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

Forward-Looking Statements

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

Critical Accounting Policies and Estimates

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

RESULTS OF OPERATIONS

Selected Financial Data

The following selected statement of operations and balance sheet data for the period from September 25, 1996, the date of our inception, through September 30, 2008 and for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007 were derived from our financial statements and notes thereto included in this report which are unaudited. Historical results are not necessarily indicative of results that may be expected for any future period. The following data should be read in conjunction with "Plan of Operation" below, and our unaudited financial statements, including the related notes to the financial statements.

                                                          For the
                                                        period from
                                                         September
                                                          25, 1996
                              For the nine For the nine (inception)
                              months ended months ended   through
                               September    September    September
                                  30,          30,          30,
                                  2008         2007         2008
Statement of Operations Data:
Net revenues                  $30          $631         $1,671
Operating expenses            $319,326     $916,814     $5,569,532
Operating loss                ($319,299)   ($916,268)   ($5,568,121)
Net loss                      ($362,270)   ($941,700)   ($5,678,644)




                            As of September 30, 2008
Balance Sheet Data:
Total assets                $40,117
Total liabilities           $3,312,977

Our total operating expenses decreased by $597,488 (65%) for the nine months ended September 30, 2008, as compared to the nine months ended September 30, 2007. The major changes were decreases of $264,277 in officer compensation, $35,700 in selling expenses, $255,059 in professional fees, and $30,000 in stock options granted directors which occurred only in 2007. The decrease in officer compensation is due to the resignation on October 19, 2007 of Sholeh Hamedani, former CEO and CFO, and the resignation on December 15, 2007 of Tim Turner, former Director of Finance & Operations. The decrease in selling expenses corresponds with the Company's discontinuance of marketing activities until obtaining additional investment capital. The decrease in professional fees for the nine months ended September 30, 2008 is attributable mainly to the following: Consulting fees decreased by $142,510 due to the suspension of operating The Children's Internet system and development activities in January 2008, accounting fees decreased by $69,524 due to having conducted an audit of 2006 and a re-audit of 2005 during the nine months ended September 30, 2007, and legal fees decreased by $43,200 due principally to the termination of the SEC litigation.

Plan of Operation

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

On September 10, 2002, we entered into a License Agreement with Two Dog Net ('TDN") for an exclusive worldwide license to market and sell The Children's Internet® service. We subsequently replaced the royalty and license agreement with a new Wholesale Sales & Marketing Agreement dated March 3, 2003. The new agreement provides for us to be the exclusive marketers of TDN's proprietary secure Internet service for children at the pre-school to junior high levels called The Children's Internet®. We further amended this agreement in February 2005 to decrease the per user fee to TDN from $3.00 to $1.00. In consideration for this decrease of the royalty fee, TDN was granted an option to acquire 18,000,000 shares of the Company's restricted common stock at an exercise price of $.07 per share for five years from the date of grant. The shares underlying the option have "piggy back" registration rights for a period of one year following any exercise of the option.

TDN did not give written notice to terminate the contract one year prior to the expiration of the initial five-year term. Therefore, the licensing agreement was automatically renewed for an additional five years expiring in 2013.

The Company released The Children's Internet®, version 9.0, to the market on March 2, 2006. The Company is the exclusive marketer and distributor of The Children's Internet® membership-based service created just for kids. In the August 2004 issue of PC Magazine, The Children's Internet® was ranked as Editors' Choice in the category of "Kids' Browsers and Services," and was voted number one over AOL, EarthLink and MSN Premium 9. Additionally in August 2006, The Children's Internet® was declared winner of Outstanding Products of 2006 by iParenting Media Awards in the software category. Shortly thereafter in September 2006, The Children's Internet® received the coveted National Parenting Center's Seal of Approval.

We believe The Children's Internet® is the most comprehensive, smart solution to the problems inherent to a child's unrestricted and unsupervised Internet access. We offer a protected online service and "educational super portal" specifically designed for children, pre-school to junior high, providing them with SAFE, real-time access to the World Wide Web; access to hundreds of thousands of the best pre-selected, pre-approved educational and entertaining web pages accessed through a secure propriety browser and search engine.

During 2007, the technology on which the product is based and the functionality of the service was improved. The Company, through TDN, also substantially upgraded the underlying system infrastructure by increasing redundant servers and improving control procedures which in turn increased the reliability of the service. Additionally, during the first quarter of 2007, where appropriate, the Company contracted with third party companies to outsource administrative support services and effectively put in place the infrastructure to support the marketing initiatives. These outsource providers handled telemarketing and the order taking process and media placement.

The Business Model

The product was being sold for $9.95 per month to the subscriber. The user must already have internet access, either through dial-up, DSL or cable broadband. We utilize both retail and wholesale channels of distribution.

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

· Parents and Kids

· The School Market: School Administrators and Teachers

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

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

· ISP customers with an interest in protecting their families

The product is launched and generated minimal revenues through our grass roots marketing efforts as well as some online marketing initiatives. At the end of the first quarter of 2007, we aired our updated Infomercial on various television stations from New York to California for an initial three week media test which was the first part of an overall three month media campaign. The Company intended to continue to run the media test to identify the markets that met or exceeded our response criteria in order to build the permanent television schedule to "roll-out" the Infomercial on a national basis. However, due to unforeseen expenses we have not had the anticipated budget in place to continue to run the media test after the first quarter of 2007.

Beginning with the third quarter of 2007, we focused the majority of our resources on negotiating and finalizing the Definitive Stock Purchase Agreement and negotiating a proposed settlement with the SEC of the outstanding claims filed by the SEC against the Company.

We believe that implementation of a broad based sales and marketing plan is essential. With adequate funding, we would execute our sales and marketing programs using a number of traditional and some less traditional marketing techniques to generate product awareness and build brand awareness. Among these are;

· Direct Response Marketing. The TV 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 awareness development, cost effectiveness, and rapid market response and feedback.

· Spot Media. In markets where consumer reaction to our Direct Response Marketing program is high, we will run spot television and radio commercials in support of our Direct Response campaign to further enhance brand awareness and reinforce the consumer purchase decision. We will also be opportunistic marketers, purchasing airtime around relevant programming, such as MSNBC's "To Catch a Predator" program.

· Public Relations. Public relations activities will combine events, special promotions, and traditional media relations with the objective of maintaining top-of-mind awareness of the product with consumers and media. We will work with our strategic partners, where possible and appropriate, to maximize resources and obtain optimum media coverage.

· Internet Advertising. The Company will employ Internet advertising on targeted sites frequented by parents of school-aged children. Advertising will also be placed on sites that specifically address Internet security for children.

· School Sales Initiative. Schools are a natural vehicle for reaching our target audience, parents of school-aged children. The Company will initiate a major sales effort aimed at forming partnerships with schools and teachers to bring awareness of our product to children and their parents. The Company has tested this concept with local school districts and the response has been excellent.

· Fundraising Initiative. The Company will establish a fundraising program for use by schools as well as other children's organizations, as a fund raising vehicle. This program will enable such organizations to raise funds by selling subscriptions to The Children's Internet service. A portion of the sales price will be refunded to the selling organization. The advantage of TCI's fund raising program over other fund raising vehicles is that our program functions like an annuity, providing continued funding to the participating organization for as long as their members continue to subscribe to The Children's Internet service.

· Strategic Partnerships. Strategic partnerships will be an important component of our overall marketing strategy. Strategic partners can provide "legitimacy" for the brand. These partners can also expose the Company's product to a large base of potential new customers. Joint public relations and marketing efforts can be a very cost effective mechanism. ISP's, web portals, telecommunications companies, child-oriented companies and public interest groups will be target strategic partners.

We believe the combined effect of this coordinated marketing program will be to build awareness of our product amongst our target consumer, to establish The Children's Internet as the premiere product in the minds of consumers and to drive this motivated consumer base to make the purchase decision to subscribe to The Children's Internet service.

Channels of Distribution:

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

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

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

Future Products and Services

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

Market Share, Cash Flow and Profitability

Although market data is not exact, and varies depending on the source, our plan is based on the belief that in the United States alone there are an approximately 35 million homes with internet access with children in kindergarten through grade 12 as of June 2007. Our model, with a mix of business generated from the respective channels of distribution, indicates we can be cash flow positive and profitable with less than 0.5% of the market.

LIQUIDITY AND RESOURCES

As of September 30, 2008, we had net loss from inception of approximately $5,679,000. Approximately $1,776,000 of the Company's cumulative net losses are non-cash compensation charges. The cumulative net losses consist of approximately $606,000 which represents the estimated fair market value for the cost of wages, if paid, for services rendered by the Company's former Chief Executive Officer, Controller and James Lambert, an outside financial consultant (we have recorded these amounts for the cost of wages and, since they did not charge the Company, as additional paid-in capital), $2,331,000 which represents professional fees such as legal and accounting expenses, $575,000 which represents a debt financing fee, $420,000 which represents officers, employees and directors compensation for which options to purchase common stock were issued, $593,000 which represents accrued officers compensation, and the balance of $1,154,000 consists primarily of payroll, occupancy and telecommunications costs including internet costs, net of approximately $2,000 in revenues. To date, Shadrack, the majority shareholder as of September 30, 2008, has funded all of our expended costs, with the exception of short-term advances totaling approximately $465,000 made by other related parties since January 2007.

Since inception, the Company has been dependent on funding from Shadrack and other related parties for our current operations and for providing office space and utilities that for the nine months ended September 30, 2008, averaged $13,700 per month in operating costs, exclusive of professional fees and officer compensation. Through September 30, 2008, the amount funded by Shadrack totaled approximately $1,490,000. On September 30, 2008, the balance due to Shadrack was approximately $1,033,000. The difference of approximately $457,000 was converted to common stock on February 15, 2005, when the Company's Board of Directors authorized the conversion of all debt owed to Shadrack into 13,054,628 shares of restricted common stock at a conversion price of $0.035 per share. The Company has received advances from TCI Holdings, to fund operations totaling approximately $343,000 since August 2007.

Where practicable, we plan to contract with third party companies to outsource administrative support services that effectively support the growth of the business. These outsource providers handle technical support, telemarketing and the order taking process and media placement. We believe this strategy will minimize the number of employees required to manage our intended growth in the future.

On January 9, 2007, the Company signed a 12-month co-location agreement with Evocative, Inc. to house the Company's search engine, servers and related equipment at Evocative's data center in Emeryville, California. This agreement replaced a similar 13-month agreement which began in October 2003 and was continued on a month-to-month basis. The new agreement added a managed firewall service. The basic annual cost under this agreement was $35,988.

As a part of streamlining business operations, in January 2008 the Company closed down its co-location facility and Internet hosting services for the Children's Internet® provided by Evocative Data Center. Since the product was taken offline, sales efforts have been suspended until additional funds are invested to establish another data center and co-location facility to host the servers that run The Children's Internet service. Additionally, the Company has terminated the Children's Internet® support and content staff during this time. Prior to taking the Children's Internet® service offline, the product was not being aggressively marketed due to the Company's lack of resources to promote the product.

On April 30, 2007, the Company and the Board of Directors adopted "The Children's Internet, Inc. 2007 Equity Incentive Plan" (the "Plan"). The purpose of the Plan is to provide incentives to attract retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company's future performance through awards of Options, Restricted Stock and Stock Bonuses. Under the terms of the Plan, the Company has made available six million (6,000,000) Shares of the Company's stock to be issued to Officers, Directors, Employees, Consultants and Advisors to the Company with certain restrictions as set forth in the Plan. The Plan will be administered by a Committee of the Board of Directors. The Plan will terminate ten years from the effective date of the Plan unless terminated earlier under terms of the Plan.

The Company's office space in Pleasanton, California had been leased by our majority shareholder, Shadrack Films, Inc., which expired on April 30, 2007. From May 1 through July 15, 2007, we rented our office space on a month-to-month basis. The Company and the landlord could not reach an agreement on terms for a new lease and we vacated the premises on July 13, 2007, and moved into office space in San Ramon, California. This office space is leased by Nasser Hamedani, a related party, who we were obligated to reimburse for the monthly lease payment of $1,762.

Going Concern Uncertainty

Through the date of this report, we have relied primarily on loans from Shadrack to fund all of our expenses. Shadrack has advised the Company that it is no longer able to provide funds to the Company. The Company entered into a Definitive Stock Purchase Agreement with TCI Holdings that, if executed would have provided the Company with an infusion of approximately $5.3 million to pay Company debts and fund future operations. As discussed in Note 4 of the Company's Financial Statements, this transaction was not consummated. Since the transaction was not consummated, the Company will be required to obtain additional funds through private placements of debt or equity securities or by other borrowing. There is no assurance that such additional financing will be available when required in order to proceed with our business plan. Further, our ability to respond to competition or changes in the market place or to exploit opportunities will be significantly limited by lack of available capital financing. If we are unsuccessful in securing the additional capital needed to continue operations within the time required, we will not be in a position to continue operations. In this event, we would attempt to sell the Company or file for bankruptcy.

Off-Balance Sheet Arrangements

None.