U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                (Amendment No. 1)

[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                     For the fiscal year ended _____________

[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

        For the transition period from March 1, 2004 to December 31, 2004

                        Commission File Number: 333-61286


                               CITY NETWORK, INC.
        (Exact name of small business issuer as specified in its charter)

          Nevada                                                 88-0467944
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                    6F-3, No. 16, Jian Ba Road, Jhonghe City
                       Taipei County 235, Taiwan, ROC N/A
               (Address of principal executive offices) (Zip Code)

                 Issuer's Telephone Number: 011-886-2-8226-5566

              Securities Registered Under Section 12(b) of the Act:

                               $0.001 Common Stock
                                (Title of Class)

              Securities Registered Under Section 12(g) of the Act:

                                      None

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or  shorter  period  that the  registrant  was  required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. YES [X] NO [ ]

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not be contained,  to the best of registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part II of this Form 10-K or any amendments to this Form 10-K. [X]

The issuer's revenues for the ten months ended December 31, 2004:  $15,674,613.

As of June 30, 2005,  there were 27,500,000  shares of the  registrant's  common
stock, $0.001 par value,  outstanding.  The aggregate market value of the common
stock held by non-affiliates of the issuer was approximately $5,676,500 based on
the  closing  price of $.25  per  share on June 29,  2005,  as  reported  by the
American Stock Exchange.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (Check one): Yes [X]; No [ ]
<PAGE>
                                EXPLANATORY NOTE

This  Amendment No. 1 to the  registrant's  annual report on Form 10-KSB for the
year ended December 31, 2004 amends Part II, Item 7 by replacing the independent
auditor's report. No other changes are made to the registrant's annual report on
Form 10-KSB for the year ended December 31, 2004.

<PAGE>
ITEM 7. FINANCIAL STATEMENTS

     Our Financial  Statements  together with the independent  auditor's  report
thereon are included on pages F-1 through F-20 hereof.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Form 10-KSB/A.

     1.   The  following   financial   statements  of  our  company,   with  the
          independent auditor's report, are filed as part of this Form 10-KSB/A:

          Independent Auditor's Report                                      F-2
          Consolidated Balance Sheets                                       F-3
          Consolidated Statements of Income                                 F-4
          Consolidated Statements of Cash Flow                              F-5
          Consolidated Statements of Changes in Stockholders' Equity        F-6
          Notes to Consolidated Financial Statements                        F-7

     2.   The following  exhibits are filed with this report and incorporated by
          reference as set forth below:

     Exhibit                             Description
     -------                             -----------
     2.1   (1)    Exchange  Agreement  dated  December  4,  2002 by and  among
                  City Network,  Inc., the shareholders of City Network, Inc.,
                  Investment Agents, Inc., Pamela Ray Stinson,  Raymond Robert
                  Acha, and Joseph H. Panganiban

     3.1 (2)      Articles of Incorporation

     3.2 (2)      Certificate of Amendment to Articles of Incorporation

     3.3 (3)      Certificate of Amendment of the Articles of Incorporation

     3.4 (4)      Amended and Restated Bylaws

     14.1 (5)     Code of Ethics

     21.1 (4)     Subsidiaries

     31.1         Certification  of Chief Executive  Officer Pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

     31.2         Certification  of Chief Financial  Officer Pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

     32.1         Certification  of Chief Executive  Officer Pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.

     32.2         Certification  of Chief Financial  Officer Pursuant to Section
                  906 of the Sarbanes-Oxley Act of 2002.

----------
(1)  Previously  filed  with the SEC as an Exhibit  to City  Network's  Form 8-K
     filed March 5, 2003, and incorporated herein by reference.
(2)  Previously  filed with the SEC as an Exhibit  to City  Network's  Form SB-2
     filed May 18, 2001, and incorporated herein by reference.
(3)  Previously  filed  with  the  SEC as an  Exhibit  to City  Network's  Proxy
     Statement filed March 21, 2003, and incorporated herein by reference.
(4)  Previously filed with the SEC as an Exhibit to City Network's Annual Report
     on Form 10-KSB filed April 15, 2005, and incorporated herein by reference.
(5)  Previously filed with the SEC as an Exhibit to City Network's Annual Report
     on Form 10-KSB filed June 16, 2003, and incorporated herein by reference.

(b)  Current Reports on Form 8-K.

     Report on Form 8-K filed December 20, 2004  announcing  the  appointment of
Yung-Yi  Tseng as CFO and director of our company and  Chung-Chieh  "Kevin" Lin,
Yong Su, and Pi-Liang Liu as directors of our company.

                                       1
<PAGE>
                                   SIGNATURES

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


                                   CITY NETWORK, INC.

Date: June 30, 2004                By: /s/ Tiao-Tsan Lai
                                      --------------------------------------
                                      Tiao-Tsan Lai
                                      Chief Executive Officer

Date: June 30, 2004                By: /s/ Yun-Yi Tseng
                                      --------------------------------------
                                      Yun-Yi Tseng
                                      Chief Financial Officer

                                        2
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


                                TABLE OF CONTENTS


Independent Auditor's Report                                            F-2

Consolidated Balance Sheets                                             F-3

Consolidated Statements of Income                                       F-4

Consolidated Statements of Cash Flow                                    F-5

Consolidated Statements of Changes in Stockholders' Equity              F-6

Notes to Consolidated Financial Statements                              F-7

                                      F-1
<PAGE>
                           LICHTER, YU AND ASSOCIATES
                          Certified Public Accountants

                       9191 Towne Centre Drive, Suite 406
                               San Diego, CA 92122
                                 (858) 320-2808


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and
Stockholders of City Network, Inc.

We have audited the  accompanying  balance  sheets of City  Network,  Inc.  (the
"Company")  as of  December  31, 2004 and  February  29,  2004,  and the related
statements of income,  stockholders'  equity,  and cash flows for the ten months
ended  December 31, 2004 and the year ended February 29, 2004.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement presentation.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of City  Network,  Inc. as of
December 31, 2004 and February 29, 2004,  and the results of its  operations and
its cash  flows  for ten  months  ended  December  31,  2004 and the year  ended
February 29, 2004 in conformity with accounting principles generally accepted in
the United States of America.


/s/ Lichter, Yu & Associates

March 7, 2005
San Diego, California

                                      F-2
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004

<TABLE>
<CAPTION>
                                                        December 31, 2004         February 29, 2004
                                                        -----------------         -----------------
<S>                                                        <C>                      <C>
                                     ASSETS

Current Assets
  Cash and cash equivalents                                $  2,010,644             $  2,723,573
  Accounts receivable, net                                    3,333,990                7,173,149
  Inventory                                                     732,027                  910,190
  Other receivables                                               6,863                  126,492
  Prepaid expenses                                              102,896                  557,903
                                                           ------------             ------------
      Total Current Assets                                    6,186,420               11,491,307
                                                           ------------             ------------

Fixed Assets, net                                             2,586,872                2,745,664
                                                           ------------             ------------
      Total Fixed Assets                                      2,586,872                2,745,664
                                                           ------------             ------------
Other Assets
  Deposits                                                    1,724,542                  255,706
  Trademarks                                                      1,812                    1,966
  Equity in net assets of affiliated company                    829,008                  770,678
  Intangible assets                                             961,053                1,000,000
  Other current assets                                            8,255                       96
                                                           ------------             ------------
      Total Other Assets                                      3,524,670                2,028,446
                                                           ------------             ------------
Total Assets                                               $ 12,297,962             $ 16,265,417
                                                           ============             ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable and accrued expenses                    $  3,335,286             $  6,838,620
  Due to related party                                           80,083                  334,812
  Loan payable                                                        0                1,680,329
  Deferred revenue                                               14,566                  260,498
  Deposits payable                                                    0                    4,371
  Current portion, long-term debt                             3,226,181                2,316,689
                                                           ------------             ------------
      Total Current Liabilities                               6,656,116               11,435,319

Long-term debt, net of current portion                          246,330                  263,041
                                                           ------------             ------------
      Total Liabilities                                       6,902,446               11,698,360
                                                           ------------             ------------

Stockholders' Equity
  Common stock, $.001 par value, 100,000,000
   shares authorized, 27,500,000 and 25,000,000
   issued and outstanding, respectively                          27,500                   25,000
  Additional paid in capital                                  5,937,946                4,260,117
  Cumulative foreign-exchange translation adjustment            142,453                   29,663
  Retained earnings                                            (712,383)                 252,277
                                                           ------------             ------------
      Total Stockholders' Equity                              5,395,516                4,567,057
                                                           ------------             ------------
      Total Liabilities and Stockholders' Equity           $ 12,297,962             $ 16,265,417
                                                           ============             ============
</TABLE>

                  See Accompanying Notes and Auditor's Report

                                      F-3
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
   TEN MONTHS ENDED DECEMBER 31, 2004 AND FISCAL YEAR ENDED FEBRUARY 29, 2004

<TABLE>
<CAPTION>
                                                         December 31, 2004        February 29, 2004
                                                         -----------------        -----------------
<S>                                                        <C>                      <C>
Sales, net                                                 $ 15,674,613             $ 19,647,749

Cost of sales                                                14,924,938               17,827,486
                                                           ------------             ------------
      Gross profit                                              749,675                1,820,263

General and administrative expenses                           1,395,388                1,391,658
                                                           ------------             ------------

      Income (loss) from operations                            (645,713)                 428,605
                                                           ------------             ------------
Other (Income) Expense
  Interest income                                                (3,785)                 (20,202)
  Rental income                                                 (17,858)                  (3,085)
  Commission income                                                (281)                 (15,517)
  (Gain) loss on currency exchange                              (10,720)                 (13,815)
  Other income                                                  (32,120)                 (11,263)
  Equity in earnings of investee                                (58,330)                   1,674
  Miscellaneous                                                   1,303                    2,499
  Bad debt expense                                              185,858                  159,238
  Loss on sale of fixed assets                                   32,068                        0
  Interest expense                                              112,922                   67,691
                                                           ------------             ------------
      Total Other (Income) Expense                              209,057                  167,220
                                                           ------------             ------------

      Income (loss) before income taxes                        (854,770)                 261,385

Provison for income taxes                                       109,890                   85,190
                                                           ------------             ------------

      Net income (loss)                                    $   (964,660)            $    176,195
                                                           ============             ============

Net income (loss) per share (basic and diluted)
  Basic                                                    $     (0.036)            $      0.007
  Diluted                                                  $     (0.036)            $      0.007

Weighted average number of shares
  Basic                                                      27,000,000               24,958,333
  Diluted                                                    27,000,000               24,958,333
</TABLE>

                  See Accompanying Notes and Auditor's Report

                                      F-4
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
   TEN MONTHS ENDED DECEMBER 31, 2004 AND FISCAL YEAR ENDED FEBRUARY 29, 2004

<TABLE>
<CAPTION>
                                                           December 31, 2004       February 29, 2004
                                                           -----------------       -----------------
<S>                                                          <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income (loss)                                          $  (964,660)            $   176,195

Adjustments to reconcile net income (loss) to net
 cash provided by (used) in operating activities:
   Depreciation and amortization                                 161,296                  44,057
   Equity in earning of investee                                 (58,330)                  1,674
   Loss on disposal of assets                                     32,068                       0
   Bad debt                                                      185,858                 159,238
   (Gain) loss on foreign currency exchange                      (10,720)                (13,815)
   Decrease (Increase) in receivables                          3,839,159              (5,652,808)
   Decrease (Increase) in inventory                              178,163                (543,184)
   Decrease (Increase) in other receivables                      119,629                (115,032)
   Decrease (Increase) in prepaid expenses                       455,007                (347,946)
   Decrease (Increase) in deposit                             (1,468,836)               (254,737)
   Decrease (Increase) in deferred charges                             0                  36,836
   Decrease (Increase) in other current assets                    (8,159)                 72,662
   (Decrease) Increase in accounts payable
     and accrued expenses                                     (3,503,334)              6,297,694
   (Decrease) Increase in deferred revenue                      (245,932)                260,498
   (Decrease) Increase in deposits payable                        (4,371)                  4,371
                                                             -----------             -----------
      Total Adjustments                                         (328,502)                (50,492)
                                                             -----------             -----------
      Net cash provided by (used in) operations               (1,293,162)                125,703
                                                             -----------             -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sale of investments                                    0                 108,594
  Proceeds from sale of fixed assets                              35,462                       0
  Purchase of intangibles                                              0                    (838)
  Purchase of investments                                              0                (772,352)
  Purchase of furniture and equipment                             (5,008)               (462,722)
                                                             -----------             -----------
      Net cash used in investing activities                       30,454              (1,235,912)
                                                             -----------             -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment on notes payable                                    (5,217,702)             (2,229,705)
  Payment of loan from related party                            (455,227)                      0
  Loan from related party                                        200,498                 743,386
  Issuance of notes payable                                      477,953               3,974,994
  Issuance of short-term debt                                  5,621,631                       0
  Issuance of common stock                                             0                 720,000
                                                             -----------             -----------
      Net cash provided by financing activities                  627,153               3,208,675
                                                             -----------             -----------

Effect of exchange rate change on cash                           (77,374)                  4,843

Net change in cash and cash equivalents                         (712,929)              2,103,309
                                                             -----------             -----------

Cash and cash equivalents at beginning of year                 2,723,573                 620,264
                                                             -----------             -----------
Cash and cash equivalents at end of year                     $ 2,010,644             $ 2,723,573
                                                             ===========             ===========
Supplemental cash flows disclosures:
  Income tax payments                                        $    35,750             $     9,235
                                                             -----------             -----------
  Interest payments                                          $   112,922             $    67,691
                                                             -----------             -----------
Non cash transaction:
  Conversion of debt to equity                               $ 1,680,329             $         0
                                                             -----------             -----------
</TABLE>

                   See Accompanying Notes and Auditor's Report

                                      F-5
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
   TEN MONTHS ENDED DECEMBER 31, 2004 AND FISCAL YEAR ENDED FEBRUARY 29, 2004

<TABLE>
<CAPTION>
                                                             December 31, 2004        February 29, 2004
                                                             -----------------        -----------------
<S>                                                              <C>                      <C>
Common stock, number of shares outstanding
  Balance at beginning of period                                 25,000,000               24,500,000
  Stock cancellation                                                      0                        0
  Stock split                                                             0                        0
  Common stock issued                                             2,500,000                  500,000
                                                               ------------             ------------
  Balance at end of period                                       27,500,000               25,000,000
                                                               ============             ============

Common stock, par value $.001 (thousands of shares)
  Balance at beginning of year                                 $     25,000             $     24,500
  Stock cancellation                                                      0                        0
  Stock split                                                             0                        0
  Common stock issued                                                 2,500                      500
                                                               ------------             ------------
  Balance at end of year                                             27,500                   25,000
                                                               ------------             ------------
Additional paid in capital
  Balance at beginning of year                                    4,260,117                3,540,617
  Issuance of stock                                               1,677,829                  719,500
                                                               ------------             ------------
  Balance at end of year                                          5,937,946                4,260,117
                                                               ------------             ------------
Cumulative foreign-exchange translation adjustment
  Balance at beginning of year                                       29,663                        0
  Foreign currency translation                                      123,689                   29,663
                                                               ------------             ------------
  Balance at end of year                                            153,352                   29,663
                                                               ------------             ------------
Retained (deficits)
  Balance at beginning of year                                      252,277                   76,082
  Issuance of stock dividend                                              0                        0
  Net income (loss)                                                (964,660)                 176,195
                                                               ------------             ------------
  Balance at end of year                                           (712,383)                 252,277
                                                               ------------             ------------

Total stockholders' equity at end of year                      $  5,406,415             $  4,567,057
                                                               ============             ============
</TABLE>

                   See Accompanying Notes and Auditor's Report

                                      F-6
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note A - ORGANIZATION

     City Network,  Inc., formerly Investment Agents,  Inc., was incorporated on
     August  8,  1996  under  the laws of the  State  of  Nevada.  City  Network
     Technology,  Inc., formerly Gelcrest  Investments Limited, was incorporated
     under  the laws of the  British  Virgin  Islands  on March  1,  2002.  City
     Network,  Inc. -Taiwan,  formerly City Engineering,  Inc., was incorporated
     under the laws of Republic of China on September 6, 1994. City Construction
     was incorporated under the laws of Republic of China on October,  10, 2003.
     City  Network,  Inc.  owns  100%  of the  capital  stock  of  City  Network
     Technology,  Inc.,  and City  Network  Technology,  Inc.  owns  100% of the
     capital  stock of City  Network,  Inc.  -  Taiwan,  and City  Construction.
     Collectively the four corporations are referred to herein as the "Company".

     On November 14, 2002, City Network  Technology,  Inc. became a wholly owned
     subsidiary of City Network,  Inc. through an Exchange Agreement,  which was
     amended on December 4, 2002 whereby City Network,  Inc. acquired all of the
     issued and outstanding  capital stock of City Network  Technology,  Inc. in
     exchange for 12,000,000 shares of City Network, Inc.

     The Company is a provider of internet broadband and wireless infrastructure
     equipment and service for the rapidly expanding broadband marketplace.  The
     Company  intends to be an important  provider of these services  predicated
     upon its  dedication to  delivering  user  friendly,  cost  effective,  and
     customer tailored high speed internet access equipment to meet the business
     needs  of  the  hospitality,  residential  property  and  telecommunication
     industry worldwide.

     On December 16, 2004, the Company changed its fiscal year end from February
     28 to December 31.

                                      F-7
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     REVENUE RECOGNITION
     Revenue from sales of products to customers is recognized  upon shipment or
     when title  passes to  customers  based on the terms of the  sales,  and is
     recorded  net of  returns,  discounts  and  allowances.  Service  income is
     recognized  as the related  services are provided  pursuant to the terms of
     the service agreement.

     PRINCIPLES OF CONSOLIDATION
     The consolidated financial statements include the accounts of City Network,
     Inc., and its wholly owned subsidiaries City Network  Technology,  Inc. and
     its  wholly  owned  subsidiaries,  City  Network,  Inc.  - Taiwan  and City
     Construction,  collectively referred to within as the Company. All material
     intercompany  accounts,  transactions  and profits have been  eliminated in
     consolidation.

     RISKS AND UNCERTAINTIES
     The  Company is subject to  substantial  risks from,  among  other  things,
     intense competition from the providers of broadband products,  services and
     the  telecommunication  industry in general,  other risks  associated  with
     financing, liquidity requirements,  rapidly changing customer requirements,
     limited operating history, and the volatility of public markets.

     CONTINGENCIES
     Certain  conditions  may exist as of the date the financial  statements are
     issued,  which may result in a loss to the  Company  but which will only be
     resolved  when  one or more  future  events  occur  or fail to  occur.  The
     Company's management and legal counsel assess such contingent  liabilities,
     and such  assessment  inherently  involves  an  exercise  of  judgment.  In
     assessing loss contingencies  related to legal proceedings that are pending
     against  the  Company  or  unasserted   claims  that  may  result  in  such
     proceedings,  the Company's legal counsel evaluates the perceived merits of
     any legal  proceedings or unasserted claims as well as the perceived merits
     of the amount of relief sought or expected to be sought.

     If the  assessment  of a contingency  indicates  that it is probable that a
     material  loss has been  incurred  and the amount of the  liability  can be
     estimated,  then the estimated  liability would be accrued in the Company's
     financial statements. If the assessment indicates that a potential material
     loss contingency is not probable but is reasonably possible, or is probable
     but  cannot be  estimated,  then the  nature of the  contingent  liability,
     together with an estimate of the range of possible loss if determinable and
     material would be disclosed.

     Loss contingencies  considered to be remote by management are generally not
     disclosed unless they involve guarantees, in which case the guarantee would
     be disclosed.

                                      F-8
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     USE OF ESTIMATES
     The  preparation  of financial  statements  in  conformity  with  generally
     accepted   accounting   principles  requires  management  to  make  certain
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  financial  statements  and the  reported  amounts of  revenues  and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.  Significant estimates include  collectibility of accounts
     receivable, accounts payable, sales returns and recoverability of long-term
     assets.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS
     The  Company  has  made  an  allowance  for  doubtful  accounts  for  trade
     receivables  based on a combination of write-off  history,  aging analysis,
     and any specific known troubled accounts.

     FIXED ASSETS
     Property and  equipment are stated at cost less  accumulated  depreciation.
     Expenditures for major additions and improvements are capitalized and minor
     replacements,  maintenance  and repairs are charged to expense as incurred.
     Depreciation  is provided on the  straight-line  method over the  estimated
     useful lives of the assets, or the remaining term of the lease, as follows:

               Furniture and Fixtures                5 years
               Equipment                             5 years
               Computer Hardware and Software        3 years
               Building and Improvements             50 years

     INTANGIBLE ASSETS
     Effective July 2002, the Company adopted Statement of Financial  Accounting
     Standards  ("SFAS") No. 142,  "Goodwill and Other  Intangible  Assets." The
     adoption  of  SFAS  No.  142  required  an  initial  impairment  assessment
     involving a comparison of the fair value of  trademarks,  patents and other
     intangible  assets  to  current  carrying  value.  No  impairment  loss was
     recognized for the years ended December 31, 2004 and February 29, 2004.

     Trademarks and other intangible assets determined to have indefinite useful
     lives are not  amortized.  The  Company  tests  such  trademarks  and other
     intangible assets with indefinite useful lives for impairment annually,  or
     more frequently if events or circumstances  indicate that an asset might be
     impaired.  Trademarks  and  other  intangible  assets  determined  to  have
     definite  lives are  amortized  over their  useful lives or the life of the
     trademark and other intangible asset, whichever is less.

     EXCHANGE GAIN (LOSS)
     During year ended December 31, 2004 and February 29, 2004, the transactions
     of City Network,  Inc. - Taiwan and City Construction were denominated in a
     foreign  currency  and are  recorded in New Taiwan  dollars at the rates of
     exchange in effect when the transactions  occur.  Exchange gains and losses
     are  recognized for the different  foreign  exchange rates applied when the
     foreign currency assets and liabilities are settled.

                                      F-9
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     TRANSLATION ADJUSTMENT
     As of  December  31,  2004 and  February  29,  2004,  the  accounts of City
     Network,  Inc. - Taiwan and City  Construction  were maintained,  and their
     financial  statements  were  expressed,  in New Taiwan Dollars (NTD).  Such
     financial  statements were translated into U.S. Dollars (USD) in accordance
     SFAS No. 52, "Foreign Currency Translation", with the NTD as the functional
     currency.  According  to the  Statement,  all assets and  liabilities  were
     translated  at  the  current  exchange  rate,   stockholder's   equity  are
     translated  at  the  historical   rates  and  income  statement  items  are
     translated  at the  weighted  average  exchange  rate for the  period.  The
     resulting  translation  adjustments are reported under other  comprehensive
     income in accordance with SFAS No. 130, "Reporting Comprehensive Income".

     As of December 31, 2004 and February  29, 2004 the exchange  rates  between
     NTD and the USD was NTD$1=USD$0.03128 and NTD$1=USD$0.02994,  respectively.
     The   weighted-average   rate  of   exchange   between   NTD  and  USD  was
     NTD$1=USD$0.02998 and  NTD$1=USD$0.02617,  respectively.  Total translation
     adjustment recognized for the year ended December 31, 2004 and February 29,
     2004 is $153,352 and $29,663, respectively.

     FAIR VALUE OF FINANCIAL INSTRUMENTS
     Our Company  measures its financial  assets and  liabilities  in accordance
     with generally accepted accounting principles. For certain of the Company's
     financial  instruments,  including  accounts  receivable (trade and related
     party),  notes  receivable and accounts  payable (trade and related party),
     and accrued  expenses,  the carrying amounts  approximate fair value due to
     their short  maturities.  The amounts owed for long-term debt and revolving
     credit  facility also  approximate  fair value because  interest  rates and
     terms offered to the Company are at current market rates.

     STATEMENT OF CASH FLOWS
     In accordance with SFAS No. 95, "Statement of Cash Flows",  cash flows from
     the Company's operations are based upon the local currencies.  As a result,
     amounts related to assets and liabilities reported on the statement of cash
     flows will not necessarily agree with changes in the corresponding balances
     on the balance sheet.

     CONCENTRATION OF CREDIT RISK
     Financial   instruments   that   potentially   subject   the   Company   to
     concentrations of credit risk are accounts receivable and other receivables
     arising from its normal business activities.  The Company has a diversified
     customer  base.  The  Company  controls  credit  risk  related to  accounts
     receivable   through  credit   approvals,   credit  limits  and  monitoring
     procedures.  The Company routinely  assesses the financial  strength of its
     customers and, based upon factors surrounding the credit risk,  establishes
     an  allowance,   if  required,  for  un-collectible   accounts  and,  as  a
     consequence,  believes  that its accounts  receivable  credit risk exposure
     beyond such allowance is limited.

                                      F-10
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     INVENTORY
     Inventory is valued at the lower of cost or market.  Cost is  determined on
     the weighted average method. As of December 31, 2004 and February 29, 2004,
     inventory consisted only of finished goods.

     PRODUCT WARRANTIES
     The Company estimates its warranty costs based on historical warranty claim
     experience  and applies  this  estimate to the revenue  stream for products
     under  warranty.   Future  costs  for  warranties   applicable  to  revenue
     recognized  in the  current  period  are  charged to cost of  revenue.  The
     warranty accrual is reviewed  quarterly to verify that it properly reflects
     the remaining obligation based on anticipated expenditures over the balance
     of the obligation period.  Adjustments are made when accrual warranty claim
     experience differs from estimate.

     LONG-TERM EQUITY INVESTMENTS
     Long-term  equity  investments  are accounted for by the equity method when
     the Company and its subsidiaries  owns 20% or more of the investee's voting
     shares,  or  less  than  20% of  investee's  voting  shares  but is able to
     exercise significant  influence over the investee's operation and financial
     polices,  but not more then 50%. All other long-term equity investments are
     accounted for by either the lower-of-cost-or-market  method or cost method.
     For  long-term  equity  investments  accounted  for under the equity method
     related to investee's that are publicly listed companies, unrealized losses
     resulting  from  declines in the market  value below cost are recorded as a
     separate component of stockholders' equity.

     For long-term  equity  investments  in non-listed  companies  accounted for
     under  the  cost  method,  investments  are  stated  at  original  cost.  A
     write-down  of the  investment  balance to  earnings is taken only if it is
     determined  that there is a permanent  decline in the  investment's  value.
     Stock dividends do not result in the recognition of investment income.

     For long-term equity  investments  accounted for by the equity method,  the
     investment  is initially  recorded at cost,  then reduced by dividends  and
     increased or decreased by investor's  proportionate share of the investee's
     net earnings or loss.

     CASH AND CASH EQUIVALENTS
     The Company considers all highly liquid investments  purchased with initial
     maturities of three months or less to be cash equivalents.

     ADVERTISING
     Advertising costs are expensed in the year incurred.

                                      F-11
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     INCOME TAXES
     Provisions  for income taxes are based on taxes payable or  refundable  for
     the current year and deferred  taxes on temporary  differences  between the
     amount of taxable  income and pretax  financial  income and between the tax
     bases of assets and liabilities and their reported amounts in the financial
     statements.

     Deferred  tax  assets  and   liabilities  are  included  in  the  financial
     statements at currently  enacted income tax rates  applicable to the period
     in which the  deferred  tax  assets  and  liabilities  are  expected  to be
     realized or settled as prescribed in SFAS No. 109,  "Accounting  for Income
     Taxes".  As changes in tax laws or rates are  enacted,  deferred tax assets
     and liabilities are adjusted through the provision for income taxes.

     EARNINGS PER SHARE
     The Company uses SFAS No. 128,  "Earnings Per Share",  for  calculating the
     basic and diluted  earnings  (loss) per share.  Basic  earnings  (loss) per
     share are computed by dividing  net income  (loss)  attributable  to common
     stockholders by the weighted  average number of common shares  outstanding.
     Diluted earnings per share are computed similar to basic earnings per share
     except  that  the   denominator   is  increased  to  include  common  stock
     equivalents, if any, as if the potential common shares had been issued.

     IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
     The Company  adopted the  provision of The Financial  Accounting  Standards
     Board ("FASB") No. 121, "Accounting for the Impairment of Long-Lived Assets
     and for Long-Lived Assets to be Disposed of". This statement  requires that
     long-lived  assets and certain  identifiable  intangibles  be reviewed  for
     impairment  whenever events or changes in  circumstances  indicate that the
     carrying  amount  of an asset  may not be  recoverable.  Recoverability  of
     assets to be held and used is  measured  by a  comparison  of the  carrying
     amount of an asset to future net cash flows expected to be generated by the
     asset.  If such assets are considered to be impaired,  the impairment to be
     recognized  is measured by the amount by which the carrying  amounts of the
     assets exceed the fair values of the assets. In assessing the impairment of
     these  identifiable  intangible  assets,   identifiable  goodwill  will  be
     allocated  on a pro rata  basis  using  fair  values  of the  assets at the
     original  acquisition  date. In estimating  expected  future cash flows for
     determining  whether an asset is impaired and if expected future cash flows
     are used in measuring  assets that are impaired,  assets will be grouped at
     the lowest level (entity level) for which there are identifiable cash flows
     that are largely  independent  of the cash flows of other groups of assets.
     Assets to be disposed of are reported at the lower of the  carrying  amount
     or fair value less costs to sell.  In recording  an  impairment  loss,  any
     related  goodwill  would be reduced to zero before  reducing  the  carrying
     amount of any identified impaired asset.

     For  goodwill not  identifiable  with an impaired  asset,  the Company will
     establish  benchmarks at the lowest lever  (entity  level) as its method of
     assessing impairment. In measuring impairment, unidentifiable goodwill will
     be  considered  impaired if the fair value at the lowest level is less than
     its carrying  amount.  The fair value of  unidentifiable  goodwill  will be
     determined by subtracting the fair value of the recognized net asset at the
     lowest level  (excluding  goodwill) from the value at the lowest level. The
     amount of the impairment loss should be equal to the difference between the
     carrying  amount of goodwill and the fair value of  goodwill.  In the event
     that impairment is recognized, appropriate disclosures would be made.

                                      F-12
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     NEW ACCOUNTING PRONOUNCEMENTS
     In January 2003, FASB issued FASB Interpretation No. 46,  "Consolidation of
     Variable Interest Entities"  ("FIN46").  This  interpretation of Accounting
     Research Bulletin No. 51, requires  companies to consolidate the operations
     of all variable interest entities  ("VIE's") for which they are the primary
     beneficiary.  The term "primary  beneficiary" is defined as the entity that
     will  absorb a majority  of  expected  losses,  receive a  majority  of the
     expected residual returns,  or both. This  interpretation was later revised
     by the issuance of  Interpretation  No. 46R ("FIN  46R").  The revision was
     issued to address certain  implementation  issues that had arisen since the
     issuance of the original  interpretation  and to provide companies with the
     ability to defer the adoption of FIN46 to period after March 15, 2004.  The
     implementation  of  FIN46  and  FIN  46R,  had no  material  impact  on the
     Company's financial statements.

     On July 16, 2004 the FASB ratified the Emerging  Issues Task Force ("EITF")
     consensus of Issue 02-14,  "Whether the Equity Method of Accounting Applies
     when an Investor Does Not Have an Investment in Voting Stock of an Investee
     but Exercises  Significant  Influence  through Other Means" ("EITF 02-14").
     The consensus  concluded that an investor should apply the equity method of
     accounting  when it can  exercise  significant  influence  over  an  entity
     through  a means  other  than  holding  voting  rights.  The  consensus  is
     effective  for  reporting  periods  beginning  after  September  2004.  The
     adoption  of EITF  02-14 did not have a  material  impact on the  Company's
     financial statements.

     On  December  16,  2004,  the FASB  issued  SFAS No.  123  (revised  2004),
     "Share-Based   Payment"  ("SFAS  123R"),   which  replaces  SFAS  No.  123,
     "Accounting for Stock-Based  Compensation"  ("SFAS 123") and supercedes APB
     Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees."  SFAS 123R
     requires  all  share-based  payments  to  employees,  including  grants  of
     employee stock options, to be recognized in the financial  statements based
     on their fair values,  beginning  with the first  interim or annual  period
     after June 15, 2005. The pro forma disclosures  previously  permitted under
     SFAS  123  no  longer  will  be  an  alternative  to  financial   statement
     recognition. The Company is required to adopt SFAS 123R in its three months
     ending  September 30, 2005. Under SFAS 123R, The Company must determine the
     appropriate fair value model to be used for valuing  share-based  payments,
     the amortization  method for compensation cost and the transition method to
     be used at date of adoption. The transition methods include prospective and
     retroactive adoption options.  Under the retroactive options, prior periods
     may be restated  either as of the  beginning of the year of adoption or for
     all periods  presented.  The prospective  method requires that compensation
     expense be recorded for all unvested stock options and restricted  stock at
     the  beginning  of the first  quarter of adoption  of SFAS 123R,  while the
     retroactive  methods  would  record  compensation  expense for all unvested
     stock  options  and  restricted  stock  beginning  with  the  first  period
     restated.  The Company is evaluating the  requirements  of SFAS 123, and it
     expects that the adoption of SFAS 123R will have no material  impact on the
     Company's financial statements.

     In September  2004, the EITF Issue No. 04-08,  "The Effect of  Contingently
     Convertible  Debt on Diluted  Earnings per Share" ("EITF 04-08") was issued
     stating that  contingently  convertible  debt should be included in diluted
     earnings  per share  computations  regardless  of whether the market  price
     trigger has been met. EIFT 04-08 is effective for reporting  periods ending
     after  December  15, 2004.  EITF 04-08 will have no material  impact on the
     Company's financial statements.

                                      F-13
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note D -CASH

     The Company maintains its cash balances at various banks in Taiwan and Hong
     Kong. All balances are insured by the Central Deposit Insurance Corporation
     (CDIC).  As of  December  31, 2004 and  February  29,  2004,  there were no
     uninsured portions of the balances held at the bank.

Note E - FIXED ASSETS

     Fixed assets consist of the following:

                                       December 31, 2004      February 29, 2004
                                       -----------------      -----------------
     Land                                $ 1,916,328             $ 1,966,694
     Building                                283,977                 305,429
     Machinery and equipment                 430,880                 427,126
     Furniture and fixtures                  143,655                 142,402
                                         -----------             -----------

                                         $ 2,774,840             $ 2,841,651

     Accumulated depreciation               (187,968)                (95,987)
                                         -----------             -----------

                                         $ 2,586,872             $ 2,745,664
                                         ===========             ===========

Note F - INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                       December 31, 2004      February 29, 2004
                                       -----------------      -----------------
     Trademarks                          $     2,150             $     2,150
     Intangible asset                      1,000,000               1,000,000
                                         -----------             -----------

                                         $ 1,002,150             $ 1,002,150

     Accumulated depreciation                (39,285)                   (184)
                                         -----------             -----------

                                         $   962,865             $ 1,001,966
                                         ===========             ===========

                                      F-14
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note G- COMMITTMENTS

     A BEST INFORMATION

     City Network, Inc. - Taiwan, signed an agreement with A Best Information in
     2003 for the exclusive right to sell A Best Information's  products.  There
     is no expiration  date in the agreement,  and the Company has the rights to
     transfer  the  agreement to any third party with a  negotiable  price.  The
     Company paid $1,000,000 for these rights.

     RESELLER AGREEMENTS
     City Network,  Inc. - Taiwan has several signed  reseller  agreements  with
     various  customers.  These resellers are given special sales prices and are
     paid commissions for their sales orders.

     CO-CONSTRUCTION AGREEMENT
     In April 2004, City  Construction  Co., Ltd. Entered into a Co-Construction
     Agreement with another company in Taipei, Taiwan. Under the Agreement,  the
     Company will finance,  construct and own 50% of the building  project.  The
     Company has not yet begun construction on the building.

     OPERATING LEASES
     The Company leases various office  facilities  under operating  leases that
     terminate on various dates.  Rental  expense for these leases  consisted of
     $50,029 for the ten months ended December 31, 2004 and $13,482 for the year
     ended February 29, 2004.  The Company has future minimum lease  obligations
     as follows:

                             2005        $20,122

Note H - LONG-TERM INVESTMENT

     BEIJING PUTAIN HEXIN NETWORK TECHNOLOGY CO., LTD
     On August 31, 2003 the Company purchased approximately  twenty-five percent
     (25%) of Beijing Putain Hexin Network Technology Co., Ltd for $325,000.  On
     December 4, 2003 the Company purchased an additional  fifteen percent (15%)
     for  $398,500.  Beijing  Putain Hexin  Network  Technology  Co., Ltd is not
     publicly traded or listed.  The Company is using the complete equity method
     to record its share of the subsidiary's net income and loss. As of December
     31, 2004 and February 29, 2004 the Company  recognized an income of $58,330
     and a loss $1,674 from their acquisition.

                                      F-15
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


Note I - COMPENSATED ABSENSES

     Employees earn annual vacation leave at the rate of seven (7) days per year
     for the first three years. Upon completion of the third year of employment,
     employees earn annual  vacation leave at the rate of ten (10) days per year
     for  years  four  through  five.  Upon  completion  of the  fifth  year  of
     employment,  employees  earn annual  vacation leave at the rate of fourteen
     (14) days per year for years six through ten. Upon  completion of the tenth
     year of employment,  one (1) additional day for each additional year, until
     it reaches  thirty (30) days per year. At  termination,  employees are paid
     for any  accumulated  annual  vacation  leave.  As of December 31, 2004 and
     February 29, 2004 vacation liability existed in the amount of $1,892 and $0
     respectively.

Note J - INCOME TAXES

     Total Federal and State income tax expense for the years ended December 31,
     2004 and February 29, 2004 amounted to $109,890 and $85,190,  respectively.
     For the years ended  December 31, 2004 and  February 29, 2004,  there is no
     difference  between the federal  statutory  tax rate and the  effective tax
     rate.

     The following is a reconciliation of income tax expense:

     12/31/04           U.S.           State       International        Total
                      --------       --------      -------------       --------
     Current          $      0       $      0         $109,890         $109,890
     Deferred                0              0                0                0
                      --------       --------         --------         --------
          Total       $      0       $      0         $109,890         $109,890
                      ========       ========         ========         ========

     02/29/04           U.S.           State       International        Total
                      --------       --------      -------------       --------
     Current          $  3,321       $      0         $ 44,180         $ 47,501
     Deferred                0              0                0                0
                      --------       --------         --------         --------
          Total       $  3,321       $      0         $ 44,180         $ 47,501
                      ========       ========         ========         ========

     Reconciliation of the differences between the statutory U.S. Federal income
     tax rate and the effective rate is as follows:

                                                  12/31/2004        2/29/2004
                                                  ----------        ---------
     Federal statutory tax rate                        33%              33%
     State, net of federal benefit                      0%               0%
                                                     ----             ----

     Effective tax rate                                33%              33%
                                                     ====             ====

                                      F-16
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004

NOTE K - DEBT

     At December 31, 2004 and February 29, 2004,  the Company had notes  payable
     outstanding  in  the  aggregate   amount  of  $3,461,162  and   $2,579,730,
     respectively. Payable as follows:

<TABLE>
<CAPTION>
           December 31, 2004                                            February 29, 2004
           -----------------                                            -----------------
<S>                                         <C>             <C>                                         <C>
Secured  note  payable  to  a  bank  in                      Secured  note  payable  to  a  bank  in
Taiwan,  interest  at 3.175% per annum,                      Taiwan,  interest  at 3.175% per annum,
due by May 29, 2016                          $280,689        due by May 29, 2016                          $ 280,689

Note  payable  to  a  bank  in  Taiwan,                      Secured  note  payable  to  a  bank  in
interest  at 3.616% per  annum,  due by                      Taiwan,  interest  at 7.425% per annum,
October 8, 2005                               500,480        due by May 9, 2004                              30,972

Note  payable  to  a  bank  in  Taiwan,                      Secured  note  payable  to  a  bank  in
interest  at 3.828% per  annum,  due by                      Taiwan,  interest  at 4.25% per  annum,
February 13, 2005                             125,120        due by June 6, 2005                             13,011

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 4.42%  per  annum,  due by                      interest  at 4.25%  per  annum,  due by
March 29, 2005                                246,921        June 12, 2005                                    1,497

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 4.42%  per  annum,  due by                      interest at 7.5% per annum, due by June
March 15, 2005                                 68,004        16, 2004                                       179,641

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 4.42%  per  annum,  due by                      interest  at 3.77%  per  annum,  due by
April 11, 2005                                 76,548        December 31, 2004                              269,462

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 4.42%  per  annum,  due by                      interest  at 3.77%  per  annum,  due by
April 10, 2005                                 54,995        March 13, 2004                                 119,760

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest at 4.42% per annum, due by May                      interest  at 3.77%  per  annum,  due by
29, 2005                                      233,493        March 26, 2004                                 188,623

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest at 3.77% per annum, due by May
March 10, 2005                                196,563        4, 2004                                        572,405

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 3.77%  per  annum,  due by
February 15, 2005                              60,761        March 5, 2004                                   78,635
</TABLE>

                                      F-17
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


NOTE K - DEBT (CONTINUED)

<TABLE>
<CAPTION>
<S>                                         <C>             <C>                                         <C>
Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 3.77%  per  annum,  due by
March 8, 2005                                141,511         April 8, 2004                                  225,573

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 3.77%  per  annum,  due by
March 2, 2005                                 35,121         April 23, 2004                                   8,994

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 3.77%  per  annum,  due by
March 15, 2005                                43,498         April 8, 2004                                   19,805

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 3.77%  per  annum,  due by
March 11, 2005                                13,085         April 8, 2004                                  261,871

Note  payable  to  a  bank  in  Taiwan,                      Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by                      interest  at 4.269% per  annum,  due by
April 9, 2005                                591,192         August 25, 2004                                328,792

Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by
April 9, 2005                                 53,895

Note  payable  to  a  bank  in  Taiwan,
interest  at 3.616% per  annum,  due by
April 9, 2005                                 59,521

Note  payable  to  a  bank  in  Taiwan,
interest  at 3.26%  per  annum,  due by
March 11, 2005                               312,752

Note  payable  to  a  bank  in  Taiwan,
interest  at 3.26%  per  annum,  due by
April 22, 2005                               121,866

Note  payable  to  a   corporation   in
Taiwan,  interest  at 6.265% per annum,
due by November  20,  2005,  personally
guaranteed by an office of the Company       256,496
                                          ----------
Total                                      3,461,612                                                      2,579,730

Current portion                           $3,215,282                                                     $2,316,689
                                          ----------                                                     ----------
Long-term portion                         $  246,330
                                          ==========                                                     $  263,041
                                                                                                         ==========
</TABLE>

                                      F-18
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004


NOTE L - RELATED PARTY TRANSACTIONS

     Throughout  the  history of the  Company,  certain  members of the Board of
     Directors  and general  management  have made loans to the Company to cover
     operating expenses or operating deficiencies.

     Andy Lai - As of December 31, 2004 and February 29, 2004, the Company has a
     non interest-bearing  loan from Andy Lai, the Company's  President,  in the
     amount of $73,827 and $334,812,  respectively.  Mr. Lai has also personally
     guaranteed a note  payable of the Company in the amount of $477,953.  As of
     December 31, 2004, the balance for the note was $256,496.

     Huang  Hui  Maio  - As  of  December  31,  2004,  the  Company  has  a  non
     interest-bearing loan from Huang Hui Maio, a shareholder of the Company, in
     the amount of $6,256.

NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying  amounts of cash and cash  equivalents,  accounts  receivable,
     deposits and accounts payable  approximate  their fair value because of the
     short maturity of those instruments.

     The carrying amounts of the Company's long-term debt approximate their fair
     value  because  of the  short  maturity  and/or  interest  rates  which are
     comparable to those currently  available to the Company on obligations with
     similar terms.

NOTE N - STOCK

     On February  14, 2003 the Board of  Directors  of the Company  approved and
     recommended that Company's Articles of Incorporation be amended to increase
     the number of authorized  shares of common  stock,  par value $0.001 of the
     Company, from 25,000,000 shares to 100,000,000; and to authorize 50,000,000
     shares of preferred stock, par value $0.001.

     On February 17, 2003, the holders of  approximately  52% of the outstanding
     shares of common stock of City Network  executed a written consent adopting
     and approving the Charter  Amendment.  The Charter Amendment was filed with
     the Secretary of State of the State of Nevada in March 2003.

     In May 2004,  the Company  issued  2,500,000  shares of its common stock as
     consideration  for the  conversion  in full of a note and  short  term debt
     payable to third parties in the aggregate of $1,680,329. The note and short
     term debt payable were  converted into shares of common stock at a price of
     approximately $0.672 per share.

                                      F-19
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     DECEMBER 31, 2004 AND FEBRUARY 29, 2004

NOTE O - TRANSITION REPORTS

     In  accordance  to  Regulation  13A-10,  the  following  table  present the
     statements  of income for the ten months  ended  December 31, 2004 and 2003
     for the Company,  due to the change in the fiscal year ended from  February
     28 to December 31.

<TABLE>
<CAPTION>
                                                        Ten months ended        Ten months ended
                                                        December 31, 2004       December 31, 2003
                                                        -----------------       -----------------
                                                            (Audited)              (Unaudited)
<S>                                                       <C>                      <C>
     Sales, net                                           $ 15,674,613             $ 16,119,649

     Cost of sales                                          14,924,938               14,798,578
                                                          ------------             ------------

           Gross profit                                     749,675.00                1,321,071

     General and administrative expenses                     1,395,388                  758,032
                                                          ------------             ------------

           Income (loss) from operations                      (645,713)                 563,039
                                                          ------------             ------------
     Other (Income) Expense
       Interest income                                          (3,785)                 (21,137)
       Rental income                                           (17,858)                  (2,093)
       Commission income                                          (281)                 (14,767)
       (Gain) loss on currency exchange                        (10,720)                  (5,100)
       Other income                                            (32,120)                 (36,067)
       Equity in earnings of investee                          (58,330)                   2,676
       Miscellaneous                                             1,303                   61,774
       Bad debt expense                                        185,858                  362,075
       Loss on sale of fixed assets                             32,068                        0
       Interest expense                                        112,922                   55,655
                                                          ------------             ------------

           Total Other (Income) Expense                        209,057                  403,016
                                                          ------------             ------------

           Income (loss) before income taxes                  (854,770)                 160,023

     Provison for income taxes                                 109,890                  137,095
                                                          ------------             ------------

     Net income (loss)                                    ($   964,660)            $     22,928
                                                          ============             ============

     Net income (loss) per share (basic and diluted)
       Basic                                              $     (0.036)            $      0.001
       Diluted                                            $     (0.036)            $      0.001

     Weighted average number of shares
       Basic                                                27,000,000               24,777,778
       Diluted                                              27,000,000               24,777,778
</TABLE>

                                      F-20