<PAGE>

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

                                   ___________

                                   FORM 10-QSB

 /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
     / /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: 000-24985


                                 PACIFICNET INC.
                                 ---------------
              (Exact name of small business issuer in its charter)

                  DELAWARE                                        91-2118007
       (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                        Identification No.)

601 New Bright Building, 11 Sheung Yuet Road,                        N/A
       Kowloon Bay, Kowloon, Hong Kong                            (Zip Code)

  (Address of principal executive offices)

                REGISTRANT'S TELEPHONE NUMBER: 011-852-2876-2900

         UNIT 2710, HONG KONG PLAZA, 188 CONNAUGHT ROAD WEST, HONG KONG
         --------------------------------------------------------------
                            (Former Name and Address)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 / /

There were 9,848,583 shares of the Company's common stock outstanding on March
31, 2005.

Transitional Small Business Disclosure Format (check one): YES / / NO / X /




<PAGE>
<TABLE>
<S>     <C>


                                          TABLE OF CONTENTS

                                                                                           PAGE
                                                                                           ----


PART I -          FINANCIAL INFORMATION......................................................2

         ITEM 1.           FINANCIAL STATEMENTS..............................................2

         ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.........7

         ITEM 3.           CONTROLS AND PROCEDURES..........................................13

PART II -         OTHER INFORMATION.........................................................13

         ITEM 1.           LEGAL PROCEEDINGS................................................13

         ITEM 2.           UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS......13

         ITEM 3.           DEFAULTS UPON SENIOR SECURITIES..................................13

         ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............13

         ITEM 5.           OTHER INFORMATION................................................13

         ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K.................................14
</TABLE>



                                                 i



<PAGE>
<TABLE>


                                        PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                       PACIFICNET INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                (In thousands of United States dollars, except par values and share numbers)

                                                                        MARCH 31, 2005     DECEMBER 31, 2004
                                                                           (UNAUDITED)          (AUDITED)
ASSETS
Current Assets:
<S>                                                                      <C>             <C>
Cash and cash equivalents                                                $        2,323  $        6,764
Restricted cash - pledged bank deposit                                            3,501           3,501
Accounts Receivables (net of allowance for doubtful accounts of $0)               5,842           5,644
Inventories                                                                       1,727           1,297
Other Current Assets                                                              6,103           4,325
                                                                         --------------- ---------------
    TOTAL CURRENT ASSETS                                                         19,496          21,531
Property and Equipment, net                                                       1,059           1,118
Investments in affiliated companies and subsidiaries                              1,260           1,063
Marketable equity securities - available for sale                                    65              29
Goodwill                                                                          9,132           8,912
                                                                         --------------- ---------------
TOTAL ASSETS                                                             $       31,012   $      32,653
                                                                         =============== ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank Line of Credit                                                      $           69   $         651
Bank Loans-current portion                                                        1,035           1,327
Capital Lease Obligations - current portion                                         113              80
Accounts Payable                                                                  1,271           3,150
Accrued Expenses and other payables                                                 524             128
Income  tax payable                                                                  --              10
Due to related party                                                                467              --
                                                                         --------------- ---------------
   TOTAL CURRENT LIABILITIES                                                      3,479           5,346

Long-term liabilities:
Bank Loans - non current portion                                                     77              69
Capital Lease Obligations - non current portion                                     126             129
   Total Long-Term Liabilities                                                      203             198
TOTAL LIABILITIES                                                                 3,682           5,544

Minority Interests in Consolidated Subsidiaries                                   2,198           2,396
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $0.0001, Authorized  - 5,000,000 shares
   Issued and outstanding - none                                                     --              --
Common Stock, par value $0.0001, Authorized - 125,000,000 shares
   Issued and outstanding:
     March 31, 2005 - 10,684,737  issues; 9,848,583 outstanding
     December 31, 2004 - 10,627,737 shares, 9,791,583 outstanding                     1               1
Treasury Stock, at cost (836,154 shares)                                           (104)           (104)
Additional Paid-In Capital                                                       53,919          53,916
Cumulative Other Comprehensive Loss                                                 (24)            (24)
Accumulated Deficit                                                             (28,660)        (29,076)
                                                                         --------------- ---------------
TOTAL STOCKHOLDERS' EQUITY                                                       25,132          24,713
                                                                         --------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $       31,012  $       32,653
                                                                         =============== ===============
See condensed notes to consolidated financial statements.

</TABLE>

                                                      2



<PAGE>

                        PACIFICNET INC. AND SUBSIDIARIES
                         CONSOLIDATED INCOME STATEMENTS
       (Unaudited. In thousands of United States dollars, except earnings
                          per share and share amounts)


                                                    THREE MONTHS ENDED MARCH 31,
                                                    ----------------------------
                                                        2005          2004
                                                      --------      --------

Revenues                                              $ 9,133       $ 3,502

Cost of Revenues                                       (7,483)       (2,253)
                                                      --------      --------

Gross Profit                                            1,650         1,249

Selling, General and Administrative expenses             (810)         (777)
Depreciation and amortization                             (43)          (67)
                                                      --------      --------


EARNINGS FROM OPERATIONS                                  797           405

Other income (expense), net                                93            64
                                                      --------      --------

EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST        890           469

Provision for income taxes                                (24)           --
Share of loss of associated companies                      (8)           --
Minority Interests                                       (443)         (328)
                                                      --------      --------

NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS         $   415       $   141
                                                      --------      --------

BASIC EARNINGS PER COMMON SHARE:                      $  0.04       $  0.02
                                                      --------      --------

DILUTED EARNINGS PER COMMON SHARE:                    $  0.04       $  0.02
                                                      --------      --------


See condensed notes to consolidated financial statements.


                                       3



<PAGE>
<TABLE>

                                  PACIFICNET INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
           (In thousands of United States dollars, except loss per share and share amounts)

                                                                        THREE MONTHS ENDED MARCH 31,
                                                                            2005            2004
                                                                          ---------      ---------
<S>                                                                       <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings                                                              $    415       $    141
Adjustment to reconcile net earnings to net cash used in operating
     activities:
Minority Interest                                                             (198)           809
Depreciation and amortization                                                   43             67
Accounts receivable and other current assets                                (1,976)        (2,285)
Inventories                                                                   (430)          (580)
Income taxes                                                                   (10)            --
Accounts payable and accrued expenses                                       (1,482)           808
                                                                          ---------      ---------

Net cash used in operating activities                                       (3,638)        (1,040)
                                                                          ---------      ---------

CASH FLOWS FROM INVESTMENT ACTIVITIES
Increase in purchase of marketable securities                                  (36)            --
Acquisition of property and equipment                                           63           (128)
Acquisition of subsidiaries                                                   (233)          (232)
                                                                          ---------      ---------

Net cash used in investing activities                                         (206)          (360)
                                                                          ---------      ---------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Dividend paid to minority interest shareholders                               (339)            --
Loans from related parties                                                     467             --
Repayment of amount borrowed                                                  (836)        (2,812)
Proceeds from sale of common stock                                              --          2,813
Proceeds from exercise of stock options                                        111             55
New bank loans                                                                  --          1,645
                                                                          ---------      ---------

Net cash provided by (used in) financing activities                           (597)         1,701
                                                                          ---------      ---------

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                        (4,441)           301
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               6,764          3,823
                                                                          ---------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $  2,323       $  4,124
                                                                          =========      =========

CASH PAID FOR:
     Interest                                                             $     45             59
     Income taxes                                                         $     34             --

NONCASH INVESTING AND FINANCING ACTIVITIES:
Investment in subsidiaries acquired through issuance of common stock            --       $  4,000
Common stock issued as a result of exercise of stock options                    --       $      5

</TABLE>


See condensed notes to consolidated financial statements.

                                                 4



<PAGE>

                        PACIFICNET INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      (Amounts expressed in United States dollars unless otherwise stated)


1.       BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows for
all periods presented have been made.

Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. Examples include provisions for returns and impairment losses,
accounting for income taxes, bad debts, and property, plant and equipment lives
for depreciation purposes. Actual results may differ from these estimates. The
results of operations for the three-month period ended March 31, 2005 are not
necessarily indicative of the operating results that may be expected for the
entire year ending December 31, 2005. These financial statements should be read
in conjunction with the Management's Discussion and Analysis included in
elsewhere in this report and the financial statements and notes thereto included
in the Company's 2004 Annual Report on Form 10-KSB.


2.       EARNINGS PER SHARE

Basic earnings per share are based on the weighted average number of shares of
common stock outstanding. Diluted earnings per share is based on the weighted
average number of shares of common stock outstanding and dilutive common stock
equivalents. All earnings per share amounts in these financial statements are
basic earnings per share as defined by SFAS No. 128, "Earnings Per Share."
Diluted EPS is computed using weighted average shares outstanding plus
additional shares issued as if in-the-money options and warrants were exercised
(utilizing the treasury stock method).

The computation of basic and diluted earnings per share is as follows:

<TABLE>

(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT WEIGHTED
 SHARES AND PER SHARE AMOUNTS)
                                                                            THREE MONTHS ENDED
                                                                      -------------------------------
                                                                      MARCH 31, 2005   MARCH 31, 2004
                                                                      --------------   --------------

<S>                                                                      <C>             <C>
Numerator-net earnings                                                   $      415      $      141

Denominator-weighted average shares to compute basic eps                  9,794,088       6,642,095
                                                                         ==========      ==========

Basic eps shares                                                          9,794,088       6,642,095
Potential dilutive from assumed exercise of stock options/warrants        1,034,103         813,073

                                                                         ----------      ----------
Denominator - weighted average number of shares                          10,828,191       7,455,168
                                                                         ==========      ==========

Basic earnings per share                                                 $     0.04      $     0.02
Diluted earnings per share                                               $     0.04      $     0.02
</TABLE>


                                       5



<PAGE>

3.       BUSINESS ACQUISITIONS

On March 30, 2005, the Company entered into an agreement to acquire a
controlling interest in Guangzhou 3G Information Technology Co. Ltd.
("Guangzhou3G-WOFE"), through the purchase of a 51% interest of
Guangzhou3G-WOFE's parent company, Pacific 3G Information & Technology Co.
Limited (Guangzhou3G-BVI), a British Virgin Islands company.

PacificNet Holdings agreed to purchase 23,050 shares (the "Sale Shares") of
3G-BVI from Asiafame International Limited, Stargain International Limited and
Trilogic Investments Limited, with principle place of business located in the
People's Republic of China (the "Sellers"), and directly subscribed to 3G-BVI to
purchase 5,000 shares (the "Subscribed Shares"). The closing of the transactions
is subject to the completion of customary closing conditions, including the
completion of business and financial due diligence, and is expected to occur on
or prior to April 30, 2005.

         The total consideration paid for the Sale Shares was payable as
follows:

         (i) USD$1,183,000 payable to the Sellers in cash within 30 days after
the closing of the transaction;

         (ii) USD$4,182,000, by delivery of 522,750 shares of common stock, par
value $0.0001 per share (the "Common Stock") of PacificNet (the "PacificNet
Shares") to the Sellers. The PacificNet Shares are to be held in an escrow
account with an Escrow Agent designated by PacificNet Holdings. The first
installment of the PacificNet Shares in the amount of 130,050 will be released
45 days after the closing of the transaction. The remaining installments will be
released in equal installments of 98,175 shares within 30 days after the end of
each quarter, including the quarter ended March 31, 2005, provided that
Guangzhou 3G attains certain net income milestones by the end of each quarter.
The Sellers will be entitled to receive all of the PacificNet Shares if
Guangzhou 3G has achieved cumulative net income for the year ended December 31,
2005 of not less than USD$2,000,000. The Sellers appointed Tony Tong and Victor
Tong, PacificNet's current CEO and President, respectively, as proxy for the
Sellers for a period of 10 years with full power to vote the PacificNet Shares
at all meetings of stockholders of the Registrant.

         (iii) issuance of warrants to purchase up to 100,000 shares of the
PacificNet's Common Stock. The exercise price of the warrants is the 5-Day
Volume Weighted Average Price of the PacificNet's Common Stock prior to March
30, 2005. The warrant is exercisable for a period of 3 years.

         PacificNet Holdings subscribed to 3G-BVI to purchase an additional
5,000 shares. The total purchase price for the Subscribed Shares is USD$500,000,
payable within 45 days after the delivery of (i) stock powers transferring
theSale Shares to PacificNet Holdings; (ii) stock certificates for the Sale
Shares and the Subscribed Shares; (iii) an executed Subscription Agreement for
the Subscribed Shares; and (iv) minutes of the Board of Directors and
shareholders of Guangzhou 3G and 3G-BVI approving the transaction.


4.       STOCKHOLDERS' EQUITY

For the period ended March 31, 2005, the Company issued 57,000 shares as a
result of exercise of share options for cash consideration of $111,400.

Common Stock Repurchase Program.
--------------------------------

The Company's Board of Directors has approved a Corporate Stock Repurchase
Program to purchase up to US$800,000 worth of outstanding shares of its common
stock in open market transactions, from time to time, in compliance with Rule
10b-18 of the Securities Exchange Act of 1934 and all other applicable
securities regulations. The purpose of the repurchase program is to enhance
shareholder value. During the three months ended March 31, 2005, the Company did
not repurchase any shares.


                                       6



<PAGE>

5.       STOCK-BASED COMPENSATION

During the quarter ended March 31, 2005, the Company granted stock options to
purchase 260,000 of the Company's common stock at $6.57 per share (based on the
market price on February 25, 2005) which will expire on February 25, 2009.
During the quarter ended March 31, 2005, no options were canceled or forfeited,
and 57,000 options were exercised for proceeds of $111,400. As of March 31,
2005, there were 1,007,100 stock options outstanding and 490,000 options
exercisable. The weighted average exercise price of the options outstanding and
exercisable is $5.50 and $2.07, respectively, and the weighted average remaining
contractual life is 3.50 and 1.50 and years, respectively.

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," under which no compensation cost for stock options
is recognized for stock option awards granted at or above fair market value. Had
compensation expense for the Company's stock-based compensation plans been
determined under FAS No. 123, based on the fair market value at the grant dates,
the Company's pro forma net earnings (loss) and pro forma net earnings (loss)
per share would have been reflected as follows at March 31:

                                                            2005          2004
                                                          -------       -------
Net earnings (loss)
  As reported                                             $   415       $   141
  Stock-based employee compensation cost, net of tax       (1,545)           --
                                                          --------      --------
  Pro forma                                               $(1,130)      $   141
                                                          ========      ========
Earnings (loss) per share
  As reported                                             $  0.04        $  0.02
                                                          ========      ========
  Pro forma                                               $ (0.04)       $  0.02
                                                          ========      ========

The fair value of options granted during the quarter ended March 31, 2005, was
approximately $5.94 per option based on the Black-Scholes option pricing model
using valuation assumptions of: a) average remaining contractual life of three
years; b) expected volatility of 124.58%, c) dividend yield of 0%; and d) a risk
free interest rate of 3.75%.


6. SEGMENT INFORMATION


The Company's reportable segments are operating units, which represent the
operations of the Company's significant business operations. PacificNet's
operations include the following three groups:

         (1) Outsourcing Services: including Business Process Outsourcing (BPO),
         call center, IT Outsourcing (ITO) and software development services.

         (2) Value-Added Telecom Services (VAS): including Interactive Voice
         Response (IVR), SMS and related VAS.

         (3) Communication Products Distribution Services: including calling
         cards, GSM/ CDMA/ XiaoLingTong products, multimedia self-service
         Kiosks.

Summarized financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column includes the Company's other
insignificant services and corporate related items, and, as it relates to
segment earnings (loss), income and expense not allocated to reportable
segments.

<TABLE>
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
                                1.                               3. Communications
                            Outsourcing              2.             Distribution
FOR THE PERIOD ENDED         Business          VAS Business           Business         Admin & Other        TOTAL
MARCH 31, 2005                  ($)                 ($)                 ($)                 ($)              ($)
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
<S>                         <C>                 <C>                 <C>                   <C>            <C>
Revenues                    3,064,000           1,330,000           4,676,000             63,000         9,133,000
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
Earnings / (Loss)
from Operations               239,000             580,000             129,000            (151,000)         797,000
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
</TABLE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT'S DISCUSSION
AND ANALYSIS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2004.

                                       7



<PAGE>

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this Form 10-QSB that are not purely historical are
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 include statements about the Company's expectations, beliefs,
intentions or strategies for the future, which are indicated by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "the Company
believes," "management believes" and similar words or phrases. The
forward-looking statements are based on the Company's current expectations and
are subject to certain risks, uncertainties and assumptions. The Company's
actual results could differ materially from results anticipated in these
forward-looking statements. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis or plan of operations is based upon our consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. 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. On an on-going basis, we
evaluate our estimates, including those related to accounts receivable reserves,
provisions for impairment losses of affiliated companies and other intangible
assets, income taxes and contingencies. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies reflect our more
significant estimates and assumptions used in the preparation of our
consolidated financial statements:

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We evaluate the collectibility of our trade receivables based on a combination
of factors. We regularly analyze our significant customer accounts, and, when we
become aware of a specific customer's inability to meet its financial
obligations to us, such as in the case of bankruptcy filings or deterioration in
the customer's operating results or financial position, we record a specific
reserve for bad debt to reduce the related receivable to the amount we
reasonably believe is collectible. We also record reserves for bad debt for all
other customers based on a variety of factors including the length of time the
receivables are past due, the financial health of the customer, macroeconomic
considerations and historical experience. If circumstances related to specific
customers change, our estimates of the recoverability of receivables could be
further adjusted. In the event that our trade receivables become uncollectible,
we would be forced to record additional adjustments to receivables to reflect
the amounts at net realizable value. The accounting effect of this entry would
be a charge to income, thereby reducing our net profit. Although we consider the
likelihood of this occurrence to be remote based on past history and the current
status of our accounts, there is a possibility of this occurrence.

INCOME TAXES - We record a valuation allowance to reduce our deferred tax assets
to the amount that is more likely than not to be realized. We have considered
future market growth, forecasted earnings, future taxable income, and prudent
and feasible tax planning strategies in determining the need for a valuation
allowance. We currently have recorded a full valuation allowance against net
deferred tax assets as we currently believe it is more likely than not that the
deferred tax assets will not be realized.

CONTINGENCIES - We may be subject to certain asserted and unasserted claims
encountered in the normal course of business. It is our belief that the
resolution of these matters will not have a material adverse effect on our
financial position or results of operations, however, we cannot provide
assurance that damages that result in a material adverse effect on our financial
position or results of operations will not be imposed in these matters. We
account for contingent liabilities when it is probable that future expenditures
will be made and such expenditures can be reasonably estimated.

                                       8



<PAGE>

VALUATION OF LONG-LIVED ASSETS INCLUDING GOODWILL AND PURCHASED INTANGIBLE
ASSETS

We review property, plant and equipment, goodwill and purchased intangible
assets for impairment whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. Our asset impairment review
assesses the fair value of the assets based on the future cash flows the assets
are expected to generate. An impairment loss is recognized when estimated
undiscounted future cash flows expected to result from the use of the asset plus
net proceeds expected from disposition of the asset (if any) are less than the
carrying value of the asset. This approach uses our estimates of future market
growth, forecasted revenue and costs, expected periods the assets will be
utilized and appropriate discount rates. Such evaluations of impairment of
long-lived assets including goodwill arising on a business combination and
purchased intangible assets are an integral part of, but not limited to, our
strategic reviews of our business and operations performed in conjunction with
restructuring actions. When an impairment is identified, the carrying amount of
the asset is reduced to its estimated fair value. Deterioration of our business
in a geographic region or within a business segment in the future could also
lead to impairment adjustments as such issues are identified. The accounting
effect of an impairment loss would be a charge to income, thereby reducing our
net profit.


NATURE OF THE OPERATIONS OF THE COMPANY

NATURE OF BUSINESS.

We were incorporated in the state of Delaware in 1987. Our business consists of
three groups, all of which operate within the outsourcing and telecommunications
industries in Asia, primarily greater China, which includes the People's
Republic of China (PRC), or mainland China, Hong Kong Special Administrative
Region (HKSAR), Macau Special Administrative Region, and Taiwan. Through our
subsidiaries we provide outsourcing services, value-added telecom services
(VAS), and communication products distribution services. Our business process
outsourcing (BPO) services include call centers providing customer relationship
management (CRM) and telemarketing services, and our information technology
outsourcing (ITO) includes software programming and development. We are
value-added resellers and providers of telecom VAS, which comprises interactive
voice response (IVR) systems, call center management systems, and VOIP, as well
as mobile phone VAS, such as short messaging services (SMS) and multimedia
messaging services (MMS). Recently, we commenced our communication products
distribution service, through wholesale and, to a lesser extent, retail sale and
distribution of calling cards in China, and we have recently invested in a
company that distributes multimedia interactive self-service kiosks. We intend
to continue to grow our business by acquiring and managing growing technology
and network communications businesses with established products and customers in
Asia.

Our business process outsourcing services generate revenues from call center
services, call center management software sales, and training and consulting. We
invoice our call center clients monthly at per seat monthly rates, a base price
plus commission per call, or a per hour charge rate, depending on the customer's
preference. Our call center software clients pay per license, for which there is
usually a one-time charge on sale of the software and annual maintenance fees
for service. We charge per project for our consulting and training services and
for our telecom VAS, which are invoiced throughout the project. Our telecom VAS
often includes a post-sale service contract for systems integration and
consulting services for which we bill separately. Our calling card and related
mobile telecom products are sold cash-on-delivery.

PacificNet's clients include the leading telecom operators, banks, insurance,
travel, marketing, and service companies, as well as telecom consumers, in
Greater China. Clients include China Telecom, China Netcom, China Mobile, China
Unicom, PCCW, Hutchison Telecom, CSL, SmarTone, Sunday, Swire Travel, Coca-Cola,
SONY, Samsung, TNT Express, Huawei, TCL, Dun & Bradstreet, American Express,
Bank of China, DBS, Hong Kong Government, and Hongkong Post. PacificNet employs
over 1000 staff in its various subsidiaries in China with offices in Hong Kong,
Beijing, Shenzhen, Guangzhou, and Shandong.

                                       9



<PAGE>

RESULTS OF OPERATIONS

The following table sets forth selected statement of operations data as a
percentage of revenues for the periods indicated.

                                                         QUARTER ENDED
                                                         -------------
                                                       MARCH 31,  MARCH 31,
---------------------------------------------------------------------------
                                                        2005         2004
---------------------------------------------------------------------------

Revenues                                               100%         100.0%
---------------------------------------------------------------------------
Cost of Revenues                                       (81.9%)      (64.3%)
---------------------------------------------------------------------------
Gross Margin                                            18.1%        35.7%
---------------------------------------------------------------------------
Selling, general and administrative expense             (8.9%)      (22.2%)
---------------------------------------------------------------------------
Depreciation and amortization                           (0.5%)      (1.9%)
---------------------------------------------------------------------------
Earnings from operations                                 8.7%        11.6%
---------------------------------------------------------------------------

Other income (expenses), net                             1.0%         1.8%
---------------------------------------------------------------------------

Provision for income taxes                              (0.3%)       --
---------------------------------------------------------------------------
Share result of associated company                      (0.1%)       --
---------------------------------------------------------------------------
Minority interest                                       (4.8%)       (9.4%)
---------------------------------------------------------------------------

Net earnings                                             4.5%         4.0%
---------------------------------------------------------------------------

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

REVENUES. Revenues for the three months ended March 31, 2005 were $9,133,000, an
increase of $5,631,000 from $3,502,000 for the three months ended March 31,
2004. For the three months ended March 31, 2005, revenues of $3,064,000,
$1,330,000 and $4,676,000 were derived from the services rendered by the
Company's three operating units: Outsourcing Services, Value-Added Services, and
Communications Products Distribution Services, respectively.

Several of our businesses experience fluctuations in quarterly performance.
Traditionally, the first quarter from January to March is a low season for our
call center business due to the long Lunar New Year holidays in China. Revenues
from the VAS and IVR segment can vary from quarter to quarter due to new product
launches and the seasonality of certain product lines.

PacificNet's operations include the following three groups:

         (1) Outsourcing Services: including Business Process Outsourcing (BPO),
         call center, IT Outsourcing (ITO) and software development services.

         (2) Value-Added Telecom Services (VAS): including Interactive Voice
         Response (IVR), SMS and related VAS.

         (3) Communication Products Distribution Services: including calling
         cards, GSM/ CDMA/ XiaoLingTong products, multimedia self-service
         Kiosks.

                                       10



<PAGE>

Summarized financial information concerning each of our main operating units is
set forth in the following table. The "Admin & Other" column included our other
insignificant subsidiaries and corporate related items.

<TABLE>
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
FOR THE PERIOD ENDED            1.                              3. Communications
                            Outsourcing             2.              Distribution
                             Business          VAS Business           Business         Admin & Other        TOTAL
MARCH 31, 2005                  ($)                 ($)                 ($)                 ($)              ($)
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
<S>                         <C>                 <C>                 <C>                   <C>            <C>
Revenues                    3,064,000           1,330,000           4,676,000             63,000         9,133,000
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
Profit / (Loss) from
Operations                    239,000             580,000             129,000            (151,000)         797,000
----------------------- -------------------- ------------------ --------------------- ----------------- --------------
</TABLE>


COST OF REVENUES. Cost of revenues for the three months ended March 31, 2005 was
$7,483,000, an increase of $5,230,000 from $2,253,000 for the three months ended
March 31, 2004. The increase is directly associated with the corresponding
increase in revenues.

GROSS PROFIT. Gross profit for the three months ended March 31, 2005 was
$1,650,000, an increase of $401,000 from $1,249,000 for the three months ended
March 31, 2004. Gross margin for the three months ended March 31, 2005, was 18%
of total revenues. We believe that our gross margin overall approximates the
industry standards.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $810,000 for the three months ended March 31,
2005, an increase of $33,000, from $777,000 for the three months ended March 31,
2004. This increase resulted from increasing the size of our operations, which
included increased premises costs and staff costs.

INCOME TAXES. Income tax provision was $24,000 for the three months ended March
31, 2005, as compared to $0 for the three months ended March 31, 2004. Interim
income tax provisions are based upon management's estimate of taxable income and
the resulting consolidated effective income tax rate for the full year. As a
result, such interim estimates are subject to change as the year progresses and
more information becomes available.

MINORITY INTERESTS. Minority interests for the three months ended March 31, 2005
totaled $(443,000), compared with $(328,000) for the same period in the prior
year, which represents the outside ownership interest in a subsidiary that is
consolidated with the parent for financial reporting purposes.

LIQUIDITY AND CAPITAL RESOURCES

CASH AND CASH EQUIVALENTS. As of March 31, 2005, the Company had cash and cash
equivalents of $2,323,000 as compared to $6,764,000 at December 31, 2004.

WORKING CAPITAL. The Company's working capital decreased to $16,016,000 at March
31, 2005, as compared to $ 16,185,000 at December 31, 2004. When compared to
balances at December 31, 2004, the minimal decrease in working capital at March
31, 2005 was primarily due to overall net decreases in the working capital
accounts resulting from reductions in cash used for payments on accounts payable
and accrued liabilities and banking loans.

NET CASH FROM OPERATING ACTIVITIES. Net cash used in operating activities was
$3,638,000 for the three months ended March 31, 2005 as compared to net cash
used in operating activities of $1,040,000 for the three months ended March 31,
2004. Net cash used in operating activities in the three months ended March 31,
2005 was primarily due to advances to related entities of $876,000, prepayment
for planned purchase of office in Beijing for $300,000, payments made to reduce
liabilities such as accounts payable and accrued expenses of $1,483,000 and
banking loans of $836,000, and purchases of inventories of $430,000 to respond
to future demand for our products.

                                       11



<PAGE>

NET CASH FROM INVESTING ACTIVITIES.

NET CASH FROM FINANCING ACTIVITIES. Net cash used in financing activities for
the three months ended March 31, 2005 was $597,000 representing repayment of
banking facilities of $836,000 primarily by EPRO, dividend paid out of $339,000
to minority interest shareholders by Linkhead, and cash received of $111,400
from the exercise of 57,000 share options. Net cash provided by financing
activities for the three months ended March 31, 2004 was $1,701,000, which was
primarily a result of common stock sold for cash of $2,868,000 offset by net
repayments on banking loans of $1,167,000.

INFLATION. Inflation has not had a material impact on the Company's business in
recent years.

CURRENCY EXCHANGE FLUCTUATIONS. All of the Company's revenues are denominated
either in U.S. dollars or Hong Kong dollars, while its expenses are denominated
primarily in Hong Kong dollars and Renminbi ("RMB"), the currency of the
People's Republic of China. The value of the RMB-to-U.S. dollar or Hong Kong
dollar-to-United States dollar and other currencies may fluctuate and is
affected by, among other things, changes in political and economic conditions.
Since 1994, the conversion of Renminbi into foreign currencies, including U.S.
dollars, has been based on rates set by the People's Bank of China, which are
set daily based on the previous day's interbank foreign exchange market rates
and current exchange rates on the world financial markets. Since 1994, the
official exchange rate generally has been stable. Recently there has been
increased political pressure on the Chinese government to decouple the RMB from
the United States dollar. Although a devaluation of the Hong Kong dollar or RMB
relative to the United States dollar would likely reduce the Company's expenses
(as expressed in United States dollars), any material increase in the value of
the Hong Kong dollar or RMB relative to the United States dollar would increase
the Company's expenses, and could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
has never engaged in currency hedging operations and has no present intention to
do so.

OFF-BALANCE SHEET ARRANGEMENTS. We had no outstanding derivative financial
instruments, off-balance sheet guarantees, interest rate swap transactions or
foreign currency forward contracts. We did not engage in trading activities
involving non-exchange traded contracts during 2005.

CONTRACTUAL OBLIGATIONS

CONTRACTUAL OBLIGATIONS. We have significant cash resources to meet our
contractual obligations as of March 31, 32005, as detailed below:

<TABLE>

                             Payments Due by Period

                                                      Less than
       Contractual Obligations           Total         1 year        1-3 years      4-5 years   After 5 years
       -----------------------           -----         ------        ---------      ---------   -------------
<S>                                   <C>            <C>             <C>               <C>          <C>
Line of credit                        $   69,000    $   69,000            --         --           --

Bank Loans                            $ 1,112,000    $ 1,035,000     $  77,000         --           --

Operating leases                      $   104,000    $   104,000            --         --           --

Capital leases                        $   239,000    $   113,000     $ 126,000         --           --
                                      ------------   ------------    ----------

Total cash contractual obligations    $ 1,524,000    $ 1,321,000     $ 203,000
                                      ============   ============    ==========
</TABLE>

CONCENTRATION OF CREDIT RISK. All of the Company's revenues are derived in Asia
and Greater China. The Company does not have any single customer that accounts
for more than 10% of its revenues or 10% of its purchases. If the Company was
unable to derive any revenue from Asia and Greater China, it would have a
significant, financially disruptive effect on the normal operations of the
Company. Based on the current economic environment in China, the Company does
not expect any material adverse impact to its business, financial condition and
results of operations.

                                       12



<PAGE>

SEASONALITY AND QUARTERLY FLUCTUATIONS. Several of our businesses experience
fluctuations in quarterly performance. Traditionally, the first quarter from
January to March is a low season for our call center business due to the long
Lunar New Year holidays in China. Revenue and income from operations for the
call center and VAS tend to be higher in the fourth quarter due to special
holiday promotions. Internet/Direct Commerce revenues also tend to be higher in
the fourth quarter due to increased consumer spending during that period.
Revenues from the VAS and IVR segment can vary from quarter to quarter due to
new product launches and the seasonality of certain product lines.


ITEM 3.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's management,
including our principal executive officer and the principal accounting 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 of the end
of the period covered by this report (the "Evaluation Date"). Based on this
evaluation, the Company's principal executive officer and principal accounting
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 Securities and Exchange Commission ("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.

Additionally, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date. We have not identified any significant
deficiencies or material weaknesses in our internal controls, and therefore
there were no corrective actions taken.


                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

None.

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.

ITEM 6.  EXHIBITS

EXHIBITS

The following exhibits are filed as part of this report:

EXHIBIT
NUMBER            DESCRIPTION
------            -----------
31.1               Rule 13a-14(a) Certification of Chief Executive Officer
31.2               Rule 13a-14(a) Certification of Chief Financial Officer
32.1               18 U.S.C. Section 1350 Certifications


                                       13




<PAGE>


                                   SIGNATURES

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

                                                PACIFICNET INC.

Date: May 15, 2005                              By: /s/ TONY TONG
                                                    -------------------
                                                Tony Tong
                                                Chief Executive Officer
                                                (Principal Executive Officer)

Date: May 15, 2005                              By: /s/ WANG SHAO JIAN
                                                    -------------------
                                                Wang Shao Jian
                                                Chief Financial Officer
                                                (Principal Financial Officer)


                                       14