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

                                  FORM 10-QSB/A
                                (Amendment No. 1)

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

    For the quarterly period ended: March 31, 2005

                                       or


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

    For the transition period from __________________ to ________________

                       Commission File Number: 001-31954


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


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


                    2F-1, No. 16, Jian Ba Road, Jhonghe City
                         Taipei County 235, Taiwan, ROC
                    (Address of principal executive offices)


                               011-886-2-8226-5566
                           (Issuer's telephone number)

                                       N/A
              (Former name, former address and former fiscal year,
                         if changed since last report)


     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period) that the issuer 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]

     The number of shares outstanding of the issuer's common stock, $0.001 par
value, as of the close of business on January 23, 2006 was 32,967,183.

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

The purpose of this Amendment No. 1 to Quarterly Report on Form 10-QSB/A of City
Network, Inc. (the "Company," "we" or "our") for the fiscal period ended March
31, 2005, filed with the Securities and Exchange Commission ("SEC") on May 23,
2005, is to (i) reflect additional commitments due to a contract between City
Construction Co., Ltd and three individuals for the construction of property in
Keelung, Taiwan; and (ii) reflect complete information on credit facility
arrangements.

The Items which are amended and restated herein are:

1.   Part I, Item 1 - Financial Statements (only Footnote 8, Footnote 10 and
     Footnote 12); and

2.   Part II, Item 1 - Legal Proceedings.

Except as otherwise expressly noted herein, this Amendment No. 1 to Quarterly
Report on Form 10-QSB/A does not reflect events occurring after the May 23, 2005
filing of our Quarterly Report on Form 10-QSB in any way, except as those
required to reflect the effects of this restatement of our financial statements
for the periods presented, as deemed necessary in connection with the completion
of revised notes to the financial statements.

The remaining Items contained within this Amendment No. 1 to our Quarterly
Report on Form 10-QSB/A consist of all other Items originally contained in our
Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2005 in
the form filed with the SEC on May 23, 2005. These remaining Items are not
amended hereby, but are included for the convenience of the reader. In order to
preserve the nature and character of the disclosures set forth in such Items as
originally filed, except as expressly noted herein, this report continues to
speak as of the date of the original filing, and we have not updated the
disclosures in this report to speak as of a later date. While this report
primarily relates to the historical periods covered, events may have taken place
since the original filing that might have been reflected in this report if they
had taken place prior to the original filing.

                                       i
<PAGE>
                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----

PART I. FINANCIAL INFORMATION...............................................  1

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

     Item 2. Management's Discussion and Analysis........................... 15

     Item 3. Controls And Procedures........................................ 18

PART II. OTHER INFORMATION.................................................. 19

     Item 1. Legal Proceedings.............................................. 20

     Item 2. Changes in Securities and Use of Proceeds...................... 20

     Item 3. Defaults Upon Senior Securities................................ 20

     Item 4. Submission of Matters to a Vote of Security Holders............ 20

     Item 5. Other Information.............................................. 20

     Item 6. Exhibits and Reports on Form 8-K............................... 20

                                       ii
<PAGE>
                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   March 31, 2005       December 31, 2004
                                                                   --------------       -----------------
                                                                    (Unaudited)
<S>                                                                 <C>                    <C>
                                     ASSETS

Current Assets
  Cash and cash equivalents                                         $  1,319,326           $  2,010,644
  Accounts receivable, net                                             2,973,167              3,333,990
  Inventory                                                              702,514                732,027
  Other receivables                                                       61,361                  6,863
  Prepaid expenses                                                       333,938                102,896
                                                                    ------------           ------------
      Total Current Assets                                             5,390,306              6,186,420
                                                                    ------------           ------------

Fixed Assets, net                                                      2,127,769              2,586,872
                                                                    ------------           ------------
      Total Fixed Assets                                               2,127,769              2,586,872
                                                                    ------------           ------------
Other Assets
  Deposits                                                             1,755,754              1,724,542
  Trademarks                                                               1,776                  1,812
  Equity in net assets of affiliated company                             818,354                829,008
  Intangible assets                                                      943,892                961,053
  Other assets                                                            19,084                  8,255
                                                                    ------------           ------------
      Total Other Assets                                               3,538,860              3,524,670
                                                                    ------------           ------------

      Total Assets                                                  $ 11,056,935           $ 12,297,962
                                                                    ============           ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable and accrued expenses                             $  3,166,324           $  3,335,286
  Due to related party                                                    73,790                 80,083
  Deferred revenue                                                         8,873                 14,566
  Current portion, long-term debt                                      3,388,219              3,226,181
                                                                    ------------           ------------
      Total Current Liabilities                                        6,637,206              6,656,116

Long-term debt, net of current portion                                         0                246,330
                                                                    ------------           ------------
      Total Liabilities                                                6,637,206              6,902,446
                                                                    ------------           ------------
Stockholders' Equity
  Common stock, $.001 par value, 100,000,000
  shares authorized, 27,500,000
  issued and outstanding                                                  27,500                 27,500
  Additional paid in capital                                           5,937,946              5,937,946
  Cumulative foreign-exchange translation adjustment                     190,552                142,453
  Retained earnings                                                   (1,736,269)              (712,383)
                                                                    ------------           ------------
      Total Stockholders' Equity                                       4,419,729              5,395,516
                                                                    ------------           ------------

      Total Liabilities and Stockholders' Equity                    $ 11,056,935           $ 12,297,962
                                                                    ============           ============
</TABLE>

                                       1
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                         -----------------------------------
                                                          March 31,              March 31,
                                                            2005                   2004
                                                         ------------           ------------
<S>                                                      <C>                    <C>
Sales, net                                               $  1,293,350           $  6,287,093

Cost of sales                                               1,255,040              5,697,879
                                                         ------------           ------------
      Gross profit                                             38,310                589,214

General and administrative expenses                           323,145                382,440
                                                         ------------           ------------

      Income (loss) from operations                          (284,835)               206,774
                                                         ------------           ------------
Other (Income) Expense
  Interest income                                                (399)                  (128)
  Rental income                                               (47,670)                (3,154)
  Commission income                                            (3,921)                (1,179)
  (Gain) loss on currency exchange                              8,258                  2,823
  Other income                                                (35,868)                (1,255)
  Reserve for bad debt                                        685,000                      0
  Equity in earnings of investee                               10,654                      0
  Miscellaneous                                                 2,339                      0
  Loss on sale of fixed assets                                 82,260                      0
  Interest expense                                             38,398                 17,090
                                                         ------------           ------------
      Total Other (Income) Expense                            739,051                 14,197
                                                         ------------           ------------

      Income (loss) before income taxes                    (1,023,886)               192,577

Provison for income taxes                                           0                      0
                                                         ------------           ------------

      Net income (loss)                                  $ (1,023,886)          $    192,577
                                                         ============           ============
Net income (loss) per share (basic and diluted)
  Basic                                                  $     (0.037)          $      0.008
  Diluted                                                $     (0.037)          $      0.008

Weighted average number of shares
  Basic                                                    27,500,000             25,000,000
  Diluted                                                  27,500,000             25,000,000
</TABLE>

                                       2
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                     ---------------------------------
                                                                      March 31,             March 31,
                                                                        2005                  2004
                                                                     -----------           -----------
<S>                                                                  <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income (loss)                                                  $(1,023,886)          $   192,577
  Adjustments to reconcile net income (loss) to
   net cash provided by (used) in operating activities:
     Depreciation and amortization                                        43,113                 9,403
     Equity in earning of investee                                        10,654                     0
     Loss on disposal of assets                                           82,260                     0
     (Gain) loss on foreign currency exchange                              8,258                 2,823
     Translation adjustment                                               21,726               (73,968)
     Decrease (Increase) in receivables                                  360,823            (2,315,935)
     Decrease (Increase) in inventory                                     29,513              (278,618)
     Decrease (Increase) in other receivables                            (54,498)             (360,089)
     Decrease (Increase) in prepaid expenses                            (231,042)             (654,266)
     Decrease (Increase) in deposit                                      (31,212)              174,380
     Decrease (Increase) in other current assets                         (10,829)              705,647
     (Decrease) Increase in accounts payable and
      accrued expenses                                                  (168,962)            3,191,123
     (Decrease) Increase in deferred revenue                              (5,693)             (292,538)
     (Decrease) Increase in deposits payable                                   0                  (105)
                                                                     -----------           -----------
     Total Adjustments                                                    54,111               107,857
                                                                     -----------           -----------
        Net cash  (used in) provided by operations                      (969,775)              300,434
                                                                     -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sale of fixed assets                                     369,042                     0
  Purchase of furniture and equipment                                          0               (22,093)
                                                                     -----------           -----------
        Net cash (used in) provided by investing activities              369,042               (22,093)
                                                                     -----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payment on notes payable                                            (1,579,160)           (1,196,547)
  Payment of loan from related party                                      (6,293)               (5,824)
  Loan from related party                                                      0                20,600
  Issuance of short-term debt                                          1,494,868               899,282
                                                                     -----------           -----------
        Net cash (used in) financing activities                          (90,585)             (282,489)
                                                                     -----------           -----------

Net change in cash and cash equivalents                                 (691,318)               (4,148)
                                                                     -----------           -----------

Cash and cash equivalents at beginning of period                       2,010,644             1,148,457
                                                                     -----------           -----------

Cash and cash equivalents at end of period                           $ 1,319,326           $ 1,144,309
                                                                     ===========           ===========
Supplemental cash flows disclosures:
  Income tax payments                                                $         0           $         0
                                                                     -----------           -----------
  Interest payments                                                  $    38,398           $    17,090
                                                                     -----------           -----------
Non cash transaction:
  Conversion of debt to equity                                       $         0           $ 1,680,329
                                                                     -----------           -----------
</TABLE>

                                       3
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                           March 31, 2005        December 31, 2004
                                                           --------------        -----------------
                                                             (Unaudited)
<S>                                                           <C>                    <C>
Common stock, number of shares outstanding
  Balance at beginning of period                              27,500,000             25,000,000
  Common stock issued                                                  0              2,500,000
                                                            ------------           ------------
  Balance at end of period                                    27,500,000             27,500,000
                                                            ============           ============
Common stock, par value $.001
  Balance at beginning of year                              $     27,500           $     25,000
  Common stock issued                                                  0                  2,500
                                                            ------------           ------------
  Balance at end of period                                        27,500                 27,500
                                                            ------------           ------------
Additional paid in capital
  Balance at beginning of year                                 5,937,946              4,260,117
  Issuance of stock                                                    0              1,677,829
                                                            ------------           ------------
  Balance at end of period                                     5,937,946              5,937,946
                                                            ------------           ------------
Cumulative foreign-exchange translation adjustment
  Balance at beginning of year                                   142,453                 29,663
  Foreign currency translation                                    48,099                112,790
                                                            ------------           ------------
  Balance at end of period                                       190,552                142,453
                                                            ------------           ------------
Retained (deficits)
  Balance at beginning of year                                  (712,383)               252,277
  Net income (loss)                                           (1,023,886)              (964,660)
                                                            ------------           ------------
  Balance at end of period                                    (1,736,269)              (712,383)
                                                            ------------           ------------

Total stockholders' equity at end of period                 $  4,419,729           $  5,395,516
                                                            ============           ============
</TABLE>

                                       4
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 1 - NATURE OF OPERATIONS

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

On November  14,  2002,  City  Network  Technology,  Inc.  became a wholly-owned
subsidiary of City Network,  Inc. through an Exchange Agreement,  dated November
14, 2004 and was amended on December 4, 2002 whereby City Network, Inc. acquired
all of the issued and outstanding capital stock of City Network Technology, Inc.
in exchange for 12,000,000 shares of City Network, Inc.

The Company designs,  manufactures and markets a comprehensive line of broadband
communication and wireless Internet access product and solutions.  The Company's
product  lines are used in  residential  building  and  hospitality  markets and
include the simple DSL bridge/ modem for the home and small  business  user. The
Company is also pursuing work in the building construction field.

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

NOTE 2 - 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, 2005 and 2004 are not
necessarily  indicative  of the results  that may be expected for the year ended
December  31, 2005,  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, 2004.

                                       5
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Consolidation - The consolidated  financial statements for 2004 include
the accounts of City Network,  Inc.,  it's wholly owned  subsidiary City Network
Technology, Inc. and its wholly-owned subsidiaries,  City Network, Inc. - Taiwan
and City Construction Co., Ltd. All material intercompany accounts, transactions
and profits have been eliminated in consolidation.

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.

Cash  and  Cash  Equivalents  -  Cash  equivalents  are  stated  at  cost.  Cash
equivalents are highly liquid investments  readily convertible into cash with an
original  maturity  of three  months or less and consist of time  deposits  with
commercial banks.

Allowance  for Doubtful  Accounts - The Company  establishes  an  allowance  for
doubtful accounts on a case-by-case  basis when it believes the required payment
of specific  amounts  owed is  unlikely  to occur  after a review of  historical
collection experience,  subsequent  collections,  and management's evaluation of
existing economic conditions.

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  expensed  as  incurred.
Whenever  an  asset  is  retired  or  disposed  of,  its  cost  and  accumulated
depreciation  or amortization  are removed from the respective  accounts and the
resulting gain or loss is credited or charged to income.

Depreciation is computed using the straight-line and  declining-balance  methods
over the following estimated useful lives:

               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 period ended March 31, 2005.

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.

                                       6
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory  -  Inventory  is  valued  at the  lower  of cost or  market;  cost is
determined  on the weighted  average  method.  As of March 31,  2005,  inventory
consisted only of finished goods.

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. As of March 31, 2005, there are no matters that warrant disclosure in
the financial statements.

Advertising - Advertising costs are expensed in the period incurred.

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.

Concentration of Credit Risk - Financial instruments,  which subject the Company
to credit  risk,  consist  primarily  of cash  equivalents  and  trade  accounts
receivable arising from its normal business  activities.  The Company places its
cash  in  what  it  believes  to  be   credit-worthy   financial   institutions.
Concentration  of credit  risk with  respect  to trade  accounts  receivable  is
primarily from customers  located in Asia.  The Company  actively  evaluates the
creditworthiness of the customers with which it conducts business through credit
approvals, credit limits and monitoring procedures.

                                       7
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Impairment  of Long-Lived  Assets - 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 are 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.

Earnings Per Share - Earnings per share are based on the weighted average number
of shares of common stock and common stock equivalents  outstanding  during each
period.  Earnings per share are computed  using the treasury  stock method.  The
options to purchase  common  shares are  considered  to be  outstanding  for all
periods presented, but are not calculated as part of the earnings per share.

Income Taxes - Income taxes have been provided based upon the tax laws and rates
in the countries in which  operations  are  conducted and income is earned.  The
income tax rates imposed by the taxing authorities vary. Taxable income may vary
from pre-tax  income for  financial  accounting  purposes.  There is no expected
relationship  between the  provision  for income taxes and income  before income
taxes,  because the countries have different taxation rules, which vary not only
to nominal  rates but also in terms of available  deductions,  credits and other
benefits. Deferred tax assets and liabilities are recognized for the anticipated
future tax effects of  temporary  differences  between the  financial  statement
basis  and the tax  basis of the  Company's  assets  and  liabilities  using the
applicable  tax  rates in  effect  at year  end as  prescribed  by SFAS No.  109
"Accounting for Income Taxes".

Exchange Gain (Loss) - As of March 31, 2005 and 2004, the  transactions  of City
Network,  Inc. - Taiwan and City  Construction  Co., Ltd. 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.

                                       8
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Translation  Adjustment  - As of March 31, 2005 and 2004,  the  accounts of City
Network,  Inc. - Taiwan and City  Construction  Co., Ltd. were  maintained,  and
their financial  statements were  expressed,  in NTD. Such financial  statements
were translated into U.S. Dollars (USD) in accordance with SFAS No. 52, "Foreign
Currency  Translation",  with the NTD as the functional  currency.  According to
SFAS No. 52, all assets and liabilities  were translated at the current exchange
rate,  stockholder's  equity are translated at the  historical  rates and income
statement  items are  translated at the weighted  average  exchange rate for the
period.  The  resulting   translation   adjustments  are  reported  under  other
comprehensive  income in accordance with SFAS No. 130, "Reporting  Comprehensive
Income".

As of March 31,  2005 and 2004 the  exchange  rates  between NTD and the USD was
NTD$1=USD$0.03149 and NTD$1=USD$0.03149, respectively. The weighted-average rate
of exchange  between NTD and USD was NTD$1 = USD$0.02979 and  NTD$1=USD$0.03149,
respectively. Total translation adjustment recognized for the period ended March
31, 2005 is $194,658.

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

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

                                       9
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 3 - CONCENTRATION

The  Company had ten major  customers  during the three  months  ended March 31,
2005. Those customers  comprise 85.3% of the total sales during the three months
ended March 31, 2005.  Sales to these customers were  approximately  $1,033,596.
Included in accounts receivable is $395,939 from these customers as of March 31,
2005.

NOTE 4 - CASH

The Company  maintains  its cash  balances  at various  banks in Taiwan and Hong
Kong.  All balances  are insured by the Central  Deposit  Insurance  Corporation
(CDIC).  As of March 31, 2005 and 2004, there were no uninsured  portions of the
balances held at the bank.

NOTE 5 - FIXED ASSETS

Fixed assets consist of the following:

                                        March 31, 2005         December 31, 2004
                                        --------------         -----------------
     Land                                $ 1,774,623              $ 1,916,328
     Building                                     --                  283,977
     Machinery and equipment                 372,189                  430,880
     Furniture and fixtures                  143,655                  143,655
                                         -----------              -----------

                                         $ 2,290,467              $ 2,774,840

     Accumulated depreciation               (162,698)                (187,968)
                                         -----------              -----------

                                         $ 2,127,769              $ 2,586,872
                                         ===========              ===========

Note 6 - INTANGIBLE ASSETS

Intangible assets consist of the following:

                                        March 31, 2005         December 31, 2004
                                        --------------         -----------------
     Trademarks                          $     2,150              $     2,150
     Intangible asset                      1,000,000                1,000,000
                                         -----------              -----------

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

     Accumulated depreciation                (56,482)                 (39,285)
                                         -----------              -----------

                                         $   945,668              $   962,865
                                         ===========              ===========

                                       10
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2005 AND 2004


NOTE 7 - COMPENSATED ABSENCES

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. At
termination, employees are paid for any accumulated annual vacation leave. As of
March 31, 2005 vacation liability exists in the amount of $3,293.

NOTE 8 - 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. The Company paid $1,000,000 for these rights.

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

Co-Construction Agreements - In April 2004, City Construction Co., Ltd. placed a
refundable  performance  bond in the amount of $227,240 with the court in Taiwan
for the rights to complete an  unfinished  building in Keelung,  Taiwan with the
owner of the land.  The Company is currently in  discussion  with the land owner
regarding the terms of the project.

In March 2005,  City  Construction  Co.,  Ltd.  entered  into a  Co-Construction
Agreement with three individuals  which own a tract of land in Keelung,  Taiwan.
Under the  agreement,  the Company will  finance,  construct  and own 60% of the
completed  building  project.  The Company has agreed to a  refundable  security
deposit  totaling  approximately  $95,500 dollars payable at various agreed upon
phases of the  construction.  The deposits will be returned within 2 years after
the  construction  is  completed.  As of March 31,  2005,  the  Company has paid
$31,490 as part of the refundable security deposit.

Operating Leases - The Company leases s office facilities under operating leases
that  terminate on various dates.  Rental expense for these leases  consisted of
$12,116  for the three  months  ended  March 31,  2005.  The  Company has future
minimum lease obligations as follows:

                            2005        $21,452

NOTE 9 - 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,  2005  the  Company
recognized a $10,654 loss from their acquisition.

                                       11
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005


NOTE 10 - DEBTS

At of March 31, 2005 the Company had three separate  revolving  secured lines of
credit agreements,  renewable annually, with three banks in Taiwan. The lines of
credit are secured either by the Company's bank accounts and accounts receivable
or by an officer of the Company.

At March 31,  2005,  the Company had  borrowings  outstanding  in the  aggregate
amount of $3,388,219, of which $3,205,577 is against these lines of credit.

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     April 9, 2005                                                $  595,161

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     April 9, 2005                                                    59,920

     Note   payable  to  a  bank  in  Taiwan,
     interest  at  4.48%  per  annum,  due by
     April 10, 2005                                                   55,364

     Note   payable  to  a  bank  in  Taiwan,
     interest  at  4.48%  per  annum,  due by
     April 11, 2005                                                   77,061

     Note   payable  to  a  bank  in  Taiwan,
     interest  at  3.35%  per  annum,  due by
     April 22, 2005                                                  122,684

     Note   payable  to  a  bank  in  Taiwan,
     interest at 3.708% per annum, due by May
     3, 2005                                                          13,736

     Note   payable  to  a  bank  in  Taiwan,
     interest at 4.48% per annum,  due by May
     29, 2005                                                        235,060

                                       12
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005


Note 10 - DEBT (CONTINUED)

     Note   payable  to  a  bank  in  Taiwan,
     interest at 3.35% per annum, due by June
     24, 2005                                                         39,687

     Note   payable  to  a  bank  in  Taiwan,
     interest at 3.35% per annum, due by June
     24, 2005                                                        264,649

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     June 29, 2005                                                   859,677

     Note   payable  to  a  bank  in  Taiwan,
     interest at 3.35% per annum, due by July
     11, 2005                                                         96,912

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     July 15, 2005                                                    44,783

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     July 27, 2005                                                    31,027

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     October 5, 2005                                                 503,840

     Note   payable  to  a  bank  in  Taiwan,
     interest  at 3.708%  per  annum,  due by
     February 13, 2006                                               125,960

     Note payable to a corporation in Taiwan,
     interest  at 6.265%  per  annum,  due by
     November 20, 2005, personally guaranteed
     by an office of the Company                                     182,642

     Total                                                         3,388,219
                                                                  ----------
     Current portion                                              $3,388,219
                                                                  ----------

     Long-term portion                                            $       --
                                                                  ==========

                                       13
<PAGE>
                                    RESTATED
                       CITY NETWORK, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005


NOTE 11 - 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.

As of March 31, 2005, the Company has a non interest-bearing loan from Tiao-Tsan
Lai,  the  Company's  Chief  Executive  Officer and  Chairman,  in the amount of
$73,790. Mr. Lai has also personally guaranteed a note payable of the Company in
the amount of  $477,953.  As of March 31,  2005,  the  balance  for the note was
approximately $182,642.

NOTE 12 - LITIGATIONS

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  $880,649.  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 $695,280. This case is currently ongoing.

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$900,000.  To date,  the court has not yet reached a verdict on
this case.

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$172,963 to
cover the outstanding account payable owed by Hwa-Ching to the Company. To date,
the court has not yet reached a verdict on this case.

RPPI International Ltd. - As of June 21, 2005, City Network  Inc.-Taiwan settled
a  litigation  with RPPI  International  Ltd.  (or  Rong-Dian),  a vendor of the
Company.

On October 10, 2004,  Rong-Dian 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$900,000  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$390,909.  As of the date of this Report, the
Company had not entered into a settlement agreement.

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. The Company and
Shanghai Bank are currently in negotiations  for a settlement  agreement in this
matter. The Company deposited a bond in the amount of approximately NT$3 million
or approximately US$90,000 with the court at the commencement of the lawsuit.

                                       14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

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.

BACKGROUND OF THE COMPANY

     City Network, Inc. ("City Network," "we," "our" or "us") was incorporated
on August 8, 1996 as Investment Agents, Inc. under the laws of the State of
Nevada. City Network Technology, Inc. ("CNT") was incorporated under the laws of

                                       15
<PAGE>
the British Virgin Islands on March 1, 2002. On November 14, 2002, CNT became a
wholly owned subsidiary of our company through an Exchange Agreement, dated
November 14, 2002 and amended on December 11, 2002, whereby our company acquired
all of the issued and outstanding capital stock of CNT in exchange for
12,000,000 shares of common stock of our company, which represented 49% of our
issued and outstanding stock at that time. In connection with the exchange and
change in control, the name of our company was changed from Investment Agents,
Inc. to City Network, Inc. the officers and directors of City Network resigned
and new officers and directors were appointed. Upon the effective date of the
exchange and change in control, we ceased our relationship with the company for
whom we previously acted as referral agent.

     CNT owns all of the issued and outstanding common stock of City Network,
Inc.-Taiwan, which was incorporated under the laws of the Republic of China on
September 6, 1994, and all of the issued and outstanding common stock of company
of City Construction Co., Ltd., which was incorporated under the laws of
Republic of China on October, 10, 2003.

     On December 16, 2004, our board of directors determined to change our
fiscal year end from February 28 to December 31.

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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2005 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2004

     NET SALES. Net sales for the three months ended March 31, 2005 were
$1,293,350 compared to $6,287,093 for the three months ended March 31, 2004. The
decrease in net sales for the three months ended March 31, 2005 was due to a
decrease in demand for our old products. Our new products, introduced in 2004,
are in the early stages of selling.

     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 and GSP products,
can increase with improved brand name recognition and increased sales channels.
We intend to promote and market our new products to improve brand name
recognition as well as work on increasing sales channels.

                                       16
<PAGE>
     COST OF SALES. Cost of sales for the three months ended March 31, 2005 was
$1,255,040 or 97.0% of net sales, as compared to $5,697,879 or 90.6% of net
sales, during the three months ended March 31, 2004. The decrease in cost of
sales is associated with the decrease in sales. The decrease in our cost of
sales as a percentage of net sales is attributable to a decrease in the sale
price of our old products, which we believe is due to an increase in competitors
selling the old products, while the cost of producing such products has remained
constant.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $323,145, or 25.0% of net sales, for the three months ended March 31, 2005,
as compared to $382,440 or 6.1% of net sales, for the three months ended March
31, 2004. The decrease was due to the decrease in sales and an associated
decrease in related expenses. The decrease in general and administrative
expenses as a percentage of net sales is attributable to fixed overhead costs
which remain constant for all levels of sales.

     INCOME (LOSS) FROM OPERATIONS. Loss from operations for the three months
ended March 31, 2005 was $(284,835), compared to income from operations for the
three months ended March 31, 2004 of $206,774. The loss from operations for the
three months ended March 31, 2005 compared with income from operations for the
three months ended March 31, 2004 was due to a decrease in sales without a
proportionate decrease in the cost of sales and general and administrative
expenses.

     OTHER (INCOME) EXPENSE. Other (income) expense was $739,051 for the three
months ended March 31, 2005, as compared to $14,197 for the three months ended
March 31, 2004. This increase in other expense was the result of additional
reserves made on accounts receivable and losses we incurred on the sale of fixed
assets in the three months ended March 31, 2005.

     NET INCOME (LOSS). Net income (loss) for three months ended March 31, 2005
was $(1,023,886) compared to income of $192,577 for the three months ended March
31, 2004. The net loss for the three months ended March 31, 2005 compared with
income for the three months ended March 31, 2004 was due to the reasons
described above, including the additional reserves made on accounts receivable.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2005 and December 31, 2004, we had cash and cash equivalents
of $1,319,326 and $2,010,644, respectively. Our current assets totaled
$5,390,306 at March 31, 2005 as compared to $6,186,420 at December 31, 2004. Our
total current liabilities were $6,637206 at March 31, 2005 as compared to
$6,656,116 at December 31, 2004. Working capital at March 31, 2005 was
$(1,246,900) and $(469,696) at December 31, 2004. For the three months ended
March 31, 2005, total cash used in operations was $(969,775) as compared to net
cash provided by operations of $300,434 during the same period in 2004. Net cash
used in financing activities was $(90,585), which consisted of the payment on
notes payable and issuance of short-term debt, as compared with net cash used in
financing activities of $(282,489) during the three months ended March 31, 2004.

     We deployed a large amount of cash in the three months ended March 31, 2005
for developing new products. Therefore there is a deficiency in working capital
at the end of such period. We have, however, begun selling our new products on a
large scale since March 31, 2005.

     Our operations and short term financing does not currently meet our cash
needs. We believe we will be able to generate revenues from sales and raise
capital through private placement offerings of its equity securities to provide
the necessary cash flow to meet anticipated working capital requirements. Our
actual working capital needs for the long and short term will depend upon
numerous factors, including our operating results, competition, and the
availability of credit facilities, none of which can be predicted with

                                       17
<PAGE>
certainty. Our future expansion will depend on operating results and will be
limited by its ability to enter into financings and raise capital.

     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. As of March 31, 2005, the amount
of committed funds was $2,400,000. An additional $1,800,000 is still required.

     Our liquidity is currently dependent on our ability to strengthen our
accounts receivable collection time period and our ability to continue to raise
cash from financing sources to fund our expansion. Our short-term and long-term
liquidity may be influenced by uncollected accounts 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, including diversifying
its customer base and controlling credit risk through credit approvals, credit
limits and monitoring procedures. There can be no assurance that these measures
will prove successful. Our inability to manage this risk will have a material
adverse effect upon its business, financial condition and results of operations.

     CAPITAL EXPENDITURES. Total capital expenditures during the three months
ended March 31, 2005 were $0 compared to $22,093 for the three months ended
March 31, 2004.

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

ITEM 3. CONTROLS AND PROCEDURES

     We maintain "disclosure controls and procedures," as such term is defined
under Exchange Act Rule 13a-15(e), that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed,
summarized, and reported within the time periods specified in the SEC's rules
and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosures. In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and in reaching a reasonable level of assurance our management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. We have carried out an
evaluation under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of March 31, 2005. Based upon their evaluation and subject to the
foregoing, the Chief Executive Officer and Chief Financial Officer concluded
that as of March 31, 2005 our disclosure controls and procedures were effective
at the reasonable assurance level in ensuring that material information relating
to us, is made known to the Chief Executive Officer and Chief Financial Officer
by others within our company during the period in which this report was being
prepared.

     There were no changes in our internal controls or in other factors during
the most recent quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.

                                       18
<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.

RPPI INTERNATIONAL LTD.

     On October 10, 2004, Rong-Dian 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$900,000 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$390,909. As of the date of this Report, the
Company had not entered into a settlement agreement.

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<PAGE>
ITEM 2. CHANGES IN 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.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

         31.1  Certifications of the Chief Executive Officer pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002.

         31.2  Certifications of the Chief Financial Officer pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002.

         32.1  Certifications of the Chief Executive Officer and Chief Financial
               Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002.

                                       20
<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: January 27, 2006             By: /s/ Tiao-Tsan Lai
                                        ---------------------------------
                                        Tiao-Tsan Lai
                                        Chief Executive Officer
                                        (Principal Executive Officer)


Dated: January 27, 2006             By: /s/ Yun-Yi Tseng
                                        ---------------------------------
                                        Yun-Yi Tseng
                                        Chief Financial Officer
                                        (Principal Financial Officer)


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