topics. These topics are nestled in a richly animated environment that is alive with sound and color specifically designed around the topics and age groups. We choose topics that we believe will encourage children to investigate the good things the Internet has to offer. For example, in the three to five year old category we offer subjects like bugs, telling time, cartoons, ABC's, and music. For the 12 to 14 year old age group topics include space, hobbies, body systems, famous speeches and people.

The second means of performing a search is through a DIRECT SEARCH. A child types in a word, such as CAR, and the search engine returns all sites in our secure database relating to cars.

The third method of searching is a category search called
BAXTER'S SMART SEARCH. The

foundation for the category search is based on the educational standards and curriculum guidelines as set by the Mid-continent regional Educational Labs (McREL). Baxter's Smart Search lets a child select from a familiar broad range of subjects generally studied in school, then select from another subset of categories to help a child further define their search until the desired information is found. The category search is an essential part of instilling time management skills by enabling children to locate sites quickly and easily on specific topics without the frustration of wading through thousands of irrelevant Internet pages. Baxter's Smart Search helps to build a child's confidence and sense of being "smart" through their . achievement of locating their desired information. Our focused search capability is a direct result of our proprietary search engine architecture.

SEARCH ENGINE ARCHITECTURE AND SITE SELECTION

Two Dog Net, Inc. uses it's proprietary Safe Zone Technology(R) to allow children to benefit from and enjoy the Internet without compromising their safety or online activities. Consumer Reports in October of 2001 tested six popular blocking and filtering software products as well as parental controls on a popular ISP. Consumer Reports found that the security generally failed to block one out of every five sites deemed objectionable. Unlike these blocking and filtering products, The Children's Internet(R) service relies on the "screening and locking" technology of it's proprietary Safe Zone Technology(R). This technology provides a secure and "locked down" environment while allowing unrestricted access to thousands of pre-selected Web sites and pages that have been "screened" and reviewed by Two Dog Net, Inc.'s content staff and then "locked" into The Children's Internet search engine database.

The Children's Internet(R) aggregates content from the Internet and allows access to cached copies of approved sites. In addition, the software allows parents to customize the service by bringing in live sites and pages from outside of The Children's Internet as they see fit for their individual child. The comprehensive search engine has thousands web pages in the secure database, and it is anticipated that it will continue to grow.

The Children's Internet(R) search engine was built on the premise that a search engine for younger children should be one of quality not quantity and consequently not be burdened with millions of irrelevant and unsuitable sites that make searching very time consuming and frustrating for children. Our belief is that the most important features of a child's search engine is safety, value, age appropriateness and ease of use.

Two Dog Net's team of educational consultants designed the architecture of the search engine to generally correspond to the school curriculum for children of each of the four age groups 3-5, 6-8, 9-11 and 12-14. The search engine is structured differently for each of the four age groups. As a result, the categories appearing on the search area for younger children will be different from those for the older age groups to reflect their different educational levels and interests.

Although here is currently only one staff content member, Two Dog Net, Inc. back in 1999 initially had a team of twenty "content watchdogs" made up of teachers, educators and other qualified reviewers who personally screened each Internet web page accessible through The Children's Internet. These content watchdogs first ensured that the web site was safe, wholesome and free of objectionable material. Then they screened for learning and entertainment value and indexed each

site according to its age-appropriateness and relevance to curriculum standards. For guidance and direction Two Dog Net, Inc. follows the curriculum guidelines set by Mid-continent Regional Educational Laboratory (McREL). McREL is one of 10 regional educational laboratories (REL's) sponsored by the Office of Educational Research and Improvement (OERI) of the U.S. Department of Education and has received international recognition for its comprehensive compendium on the identification and articulation of content standards and benchmarks. McREL identifies standards and gives benchmarks of what grade-level a child is at in the core subject areas of math, science, civics, dance, theater, music, art, English language arts, history, and social studies, to name a few. The compilation of content standards for K-12 curriculum is too extensive to list within this disclosure, but the public at large may view the compendium of K-12 standards and guidelines by visiting their web site at: www.mcrel.org.

In order to efficiently and effectively begin the systematic collection, review and analysis of appropriate content for The Children's Internet(R) search engine, the content staff would go to organizations that they trusted to provide appropriate sites for children, such as the American Library Association (ALA) as a resource to aggregate a large number of sites. For example, by visiting http://www.ala.org/ala/alsc/greatwebsites/greatwebsiteskids.htm the content staff had access to hundreds of the ALA's picks of "Great Web Sites for Kids". The content staff also utilized other well-established resources and search engines, which are focused on children's content such as Yahooligans (Yahooligans.com) or Ask Jeeves for Kids (AJKids.com).

In reviewing web sites, the content staff reviewed each page of every web site so that not just the "primary root" address (e.g. http://www.disney.go.com) was put into the white list of accepted sites, but each page which is identified with a URL extension for example from Disney's home page the child would then link to Disney's "Kids Island" games
(http://www.disney.go.com/disneychannel/games/index.html). Notice how the URL address changes and lengthens to include each web page.

For example an entire site may consist of twenty pages and fifteen of those pages are accepted and five pages are not accepted. The pages that would be unacceptable for example would be pages like message boards that the webmaster does not control and where people can freely post profanity or inappropriate content and guest book pages where the child may be asked to record personal information.

The Children's Internet treats every hyperlink, including banner ads, pop-up windows, and text links as a separate web page and for each such hyperlink to be approved it is subjected to the same human review process. If a hyperlink is approved then it is added to the white list database. Therefore, many of the links on approved pages will not work because they have either not been reviewed by our content staff member or they have been reviewed and have not met our criteria. Clicking on a an unapproved hyperlink leads only to a green box that conforms to the space where the page linked to would normally appear with our warning message saying, "CAUTION, CURIOUS CANINES! THIS PAGE IS NOT PART OF THE CHILDREN'S INTERNET". The content of banner advertisements and pop-up windows is also blocked and results in this same warning message.

SEARCH ENGINE MAINTENANCE

After the difficult and labor-intensive task of building the integral foundation of the search engine was completed in 2001, Two Dog Net, Inc. downsized its content staff to one member and has since

focused its efforts on maintaining the database. Maintenance of the search engine is accomplished through a process of automated programs and human review. The labor of the content staff member is needed for only approximately 10% of the process as the automated systems are responsible for 90% of the maintenance and updating of the search engine, which are supervised by our Chief Software Architect, Tyler Wheeler. Additionally, Two Dog Net's Chief Technical Officer oversees the automated update cycles Although we take great precautions both through automated technology and human review there can be no assurance that we will be completely successful in addressing all such risks posed by the Internet.

AUTOMATED SEARCH ENGINE SERVERS

There are three servers involved in operating the search engine and its maintenance: the public server, the private server and the proxy server. The public server uses a customized and modified version of the Alta Vista Search Engine licensed software package and is the search engine and interface accessed by users. The private server is the home to the private interface used by our content staff reviewer to maintain and update the system. The proxy server acts as an intermediary between the Internet and our public server and it is instrumental to security by employing firewall services that separates and protects our internal computer network from outside intrusion, administrative control, and caching services.

AUTOMATED SEARCH ENGINE UPDATES

We maintain the integrity of our "white list" of pre-approved web pages and update sites by employing a program called Scooter. Scooter is a registered trademark of the Alta Vista search engine developed by Digital Corporation (which Two Dog Net licensed and customized). Most Internet search engines have such a program, which is also known as a "spider" or a "bot." Scooter is a program designed that visits web sites and reads their pages and other information in order to create entries for a search engine index. In our case Scooter goes out to the Internet and systematically visits every pre-approved web page on our white list and reads the entire page on each web site. When Scooter finds a pre-approved web page that has changed its URL and or has changed any text or page contents on the web page then that site is removed from the white list, returned to the private server, indexed accordingly as a URL change and or as a text/content change and put in cue to be reviewed by our content staff member. Due to the large file size of our white list and the amount of hardware and memory resources it takes to run Scooter, rather than have Scooter visit the entire white list in one day, we take the white list and break it down into smaller file sizes and cover the entire list once a week. Basically we take 20% of our white list each day, Monday through Friday and run Scooter on the smaller files. After the changed sites are reviewed by our content staff member and either approved or disapproved, those updates are made to create a new updated master white list of pre-approved we pages and are posted to the public server (search engine) and to the proxy server every Saturday between 10:00 p.m. PST and 2:00 a.m. PST.

AUTOMATED SEARCH ENGINE MAINTENANCE

A significant part of the automated search engine maintenance and security mechanisms run through the proxy server. The proxy server works directly with our public server (search engine) and is an integral part or our security interface for users. All of the web pages that have been screened and pre-approved by our content reviewers and teachers are cached (stored) on the proxy server and all of the web pages that are accessible by users through the search engine (public server) are in the exact image and "state" they were in when they were screened by the content reviewer. Therefore the only pages accessed by users are the cached pages and if the page has been updated, changed or hacked the

child is protected because they only see the pre-approved cached web page and will not have access to that modified page until it is reviewed by the content staff and posted back to the white list of approved web pages. The proxy server is updated every seven days (see "Automated Search Engine Updates")

Our proxy server receives a request for a Web page from a user accessing the Public server. If the request passes screening requirements (if the requested web page is exactly the same URL and the same text on the web page) the proxy server, looks in its local cache of previously downloaded Web pages and returns it to the user without needing to forward the request to the Internet. If the page does not match the exact page that is in the cache, this site is immediately logged to the proxy server and the URL for the site is forwarded to the private server for our content staff member to review the changed content. Regardless of whether a site has changes or not, the pre-approved cached page on the proxy server is what is returned to the user. To the user, the proxy and cache servers are "invisible" and this process happens in milliseconds.

Additional advantages of using the proxy server are that the cache can speed response time to users and the identity of users can not be tracked or logged by the web sites because their only contact is with our servers.

Because the cache is currently updated only once a week, the web content that our users get will not always be up to date, but we believe this will not be a serious detriment to potential customers as we believe they prefer the protection the cache gives against inappropriate content over having the most up-to-date sites. Additionally, over the past four years, Two Dog Net's actual experience in this industry has shown that many web pages for children are rarely updated especially homework help reference web pages (for example encyclopedia, dictionary, thesaurus entries) as well as games and entertainment and the seven day lag time for posting updates is sufficient. News and magazine web pages are generally not part of the search engine but we give parents the option to customize the product for their children by using our "Family Favorites" tool to add news and magazine sites as approved links for their child to access.

CONTENT REVIEWERS SEARCH ENGINE UPDATES

Currently because the primary focus has changed from building or expanding the database to simply maintaining the existing database, as discussed earlier we have found that one content staff member is sufficient to review the changed sites. The content staff member is responsible for reviewing the web pages which have been removed from the white list because Scooter detected changes to the content or to the URL. This staff member either updates such a site's URL address and/or reviews the new and updated content on the page and re-submits the page as an approved web page or permanently remove the site from The Children's Internet database if the content is no longer appropriate. In addition to maintaining the integrity of the original database and keeping URL's and content current and safe the content reviewer also spends some time searching for new children's sites to add to the white list.

A QUICK, RICH MULTIMEDIA ENVIRONMENT

We make heavy use of animation and sound throughout The Children's Internet(R) to make the environment entertaining for children and to maintain their interest. Our focus groups have confirmed our belief that children are generally visually oriented and that sound and movement are

major factors in keeping children interested in the content and search results. We also learned that fast response times are important in maintaining a child's interest. Animation and sound are not extensively used over the Internet because sending large multimedia files can significantly slow down response times.

To obtain faster response times, we will periodically provide new content to our subscribers via CD-ROM. This includes the background screens for the homerooms and the search engine screens, all of which contain vivid content, animation and sound. These files are downloaded from the CD to the hard drive of the user's personal computer and upload from the hard drive almost instantly. The user's personal computer interacts over the Internet with our host server. The server is able to deliver to the user content that is customized for each child and changes daily. This combined method provides users with a rich, interactive experience with fast response times.

HARDWARE AND INFRASTRUCTURE

We have the rights to The Children's Internet(R) technology from an agreement with Two Dog Net the developer of the technology. The agreement covers the use of the technology and the use of hardware and software currently owned by Two Dog Net on which The Children's Internet(R) operates. Future upgrades to the equipment for expansion and modernization will be our responsibility.

Our Internet bandwidth provider is EmeryTech Data Center. EmeryTech Data Center, our co-location facility provides us with10 Mbps (Mega bytes per second) with expandability of up to 100 Mbps (Mega bytes per second) from two separate carriers, Qwest Communications and AT &T, for redundancy and back-up precautions.

MARKETING AND SALES

We plan to have two sources of revenue:

1. Retail Sales- selling monthly subscriptions to the Children's Internet(R) service directly to consumers; and

2. Wholesale Distribution- selling The Children's Internet at the wholesale prices to ISPs to re-sell to their current ISP customers.

Customers will pay for the service each month electronically via credit card or debit card. When the ISP is an authorized wholesale distributor of our service, the ISP will pay us monthly in one bulk payment for all of their customers subscribing to the service and then they will bill and collect the monthly subscription fee from each of their individual subscribers. If an individual acquires the service directly from us, we will automatically bill for the service each month. Initially we intend to use an Internet billing service to provide that service. To reach the approximately 55 million US households with children, we will invest in television supported by radio and print advertising as well as public relations activities to generate a high level of product awareness.

Although we originally planned to offer dial-up services to our customers, on June 11, 2003, Two Dog Net's third-party dial-up services provider, changed its pricing to a cost prohibitive structure that made it impossible for us to continue with our sales plan. Because of this, we are no longer

offering wholesale dial-up services to ISPs. Therefore, our customers will be ISPs or customers who already have existing Internet access.

Our management believes that adding multiple forms of media to an advertising campaign raises total response. A combination of different media increases results because different people respond to different stimuli and reinforces the advertisers' messages.

All of our marketing efforts, regardless of the medium, will integrate references to The Children's Internet(R) website. Integration of the website in all marketing will encourage prospective users to test the product, and eventually to order the product online.

Selling and marketing are core competencies at The Children's Internet(R). We will focus our sales and marketing programs on two distinct yet related areas.

Using the ISPs' current customers as a base, we will market The Children's Internet(R) to those users as well as seek new users. Our sales effort with ISPs encompasses the utilization of third-party marketing companies.

On August 14, 2002, we entered into a License Agreement and a Independent Sales Agreement with Infolink Communications, Ltd. Both agreements are for a term of three years, after which they automatically renew for three additional one year terms unless a party gives the other party 30 days notice prior to any such renewal.

Under the License Agreement, Infolink is authorized to sell The Children's Internet(R) service at prices to be determined by Infolink to the U.S. government and to corporate sponsors. In return, we would be entitled to $4.05 per month for each computer on which the service is being used by Infolink's customers under the agreement..

The Independent Sales Agreement allows Infolink to sell The Children's Internet(R) service to Infolink's customers at prices determined by Infolink. In return, we would be entitled to $.95 per computer on which the service is used by Infolink's customers under this agreement.

In addition to establishing relationships with third-party marketing companies, we also plan to focus on establishing long term, value-driven relationships with:

- Parents and Children
- The School Market: School Administrators and Teachers

Children are the single fastest growing segment of Internet users today. Despite this fact, there is an ever-increasing amount of content devoted to harmful and unwholesome subjects that can damage children and inhibit them from learning while utilizing this exciting, resourceful technology. Of the 174 million Internet users in America, 90% of that amount are children and teenagers (ages 5 to 17). (U.S. Internet Population Continues to Grow" Cyber Atlas, Jupiter Media Corporation, February 6, 2002) In 2000, children 12 years and under influenced the household spending of over $600 billion. (McNeal, James (2001). Quoted in McDonald M, Lavelle M. Call it 'kid-fluence'. U.S. NEWS & WORLD REPORT, July 30, 2001, p.32.)

Careful development of the right message is of critical importance to the success of our marketing efforts and to the accomplishment of our financial objectives short and long term. Our commitment is to the ongoing testing and refinement of our message and our media mix. Initially we envision both local and regional rollouts prior to a full-scale national program. In most cases, test programs are most successful when staged over 3 to 4-month timeframes. Our methodology will develop a program, launch the program, evaluate, refine and continue forward based only upon having received quality customer feedback.

Our overall business and marketing strategy consists of the following key elements:

- GENERATE PRODUCT AWARENESS. We will implement an integrated marketing communications and sales strategy that continuously promotes awareness of The Children's Internet(R).

- BUILD BRAND EQUITY. We are dedicated to establishing and building our brand names, and our future plans include marketing and The Children's Internet(R) branded products based on our proprietary animated characters.

- ESTABLISH MARKETING RELATIONSHIPS. We believe that entering into marketing agreements, similar to those we have entered into with Infolink and described above, will be important in retaining customers for The Children's Internet(R).

CONSUMER MARKETING AND SALES

We are authorized to use a 30 minute infomercial produced by Two Dog Net describing The Children's Internet(R) service. The infomercial will be the cornerstone of our consumer-marketing program. This direct response-marketing vehicle provides a number of advantages including: a direct sale opportunity, brand development, cost effectiveness, and rapid market response (feedback).

The infomercial will serve three benefits in our marketing mix: as a primary source to generate qualified leads, a sponsorship tie-in vehicle and a significant brand recognition tool. We will utilize the infomercial to support our dial-up small ISPs, (building new users for them) as well as attracting new small ISPs. We believe a multi-tiered approach with the infomercial supported by varied marketing campaigns will be highly effective for us.

We will reach parents through an integrated marketing plan that leads with the infomercial and supported by traditional marketing venues such as radio and print. The infomercial includes powerful testimonials from non-biased "experts" like the FBI, the FCC Chairman Bill Kennard, and IBM's Director of Educational Services. The infomercial validates the dangers on the Internet, while simultaneously reinforcing the educational value and need of The Children's Internet(R).

SPONSORSHIP SALES, ADVERTISING BANNER SALES AND E-COMMERCE

SPONSORSHIP SALES: We intend to present sponsorship opportunities to large consumer driven companies that focus on the specific demographic markets of children and/or their families. We

intend to incorporate sponsor specific content into users' primary age-specific Web pages or on other high traffic areas of The Children's Internet(R). Our goals are to provide each sponsor with a targeted audience, and to provide value-added marketing tools to increase both sales and brand equity.

We intend to create a premier sponsorship program for our corporate sponsors. Premier sponsors on The Children's Internet(R) will have unique benefits over traditional sponsorships. Utilizing our infomercial expertise, sponsors will be able to create multi-media, TV-like commercial spots specifically formatted to "air" on the Internet, otherwise known as Intermercials(C), which will appear in different areas of The Children's Internet(R).

The Children's Internet(R) has opportunities for events, cross promotions, tie-ins and long term relationships. The Children's Internet(R) will seek to attract market leaders in key categories.

ADVERTISING BANNER SALES: Our primary sales effort will be to develop sponsorship relationships. A secondary effort will be traditional Internet banner advertising. Because of the nature of The Children's Internet(R), in which children are automatically directed to and locked into the service, advertisers are more likely to receive a higher traffic volume of their target audience than most other potential advertising sites.

E-COMMERCE PARTNERSHIPS: In the past year, the Internet has become a generally accepted medium for the sale of products and services ranging from books and CD's to airline and event tickets.

This widespread acceptance of the Internet as a shopping venue for the public at large opens great opportunities for The Children's Internet(R). We are searching for companies that wish to establish a presence on the Internet for the sale of their products to our target audience or our user base. The Children's Internet(R) has the advantage of being able to design content sites targeted at the specific user for specific categories of product sales. For example, we may design a music store in which children can listen to new CDs and purchase the CD online. We may create a toy store in which children view new toys, try them out and drag icons of specific toys they want to their own holiday wish list. Parents will be able to view this list and purchase online the exact toys their child has requested.

We have not yet made any sponsorship sales or advertising banner sales nor have we entered into any e-commerce partnerships, and we can offer no assurance that we will ever successfully do so. However, we hope to derive revenues from these activities if we are successful.

PUBLIC RELATIONS

Public relations activities will combine events, special promotions, and other integrated marketing strategies with traditional media relations with the objective of remaining top-of-mind with consumers and media.

We intend to:

- Promote a Children's Internet Safety Week.
- Build relationships with school districts on a countywide basis.
- Establish educator relations program designed to update educators on the latest in Internet

technology, including a comprehensive Educator's Kit and media relations initiatives.
- Encourage use of The Children's Internet(R)in classroom settings day in and day out.
- Partner with targeted organizations consistent with The Children's Internet(R) overall business direction.
- Position wherever possible, The Children's Internet(R) to be the "market leader" in safety on the Internet for children; continually pursue opportunities to place our management as speakers in appropriate safety and educational forums.
- Provide news bureau services and announcements of developments within our company (partners, content, features, etc.).

ONLINE PROMOTION

With the use of permission marketing, we will allow our best prospects and customers to tell us what kind of information they want and will allow from us and we will provide it. Building this type of relationship is fundamental in running successful online and traditional direct selling programs. We are after long term relationships with our customer base. It is our hope that children who become users at age four or five stay with us for another five to seven years -- not unlike the loyalty enjoyed by Sesame Street in the 1960s-1990s.

Along with permission marketing, other on-line promotion will include newly developed Intermercials(C). We will create commercials specifically designed for Internet viewing and run them throughout the Internet where there is high visibility of our target audience.

FREE CD DISTRIBUTION

Following the successful software model of free distribution, The Children's Internet(R) may distribute CD's to appropriate and selected non-profit organizations and clubs. This will allow large numbers of prospects the opportunity to become familiar with our product and services.

SCHOOL ADMINISTRATORS AND TEACHERS

To accomplish our objectives, we intend to employ the following marketing communications programs and elements:

TEACHER SURVEYS - These surveys will be used to determine technology needs and assess the teachers' understanding of using the Internet as a primary teaching tool. This will also deepen our relationships and visibility opportunities with teachers.

EDUCATOR'S PACKAGE- This package will contain a comprehensive assembly of key printed informational materials to explain the full array of The Children's Internet(R) services and products--generic brochure, case studies/testimonials, site screen shots, key facts and fundraising oriented promotional materials.

EDUCATIONAL CONFERENCES- Typically these events attract 3,000 to 6,000 attendees and represent an outstanding direct marketing opportunity to build prospects for our sales and marketing database. Our efforts would include product demonstrations, handouts, and offers to try The Children's Internet(R).

DIRECT PRESENTATIONS- This method will involve direct selling to school administrators, technologists, teachers, etc. We will attempt to be represented at key conferences of the PTA nationally and regionally.

ACTIVE PARTICIPATION IN SELECTED ADVOCACY GROUPS- This action will be designed to enable The Children's Internet(R)'s high visibility among groups concerned and focused on Internet safety for children and the expansion of more useful content for schools. This would involve The PTA, National School Board Association and The National Association of Elementary School Principals.

EDUCATOR PARTNERSHIPS- This action involves designing long-term relationships with respected educational authorities that are highly visible throughout the country.

EDUCATION MARKET MEDIA RELATIONS- A series of targeted media relations activities has been developed to engage school personnel, parents and children--all around Internet Safety and the uniqueness of The Children's Internet(R). Media relations will be the foundation used to generate awareness, trial and involvement with our products and services.

The school market is an important vehicle for obtaining product trial by children and awareness of the product by parents. We intend to implement an aggressive marketing program aimed at school districts and a school fund raising program aimed at local schools, parents' groups and PTA's. This would provide not only increased exposure among our target market, but also product trial by the children.

A NEW REVENUE STREAM FOR SCHOOLS - FUNDRAISING

The Children's Internet(R) has developed a fundraising program for schools with The Children's Internet(R) as the centerpiece for local community fundraising efforts. The Children's Internet(R) will pay schools or related organizations (PTA or Parents Group) a percentage of the subscription revenue generated from sales of The Children's Internet(R) service by the school or related organization. Initial interest in this program at focus groups of PTA and Parent Group members has been extremely high. Parents were drawn by the opportunity of selling a product that they perceive to have real value rather than the typical fund raising vehicle of magazines, candy or wrapping paper.

The typical parent group has 5 to 10 members who are dedicated to making their school better for their children. These parents have almost a missionary zeal and can be one of our most effective assets. We will test this method initially with private schools and then expand to the public school sector later on.

PRICING CONSIDERATIONS

The Children's Internet(R) anticipates retail pricing at $9.95 per month. Presently, there appear to be no specific competitive price barriers or market forces at work. The Children's Internet(R) brand is capable of exceeding customer expectations the more the possibility of premium pricing exists.

RESEARCH AND DEVELOPMENT

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

Over the course of the past six years, Two Dog Net has been focused on the development of Safe Zone Technology(R), The Children's Internet(R), and the creation of unique user interfaces and feature functionality for The Children's Internet(R). 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(R) 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(R) and feel comfortable that the research and development effort will not dilute our focus and resources from the success of The Children's Internet(R).

WHOLESALE SALES & MARKETING AGREEMENT

On September 10, 2002, we entered into a License Agreement with Two Dog Net, Inc. for an exclusive worldwide license to market and sell The Children's Internet(R) service. We were required to pay Two Dog Net a monthly royalty payment of 7% of net sales of The Children's Internet(R) product. We acquired the license for $2,000,000 required to be paid no later than September 10, 2004. We paid $15,500 of this amount during the quarter ended September 30, 2002.

On November 5, 2002, we 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 our long-term debt. However these two million shares were never issued and on March 3, 2003, we replaced the License Agreement with a Wholesale Sales & Marketing Agreement which gives us the exclusive worldwide right to market, sell, and distribute The Children's Internet(R) service and wholesale dial-up Internet service of Two Dog Net. We will pay Two Dog Net a per user charge of $3.00 per month for each user accessing The Children's Internet(R) 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 have related parties with Two Dog Net as follows:

- Our President, Chief Executive Officer, and one of our Directors, Sholeh Hamedani, is the sole shareholder of our parent company, Shadrack Films, Inc. Ms. Hamedani was also President of Two Dog Net, Inc., the licensor of The Children's Internet(R)technology until 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

TWO DOG NET, INC.

We currently rely upon Two Dog Net, Inc. to maintain the product, The Children's Internet(R), in its current form. Two Dog Net, Inc. invested approximately seven years in the development of the product and its supporting technologies. Today, because all the research and product development is complete, they have changed their business model accordingly and have downsized considerably. They no longer need to employ technologists, artists, animators, writers, educators, and the respective management to run the business. Currently they operate their business with their Founder and Chairman, Nasser Hamedani, their Chief Technical Officer, Larry Wheeler, an accountant and creative/content director. When it becomes necessary to subsidize their own efforts they retain, on an as needed basis, independent contractors. In the unlikely event that Two Dog Net, Inc. ceases their operations due to circumstances beyond their control we have in place the necessary mechanisms to seamlessly assume their current responsibilities of maintaining the product. We feel confident in our management team's ability and experience to be able to continue supporting the sales of the product.

Aside from their licensing of The Children's Internet(R) service to us, they do not currently license any of their other products and or technologies. Additionally, they do not generate any revenues, or net income besides the revenues derived from the sales of The Children's Internet(R). Two Dog Net, Inc.'s current overhead costs, which continue to be funded through private sources, are minimal and they do not foresee their operating costs significantly increasing.