UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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


                 FOR THE QUARTERLY PERIOD ENDED: March 31, 2006


                        COMMISSION FILE NUMBER: 001-31954


                               CITY NETWORK, INC.
           (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.)


                    2F-1, No. 16, Jian Ba Road, Chung Ho City
                         Taipei County 235, Taiwan, ROC
                    (Address of Principal Executive Offices)


                               011-886-2-8226-5566
                               (Telephone Number)

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

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X].

As of May 22, 2006,  there were  32,967,183  shares of common  stock,  par value
$0.001 per share, outstanding.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X].
<PAGE>
                                Table Of Contents

PART I - FINANCIAL INFORMATION..............................................  3

   Item 1.  Financial Statements............................................  3

   Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations....................................... 26

   Item 3.  Controls and Procedures......................................... 30

PART II - OTHER INFORMATION................................................. 31

   Item 1.  Legal Proceedings............................................... 31

   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds..... 31

   Item 3.  Defaults Upon Senior Securities................................. 31

   Item 4.  Submission of Matters to a Vote of Security Holders............. 31

   Item 5.  Other Information............................................... 31

   Item 6.  Exhibits........................................................ 32

SIGNATURES ................................................................. 33

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       CITY NETWORK, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2006 AND DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                     March 31, 2006     December 31, 2005
                                                     --------------     -----------------
                                                       (Unaudited)
<S>                                                   <C>                  <C>
                               ASSETS

Current Assets
  Cash and cash equivalents                           $    83,413          $   856,587
  Accounts receivable, net                              4,263,567            4,371,110
  Inventory                                               356,322              252,608
  Other receivables                                       431,301              241,304
  Prepaid expenses                                      5,071,441            3,500,021
  Short-term investments                                  922,200                   --
                                                      -----------          -----------

      Total Current Assets                             11,128,244            9,221,630
                                                      -----------          -----------

Fixed Assets, net                                       3,170,012            2,391,422
                                                      -----------          -----------
Other Assets
  Deposits                                                511,616              503,579
  Cash held for compensating balances                   1,291,506            1,380,992
  Construction in progress                                 32,662              418,105
  Trademarks                                                1,707                1,727
  Equity in net assets of affiliated company              761,571              790,842
  Intangible assets                                       914,515              923,347
                                                      -----------          -----------

      Total Other Assets                                3,513,577            4,018,592
                                                      -----------          -----------

      Total Assets                                    $17,811,833          $15,631,644
                                                      ===========          ===========
</TABLE>

                                       3
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2006 AND DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                                      March 31, 2006       December 31, 2005
                                                                      --------------       -----------------
                                                                       (Unaudited)
<S>                                                                    <C>                    <C>
                LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable and accrued expenses                                $  2,474,507           $  1,471,867
  Convertible note payable                                                  250,000                250,000
  Due to related party                                                    1,106,195              1,131,494
  Deferred revenue                                                        3,220,301              3,198,414
  Current portion, long-term debt                                         3,641,753              4,220,230
                                                                       ------------           ------------

      Total Current Liabilities                                          10,692,756             10,272,005

Long-term debt, net of current portion                                    2,360,985                572,668
                                                                       ------------           ------------

          Total Liabilities                                              13,053,741             10,844,673
                                                                       ------------           ------------
Stockholders' Equity
  Common stock, $.001 par value, 100,000,000 shares
   authorized, 32,967,183 shares issued and 28,521,728
   shares outstanding at March 31, 2006 and December 31, 2005                32,967                 32,967
  Additional paid in capital                                              6,157,479              6,157,479
  Other comprehensive income                                                443,033                366,384
  Accumulated deficit                                                    (1,875,387)            (1,769,859)
                                                                       ------------           ------------
      Total capital and retained deficit                                  4,758,092              4,786,971
  Less: cost of treasury stock                                                    0                      0
                                                                       ------------           ------------

      Total Stockholders' Equity                                          4,758,092              4,786,971
                                                                       ------------           ------------

      Total Liabilities and Stockholders' Equity                       $ 17,811,833           $ 15,631,644
                                                                       ============           ============
</TABLE>
                                       4
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        March 31, 2006         March 31, 2005
                                                        --------------         --------------
<S>                                                      <C>                    <C>
Sales, net                                               $  2,581,062           $  1,293,350

Cost of sales                                               2,400,155              1,255,040
                                                         ------------           ------------

      Gross Profit                                            180,907                 38,310

General and administrative expenses                           358,893                323,145
                                                         ------------           ------------

      Income (loss) from operations                          (177,986)              (284,835)
                                                         ------------           ------------
Other (Income) Expense
  Interest income                                              (6,971)                  (399)
  Rental income                                               (46,470)               (47,670)
  Commission income                                           (99,136)                (3,921)
  (Gain) loss on currency exchange                             12,677                  8,258
  Reserve for bad debt                                         14,993                685,000
  Equity in earnings of investee                               29,271                 10,654
  Miscellaneous                                               (32,192)               (33,529)
  Loss on sale of fixed assets                                     --                 82,260
  Interest expense                                             55,370                 38,398
                                                         ------------           ------------

      Total Other (Income) Expense                            (72,458)               739,051
                                                         ------------           ------------

      Income (loss) before income taxes                      (105,528)            (1,023,886)

Provision for income taxes                                          0                      0
                                                         ------------           ------------

      Net income (loss)                                  $   (105,528)          $ (1,023,886)
                                                         ============           ============

Net income (loss) per share (basic and diluted)
  Basic                                                  $     (0.004)          $     (0.037)
  Diluted                                                $     (0.004)          $     (0.037)

Weighted average number of shares
  Basic                                                    28,521,728             27,500,000
  Diluted                                                  28,521,728             27,500,000
</TABLE>

                                       5
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              March 31, 2006       March 31, 2005
                                                                              --------------       --------------
<S>                                                                            <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income (Loss)                                                            $  (105,528)          $(1,023,886)
  Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities:
     Depreciation and amortization                                                  48,431                43,113
     Equity in earnings of investee                                                 29,271                10,654
     Bad debt                                                                       14,993                    --
     Losses on disposal of fixed assets                                                 --                82,260
     Loss (Gain) on foreign currency exchange                                      (12,677)                8,258
     Decrease (Increase) in receivables                                            135,455               360,823
     Decrease (Increase) in other receivables                                     (107,469)              (54,498)
     Decrease (Increase) in inventory                                             (114,033)               29,513
     Decrease (Increase) in deposit                                                     --               (31,212)
     Decrease (Increase) in prepaid expenses and other current assets           (1,256,004)             (241,871)
     Increase (Decrease) in accounts payable and accrued expenses                  976,929              (168,962)
     (Decrease) Increase in deferred revenue                                            --                (5,693)
     (Decrease) Increase in other liabilities                                       10,967                    --
                                                                               -----------           -----------
         Total Adjustments                                                        (274,137)               32,385
                                                                               -----------           -----------

         Net cash provided by (used in) operating activities                      (379,665)             (991,501)
                                                                               -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from disposal of property, plant and equipment                               --               369,042
  Purchases of property, plant and equipment                                      (774,714)                   --
  Increase in short-term investments                                              (921,138)                   --
  Increase in other assets                                                          99,908                    --
                                                                               -----------           -----------

         Net cash provided by (used in) investing activities                    (1,595,945)              369,042
                                                                               -----------           -----------
</TABLE>

                                       6
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    March 31, 2006        March 31, 2005
                                                                    --------------        --------------
<S>                                                                   <C>                   <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from short-term borrowings                                 $   678,950           $ 1,494,868
  Payment on notes payable                                             (1,308,210)           (1,579,160)
  Payment of loan from related party                                         (215)               (6,293)
  Proceeds from long-term debts                                         1,791,307                    --
  Proceeds from advance                                                    19,910                    --
                                                                      -----------           -----------

         Net cash provided by (used in) financing activities            1,181,742               (90,585)
                                                                      -----------           -----------

Effect of exchange rate change on cash                                     20,694                21,726

Net change in cash and cash equivalents                                  (773,174)             (691,318)
                                                                      -----------           -----------

Cash and cash equivalents at beginning of year                            856,587             2,010,644
                                                                      -----------           -----------

Cash and cash equivalents at end of year                              $    83,413           $ 1,319,326
                                                                      ===========           ===========

Supplemental cash flows disclosures:
  Income tax payments                                                 $        --           $        --
                                                                      ===========           ===========

  Interest payments                                                   $    54,513           $    38,398
                                                                      ===========           ===========
</TABLE>
                                       7
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                      MARCH 31, 2006 AND DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                    March 31, 2006       December 31, 2005
                                                    --------------       -----------------
                                                      (Unaudited)
<S>                                                <C>                    <C>
Common stock, number of shares
  Balance at beginning of period                       32,967,183             27,500,000
  Common stock issued                                          --              5,467,183
                                                     ------------           ------------

  Balance at end of period                             32,967,183             32,967,183
                                                     ------------           ------------
Treasury stock, number of shares
  Balance at beginning of period                        4,445,455                     --
  Treasury stock acquired                                      --              4,445,455
                                                     ------------           ------------

  Balance at end of period                              4,445,455              4,445,455
                                                     ------------           ------------
Common stock, par value $.001
  Balance at beginning of period                     $     32,967           $     27,500
  Common stock issued                                          --                  5,467
                                                     ------------           ------------

  Balance at end of period                                 32,967                 32,967
                                                     ------------           ------------
Additional paid in capital
  Balance at beginning of period                        6,157,479              5,937,946
  Issuance of stock                                            --                219,533
                                                     ------------           ------------

  Balance at end of period                              6,157,479              6,157,479
                                                     ------------           ------------
Other comprehensive income
  Balance at beginning of period                          366,384                142,453
  Foreign currency translation                             76,649                223,931
                                                     ------------           ------------

  Balance at end of period                                443,033                366,384
                                                     ------------           ------------
Retained earnings (deficits)
  Balance at beginning of period                       (1,769,859)              (712,383)
  Net income (loss)                                      (105,528)            (1,057,476)
                                                     ------------           ------------

  Balance at end of period                             (1,875,387)            (1,769,859)
                                                     ------------           ------------

Less: Cost of treasury stock                                    0                      0
                                                     ------------           ------------

Total stockholders' equity at end of period          $  4,758,092           $  4,786,971
                                                     ============           ============
</TABLE>

                                       8
<PAGE>
                       CITY NETWORK, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006
                                   (UNAUDITED)


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".

     The  Company  designs,  manufactures  and markets a  comprehensive  line of
     broadband   communication   and  wireless   Internet  access  products  and
     solutions.  Also, the broadband  communication  product line includes VOIP,
     GUI-based remote  management and routing  technology  software packages for
     simplified  setup,   extensive   network   management  and  global  network
     connectivity  capabilities,  home PNA and xDSL broadband access  equipment,
     ADSL/VDSL ACCESS DEVICES, HPNA ACCESS DEVICES, FTTB (Fiber to the Building)
     and FTTH  (Fiber to the Home),  PCMCIA  cards and USB  adapters.  The other
     wireless  Internet  access  solutions  are  used  in  both  individual  and
     corporate.

     The Company has also recently  begun the  development  of its  construction
     business. The Company plans to develop and build commercial and residential
     buildings,  industry factory  buildings,  and professional  buildings.  The
     Company has entered co-construction  agreements for the development of land
     in Keelung, Taiwan and the purchase of materials with a company in Vietnam,
     as further described in Note H herein.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     UNAUDITED INTERIM FINANCIAL INFORMATION

     The accompanying  financial  statements have been prepared by City Network,
     Inc.,  pursuant to the rules and regulations of the Securities and Exchange
     Commission  (the  "SEC")  Form  10-QSB and Item 310 of  Regulation  S-B and
     generally accepted accounting  principles for interim financial  reporting.
     These financial statements are unaudited and, in the opinion of management,
     include all  adjustments  (consisting of normal  recurring  adjustments and
     accruals)  necessary for a fair  presentation of the statement of financial
     position,  operations, and cash flows for the periods presented.  Operating
     results  for the  three  months  ended  March  31,  2006  and  2005 are not
     necessarily  indicative  of the results  that may be expected  for the year
     ended  December 31, 2006, or any future  period,  due to seasonal and other
     factors.  Certain information and footnote disclosures normally included in
     financial   statements  prepared  in  accordance  with  generally  accepted
     accounting  policies  have been  omitted in  accordance  with the rules and
     regulations  of the  SEC.  These  financial  statements  should  be read in
     conjunction  with  the  audited   consolidated   financial  statements  and
     accompanying notes,  included in the Company's Annual Report on Form 10-KSB
     for the year ended December 31, 2005.

                                       9
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

                                       10
<PAGE>
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 three months period ended March 31, 2006. 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)

     As of March 31, 2006 and 2005,  the  transactions  of City Network,  Inc. -
     Taiwan and City Construction were denominated in a foreign currency and are
     recorded in New Taiwan Dollars ("NTD"),  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.

                                       11
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     TRANSLATION ADJUSTMENT

     As of March 31, 2006, 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 a component of shareholders' equity.

     As of March 31, 2006 and December 31, 2005 the exchange  rates  between NTD
     and the USD were NTD$1=USD$0.03074 and NTD$1=USD$0.03044, respectively. The
     weighted-average   rates   of   exchange   between   NTD   and   USD   were
     NTD$1=USD$0.03098,  NTD$1=USD$0.03117, and NTD$1=USD$0.02979 for the period
     (year)  ended  March 31,  2006,  December  31,  2005,  and March 31,  2005,
     respectively.  Total translation adjustment recognized as of March 31, 2006
     and December 31, 2005 is $443,033 and $366,384, 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.

     INVENTORY

     Inventory is valued at the lower of cost or market.  Cost is  determined on
     the weighted average method. As of March 31, 2006, inventory consisted only
     of finished goods.

                                       12
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     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.

     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.

                                       13
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     INCOME TAXES (Continued)

     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

     On January 1, 2002 the Company  adopted  SFAS No. 144  "Accounting  for the
     Impairment  or  Disposal  of  Long-Lived  Assets".  The  Company  evaluates
     long-lived   assets   for   impairment   whenever   events  or  changes  in
     circumstances  indicate  that the  carrying  value  of an asset  may not be
     recoverable.  If the estimated future cash flows  (undiscounted and without
     interest  charges)  from the use of an asset  were less  than the  carrying
     value,  a write-down  would be recorded to reduce the related  asset to its
     estimated fair value. There have been no such impairments to date.

     NEW ACCOUNTING PRONOUNCEMENTS

     In  December  2004,  the FASB issued SFAS No.  151,  "Inventory  Costs,  an
     amendment of ARB No. 43,  Chapter 4," which will become  effective  for the
     Company  beginning  January 1, 2006. This standard  clarifies that abnormal
     amounts  of idle  facility  expense,  freight,  handling  costs and  wasted
     material  should be expensed as incurred and not  included in overhead.  In
     addition,  this standard  requires that the allocation of fixed  production
     overhead  costs  to  inventory  be  based  on the  normal  capacity  of the
     production  facilities.  The  Company  does not  believe  the impact of the
     change will be material.

     In December 2004, the FASB issued SFAS No.  152,"Accounting for Real Estate
     Time-Sharing  Transactions".  The FASB issued this Statement as a result of
     the guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting
     for Real Estate  Time-Sharing  Transactions".  SOP 04-2 applies to all real
     estate  time-sharing  transactions.  Among other  items,  the SOP  provides
     guidance on the  recording  of credit  losses and the  treatment of selling
     costs,  but does not change the  revenue  recognition  guidance in SFAS No.
     66,"Accounting  for Sales of Real  Estate",  for real  estate  time-sharing
     transactions.  SFAS No.  152  amends  Statement  No.  66 to  reference  the
     guidance  provided  in SOP 04-2.  SFAS No.  152 also  amends  SFAS No.  67,
     "Accounting  for  Costs  and  Initial  Rental  Operations  of  Real  Estate
     Projects",  to state  that SOP  04-2  provides  the  relevant  guidance  on
     accounting for incidental  operations and costs related to the sale of real
     estate  time-sharing  transactions.  SFAS No.  152 is  effective  for years
     beginning  after June 15, 2005,  with  restatements  of  previously  issued
     financial  statements  prohibited.  This statement is not applicable to the
     Company.

                                       14
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     NEW ACCOUNTING PRONOUNCEMENTS (Continued)

     In December  2004, the FASB issued SFAS No.  153,"Exchanges  of Nonmonetary
     Assets,"  an  amendment  to  Opinion  No.  29,"Accounting  for  Nonmonetary
     Transactions".  Statement No. 153  eliminates  certain  differences  in the
     guidance  in  Opinion  No. 29 as  compared  to the  guidance  contained  in
     standards  issued by the  International  Accounting  Standards  Board.  The
     amendment  to  Opinion  No. 29  eliminates  the fair  value  exception  for
     nonmonetary  exchanges of similar  productive assets and replaces it with a
     general  exception  for  exchanges of  nonmonetary  assets that do not have
     commercial  substance.  Such an exchange  has  commercial  substance if the
     future cash flows of the entity are expected to change  significantly  as a
     result of the  exchange.  SFAS No. 153 is effective for  nonmonetary  asset
     exchanges  occurring  in periods  beginning  after June 15,  2005.  Earlier
     application  is permitted  for  nonmonetary  asset  exchanges  occurring in
     periods  beginning  after  December  16, 2004.  Management  does not expect
     adoption  of  SFAS  No.  153 to have a  material  impact  on the  Company's
     financial statements.

     In May 2005,  the FASB issued  Statement No. 154,  "Accounting  Changes and
     Error  Corrections",  a replacement of Accounting  Principles Board Opinion
     No. 20, "Accounting  Changes",  and Statement No. 3, "Reporting  Accounting
     Changes in Interim Financial Statements" ("SFAS 154"). SFAS 154 changes the
     requirements  for the  accounting  for,  and  reporting  of,  a  change  in
     accounting   principle.   Previously,   voluntary   changes  in  accounting
     principles were generally  required to be recognized by way of a cumulative
     effect adjustment  within net income during the period of the change.  SFAS
     154  requires   retrospective   application  to  prior  periods'  financial
     statements,  unless it is  impracticable  to determine either the period of
     specific  effects  or the  cumulative  effect  of the  change.  SFAS 154 is
     effective  for  accounting  changes  made in fiscal years  beginning  after
     December 15, 2005;  however,  the statement  does not change the transition
     provisions of any existing accounting pronouncements.  The Company does not
     believe  adoption of SFAS 154 will have a material  effect on its financial
     position, cash flows or results of operations.

     In  February  2006,  the FASB  issued  Statement  of  Financial  Accounting
     Standards No. 155,  "Accounting for Certain Hybrid  Financial  Instruments"
     ("SFAS  155"),  which  amends SFAS No.  133,  "Accounting  for  Derivatives
     Instruments  and  Hedging  Activities"  ("SFAS  133")  and  SFAS  No.  140,
     "Accounting   for  Transfers   and   Servicing  of  Financial   Assets  and
     Extinguishment  of Liabilities"  ("SFAS 140").  SFAS 155 amends SFAS 133 to
     narrow the scope exception for interest-only and  principal-only  strips on
     debt instruments to include only such strips representing rights to receive
     a specified  portion of the  contractual  interest or principle cash flows.
     SFAS 155 also amends SFAS 140 to allow qualifying  special-purpose entities
     to hold a passive derivative financial instrument  pertaining to beneficial
     interests  that it is a  derivative  instrument.  The Company is  currently
     evaluating the impact this new Standard, but believes that it will not have
     a material impact on the Company's financial position,

NOTE C - CONCENTRATION

     The Company had two major customers during the three months ended March 31,
     2006.  Sales  to  these  customers  were  approximately  $2,300,569.  Those
     customers  comprise  89% of the total sales  during the three  months ended
     March 31, 2006. Included in accounts receivable is approximately $3,120,266
     from these customers as of March 31, 2006.

                                       15
<PAGE>
NOTE D - CASH

     The Company  maintains its cash  balances at various  banks in Taiwan.  The
     balances are insured by the Central Deposit Insurance Corporation (CDIC) up
     to  approximately  $30,740.  As of March 31, 2006,  there was $1,330,732 in
     uninsured balances held at these banks.

NOTE E - COMPENSATING BALANCES

     The  company,  under the  terms of its  lines of  credit  with two banks in
     Taiwan, has agreed to maintain a compensating balance equal to at least 30%
     to 35% of the outstanding loan balance. As of March 31, 2006, $1,291,506 of
     cash is restricted for this purpose (see Note L).

NOTE F - FIXED ASSETS

     Fixed assets consist of the following:

                                        March 31, 2006      December 31, 2005
                                        --------------      -----------------
     Land                                $ 1,927,837           $ 1,909,023
     Machinery and equipment                 673,171               512,433
     Furniture and fixtures                  782,333               208,705
                                         -----------           -----------

                                         $ 3,383,341           $ 2,630,161

     Accumulated depreciation               (213,329)             (238,739)
                                         -----------           -----------

                                         $ 3,170,012           $ 2,391,422
                                         ===========           ===========

NOTE G - INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                        March 31, 2006      December 31, 2005
                                        --------------      -----------------
     Trademarks                          $     2,244           $     2,222
     Intangible asset                      1,075,900             1,065,400
                                         -----------           -----------

                                         $ 1,078,144           $ 1,067,622

     Accumulated depreciation               (161,922)             (142,548)
                                         -----------           -----------

                                         $   916,222           $   925,074
                                         ===========           ===========

                                       16
<PAGE>
NOTE H- COMMITMENTS

     A Best Information  Technology,  Inc. - City Network, Inc. - Taiwan, signed
     an  agreement  with A Best  Information  Technology,  Inc.  in 2002 for the
     exclusive  right to sell A Best  Information's  products.  The  rights  are
     perpetual and transferable.

     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  Agreements - In April 2004,  City  Construction  Co., Ltd.
     placed a  refundable  performance  bond in the amount of $233,624  with the
     court in Taiwan  for the  rights to  complete  an  unfinished  building  in
     Keelung,  Taiwan with the owners of the land.  The Company is  currently in
     discussion with the landowners regarding the terms of the project.

     In March  2005,  City  Construction  Co.,  Ltd.  entered a  Co-Construction
     Agreement  with  three  individuals  who  own a tract  of land in  Keelung,
     Taiwan. Under the agreement, the Company will finance,  construct and, upon
     completion,  will own 60% of the building  project.  The Company  agreed to
     make  refundable  deposits,  as security,  totaling  approximately  $91,320
     payable at various  agreed upon phases of the  construction.  The  deposits
     will be returned within 2 years after the construction is completed.  As of
     Mar 31,  2006,  the  Company  has paid  $92,220  as part of the  refundable
     security deposit and $585,982 as construction in progress on the building.

     On July 20, 2005, and as amended on September 22, 2005, the Company entered
     into a contract  with a company in Vietnam.  Per the terms of the  contract
     the Company has agreed to procure  materials and  equipment  related to the
     construction of a commercial building in Vietnam. As of March 31, 2006, the
     Company  received an advance of  $3,000,000  on this  contract and is using
     these funds to purchase the related materials.

     On July 25,  2005 the  Company  entered  into a contract  with a company in
     Samoa  to  purchase  materials  from  them  related  to the  above  Vietnam
     contract. The total purchases will be approximately $3,000,000. As of March
     31, 2006, the Company advanced approximately $2,740,000 to this vendor.

     Operating  Leases - The Company leases office  facilities  under  operating
     leases that  terminate on various  dates.  Rental  expense for these leases
     consisted of $11,892 for the three months ended March 31, 2006. The Company
     has future minimum lease obligations as follows:

                      Year                      Amount
                      ----                      ------
                      2007                      $31,199
                      2008                       20,888
                      ----                      -------
                      Total                     $52,087
                                                =======

                                       17
<PAGE>
NOTE H- COMMITMENTS (Continued)

     On March 16, 2006, the Company entered a Security  Purchase  Agreement with
     Cornell Capital  Partners,  LP. In the transaction,  the Company will issue
     secured  convertible  debentures  (the  "Notes") in an aggregate  principal
     amount of up to $650,000 to Cornell  Capital or Highgate House Funds,  Ltd.
     ("Highgate House," and together with Cornell Capital,  the "Investor"),  an
     affiliate  of Cornell  Capital.  The Company  plans to use a portion of the
     Notes to redeem  $250,000  in  aggregate  principal  amount,  plus  accrued
     interest, of secured convertible debentures issued pursuant to a Securities
     Purchase  Agreement,  dated August 10, 2005, by and between the Company and
     Highgate House (the "Original Notes").

     Under the Term Sheet,  the Notes will mature three years after issuance.  A
     20%  redemption  premium on the  principal  amount of the Notes is due when
     they are  redeemed,  if the closing  bid price of the common  stock is less
     than the Fixed Conversion Price.  Additionally,  an annual interest rate of
     7% accrues on the outstanding principal amount of the Notes. The Notes will
     be secured by substantially all of the assets of the Company and its direct
     and  indirect  wholly-owned  subsidiaries,   City  Technology,  Inc.,  City
     Network,  Inc.--Taiwan  and City  Construction  Co.,  Ltd.; a pledge of the
     4,445,455 shares of common stock, par value $0.001 per share,  securing the
     Original  Notes;  and a pledge  of  2,000,000  additional  shares of common
     stock. The 2,000,000 additional shares of common stock will be pledged only
     if Notes exceeding  $275,000 in aggregate  principal amount are issued. The
     Notes are convertible  into Common Stock based on at the lower of (a)$0.268
     per share or (b)  ninety-five  percent (95%) of the lowest volume  weighted
     average  price of the Common Stock,  as reported by Bloomberg,  LP, for the
     thirty  (30)  trading  days  preceding  the  conversion.  Upon  closing the
     transaction,  the Company  will issue to the  Investor a five-year  warrant
     (the "Warrant") to purchase  1,000,000 shares of Common Stock (the "Warrant
     Shares") at an exercises  price of $0.001 per share.  The Company will also
     agree to register the Common Stock underlying the Notes and the Warrant.

     Upon signing definitive  documents for the transaction,  the Standby Equity
     Distribution  Agreement  between the Company  and  Cornell  Company,  dated
     August 10, 2005, will be terminated.

     On January 24, 2006, City Network, Inc. - Taiwan (the "Purchaser"), entered
     into a Purchase and Sale  Agreement  with Wang,  Rong-Zong  (the  "Seller")
     pursuant to which the Purchaser agreed to purchase and the Seller agreed to
     sell property  located in the City of Tou-Liu,  Yun-Lin  County,  including
     Lots 38-436,  37-126 and 37-125,  and otherwise  known as Building B, #222,
     Chunghwa Rd.,  Tou-Liu City,  Yun-Lin County,  Taiwan ROC, for an aggregate
     purchase  price equal to  approximately  $2 million (NTD  64,000,000).  The
     aggregate  purchase price is payable in four  installments as follows:  (i)
     $312,940 (NTD  10,000,000),  (ii) $250,352 (NTD 8,000,000),  (iii) $190,738
     (NTD 6,100,000) and (iv) $1.25 million (NTD 39,900,000).

     As of March 31,  2006,  the  Purchaser  has paid to the  Seller for a total
     amount equal to approximately $782,000 (NTD 25,450,000). The Purchaser will
     pay the final  payment to the  Seller  upon  receipt  of a mortgage  in the
     amount of  approximately  $1.25  million (NTD  39,900,000).  On January 23,
     2006,  the  Purchaser  was  approved  for  a  mortgage  in  the  amount  of
     approximately $1.25 million (NTD 39,900,000) by Hua Nan Commercial Bank but
     the Purchaser has not yet received the cash amount of the mortgage.

     On January  24,  2006,  the  Purchaser  issued a check to the Seller in the
     amount of  approximately  $1.25 million (NTD  39,900,000) as a guarantee of
     the   Purchaser's   payment  of  the   outstanding   purchase   price  (the
     "Guarantee").  The Seller  agreed to return the  Guarantee to the Purchaser
     upon the Purchaser's  receipt of the full mortgage and the Seller's receipt
     of the outstanding purchase price.

                                       18
<PAGE>
NOTE I - LONG-TERM INVESTMENT

     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 March
     31, 2006, the Company recognized a loss of $29,271 from their acquisition.

NOTE J - 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 March 31, 2006 vacation
     liability existed in the amount of $2,497.

NOTE K - INCOME TAXES

     Total Federal and State income tax expense for the quarters ended March 31,
     2006 and 2005 were both  amounted to $0. For the three  months  ended March
     31, 2006 and 2005, there is no difference between the federal statutory tax
     rate and the effective tax rate.

     The following is a reconciliation of income tax expense:

     03/31/06         U.S.            State         International        Total
     --------         ----            -----         -------------        -----
     Current         $    0           $    0           $    0           $    0
     Deferred             0                0                0                0
                     ------           ------           ------           ------

     Total           $    0           $    0           $    0           $    0
                     ======           ======           ======           ======

     03/31/05         U.S.            State         International        Total
     --------         ----            -----         -------------        -----
     Current         $    0           $    0           $    0           $    0
     Deferred             0                0                0                0
                     ------           ------           ------           ------

     Total           $    0           $    0           $    0           $    0
                     ======           ======           ======           ======

                                       19
<PAGE>
NOTE K - INCOME TAXES (Continued)

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

                                             03/31/06            03/31/05
                                             --------            --------
     Federal statutory tax rate                   34%                 34%
     State, net of federal benefit                 0%                  0%
                                              ------              ------

     Effective tax rate                           34%                 34%
                                              ======              ======

NOTE L - OTHER COMPREHENSIVE INCOME

     Balances  of related  after-tax  components  comprising  accumulated  other
     comprehensive income (loss), included in stockholders' equity, at March 31,
     2006 and December 31, 2005 are as follows:

                                     Foreign Currency        Accumulated Other
                                   Translation Adjustment   Comprehensive Income
                                   ----------------------   --------------------
     Balance at December 31, 2004        $ 142,453               $ 142,453
     Change for 2005                     $ 223,931               $ 223,931
                                         ---------               ---------

     Balance at December 31, 2005        $ 366,384               $ 366,384
     Change for 2006                     $  76,649               $  76,649
                                         ---------               ---------

     Balance at March 31, 2006           $ 443,033               $ 443,033
                                         =========               =========

NOTE M - DEBT

     At March 31, 2006 and  December  31,  2005,  the Company had notes  payable
     outstanding  in  the  aggregate  amount  of  $6,002,738  and $  $4,792,898,
     respectively. Payable as follows:

<TABLE>
<CAPTION>
            March 31, 2006                                                December 31, 2005
            --------------                                                -----------------
<S>                                         <C>                <C>                                     <C>
Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
October 8, 2006                             $     491,840       by October 8, 2006                     $     487,040

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
August 31, 2006                                   922,200       by August 31, 2006                           913,200

Secured  note  payable  to  a  bank  in                         Secured  note payable to a bank in
Taiwan,  interest  at 3.838% per annum,                         Taiwan,  interest  at  5.906%  per
due by January 12, 2007                           122,960       annum, due by September 28, 2006             232,483
</TABLE>

                                       20
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>                <C>                                     <C>
Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
April 28, 2006                                    426,978       by January 27, 2006                           45,660

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
May 12, 2007                                      341,582       by February 3, 2006                           96,206

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
June 16, 2006                                     423,942       by February 3, 2006                          123,693

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
June 22, 2006                                     205,468       by February 17, 2006                         233,802

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
June 2006                                          63,245       by February 21, 2006                         219,739

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 3.838% per  annum,  due by                         interest at 3.838% per annum,  due
July 31, 2006                                     678,950       by February 25, 2006                          24,352

Note  payable  to  a  bank  in  Taiwan,                         Note  payable to a bank in Taiwan,
interest  at 4.200% per  annum,  due by                         interest at 3.838% per annum,  due
January 24, 2012                                1,793,371       by March 3, 2006                              69,950

Note  payable  to  a   corporation   in                         Note  payable to a bank in Taiwan,
Taiwan,  no  interest,  due by February                         interest at 3.838% per annum,  due
10, 2010                                          532,202       by March 24, 2006                            295,919

                                                                Note  payable to a bank in Taiwan,
                                                                interest at 3.838% per annum,  due
                                                                by April 1, 2006                             279,553

                                                                Note  payable to a bank in Taiwan,
                                                                interest at 3.838% per annum,  due
                                                                by April 21, 2006                            435,872

                                                                Note  payable to a bank in Taiwan,
                                                                interest at 3.838% per annum,  due
                                                                by April 28, 2006                            422,811

                                                                Note  payable to a bank in Taiwan,
                                                                interest at 3.838% per annum,  due
                                                                by January 17, 2006                          339,950

                                                                Note payable to a  corporation  in
                                                                Taiwan,   no   interest,   due  by
                                                                February 10, 2010                            572,668
                                            -------------                                             --------------
Total                                           6,002,738                                                  4,792,898

Current portion                             $   3,641,753                                              $   4,220,230
                                            -------------                                              -------------
Long-term portion                           $   2,360,985                                              $     572,668
                                            =============                                              =============
</TABLE>

                                       21
<PAGE>
NOTE N - 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 March 31,  2006,  the Company  has a non  interest-bearing
     loan from Andy Lai, the Company's President, in the amount of $798,795.

     Stella Tseng - As of March 31, 2006, the Company has a non interest-bearing
     loan from Stella  Tseng,  a  shareholder  of the Company,  in the amount of
     $307,400.

NOTE O - 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 P - SEGMENT REPORTING

     The  Company  has  two  principal  operating  segments  which  are  (1) the
     production  of  broadband   communication   and  wireless  Internet  access
     products,  (2) other,  including building  constructions and procurement of
     material and equipment  related to construction.  These operating  segments
     were  determined  based on the nature of the  products  offered.  Operating
     segments are defined as components of an  enterprise  about which  separate
     financial information is available that is evaluated regularly by the chief
     operating  decision-maker  in  deciding  how to allocate  resources  and in
     assessing  performance.  The Company's  chief  executive  officer and chief
     financial  officer have been  identified  as the chief  operating  decision
     makers. The Company's chief operating decision makers direct the allocation
     of resources to operating segments based on the profitability,  cash flows,
     and other measurement factors of each respective segment.

     The  Company has  determined  that  broadband  communication  and  wireless
     Internet access products operating segment are reportable  segments as they
     meet the quantitative thresholds under Financial Accounting Standards Board
     Statement No. 131 (Disclosures  about Segments of an Enterprise and Related
     Information).

     The Company evaluates  performance  based on several factors,  of which the
     primary  financial  measure is business  segment  income before taxes.  The
     Company's  construction  operating  segment is currently in the development
     stage and has no revenues. The accounting policies of the business segments
     are the  same as  those  described  in  "Note  A:  Summary  of  Significant
     Accounting  Policies." The table on the following page shows the operations
     of the Company's reportable segments:

                                       22
<PAGE>
NOTE P - SEGMENT REPORTING (Continued)

<TABLE>
<CAPTION>
                                               Broadband
                                             communication
                                              and wireless
                                            Internet access
                                               products            Other (1)           Consolidated
                                               --------            ---------           ------------
<S>                                          <C>                  <C>                   <C>
     1st Quarter 2006
     Sales to unaffiliated customers         $ 2,581,062          $         0           $ 2,581,062
     Intersegment sales                                0                    0                     0
     Net sales                                 2,581,062                    0             2,581,062
     Income (loss) before taxes                   48,335             (153,863)             (105,528)
     Total assets (2)                         12,270,995            5,540,838            17,811,833
     Property additions (3)                      774,714                    0               774,714
     Interest expense                             54,513                  857                55,370
     Interest revenue                                  0                6,971                 6,971
     Depreciation and amortization (3)            48,431                    0                48,431
</TABLE>

     (1)  Revenue  from   segments   below  the   quantitative   thresholds   is
          attributable to two operating segments of the Company.  Those segments
          include  building   constructions  and  procurement  of  material  and
          equipment related to construction. None of those segments has ever met
          any  of  the  quantitative   thresholds  for  determining   reportable
          segments.

     (2)  Total business  assets are the owned or allocated  assets used by each
          business.  Corporate  assets  consist  of cash and  cash  equivalents,
          unallocated fixed assets of support  divisions and common  facilities,
          and certain other assets.

     (3)  Corporate property additions and depreciation and amortization expense
          include items  attributable to the unallocated fixed assets of support
          divisions and common facilities.

     Also,  because all of the  Company's  sales are  derived  from the sales of
     products  outside of the United States,  all long-lived  assets are located
     outside the United States.

NOTE Q - LEGAL PROCEEDINGS

     The  Company is party to certain  litigation  that has arisen in the normal
     course of its business and that of its subsidiary.

     Hwa-Ching - In August 2004, a customer  closed business and did not pay the
     remaining  balance due to City Network - Taiwan on outstanding  receivables
     in the amount of  NT$27,313,003  or  US$839,602.  City Network - Taiwan has
     filed  criminal and civil  litigation  against the customer for fraud.  The
     Company  has  recorded  a reserve  against  this  account  in the amount of
     $671,681. This case is currently ongoing.

                                       23
<PAGE>
NOTE Q - LEGAL PROCEEDINGS (Continued)

     In August 2004, City Network  Inc.-Taiwan filed a lawsuit against the owner
     of Hwa-Ching  Co., as well as the following  eight  individuals  in Taiwan,
     alleging  fraud for closing  down  Hwa-Ching  Co.  without  payment for the
     delivered merchandise.  City Network Inc.-Taiwan sought approximately NT$27
     million or approximately  US$830,000. In January 27 2006, the court reached
     a verdict  and found  three  individuals  guilty of fraud and  another  two
     individual not guilty.  In connection to the  litigation  against the other
     three individuals, the court has not yet reached a verdict.

     In December  2004,  the Company filed a lawsuit  against  Tain-Kang  Co., a
     customer of Hwa-Ching Co. in Taipei District Court claiming damages owed to
     Hwa-Ching from  Tain-Kang in the amount of  approximately  NT$5,796,000  or
     US$178,169 to cover the  outstanding  account  payable owed by Hwa-Ching to
     the Company.  In November 2005,  Taipei District Court reached the judgment
     in favor of  defendant.  The  Company  filed  appeal to Taiwan  High Court.
     During the appeal,  the Company  reduced the claimed amount to NT$3,796,000
     or  US$116,689  due to  Tain-Kang  has  provided  the proof of  payments of
     NT$2,000,000 in the court. To date, the court has not yet reached a verdict
     on this case.

     On October 10, 2004, RPPI  International  Ltd. (or Rong-Dian),  a vendor of
     the Company, filed a lawsuit against City Network Inc.-Taiwan in the Taiwan
     Taipei  district court of Taiwan,  in Taipei,  Taiwan,  alleging  breach of
     contract  for  two  different   purchase   agreements   that  City  Network
     Inc.-Taiwan  entered with them and two third parties.  Rong-Dian sought the
     aggregate amount of approximately NT$40.2 million or US$1.2 million for the
     alleged breaches. One purchase agreement was for an order that City Network
     Inc.-Taiwan  sold to Hwa-Ching Co. in the amount of  approximately  NT$27.3
     million or  US$840,000  and the other  purchase  agreement was for an order
     City Network  Inc.-Taiwan sold to a separate customer of the Company in the
     amount of approximately NT$12.9 million or US$396,546.

     On June 21, 2005, City Network Inc.-Taiwan  entered a settlement  agreement
     with  Rong-Dian and on June 29, 2005, the district court lifted the lawsuit
     against us. In the June 2005 settlement agreement, City Network Inc.-Taiwan
     agreed to pay Rong-Dian a total of approximately  NT$40.2 million or US$1.2
     million,  to cover the full amount City Network  Inc.-Taiwan owed under the
     two purchase  agreements.  In August 2005,  City Network  Inc.-Taiwan  paid
     Rong-Dian  approximately  NT$12.9 million or US$390,909 of the total amount
     owed upon  receipt of such amount from our  customer.  City  Network Inc. -
     Taiwan  intends to pay the  balance  of  approximately  NT$27.3  million or
     US$840,000  to  Rong-Dian  in 54  separate  checks,  issued and  payable by
     Tai-Wang  Technology  Co.,  Ltd.  These  checks  will be in  increments  of
     NT$500,000 or US$15,370 and payable for 53 consecutive months, beginning on
     August  10,  2005  with the last and 54th  payment  being in the  amount of
     NT$813,003 or US$24,992 instead of NT$500,000 or US$15,370. As of March 31,
     2006,  approximately NT$4 million,  or approximately  US$122,960,  has been
     paid on this liability.

     Pursuant to the June 2005 settlement  agreement,  City Network  Inc.-Taiwan
     agreed to pay Rong-Dian the balance of NT$27.3 million in monthly payments.
     However,  as a result of its  relationship  with Tai-Wang and the fact that
     Tai-Wang  is  the  vendor  who  introduced  City  Network   Inc.-Taiwan  to
     Rong-Dian,  Tai-Wang assumed the  responsibility for the payment of NT$27.3
     million or US$827,272 to  Rong-Dian.  Tai-Wang  wrote each monthly check in
     advance and thereafter provided all 54 checks to Rong-Dian.  Rong-Dian will
     cash one check each month  until it  receives  payment of the full  NT$27.3
     million.  However,  as Tai-Wang has no written obligation with City Network
     Inc.-Taiwan to make each monthly payment,  beyond an oral promise to do so,
     there is no assurance  that each monthly  check will be properly  cashed by
     Rong-Dian. Therefore the Company continues to report the total liability to

                                       24
<PAGE>
NOTE Q - LEGAL PROCEEDINGS (Continued)

     Rong-Dian.  As each  payment is  successfully  paid by Tai-Wang the Company
     will reduce the liability  accordingly  and  recognize  other income as the
     benefit provided by Tai-Wang.

     Additionally, as part of the June 2005 settlement agreement, we secured our
     obligation  that Tai-Wang  would pay Rong-Dian the  outstanding  balance of
     NT$27.3 million or US$827,272 by giving Rong-Dian a first priority mortgage
     on certain  property  including lots 701-4 and 701-6 in  Jay-hou-xiao-duan,
     Xi-zhi Duan,  Xixhi City,  Taipei  County,  Taiwan.  The value of the first
     priority  mortgage on the  property  is  approximately  NT$27.3  million or
     US$827,272,   the  aggregate   amount  owed  to  Rong-Dian.   City  Network
     Inc.-Taiwan agreed with Rong Dian that this mortgage will expire in 2010.

     Shanghai Bank - On January 24, 2005,  Shanghai  Commercial and Savings Bank
     ("Shanghai  Bank") filed a lawsuit with the Taipei  District  Court against
     the  Company   claiming   approximately   NT$12  million  or  approximately
     US$387,000  for the  payment of an unpaid  purchase  price for  goods.  The
     Company  purchased  such  goods from Chin Shin and Chin Shin  assigned  the
     account  receivable  to  Shanghai  Bank.  As such,  Shanghai  Bank sued the
     Company for the payment of those goods.  However,the  Company  returned the
     said goods because they were defective.

     On November  24, 2005,  the Company  entered a  settlement  agreement  with
     Shanghai  Bank and the  district  court  lifted  the  lawsuit  against  the
     Company. In the settlement agreement,  the City Network Inc.- Taiwan agreed
     to pay Shanghai Bank a total of  NT$5,100,000  or US$ 155,244.  In December
     2005,  City  Network,  Inc.-  Taiwan paid  Shanghai  Bank  NT$1,100,000  or
     US$33,484.  City  Network,  Inc.-  Taiwan  intends  to pay the  balance  of
     NT$4,000,000  or US$121,760 to Shanghai  Bank in 4 separate  checks.  These
     checks will be payable for each 2 months,  beginning  on February 25, 2006.
     As of March 31,  2006,  NT$2,100,000  or US  $63,924  has been paid on this
     liability.

NOTE R- GOING CONCERN

     The  Company  has  suffered   recurring   losses  from   operations,   cash
     deficiencies  and the  inability to meet its maturing  obligations  without
     borrowing from related parties and  restructuring  debts.  These issues may
     raise substantial concern about its ability to continue as a going concern.

     Management has prepared the following  statement to address these and other
     concerns:

     The Company is currently  engaged in discussions with a number of companies
     regarding strategic  acquisitions or potential  financings.  Although these
     discussions  are  ongoing,  there  can be no  assurance  that  any of these
     discussions will result in actual acquisitions or a completed financing for
     the Company.

                                     ******

                                       25
<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     The  following   discussion   should  be  read  in  conjunction   with  the
Consolidated  Financial Statements and Notes thereto appearing elsewhere in this
Form  10-QSB.  The  information  in  this  discussion  contains  forward-looking
statements  within the meaning of Section 27A of the  Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
These  forward-looking  statements  involve risks and  uncertainties,  including
statements  regarding our capital  needs,  business  strategy and  expectations,
including but not limited to the following:

     *    our  ability to raise  funds in the future  through  public or private
          financings;

     *    the timing of our introduction of products or product enhancements;

     *    our ability to manage costs  associated with our product or technology
          acquisitions;

     *    our ability to keep pace with rapidly  changing  technology,  evolving
          industry standards and new product and services in our industry;

     *    customers' acceptance of our product designs;

     *    our ability to integrate businesses,  products and technologies and in
          joint ventures and strategic relationships with other companies;

     *    our  business   expenses  being  greater  than   anticipated   due  to
          competitive factors or unanticipated developments;

     *    changes in political and economic conditions in the Asian and European
          countries where we do business;

     *    our ability to retain management and key personnel;

     *    our  ability  to  protect  our   developed   technologies,   know-how,
          trademarks and related intellectual properties; and

     *    our  ability to comply  with the  requirements  of Section  404 of the
          Sarbanes-Oxley Act of 2002.

     Any statements contained herein that are not statements of historical facts
may be deemed to be forward-looking  statements. In some cases, you can identify
forward-looking  statements  by  terminology  such as "may",  "will",  "should",
"expect",  "plan",  "intend",  "anticipate",  "believe",  estimate",  "predict",
"potential"  or  "continue",  the  negative  of such  terms or other  comparable
terminology.  Actual  events or results may differ  materially.  We disclaim any
obligation  to publicly  update these  statements,  or disclose  any  difference
between  its  actual  results  and  those  reflected  in these  statements.  The
information  constitutes  forward-looking  statements  within the meaning of the
Private Securities Litigation Reform Act of 1995.

                                       26
<PAGE>
BACKGROUND OF THE COMPANY

     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  Co., Ltd. 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".

     The  Company  designs,  manufactures  and markets a  comprehensive  line of
broadband  communication  and wireless  Internet  access  product and solutions.
Also, the broadband  communication  product line includes VOIP, GUI-based remote
management  and routing  technology  software  packages  for  simplified  setup,
extensive network management and global network connectivity capabilities,  Home
PNA and xDSL broadband access equipment,  ADSL/VDSL ACCESS DEVICES,  HPNA ACCESS
DEVICES, FTTB (Fiber to the Building) and FTTH (Fiber to the Home), PCMCIA cards
and USB adapters.  The other wireless internet access solutions are used in both
individual and corporate.

     The Company has also recently  begun the  development  of its  construction
business.  The Company  plans to develop and build  commercial  and  residential
buildings,  industry factory buildings,  and professional buildings. The Company
has entered  co-construction  agreements for the development of land in Keelung,
Taiwan and the  purchase  of  materials  with a company in  Vietnam,  as further
described in Part I herein, in the notes to the financial statements.

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

     We have suffered  recurring losses from operations,  cash  deficiencies and
the inability to meet our maturing  obligations  without  borrowing from related
parties and  restructuring  debts.  These issues may raise  substantial  concern
about our ability to continue as a going concern.

     We are  currently  engaged  in  discussions  with  a  number  of  companies
regarding  strategic  acquisitions  or  potential  financings.   Although  these
discussions are ongoing, there can be no assurance that any of these discussions
will result in actual acquisitions or a completed financing for us.

CRITICAL ACCOUNTING POLICIES

     The  discussion  and analysis of our  financial  conditions  and results of
operations is based upon our financial  statements,  which have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("GAAP").  The preparation of these financial  statements requires us to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and liabilities.  See "Summary of Significant  Accounting Policies" in the Notes
to  Consolidated  Financial  Statements  in Item to this Report for our critical
accounting policies.  No significant changes in our critical accounting policies
have occurred since December 31, 2004.

                                       27
<PAGE>
RESULTS OF OPERATIONS

THREE  MONTHS  ENDED MARCH 31, 2006  COMPARED  WITH THREE MONTHS ENDED MARCH 31,
2005

     NET  SALES.  Net sales  for the  three  months  ended  March 31,  2006 were
$2,581,062 compared to $1,293,350 for the three months ended March 31, 2005. The
increase  in net sales for the three  months  ended  March 31, 2006 was due to a
general increase in business to existing and new customers.

     We  design,  manufacture  and  market  a  comprehensive  line of  broadband
communication  and wireless  Internet access  solutions,  including home PNA and
xDSL  broadband  access  equipment and related  accessories,  which comprise our
older,  established  products. In 2004, we introduced new products such as VoIP,
GSP and wireless Internet access products.

     We believe  that an increase in  competition  over the market for our older
products  has  contributed  to a decline  in the unit  price of those  products.
Additionally,  we believe that the introduction of more technologically advanced
products  to the  marketplace  have  diminished  consumer  demand  for our older
products.  We intend to continue  upgrading our older  products to meet customer
expectations.

     We  believe  that  sales  for our new  products,  such  as  VoIP,  wireless
communication  products and GSP products,  can increase with improved brand name
recognition and increased sales  channels.  We intend to continue  promoting and
marketing our new products to improve brand name  recognition as well as work on
increasing sales channels.

     COST OF SALES.  Cost of sales for the three months ended March 31, 2006 was
$2,400,155  or 93.0% of net sales,  as  compared to  $1,255,040  or 97.0% of net
sales, during the three months ended March 31, 2005. The decrease in the cost of
sales as a percentage of revenue is due to the increase of net sales.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
were $358,893 or 13.9% of net sales,  for the three months ended March 31, 2006,
as compared to $323,145 or 25.0% of net sales,  for the three months ended March
31,  2005.  The increase was due to an increase in  professional  expenses.  The
decrease in general and administrative  expenses as a percentage of net sales is
due to the fixed overhead, including salary, rent, depreciation and such factors
being a big part of general and administrative expenses.

     LOSS FROM OPERATIONS. Loss from operations for the three months ended March
31, 2006 was  $(177,986),  compared to loss from operations for the three months
ended March 31, 2005 of $(284,835). The decrease in loss from operations for the
three months ended March 31, 2006  compared  with loss from  operations  for the
three  months ended March 31, 2005  resulted  primarily  from reasons  primarily
described above.

     OTHER (INCOME) EXPENSE.  Other (income) expense was $(72,457) for the three
months ended March 31, 2006,  as compared to $739,051 for the three months ended
March 31, 2005. This change was the result of the decrease of bad debt reserve.

     NET LOSS.  Net loss for three  months  ended March 31, 2006 was  $(105,528)
compared to net loss of $(1,023,886)  for the three months ended March 31, 2005.
The decrease in net loss was due to the reasons described above.

                                       28
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2006 and December 31, 2005,  we had cash and cash  equivalents
of $83,413 and $856,587, respectively. Our current assets totaled $11,128,243 at
March 31, 2006 as compared to $9,221,630 at December 31, 2005. Our total current
liabilities  were  $10,692,756  at March 31, 2006 as compared to  $10,272,005 at
December  31,  2005.  Working  capital  at  March  31,  2006  was  $435,488  and
$(1,050,375)  at December 31,  2005.  For the three months ended March 31, 2006,
total cash used in operations was $(379,665) as compared to net cash provided by
operations  of $(991,501)  during the same period in 2005.  Net cash provided by
financing activities was $1,181,742,  which consisted of loans, as compared with
net cash used in financing activities of $(90,585) during the three months ended
March 31, 2005.

WORKING CAPITAL REQUIREMENTS

     Our  operations  and short term  financing do not  currently  meet our cash
needs.  We  currently  are  engaged in  discussions  with a number of  companies
regarding strategic acquisitions or investments.  Although these discussions are
ongoing,  there can be no assurance that any of these discussions will result in
actual  acquisitions  or investment.  Several  potential  investors have already
shown their interest to invest in our company.

FACTORS THAT INTERRUPT OUR OPERATIONS

     Our major risk is incurring a large amount of bad debt.  Our short-term and
long-term liquidity may be influenced by uncollected account receivables. If the
amount of bad debt is high,  it will  severely  affect our  ability to  continue
operations.  Therefore,  we are taking  precautions to manage this risk, such as
preparing accounts receivable aging reports each week and collecting the overdue
invoices.  We will try to diversify  our customer  base and control  credit risk
related to accounts  receivable  through  credit  approvals,  credit  limits and
monitoring  procedures.  Although we have already  taken these  measures,  it is
still possible to incur a large amount of bad debt.

     Financial  instruments that  potentially  subject us to  concentrations  of
credit risk are cash, accounts receivable and other receivables arising from its
normal  business  activities.  We  place  our  cash  in what  we  believe  to be
credit-worthy financial institutions.  We have a diversified customer base, most
of which are  related  parties.  We control  credit  risk  related  to  accounts
receivable through credit approvals, credit limits and monitoring procedures. We
routinely assess the financial strength of its customers and, based upon factors
surrounding  the  credit  risk,  establish  an  allowance,   if  required,   for
un-collectible  accounts  and,  as a  consequence,  believe  that  our  accounts
receivable credit risk exposure beyond such allowance is limited.

     CAPITAL  EXPENDITURES.  Total capital  expenditures during the three months
ended March 31, 2006 were  $774,714  compared to $0 for the three  months  ended
March 31, 2005.

     CONSTRUCTION.  The Company has begun the  development  of its  construction
business.  The Company  plans to develop and build  commercial  and  residential
buildings, industry factory buildings, and professional buildings.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

                                       29
<PAGE>
ITEM 3. CONTROLS AND PROCEDURES

     Under  the  supervision  and  with  the   participation  of  the  Company's
management,  including  our Chief  Executive  Officer  and the  Chief  Financial
Officer,  the Company conducted an evaluation of the effectiveness of the design
and operation of its  disclosure  controls and  procedures,  as defined in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934, as amended,
as of the end of the period  covered by this  report  (the  "Evaluation  Date").
Based on this  evaluation,  our Chief Executive  Officer and the Chief Financial
Officer  concluded  as of the  Evaluation  Date  that the  Company's  disclosure
controls  and  procedures  were  effective  such that the  material  information
required to be included in our SEC reports is  recorded,  processed,  summarized
and reported  within the time periods  specified in SEC rules and forms relating
to the Company, including our consolidating subsidiaries,  and was made known to
them by others within those entities,  particularly  during the period when this
report was being prepared.

                                       30
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

HWA-CHING CO. AND RELATED LAWSUITS

     In April 2004,  Hwa-Ching Co. made purchases from City Network  Inc.-Taiwan
for  products  in  the  aggregate  amount  of  approximately  NT$19  million  or
US$575,757.  In  June  2004,  Hwa-Ching  Co.  wrote  a  check  to  City  Network
Inc.-Taiwan paying for such products and City Network  Inc.-Taiwan  successfully
cashed this check.  Also in June 2004,  Hwa-Ching Co. made  purchases  from City
Network   Inc.-Taiwan  for  additional  products  in  the  aggregate  amount  of
approximately  NT$18  million or  US$545,454  and paid for such  products with a
check that City Network Inc.-Taiwan also successfully cashed.

     During June to August 2004,  Hwa-Ching Co.  requested  additional  products
from City Network  Inc.-Taiwan in the aggregate  amount of  approximately  NT$27
million or  US$818,181.  City  Network  Inc.-Taiwan  filled  these  orders  with
confidence  as Hwa-Ching  had paid for the prior orders from April 2004 and June
2004.  However,  the check,  in the  amount of  approximately  NT$27  million or
US$818,181  that Hwa-Ching Co. wrote to City Network,  Inc.-Taiwan  bounced upon
deposit with the bank.  Immediately  thereafter,  Hwa-Ching Co. closed down with
this  remaining  account  payable  balance  of  approximately  NT$27  million or
US$818,181 outstanding and payable to City Network Inc.-Taiwan.

     In August 2004, City Network Inc.-Taiwan filed a lawsuit against Yune-Chang
Tsuo,  the owner of Hwa-Ching  Co., as well as the following  eight  individuals
including,  Yong-Zhang  Zhuo,  Shu-Tao Lu, Yong-Yi Zhuo,  Zhuan-Xuan Dai, Ya-Hui
Qiu, Mei-Zhen Huang,  Zong-Ya Wu, Yao-Guo Cen in Taiwan Taipei district court of
Taiwan, in Taipei, Taiwan, alleging fraud for closing down Hwa-Ching Co. without
payment  for  the  delivered   merchandise.   City  Network  Inc.-Taiwan  sought
approximately NT$27 million or approximately  US$900,000 from Yune-Chang Tsuo to
cover the outstanding  account payable. To date, the court has not yet reached a
verdict on this case.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5. OTHER INFORMATION

     None.

                                       31
<PAGE>
ITEM 6. EXHIBITS

     (a) Exhibits:

         No.                              Description
         ---                              -----------

        31.1    Certification  of  Chief  Executive  Officer  pursuant  to  Rule
                13a-14(a)/15d-14(a)  of the Securities  Exchange Act of 1934, as
                adopted  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
                2002, filed herewith.

        31.2    Certification  of the Chief Financial  Officer  pursuant to Rule
                13a-14(a)/15d-14(a)  of the Securities  Exchange Act of 1934, as
                adopted  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
                2002, filed herewith.

        32.1    Certification  of Chief Executive  Officer pursuant to 18 U.S.C.
                1350  (Section  906 of the  Sarbanes-Oxley  Act of 2002),  filed
                herewith.

        32.2    Certification  of Chief Financial  Officer pursuant to 18 U.S.C.
                1350  (Section  906 of the  Sarbanes-Oxley  Act of 2002),  filed
                herewith.

                                       32
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            CITY NETWORK, INC.


Dated: May 22, 2006                       By: /s/ Alice Chen
                                              -----------------------------
                                              Alice Chen
                                              Chief Executive Officer
                                              (Principal Executive Officer)



Dated: May 22, 2006                       By: /s/ Yun-Yi Tseng
                                              -----------------------------
                                              Yun-Yi Tseng
                                              Chief Financial Officer
                                              (Principal Financial Officer)

                                       33