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

                          FORM 10-KSB/A
                         Amendment No. 2

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

       For the fiscal year ended December 31, 2005

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

       Commission file number:  000-26731


                      PACIFIC WEBWORKS, INC.
      (Exact name of registrant as specified in its charter)

    Nevada                                  87-0627910
 -----------------------          -----------------------------------
(State of incorporation)          (I.R.S. Employer Identification No.)

180 South 300 West, Suite 400, Salt Lake City, Utah          84101
(Address of principal executive offices)                   (Zip code)

Issuer's telephone number, including area code: (801)578-9020

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock

Check whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]

The issuer (1) filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 [ ]

Disclosure of delinquent filers in response to item 405 of Regulation S-B is
not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. [ ]

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

State issuer's revenue for its most recent fiscal year:   $5,914,346

As of March 7, 2007, the registrant had 35,776,895 shares of common stock
outstanding.  The aggregate market value of the shares of voting stock held by
non-affiliates as of that date was approximately $1,387,193.

Documents incorporated by reference:  None

Transitional Small Business Disclosure Format: Yes [ ] No [X]

<PAGE>

                         EXPLANATORY NOTE

In July 2005 the Securities and Exchange Commission ("SEC") conducted a review
of our annual report on Form 10-KSB for the year ended December 31, 2005.  As
a result of this review, we have revised the Revenue Recognition paragraph of
Note 1 to the financial statements for the years ended December 31, 2005 and
2004 to comply with the SEC's comments.

                        TABLE OF CONTENTS


                             PART II
Item 7.  Financial Statements.............................................2

         Report of Independent Registered Public Accounting Firm..........3

         Consolidated Balance Sheets, December 31, 2005 and
         December 31, 2004................................................4

         Consolidated Statements of Operations for the years ended
         December 31, 2005 and 2004.......................................5

         Consolidated Statements of Stockholders Equity for the years
         ended December 31, 2005 and 2004.................................6

         Consolidated Statements of Cash Flows for the years ended
         December 31, 2005 and 2004.......................................7

         Notes to the Unaudited Financial Statements......................8

                             PART III
         Item 13.  Exhibits..............................................22

         Signatures......................................................23






                             PART II

                   ITEM 7: FINANCIAL STATEMENTS



             Pacific WebWorks, Inc. and Subsidiaries

                CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 2005






                                2





Chisholm                                        533 West 2600 South, Suite 25
  Bierwolf &                                            Bountiful, Utah 84010
    Nilson, LLC                                         Phone: (801) 292-8756
Certified Public Accountants                              Fax: (801) 292-8809


     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
of Pacific Webworks, Inc.

We have audited the accompanying consolidated balance sheets of Pacific
Webworks, Inc. and Subsidiaries as of December 31, 2005 and 2004 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the PCAOB (United
States).  Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement.  The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting.  Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting.  Accordingly, we express no such opinion.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Pacific Webworks, Inc. and Subsidiaries as of December 31, 2005 and 2004
and the results of its operations and cash flows for the years then ended in
conformity with U.S. generally accepted accounting principles.




/s/ Chisholm, Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, UT
February 3, 2006




                                3
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
                   CONSOLIDATED BALANCE SHEETS


                              ASSETS

                                                          December 31,
                                                      2004           2005
                                                 -------------- -------------
CURRENT ASSETS

  Cash and cash equivalents                      $     452,983  $    744,520
  Receivables
    Trade, less allowance
    for doubtful receivables of
    $127,421 in 2004 and $97,592 in 2005                96,260       269,002
  Prepaid expenses                                      74,202       153,291
                                                 -------------- -------------

     Total current assets                              623,445     1,166,814
                                                 -------------- -------------

PROPERTY AND EQUIPMENT, NET AT COST                     70,382        81,039
RESTRICTED CASH                                        136,519       163,472
GOODWILL                                             2,946,253     2,946,253
OTHER ASSETS, NET                                       22,989        10,505
                                                 -------------- -------------

                                                 $   3,799,588  $  4,368,083
                                                 ============== =============


               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                               $      89,164  $     94,053
  Accrued liabilities                                  181,109       125,280
  Deferred revenue                                     431,578       679,206
  Current liabilities from discontinued operations     235,274       235,274
                                                 -------------- -------------

    Total current liabilities                          937,125     1,133,812
                                                 -------------- -------------

Notes payable                                                -       100,000
                                                 -------------- -------------

    Total liabilities                                  937,125     1,233,812
                                                 -------------- -------------
STOCKHOLDERS' EQUITY

  Common stock - par value $0.001; authorized
   50,000,000; issued and outstanding
   28,517,622 shares in 2004 and
   35,426,895 shares in 2005                            28,518        35,427
  Additional paid-in capital                        15,560,971    16,121,744
  Accumulated deficit                              (12,727,027)  (13,022,900)
                                                 -------------- -------------

    Total stockholders' equity                       2,862,462     3,134,271
                                                 -------------- -------------

                                                 $   3,799,587  $  4,368,083
                                                 ============== =============




 The accompanying notes are an integral part of these statements.

                                4
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
              CONSOLIDATED STATEMENTS OF OPERATIONS


                                                         Year ended
                                                         December 31,
                                                      2004           2005
                                                 -------------- -------------
Revenues, net
  Software, access and license fees              $     655,440  $  1,392,093
  Hosting, gateway and maintenance fees              1,430,328     1,814,550
  Training and education                               817,197     1,219,231
  Merchant accounts, design and other                  714,521     1,488,471
                                                 -------------- -------------
                                                     3,617,486     5,914,346

Cost of sales                                        1,071,241     1,771,725
                                                 -------------- -------------

    Gross profit                                     2,546,245     4,142,620

Selling expenses                                     1,516,567     2,362,694
Research and development                               242,012       264,829
General and administrative                           1,228,324     1,842,262
Depreciation and amortization                           49,736        29,795
                                                 -------------- -------------

    Total operating expenses                         3,036,640     4,499,580
                                                 -------------- -------------

    Net loss from operations                          (490,395)     (356,960)
                                                 -------------- -------------
Other income (expense)
  Interest income                                        3,054        11,817
  Other income (expense), net                             (986)       49,270
                                                 -------------- -------------
                                                         2,068        61,087
                                                 -------------- -------------
    Net income (loss) from continuing operations
    before income taxes                               (488,327)     (295,873)
                                                 -------------- -------------
Income Taxes                                               300             -
                                                 -------------- -------------

    Net income (loss) from continuing operations      (488,627)     (295,873)

Discontinued operations
  Gain (loss) from operations (net of income tax)            -             -

  Gain on disposal (net of income tax)                       -             -
                                                 -------------- -------------
    Total gain (loss) from discontinued operations           -             -

    NET LOSS                                      $    (488,627) $   (295,873)
                                                 ============== =============
Net loss per common share - basic and dilutive
  Net income loss from continuing operations     $       (0.02) $      (0.01)
  Gain from discontinued operations                          -             -
                                                 -------------- -------------
  Net earnings (loss)                            $       (0.02) $      (0.01)
                                                 ============== =============
Weighted-average number of shares outstanding
  Basic                                             24,853,964    31,497,718
                                                 ============== =============
  Dilutive                                          25,165,075    32,656,228
                                                 ============== =============



 The accompanying notes are an integral part of these statements.

                                5

<PAGE>
<TABLE>
<CAPTION>





             Pacific WebWorks, Inc. and Subsidiaries
          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
              Years ended December 31, 2004 and 2005


                                                             Additional
                         Price per        Common Stock         Paid-in     Accumulated
                           share       Shares      Amount      Capital       Deficit       Totals
                         ---------- ------------ ---------- ------------- ------------- -------------

                      <c>        <c>          <c>        <c>           <c>           <c>
Balances at
 January 1, 2004         $       -   24,587,622  $  24,588  $ 15,288,181  $(12,238,400) $  3,074,369

Issuance of stock for
 insurance policies           0.09      300,000        300        26,420             -        26,720

Issuance of common
 stock for cash               0.07    3,630,000      3,630       246,370             -       250,000

Net loss 2004                    -            -          -             -      (488,627)     (488,627)
                                    ------------ ---------- ------------- ------------- -------------
Balances at
 December 31, 2004                   28,517,622     28,518    15,560,971   (12,727,027)    2,862,462

Issuance of stock for
 insurance policies           0.01      639,273        638        55,210             -        55,849

Issuance of stock for
 portfolio                    0.10       20,000         20         1,980             -         2,000

Issuance of common
 stock for cash               0.12    6,250,000      6,250       493,750             -       500,000

Compensation for
 Issuance of Warrants
  to Investor
  Relations Firm                 -            -         -          9,832             -         9,832

Net loss 2005                    -            -         -              -      (295,873)     (295,873)
                                    ------------ ---------- ------------- ------------- -------------
Balances at
  December 31, 2005                  35,426,895  $  35,426  $ 16,121,744  $(13,022,900) $  3,134,270
                                    ============ ========== ============= ============= =============




    The accompanying notes are an integral part of this financial statement

                                       6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>








                    Pacific WebWorks, Inc. and Subsidiaries
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                       For the
                                                                     year ended
                                                                     December 31,
                                                                 2004          2005
                                                            -------------- -------------
<S>                                                         <C>            <C>
Increase (decrease) in cash and cash equivalents
  Cash flows from operating activities
    Net earnings (loss)                                     $    (488,627) $   (295,873)
    Adjustments to reconcile net earnings (loss)
     to net cash used in operating activities
      Depreciation & amortization                                  49,736        29,795
      Issuance of  options and warrants for compensation                -         9,832
      Bad debt expense                                            512,914       828,437
    Changes in assets and liabilities
      Receivables                                                (579,525)   (1,001,180)
      Prepaid expenses and other assets                            65,827        (8,756)
      Accounts payable and accrued liabilities                     23,502       (50,940)
      Deferred revenue                                            225,977       247,628
                                                            -------------- -------------

        Total adjustments                                         298,431        54,816
                                                            -------------- -------------

        Net cash provided by continuing operating activities     (190,196)     (241,057)
                                                            -------------- -------------
Cash flows from investing activities
  Purchases of property and equipment                             (21,966)      (40,452)
  Cash on reserve with bank                                       (85,568)      (26,953)
                                                            -------------- -------------

        Net cash provided by (used in) investing activities      (107,534)      (67,405)
                                                            -------------- -------------
Cash flows from financing activities
  Proceeds from notes payable                                           -       100,000
  Proceeds from convertible notes payable                               -       200,000
  Payments on convertible notes payable                                 -      (200,000)
  Proceeds on issuance of stock                                   250,000       250,000
  Proceeds on exercise of warrants                                      -       250,000
                                                            -------------- -------------

        Net cash used in financing activities                     250,000       600,000
                                                            -------------- -------------

        Net increase in cash and cash equivalents                 (47,730)      291,538

  Cash and cash equivalents at beginning of period                500,713       452,983
                                                            -------------- -------------

  Cash and cash equivalents at end of period                $     452,983  $    744,521
                                                            ============== =============

  Supplemental disclosures of cash flow information:
    Cash paid for interest                                  $           -  $          -
    Cash paid for income taxes                                        800           800

  Non-cash financing activities:
    Issuance of stock for prepaid insurance policies               26,720        55,849
    Reseller note settlement                                            -             -

       The accompanying notes are an integral part of these statements.

                                       7

</TABLE>
<PAGE>




             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

The Company
-----------
Pacific WebWorks, Inc. and its subsidiaries, engage in the development and
distribution of web tools software, electronic business storefront hosting,
and Internet payment systems for individuals and small to mid-sized
businesses.  The company also provides website development and training for
its customers.

The Company was organized under the laws of the state of Nevada on May 18,
1987 as Asphalt Associates, Inc.  On December 31, 1998, the board of directors
changed the name of the Company to Pacific WebWorks, Inc.  On January 11,
1999, the Company merged with Utah Webworks, Inc., a Utah corporation
organized April 10, 1997.  The share exchange with Utah Webworks was accounted
for as a reverse merger; therefore, all financial information prior to January
11, 1999 is that of the accounting survivor, Utah Webworks.

TradeWorks Marketing, Inc. and FundWorks, Inc. were organized in the state of
Delaware in July and August of 2003, respectfully.  TradeWorks began
operations in August 2003 and engages in the marketing and sales of Pacific
WebWorks and Intellipay products.  FundWorks began operations in December 2003
and provides operating leases for customers with higher credit risk.

Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements include the
accounts of Pacific WebWorks, Inc. and its wholly owned subsidiaries,
Intellipay, Inc., TradeWorks Marketing, Inc., FundWorks, Inc., and World
Commerce Network, LLC.  All significant intercompany accounts and transactions
have been eliminated in consolidation.  The operations of World Commerce
Network, LLC have been discontinued. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Certain prior period balances have been reclassified to conform with current
period presentation.

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes.  Management
believes that the estimates used in preparing the financial statements are
reasonable and prudent; however, actual results could differ from these
estimates.  Significant estimates include the allowance for doubtful accounts,
impairment assessments of goodwill, and certain accrued liabilities such as
contingent liabilities.

Cash Equivalents
----------------
The Company considers all highly liquid instruments maturing in three months
or less when purchased to be cash equivalents.

                                8
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION   CONTINUED

Depreciation and amortization
-----------------------------
Depreciation of property and equipment is provided on the straight-line method
over the estimated useful lives of the assets.  Accelerated methods of
depreciation of property and equipment are used for income tax purposes.

Goodwill
--------
The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, in
2002. Under SFAS No. 142, goodwill is no longer amortized, but is tested for
impairment at a reporting unit level on an annual basis and between annual
tests if an event occurs or circumstances change that would more likely than
not reduce the fair value of a reporting unit below its carrying amount.
Events or circumstances which could trigger an impairment review include a
significant adverse change in legal factors or in the business climate, an
adverse action or assessment by a regulator, unanticipated competition, a loss
of key personnel, significant changes in the manner of our use of the acquired
assets or the strategy for our overall business, significant negative industry
or economic trends or projected future results of operations. For purposes of
financial reporting and impairment testing in accordance with SFAS No. 142,
the Company's Intellipay business unit operates in one principal business
segment, a provider of online credit card gateway services.

In testing for a potential impairment of goodwill, the estimated fair value of
the business unit is compared with book value, including goodwill. If the
estimated fair value exceeds book value, goodwill is considered not to be
impaired and no additional steps are necessary. If, however, the fair value of
the Company is less than book value, then the carrying amount of the goodwill
is compared with its implied fair value. The estimate of implied fair value of
goodwill may require independent valuations of certain internally generated
and unrecognized intangible assets such as our paying monthly gateway
portfolio, software and technology and trademarks. If the carrying amount of
our goodwill exceeds the implied fair value of that goodwill, an impairment
loss would be recognized in an amount equal to the excess. In accordance with
SFAS No. 142, the Company performed a goodwill impairment test during 2005 and
concluded there was no impairment of goodwill.

Fair value of financial instruments
-----------------------------------
The fair value of the Company's cash and cash equivalents, receivables,
accounts payable, accrued liabilities and capital lease obligations
approximate carrying value based on their effective interest rates compared to
current market prices.

Revenue Recognition
-------------------
The Company recognizes revenue in accordance with the Securities and Exchange
Commission, Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in
Financial Statements" and its revisions in SAB No. 104.  SAB 101 and 104
clarify application of generally accepted accounting principles related to
revenue transactions.  In the third quarter 2003, the Company adopted EITF
Issue No. 00-21, Revenue Arrangements with Multiple Deliverables ("EITF Issue
No. 00-21").

                                9

<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION - CONTINUED

Revenue Recognition - Continued
-------------------------------

We receive revenue for hosting, gateway, and maintenance fees, software access
and licensing fees, training and education and the sale of merchant accounts
as well as custom website design work.  Revenues from up-front fees are
deferred and recognized over the period services are performed ranging from
eight months to one year.  Fees for the set-up of merchant accounts are
deferred and recognized as services are completed (which is generally two
months).  Revenues from monthly hosting, maintenance, transaction and
processing fees are recorded when earned. Operating lease revenues for
merchant accounts and software are recorded as they become due from customers.

The Company recognizes revenues when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists, (2) delivery of products and
services has occurred, (3) the fee is fixed or determinable and (4)
collectibility is reasonably assured.

In an arrangement with multiple deliverables, the delivered item(s) is
considered a separate unit of accounting if all of the following criteria are
met: (1) the delivered item(s) has value to the customer on a standalone
basis, (2) there is objective and reliable evidence of the fair value of the
undelivered item(s), and (3) if the arrangement includes a general right of
return, delivery or performance of the undelivered item(s) is considered
probable and substantially in the control of the vendor. If all the conditions
above are met and there is objective and reliable evidence of fair value for
all units of accounting in an arrangement, the arrangement consideration is
allocated to the separate units of accounting based on their relative fair
values.

Cost of sales
-------------
Cost of sales includes costs related to fulfillment, customer service, certain
royalties and commissions, amortization of purchased customer portfolios,
service personnel, telecommunications and data center costs.

Sales and marketing costs
-------------------------
Sales and marketing expenses include advertising expenses, seminar expenses,
commissions and personnel expenses for sales and marketing. The Company has
expended significant amounts on sales and marketing, including national
television, radio, and print advertising. Marketing and advertising costs to
promote the Company's products and services are expensed in the period
incurred.

Research and development costs
------------------------------
Product development expenses include expenses for the maintenance of existing
software and the development of new or improved software and technology,
including personnel expenses for the product engineering department.  Costs
incurred by the Company to develop, enhance, manage, monitor and operate the
Company's technology services are generally expensed as incurred.

                                10

<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION - CONTINUED

General and administrative costs
--------------------------------
General and administrative expenses include personnel expenses for executive,
finance, and internal support personnel. In addition, general and
administrative expenses include fees for bad debt costs, professional legal
and accounting services, insurance, office space, banking and merchant fees,
and other overhead-related costs.

Income taxes
------------
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax bases
of assets and liabilities measured by the currently enacted tax rates in
effect for the years in which these differences are expected to reverse.
Deferred tax expense or benefit is the result of changes in deferred tax
assets and liabilities.

Stock Based Compensation
------------------------
The Company has applied the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation
Transition and Disclosure - An amendment of FASB Statement No. 123," for the
years ended December 31, 2004 and 2003.  This Statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation.  In addition, this Statement amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures
in both interim and annual financial statements about the method of accounting
for stock-based compensation and the effect of the method on reported results.
As permitted by SFAS No. 148, the Company continues to account for stock
options under APB Opinion No. 25, under which no compensation has been
recognized.

The following table illustrates the effect on net losses and loss per share if
the Company had applied the fair value recognition provisions of SFAS No. 123,
as amended by SFAS 148 to stock-based compensation:


                                                Year Ended December 31,
                                                   2004          2005
                                              ------------- --------------
Net loss
  From continuing operations
                              As reported     $   (488,327) $    (295,873)
                              Pro forma           (809,358)      (507,332)

Net earnings (loss)           As reported     $   (488,327) $    (295,873)
                              Pro forma           (809,358)      (507,332)

Net earnings (loss) per
 common share from continuing
 operations basic and
 fully diluted                As reported     $      (0.02) $       (0.00)
                              Pro forma              (0.03)         (0.01)

Net earnings (loss) per
  common  share               As reported     $      (0.02) $       (0.00)
                              Pro forma              (0.03)         (0.01)


                                11
<PAGE>







             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION - CONTINUED

Stock Based Compensation - Continued
------------------------------------
The fair value of these options was estimated at the date of grant using the
Black-Scholes American option-pricing model with the following
weighted-average assumptions for options granted in 2004 and 2005: expected
volatility of 101 percent and 174 percent, respectively; risk-free interest
rate of 4.00 percent and 4.23 percent, respectively; and expected life of 3.5
and 5 years, respectively.  The weighted-average fair value of options granted
was $0.05 and $0.11 in 2004 and 2005, respectively.

Option pricing models require the input of highly sensitive assumptions,
including expected stock volatility.  Also, the Company's stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair
value estimate.  Management believes the best input assumptions available were
used to value the options and that the resulting option values are reasonable.

Earnings (loss) Per Share
-------------------------
The computation of net loss per share of common stock is based on the weighted
average number of shares outstanding during each period presented. The Company
utilizes the treasury stock method to calculate loss per share.  Potentially
issuable common shares totaling 5,334,424 related to options were excluded
from the calculation of diluted loss per share because their effects were
anti-dilutive for the year ended December 31, 2004.  Potentially issuable
common shares totaling 6,802,151 related to options and 1,000,000 related to
warrants were excluded from the calculation of diluted loss per share because
their effects were anti-dilutive for the year ended December 31, 2005.

The following is the calculation for weighted average common shares used in
basic and dilutive net earnings (loss) per share:

                                                  Year ended December 31,
                                                     2004         2005
                                                ------------   ------------
Common shares outstanding during the period      24,587,622     28,517,622
Weighted average common shares issued               266,342      2,980,096
                                                ------------   ------------
Weighted average common shares used
   in basic earnings (loss) per share            24,853,964     31,497,718
                                                ------------   ------------
Dilutive effects of potentially issuable
   common shares (warrants)                         311,111      1,158,510
                                                ------------   ------------
Weighted average number of common shares
  and dilutive potential common stock used
  in diluted earnings (loss) per share           25,165,075     32,656,228
                                                ============   ============

Recent Accounting Pronouncements
---------------------------------
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment".
This Statement revises SFAS No. 123, "Accounting for Stock-Based Compensation"
and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS No. 123(R) requires that the compensation cost relating to share-based
payment transactions be recognized in financial

                                12
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION - CONTINUED

Recent Accounting Pronouncements - Continued
--------------------------------------------
statements.  The cost will be measured based on the fair value of the
instruments issued.  The Company will be required to apply SFAS No. 123(R) as
of the first interim reporting period that begins after June 15, 2005.
Accordingly, the Company will adopt SFAS No. 123(R) in the third quarter of
2005.  Management is currently evaluating the impact SFAS No. 123(R) will have
on the Company's results of operations as a result of adopting this new
Standard.

NOTE 2 - PROPERTY AND EQUIPMENT

Property and equipment includes the following:
                                                                  Estimated
                                                 December 31,     useful
                                                2004      2005    life (years)
                                          ----------- ----------- ------------
      Computer Equipment                  $  340,760  $  350,338       3-5
      Equipment                              116,710     141,306       2-10
      Software                                93,958      98,847       1-3
      Furniture and Fixtures                  86,780      87,787       3-10
      Leasehold Improvements                   4,598       4,980 Life of lease
                                          ----------- -----------
                                             642,806     683,258
      Less Accumulated Depreciation         (572,424)   (602,219)
                                          ----------- -----------
                                          $   70,382  $   81,039
                                          =========== ===========



NOTE 3 - OTHER ASSETS

Other assets include the following:             December 31,
                                             2004          2005
                                         -------------- -------------
      Purchased customer portfolio       $     278,309  $    280,309
      Deposits                                   9,672         9,672
                                         -------------- -------------
                                               287,981       289,981
                                         -------------- -------------
      Accumulated amortization                (264,992)     (279,476)
                                         -------------- -------------
                                         $      22,989  $     10,505
                                         ============== =============

Pacific WebWorks, Inc. has entered into agreements with resellers for the
purchase of residual interests in customer hosting and terminal portfolios.
These definite-life intangible assets are being amortized over the period of
expected future cash flows these charges are included in cost of sales.


                                13

<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 4 - ACCRUED AND OTHER LIABILITIES

Accrued liabilities consist of the following:                December 31,
                                                          2004        2005
                                                       ----------- -----------
     Payroll related liabilities                       $   38,130  $   46,054
     Sales contractor commissions                           6,766       2,346
     Contingent reseller commissions                       39,790           -
     Operating lease in default                            90,357      91,522
     Refunds and factor                                     4,426     (16,282)
     Income tax payable                                     1,200         900
     Other                                                    440         440
                                                       ----------- -----------
                                                       $  181,109  $  181,109
                                                       =========== ===========
NOTE 5 - OPERATING LEASE REVENUES

During years ended December 31, 2004 and 2005, certain customers of TradeWorks
entered into operating lease agreements that were assigned to FundWorks to
purchase e-commerce software and merchant accounts over 24 to 36 months for
$59.95 per month.  The leases are non-cancelable and related revenue is
recorded monthly as earned.

Future annual minimum lease receipts for FundWorks operating leases as of
December 31, 2005 are as follows:
                                        Through
                                      December 31,
                                        2006           $  321,392
                                        2007              199,094
                                        2008                    -
                                      Thereafter                -
                                                       -----------
                                                       $  520,486
                                                       ===========

Collectability of future minimum lease receipts cannot be assured as the
customers placed in operating leases are of a higher credit risk.  TradeWorks
also enters into factoring arrangements for certain sales of e-commerce
software and merchant accounts to an outside leasing company with recourse.
Estimated recourse amounts are reduced from the amount funded to the company
and netted against sales for reporting purposes as they are not considered
realizable.  Additional amounts due under the factoring arrangements are
estimated and recorded as an accrued liability (Note 4).

NOTE 6 - NOTES PAYABLE / CONVERTIBLE NOTES PAYABLE

During June 2005, the Company entered into Promissory Note agreements with
limited liability companies for $200,000.  The notes interest was at 8% per
annum, and was due in full including principal and interest on December 31,
2006.  The notes were collateralized by the Company's business assets.   The
notes were paid in full during the third quarter 2005.


                                14

<PAGE>





             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 6 - NOTES PAYABLE / CONVERTIBLE NOTES PAYABLE - CONTINUED

On October 30, 2005, the Company entered into Promissory Note agreement for
$100,000.  The note interest was at 8% per annum, and is due in full including
principal and interest on April 30, 2007.  The note is collateralized by the
Company's business assets.

NOTE 7 - STOCKHOLDERS' EQUITY

Stock Issuance
--------------
On July 1, 2005, the Company entered into a Unit Purchase Agreement with
investors for up-to 4,500,000 units at $0.06 per unit.  A unit consists of one
share of the Company's common stock and one warrant for the purchase of an
additional share at a specified exercise price. One half of the warrants have
an exercise price of $0.12 per share and one half have an exercise price of
$0.17 per share.   Warrants are immediately exercisable and will expire one
year from the effective date of a registration statement to be filed covering
the shares.

During July 2005, 4,166,667 units were purchased resulting in the issuance of
4,166,667 shares of the Company's common stock for total funding of $250,000.
Also in July 2005, investors exercised warrants at $0.12 per share for
2,083,333 shares of the Company's common stock for $250,000 in cash.
Immediately following these transactions warrants representing 2,083,333
shares of the Company's common stock were outstanding at an exercise price of
$0.17 per share.

During May and October 2005, the Company issued 230,000 and 408,500 shares of
its common stock for payment of $15,000 and $40,850 related to insurance
premiums.

During February 2005, the Company issued 20,000 shares of its common stock to
purchase a portfolio of recurring service customers and related technology
valued at $2,000.

Equity Incentive Plan
---------------------
On March 8, 2001, the Board of Directors adopted the Pacific WebWorks, Inc.
2001 Equity Incentive Plan (the Plan). The Plan allows for the granting of
awards in the form of stock options, stock appreciation rights or restricted
shares to employees, independent directors and certain consultants. The
Company may grant awards representing up to 7,500,000 shares of the Company's
common stock under the Plan.  The Plan has not been approved by the Company's
shareholders as of December 31, 2005.

Directors, officers, and employees have been granted options to acquire
6,802,151 shares of the company's common stock and 5,834,651 of the options
are exercisable as of December 31, 2005. The options were granted at exercise
prices ranging from $0.07 - $2.00 per share.  The options vest periodically
through April 2006 and expire through April 2011.

                                15

<PAGE>








             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005


NOTE 7 - STOCKHOLDERS' EQUITY  - CONTINUED

Equity Incentive Plan - Continued
---------------------------------
Options to purchase 50,000 shares of the Company's common stock were granted
in April 2005 at an exercise price of $0.10 per share. These options vest
through October 2005 and expire in April 2010.

Information with respect to the Company's stock options follows:

                                                              Weighted-average
                                Stock options  Exercise price  exercise price
                                ------------- ---------------  --------------
Outstanding at January 1, 2003     4,696,302    $0.14-$2.00       $0.54
   Granted                         1,400,000       0.07            0.07
   Exercised                               -          -               -
   Forfeited                         761,878     0.14- 2.00        0.82
                                ------------- ---------------  --------------
Outstanding at December 31, 2004   5,334,424    $0.07-$1.75       $0.37
                                ============= =============== ===============
   Granted                         1,935,000       0.12            0.12
   Exercised                               -          -               -
   Forfeited                         471,773    $0.07-$1.75       $0.48
                                ------------- --------------- ---------------
Outstanding at December 31, 2005   6,797,651    $0.07-$0.87       $0.28
                                ============= =============== ===============


Options outstanding
                                       Weighted-           Weighted-
                         Number          average         average remaining
       Exercise price  outstanding    exercise price  contractual life (years)
       --------------  -----------    --------------  ------------------------
           0.87            40,151        0.87                    5
           0.75         1,582,500        0.75                  4.75
           0.23         1,230,000        0.23                  1.5
           0.14           385,000        0.14                  2.75
           0.12         1,935,000        0.12                  4.75
           0.07         1,625,000        0.07                  3.75
                        ---------
                        6,802,151
                        =========

Options exercisable
                                       Weighted-           Weighted-
                         Number          average         average remaining
       Exercise price  exercisable    exercise price  contractual life (years)
       --------------  -----------    --------------  ------------------------
           0.87            40,151        0.87                    5
           0.75         1,582,500        0.75                  4.75
           0.23         1,230,000        0.87                  1.5
           0.14           385,000        0.14                  2.75
           0.12           967,500        0.12                  4.75
           0.07         1,625,000        0.07                  3.75
                        ---------
                        5,834,651
                        ==========


                                16


<PAGE>





             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005


NOTE 7 - STOCKHOLDERS' EQUITY - CONTINUED

Issuance of Warrants
--------------------
During July 2005, the Company issued warrants to purchase 1,000,000 shares of
its common stock to an investor relations firm.  The warrants are immediately
exercisable for 500,000 shares at $0.10 and 500,000 shares at $0.15 and expire
in July 2008.  The fair value of this transaction totals $9,832 which has been
estimated using the Black Scholes option-pricing model and recorded as a
general and administrative expense.

As discussed above, during July 2005, the Company issued warrants to purchase
2,083,333 shares of its common stock at $0.12 per share and warrants to
purchase 2,083,333 shares of its common stock at $0.17 per share.  The
warrants were issued in conjunction with a common stock transaction.  A total
of 2,083,333 warrants were exercised in July 2005 for $250,000 in cash.

As of December 31, 2005, warrants to purchase a total of 1,000,000 shares of
the Company's common stock are outstanding and exercisable at a price of $0.17
per share.

NOTE 8 - DISCONTINUED OPERATIONS

The following includes the net current liabilities for the Company's
discontinued operations as of December 31, 2004 and December 31, 2005:

                                               World
                                              Commerce
                                             Network, LLC.
                                             -------------
ASSETS
Current assets                               $         -
Long-term assets                                       -
                                             -------------
  Total assets                               $         -
                                             =============
LIABILITIES
Payables past due                                 64,010
Accrued liabilities                              171,264
                                             -------------
  Total current liabilities                  $   235,274
                                             =============
Net current liabilities                      $   235,274
                                             =============


Discontinued subsidiary - World Commerce Network, LLC
-----------------------------------------------------
In July 2002, the Board of Directors of Pacific WebWorks, Inc. resolved to
discontinue World Commerce Network, LLC and set forth a formal plan of
disposal.  Negotiations and settlements of World Commerce liabilities are
currently underway as the LLC is phasing out its related operations.  World
Commerce Network became a consolidated entity with the Company in March 2000.

Other current liabilities
Other current liabilities of World Commerce Network, LLC consist of estimated
customer refunds approximating $56,000 and estimated contingent liabilities
from the legal matter noted below approximating $95,000 as of December 31,
2005.

                                17
<PAGE>








             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005


NOTE 8 - DISCONTINUED OPERATIONS - CONTINUED

Pending litigation
In September 2002, World Commerce Network, LLC received a complaint from a
leasing company for recourse obligations funded for customer leases during
2000 for seminar related activities.  The agreement between World Commerce
Network and the leasing company provides for recourse on leases in which
customers have not made first payment.  Estimated recourse obligations for
World Commerce Network approximate $95,000 at December 31, 2005 and December
31, 2004 and have been recorded as an accrued liability.  Management believes
that the recorded liability for this matter is sufficient to cover any
resulting judgment from this claim.

In April 2001, one of World Commerce Network's former vendors filed a
complaint alleging default under a certain application for credit and personal
guaranty made by a former officer of the Company.  The vendor seeks
approximately $65,000 plus interest.  The Company is defending the claim and
believes the amount should be reduced based upon the vendor's performance and
other disputes.  The Company has filed an answer to the complaint and further
litigation is pending.   The Company has recorded amounts in the consolidated
financial statements representing its estimated liability for this matter.
Management believes that the amount recorded is sufficient to cover the
resulting liability from this complaint.

NOTE 9 - OPERATING COMMITMENTS

Operating lease in default
--------------------------
In June 2002, in conjunction with the migration of the Intellipay operations
to our Salt Lake City facilities, Intellipay, Inc. defaulted on its operating
lease for office space in Fremont, California.  The lease agreement required
payment of approximately $6,000 per month plus applicable late fees and
interest through December 2003 when the lease expired.

As of December 31, 2005, Intellipay, Inc. has recorded an accrued liability of
approximately $91,522 related to the months of office lease under default,
less months re-leased by the property manager to others, including estimated
interest and late fees. The Company is not aware of any legal proceedings
related to this lease and does not anticipate any legal action to be taken.

Operating leases
----------------
The Company has entered into a lease agreement for the lease of office space
for its operations in Salt Lake City, Utah.  The lease requires $8,400 per
month from January 2005 through expiration in December 2006.  Rent expense for
the Salt Lake offices for the years ended December 31, 2004 and 2005
approximates and $100,000 and $100,000 respectively.

The following is a schedule of future minimum lease payments under the
operating lease:

             Year ended        Lease
             December 31,    Commitment
             ------------    ----------

                 2006        $  101,760
              Thereafter              -
                             ----------
                             $  101,760
                             ==========


                                18
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 9 - OPERATING COMMITMENTS - CONTINUED

Other matters
-------------
The Company is involved in other various disputes and legal claims in the
normal course of business.  It is not possible to state the ultimate
liability, if any, in these matters.  In the opinion of management, any
resulting litigation will have no material effect on the financial position
and results of operations of the Company in excess of amounts recorded.

NOTE 10 - INCOME TAXES

The company has sustained losses in all periods presented. Consequently, there
is no income tax provision or benefit for the periods presented.
Reconciliation of income taxes computed at the federal statutory rate and
income tax expense are as follows:

                                                     12/31/2005
                                                 ----------------
 Federal income taxes at statutory rate           $    (100,597)
 State income taxes net of federal benefit        $      (9,704)
 Change in the Valuation Allowance                $      89,671
 Other                                            $      20,630
                                                  --------------
 Total                                            $          (0)
                                                  ==============


Deferred taxes consist of the following:

 Deferred Tax Assets:
      Allowance for doubtfull accounts            $      36,402
      Net operating loss carryforwards            $   3,536,767
      Excess book depreciation and amortization   $      61,557
      Capital loss Carryforwards                  $     219,530
      Deferred expenses                           $      31,506
                                                  --------------
                                                  $   3,885,762
      Less valuation Allowance                    $  (3,885,762)
                                                  --------------
      Net Tax Assets                              $           -
                                                  ==============

                                19
<PAGE>






             Pacific WebWorks, Inc. and Subsidiaries
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005

NOTE 10 - INCOME TAXES - CONTINUED

The Company has sustained net operating losses in all periods presented.
There were no deferred tax assets or income tax benefits recorded in the
financial statements for net deductible temporary differences or net operating
loss carryforwards because the likelihood of realization of the related
tax benefits cannot be established. Accordingly, a valuation allowance has
been recorded to reduce the net deferred tax asset to zero. The increase in
the valuation allowance was $89,671 for the year ended December 31, 2005.

As of December 31, 2005, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $9,700,000 expiring through 2025. As
of December 31, 2005 the Company had a federal capital loss carryforward for
tax reporting purposes of approximately $650,000 expiring in 2008.

NOTE 11 - SEGMENT REPORTING

Although the Company operates in one business segment, the production and
distribution of business e-commerce software, management reports by individual
business unit.

Segment reporting by business unit follows:

<TABLE>
<CAPTION>


Year ended             Pacific
December 31, 2004(a)   WebWorks     Intellipay    Trade Works  FundWorks      Total
--------------------   ------------ ------------- ------------ ---------- -------------

                    <c>          <c>           <c>          <c>        <c>
Revenues, net          $ 1,081,089  $    484,339  $ 1,936,246  $ 115,812  $  3,617,486

Income (loss) from
continuing operations
before income tax         (173,418)       75,635     (402,077)    11,233      (488,627)

Net income (loss)      $  (174,547) $     75,565  $  (401,951) $  12,306  $   (488,327)

Assets                 $ 3,548,859  $     39,191  $   193,755  $  17,783  $  3,799,588

____________________________________________________
(a)  Amounts exclude all intercompany receivables, payables, revenues and expenses.
     The Company does not allocate assets or expenses in between individual business units.


                                  20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>







               Pacific WebWorks, Inc. and Subsidiaries
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          December 31, 2005


NOTE 11 - SEGMENT REPORTING - CONTINUED



Year ended             Pacific
December 31, 2005(a)   WebWorks     Intellipay    Trade Works  FundWorks      Total
--------------------   ------------ ------------- ------------ ---------- -------------

                    <c>          <c>           <c>          <c>        <c>
Revenues, net          $ 1,385,647  $    542,899  $ 3,746,691  $ 239,109  $  5,914,346

Income (loss) from
continuing Operations
before income tax         (177,939)       97,555     (319,015)   103,526      (295,873)

Net income (loss)      $  (176,702) $     97,269  $  (319,966) $ 103,526  $   (295,873)

Assets                 $ 3,846,604  $     20,627  $   386,842  $ 114,010  $  4,368,083
____________________________________________________
(a)  Amounts exclude all intercompany receivables, payables, revenues and expenses.
     The Company does not allocate assets or expenses in between individual business units.


</TABLE>

NOTE 12 - MARKET RISK

We rely on the efforts of third party resellers to add accounts to our
customer base.  A significant portion of our customer accounts were provided
by previous Pacific WebWorks and Intellipay resellers who no longer resell our
products and services.  While we continue to add additional resellers,
including the Company's TradeWorks Marketing subsidiary, we are primarily
dependent upon further addition of reseller distribution channels for future
sales growth.

NOTE 13 - SUBSEQUENT EVENTS

No significant subsequent events have taken place since December 31, 2005.


                                21

<PAGE>


                             PART III

                        ITEM 13.  EXHIBITS

No.  Description
---- -----------
3.1  Articles of Incorporation, as amended (Incorporated by reference to
     exhibit No. 3.1 for Form 10-Q filed November 13, 2001)
3.2  Amended and Restated Bylaws of Pacific WebWorks, Inc. (Incorporated by
     reference to exhibit No. 3.2 for Form 10, as amended, file No. 0-26731,
     filed July 16, 1999.)
4.1  Unit Purchase Agreement between Pacific WebWorks and Investors, dated
     July 1, 2005 (Incorporated by reference to exhibit 4.1 to Form 10-QSB,
     filed August 12, 2005)
4.2  Form of Unit Warrants, dated July 1, 2005 (Incorporated by reference to
     exhibit 4.2 to Form 10-QSB, filed August 12, 2005)
10.1 Master Service Agreement between Electric Lightwave, Inc., and Utah
     WebWorks, Inc., dated February 2, 1998  (Incorporated by reference to
     exhibit No. 10.1 for Form 10, as amended, file No. 0-26731, filed July
     16, 1999.)
10.2 Internet Access Agreement, Addendum to Master Service Agreement between
     Electric Lightwave, Inc., and Pacific WebWorks, Inc., dated January 1,
     2002 (Incorporated by reference to exhibit No. 10.2 for Form 10-K, filed
     March 26, 2002)
10.3 Lease Agreement between Pacific WebWorks, Inc. and Westgate Business
     Center, dated November 20, 2003 (Incorporated by reference to exhibit
     10.3 for Form 10-KSB, filed March 22, 2004)
10.4 Form of employment agreement for executive officers, dated April 1, 2004
     (Incorporated by reference to exhibit 10.5 for Form 10-KSB, filed March
     31, 2005)
10.5 Consulting agreement between Pacific WebWorks and Chesapeake Group, Inc.,
     dated July 1, 2005 (Incorporated by reference to exhibit 10.5 to Form
     10-QSB, filed August 12, 2005)
10.6 Registration Rights Agreement between Pacific WebWorks and Unit
     Investors, dated July 1, 2005 (Incorporated by reference to exhibit 10.6
     to Form 10-QSB, filed August 12, 2005)
21.1 Subsidiaries of Pacific WebWorks (Incorporated by reference to exhibit
     21.1 for Form 10-QSB, filed November 13, 2003)
31.1 Chief Executive Officer Certification
31.2 Principal Financial Officer Certification
32.1 Section 1350 Certification


                                22
<PAGE>


                            SIGNATURES

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

                                 Pacific WebWorks, Inc.


                                     /s/ Christian R. Larsen
Date: March 20, 2007             By:_____________________________________
                                 Christian R. Larsen, President


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.



                                 /s/ Christian R. Larsen
Date: March 20, 2007             _____________________________________
                                 Christian R. Larsen
                                 President and Director


                                 /s/ Kenneth W. Bell
Date: March 20, 2007             _____________________________________
                                 Kenneth W.  Bell
                                 Chairman of the Board, Chief Executive
                                 Officer, Principal Financial and Accounting
                                 Officer and Treasurer



                                 /s/ R. Brett Bell
Date: March 20, 2007             _____________________________________
                                 R. Brett Bell
                                 Secretary and Controller



                                23