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

                                     FORM 10-K

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

       For The Fiscal Year Ended December 31, 2001

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

       For the transition period:


                                 SIDEWARE SYSTEMS INC.
                        ---------------------------------------
                (Exact name of Registrant as specified in its charter)


                 Yukon Territory
               -------------------               ----------------------
             (State or jurisdiction                 (IRS Employer
                of incorporation)                Identification No.)

              7900 Westpark Drive, Suite T300, McLean, Virginia, 22102
              --------------------------------------------------------
                     (Address of principal executive offices)

                      Issuer's telephone number (703) 437-9002

         Securities registered pursuant to section 12(b) of the Act:

         None

         Securities registered pursuant to section 12(g) of the Act:

                         Common Shares without par value
                      ------------------------------------
                                (Title of Class)

Check whether the registrant (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

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.  x

State the aggregate market value of the voting and non-voting common
equity held by non-affiliates, computed by reference to the closing
price for trading of the issuer's stock on the OTC Bulletin Board as at
March 14, 2002:  14,200,000.

State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  85,514,735 common
shares without par value, as at March 14, 2002.


                        Index to Exhibits on Page 47

<PAGE>

                             Sideware Systems Inc.
                                   Form 10-K

                               TABLE OF CONTENTS

PART I

Item 1.	  Business                                                        1
Item 2.	  Properties                                                     12
Item 3.	  Legal Proceedings                                              12
Item 4.	  Submission of Matters to a Vote of Security Holders            13

PART II
Item 5.	  Market for Registrant's Commons Equity and Related
            Stockholder Matters                                          13
Item 6.	  Selected Financial Data                                        19
Item 7.	  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                    20
Item 7a.  Quantitative and Qualitative Disclosures about Market Risk     38
Item 8.	  Financial Statements and Supplementary Data                    38
Item 9.	  Changes in and Disagreements with Accountants on Accounting
            Financial Disclosure                                         38

PART III
Item 10.  Directors and Executive Officers of the Registrant             38
Item 11.  Executive Compensation                                         40
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management                                                   43
Item 13.  Certain Relationship and Related Transactions                  45

PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
            8-K                                                          47

<PAGE>

                            (ii)

This annual report contains forward-looking statements which
involve risks and uncertainties. When used in this annual report
the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements.
Sideware's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that
might cause these differences include, but are not limited to,
those discussed in ITEM 7, under the heading "Risk Factors."
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of
this annual report.  Sideware undertakes no obligation to
publicly release the results of any revisions to the
forward-looking statements which may be made to reflect events or
circumstances after the date of this annual report, or to reflect
the occurrence of unanticipated events.

Prior to November 2000 Sideware filed annual and other reports
with the Securities and Exchange Commission as a foreign private
issuer, as defined under the Securities Exchange Act of 1934.
Beginning in November 2000 Sideware began to file reports as
a domestic issuer.  Reports which Sideware filed prior to November
2000 contained financial statements prepared in accordance with
Canadian generally accepted accounting principles.  The financial
statements contained in this annual report were prepared in
accordance with United States generally accepted accounting
principles, and Sideware has restated the results from prior
periods in accordance with those principles.

Prior to December 1998 Sideware operated with an April 30 fiscal
year end.  In December 1998, Sideware changed its fiscal year end
from April 30 to December 31.  Financial results for periods up
to April 30, 1998 are reported with an April 30 year end.
Financial results for periods subsequent to April 30, 1998 are
reported with a December 31 year end.


<PAGE>
                            1

PART I.

ITEM 1.  BUSINESS

BUSINESS ACTIVITIES OF SIDEWARE

Sideware was incorporated in April 1983 in the Province of
British Columbia, under the name "Heart Minerals Ltd."  Sideware
shares commenced trading publicly on the Vancouver Stock Exchange
in October 1993.  On June 27, 1984 Sideware changed its name to
"SRO Entertainment International Ltd.", as a result of a change
in business to the development of theatrical productions.  On
January 30, 1990 Sideware changed its name to "Pacrim
Entertainment Group Inc.", as a result of a capital
reorganisation, in which Sideware shares were consolidated on a
2.5:1 basis.

Sideware entered the software development business in 1990, when
it acquired the assets of a private software company named
"Evergreen Technology Corp."  On January 9, 1991 Sideware changed
its corporate name to "Evergreen International Technology Inc."

In May 1995, Evergreen International Technology Corp. came under
new management.  In November 1995, the new management released
its first commercial product, JOT-IT!.  Essentially an electronic
"sticky" note, JOT-IT! allowed a user to "stick" notes directly
onto documents, applications, drop down menus, text entry fields,
and other locations, allowing notes to appear when the user
required them.  On January 31, 1997 Evergreen changed its corporate
name to "JOT-IT! Software Corp.".

In July 1997, 3M Corporation commenced legal proceedings against
JOT-IT! Software Corp. alleging that the name "JOT-IT!" infringed
3M trademarks.  In October 1997, JOT-IT! settled the 3M litigation,
and agreed to change its corporate and product names.  The single
user product was re-named "Tagalongs".

In November 1997, JOT-IT! Software Corp. released its first groupware
product, Net Notions.  Neither Tagalongs nor Net Notions generated
material revenue, and both products were discontinued.  On
February 18, 1998, to comply with the agreement with 3M
Corporation, JOT-IT! Software Corp. changed its corporate name to
"Sideware Systems Inc."

In the fall of 1997, Sideware also commenced development of Dr.
Bean, an eCRM (electronic Customer Relationship Management)
computer program.  Dr. Bean created direct real time chat
communication between customers and producers marketing their
products through Internet e-commerce sites.  Dr. Bean was
released for commercial distribution during the second half of
1999.  Following release of Dr. Bean, development and marketing
of Dr. Bean and its successor products became Sideware's
principal business.

During 2000 Sideware expanded its work force substantially, and
opened several regional sales offices in the United States.
Sideware also relocated its head office from North Vancouver,
British Columbia, to Reston, Virginia.

During 2001 Sideware released the Enterprise Interaction Suite,
which included the core features of Dr. Bean.  The Enterprise
Interaction Suite also added features, including e-mail
management, integration of Web based and telephone
communications, and software capable of providing automated
responses to customer inquiries.

Sideware was not able to generate substantial sales revenue
through the Enterprise Interaction Suite.  Accordingly, in
September 2001 Sideware ceased marketing and development of the
Enterprise Interaction Suite.  Sideware terminated the majority
of its employees, including substantially all of its sales and
technical personnel.


<PAGE>
                            2

In September 2001, Sideware invested $1,000,000, exclusive of
acquisition costs, in Chalk.com Network (Holding) Corp., parent
company of the Chalk Group, to acquire 13,000,000 common shares
from the company's treasury.  In addition, Sideware paid $1.00 to
acquire 5,000,000 common shares of Chalk.com Network (Holding)
Corp., from David Chalk, the founder of the Chalk Group.  The
18,000,000 shares acquired by Sideware represented 66.7% of the
issued and outstanding shares of Chalk.com Network (Holding)
Corp., or 60.3% on a fully diluted basis, after allowing for the
exercise of outstanding share purchase warrants and stock options
previously issued by Chalk.com Network (Holding) Corp.

In December 2001, Sideware acquired 3,725,050 additional shares
in Chalk.com Network (Holding) Corp. from remaining minority
stockholders.  The additional shares raised Sideware's ownership
of the Chalk Group to 80.7%, or 72.9% on a fully diluted basis.
To acquire the additional shares, Sideware issued 3,233,346
common shares and 646,668 share purchase warrants.  Each share
purchase warrant entitles the holder to acquire one additional
Sideware share for a period of 18 months at a price of $0.13 per
share.

Since September 2001, development of the business of the Chalk
Group has been Sideware's principal business.  Sideware financial
information presented for the year ended December 31, 2001 includes
the operations of the Chalk Group, which have been consolidated
in Sideware's financial statements with effect from the date of
acquisition.

In December 2001 Sideware also signed an Agreement and Plan of
Merger and Reorganization with KnowledgeMax, Inc., a private
company.  Under the agreement, Sideware proposes to merge with
KnowledgeMax.  Additional information on the proposed merger
is given below.

BUSINESS OF THE CHALK GROUP

The Chalk Group began business in 1996 as the producer of "Dave
Chalk's Computer Show", a television show aimed at educating
consumers in new technologies.

During 1997, the Chalk Group expanded its business to include
production of video presentations for closed circuit broadcast on
commercial airline flights.  The Chalk Group secured contracts to
broadcast its productions on flights of Canadian Airlines
International and Cathay Pacific.  From the beginning of its
business to the final quarter of 1999, the Chalk Group completed
its production work relying principally on outside contractors,
having fewer than ten full time employees.

In the final quarter of 1999, the Chalk Group began an expansion
of its business.  The Chalk Group decided to focus its business
and marketing efforts on two principal lines of business:

-  production and marketing of video vignettes for online
   Internet advertising; and
-  expansion of the group's existing business producing video
   presentations for commercial airline flights.

The Chalk Group opened an office in the United States, and
expanded its work force to approximately 60 employees.
Operations of the Chalk Group during 2000 were financed
principally through approximately $5,000,000 in new equity
capital which the Chalk Group raised during 2000.

The expansion of the Chalk Group's business did not prove
profitable.

-  The Chalk Group secured contracts to broadcast its in-
   flight video presentations with several international
   airlines, including Delta Airlines, Air France, KLM, and
   British Airways.  In doing so, the Chalk Group committed to
   make substantial fixed payments for flight broadcast time,
   in the expectation that it would be able to sell
   advertising in its presentations at profitable rates.  The
   airline contracts became unprofitable when anticipated
   advertising revenue did not materialize.
-  The Chalk Group also secured contracts to place advertising
   vignettes on two major internet websites, yahoo.com and
   excite.ca.  Initially the Chalk Group sold its advertising
   vignettes at loss leader prices, in the expectation that
   market exposure would lead to additional profitable sales.
   The production of advertising vignettes became unprofitable


<PAGE>
                            3

   when additional sales did not materialize.

For the year ended December 31, 2000, the Chalk Group reported a
comprehensive loss of approximately $8.0 million.

During 2001, the Chalk Group contracted its operations, closing
its United States office and reducing its work force to
approximately 25 employees.  With growing use of the Internet for
training purposes, the Chalk Group began seeking contracts to
produce interactive Internet training programs.  In these fields,
the Chalk Group has been successful in winning contracts with
major corporations.  Examples include the following:

-  In January 2001, the Chalk Group secured a contract with
   Sega to develop a website to educate retailers on new Sega
   game products.
-  In March 2001, the Chalk Group secured a contract with
   Canon Corp. to develop a web-based training program on
   Canon printers, for use by Canon sales representatives.
-  In March 2001, the Chalk Group secured a contract with
   Symantec to develop an audio/visual Internet presentation
   explaining the use of Symantec products.
-  In June 2001, the Chalk Group secured a contract with Telus
   Mobility to develop a website to educate sales
   representatives on new cell phone technologies.
-  In July 2001, the Chalk Group secured a contract with the
   Royal Bank of Canada to develop a website to instruct
   consumers in on-line banking.
-  In October 2001, the Chalk Group secured a contract with
   Microsoft Canada to produce 15 video vignettes, to be used
   on the web site of Microsoft Canada, demonstrating key
   features of the Windows XP operating system.

The approximate geographic breakdown of the contracts signed by
the Chalk Group during 2001, by value, is as follows:

-  53.0% with customers in the United States
-  46.5% with customers in Canada
-   0.5% with overseas customers

For the fiscal year ended December 31, 2001, the Chalk Group
signed contracts with customers with a total value of
approximately US$1.4 million.  The value of signed contracts
differs from recognized revenues due to the timing of the
delivery of the products and the Chalk Group's revenue
recognition policy.  For fiscal 2001, the Chalk Group's top ten
and top twenty customers by signed contract values accounted for
66% and 91% of the total value of signed contracts, respectively.
The Chalk Group's top two customers by signed contract values
accounted for 12% and 10% of signed contract values.
Substantially all of the contracts signed in 2001 were from
customers based in Canada and the United States.  At present, the
Chalk Group cannot determine whether it will have a similar level
of customer concentration going forward.

The Chalk Group believes that additional contracts to develop
Internet e-Learning content are its most likely source of future
revenues, and intends to focus its sales efforts in that area.
The Chalk Group also continues to produce the television show
"Dave Chalk Computer Life" (previously "Dave Chalk's Computer
Show"), which is shown currently in Canada on the Globe and
Mail's ROB TV, the Global Television Network, and Tech TV.  The
Chalk Group has terminated the majority of its airline contracts,
but has continued to produce in-flight productions for some
airlines, including Air Canada and Cathay Pacific.

Currently, the Chalk Group has 34 full-time employees consisting
of:

-  8 sales employees;
-  4 marketing employees;
-  7 accounting, general, and administrative employees; and
-  15 production and engineering employees.


<PAGE>
                            4

The Chalk Group believes that its owns copyright in the Internet
content and television shows which it produces.  Otherwise, the
Chalk Group has not developed any proprietary software.

The Chalk Group has identified four public companies that it
believes compete most directly with its business:  Docent, Inc.,
Click2Learn.com Incorporated, SmartForce CBT Group Plc, and
Digitalthink Incorporated.  All four companies specialize in the
development of web-based learning and training solutions.  The
Chalk Group believes that additional competitors are likely to
enter the field as e-learning becomes more prominent in the
corporate world.  Those competitors may have significant
competitive advantages over the Chalk Group, including greater
name recognition and greater financial, technical, marketing, and
other resources.

MERGER AGREEMENT WITH KNOWLEDGEMAX, INC.

On December 7, 2001, Sideware entered into an Agreement and Plan
of Merger and Reorganization with KnowledgeMax, Inc.
KnowledgeMax is a Delaware corporation with its principal
executive offices in McLean, Virginia, a suburb of
Washington, D.C.  If the merger proceeds, the business of
KnowledgeMax will become the business of Sideware, and Sideware
will change its name to "KnowledgeMax, Inc."  This description
of the merger agreement is qualified in its entirety by
reference to the merger agreement which is included as
Appendix A to the proxy statement prospectus and is incorporated
herein by reference.

To complete the merger, Sideware has established a wholly owned
Delaware subsidiary corporation, KM Acquisition Corp.  KM
Acquisition Corp. will merge with and into KnowledgeMax, making
KnowledgeMax a wholly owned subsidiary of Sideware.  KnowledgeMax
stockholders will receive shares of Sideware common stock, and
Sideware will assume the existing stock options of KnowledgeMax,
by issuing shares of Sideware common stock when the options are
exercised.  Prior to completing the merger, Sideware will change
its corporate jurisdiction from the Yukon Territory of Canada to
Delaware, by continuing as a corporation under the General
Corporation Law of Delaware.  Sideware stockholders will still
own Sideware shares, but they will be shares of common stock of a
Delaware corporation, rather than shares in a Yukon corporation.

   CONVERSION RATIO ON THE MERGER

The merger agreement includes a procedure to calculate the
conversion ratio, setting the number of shares of Sideware common
stock that will be issued for each share of KnowledgeMax common
stock.  The intent of the merger agreement is to give existing
KnowledgeMax stockholders a 55% interest in Sideware, with the existing
Sideware stockholders retaining 45%.  The merger agreement also includes
procedures to allow for outstanding warrants and stock options.

More specifically, the conversion ratio will be calculated using
data that is current at the time of closing, by:

-  adding the total number of outstanding Sideware shares to
   the total number of shares underlying Sideware warrants and
   options that are "in the money" (i.e., with exercise prices
   below the market value of Sideware shares) at closing;
-  dividing that number by the total number of outstanding
   KnowledgeMax shares, plus the total number of shares
   underlying KnowledgeMax warrants and options, whether in
   the money or not; and
-  multiplying the result by 55/45.

The merger agreement also includes two qualifications to this
procedure:

-  In December 2001, Sideware granted options to employees and
   officers of the Chalk Group to purchase 1,255,000 shares of
   Sideware common stock, to fulfill previous commitments to
   those employees.  These options will expire within 30 days
   after the merger, and will only be included in calculating
   the conversion ratio to the extent that they are exercised
   prior to the merger.


<PAGE>
                            5

-  In December 2001 and January 2002, Sideware also granted
   options to purchase 2,475,000 shares of Sideware common stock
   to several Sideware directors and employees, also to fulfill
   existing commitments, and to compensate employees who accepted
   reduced pay.  These options will be included in calculating
   the conversion ratio, whether they are in or out of the money.

Following the merger, Sideware will assume the obligations of
KnowledgeMax under its existing stock options, which means that
the option holders will be able to acquire Sideware stock on the
exercise of their options.  Using the estimated conversion ratio
of 24.35, Sideware estimates that participants in the KnowledgeMax
stock option plan will hold options to purchase approximately
15,364,850 shares of Sideware common stock at a weighted average
price of approximately $0.06 per share.  Sideware options and
warrants will continue to be exercisable at the same exercise
prices as before the merger.

Following the merger, Sideware expects to have approximately
178,565,900 shares of common stock issued and outstanding.  The
following table shows the number of Sideware shares that will
either be issued or reserved for issuance in the categories
indicated, and also percentage ownership on:

-  an issued and outstanding basis; and
-  a diluted basis, giving effect to all options and warrants
   which are "in the money" based on current trading prices.

Sideware share capital - post merger

<TABLE>
<CAPTION>

Category              Number of      % - issued and      % - diluted,
                       shares          outstanding       including in
                                                          the money
                                                         options and
                                                          warrants
<S>                  <C>                  <C>              <C>

Sideware
stockholders         85,514,735             48%             44%

KnowledgeMax
stockholders         93,051,165             52%             47%

Holders of
KnowledgeMax
options              15,364,850             n/a              8%

Holders of
Sideware
warrants - in
the money               646,668             n/a              *

Holders of
Sideware
warrants - out
of the money          8,279,085             n/a             n/a

Holders of
Sideware
options - in
the money             2,475,000             n/a              1%

Holders of
Sideware
options - out
of the money         10,968,316             n/a              n/a

* Less than 1%

</TABLE>

   MANAGEMENT FOLLOWING THE MERGER

The merger agreement provides that Sideware will have 11
directors following the merger.  Five directors will come from
the current Sideware board, and six will be current directors of
KnowledgeMax.  The following table lists the individuals that are
expected to serve as directors and executive officers following
the merger:

     Name              Age    Expected position with Sideware

E. Linwood Pearce       56    Chairman of the Board of
                              Directors and Chief Executive
                              Officer

James L. Speros         42    President and Director

Kenneth R. Thornton     59    Vice Chairman of the Board of
                              Directors


<PAGE>
                            6

Donna L. Lynn           60    Chief Operating Officer and
                              Director

Edwin S. Grosvenor      50    Executive Vice President and
                              Director

Alan R. Sultan          36    Senior Vice President and
                              Director

Jay H. Nussbaum         57    Director

Jack Kemp               66    Director

John Shoemaker          59    Director

Edward H. Gross         58    Director

Joe J. Boivin           35    Director

Charles P. Abod II      41    Acting Chief Financial Officer

Richard Luebkemann      43    Vice President for Technology

Rahul Bardhan           36    Vice President for Engineering

Mr. Pearce, Ms. Lynn, Mr. Grosvenor, Mr. Sultan, Mr. Gross, and Mr. Boivin are
currently directors of KnowledgeMax.  Mr. Gross is a former executive director
of Baker & Taylor, Inc., a significant stockholder of KnowledgeMax.  Mr. Gross
served as Baker & Taylor's designee on KnowledgeMax's board of directors
pursuant to a contractual right granted to Baker & Taylor by KnowledgeMax.
Upon Mr. Gross's resignation from Baker & Taylor, Baker & Taylor appointed a
new designee, Pamela R. Smith, to replace Mr. Gross on the KnowledgeMax board
of directors.  While Mr. Gross has been elected to serve as a director of
Sideware following the closing of the merger, he has indicated his desire to
resign this position immediately following such appointment.  Accordingly, it
is anticipated that the board of directors will fill the vacancy created by
Mr. Gross's resignation by appointing another designee of Baker & Taylor, who
is presently expected to be Ms. Smith.  Mr. Abod and Mr. Luebkemann are
officers of KnowledgeMax.

  CONDITIONS TO THE MERGER

The merger agreement contains conditions to the merger, some of which have
not yet been fulfilled.  Accordingly, it is not yet known whether the
merger will proceed.

Some of the conditions bind only one of the parties, meaning that
the other party can decide to waive the condition, and proceed
with the merger even if the condition is not fulfilled.  Other
conditions are binding on both parties, meaning that they must
either be fulfilled or waived by both parties before the merger
proceeds.

Some of the conditions have already been fulfilled at the date of
this annual report:

-  Sideware has raised at least $1,000,000 in private
   placement financing.
-  Certain of the directors, officers, and large stockholders
   of Sideware and KnowledgeMax have executed voting
   agreements.
-  KnowledgeMax has completed an audit of its financial
   statements delivered to Sideware prior to execution of the
   merger agreement.
-  Both Sideware and KnowledgeMax held stockholders' meetings on
   March 20, 2002, having filed a joint proxy statement - prospectus
   included on a registration statement on Form S-4 relating to the
   merger and their respective stockholder meetings.  Approval for
   the merger agreement from both Sideware and KnowledgeMax
   stockholders was received at the meetings on March 20, 2002.
-  The percentage of dissenting Sideware shares plus the percentage of
   KnowledgeMax dissenting shares did not exceed 6%.

The principal remaining condition that binds both parties is the
following:

-  Sideware must continue as a Delaware corporation.

The principal conditions binding Sideware only, which can be
waived by KnowledgeMax, are the following:


<PAGE>
                            7

-  Sideware must raise at least $2,000,000 through the sale of
   some or all of the Chalk Group, and have the proceeds
   placed in escrow prior to closing the merger.  SIDEWARE
   EXPECTS THAT IT CAN ONLY RAISE THIS AMOUNT BY SELLING MOST
   OR ALL OF ITS INTEREST IN THE CHALK GROUP.   As of the
   date of this annual report, Sideware has sold 15% of its
   interest in the Chalk Group for aggregate proceeds of
   $301,026.
-  Sideware must appoint certain existing KnowledgeMax
   directors and officers as directors and officers of
   Sideware.
-  The representations and warranties of Sideware must be
   accurate, and Sideware must perform the covenants set out
   in the merger agreement.
-  Sideware must have a third party assume liability under the
   lease of its Vancouver, British Columbia office premises,
   effective the later of the closing of the merger and April 1,
   2002.  Sideware expects that it will require the purchaser of
   the Chalk Group to assume this lease.
-  Sideware must not suffer a material adverse change.

The principal conditions binding KnowledgeMax only, which can be
waived by Sideware, are the following:

-  All KnowledgeMax preferred shares must be converted to
   common shares, and all KnowledgeMax warrants must either be
   exercised or terminated.
-  The representations and warranties of KnowledgeMax must be
   accurate, and KnowledgeMax must perform the covenants set
   out in the merger agreement.
-  KnowledgeMax must not suffer a material adverse change.

  TERMINATION, LOAN REPAYMENT AND LIQUIDATED DAMAGES

Either party can terminate the merger agreement if:

-  it determines that a condition to the merger binding the other
   party either has not been, or will not be, fulfilled;
-  the other party is in breach of its representations, warranties
   or covenants, and the breach is not cured within 15 days
   of demand or
-  the merger is not completed by July 31, 2002, other than because
   of a default by the party seeking to terminate the merger.

The merger agreement also contains provisions governing repayment
of any funds loaned by Sideware to KnowledgeMax, and the payment
of liquidated damages, if the agreement is terminated:

-  If Sideware terminates the merger agreement on account of
   intentional misrepresentations or willful material breach of
   contract by KnowledgeMax, KnowledgeMax must repay any amounts
   it has borrowed from Sideware immediately, plus $1,000,000
   in liquidated damages
-  If KnowledgeMax terminates the merger agreement on account of
   intentional misrepresentations or willful material breach of
   contract by Sideware, Sideware must pay KnowledgeMax
   $1,000,000 in liquidated damages, and KnowledgeMax can set
   that amount off against any loan it has received from Sideware.
-  If the merger agreement is terminated on any other grounds
   besides those identified above, KnowledgeMax must repay any
   amounts loaned to it under the merger agreement within six months.


   BUSINESS OF KNOWLEDGEMAX, INC.

As Sideware may complete a merger with KnowledgeMax following its
stockholders' meeting held March 20, 2002, information
about the business of KnowledgeMax has been included in this annual
report.  This information has been provided by KnowledgeMax, and
is accurate to the best of the knowledge of Sideware management.
As described above, there are a number of material conditions that
must be satisfied or waived before the merger can close.
Accordingly, there can be no assurance that the merger will
be consummated.


<PAGE>
                            8

KnowledgeMax is a privately held company incorporated in the State
of Delaware and located in metropolitan Washington D.C.'s
technology corridor.  KnowledgeMax has developed a supply chain
management system which it believes will significantly change the
way corporations and other organizations select, purchase, and
deliver knowledge resources and education to their professional
employees.  Through KnowledgeMax's solution, corporations can
select and make available to employees throughout the organization
a wealth of inter-related learning and knowledge resources at a
measurable and controllable cost.

KnowledgeMax's eLearning desktop incorporates proprietary
technologies and connects to multiple databases of learning
content and knowledge resources, utilizing an integrated
internet-enabled backplane.  KnowledgeMax's marketing approach is
to provide corporate users with an integrated desktop containing
value-added services as a means to bind its clients to
KnowledgeMax's enterprise eLearning and knowledge resource
centers, using a co-branded corporate delivery structure.

KnowledgeMax has assembled an experienced and complementary
executive team that brings to KnowledgeMax expertise in general
business, traditional and electronic publishing, corporate
education, the information industry, internet/intranet
integration, and information technology.  KnowledgeMax's senior
executives have launched and developed new business ventures and
have experience managing both privately held and publicly traded
companies.  They have experience in international marketing and
distribution, strategic partnering technology and enterprise
platform development, and capital raising.

   INDUSTRY BACKGROUND

According to Training Magazine's 1999 Industry Report, the market
for education, including both instructor-led and technology-
enabled (e.g. online, computer-based, or video) is more than $62
billion in the U.S. for corporations (employer-sponsored
learning) and of this $62 billion, U.S. organizations spend more
than half ($34 billion) on professionals and managers.  According
to Eduventures, Inc., companies in the training market generated
revenues of $26.7 billion in 1999, a 10% growth over 1998, and
overall training budgets grew 23.5% with outsourcing growing at
51.5%.  Fueling the market is a strong demand for effective
development and retention of knowledge resources within
corporations.

With growing concern over competition, the need to retain the
best and most qualified professionals (even in an economic
downturn), and the attrition of dedicated in-house knowledge
professionals, corporations are facing ever-increasing pressure
to treat the knowledge of workers as a primary asset of the firm
and a key source of competitive advantage.  KnowledgeMax believes
that leading organizations have realized that effective internal
education, development, and access to knowledge resources are
critical to both retaining valuable employees and increasing
their capabilities at a reasonable cost.  Consolidation in a
variety of industries such as finance, telecommunications,
and energy, is fostering the need to retrain displaced personnel.

Investment in the education of the workforce has always been a
significant corporate expense - according to Training and
Development Magazine, companies spend between $500 and $3,500 for
each employee.  However this outlay has generally been
inefficiently spread across an uncoordinated and undirected array
of educational offerings from multiple vendors.  Today, few
companies can accurately determine the return on training
investments due to a lack of consolidated data and supporting
measurement criteria.  Without central control of education and
training activities, organizations often make unnecessary and
duplicate investments, acquire materials of uneven quality,
disseminate at significant expense and find that much of their
effort is ineffective.

Numerous organizations have begun to embrace the "next wave" of
technological innovation - the corporate university - as a way of
consolidating educational investment and controlling the focus of
employee education.  Corporate University Xchange, a US corporate
education research and consulting group, estimates that over the
past 15 years the number of corporate universities grew from 400
to about 2,000, and it estimates that by the end of the decade
the number of corporate universities will exceed 3,700.
KnowledgeMax believes that organizations are now searching for an
"out-of-the-box" solution for their corporate universities.


<PAGE>
                            9

The supply of education and training products and services has
traditionally been fragmented into many small players and a
handful of larger providers, each targeting only specific
"islands of learning content," and delivered in classroom
settings that often require expensive travel and critical time
away from the workplace.  The development of electronic
distribution technologies has greatly reduced the time and cost
of providing education while increasing the flexibility and
customization of learning programs.

   VALUE PROPOSITION

KnowledgeMax has developed an enterprise knowledge platform to
provide an off-the-shelf procurement and delivery service that
supports an enterprise-wide knowledge and eLearning solution. The
system manages transactions, while responding to the changing
needs of its clients.  The system enables clients to track
expenditures across their organizations, and leverage the
capabilities of technology-based educational and knowledge
products, including books, online courseware, training videos,
and books on tape.

KnowledgeMax believes that the efficiencies provided by its
supply chain management system can generate significant cost
savings for its corporate clients.  KnowledgeMax believes that
its clients' employees will benefit from a one-stop shop for a
wealth of knowledge resources, access to personalized learning
anytime and at anyplace, the empowerment to learn and develop
their careers, and the support and explicit sponsorship of their
employers.  KnowledgeMax also believes that the direct access to
the corporate desktop to be provided by its system will give many
learning and information content partners a superior distribution
channel to millions of professionals worldwide.

   PRODUCTS AND SERVICES: THE VIRTUAL KNOWLEDGE RESOURCE CENTER

KnowledgeMax creates added value beyond simple aggregation of
content with a variety of services, including its own expert
advice on the selection of materials.  KnowledgeMax also offers
additional content that includes excerpts of leading business
books, product descriptions, reviews of new offerings, suggested
reading lists, and proprietary online knowledge resources
including:

 -  KnowledgeNetwork: A proprietary online database created by
    KnowledgeMax, containing courses, videos, audiotapes, and
    online excerpts of business books in over fifty categories.
    The system functions like a consultant and an expert
    business librarian, providing employees with a variety of
    ready-to-go materials.

 -  Experts Online: Instant access to writing by more than 800
    business leaders, consultants and academics such as Norman
    Augustine, Warren Bennis, Edwards Deming, Peter Drucker,
    Andrew Grove, Michael Hammer, Rosabeth Moss Kanter, Tom
    Peters, Michael Porter, Peter Senge, and Jack Welsh.

 -  Virtual Business SchoolTM: The Virtual Business SchoolTM is a
    proprietary learning system organized into recommended
    courses for independent learning.  The Virtual Business
    SchoolTM features current best practices and thinking on
    critical business issues, including Business Strategy,
    Growth and Innovation, The Learning Organization, Managing
    Quality, People Skills, Teams and Teamwork, Marketing,
    Salesmanship, and Sales Strategy.

 -  BookFinder -  information on over 2.5 million books with one
    of the most powerful search systems available for books,
    including 100,000 searchable tables of contents and lists
    of books in 12,000 business subject categories.

 -  E-Learning - hundreds of Web-based courses and Computer-
    Based Training (on CD-ROMs) from numerous respected content
    providers in one convenient database.

 -  Videos/Tapes - a single source for hundreds of training
    videos and business books on tape.


<PAGE>
                           10

In the future, KnowledgeMax plans to offer premium services that
enable client organizations to integrate their content into the
KnowledgeMax platform, take advantage of the KnowledgeMax supply
chain infrastructure to provide an internal and external
distribution channel for client content, and deliver specialized
events and learning opportunities to the end-user desktop.
KnowledgeMax expects that the first of its premium service
offerings will be "Print on Demand", providing on-demand printing
or CD/CDR replication for books and bound publications and
documents. This feature will provide the client with the ability
to deliver volatile information without incurring the upfront
costs of volume commitments, printing, and warehousing.
KnowledgeMax's supply chain process is expected to enable the
client to completely outsource this function to KnowledgeMax.

   INFRASTRUCTURE ASSETS

KnowledgeMax currently operates a proprietary search engine
developed with the assistance of leadSOFT, which incorporates
content management, user authentication, registration, tailored
purchasing protocols, and eCommerce functionality.

KnowledgeMax's eCommerce services will offer a number of
combinations of purchasing options, including automatic purchase
orders and required charge back codes to fit different corporate
purchasing protocols.

Orders for books placed through the system are directed to
KnowledgeMax's strategic partner and investor, Baker & Taylor,
and drop-shipped from Baker & Taylor's warehouse.  Koen Books and
Pearson Education also provide book fulfillment directly to the
end user.  Other learning products, when added, are expected to
be fulfilled by Baker & Taylor or made available through business
alliances with owners of the content.

   SALES AND MARKETING

KnowledgeMax promotes its services through executive direct sales
at the enterprise level, marketing to the ultimate employee end
user within an organization, and assisted distribution through
service partners and value-added reseller partners.  This multi-
tiered approach is designed to capture new customers and maximize
the business conducted with existing customers:

-  Enterprise: A dedicated sales force solicits sales to new
   clients.
-  Partnerships:  KnowledgeMax is focused on creating
   strategic relationships, such as co-branding and co-
   marketing, with established service and product vendors in
   related markets.
-  End-User: KnowledgeMax intends to establish a client
   services group to expand its existing relationships.

   CLIENTS

KnowledgeMax has contracts with several customers, of which the
largest is IBM.  To date, IBM has accounted for the majority of
KnowledgeMax's revenue.  If KnowledgeMax were to lose one of its
key contracts or if sales to its key customers were reduced
materially, it would have a material adverse effect on
KnowledgeMax's results of operations.

   INTELLECTUAL PROPERTY

The success and ability of KnowledgeMax to compete are dependent
on its ability to develop and maintain the proprietary aspects of
its technology and operate without infringing on the proprietary
rights of others. KnowledgeMax relies on a combination of
trademark, trade secret and contractual restrictions to protect
the proprietary aspects of its technology and license
arrangements to use the proprietary technology of others. These
legal protections afford only limited protection for KnowledgeMax
technology.  KnowledgeMax holds no patents and has not filed any
patent applications with the United States Patent and Trademark
Office. KnowledgeMax seeks to limit disclosure of KnowledgeMax


<PAGE>
                           11

intellectual property by requiring employees and consultants with
access to proprietary information to execute confidentiality
agreements with KnowledgeMax and by restricting access to its source
code. Due to rapid technological change, KnowledgeMax believes that
factors such as the technological and creative skills of its personnel,
new product developments and enhancements to existing products are more
important than the various legal protections of its technology to
establishing and maintaining a technology leadership position.

Despite the efforts of KnowledgeMax to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of
KnowledgeMax technology or to obtain and use information that
KnowledgeMax regards as proprietary.  Litigation may be necessary
in the future to enforce the intellectual property rights of
KnowledgeMax, to protect its trade secrets, to determine the
validity and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Any
litigation could result in substantial costs and diversion of
resources and could cause the business and financial results of
KnowledgeMax to suffer. There can be no assurance that the means
of KnowledgeMax of protecting its proprietary rights will be
adequate or that competitors will not independently develop
similar technology. Any failure to meaningfully protect
KnowledgeMax property could cause its business and financial
results to suffer.

   SUPPLIERS AND STRATEGIC PARTNERS

KnowledgeMax has formed a number of strategic relationships to
support operations, to provide premium services, and to grant
access to a broad pipeline of content in order to provide a suite
of the "best-of-breed" education and training products available:

-  Baker & Taylor, one of the world's largest book, video, and
   audio wholesalers (with over 10 million books in stock), is
   a stockholder and a key strategic partner of KnowledgeMax,
   and has been engaged to fulfill KnowledgeMax's book orders
   directly to KnowledgeMax's clients.  In turn, KnowledgeMax
   provides an outlet for Baker & Taylor to reach the
   corporate market.
-  leadSOFT, a leading provider of search engines in the
   publishing industry, is both the developer of the search
   engine technology and a stockholder of KnowledgeMax.
-  Koen Books, another large wholesaler, fulfills and ships
   book orders worldwide.
-  Pearson Education, one of the leading providers of IT and
   business books and educational materials, provides books and
   other educational materials to KnowledgeMax customers.
-  KnowledgeMax has over fifty agreements with providers of
   courseware, eLearning, videotapes, databases, journals, and
   publications and research reports, which it is in the
   process of aggregating into its system.

   COMPETITION

The corporate learning market is highly fragmented and extremely
competitive with many new companies emerging to capitalize on the
growing corporate eLearning space.  Many firms are solely
concentrating on developing original learning content (books,
tapes, CDs, videos, online courseware, interactive simulations,
etc.).  However, KnowledgeMax and its most direct competitors
focus on supplying distribution and services in the corporate
education and training industry.

Many of KnowledgeMax's competitors have greater financial
resources and more experience than KnowledgeMax.  Smaller
companies may also prove to be significant competitors,
particularly through arrangements with large corporate
collaborators.

KnowledgeMax anticipates that it will face increased competition
in the future as new companies enter the market and advanced
technologies become available.  KnowledgeMax's competitors may
develop more effective or more affordable technologies or
services than KnowledgeMax can provide, thus rendering
KnowledgeMax's technologies and/or services obsolete or
uneconomical.

   EMPLOYEES


<PAGE>
                           12

As of April 1, 2002, KnowledgeMax employed 16 fulltime
employees and 4 independent contractors.  Of these employees
and contractors, 6 are in executive or administrative positions,
3 are in editorial, 9 are in information technology, and 2
are in sales and business development. KnowledgeMax believes that
its professional employees are trained and skilled and that its
ability to continue to provide products and services to its
existing clients and to expand its business is highly dependent
upon retaining its existing professionals and attracting
additional professionals with the requisite credentials. The
competition for these types of employees is intense and the loss
of a significant number of its professional staff could have a
material adverse effect on the company.  KnowledgeMax believes
that its relationship with its employees is good and none of its
employees are represented by a collective bargaining unit.


ITEM 2.  PROPERTIES

Sideware has moved its head office to 7900 Westpark
Drive, Suite T300, McLean, VA 22102.  KnowledgeMax has entered into
a lease for these premises, which are intended to serve as the principal
executive offices for the combined company following the merger.
The term of the lease runs to March 1, 2003, and KnowledgeMax has the
right to renew the lease for a further three years.  The rent is
$12,030.33 per month and the area of the premises is 8,492 square feet.
Sideware is not a party to the lease.

Prior to October 2000, Sideware's head office was in North
Vancouver, British Columbia.  In October 2000, Sideware moved its
head office to Reston Virginia, and continued to use the North
Vancouver premises as a research and development office.  In
addition, during 2000 Sideware opened approximately 8 regional
sales offices in the United States.

With the contraction of its business during 2001, Sideware has
substantially reduced its office premises.  During 2001, it
closed its regional sales offices.  Sideware has also terminated
its lease obligations with respect to its Reston head office
premises.

Sideware has also terminated its lease obligations relating to
its previous U.S. head office premises in Herndon, Virginia.  As
part of the agreement to terminate that lease, Sideware agreed
with the landlord that it will be responsible for a maximum of
$30,500 in rent if the new tenant does not pay the required rent.

The premises previously occupied by Sideware in North Vancouver
have now been occupied by other companies.  However, Sideware
remains liable to the landlord if the present tenants fail to pay
the rent.  The term of the lease which Sideware executed ends in
August 2003.  If the present tenants default in payment of the
rent, the resulting maximum liability for Sideware will be
approximately $300,000, based on the rental payments remaining
until the end of the lease term.

Sideware has sublet premises which it previously occupied in
Atlanta, Georgia.  Rent payments under the head lease total
approximately $5,800 per month, and Sideware is receiving
approximately $4,200 from the sub-tenant.  Sideware must pay the
difference, and could be liable for the total lease payment if
the sub-tenant does not pay the rent.  The Atlanta lease ends in
April 2003.

The Chalk Group operates from leasehold premises in Burnaby,
British Columbia.  The lease runs to December 2002, and costs
approximately $7,000 per month.


ITEM 3.  LEGAL PROCEEDINGS

As at the date of this annual report, neither Sideware nor any company
in the Chalk Group is party to any material legal proceedings.


<PAGE>
                           13


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

No matters were submitted to a vote of security holders during the
fourth quarter of 2000.

At Sideware's annual general meeting held June 20, 2001, the
stockholders of Sideware authorized a change of the corporate
jurisdiction of Sideware from British Columbia to the Yukon Territory,
Canada.  Sideware acted on that resolution in December 2001, and
became a Yukon corporation effective December 18, 2001.



ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

     NATURE OF TRADING MARKET

Sideware common shares currently trade on the Toronto Stock
Exchange under the symbol "SYD.U" and are quoted on the OTC
Bulletin Board under the symbol "SDWS".  Trading on the Toronto
Stock Exchange commenced November 10, 2000.  Quotation on the OTC
Bulletin Board was authorized to commence October 29, 1999.

Prior to November 20, 2000, Sideware shares also traded on the
Canadian Venture Exchange.  Up to November 4, 1999 trading on the
Canadian Venture Exchange was in Canadian dollars.

The following table sets forth trading information for the
quarters indicated.  Figures quoted for the third quarter of 1999
and all previous periods are in Canadian dollars, and are based
on data from the Canadian Venture Exchange.  Figures quoted for
the fourth quarter of 1999 and all subsequent periods are in
United States dollars, and are based on data from the Canadian
Venture Exchange, the Toronto Stock Exchange, and the OTC
Bulletin Board.

Figures stated for the Canadian Venture Exchange and the Toronto
Stock Exchange represent high and low trading prices.  Figures
stated for the OTC Bulletin Board represent high and low bids.
Figures stated for the OTC Bulletin Board reflect inter-dealer
prices, without retail mark-up, mark-down, or commission and may
not represent actual transactions.


<TABLE>
<CAPTION>


                                        CVE/TSE         CVE/TSE         OTC-BB          OTC-BB
                                        High            Low             High            Low
                                        ($/C$)          ($/C$)          ($)             ($)
                                        -------         -------         ------          ------
<S>                                    <C>             <C>              <C>              <C>

2001
----

Fourth Quarter                          $0.255          $0.105          $0.26            $0.10
Third Quarter                           $0.50           $0.12           $0.52            $0.13
Second Quarter                          $0.64           $0.11           $0.65            $0.15
First Quarter                           $1.80           $0.35           $1.69            $0.35

2000
----

Fourth Quarter                          $2.40           $0.44           $2.25            $0.44
Third Quarter                           $4.25           $1.92           $4.00            $1.91
Second Quarter                          $10.35          $3.30           $10.19           $3.28
First Quarter                           $25.50          $7.05           $24.88           $7.06


1999
----

Fourth Quarter                          $10.15          $1.48           $12.85           $1.38
Third Quarter                           C$3.38         C$2.20
Second Quarter                          C$3.47         C$0.94
First Quarter                           C$0.85         C$0.45


</TABLE>


<PAGE>
                           14

On, March 14, 2002 the closing prices for Sideware shares on the Toronto
Stock Exchange and the OTC-Bulletin Board were $0.16 and $0.19, respectively.

     DIVIDEND POLICY

Sideware has never paid cash dividends on its capital stock.  Sideware
currently intends to retain all earnings, if any, to finance the growth
and development of its business.  Sideware does not anticipate paying
any cash dividends in the foreseeable future.

     DESCRIPTION OF OUTSTANDING CAPITAL STOCK

Sideware's authorized capital consists of 198,978,997 common shares without
par value.  The holders of the common shares are entitled to receive
notice of, attend and vote at all shareholders' meetings.  The common
shares carry one vote per share and have no par value.  The holders of
the common shares are entitled to receive dividends if, as, and when
declared by our board of directors.  The common shares carry no
preemptive rights, conversion rights, redemption provisions, sinking
fund provisions or liability to further calls or to assessment.  There
are no restrictions on Sideware's ability to repurchase or redeem the common
shares except under applicable securities laws, and to the extent that
any such repurchase or redemption would render our company insolvent.

As of March 14, 2002 Sideware has 85,514,735 shares of common stock
outstanding, which are held of record by approximately 450 stockholders
of record.  Approximately 371 record holders of common shares (including
CEDE & Co., a US depository) are within the United States, holding
30.4 million shares (approximately 36% of the total shares issued
and outstanding).  Approximately 45.8 million shares are registered in
the name of CDS & Co., a Canadian depository.  Approximately 14.9 million
shares are registered in the name of CEDE & Co., a United States depository.

Based on information Sideware assembled for its March 20, 2002 shareholders'
meeting, Sideware believes it has in excess of 20,000 beneficial shareholders.
Sideware does not have reliable information as to the extent of beneficial
ownership of its shares by United States residents, but believes that in excess
of 50% of its shares are owned beneficially by United States residents.

     RECENT SALES OF UNREGISTERED SECURITIES

During the year ended December 31, 2001, Sideware issued the following
securities in private placements, pursuant to exemptions from
registration under section 4(2) of the Securities Act of 1933.

During the year ended December 31, 2001, Sideware issued the
following securities in private placements, pursuant to
exemptions from registration under Section 4(2) of the Securities
Act of 1933.

(1)  On February 22, 2001, Sideware issued 5,229,752 units to 44
purchasers.  Each unit consisted of one common share and one
share purchase warrant.  Each warrant entitles the holder to
acquire one additional common share at any time up to
February 22, 2004.  The initial exercise price for the warrants
was $1.00 per share, but that exercise price has subsequently
been reduced as a result of the effect of anti-dilution clauses
in the warrant agreements. Sideware estimates that the current
exercise price for the warrants is $0.80.  The warrants are
non-transferable.  None of the warrants have been exercised.

The price of the units was $0.76 per unit for all purchasers
other than Grant Sutherland, Paul Hildebrand, and Alder
Enterprises Ltd.  In accordance with regulations of the Toronto
Stock Exchange, those purchasers paid a price of $0.80 per unit.

The purchasers of the units included the following directors and
executive officers of Sideware:

   Grant Sutherland                              1,250,000 units


<PAGE>
                           15

Other purchasers who acquired 5% or more of this offering
included the following:

   Welcome Opportunities Ltd.                      500,000 units
   SDS Merchant Fund LP                            394,737 units
   American High Growth Equities Retirement Trust  328,947 units
   Michael Colen                                   263,158 units

All purchasers in the February 22, 2001 private placement were
accredited investors.  Issuance of the units was exempt from
registration under Rule 506 of Regulation D to the Securities
Act of 1933.

H.C. Wainwright & Co., Inc. acted as placement agent for the
February 22, 2001 private placement.  As consideration for
placement agent services, Sideware paid H.C. Wainwright & Co.,
Inc. commissions totalling $282,252.60, equal to 7% of the funds
raised in the February 22, 2001 private placement.  Sideware also
issued to H.C. Wainwright & Co. Inc. and certain of its
associates warrants to acquire 526,316 common shares and 526,316
share purchase warrants.  Under the terms of these warrants,
payment of an exercise price of $0.76 entitles the warrant holder
to receive one common share and one share purchase warrant.
Each share purchase warrant will entitle the holder to purchase
one additional share.
The initial exercise price for the share purchase warrants was
$1.00, but that exercise price has subsequently been reduced as a
result of the effect of anti-dilution clauses in the warrant
agreements.  Sideware estimates that the current exercise price
for the warrants is $0.80.  The warrants issued as consideration
for placement agent services, and any share purchase warrants
issued on exercise of those warrants, will expire February 22,
2004.

(2) On September 5, 2001 Sideware issued 2,941,176 shares to Grant
Sutherland, a Sideware director, at a price of $0.34 per share.
Issuance of the shares was exempt from registration under Rule 506
of Regulation D to the Securities Act of 1933.  Sideware used the
proceeds from this private placement to fund the acquisition of a
majority interest in the Chalk Group.

(3)  On December 11, 2001, Sideware issued 13,500,000 shares to
22 purchasers at a price of $0.10 per share.  The shares were
issued to accredited investors pursuant to exemptions from
registration under Rule 506 of Regulation D to the Securities Act
of 1933.  The purchasers of the shares included the following
directors and executive officers:

   James Speros                                   1,000,000 shares
   Kenneth Thornton                               1,000,000 shares
   Grant Sutherland                               1,000,000 shares

Other purchasers who acquired 5% or more of this offering
included the following:

   Michael Colen                                  1,000,000 shares
   Welcome Opportunities Ltd.                     1,000,000 shares
   Sidney Colen                                   1,000,000 shares
   Blackjack Investments LP                       1,000,000 shares
   Melvin Beaumont                                1,000,000 shares
   Debra Berman                                     750,000 shares

(4)  During December 2001, Sideware has issued 3,233,346 common shares
and 646,668 share purchase warrants to acquire the positions of
six minority stockholders in the Chalk Group.  Each share purchase
warrant entitles the holder to acquire one additional common share of
Sideware common stock at a price of $0.13 per share for a period
of 18 months.  In exchange, Sideware received an additional 3,725,050
shares in Chalk.com Network (Holding) Corp., parent company of
the Chalk Group, raising its interest in the Chalk Group to 80.7%.
The shares and warrants were issued to accredited investors
pursuant to exemptions from registration under Rule 506 of
Regulation D to the Securities Act of 1933.


<PAGE>
                              16

(5)  On December 17, 2001, Sideware agreed to issue 332,222 shares
to directors and employees in satisfaction of unpaid salary and
bonus commitments as follows.

  Kenneth Thornton:  45,303 shares in lieu of $6,500 in unpaid salary
  James Speros:      98,737 shares in lieu of $14,166.68 in unpaid salary
  Rahul Bardhan:     48,788 shares in lieu of $7,000 in unpaid salary
  Michael Finn:      139,394 shares in lieu of $20,000.00 in unpaid
                     salary and bonus

The shares were issued in January 2002.  The shares were issued to
accredited investors pursuant to exemptions from registration in Rule
506 of Regulation D to the Securities Act of 1933.

(6)  On December 17, 2001, Sideware issued 362,202 shares to a
creditor of the Chalk Group, in settlement of debts of the Chalk
Group.  The shares were issued to an accredited investor pursuant
to exemptions from registration in Rule 506 of Regulation D to
the Securities Act of 1933.

All cash proceeds from of the securities listed above have been used
as general working capital, to finance our ongoing operations.


     EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

Sideware is unaware of any governmental laws, decrees or
regulations in force in Canada which restrict the export or
import of capital, or the remittance of dividends, interest, or
other payments to US residents.
There are no limitations imposed by the laws of the Yukon
Territory, or by the Sideware charter or other governing
documents, on the right of a non-resident to hold or vote shares
of Sideware common stock.  However, investments in Sideware
common stock could be affected by either the Investment Canada
Act (the "Investment Act") or the Competition Act of Canada.

   INVESTMENT ACT REVIEW

The following summarizes the principal features of the Investment
Act for a non-resident who proposes to acquire Sideware common
stock.  The summary is of a general nature only and is not
intended to be more; nor is it a substitute of independent advice
from an investor's own advisor.  The summary does not anticipate
statutory or regulatory amendments.

The Investment Act generally prohibits implementation of
"reviewable" investments by persons, including governments, who
are not "Canadians" as defined in the Investment Act.  The
prohibition does not apply if the responsible cabinet Minster,
after review, is satisfied that the investment is likely to be of
a net benefit to Canada.

Whether an investment is "reviewable" under the Investment Act
can depend on the nationality of the investor.  A US citizen
qualifies as a "World Trade Organization Investor."  As a result,
and subject to the restrictions noted below, an investment in a
Canadian business by a US citizen is only reviewable if it is an
investment to acquire control of the Canadian business, and if
the value of the assets of the Canadian business, as shown on its
financial statements, exceeds a specified amount.  For 2001 the
specified amount was $209 million.

For an investor who does not qualify as a "World Trade
Organization Investor", when the target company is not controlled
by a World Trade Organization Investor, a more stringent standard
applies.  An investment is reviewable if it is an investment to
acquire control of the Canadian business and the value of the
assets of the Canadian business, as shown on its financial
statements, is $5 million or more.

A non-Canadian would acquire control of Sideware for purposes of
the Investment Act if the non-Canadian acquired a majority of the
common stock.  The acquisition of less than a majority, but of


<PAGE>
                           17

one-third or more of the common stock, would be presumed to be an
acquisition of control unless it could be established that, on
acquisition, the company would not be controlled in fact by the
acquirer through the ownership of shares of common stock.

In addition to the review provisions, any transaction involving
the acquisition of control of a Canadian business, or the
establishment of a new business in Canada by a non-Canadian, is a
notifiable transaction, and must be reported to Industry Canada
by the non-Canadian making the investment either before or within
thirty (30) days after the investment.

Certain transactions relating to common shares are exempt from
the Investment Act, including:

-  an acquisition of common shares by a person in the ordinary
   course of that person's business as a trader or dealer in
   securities;
-  an acquisition of control of the company in connection with
   the realization of security granted for a loan or other
   financial assistance and not for a purpose related to the
   provisions of the Investment Act; and
-  an acquisition of control of the company by reason of an
   amalgamation, merger, consolidation or corporate
   reorganization, following which the ultimate direct or
   indirect control in fact of the company, through the
   ownership of common shares, remains unchanged.

   COMPETITION ACT REVIEW

Investments giving rise to the acquisition or establishment,
directly or indirectly, by one or more persons of control over,
or a significant interest in the whole or part of, a business of
a competitor, supplier, customer, or other person are subject to
substantive review by Canada's Competition Law Authority, the
Director of Investigation and Research.

If the Director concludes that a merger, whether by purchase or
lease of shares or assets, by amalgamation or by combination, or
otherwise, prevents or lessens, or is likely to prevent or lessen
competition substantially, he may apply as may be necessary to
eliminate the substantial lessening or prevention of competition.
The substantive merger review power applies to all mergers,
whether or not they meet limits for pre- notification under the
Competition Act.

In addition to substantive merger review, the Competition Act
provides for a pre-notification regime respecting mergers of
certain size. The regime applies in respect of share
acquisitions, asset acquisitions, amalgamations, and
combinations. This filing refers specifically to share
acquisition, although the pre-notification regime applies, with
the appropriate modification, to other types of acquisition of
control as well.

In order for a share acquisition transaction to be pre-
notifiable, the parties to the transaction (being the person or
persons who proposed to acquire shares, and the corporation the
shares of which are to be acquired), together with their
affiliates (being all firms with a 50% or more voting shares
linkage up and down the chain), must have:

-  aggregate gross assets in Canada that exceed C$400,000,000
   in value, as shown on their audited financial statements
   for the most recently completed fiscal year (which must be
   within the last fifteen (15) months); or
-  aggregate gross revenue from sales in, from, or into Canada
   that exceed C$400,000,000 for the most recently completed
   fiscal year, as shown on the financial statements; and
-  the party being acquired or corporations controlled by that
   party must have gross assets in Canada, or gross revenues
   from sales in or from Canada, exceeding C$35,000,000 as
   shown on the financial statements.

Acquisition of shares carrying up to 20% of the votes of a
publicly traded corporation, or 35% of the votes in a private
corporation, will not be subject to pre-notification, regardless
of the above thresholds.  However, exceeding the 20% or the 35%
threshold, and again exceeding the 50% threshold, gives rise to
an obligation of notification if the applicable size threshold is
met.

If a transaction is pre-notifiable, a filing must be made with
the Director containing the prescribed information with respect


<PAGE>
                           18

to the parties, and a waiting period, (either seven or twenty-one
days, depending on whether a long or short form filing is chosen)
must expire prior to closing.

As an alternative to pre-notification, the Director may grant an
Advance Ruling Certificate which exempts the transaction from
pre-notification. Advance Ruling Certificates are granted where
the Director concludes, based on the information provided to him,
that he would not have sufficient grounds on which to apply to the
Competition Tribunal to challenge the transaction.

TAXATION

This section summarizes the current principal Canadian federal
income tax considerations applicable to the holding and disposing
of common shares of Sideware by a holder of our common shares who
is resident in the United States of America, who has never been a
resident of Canada, and who holds common shares solely as capital
property (a "U.S. Holder").  This summary is based on the current
provisions of the Income Tax Act of Canada, the regulations
thereunder, all amendments thereto publicly proposed by the
government of Canada to the date hereof, the published
administrative practices of the Canada Customs and Revenue
Agency, and on current provisions of the Canada-United States
Income Tax Convention, 1980, as amended (the "Treaty").  Except
as otherwise expressly provided, this summary does not take
account of any provincial, territorial or foreign tax law or treaty.
It has been assumed that all currently proposed amendments will be
enacted substantially as proposed and that there is no other relevant
change in any governing law or practice, although no assurance can be
given in these respects.

This summary applies to Sideware as a Canadian corporation.  As part
of the proposed merger with KnowledgeMax, Inc., Sideware will continue
its corporate status as a Delaware corporation.  If that occurs, some
or all of the following information on Canadian taxation will cease
to apply.

THIS SUMMARY IS NOT INTENDED TO INCLUDE ALL CIRCUMSTANCES IN
WHICH A DISPOSITION OF COMMON SHARES MIGHT OCCUR.  THIS SUMMARY
DOES NOT CONSTITUTE, AND SHOULD NOT BE CONSTRUED TO CONSTITUTE,
TAX ADVICE TO ANY PARTICULAR READER.  READERS ARE, THEREFORE,
ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR
INDIVIDUAL CIRCUMSTANCES.

THIS SUMMARY CONTAINS INFORMATION RELATING ONLY TO PROVISIONS OF
CANADIAN FEDERAL INCOME TAX LAW, AS SET OUT ABOVE.  THIS SUMMARY
DOES NOT INCLUDE INFORMATION RELATING TO THE PROVISIONS OF ANY
TAXATION LEGISLATION OF THE UNITED STATES OF AMERICA OR ANY STATE
THEREOF.  READERS WHO ARE OR MAY BE SUBJECT TO LIABILITY TO TAX
UNDER ANY LEGISLATION OF THE UNITED STATES OF AMERICA, OR ANY
STATE THEREOF, ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS
WITH RESPECT TO SUCH LIABILITY.

   DIVIDENDS ON COMMON SHARES

Under the Income Tax Act, amounts paid or credited or deemed paid
or credited on account of dividends to holders of common shares
that are resident in a country other than Canada will be subject
to withholding tax of 25% of the amount of the dividend.  The
rate of withholding tax may be reduced pursuant to the terms of a
bilateral income tax treaty between Canada and the country in
which a holder of common shares is resident.  In certain
circumstances, the purchase by Sideware of its common shares may
result in a deemed dividend.

Under the Treaty, if the recipient of a dividend on the common
shares is the beneficial owner of such dividends and is
considered to be a resident of the United States for purposes of
the Treaty, the rate of Canadian withholding tax on such
dividends will generally be reduced to 15% of the amount of such
dividends or, if the recipient is a corporation which owns at
least 10% of Sideware's voting stock, to 5% of the amount of such
dividends.


<PAGE>
                           19

   DISPOSITION OF COMMON SHARES

A holder of common shares who is not resident in Canada will not
be subject to tax under the Income Tax Act in respect of any
capital gain, or be entitled to deduct any capital loss, realized
on a disposition of the common shares unless at the time of such
disposition such common shares constitute "Taxable Canadian
Property" of the holder for purposes of the Income Tax Act and
the holder is not entitled to relief under a bilateral income tax
treaty between Canada and the country in which the holder of the
common shares is resident. If the holder is not entitled to
relief under a tax treaty, one half of the gain arising on a
disposition of Taxable Canadian Property will be taxable at the
rates that approximate the rates applicable to residents of
Canada.

Sideware common shares will not generally constitute "Taxable
Canadian Property" at a particular time if they are listed on a
prescribed stock exchange (which includes the Toronto Stock
Exchange) at that time.  However, a holder's common shares and
rights to acquire common shares or interests in common shares
will be considered "Taxable Canadian Property" if the holder uses
or holds, or is deemed to use or hold, such shares in, or in the
course of carrying on, a business in Canada, or if at any time
during the five year period immediately preceding the disposition
of such common shares, the non-resident holder and persons with
whom the non-resident holder did not deal at arm's length owned,
had rights to acquire, or had interests in 25% or more of the
issued shares of any class.

Under the Treaty, any gain from a disposition of common shares by
a person who is considered a resident of the United States for
purposes of the Treaty may be exempt from Canadian tax even if
the shares constitute Taxable Canadian Property.  This exemption
will apply if, at the time of disposition, the value of the
common shares did not derive principally from Canadian real
property and such shares do not form part of the business
property of a permanent establishment of the holder in Canada or
pertain to a fixed base available to the holder in Canada for the
purpose of performing independent personal services.



ITEM 6.  SELECTED FINANCIAL DATA

The following table sets out selected financial information for
each of the periods indicated, derived from Sideware's
consolidated financial statements.

Information as at December 31, 2001 and 2000 and for the years
ended December 31, 2001, 2000, and 1999 has been extracted from
the audited consolidated financial statements for Sideware
contained in this annual report.  Information as at December 31,
1999, as at and for the eight month period ended December 31,
1998, and as at and for the years ended April 30, 1998 and 1997
has been extracted from audited consolidated financial statements
for Sideware not included in this annual report.

Prior to December 1998 Sideware operated with an April 30 fiscal
year end.  In December 1998, Sideware changed its fiscal year end
from April 30 to December 31.  Financial results for periods up
to April 30, 1998 are reported with an April 30 year end.
Financial results for periods subsequent to April 30, 1998 are
reported with a December 31 year end.

<TABLE>
<CAPTION>
                                                          Eight
                                                          months
                                                          ended
                                                         December
                          Year ended December 31,           31,      Year ended April 30,
                     ---------------------------------   ---------   ---------------------
                      2001           2000       1999       1998        1998        1997
                    (000's)         (000's)    (000's)    (000's)     (000's)     (000's)

<S>                 <C>         <C>         <C>          <C>         <C>         <C>

Sales revenue
 continuing
 operations           $346            $0         $0         $0          $0         $0

Loss from
 continuing
 operations         $(3,510)       $(6,989)   $(1,916 )    $(454)      $(894)    $(1,089)


<PAGE>
                           20

Loss from
 discontinued
 operations        $(10,632)      $(20,806)   $(3,772)     $(829)      $(820)     $(355)

Comprehensive
 loss              $(14,253)      $(28,447)   $(5,422)    $(1,383)    $(1,748)   $(1,444)

Loss per
 share              $(0.21)        $(0.48)     $(0.15)     $(0.05)     $(0.08)    $(0.06)

Total assets        $3,879         $10,459     $7,537       $1,138     $1,676     $1,005

Total
 stockholders'
 equity (deficit)   $1,906         $9,044      $6,874        $954      $1,531       $726


</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

Prior to November 2000, Sideware filed annual and other reports with
the Securities and Exchange Commission as a foreign private issuer, as
defined under the Securities Exchange Act of 1934.  Beginning in
November 2000, Sideware began to file our reports as a domestic issuer.
Reports which Sideware filed prior to November 2000 contained financial
statements prepared in accordance with Canadian generally accepted
accounting principles.  The financial statements contained in this
annual report were prepared in accordance with United States generally
accepted accounting principles, and Sideware has restated the results
from prior periods in accordance with those principles.  The discussion
below is solely in respect of Sideware's financial position and results
of operations determined in accordance with United States generally
accepted accounting principles.


Prior to September 2001, the core business of Sideware was the
development and marketing of its electronic Customer Relationship
Management software.  In September 2001, Sideware discontinued
its business activities in that segment.  Accordingly, Sideware
has reported results from that segment as discontinued
operations.  General and administrative expenses have been
allocated to continuing operations, while sales and marketing and
research and development expenses have been allocated to
discontinued operations.

   YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED
   DECEMBER 31, 2000

   COMPREHENSIVE LOSS

Comprehensive loss decreased from $28,446,552 for the year ended
December 31, 2000 to $14,252,790 for the year ended December 31,
2001.  This reduction included:

-  a reduction in the loss from continuing operations from
   $6,988,794 to $3,847,468; and

-  a reduction in the loss from discontinued operations from
   $20,805,594 to $10,632,482.

Factors contributing to the respective changes in continuing and
discontinued operations are set out below, under the applicable
headings.

   REVENUES - CONTINUING OPERATIONS

Consolidated revenues from continuing operations for the year
ended December 31, 2001 were $346,334.  This amount included:


<PAGE>
                           21

-  $235,225 from television and airline segment productions;
   and

-  $111,109 from the sale of interactive Internet media
   content.

All of these revenues were earned within the Chalk Group.  There
were no corresponding revenues during the year ended December 31,
2000, as Sideware did not have any interest in the Chalk Group or
revenues from any other source during that period.

   COST OF REVENUES - CONTINUING OPERATIONS

Cost of revenues for the year ended December 31, 2001 was
$415,874.  The principal components of this amount were:

-  approximately $203,000 in salaries relating to the production
   of media content sold; and

-  approximately $159,000 in post-production costs.

All of these costs of revenue were incurred by the Chalk Group.
There was no corresponding cost of revenues for the year ended
December 31, 2000, as Sideware did not have any interest in the
Chalk Group during that period.

   OPERATING EXPENSES - CONTINUING OPERATIONS

Total operating expenses for continuing operations decreased from
$7,539,327 for the year ended December 31, 2000 to $4,031,444 for
the year ended December 31, 2001.  Operating expenses for the
year ended December 31, 2001 included the following expenses
incurred by the Chalk Group:

-  $261,109 in sales and marketing and website operation
   expenses; and

-  $419,010 in general and administrative expenses.

No Chalk Group operating expenses were included in Sideware's
operating results for the year ended December 31, 2000, as
Sideware did not have any interest in the Chalk Group during that
period.

The majority of the remaining operating expenses for continuing
operations consisted of general and administrative expenses
incurred by Sideware, which decreased from $7,533,958 for the
year ended December 31, 2000 to $3,351,325 for the corresponding
period in 2001.  These amounts included stock-based compensation
of $4,471,295 and $56,213 respectively.  Excluding stock-based
compensation, general and administrative expenses of Sideware
increased from $3,062,663 for the year ended December 31, 2000 to
$3,295,112 for the corresponding period in 2001.  The principal
factors contributing to this increase were the following:

-  Foreign exchange losses increased by approximately
   $680,000.  Sideware's foreign exchange gains and losses
   result principally from the translation of financial
   transactions recorded in Canadian dollars into the
   functional and reporting currency of United States
   dollars for financial reporting purposes.

-  Bad debt expenses increased by approximately $145,000.
   Several customers from fiscal 2000 went bankrupt during
   2001, requiring accounts receivable to be written off.
-  Professional fees decreased by approximately $150,000,
   principally as a result of using in-house personnel to do
   more legal and accounting work.

   INTEREST ON CASH BALANCES - CONTINUING OPERATIONS

Interest income decreased from $550,533 for the year ended
December 31, 2000 to $253,516 for the year ended December 31,
2001.  The principal reason for the decrease was lower average
cash balances during 2001.

   LOSS FROM CONTINUING OPERATIONS


<PAGE>
                           22

Loss from continuing operations decreased from $6,988,794 for the
year ended December 31, 2000 to $3,847,468 for the year ended
December 31, 2001.  The principal reason was the reduction in
general and administrative expenses of Sideware, including stock-
based compensation, described above.

   LOSS FROM DISCONTINUED OPERATIONS

Loss from discontinued operations consisted of losses incurred in
the development and marketing of eCRM software.  Sideware
terminated this business segment during September 2001.

Loss from discontinued operations decreased from $20,805,594 for
the year ended December 31, 2000 to $10,632,482 for the year
ended December 31, 2001.  The principal reason for the decrease
was lower stock-based compensation, which decreased from
$6,899,042 to $321,261.  Sideware's stock-based compensation
expenses resulted principally from stock options granted to
employees at prices below the prevailing market prices for
Sideware shares.  Excluding stock-based compensation expenses,
losses from discontinued operations decreased from $13,906,552
for the year ended December 31, 2000 to $10,311,221 for the year
ended December 31, 2001.  The principal components of these
amounts included the following.

-  Revenue from discontinued operations decreased from $667,628
   to $135,838, principally as a result of a reduction of
   approximately $420,000 in software license revenue.  In
   addition, services revenue decreased by approximately $40,000
   and hardware re-sales to related parties decreased by
   approximately $50,000.

-  Cost of revenues from discontinued operations decreased
   from $139,824 to $40,911, principally as a result of the
   reduction of hardware sales to related parties, which
   were made at cost.

-  Sales and marketing expenses decreased from $16,807,001
   to $5,198,976, inclusive of stock-based compensation of
   $5,767,155 and $193,746, respectively.  Excluding stock-
   based compensation, sales and marketing expenses
   decreased from $11,039,846 to $5,005,239, principally as
   a result of reductions in sales and marketing personnel
   during 2001 and reduced attendance at industry trade
   shows.

-  Research and development expenses decreased from
   $4,526,397 to $2,740,947, inclusive of stock-based
   compensation of $1,131,887 and $127,515, respectively.
   Excluding stock-based compensation, research and
   development expenses decreased from $3,394,510 to
   $2,613,432, principally as a result of personnel
   reductions.

-  For the year ended December 31, 2001 Sideware recorded
   costs associated with discontinuing operations of
   $1,660,486.  Cash costs totaled approximately $372,000,
   consisting principally of termination payments made to
   departing employees.  Non-cash costs totaled
   approximately $1,250,000, resulting principally from writing
   off capital assets associated with office premises which
   Sideware no longer uses.

-  For the year ended December 31, 2001 Sideware also recorded
   restructuring costs of $1,127,000.  Cash restructuring costs
   (including forgiveness of employee loans) totaled approximately
   $611,000, consisting principally of termination payments made
   to departing employees.  Non-cash restructuring costs totaled
   approximately $516,000, resulting principally from writing off
   capital assets associated with office premises which Sideware
   no longer uses.  The terminated employees and written off capital
   assets were all related to, or used in, the eCRM business segment
   exclusively.

   OTHER COMPREHENSIVE LOSS

The adjustments to other comprehensive loss decreased from $652,164
for the year ended December 31, 2000 to $110,700 for the year ended
December 31, 2001.  This change resulted from the following factors:

-  For the year ended December 31, 2000, Sideware incurred
   foreign currency translation adjustment losses of $788,714,
   compared to a gain of $25,850 during 2001.  Sideware records
   foreign currency translation adjustments in translating financial


<PAGE>
                           23

   transactions recorded in Canadian dollars into the functional and
   reporting currency of United States dollars for financial
   reporting purposes.

-  For the year ended December 31, 2001, Sideware recorded a net
   realized holding loss on short-term investments of $136,550.
   There was a corresponding gain of $136,550 for the year ended
   December 31, 2000.  The gain for 2000 was an accrual recorded
   at year end.  The loss for 2001 was recorded on realization of
   the gain, when the amount of the gain was included in comprehensive
   income.

   YEAR ENDED DECEMBER 31, 2000 COMPARED WITH THE YEAR ENDED
   DECEMBER 31, 1999

   COMPREHENSIVE LOSS

Comprehensive loss for the year ended increased from $5,421,609
for the year ended December 31, 1999 to $28,446,552 for the year
ended December 31, 2000.  This change included:

-  an increase in loss from discontinued operations, from
   $3,771,690 to $20,805,594; and
-  an increase in loss from continuing operations, from
   $1,915,778 to $6,988,794.

The increased losses were principally the result of higher
operating expenses, which increased in virtually all categories
from the year ended December 31, 1999 to the year ended December
31, 2000.  The principal reasons for the increase in operating
expenses were the increase in Sideware's work force, the opening
of additional offices in the United States, and an increase in
sales and marketing efforts.

In addition, Sideware incurred large stock-based compensation
expenses during 2000.  Sideware incurred stock-based compensation
expenses when it granted stock options to employees or to
consultants having exercise prices below the prevailing market
prices for Sideware shares.  Total stock-based compensation
expenses increased from $271,908 for the year ended December 31,
1999 to $11,370,337 for the year ended December 31, 2000.  Over
60% of the 2000 stock-based compensation expense arose from the
grant of 1,000,000 stock options on January 21, 2000.  That grant
occurred in the following circumstances:

-  Under regulations of the Canadian Venture Exchange
   ("CDNX"), where Sideware shares were then trading, the
   minimum price for stock options was based on the average
   closing price for its shares during the 10 trading days
   preceding the grant of stock options.
-  Sideware granted options to purchase 1,000,000 shares at
   $11.08 on January 21, 2000.  In accordance with CDNX
   regulations, the $11.08 exercise price was based on the
   average closing price of Sideware shares on the 10 trading
   days preceding January 21, 2000.
-  The closing price for Sideware shares on January 21, 2000
   was $19.00.  Sideware used this price in calculating the
   stock-based expense arising from this transaction, which
   was equal to $6,980,000.
-  The stock options granted on January 21, 2000 were subject
   to approval of the CDNX, and could not be exercised before
   that approval was obtained.  Sideware received CDNX
   approval on February 23, 2000.  The closing price for the
   shares on that date was $10.00.
-  None of the options granted January 21, 2000 have been
   exercised.


   LOSS FROM CONTINUING OPERATIONS

Loss from continuing operations increased from $1,915,778 for the
year ended December 31, 1999 to $6,988,794 for the year ended
December 31, 2000.  In each case, the amount of the loss was
equal to interest earned on cash balances, less general and
administrative expenses.

The increased loss was due principally to higher general and
administrative expenses, which increased from $1,978,298 during
1999 to $7,533,958 during 2000.  The principal factors which
contributed to the increase were as follows.


<PAGE>
                           24

-  Stock-based compensation expense allocated to general and
   administrative expenses increased from $91,921 to
   $4,471,295.
-  Salaries and benefits allocated to general and
   administrative expenses increased from $249,880 to
   $1,591,796 due to the hiring of approximately 10 new
   administrative employees.
-  Professional fees increased from $683,887 to $739,949.
   Legal expenses decreased from $443,378 to $349,662.
   Accounting and auditing expenses increased from $170,114 to
   $210,000. During 1999, Sideware also recorded an expense of
   $107,686, representing the value of 250,000 shares issued
   to National Securities Corp. of Chicago, Illinois in
   connection with the listing of its shares on the OTC
   Bulletin Board.
-  Sideware's bad debt expense increased from $6,146 to
   $136,503.  The majority of the bad debt allowance for the
   year ended December 31, 2000 related to one sales contract,
   in respect of which the purchaser requested a deferral in
   payment to the second half of 2001.  In addition, Sideware
   made a general allowance in the amount of 10% of license
   and services revenue recognized during 2000.
-  During the year ended December 31, 2000 Sideware recognized
   a foreign exchange gain of $593,042, compared with a
   foreign exchange loss of $184,179 for the year ended
   December 31, 1999.  Sideware incurred expenses, received
   revenues, and held short term financial instruments, in
   both Canadian and United States dollars.  Sideware's
   foreign exchange gains and losses result principally from
   continuing to use the Canadian dollar as the company's
   functional currency, while reporting financial results in
   United States dollars.

Interest earned on cash balances increased from $98,493 during
1999 to $550,533 during 2000, principally as a result of higher
average cash balances during 2000.

   LOSS FROM DISCONTINUED OPERATIONS

Discontinued operations for the years ended December 31, 2000 and
1999 included Sideware's eCRM software business, which was
discontinued in September 2001.  Net loss from discontinued
operations increased from $3,771,690 for the year ended December 31,
1999 to $20,805,594 for the year ended December 31, 2000.  The increased
loss resulted from higher sales and marketing and research and
development expenses, which are explained more fully below.

   REVENUE - DISCONTINUED OPERATIONS

Revenue from discontinued operations increased from $33,389 for
the year ended December 31, 1999 to $667,628 for the year ended
December 31, 2000.  Revenue for 2000 included:

-  $461,962 in license revenue from sales of software
   products;
-  $96,217 for services rendered in installing software
   products, and for maintenance services; and
-  $109,449 in hardware and software re-sales.

Of the $109,449 in hardware and software re-sales, $81,945 came
from sales to related parties.  Sideware purchased computer
equipment for BrainTech, Inc., Techwest Management Inc., and
Dunsmuir Management Inc., owing to favourable prices available to
Sideware under the IBM Business Partner Reseller Program.
BrainTech, Inc. is a public company whose directors include James
Speros, Grant Sutherland, and Edward White, directors of
Sideware.  Techwest Management Inc. and Dunsmuir Management Inc.
are private companies with which Mr. Sutherland is affiliated.
In the initial re-sales to related parties during 1998 Sideware
charged a mark-up over cost.  The mark-up was eliminated on
subsequent transactions.

In addition, Sideware recorded $168,661 in deferred revenue as at
December 31, 2000.  The deferred revenue consisted of payments
received, and accounts receivable recorded, on account of:

-  future maintenance obligations; and
-  sales of software products which were not sufficiently
   completed by December 31, 2000 to comply with Sideware's
   revenue recognition policy.


<PAGE>
                           25

   COST OF REVENUES - DISCONTINUED OPERATIONS

Cost of revenues for the year ended December 31, 2000 was
$139,824  Cost of revenues allocated to hardware and software re-
sales was $109,449, of which $81,945 resulted from sales to
related parties.  As stated above, re-sales to related parties
were made at cost.  Re-sales of hardware and software to arm's
length parties were generally included in sales of software
products.  Sideware's practice was to allocate:

-  an amount equal to the cost of hardware or software sold as
   revenue attributed to the re-sale of hardware and software;
   and
-  the balance of the revenue from any sale to license revenue
   or services.

Cost of revenues allocated to services and license revenue were,
respectively, $28,843 and $1,532.  Gross margins on license and
service revenue were 99.7% and 70%, respectively.  Substantially
all costs relating to license revenue were expensed in prior
periods as research and development costs.

Sideware did not realize any revenue from sales of software
during the year ended December 31, 1999.  Revenue from hardware
and software re-sales was $33,389, substantially all of which
came from sales to related parties.  Cost of revenues was
$32,900, substantially all of which also came from sales to
related parties.  As at December 31, 1999 Sideware recorded no
deferred revenue.

  OPERATING EXPENSES - DISCONTINUED OPERATIONS

Sales and marketing expenses increased from $2,281,827 for the
year ended December 31, 1999 to $16,807,001 for the year ended
December 31, 2000.  The principal factors which contributed to
this increase included the following:

-  Stock-based compensation allocated to sales and marketing
   increased from $124,479 to $5,767,155.
-  Salaries and benefits allocated to sales and marketing,
   exclusive of stock-based compensation, increased from
   $841,032 to $5,855,558.  During 2000 Sideware hired
   approximately 65 new sales and marketing employees.
-  Trade show costs increased from $257,466 to $807,165.  The
   majority of the 2000 trade show expenses were incurred at
   the Spring Internet World 2000 trade show, where Sideware
   provided an extensive display and demonstrations of its
   eCRM products.
-  Travel costs increased from $154,758 to $771,698, as a
   result of the increase in Sideware's sales and marketing
   work force, and their consequential travel expenses.
-  Advertising and marketing costs increased from $337,153 to
   $1,729,939.  Marketing expenses for the year ended December
   31, 2000 consisted principally of costs incurred in
   preparing marketing materials and in obtaining market
   studies.
-  Amortization charges allocated to sales and marketing
   increased from $91,031 to $343,779.
-  Rent and facilities costs allocated to sales and marketing
   increased from $128,392 to $674,596.  This increase
   resulted principally from the costs associated with a new
   head office in Reston, and additional regional sales
   offices.

Research and development expenses increased from $1,490,352 for
the year ended December 31, 1999 to $4,526,397 for the year ended
December 31, 2000.  Stock-based compensation allocated to
research and development increased from $55,508 to $1,131,887.
Salaries and benefits, exclusive of stock-based compensation,
increased from $985,426 to $2,087,980, due to the hiring of
approximately 25 new research and development employees.  In
addition, research and development expenses for the year ended
December 31, 2000 included approximately $490,000 paid to Science
Applications International Corp., principally for work done in
developing a demonstration for the exhibit at Spring Internet
World 2000 and for work relating to telephony integration and
VoIP features for potential incorporation into Sideware products.
Travel costs allocated to research and development increased from
$42,737 to $188,085, principally as a result of travel by
research and development personnel between the Reston and North
Vancouver offices.


<PAGE>
                           26

    LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed operations through the private placement
of common equity.  From May 1995 to December 31, 2000, we raised
approximately $40.4 million in equity financing through private
placements, including the exercise of warrants issued pursuant thereto,
and the exercise of stock options.

In February 2001 we closed a private placement of 5,229,752 common
shares for net proceeds of approximately $3,7 million.  Additionally,
we issued 5,229,752 share purchase warrants and 526,316 brokers'
warrants.  Each share purchase warrant entitles the holder to purchase one
additional common share for three years at a price of $1.00 per share.
Each brokers' warrant entitles the holder to purchase one unit at a price
of $0.76 per unit, with each unit consisting of one common share and one
share purchase warrant.

In September 2001 on acquisition of the Chalk Group, we closed a private
placement of 2,941,176 shares for net proceeds of approximately $1.0 million.

In December 2001, Sideware raised $1,350,000 in private placement financing,
issuing 13,500,000 common shares at a price of $0.10 per share.  Under the
merger agreement with KnowledgeMax, those proceeds are being used to fund the
operations of both companies prior to closing.  For the period December 2001
to March 2002, Sideware (excluding Chalk Group) and KnowledgeMax incurred
monthly expenditures of approximately $350,000 per month, consisting of
approximately:

-	$200,000 per month in salaries; and
-	$150,000 per month in general and administrative expenses, including
         expenses relating to the merger.

In addition to the funds raised by Sideware, KnowlegeMax raised approximately
$200,000 in private placement financing during December 2001.  Based on the
monthly expenditures described above, the financing raised was sufficient
to pay the combined operating expenses of the two companies through March 2002.

As at December 31, 2001 our cash and cash equivalents and short term investments
were $1.0 million, a decrease of $5.9 million from December 31, 2000.
Working capital at December 31, 2001 was approximately zero, a decrease of
$6.7 million from December 31, 2000.

Net cash used in operating activities for the years ended December 31, 2001
and December 31, 2000 was $11.0 million and $15.6 million, respectively.
Cash used in operating activities in each period was primarily the result of
net losses, decreased accounts payable and decreased deferred revenue, partially
offset by decreases in accounts receivable, inventory and prepaid expenses.

Net cash provided by financing activities for the years ended December 31, 2001
and December 31, 2000 was $5.9 million and $19.1 million, respectively.
Cash provided by financing activities in each of the periods was the result
of the issuance of common equity, exercise of share purchase warrants,
and exercise of options.

Net cash provided from investing activities for the year ended December 31, 2001
was $5.6 million.  Net cash used in investing activities the year ended
December 31, 2000 was $7.8 million.  Cash provided from investing activities
in 2001 was primarily the result of the sale of short-term investments.  Cash
used in investing activities in 2000 was primarily the result of the purchase
of short-term investments and capital assets.

As of March 26, 2002, Sideware, including Chalk Group, has exhausted
substantially all of its cash resources.  Sideware expects that it can
only raise additional funds by selling most or all of its interest in the
Chalk Group.  At the date of this annual report, Sideware has not
entered into any agreement to sell any portion of its interest
in the Chalk Group.

During the final quarter of 2001, the Chalk Group spent
approximately $275,000 in retiring indebtedness incurred prior
to the investment by Sideware.


<PAGE>
                           27

	Significant Accounting Policies

Note 3 to the Consolidated Financial Statements for the years ended
December 31, 2001, 2000 and 1999 contains a list of significant accounting
policies.  Selected accounting policies from Note 3 appear below.

Use of estimates:
-  The preparation of financial statements in conformity with generally
   accepted accounting principles requires us to make estimates and
   assumptions that effect the reported amounts of assets and liabilities,
   the disclosure of contingent assets and liabilities at the date of the
   financial statements and the reported amounts of revenue and expenses
   during the reporting period.   Actual amounts could differ from
   those estimates.

Revenue recognition:
-  In accordance with the provisions of SOP 00-2 - "Accounting by Producers or
   Distributors of Films", the Company recognizes revenue from Chalk.com's sale
   or licensing arrangement of a television and airline segment production when
   persuasive evidence of a sale or licensing arrangement exists, the film is
   complete, and has been delivered and accepted in accordance with the terms of
   the arrangement, the license period of the arrangement has begun, the
   arrangement fee is fixed and determinable, and the collection of the
   arrangement fee is reasonably assured.  If Chalk.com does not meet any one of
   the criteria described above, all revenue from the arrangement is deferred
   until such time as the conditions are met.
-  The Company recognizes revenue for Chalk.com interactive media in accordance
   with SAB 101 which states that revenue generally is realized or realizable
   and earned when all of the following criteria are met: persuasive evidence
   of an arrangement exists, delivery has occurred or services have been
   rendered, the seller's price to the buyer is fixed or determinable, and
   collectibility is reasonably assured. If Chalk.com does not meet any one
   of the criteria described above, all revenue from the arrangement is
   deferred until such time as the conditions are met.
-  The Company recognized revenue from its electronic Customer Relationship
   Management ("eCRM") software in accordance with SOP 97-2, "Software Revenue
   Recognition". SOP 97-2, as amended, generally requires revenue from software
   arrangements involving multiple elements to be allocated to each element
   of the arrangement based on the relative fair values of the elements, such
   as software products, post contract customer support, installation, or
   training and recognized as the element is delivered and the Company has
   no significant remaining performance obligations.  For multiple element
   contracts where maintenance is bundled with the software license, the
   residual method in accordance with SOP 98-9 is used and Vendor Specific
   Objective Evidence ("VSOE") established for the undelivered element,
   being the maintenance support through the sale of separate maintenance
   agreements, to determine the value to be assigned to the software
   license.  For contracts where maintenance is not bundled with the
   software license, the Company uses the sale value of the software
   license as its fair value to record revenue.
-  In addition to the establishment of fair value, license revenue is
   recognized when there is persuasive evidence of an arrangement and
   delivery to the customer has occurred, provided the arrangement does
   not require significant customization of the software, the fee is
   fixed and determinable, and collectibility is considered probable.
-  Service revenue from maintenance contracts is recognized ratably over
   the term of the maintenance contract, on a straight-line basis.  Other
   service revenue is recognized at the time the service is performed.
-  The Company recognizes sales of equipment to external and related
   parties in revenues and the related costs of the sale in cost of
   revenues.  The Company takes title to and holds the equipment,
   bearing all of the risks and rewards of ownership, prior to sale.


<PAGE>
                           28

Goodwill:
-  Goodwill is accounted for in accordance with FAS 142 "Goodwill and Other
   Intangible Assets".  It represents the difference between the cost of
   the investment in Chalk.com and the fair value of its underlying net
   identifiable assets at the time of acquisition.  Goodwill is not
   amortized.  Goodwill is tested for impairment on an annual basis using
   the expected present value of future cash flows.  As at
   December 31, 2001, no impairment has been recognized.

Intangible assets:
-  Intangible assets are accounted for in accordance with FAS 142 "Goodwill and
   Other Intangible Assets".  They are recorded at the present value of
   expected cash flows of intangible assets acquired in the acquisition
   of Chalk.com.  They are amortized over the weighted average life of the
   contracts that give rise to the intangible assets.

     RISK FACTORS

INVESTMENT IN SIDEWARE SHARES INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, BEFORE PURCHASING SIDEWARE SHARES.  IN ADDITION, THERE ARE
RISKS RELATING TO THE PROPOSED MERGER WITH KNOWLEDGEMAX, INC.  AS
SIDEWARE STOCKHOLDERS APPROVED THAT MERGER, THE DISCUSSION BELOW
INCLUDES RISKS RELATING TO THE MERGER AND TO KNOWLEDGEMAX.
INFORMATION RELATING TO RISKS RELATING TO KNOWLEDGEMAX WAS PROVIDED
BY KNOWLEDGEMAX AND IS ACCURATE TO THE BEST OF THE KNOWLEDGE OF
SIDEWARE MANAGEMENT.

   RISKS RELATING TO SIDEWARE

BECAUSE SIDEWARE HAS TERMINATED ITS ECRM BUSINESS, IT HAS NO
BUSINESS OTHER THAN ITS INTEREST IN THE CHALK GROUP.

In September 2001, Sideware ceased development and marketing of
its electronic Customer Relationship Management software, which
was previously its core business.  Following that, Sideware's
only substantial asset, and its only significant business
operation, was its interest in the Chalk Group.  The Chalk Group
has never generated operating profits, and its value is
speculative.

The auditors' report on Sideware's December 31, 2001 consolidated
financial statements contains an explanatory paragraph that
states that Sideware's recurring losses from operations and
negative cash flows from operating activities raise substantial
doubt about its ability to continue as a going concern.  The
consolidated financial statements do not include any adjustments
that might result from the outcome of that uncertainty.

BECAUSE THE MARKET PRICE OF SIDEWARE SHARES HAS BEEN PARTICULARLY
VOLATILE, INVESTORS IN SIDEWARE SHARES FACE A HIGH DEGREE OF
MARKET RISK.

The stock market in general has recently experienced extreme
price and volume fluctuations.  In particular, the stock prices
of technology companies have been extremely volatile, and have
experienced price fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies.

The price of Sideware common shares has also experienced
substantial fluctuations.  Between January 1, 2000 and March 14,
2002 the Sideware share price has fluctuated between a high of
$25.50 and a low of $0.10.  As of March 14, the most recent trading
prices for Sideware shares on the Toronto Stock Exchange and the OTC
Bulletin Board were $0.16 and $0.19, respectively.  The historical
susceptibility of the Sideware stock price to fluctuation may
expose investors acquiring Sideware stock to a high degree of risk.

BECAUSE THE SIDEWARE STOCK PRICE HAS BEEN VOLATILE, SIDEWARE MAY
HAVE DIFFICULTY RAISING ADDITIONAL CAPITAL.


<PAGE>
                           29

Sideware will likely have to raise additional capital, whether
the merger with KnowledgeMax occurs or not.  The historic
volatility of the Sideware stock price may deter potential
investors.

BECAUSE SIDEWARE HAS SUB-LET PREMISES WHICH IT OCCUPIED
PREVIOUSLY, IT MAY INCUR ADDITIONAL CASH COSTS RELATING TO ITS
FORMER PREMISES.

From 1995 to the summer of 2001, Sideware occupied office
premises in North Vancouver, British Columbia.  Sideware vacated
those premises in September 2001, and other tenants have assumed
occupancy of those premises.  However, Sideware remains liable to
the landlord if the present tenants fail to pay the rent.  The
term of the lease which Sideware executed ends in August 2003.
If the present tenants default in payment of the rent, the
resulting maximum liability for Sideware will be approximately
$300,000, based on the remaining rental payments to the end of
the lease.

BECAUSE SIDEWARE'S FORMER BUSINESS DID NOT SUCCEED, SIDEWARE MAY
BE SUBJECT TO INVOLUNTARY DE-LISTING FROM THE TORONTO STOCK
EXCHANGE.

In September 2001, Sideware terminated development and marketing
of its eCRM software.  Sideware's principal asset and business
venture became its interest in the Chalk Group.  To maintain its
listing on the Toronto Stock Exchange, Sideware is required to
meet certain financial and other requirements following a change
of business.  Sideware does not presently meet those
requirements, and faces a risk that its shares will be de-listed
from the Toronto Stock Exchange.

De-listing from the Toronto Stock Exchange would not prevent
trading of Sideware shares through the OTC Bulletin Board, so
long as Sideware remains current in its filings with the
Securities and Exchange Commission.  However, de-listing from the
Toronto Stock Exchange may limit the market for Sideware shares
among Canadian investors who are accustomed to trading on the
Toronto Stock Exchange.

BECAUSE SIDEWARE STOCK MAY BE SUBJECT TO "LOW PRICE STOCK" RULES,
THE MARKET FOR SIDEWARE STOCK MAY BE LIMITED.

The Securities and Exchange Commission has adopted regulations
which generally define a "penny stock" to be any equity security
that has a market price less than US$5.00.  Sideware common stock
is currently subject to those rules, and may remain so
indefinitely.  The penny stock rules require broker-dealers to
make a special suitability determination before selling Sideware
stock to investors who are not either regular customers or
accredited investors.  As a result, the potential market for
Sideware stock may be limited.

BECAUSE SIDEWARE SHARES TRADE IN RELATIVELY LIMITED VOLUMES, THE
LIQUIDITY OF INVESTORS IN SIDEWARE SHARES MAY BE LIMITED.

Sideware shares have historically traded in relatively limited
volumes, in relation to the total number of shares outstanding,
on both the Toronto Stock Exchange and the OTC Bulletin Board.
As a result, investors in Sideware shares may have difficulty in
selling Sideware shares.

   RISKS RELATING TO THE CONTINUATION OF SIDEWARE TO DELAWARE

SIDEWARE MAY OWE TAXES TO CANADIAN TAXING AUTHORITIES AS A RESULT
OF THE CONTINUATION.

For Canadian tax purposes, Sideware will be treated as though it
sold all of its property at the time of continuation, and
received the fair market value for those properties. Sideware
will be taxed on any income or gain realized on the deemed sale.
Sideware could be subject to an additional tax if the fair
market value of its assets, net of liabilities, exceeds the paid-up
capital of its issued and outstanding shares.


<PAGE>
                           30

Sideware management has reviewed Sideware's assets, liabilities,
and paid-up capital, and believes that it will not owe any
Canadian federal income taxes as a result of the continuation.
However, it is possible that Canadian taxing authorities could
disagree with the position of Sideware management on the value of
Sideware's properties, or on other factual or legal conclusions
of Sideware relating to its tax liabilities.

AS A RESULT OF THE CONTINUATION, SIDEWARE WILL BE UNABLE TO
DEDUCT PREVIOUS OPERATING LOSSES FOR INCOME TAX PURPOSES.

Sideware has incurred substantial operating losses during recent
years.  As a Canadian corporation, subject to limitations
specified in Canadian income tax legislation, Sideware has the
ability to offset those losses against future profits, if it
should be able to generate profits in the future.  After
continuing to Delaware, Sideware will become subject to the
United States income tax laws, which will not allow Sideware to
offset its previous losses incurred while Sideware was a Canadian
company, and which were not incurred in the conduct of a U.S.
trade or business nor attributable to a U.S. permanent
establishment, against future profits earned as a Delaware
corporation.  Accordingly, continuing to Delaware may subject
Sideware to higher effective tax rates in the future.

SIDEWARE STOCKHOLDERS MAY SUFFER ADVERSE U.S. TAX CONSEQUENCES AS
A RESULT OF THE CONTINUATION.

If Sideware sells all or substantially all of its ownership
interest in the Chalk Group immediately before or after the
continuation and prior to the completion of the merger, Sideware
believes that the continuation will not qualify as a tax-free
reorganization under Section 368(a)(1)(F) of the Internal Revenue
Code.  As a result, on the effective date of the continuation,
Sideware Canada will be deemed to contribute its assets tax-free
to Sideware Delaware under Code Section 351 in exchange for
Sideware Delaware shares, followed by a deemed liquidating
distribution by Sideware Canada of the Sideware Delaware shares
to its stockholders who own Sideware Canada shares.  U.S.
stockholders and certain non-U.S. stockholders will recognize
capital gain or loss on the receipt of Sideware Delaware shares
in the deemed distribution, measured by the difference between
the fair market value of Sideware shares on the effective date of
the continuation and the adjusted tax basis of the Sideware
Canada shares to those stockholders.   This adverse tax
consequence may influence such stockholders to exercise their
appraisal rights and receive cash for their Sideware shares,
rather than voting in favor of the continuation.

CANADIAN STOCKHOLDERS WHO HOLD SIDEWARE STOCK IN A RETIREMENT
SAVINGS PLAN COULD BE SUBJECT TO TAX FOLLOWING THE CONTINUATION.

Following the continuation to Delaware, Sideware shares will be
"foreign property" for purposes of the Canadian income tax
regulations relating to registered retirement savings plans and
other similar savings plans.  Canadian income tax regulations
place limitations on the amount of "foreign property" that can be
held in these savings plans.  Exceeding these limitations could
create income tax liabilities for Canadian stockholders of
Sideware.

In addition, Sideware shares may be de-listed from the Toronto
Stock Exchange.  If this happens in combination with a
continuation to Delaware, Sideware shares could cease to be
qualified investments for registered retirement savings plans and
other similar savings plans.  This could create additional income
tax liabilities for Canadian stockholders of Sideware who hold
Sideware shares in their registered retirement savings plans, or
other similar savings plans.

For additional information on these potential tax liabilities,
see "MATERIAL TAX CONSEQUENCES OF THE TRANSACTIONS - Canadian
federal income tax consequences - Canadian retirement plans".
Canadian stockholders of Sideware who hold Sideware shares in a
registered retirement savings plan or other similar savings plan
should consult their own tax advisors regarding the potential
consequences of the continuation to Delaware.

   RISKS RELATING TO THE MERGER

BECAUSE KNOWLEDGEMAX IS NOT PROFITABLE, THE MERGER MAY NOT BE
BENEFICIAL TO SIDEWARE.

Following the merger, the business of KnowledgeMax will be the
core business of Sideware.  KnowledgeMax has never generated


<PAGE>
                           31

profits from its operations, and there is no assurance that
KnowledgeMax will be profitable in the future.  As a result, the
merger may not be beneficial to Sideware.  Specific risk factors
concerning the business of KnowledgeMax are set out below under
"Risks relating to KnowledgeMax".

BECAUSE THE MERGER WILL REQUIRE SIDEWARE TO DISPOSE OF MOST OR
ALL OF ITS INTEREST IN THE CHALK GROUP, THE MERGER MAY BE
DETRIMENTAL TO SIDEWARE.

Following the merger, Sideware will own the business of
KnowledgeMax, but will have disposed of most or all of its
interest in the Chalk Group.  Both KnowledgeMax and the Chalk
Group are early stage businesses, and their potential values are
uncertain and speculative.  KnowledgeMax may turn out to be less
profitable, or of less value, than Sideware's interest in the
Chalk Group.  As a result, the merger may reduce the value of
Sideware.

BECAUSE THE MERGER WILL DILUTE EXISTING SIDEWARE STOCKHOLDERS, IT
MAY HAVE A NEGATIVE EFFECT ON THE VALUE OF THEIR SIDEWARE SHARES.

In addition to the sale of the Chalk Group, the merger will
result in Sideware issuing a large number of shares to
KnowledgeMax stockholders, which will dilute the positions of the
existing stockholders in Sideware.  Following the merger,
existing Sideware stockholders will own less than 50% of
Sideware.  This dilution may reduce the value of their Sideware
shares.

FAILURE TO COMPLETE THE MERGER MAY LEAVE SIDEWARE INSOLVENT.

Under the merger agreement, Sideware has advanced, and will
continue to advance, a substantial portion of its available
cash by way of loan to KnowledgeMax prior to closing.  If the
merger is not completed, KnowledgeMax may be required to repay
those funds.  In addition, both companies will incur substantial
transaction costs, including legal, accounting, and other
professional fees, in anticipation of completing the merger.
If the merger is not completed:

-  KnowledgeMax may be heavily indebted to Sideware, without
   the means to pay that debt;
-  Sideware may be left without significant cash resources,
   and unable to recover any of the funds it has lent to
   KnowledgeMax; and
-  both companies may be left with substantial liabilities,
   and without the means to pay those liabilities.

FAILURE TO COMPLETE THE MERGER MAY LEAVE SIDEWARE UNABLE TO
MERGE WITH OTHER COMPANIES.

If the merger is not completed, Sideware may both be left with
significant debts, and without significant cash resources.  In
addition, failure of the merger may result in legal disputes, which
could include large claims for liquidated damages under the merger
agreement.  These factors may make Sideware an unattractive merger
partner for other companies, or may prevent Sideware from raising
new capital or entering into other acquisition transactions.

POST-MERGER SELLING BY KNOWLEDGEMAX STOCKHOLDERS MAY AFFECT THE
SIDEWARE STOCK PRICE.

The merger will result in approximately 93 million Sideware
shares being issued to KnowledgeMax stockholders.  KnowledgeMax
is a private company, and KnowledgeMax stockholders have not
previously had the ability to sell their shares in a public
market.  Following the merger, KnowledgeMax stockholders may wish
to liquidate some or all of their investments.  The market price
for Sideware stock may fall if the KnowledgeMax stockholders
sell, or are perceived as intending to sell, a substantial
portion of the Sideware shares issued to them in the merger.

MARKET SELLING BY SIDEWARE STOCKHOLDERS WHO DISAPPROVE OF THE
MERGER MAY AFFECT THE SIDEWARE STOCK PRICE.

Some existing Sideware stockholders may disapprove of the merger,
and may seek to sell their Sideware shares as a result.  If a
substantial number of Sideware stockholders disapprove of the
merger, or are perceived as doing so, downward pressure on the
Sideware stock price may result.


<PAGE>
                           32

SIDEWARE MAY BE UNABLE TO SELL THE CHALK GROUP, WHICH MAY CAUSE
THE MERGER TO FAIL.

One of the conditions to the merger is that Sideware must raise
at least $2,000,000 by selling some or all of its interest in
the Chalk Group.  The Chalk Group has never generated profits,
and has only speculative value.  Sideware has no assurance that
it will be able to sell all or a sufficient portion of its holdings
in the Chalk Group for the requisite price, or at all.

FOLLOWING THE MERGER, SIDEWARE MAY BE UNABLE TO RAISE ADDITIONAL
CASH.

Following the merger, the business of KnowledgeMax will become
the core business of Sideware.  KnowledgeMax's business has never
generated operating profits or positive cash flow.  Accordingly,
Sideware will likely require additional capital to continue the
development of the KnowledgeMax services and products, to pay the
costs of marketing those services and products, and to cover operating
losses until Sideware is able to become profitable.  To raise
additional capital, Sideware may have to issue additional shares, which
may dilute the interests of existing stockholders substantially.
There is no assurance that Sideware will be able to raise
additional capital on terms favourable to Sideware, or at all.

Sideware and KnowledgeMax estimate that their current cash
resources will be sufficient to pay anticipated operating
expenses until approximately the end of the first quarter of
2002, without giving effect to the proceeds of the sale of Sideware's
interest in the Chalk Group.  If the companies are not able either to
raise additional capital or commence generating substantial sales
revenue prior to then, they face a risk of insolvency.

THE MERGER MAY RESULT IN SIDEWARE SHARES BEING DE-LISTED FROM THE
TORONTO STOCK EXCHANGE

Under regulations of the Toronto Stock Exchange, in order to
maintain its listing following the merger, Sideware will have to
meet certain financial requirements.  Sideware believes that it
is unlikely to meet those requirements.  Accordingly, the merger
may result in Sideware shares being de-listed from the Toronto
Stock Exchange.  If Sideware shares are de-listed from the Toronto
Stock Exchange, the only public market for stock will be the OTC
Bulletin Board.

   RISKS RELATING TO KNOWLEDGEMAX

KNOWLEDGEMAX HAS A HISTORY OF LOSSES AND HAS NOT GENERATED ANY
SIGNIFICANT REVENUES TO DATE.

KnowledgeMax has a limited operating history and since its
inception has not generated any significant revenues, which makes
it difficult to predict future results on the basis of past
performance.  KnowledgeMax has an accumulated deficit of
approximately $6.1 million for the period from inception in June
1996 to September 30, 2001, and is likely to continue to incur
operating losses for the foreseeable future.  There can be no
assurance that KnowledgeMax will attain profitability or that its
revenues will grow.  As a result, investors in KnowledgeMax, or in
Sideware after the merger, could lose the entire amount of their
investment.

The auditors' report covering KnowledgeMax's December 31, 2000
financial statements contains an explanatory paragraph that
states that KnowledgeMax has incurred losses and negative cash
flows from operations and working capital and stockholders'
deficits and has been unable to repay certain obligations when
due that raise substantial doubt about its ability to continue as
a going concern.  The financial statements do not include any
adjustments that might result from the outcome of that
uncertainty.


<PAGE>
                           33

KNOWLEDGEMAX'S OPERATING RESULTS MAY BE UNPREDICTABLE AND
VOLATILE.

As an early stage business, KnowledgeMax's results of operations
are likely to fluctuate significantly from quarter-to-quarter and
year-to-year.  Operating results can fluctuate as a result of a
number of factors, including, but not limited to, the following:

-  timing of development and commercialization of the
   KnowledgeMax platform;
-  commencement, delay, cancellation or completion of
   contracts with clients;
-  risks associated with contract terms;
-  mix of products and services provided;
-  timing and amount of start-up expenses for new services;
   and
-  timing and integration of new content.

KnowledgeMax's current and planned expense levels are based in
part on its estimate of future revenue.  Consequently, revenue or
profits, if any, may vary significantly from period to period,
and revenue or profits, if any, in any period will not
necessarily be predictive of results in subsequent periods.

KNOWLEDGEMAX'S REVENUES ARE CURRENTLY CONCENTRATED AMONG A SMALL
NUMBER OF CLIENTS.

Historically, KnowledgeMax's revenues have been concentrated
among a small number of clients.  In particular, IBM has
accounted for the majority of the company's revenues.  The loss
of a significant client, such as IBM, could have a material
adverse effect on KnowledgeMax, or Sideware after the merger.
KnowledgeMax will need to expend significant resources to expand
its client base.  There is no assurance that KnowledgeMax, or
Sideware after the merger, will have the financial and other
resources required to expand the client base of KnowledgeMax, or
that any efforts to expand that client base will succeed.

KNOWLEDGEMAX'S PERFORMANCE IS DEPENDENT ON KEY PERSONNEL.

KnowledgeMax depends on the principal members of its senior
management including, in particular, E. Linwood Pearce,
KnowledgeMax's Chairman and co-Chief Executive Officer, who will
become the Chairman and CEO of Sideware following the merger,
Edwin S. Grosvenor, KnowledgeMax's Founder and co-Chief Executive
Officer, who will become Executive Vice President following the
merger, Donna L. Lynn, KnowledgeMax's President and Chief
Operating Officer, who will become Chief Operating Officer
following the merger, Alan Sultan, Sr. Vice President Business
Development, who will become a Senior Vice President after the
merger, and Richard Luebkemann, VP, Technology, who will serve in
the same capacity after the merger.

No assurance can be given that KnowledgeMax will be able to
retain these personnel.  In addition, KnowledgeMax will need to
attract and retain more individuals to further develop its
eCommerce business.  The failure to retain or attract necessary
technical, managerial, sales, and marketing professionals, or the
loss of one or more members of KnowledgeMax's senior management
could have a material adverse effect on the business of
KnowledgeMax, or the business of Sideware after the merger.

KNOWLEDGEMAX IS DEPENDENT ON ITS RELATIONSHIP WITH BAKER & TAYLOR
AND LEADSOFT.

KnowledgeMax has arrangements with Baker & Taylor for the use of
its book and video databases and for order fulfillment.
KnowledgeMax cannot ensure that Baker & Taylor will continue to
offer these services past the current stated contract maturities.
Likewise, KnowledgeMax's chief provider of technology for its
search engine and eCommerce capabilities, leadSOFT, may choose to
end its support of KnowledgeMax's platform.  While KnowledgeMax
is confident that it could, if necessary, obtain similar quality
services to replace leadSOFT and Baker & Taylor, the disruption
caused by the termination of those relationships could have a
material adverse effect on the business of KnowledgeMax, or the
business of Sideware after the merger.

KnowledgeMax has entered into a number of other non-exclusive
relationships with publishers, educational firms, content


<PAGE>
                           34

providers, and service fulfillment providers.  KnowledgeMax also
plans to pursue other similar opportunities.  KnowledgeMax is
dependent on the ability of its suppliers to provide education
content, course materials, products, and services to
KnowledgeMax's clients and their employees.  The failure of
current or future suppliers to fulfill their obligations to
KnowledgeMax would likely have a material adverse effect on the
business of KnowledgeMax, or the business of Sideware after the
merger.

KNOWLEDGEMAX IS DEPENDENT UPON THIRD PARTIES FOR CONTENT.

KnowledgeMax licenses content for its web-based services from
third parties, and intends to continue doing so.  Some of this
content must be integrated with content that is developed
internally or licensed from other third parties.  There can be no
assurance that these third party content licenses will continue
to be available on commercially reasonable terms, or that
KnowledgeMax will be able to integrate third party content
successfully.  The inability to license or integrate required
third party content could result in delays in site enhancement or
end-user services until equivalent content can either be
developed or procured from other suppliers.

SYSTEM DEVELOPMENT AND FAILURE PRESENT ADDITIONAL RISKS.

KnowledgeMax's future revenues will depend in large part on the
number of consumers who use its web sites and web-based products,
and those of its partners.  The reliability, availability, and
satisfactory performance of those web sites, and their related
transaction-processing systems and infrastructure, will be
critical to the business of KnowledgeMax.  Disruptions or poor
technical performance of any of these websites or systems would
reduce sales and the attractiveness of KnowledgeMax's service and
product offerings.  The sales, operating costs, and customer
relationships of KnowledgeMax could also be adversely affected if
KnowledgeMax's systems are not successfully integrated with those
of its partners.

KNOWLEDGEMAX OPERATES IN A HIGHLY COMPETITIVE INDUSTRY.

The market for KnowledgeMax's products and services is highly
competitive.  Among others, KnowledgeMax competes with
traditional and online book selling and education and training
companies.  Competition is based on a number of factors,
including, but not limited to, the following:

-  product performance, features, and reliability;
-  price;
-  relative expertise and sophistication;
-  technical support and service;
-  breadth of product line; and
-  sales and distribution capability.

Many of KnowledgeMax's competitors have greater financial
resources and more experience than KnowledgeMax.  Smaller
companies may also prove to be significant competitors,
particularly through arrangements with large corporate
collaborators.

KnowledgeMax anticipates that it will face increased competition
in the future as new companies enter the market and advanced
technologies become available.  KnowledgeMax's competitors may
develop more effective or more affordable technologies or
services than KnowledgeMax can provide, thus rendering
KnowledgeMax's technologies and/or services obsolete or
uneconomical.

EXPECTED RAPID TECHNOLOGICAL CHANGE IN KNOWLEDGEMAX'S INDUSTRY
MAY LEAD TO OBSOLESCENCE OF ITS PRODUCT AND SERVICE OFFERINGS.

Rapid and substantial technological changes are expected to
continue in the online learning and education fields.
Consequently, there can be no assurance that the products and
services of KnowledgeMax will not become obsolete or
noncompetitive, or that KnowledgeMax will be able to
keep pace with technological developments.  KnowledgeMax's ability


<PAGE>
                           35

to anticipate changes in technology and industry standards, and to
develop and successfully introduce new products that can gain
market acceptance on a timely basis, will be critical to
KnowledgeMax.  The business of KnowledgeMax is unlikely to
succeed if it is unable, for technological or other reasons, to
develop products that are innovative, technologically
competitive, responsive to customer needs, and competitively
priced.

KNOWLEDGEMAX'S BUSINESS MAY NEED ADDITIONAL FINANCING FOLLOWING
THE MERGER.

KnowledgeMax believes that its revenues, in addition to the
financial resources of Sideware that it will gain access to
following the merger including the proceeds of Sideware's sale
of some or all of its interest in the Chalk Group, will be
sufficient to fund planned operations and capital expenditures
for approximately five months.  However, revenue shortfalls
may require financing for working capital sooner.

In addition, KnowledgeMax expects that its business will likely
require additional financing in the future to continue
development of its products and services, and to cover operating
losses until the business can become profitable.  There can be no
assurance that the business of KnowledgeMax will be sufficiently
attractive to investors to raise the necessary funding on terms
that are acceptable to KnowledgeMax, or to Sideware after the
merger, or at all.  Any future equity or convertible debt
financing could result in dilution to KnowledgeMax's current
stockholders, or to the then current stockholders of Sideware
after the merger.  If adequate funds are not available, important
development and marketing efforts may have to be abandoned or
reduced, or existing technology rights may have to be sold or
relinquished.

KNOWLEDGEMAX'S SUCCESS IS DEPENDENT ON ITS ABILITY TO MANAGE
GROWTH.

KnowledgeMax's business model calls for a period of sustained
growth. This growth will place a significant strain on the
management and operations infrastructure of KnowledgeMax, or of
Sideware after the merger.  Management of growth will depend on
the ability of KnowledgeMax or Sideware to, among others:

-  attract and deliver on new customer relationships;
-  attract, hire, and retain skilled managers and other
   employees;
-  implement and improve operational, information, and
   financial control systems;
-  increase technical development and delivery capabilities;
-  expand customer service and technical service resources;
   and
-  attract and retain strategic partners.

Inability to anticipate, implement, and manage the changes
required to sustain growth could have a material adverse effect
on the business of KnowledgeMax, or of Sideware after the merger.

IF KNOWLEDGEMAX IS UNABLE TO FURTHER DEVELOP ITS SALES AND
MARKETING TEAM, IT MAY NOT BE ABLE TO ACHIEVE ITS GROWTH PLANS.

To date, KnowledgeMax has marketed its services and products
primarily through the efforts of its senior management staff and,
more recently, its newly hired Vice President of Sales and Vice
President of Client Services.  To succeed, KnowledgeMax will need
to hire additional sales and marketing personnel and to expand its
sales and marketing activities.  It may be difficult to attract and
maintain a sales force with sufficient technical expertise to
market KnowledgeMax's products and services effectively.

KNOWLEDGEMAX IS SUBSTANTIALLY DEPENDENT UPON ITS ABILITY TO
REALIZE REVENUES FROM ITS WEB-BASED SERVICES AND PRODUCTS.

KnowledgeMax expects that a substantial portion of its revenues
will come from electronic commerce and intranet-based transactions
from its client companies' employees.  There can be no assurance that
service revenues, commissions, and royalties from the sale of
KnowledgeMax products will not decline in the future, particularly as


<PAGE>
                           36

competition in the eLearning and online education industry intensifies.
A significant decline in service revenues and sales commissions, without
a corresponding increase in transaction volume, would adversely impact
revenue from KnowledgeMax's business.

KNOWLEDGEMAX MAY NOT BE ABLE TO PROTECT ITS INTELLECTUAL PROPERTY
ADEQUATELY.

KnowledgeMax relies on confidentiality procedures, contractual
provisions, and intellectual property and trade laws to protect
its proprietary rights in its products, services, and technology.
KnowledgeMax generally enters into intellectual property
assignment and confidentiality agreements with its employees,
consultants, customers, and potential customers, and limits
access to, and distribution of, its proprietary information.
KnowledgeMax has investigated the possibility of filing patents
to protect certain of its technology, but to date has not made
any such filings.

KnowledgeMax believes that the foregoing measures afford only
limited protection.  There can be no assurance that KnowledgeMax
will be successful in preventing misappropriation of its
technology or unauthorized copying or use of its services and
products.  In addition, KnowledgeMax has no assurance that others
will not independently develop products or services which
duplicate the features of KnowledgeMax products and services.

KNOWLEDGEMAX COULD BE MATERIALLY HARMED BY POTENTIAL REGULATION
OF THE INTERNET.

KnowledgeMax and its partners are subject to rules, regulations,
and laws applicable to businesses generally and to rules,
regulations, and laws directly applicable to access to web-based
commerce and privacy.  Although there are currently relatively
few laws and regulations directly applicable to the Internet and
online service providers, a number of laws and regulations are
under consideration by various legal bodies.  Laws and
regulations may be adopted with respect to the Internet covering
issues such as user privacy, pricing, content, copyrights,
distribution, antitrust, and characteristics and quality of
products and services.  Furthermore, the growth and development
of the market for eCommerce and web-based services may prompt
calls for more stringent consumer protection laws, which may
impose additional burdens on companies conducting business
online.  The adoption of any additional laws or regulations may
decrease the growth of the Internet or commercial online
services, which could, in turn, decrease the demand for
KnowledgeMax's products and services and increase KnowledgeMax's
cost of doing business.

KNOWLEDGEMAX IS DEPENDENT ON INTERNET TRANSMISSION AND SECURITY
BREACHES COULD HAVE AN ADVERSE EFFECT ON ITS REVENUES.

A lack of security over the Internet may cause Internet use to
decline, and cause KnowledgeMax to expend capital and resources
to protect against security breaches.  A significant barrier to
electronic commerce over the Internet has been the need for
secure transmission of confidential information.  Internet use
could decline if any well-publicized compromise of security
occurs.

Additionally, computer "viruses" may cause interruptions or other
delays for KnowledgeMax's systems, which may materially impact
KnowledgeMax's ability to operate its business.  If a computer
virus affecting the Internet in general is highly publicized or
particularly damaging, KnowledgeMax's customers may be unable or
unwilling to use the Internet, which would have an adverse effect
on KnowledgeMax's revenues.  KnowledgeMax, or Sideware after the
merger, may be required to expend capital and resources to
protect against or to alleviate these problems.

KNOWLEDGEMAX COULD BE LIABLE FOR FRAUDULENT ACTIVITIES AND
BREACHES OF SECURITY ON ITS WEB SITE.

A fundamental requirement for e-commerce is the secure
transmission of confidential information over public networks.
KnowledgeMax depends upon the e-commerce systems of its payment
processor and other software and hardware technologies it
licenses to prevent fraud and other security breaches, but there
is no assurance that those systems and processes are infallible.
Failure to detect or prevent fraud could harm the business of
KnowledgeMax substantially.  The law relating to the liability of
providers of online payment services is currently unsettled.


<PAGE>
                           37

SYSTEM INTERRUPTION AND THE LACK OF INTEGRATION AND REDUNDANCY IN
KNOWLEDGEMAX'S SYSTEMS MAY AFFECT ITS SALES.

Client access to KnowledgeMax's web sites directly affects
revenue.  KnowledgeMax experiences occasional system
interruptions that make its web site unavailable or prevent
efficient servicing of orders.  These interruptions reduce sales
and the attractiveness of KnowledgeMax's  products and services.

To minimize the likelihood of system interruptions, KnowledgeMax
will need to purchase additional software and hardware, and to
upgrade systems and network infrastructure.  Additional
improvements will be required to accommodate increased traffic
on the KnowledgeMax web site and increased sales volume.
KnowledgeMax does not at present have adequate backup systems
or a formal disaster recovery plan, and may have inadequate
insurance coverage or insurance limits to compensate it for
losses from a major interruption.

Computer viruses, physical or electronic break-ins, fire, flood,
power loss, telecommunications, acts of terrorism, and similar
disruptions could also cause system interruptions or damage,
preventing KnowledgeMax from providing services and filling
customer orders, or destroying critical data.  If any of these
were to occur the reputation and good will of KnowledgeMax could
be damaged.  Additionally, KnowledgeMax relies on an outside
vendor to host its web site and servers and to provide site
security.  A breach of security or other disruption at this
center could have a material adverse effect on KnowledgeMax's
operations.  KnowledgeMax, and Sideware after the merger, will
need additional personnel and software resources to monitor the
site, and to install intrusion detection systems and other
devices and systems that help keep the site secure.

     EFFECTS OF FOREIGN CURRENCY EXCHANGE RATES AND INFLATION

Results for all fiscal years have been reported in United States
dollars.  However, some of Sideware's operations have been
conducted in Canada, and some of its transactions have been
carried out in Canadian dollars.

For the year ended December 31, 2001, Sideware used the United
States dollar for both its functional and reporting currency.
For the year ended December 31, 2001, Sideware reported a gain
from foreign currency translation adjustments of $25,850, as well
as a foreign exchange loss of $29,425, which was included in
general and administrative expenses.  Foreign currency
translation adjustments result from the translation of financial
transactions recorded in Canadian dollars into the functional and
reporting currency of United States dollars for financial
reporting purposes.  The foreign exchange loss resulted from
currency translations relating to day to day transactions.

Throughout most of 2000, Sideware was headquartered in Canada.
Accordingly, for the year ended December 31, 2000, Sideware used
the Canadian dollar as its functional currency.  To prepare year
end financial statements, Sideware converted Canadian dollar
amounts into United States dollars using an exchange rate of
US$1.00 = C$1.4900.  For the year ended December 31, 2000,
Sideware reported a loss from foreign currency translation
adjustments of $788,712 and a foreign exchange gain of $652,897.

For the year ended December 31, 1999, Sideware previously
reported its financial results in Canadian dollars.  For purposes
of this annual report, Sideware converted the results from 1999
into United States dollars using and exchange rate of US$1.00 =
C$1.4858.  For the year ended December 31, 1999, Sideware
incurred a foreign exchange loss of $184,179.

As the Chalk Group operates in Canada, Sideware currently incurs
a substantial portion of its expenses in Canadian dollars.  If
the Chalk Group continues to represent Sideware's principal
business activity, fluctuations in exchange rates between the
United States dollar and the Canadian dollar could materially
affect its results of operations in the future.  If the proposed
merger with KnowledgeMax proceeds, Sideware expects that the
large majority of its transactions thereafter will be in United
States dollars.  As at the date of this annual report, Sideware
has not engaged in exchange rate hedging activities.  To the
extent that Sideware implements such hedging activities in the
future, there can be no assurance that they will be successful.


<PAGE>
                           38

Sideware believes that inflation has not had a material adverse
affect on its results of operations, there can be no assurance
that inflation will not have a material adverse effect on results
of operations in the future.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

As at December 31, 2001 Sideware has not entered into or
acquired financial instruments that have a material market risk.
Sideware has no financial instruments for trading or other
purposes and no derivative or other financial instruments with
off balance sheet risk.  All financial assets and liabilities are
due within the next twelve months and are classified as current
assets or liabilities in the consolidated balance sheet provided
with this prospectus.  The fair value of all financial
instruments at December 31, 2001 is not materially different
from their carrying value.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Appended hereto are the following financial statements:

(1)  Consolidated balance sheets as of December 31, 2001 and December
     31, 2000;
(2)  Consolidated statements of operations and comprehensive loss for
     the fiscal years ended December 31, 2001, 2000, and 1999;
(3)  Consolidated statement of stockholders equity for the fiscal
     years ended December 31, 2001, 2000, and 1999;
(4)  Consolidated statements of cash flows for the fiscal years ended
     December 31, 2001, 2000, and 1999; and
(5)  the auditors' report of KPMG LLP thereon.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Not applicable.


PART III

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

The following table states information with respect to our directors
and executive officers as of December 31, 2001:

Name                        Age                Position

James L. Speros             42           President, Chief Executive
                                           Officer, and Director
Kenneth R. Thornton         59           Chairman of the Board of
                                           Directors
W. Grant Sutherland         55           Directors (resigned effective
                                           March 20, 2002)
Jay H. Nussbaum             57           Director (resigned effective
                                           April 1, 2002)
Jack Kemp                   66           Director
John Shoemaker              59           Director
Peter Kozicki               67           Director (resigned effective
                                           March 20, 2002)
Edward A. White             56           Director (resigned effective
                                           March 20, 2002)
Rahul Bardhan               36           Chief Technology Officer
Stewart Walchli             29           Chief Financial Officer
                                           of the Chalk Group


<PAGE>
                           39

JAMES L. SPEROS.  Director, President, and Chief Executive Officer.
Mr. Speros was appointed President and Chief Executive Officer of
Sideware effective October 15, 2000.  Prior to that, beginning August 5,
1998, Mr. Speros was the President and Chief Operating Officer of
Sideware Corp., Sideware's wholly owned US subsidiary.  From June
1993 to January 1997 Mr. Speros was the President and owner of
two professional sports franchises, the Baltimore Stallions and
Montreal Alouettes of the Canadian Football League.  From January
1997 to February 1999 Mr. Speros was the President of Exploration
Mirandor, a mining exploration company.   Mr. Speros is a
director of Consolidated Maymac Petroleum Corp., a public company
trading on the Canadian Venture Exchange, and of BrainTech, Inc.,
a public company trading through the OTC Bulletin Board.

KENNETH R. THORNTON.  Chairman of the Board of Directors.  Mr.
Thornton was appointed as a director of Sideware effective April 1,
2001, and as Chairman of the Board effective June 28, 2001.  Mr.
Thornton was previously employed by IBM, as General Manager of IBM's
Public Sector.  In this role, he led IBM's government, education,
healthcare and pharmaceuticals business operations worldwide.
Previously, he served as the vice president and general manager of
IBM's Mid-Atlantic Area, where he was responsible for leading IBM's
marketing and services operations in the Mid-Atlantic states. Prior
positions with IBM include Industry Director of the Public Sector,
Regional Manager of the Atlantic Region, Director of Federal Marketing
Operations and Sales Branch Manager.  Mr. Thornton has been a member of
the Internet2 Executive Council, a part of IBM's Worldwide Management
Council, and a member of IBM's Corporate Technology Council.

W. GRANT SUTHERLAND.  Director.  Mr. Sutherland had been a director
since May 1993.  From May 3, 1995 to June 28, 2001, Mr. Sutherland
held the position of Chairman of the Board.  Since September 2001 Mr.
Sutherland has also acted as interim President of the Chalk Group.  Since
December 1995 Mr. Sutherland has also been a director and the Chairman
of the Board of BrainTech, Inc.  Mr. Sutherland is a licensed lawyer
in the Province of British Columbia, and has been engaged in the
private practice of law for over 25 years.  Mr. Sutherland is a partner
in the law firm Sutherland Johnston.  Mr. Sutherland resigned his
position as director effective March 20, 2002.

JAY H. NUSSBAUM.  Director.  Mr. Nussbaum was appointed a
director of Sideware on June 14, 1999.  In December 2001, Mr.
Nussbaum was appointed Executive Vice President for Managed
Services and Enterprise Solutions for KPMG Consulting.
Previously, Mr. Nussbaum was the Executive Vice President of
Oracle Service Industries and a member of the Executive Committee
of Oracle.  Mr. Nussbaum joined Oracle after a 24-year career
with Xerox Corp. that culminated with his position as President,
Integrated Systems Operations.  Mr. Nussbaum received a
bachelor's degree in business from the University of Maryland.
He is a member of the University's Chancellor's Advisory Board
and also serves on the advisory board of James Madison
University.  Mr. Nussbaum is on the board of directors of the
Armed Forces Communications and Electronics Association and is
active in several other business and charitable organizations in
the Washington area.  Mr. Nussbaum resigned his position as
director effective April 1, 2002.

JACK KEMP.  Director. Director. Mr. Kemp was appointed a director of
Sideware on February 9, 2001.  Mr. Kemp is a co-founder of
Empower America, an organization devoted to ensuring that
government actions foster growth, economic well-being, freedom,
and individual responsibility.  In 1996, Mr. Kemp was the Vice-
Presidential candidate for the Republican Party.  Prior to founding
Empower America, Mr. Kemp served for four years as U.S. Secretary of
Housing and Urban Development, and for 18 years in the U.S. House of
Representatives.  Mr. Kemp also serves as a director of Oracle Corp.,
Hawk Corporation, Proxicom, Inc., and Speedway Motorsports Inc.

John Shoemaker.  Director.  Mr. Shoemaker was appointed a
director of Sideware on February 9, 2001.  For the past 10 years,
Mr. Shoemaker has held a variety of senior executive positions
with Sun Microsystems.  His present position is Executive Vice
President & General Manager, Computer Systems.  Prior to joining
Sun Microsystems, Mr. Shoemaker was the senior vice president of
electronic printing and the vice president and general manager of
the document systems business at Xerox Corporation.

PETER KOZICKI.  Director.  Mr. Kozicki was elected a director on May
3, 1995.  Mr. Kozicki is a retired engineer.  Prior to his retirement,
Mr. Kozicki was a private engineering consultant for over 12 years,
specializing in the installation of deep foundations and vertical
barriers for containment of hazardous wastes.  He obtained his B.Sc.


<PAGE>
                           40

degree in Civil Engineering from the University of Saskatchewan and a
M.Sc. degree in Soil Mechanics from the University of Alberta. Mr.
Kozicki resigned his position as director effective March 20, 2002.

EDWARD A. WHITE.  Director.  Mr. White was appointed a director on
October 14, 1995.  Mr. White is a member of the British Columbia
Institute of Chartered Accountants, and practiced as a self-employed
chartered accountant for over 20 years.  Mr. White has been a director
and officer of Oro Bravo Resource Partners Ltd. since February 1987,
and a director of West African Venture Exchange Corp. since March 1993.
In November 2000, Mr. White also became a director and Chief Financial
Officer of BrainTech, Inc.  Mr. White currently works full time for
BrainTech, Inc.  Mr. White resigned his position as director effective
March 20, 2002.

RAHUL BARDHAN.  Chief Technology Officer.  Mr. Bardhan joined Sideware
in September 2000.  Mr. Bardhan was previously employed by Oracle Corp.,
in the capacity of Senior Practice Director.  While employed by Oracle
Corp., Mr. Bardhan was also involved in establishing Oracle's national
e-commerce accounting practice and in opening Oracle's office in
India.  Mr. Bardhan holds a Bachelor in Engineering in Computer
Science and Engineering from the University of Mysore, India, and a
Masters Degree in Business Administration from Virginia Tech.

STEWART F. WALCHLI.  Chief Financial Officer of the Chalk Group.  Mr.
Walchli joined Sideware as its Chief Financial Officer in March 2000.
In September 2001, Mr. Walchli also became Chief Financial Officer of
the Chalk Group.  In February 2002, resigned as Chief Financial Officer
of Sideware, but continues as Chief Financial Officer of the Chalk Group.
Mr. Walchli worked previously for three years as an investment banker
with CIBC World Markets, focusing on technology companies, particularly
in the Internet and e-commerce spaces.  Prior to CIBC World Markets,
Mr. Walchli worked in the Corporate Finance and Financial Assurance
Groups with KPMG.  Mr. Walchli is a member of the Institute of Chartered
Accountants of British Columbia.


ITEM 11.  EXECUTIVE COMPENSATION

Apart from stock options, Sideware does not presently compensate our
directors for services provided as directors.  Sideware provides
compensation to its directors who are also officers or employees,
for services rendered as officers or employees.  Sideware provides
the following compensation to its current directors and executive
officers.

JAMES L. SPEROS.  During 1999 Mr. Speros was paid a salary of
$8,000 per month from January to April, $11,500 per month from
May to October, and $15,000 per months during November and
December.  During 2000, Mr. Speros was paid a salary of $250,000.
During 2001, Mr. Speros agreed to reduce his salary to $200,000
per year, in view of the reduced cash resources of Sideware.  By
written amendment to his employment agreement dated
November 27, 2001, Mr. Speros agreed to reduce his salary
further to $170,000 per year.  In December 2001, Mr. Speros
agreed to accept 98,737 shares of Sideware in lieu of one half
of his salary for the months of November and December 2001.
Mr. Speros' amendment agreement also provides that if another
Sideware employee earns a salary greater than that earned by
Mr. Speros, Mr. Speros shall automatically receive a raise
to match the other employee's salary up to a maximum of
$250,000 annually.

Mr. Speros also holds options to purchase 1,175,000 shares of
Sideware common stock, all of which have vested.

In April 2001, Mr. Speros entered into a Change of Control
Severance Agreement which entitled him to up to two years salary
and bonus if his employment was terminated within specified
periods either before or after a change in control of Sideware.
Under the November 27, 2001 amendment agreement, the maximum cash
payout to Mr. Speros in the event of termination of his employment
was reduced to $170,000.

Kenneth R. Thornton.  Commencing in July 2001, Mr. Thornton
receives a salary of $6,500 per month as Chairman of Sideware.
In December 2001, Mr. Thornton agreed to accept 45,303 shares of
Sideware common stock in lieu of one half of his salary for the
months of November and December 2001.  Mr. Thornton holds options
to purchase 950,000 shares, all of which have vested.


<PAGE>
                           41

GRANT SUTHERLAND.  Mr. Sutherland ceased receiving salary compensation
from Sideware in June 2001, when he resigned as Chairman.  From January
2001 to June 2001, Mr. Sutherland received salary payments totalling
approximately $44,000.

RAHUL BARDHAN.  Mr. Bardhan's salary during 2000 and at the
commencement of 2001 was $250,000 per year.  In March 2001, Mr.
Bardhan was also paid a bonus of $60,000 in respect of the fiscal
year ended December 31, 2000.  During 2001, in view of the
reduced cash resources of Sideware, Mr. Bardhan accepted a series
of salary reductions which reduced his monthly salary to the
equivalent of $170,000 per year.  By written amendment dated
November 27, 2001, Mr. Bardhan agreed to reduce his salary to
$170,000 per year.  In December 2001, Mr. Bardhan also agreed to
accept 48,788 shares of Sideware in lieu of one half of his
salary for the month of November 2001.

In August 2000, Mr. Bardhan entered into a Change of Control
Severance Agreement which entitled him to up to two years salary
and bonus if his employment was terminated within specified
periods either before or after a change in control of Sideware.
Under the November 27, 2001 amendment agreement, the maximum cash
payout to Mr. Bardhan in the event of termination of his
employment was reduced to $170,000.  The November 27, 2001
agreement is subject to Sideware either completing the merger
with KnowledgeMax or raising $5 million in financing by June 30,
2002.

Mr. Bardhan also holds options to purchase 1,800,000 shares, of
which 1,400,000 have vested.


STEWART WALCHLI.  The Chalk Group currently pays Mr. Walchli a salary
of approximately $95,000 per year.  For 2001, Mr. Walchli received
salary payments totaling approximately $136,000 from Sideware and
the Chalk Group, plus payments totaling $30,000 relating to Mr.
Walchli's relocation to the United States, and then back to
Canada.  Prior to December 31, 2000, Mr. Walchli's salary was
$100,000 per year.  In April 2001, Sideware also made an
additional payment to Mr. Walchli of $50,000, which had been
accrued as at December 31, 2000, as an adjustment to Mr.
Walchli's  compensation in recognition of additional duties and
responsibilities undertaken by Mr. Walchli in assuming the role
of Chief Financial Officer, after accepting employment as
Vice-President Finance.  On termination of his position as Chief
Financial Officer of Sideware in February 2002, Mr. Walchli also
received a termination payment of $35,000.  Mr. Walchli holds
options to purchase 1,300,000 shares, all of which have vested.

The following table summarizes compensation paid to our directors and
named executive officers for the fiscal years ended December 31, 2001,
2000, and 1999.

                    SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                           Annual Compensation              Long Term Compensation
Name and                                                           Awards                 All other
Principal        Period                                    Restricted   Securities        Compensation
Position          Ended    Salary     Bonus     Other         Stock     Underlying
                mm/dd/yy                                      Awards    Optons/SARs

<S>             <C>        <C>         <C>       <C>           <C>        <C>               <C>

James Speros    12/31/01   $208,696(1) $      0  $      0       0            800,000         $      0
President, CEO  12/31/00   $225,000    $      0  $      0       0                  0         $ 54,000 (2)
(since Oct.     12/31/99   $136,250    $ 50,000  $      0       0            125,000         $      0
15, 2000)

Kenneth         12/31/01   $ 37,500(1) $      0  $      0       0            950,000         $      0
Thornton,
Chairman
(since Jun.
20, 2001)

Grant           12/31/01   $ 44,000(3) $      0  $      0       0            150,000         $      0
Sutherland,     12/31/00   $167,000    $      0  $      0       0                  0         $      0
Director        12/31/99   $ 63,400    $ 85,140  $      0       0            375,000         $      0


<PAGE>
                           42

Rahul Bardhan,  12/31/01   $173,441(1) $         $      0       0            800,000         $      0
Chief           12/31/00   $ 63,550    $ 60,000  $      0       0          1,000,000         $      0
Technology
Officer

Stewart Walchli 12/31/01   $136,725(3) $      0  $              0          1,000,000         $30,000(4)
Chief           12/31/00   $ 83,917    $      0  $ 50,000       0            300,000         $      0
Financial
Officer

Scott           12/31/01   $ 80,187    $      0  $      0       0            500,000         $150,000(5)
Friedlander,    12/31/00   $172,600    $ 16,800  $200,000       0          2,000,000         $      0
Exec. VP

</TABLE>

(1)  Includes the following common shares issued in lieu of unpaid salary:
     Kenneth Thornton:  45,303 shares in lieu of $6,500 in unpaid salary
     James Speros:      98,737 shares in lieu of $14,166.68 in unpaid salary
     Rahul Bardhan:     48,788 shares in lieu of $7,000 in unpaid salary

(2)  This amount represents a club membership purchased for Mr. Speros.

(3)  Includes amounts converted from Canadian funds at C$1.00 = US$0.63.

(4)  Relocation allowance.

(5)  Severance payments.

Sideware does not have a long term incentive plan.

The following table summarizes options granted to our directors and
executive officers during the year ended December 31, 2001.

                OPTION / SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

Name                    Number of          Percent of          Exercise or   Expiration     Potential Realizable
                        securities         total options /     base price    date           Value at Assumed
                        underlying         SARs granted to                   (mm/dd/yy)     Rates of Stock Price
                        Options /          employees in                                     Appreciation (1)
                        SARs granted       fiscal year
                                                                                              5%        10%

<S>                     <C>                <C>                  <C>           <C>           <C>       <C>

James Speros             500,000           4.5%                 $1.00         01/18/06      $138,000  $300,500
                         300,000           2.7%                 $0.24         12/05/06      $ 19,870  $43,920

Kenneth Thornton         150,000           1.4%                 $1.00         03/07/06      $ 1,200   $40,785
                         500,000           4.5%                 $0.35         06/27/06      $48,300   $106,750
                         300,000           2.7%                 $0.24         12/05/06      $ 19,870  $43,920

Grant Sutherland         150,000           1.4%                 $1.00         01/18/06      $41,400   $90,150

Jay Nussbaum              50,000           0.4%                 $1.00         01/18/06      $23,000   $50,083
                         150,000           1.4%                 $1.00         02/09/06      $14,475   $61,312

Jack Kemp                150,000           1.4%                 $1.00         01/18/06      $41,400   $90,150

John Shoemaker           150,000           1.4%                 $1.00         01/18/06      $41,400   $90,150

Peter Kozicki             20,000           0.2%                 $1.00         01/18/06      $9,200    $20,000

Edward White              20,000           0.2%                 $1.00         01/18/06      $9,200    $20,000

Scott Friedlander        500,000           4.5%                 $1.00         01/18/06      $138,000  $300,500


<PAGE>
                           43

Rahul Bardhan            500,000           4.5%                 $1.00         01/18/06      $138,000  $300,500
                         300,000           2.7%                 $0.24         12/05/06      $ 19,870  $43,920

Stewart Walchli          500,000           4.5%                 $1.00         01/18/06      $138,000  $300,500
                         500,000           4.5%                 $0.24         12/05/06      $ 31,117  $73,200
</TABLE>


(1) Potential realizable values are computed by (a)
    multiplying the number of shares subject to the options by the
    fair market value of Sideware shares, (b) assuming that the
    aggregate stock value derived from that calculation compounds
    at the annual 5% or 10% rate shown in the table for the term
    of the option and (c) subtracting from that result the
    aggregate option exercise price. The 5% and 10% assumed annual
    rates of stock price appreciation are mandated by the rules of
    the SEC and do not represent Sideware's prediction of its
    stock price.

All option grants were authorized by the full board of directors, and
all options were granted at an exercise price equal to fair market
value in accordance with the rules of the Toronto Stock Exchange.

The following table summarizes options exercised by our directors and
executive officers during the year ended December 31, 2001.

Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End
Option / SAR Values

<TABLE>
<CAPTION>

                    Shares acquired   Value realized    Number of securities    Value of unexercised
Name                  on exercise                       underlying unexercised  in-the-money options /
                                                        options / SARS at end   SARs at end of fiscal
                                                        of fiscal year          year
                                                        ----------------------   ---------------------
                                                          Exercisable /
                                                          Unexercisable


<S>                 <C>                <C>              <C>                      <C>

James Speros        0                  $0               1,175,000 / 0            $0

Kenneth Thornton    0                  $0               950,000 / 0              $0

Grant Sutherland    0                  $0               520,000 / 0              $0

Jay Nussbaum        0                  $0               600,000 / 0              $0

Jack Kemp           0                  $0               150,000 / 0              $0

John Shoemaker      0                  $0               150,000 / 0              $0

Peter Kozicki       0                  $0               195,000 / 0              $0

Edward White        0                  $0               195,000 / 0              $0

Scott Friedlander   0                  $0               0 / 0                    $0

Rahul Bardhan       0                  $0               1,400,000 / 600,000      $0

Stewart Walchli     0                  $0               1,300,000 /0             $0

</TABLE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND
MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of Sideware outstanding common shares as of
March 8, 2002 by:

-  Sideware directors and executive officers; and
-  all of the Sideware directors and executive officers as
   a group.

To the best of the knowledge of Sideware management, no
person other than Grant Sutherland is the beneficial owner of
more than 5% of the Sideware issued and outstanding common
shares.  Unless otherwise indicated, the address of each person
listed below is c/o Sideware Systems Inc., 7900 Westpark Drive,
Suite T300, McLean, VA 22102.


<PAGE>
                           44


<TABLE>
<CAPTION>

Title of Class       Name of Beneficial Owner     Amount and Nature of    Percent of
                                                  Beneficial Ownership      Class(1)

<S>                  <C>                          <C>                     <C>

Common               James Speros,
                     President, CEO               3,051,137(2)            3.5%

Common               Kenneth R. Thornton,
                     Chairman                     2,450,000(3)            2.6%

Common               Grant Sutherland, Director   7,648,276(4)            8.8%

Common               Jay Nussbaum, Director         600,000(5)             *

Common               Jack Kemp, Director            150,000(6)             *

Common               John Shoemaker, Director       150,000(7)             *

Common               Edward White, Director         335,780(8)             *

Common               Peter Kozicki, Director        769,100(9)             *

Common               Rahul Bardhan, Chief
                     Technology Officer          1,448,788(10)            1.7%

Common               Stewart Walchli, CFO,
                     the Chalk Group             1,300,000(11)            1.5%

Common               All Directors and
                     Executive Officers         17,903,081(12)           19.2%

</TABLE>

* less than 1%

(1) Beneficial ownership is determined in accordance with the
    rules of the Securities and Exchange Commission and generally
    includes voting or investment power with respect to
    securities. Shares of Common Stock subject to options or
    warrants currently exercisable or convertible, or exercisable
    or convertible within 60 days, are deemed outstanding for
    computing the percentage of the person or group of persons
    holding such option or warrant but are not deemed outstanding
    for computing the percentage of any other person. Except as
    indicated in the footnotes to this table and pursuant to
    applicable community property laws, the persons named in the
    table have sole voting and investment power with respect to
    all shares of Common Stock beneficially owned.
(2) Includes shares issuable under the following securities:
    - 1,175,000 shares issuable under stock options exercisable
      within 60 days.
(3) Includes shares issuable under the following securities:
    - 950,000 shares issuable under stock options exercisable
      within 60 days.
(4) Includes shares issuable under the following securities:
    - 520,000 shares issuable under stock options exercisable
      within 60 days; and
    - 1,250,000 shares issuable under outstanding share purchase
      warrants exercisable within 60 days.
(5) Includes shares issuable under the following securities:
    - 600,000 shares issuable under stock options exercisable
      within 60 days.
    Mr. Nussbaum's address is c/o KPMG Consulting, 1676
    International Drive, McLean, VA 22102
(6) Includes shares issuable under the following securities:
    - 150,000 shares issuable under stock options exercisable
    within 60 days.
    Mr. Kemp's address is c/o Empower America, 1701 Pennsylvania
    Ave., Washington, DC 20006.
(7) Includes shares issuable under the following securities:
    - 150,000 shares issuable under stock options exercisable
      within 60 days.
    Mr. Shoemaker's address is c/o Sun Microsystems, 901 San
    Antonio Road, USCA04-208, Palo Alto, CA 94303-4900.
(8) Includes shares issuable under the following securities:
    - 195,000 shares issuable under stock options exercisable
      within 60 days.
(9) Includes shares issuable under the following securities:
    - 195,000 shares issuable under stock options exercisable
      within 60 days.
(10)Includes shares issuable under the following securities:
    - 1,400,000 shares issuable under stock options exercisable
      within 60 days.
(11)Includes shares issuable under the following securities:
    - 1,300,000 shares issuable under stock options exercisable
      within 60 days.


<PAGE>
                           45

(12)Includes shares issuable under the following securities:
    - 6,635,000 shares issuable under stock options exercisable
      within 60 days; and
    - 1,250,000 shares issuable under outstanding share purchase
      warrants exercisable within 60 days.

To the best of Sideware's knowledge, it is not controlled directly or
indirectly by any other corporation or by any foreign government.

Aside from the merger with KnowledgeMax, Sideware is unaware of any
arrangements, the operation of which may at a subsequent date result
in a change of corporate control.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Subsequent to January 1, 2001, Sideware has entered into the transactions
set out below in which its current directors or officers were interested.


   TRANSACTIONS WITH BRAINTECH, INC.

BrainTech is a public company engaged in the business of developing
and marketing vision systems and related hardware and software
products.  The directors of BrainTech are Owen Jones, Grant
Sutherland, James Speros, and Edward White.  BrainTech common shares
are quoted on the OTC-Bulletin Board.  As at the date of this annual
report, inclusive of options and warrants exercisable within 60 days,
Mr. Sutherland, Mr. Speros and Mr. White own the following shares in
BrainTech:

     Name              Number of Shares   % of Issued and Outstanding

    Grant Sutherland      3,992,499                      6.7%
    James Speros            300,000                      0.5%
    Edward White          1,125,001                      2.0%

Up to November 2000 Sideware operated under a cost sharing
arrangement with BrainTech, pursuant to which the two companies
shared the following costs:

-  costs of North Vancouver offices premises;
-  salary costs of certain personnel including, among other
   things, the salary costs of accounting personnel; and
-  miscellaneous office charges, such as office supplies and
   telephone and fax charges.

Sideware bore 80% of the common costs owing to the substantially
greater level of its business activity, and its corresponding
greater use of the common premises and personnel.  Both companies
signed the lease for the North Vancouver premises, and are jointly
and severally liable for 100% of the rent remaining under the lease.

In the summer of 2000, BrainTech began to move its
operations to separate premises.  On November 6, 2000 the two
companies entered into a letter agreement under which BrainTech
would continue to use a portion of the North Vancouver office, as
well as certain services provided by Sideware personnel, during a
transitional period not to exceed six months.

In the summer of 2001, Sideware terminated its operations in
North Vancouver.  BrainTech took occupancy of approximately two-
thirds of the North Vancouver premises, and the remaining third
was sublet to a third party.  Sideware remains a signatory to the
lease, and could be held liable for the rent payments if the
present occupants fail to pay the rent.  The term of the lease
expires August 31, 2003.  Inclusive of a proportionate share of
operating costs, the lease payments for the premises currently
occupied by BrainTech are approximately $120,000 per year.  The
lease payments for the premises occupied by the third party sub-
tenant are approximately $60,000 per year.

Sideware previously purchased computer equipment for BrainTech,
Inc. owing to favorable equipment pricing available to it under


<PAGE>
                           46

IBM marketing programs.  Hardware sales to BrainTech totaled
approximately $20,000 during the fiscal year ended December 31,
2000.  There were no sales to BrainTech during 2001.

BrainTech also enrolled in the Sideware Partner Program, through
which Sideware previously marketed its eCRM software products.


	PRIVATE PLACEMENTS

On February 22, 2001, Sideware sold 5,229,752 units to 44
purchasers.  Each unit consisted of one common share and one
share purchase warrant.  Each warrant entitles the holder to
acquire one additional common share at any time up to
February 22, 2004.  The initial exercise price for the warrants
was $1.00 per share, but that exercise price has subsequently
been reduced as a result of the effect of anti-dilution clauses
in the warrant agreements.  Sideware estimates that the current
exercise price for the warrants is $0.80.  The warrants are
non-transferable.  None of the warrants have been exercised.
Grant Sutherland, the Chairman of the Board of Sideware,
purchased 1,250,000 units at a price of $0.80 per unit.

On September 5, 2001, Sideware sold 2,941,176 common shares to
Mr. Sutherland at $0.34 per share.  The proceeds from this private
placement were used to fund Sideware's acquisition of a majority
interest in the Chalk Group.

In December 2001 Sideware completed a private placement of
13,500,000 common shares at a price of $0.10 per share.
 Purchasers in this private placement included the following
directors of Sideware:

   James Speros                            1,000,000 shares
   Kenneth Thornton                        1,000,000 shares
   Grant Sutherland                        1,000,000 shares

	ACQUISITION OF THE CHALK GROUP

In September 2001, Sideware invested $1,000,000, exclusive of
acquisition costs, in Chalk.com Network (Holding) Corp., parent
company of the Chalk Group, to acquire 13,000,000 common shares
from the company's treasury.  In addition, Sideware paid $1.00 to
acquire 5,000,000 common shares of Chalk.com Network (Holding)
Corp., from David Chalk, the founder of the Chalk Group.  The
18,000,000 shares acquired by Sideware represented 66.7% of the
issued and outstanding shares of Chalk.com Network (Holding)
Corp., or 60.3% on a fully diluted basis, after allowing for the
exercise of outstanding share purchase warrants and stock options
previously issued by Chalk.com Network (Holding) Corp.

The funds for Sideware's investment in the Chalk Group were
provided by Grant Sutherland, through the private placement of
2,941,176 shares on September 5, 2001, described above.  Mr.
Sutherland also owns 100,000 special warrants in Chalk Network
(Holding) Corp., parent company of the Chalk Group, which he
acquired as a personal investment in October 2000.  The special
warrants entitle Mr. Sutherland to acquire, without further
payment, approximately 132,000 shares in Chalk.com Network
(Holding) Corp.  At the date of this annual report 132,000 common
shares of Chalk.com Network (Holding) Corp. would represent less
than 1% of outstanding common shares of that company.  Mr.
Sutherland's son works as Executive Vice President of the Chalk
Group.

   OTHER TRANSACTIONS

Sideware and the Chalk Group have acquired legal services from
the law firm Sutherland Johnston, of which Grant Sutherland is a
partner.  Subsequent to January 1, 2001 Sideware and the Chalk
Group have paid a total of approximately $160,000 in legal fees
to Sutherland Johnston.

During 2001 Sutherland Johnston also continued to occupy a
portion of the leasehold premises of Sideware at 777 Dunsmuir
Street in Vancouver, British Columbia.  For the year ended
December 31, 2001, Sutherland Johnston reimbursed Sideware
approximately $50,000 in respect of Sideware's rent obligations
on the premises.  The amount paid by Sutherland Johnston was based


<PAGE>
                           47

on the relative portion of the area of the premises occupied by
Sutherland Johnston.

During 2001, the Chalk Group paid $94,066 to its former President
for rental of his residence as a film set.  Substantially all of
those payments took place prior to Sideware acquiring control of
the Chalk Group.  In addition, the Chalk Group made payments totaling
$59,961 to a former principal security holder for management and
accounting services.  All of those payments took place prior to
Sideware acquiring control of the Chalk Group.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.

During the quarter ended December 31, 2001 Sideware did not file
reports on Form 8-K.

Index to Exhibits


Number                      Exhibit

2.1(7)    Agreement and Plan of Merger and Reorganization
          (included as Appendix A to the joint proxy statement -
          prospectus
3.1(1)    Memorandum of Incorporation dated March 30, 1983
3.2(1)    Articles of Incorporation dated March 30, 1983
3.3(1)    Special Resolution dated January 12, 1984
3.4(1)    Special Resolution dated June 15, 1989
3.5(1)    Special Resolution dated September 27, 1990
3.6(1)    Special Resolution dated December 18, 1996
3.7(1)    Articles of Incorporation
3.8(1)    Special Resolution dated January 29, 1998
3.9(5)    Special Resolution dated June 28, 2000
3.10(7)   Articles of Continuation of Sideware to the Yukon
          Territory
3.11(7)   Bylaws of Sideware
10.1(1)   Assignment of Lease and Modification of Lease Agreement
          dated August 17, 1998 between HOOPP Realty Inc., Techwest
          Management Inc., Sideware Systems Inc., and BrainTech, Inc.
10.2(2)   Lease effective as of July 1, 1999 between the
          Company, Techwest Management Ltd., BrainTech, Inc. and
          Pacific Centre Leaseholds Ltd.
10.3(2)   Assignment Agreement effective as of July 1, 1999
          between the Company, Techwest Management Ltd.,
          BrainTech, Inc., and SJM Management Ltd.
10.4(6)   Change of Control Severance Agreement with Rahul
          Bardhan
10.5(7)   Change of Control Severance Agreement with James
          Speros
10.6(7)   Amendment agreement between James Speros and Sideware
10.7(7)   Amendment agreement between Rahul Bardhan and Sideware
10.8(6)   Assignment of Lease
10.9(3)   2000 Stock Option Plan
10.10(4)  Amended 2000 Stock Option Plan
10.11(6)  Stock Option Plan (2001)
10.12(7)  Sideware 2002 Equity Incentive Plan
10.13(7)  Form of stock option agreement under Sideware 2002
          Incentive Equity Plan
11.1      Computation of net loss per share
21.1      List of subsidiaries


<PAGE>
                           48


(1) Incorporated by reference to exhibit to Sideware's Registration
    Statement on Form 20-F filed in May 1999 (file no. 000-29974).
(2) Incorporated by reference to exhibit to Sideware's Registration
    Statement on Form F-1 filed on November 12, 1999
    (file no. 333 90893).
(3) Incorporated by reference to exhibit to Sideware's Registration
    Statement on Form F-3 filed on April 18, 2000 (file no. 333 34984).
(4) Incorporated by reference to exhibit to Amendment No. 1 to
    Sideware's Registration Statement on Form F-3/A filed on
    June 8, 2000 (file no. 333-34984).
(5) Incorporated by reference to exhibit to Sideware's Form 10-Q for
    the quarter ended September 30, 2000 filed on November 15, 2000
    (file no. 000-29974).
(6) Incorporated by reference to exhibit to Sideware's Form 10-K for
    the year ended December 31, 2000 filed on March 23
    (file no. 000-29974).
(7) Incorporated by reference to exhibit to Sideware's Registration
    Statement on Form S-4 filed on January 11, 2002
    (registration no. 333-76648).


<PAGE>
                           49



                            SIGNATURES

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


Dated: April 15, 2002                 Sideware Systems Inc.

                                      "James L. Speros"


                                      By:
                                      James L. Speros,
                                      President and Chief Executive Officer



                           POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James L. Speros as such
person's true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
annual report, and to file same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact ad
agent, or his subititutes, may lawfully do or cause to be done by
virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of
1934, this annual report has been signed below by the following
persons in the capacities and on the dates indicated.

     Signature                  Title                       Date

"James Speros"          Chief Executive Officer,        April 15, 2002
--------------------    President, and Director
James L. Speros         (Principal Executive Officer),
                        Chief Financial Officer
                        (Principal Financial and
                        Acccounting Officer)


"Kenneth Thornton"      Chairman of the Board of        April 15, 2002
--------------------    Directors, Director
Kenneth R. Thornton


"John Shoemaker"        Director                        April 15, 2002
--------------------
John Shoemaker


<PAGE>



                     Consolidated Financial Statements
                     (Expressed in United States dollars)

                     SIDEWARE  SYSTEMS  INC.
                     (Prepared in accordance with generally accepted
                     accounting principles in the United States)

                     Years ended December 31, 2001, 2000, and 1999

<PAGE>


AUDITORS' REPORT

To the Stockholders and Board of Directors
Sideware Systems Inc.

We have audited the consolidated balance sheets of Sideware
Systems Inc. as at December 31, 2001 and 2000 and the
consolidated statements of operations and comprehensive loss,
stockholders' equity and cash flows for the years ended December
31, 2001, 2000 and 1999.  These consolidated 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 auditing standards
generally accepted in the United States of America.  Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as at December 31, 2001 and 2000 and the results of its
operations and its cash flows for the years ended December 31,
2001, 2000 and 1999 in accordance with accounting principles
generally accepted in the United States of America.

As discussed in note 2(g) to the consolidated financial statements,
effective July 1, 2001, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations", and certain provisions of SFAS No. 142,
"Goodwill and Other Intangible Assets", as required for goodwill and
intangible assets resulting from business combinations consummated
after June 30, 2001.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed
in note 1 to the financial statements, the Company has suffered
recurring losses from operations and has had negative cash flows
from operating activities for each of the years presented which
raise substantial doubt about its ability to continue as a going
concern.  Management's plans in regard to these matters are also
described in note 1.  The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.


(signed)  "KPMG LLP"

Chartered Accountants

Vancouver, Canada

February 5, 2002, except for note 21
 which is as of March 20, 2002



<PAGE>


SIDEWARE SYSTEMS INC.
Consolidated Balance Sheets
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

December 31, 2001 and 2000

<TABLE>
<CAPTION>

============================================================================
                                                        2001            2000
----------------------------------------------------------------------------
<S>                                              <C>            <C>
Assets

Current assets:
  Cash and cash equivalents                      $   981,473    $    949,999
  Short-term investments (note 4)	              17,265	   5,982,588
  Accounts receivable:
    Trade, less allowance for
      doubtful accounts of $12,368
      (2000 - $142,047) (note 5)                     214,899         467,783
    Other                                             18,709         126,842
  Note receivable (note 6)                           150,000               -
  Due from related parties (note 7(b))                     -          29,859
  Current portion of long-term
    receivables (note 8)                                   -           6,849
  Inventory                                                -          46,829
  Prepaid expenses                                    87,827         549,639
  --------------------------------------------------------------------------
                                                   1,470,173       8,160,388

Deposit on lease                                      75,761         129,926
Long-term receivables (note 8)                             -         105,587
Deferred finance charges (note 8)                          -          95,583
Intangible assets (note 9)                         1,385,265               -
Goodwill (note 9)                                    673,185               -
Fixed assets (note 10)                               274,505       1,967,818
----------------------------------------------------------------------------
                                                $  3,878,889    $ 10,459,302
============================================================================

Liabilities and Stockholders' Equity

Current liabilities
  Accounts payable and accrued liabilities      $    971,700    $  1,246,683
  Current portion of obligations under
   capital leases (note 12)                           49,990               -
  Current portion of notes payable (note 13)         262,500               -
  Deferred revenue                                   189,551         168,661
  --------------------------------------------------------------------------
                                                   1,972,394       1,415,344

Obligations under capital leases (note 12)            61,153               -
Notes payable (note 13)                              437,500               -
----------------------------------------------------------------------------
                                                   1,972,394       1,415,344

Stockholders' equity:
  Common stock:
    Authorized:  198,978,997 common shares,
      no par value
    Issued and outstanding:  85,182,513
      (2000 - 60,886,415)	                  47,339,385      40,660,382
  Additional paid-in capital                      12,122,161      12,146,732
  Deferred stock-based compensation                        -        (460,895)
  Accumulated other comprehensive income            (614,385)       (503,685)
  Deficit                                        (56,940,666)    (42,798,576)
  --------------------------------------------------------------------------
                                                   1,906,495       9,043,958
----------------------------------------------------------------------------
                                               $   3,878,889    $ 10,459,302
============================================================================
</TABLE>

Discontinued operations (note 16)
Commitments (note 17)
Contingencies (note 18)

See accompanying notes to consolidated financial statements.

                                                                   1

<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

<TABLE>
<CAPTION>

====================================================================================


                                                       Years ended December 31,
                                                   ------------------------------
                                                2001            2000            1999
------------------------------------------------------------------------------------
<S>                                    <C>            <C>             <C>


Revenue:
  Television and airline segment
   production                          $     235,225  $            -  $            -
  Interactive media                          111,109               -               -
  ----------------------------------------------------------------------------------
                                             346,334               -               -

Cost of revenues                             415,874               -               -
------------------------------------------------------------------------------------
Gross margin                                 (69,540)              -               -

Operating expenses:
  Sales and marketing and website
   operations                                261,109               -               -
General and administrative (including
 stock-based compensation of $56,213,
 $4,471,295, and $91,921)                  3,770,335       7,533,958       1,978,298
  Write-off of fixed assets                        -               -          35,973
  Proceeds of settlement of legal
   claim (note 18)                                 -        (147,651)              -
  Value assigned to shares issued in
    satisfaction of a legal claim
    (note 18)                                      -         153,020               -
------------------------------------------------------------------------------------
                                           4,031,444       7,539,327       2,014,271
------------------------------------------------------------------------------------

Operating loss from continuing
 operations                               (4,100,984)     (7,539,327)     (2,014,271)

Interest income                              253,516         550,533          98,493
------------------------------------------------------------------------------------

Loss from continuing operations before
 extraordinary items                      (3,847,468)     (6,988,794)     (1,915,778)

Loss from discontinued operations
 (note 16)                               (10,632,482)    (20,805,594)     (3,771,690)
------------------------------------------------------------------------------------

Loss before extraordinary items          (14,479,950)    (27,794,388)     (5,687,468)

Extraordinary items:
  Gain on settlement of accounts
   payable (note 11)                         254,819               -               -
  Gain on settlement of stockholder
   loans (note 13)                            83,041               -               -
  ----------------------------------------------------------------------------------
                                             337,860               -               -
------------------------------------------------------------------------------------

Loss for the year                        (14,142,090)    (27,794,388)     (5,687,468)

Other comprehensive income
 (loss):
  Foreign currency translation
   adjustments                                25,850        (788,714)        265,859
  Net unrealized holding gain on
   short-term investments (note 4)          (136,550)        136,550               -
  ----------------------------------------------------------------------------------
                                            (110,700)       (652,164)        265,859
------------------------------------------------------------------------------------
Comprehensive loss                     $ (14,252,790)  $ (28,446,552)  $  (5,421,609)
------------------------------------------------------------------------------------
Basic and diluted loss per share
 from continuing operations before
 extraordinary items                   $       (0.06)  $       (0.12)  $       (0.05)
Basic and diluted loss per share
 from discontinued operations                  (0.16)          (0.36)          (0.10)
Basic and diluted loss per share
 before extraordinary items                    (0.22)          (0.48)          (0.15)
Basic and diluted earnings per share
 on extraordinary item                          0.01               -               -
Basic and diluted loss per share               (0.21)          (0.48)          (0.15)
Weighted average common shares,
 used in computing loss per share,
 basic and diluted                        67,186,671      58,078,005      37,391,211
------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

</TABLE>

                                                                            2
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Statements of Stockholders' Equity
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

<TABLE>
<CAPTION>

================================================================================================================================
                                                                                          Accumulated
                         Share capital        Special warrants   Additional     Deferred         other                      Total
                         -------------        ----------------      paid-in  stock-based comprehensive               stockholders
                      Number    Assigned     Number    Assigned     capital compensation          loss      Deficit        equity
---------------------------------------------------------------------------------------------------------------------------------
<S>               <C>         <C>         <C>         <C>         <C>         <C>         <C>           <C>           <C>


Balance,
 December 31,
 1998             27,269,959   9,585,372     90,000      748,432     43,592            -      (117,380)  (9,316,720)       943,296

Shares issued
 on exercise of
 non-transferable
 warrants         10,434,335   3,418,136          -            -          -            -             -            -      3,418,136

Shares issued
 on exercise of
 options           1,343,500     806,508          -            -          -            -             -            -        806,508

Special warrants
 issued	                   -           -  9,326,332    2,084,911          -            -             -            -      2,084,911

Shares issued
 on exercise of
 special warrants  9,724,611   2,833,343 (9,416,332)  (2,833,343)         -            -             -            -              -

Shares issued
 for cash          2,746,833   4,514,656          -            -          -            -             -            -      4,514,656

Shares issued
 for services
 rendered            250,000     107,686          -            -          -            -             -            -        107,686

Deferred stock-
 based
 compensation              -           -          -            -    271,908     (271,908)            -            -              -

Amortization of
 deferred
 stock-based
 compensation              -           -          -            -         -       271,908             -            -        271,908

Share
 subscriptions
 receivable
 (243,900 common
 shares)                   -     396,619          -            -         -            -	             -            -        396,619

Share issue costs          -    (247,843)         -            -         -            -              -            -       (247,843)

Foreign currency
 translation
 adjustment                -           -          -            -         -            -        265,859            -        265,859

Loss for the year          -           -          -            -         -            -              -   (5,687,468)    (5,687,468)
----------------------------------------------------------------------------------------------------------------------------------

Balance,
 December 31,
 1999,            51,769,238  21,414,477          -            -   315,500            -        148,479  (15,004,188)     6,874,268

Shares issued
 on exercise of
 non-transferable
 warrants          3,919,702     3,803,797         -         -           -            -             -             -    3,803,797

Shares issued
 on exercise of
 options           1,584,100     1,469,279         -         -           -            -             -             -    1,469,279

Shares issued
 for cash          3,340,100    14,557,888         -         -           -            -             -             -   14,557,888

Shares issued
 for
 subscriptions
 previously
 received            243,900             -         -         -           -            -             -             -            -

Shares issued
 on settlement
 of legal claim       80,000       153,020         -         -           -            -             -             -      153,020

Share issue costs          -      (738,079)        -         -           -            -             -             -     (738,079)

Cancelled shares     (50,625)            -         -         -           -            -             -             -            -

Stock-based
 compensation              -             -         -         -     247,758            -             -             -      247,758

Deferred stock-
 based
 compensation              -             -         -         -  11,583,474  (11,583,474)            -             -            -

Amortization
 of deferred
 stock-based
 compensation              -             -         -         -           -   11,122,579             -             -   11,122,579

Net unrealized
 holding gain
 on short-term
 investments,
 net of tax
 effect of nil             -             -          -        -           -            -       136,550             -      136,550

Foreign currency
 translation
 adjustment                -             -          -        -           -            -      (788,714)            -     (788,714)

Loss for the year          -             -          -        -           -            -             -   (27,794,388) (27,794,388)
--------------------------------------------------------------------------------------------------------------------------------
Balance,
 December 31,
 2000
 carried forward  60,886,415   $40,660,382          -  $     - $12,146,732  $  (460,895) $   (503,685) $(42,798,576) $ 9,043,958
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                     3
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Statements of Stockholders' Equity, continued
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

<TABLE>
<CAPTION>
================================================================================================================================
                                                                                          Accumulated
                         Share capital        Special warrants Additional      Deferred         other                      Total
                         -------------        ----------------    paid-in   stock-based comprehensive               stockholders
                      Number    Assigned     Number   Assigned    capital  compensation          loss      Deficit        equity
--------------------------------------------------------------------------------------------------------------------------------
<S>               <C>          <C>         <C>        <C>      <C>          <C>          <C>           <C>            <C>

Balance,
 December 31,
 2000, brought
 forward          60,886,415  $40,660,382          -  $      - $12,146,732  $ (460,895)  $  (503,685)  $(42,798,576) $ 9,043,958

Shares issued
 for cash
 (note 14(b))     21,670,928    6,387,121          -         -           -           -             -              -    6,387,121

Shares issued
 on acquisition
 of shares of
 subsidiary
 (note 9)          3,233,346      614,335          -         -           -           -             -              -      614,335

Shares issued
 for services
 rendered            362,202       43,750          -         -           -           -             -              -       43,750

Share issue
 costs                     -     (304,703)         -         -           -           -             -              -     (304,703)

Share
 subscription
 receivable                -      (61,500)         -         -           -           -             -              -      (61,500)

Cancelled
 shares
 (note 14(a))       (970,378)           -          -         -           -           -             -              -            -

Warrants
 issued on
 acquisition
 of shares
 of subsidiary
 (note 9)                  -            -          -         -      58,850           -             -              -       58,850

Deferred
 stock-based
 compensation              -            -          -         -     (83,421)     83,421             -              -            -

Amortization
 of deferred
 stock-based
 compensation              -            -          -         -           -     377,474             -              -      377,474

Net unrealized
 holding gain
 on short-term
 investments
 (note 4)                  -            -          -         -           -           -      (136,550)             -     (136,550)

Foreign
 currency
 translation
 adjustment                -            -          -         -           -           -        25,850              -       25,850

Loss for the
 year                      -            -          -         -           -           -             -    (14,142,090) (14,142,090)
--------------------------------------------------------------------------------------------------------------------------------
Balance,
 December 31,
 2001             85,182,513 $ 47,339,385          -  $      - $12,122,161  $        -  $   (614,385)  $(56,940,666) $ 1,906,495
================================================================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.

                                                                         4

<PAGE>


SIDEWARE SYSTEMS INC.
Consolidated Statements of Cash Flows
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

<TABLE>
<CAPTION>

=====================================================================================


                                                        Years ended December 31,
                                                   -------------------------------
                                                2001             2000            1999
-------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>

Cash flows used in operating
 activities:
  Loss for the year                    $ (14,142,090)  $ (27,794,388)  $   (5,687,468)
  Items not involving cash:
    Amortization of fixed assets             503,253         704,044          284,472
    Amortization of intangible assets        105,093               -                -
    Stock-based compensation                 377,474      11,370,337          271,908
    Loss on disposal of assets             1,769,750               -           35,973
    Write-down of long-term
     receivable                               65,000               -                -
    Gain on settlement of accounts
     payable                                (254,819)              -                -
    Gain on settlement of shareholder
     loans                                   (83,041)              -                -
    Value assigned to shares issued
     for accounting services                  43,750               -                -
    Value assigned to shares issued
     for financial advisory services               -               -          107,686
    Value assigned to shares issued
     in satisfaction of legal claim                -         153,020                -

  Changes in non-cash operating
   working capital:
    Accounts receivable                      780,415        (479,183)          38,514
    Due (to) from related parties             29,859         (68,166)         290,816
    Inventory                                479,181          24,435          (42,096)
    Prepaid expenses                         478,302        (317,901)        (169,860)
    Accounts payable and accrued
     liabilities                            (813,834)        650,961          418,197
    Deferred revenue                        (307,170)        169,793                -
  -----------------------------------------------------------------------------------
  Net cash used in operating
   activities                            (10,968,877)    (15,587,048)      (4,451,858)

Cash flows from financing
 activities:
  Special warrants issued for cash                 -               -        2,084,911
  Shares issued for cash, net of
   share issue costs                       6,020,918      19,092,885        8,494,337
  Share subscriptions receivable                   -               -          396,619
  Increase in notes payable                   37,989               -                -
  Repayment of lease obligations             (14,423)              -                -
  Notes payable                             (175,000)              -                -
  -----------------------------------------------------------------------------------
  Net cash provided by financing
   activities                              5,869,484      19,092,885       10,975,867

Cash flows from investing
 activities:
  Sale (purchase) of short-term
   investments                             5,846,038      (5,915,785)               -
  Long-term receivables and
   deferred charges                          143,019           7,040         (217,068)
  Purchase of fixed assets                  (287,346)     (1,790,479)        (782,425)
  Deposit on lease, net                       54,164        (111,219)         (14,106)
  Note receivable                           (150,000)              -                -
  Business acquisition                       (29,047)              -                -
  -----------------------------------------------------------------------------------
  Net cash used in investing
   activities                              5,576,828      (7,810,443)      (1,013,599)

Effect of exchange rates on cash
 and cash equivalents                       (445,961)       (675,196)         212,423
-------------------------------------------------------------------------------------
Increase (decrease) in cash and
 cash equivalents                             31,474      (4,979,802)       5,722,833

Cash and cash equivalents,
 beginning of year                           949,999       5,929,801          206,968
-------------------------------------------------------------------------------------
Cash and cash equivalents,
 end of year                           $     981,473   $     949,999    $   5,929,801
=====================================================================================

</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

                                                              5

<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Statements of Cash Flows
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

<TABLE>
<CAPTION>

=====================================================================================


                                                        Years ended December 31,
                                                   -------------------------------
                                                2001             2000            1999
-------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>



Supplemental information:
  Non-cash financing and investing
   activities:
    Shares issued in satisfaction
     of legal claim                    $          -    $     153,020   $           -
    Shares issued for services
     rendered                                43,750                -         107,686
    Shares issued on exercise of
     special warrants                             -                -         657,613
    Shares issued for investment
     advisory services                            -                -               -
    Shares issued on subscription            61,500                -               -
    Shares issued on acquisition of
     subsidiary (note 9)                    614,335                -               -
    Warrants issued on acquisition
     of subsidiary (note 9)                  58,850                -               -
=====================================================================================

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                                                  6

<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


1.  DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS:

    These consolidated financial statements have been prepared on the
    going concern basis under which an entity is considered to be
    able to realize its assets and satisfy its liabilities and
    commitments in the ordinary course of business.  Through the date
    of these consolidated financial statements the Company has not
    generated significant revenues, and has incurred operating losses
    and negative cash flow from operating activities.  Operations to
    date have been primarily financed by equity transactions.
    In April 2001, the Company began a restructuring that involved
    the termination of a substantial portion of its work force, the
    transferring of the research and development operations from
    North Vancouver, British Columbia to its head office in Reston,
    Virginia, a reduction in sales, marketing, general and
    administrative expenditures, and the closing of several remote
    sales offices.  In September 2001, the Company decided to suspend
    operations relating to the development and sales of its
    electronic Customer Relationship Management ("eCRM") software
    (note 16).

    In September 2001, the Company invested $1,001,541 in
    Chalk.com Network (Holding) Corporation ("Chalk.com") to
    acquire 18,000,000 common shares, a majority interest, of
    Chalk.com.  In December 2001, Sideware Systems Inc. entered
    into six share exchange agreements and one special warrant
    agreement with minority stockholders of Chalk.com.  In total,
    the minority stockholders exchanged 3,725,050 common stock and
    100,000 special warrants of Chalk.com they held for 3,233,346
    Sideware common stock.  The minority stockholders of the
    Company also received 646,668 Sideware common stock share
    purchase warrants.  Upon completion of this transaction,
    Sideware holds an 80.7% interest in Chalk.com, or 71.3% on a
    fully diluted basis after allowing for the exercise of
    outstanding share purchase warrants and stock options
    previously issued by Chalk.com.

    Chalk.com specializes in creating e-commerce enabled multimedia
    solutions for manufacturers of technology-related products. The
    Company uses online and offline media distribution which include
    the internet, television, in-flight airline entertainment and
    radio.  The Company will be concentrating its efforts on
    developing the business of Chalk.com and focus on the eLearning
    market.

    In December 2001, the Company entered into an agreement and
    Plan of Merger with KnowledgeMax, Inc. ("KnowledgeMax") (note 21(b)).
    Completion of this transaction is subject to completion of
    all required documentation.

                                                                  7
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


1.  DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS (CONTINUED):

    The Company's future operations and its continuation as a going
    concern are dependent upon its ability to increase its customer
    base, increase sales of its e-learning product to generate
    positive cash flows from operations and ultimately attaining
    profitability.  Depending on the Company's ability to develop
    sales and related cash flows, the Company may need to raise
    additional capital through public or private financings that may
    not be available on reasonable terms.  As a condition of the
    merger, approximately $2 million in financing is to be raised.
    If that transaction completes, KnowledgeMax will be the primary
    business that continues.  It is management's intention to
    continue towards finalization of the KnowledgeMax transaction
    and the identification of additional financing sources to
    continue development and operations.  The consolidated financial
    statements do not include any adjustments relating to the
    recoverability of assets and classification of assets and
    liabilities that might be necessary should the Company be unable
    to continue as a going concern.

2.  BASIS OF PRESENTATION:

    These consolidated financial statements have been prepared by
    the Company in accordance with generally accepted accounting
    principles in the United States of America.  They include the
    financial statements of the Company and its subsidiaries, all
    of which are wholly owned except for Chalk.com (note 9).  All
    material intercompany balances and transactions have been
    eliminated in consolidation.

3.  SIGNIFICANT ACCOUNTING POLICIES:

 (a)  Use of estimates:

      The preparation of financial statements in conformity with
      generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and the disclosure of
      contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses
      during the reporting period.  Actual results could differ from
      those estimates.

 (b)  Cash equivalents:

      Cash equivalents consists of highly liquid investments having
      terms to maturity at the date of acquisition of not more than
      three months.

 (c)  Short-term investments:

      The Company classifies its investments in marketable
      securities as "available-for-sale." Such investments are
      recorded at fair value based on quoted market prices, with
      unrealized gains and losses recorded as other comprehensive
      income (loss) until realized.

      The Company classifies its short-term investments in debt
      instruments as "held-to-maturity".  Such investments are
      reported at amortized costs and interest is recorded in the
      statement of operations when earned.

                                                                  8
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

3.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

 (d)  Fixed assets:

      Fixed assets are carried at cost less accumulated
      amortization.  Amortization is calculated annually as follows:

      ============================================================
      Asset                                   Basis           Rate

      Automobiles                 declining-balance            30%
      Furniture and fixtures      declining-balance            20%
      Computer equipment              straight-line        33 1/3%
      Trade show assets               straight-line        33 1/3%
      Computer software               straight-line            50%
      Leasehold improvements          straight-line     lease term
      ============================================================

 (e)  Deferred charges:

      Deferred charges represent the discount on notes receivable
      and are being recognized by the yield method over the term of
      the note.

 (f)  Impairment of long-lived assets:

      In accordance with Statement of Financial Accounting Standards
      ("SFAS") No. 121, "Accounting for the Impairment of Long-
      Lived Assets and for Long-Lived Assets to be Disposed Of", the
      Company monitors the recoverability of long-lived assets,
      which include property and equipment and other assets, based
      on factors such as future asset utilization, business climate
      and future undiscounted cash flows expected to result from the
      use of the related assets.  The Company's policy is to record
      an impairment loss in the period when it is determined that
      the carrying amount of the asset may not be recoverable, at
      which time the asset is written down to fair market value.

 (g)  Goodwill:

      Goodwill is accounted for in accordance with FAS 142 "Goodwill
      and Other Intangible Assets".  It represents the difference
      between the cost of the investment in Chalk.com and the fair
      value of their underlying net identifiable assets at the time
      of acquisition.  Goodwill is not amortized.  Goodwill is
      tested for impairment on an annual basis using the expected
      present value of future cash flows.  As at December 31, 2001,
      no impairment has been recognized.

 (h)  Intangible assets:

      Intangible assets are accounted for in accordance with FAS 142
      "Goodwill and Other Intangible Assets".  They are recorded at
      the present value of expected cash flows of intangible assets
      acquired in the acquisition of Chalk.com.  They are amortized
      over the weighted average life of the contracts that give rise
      to the intangible assets.

                                                                   9
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

3.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

 (i)  Income taxes:

      The Company accounts for income taxes under the asset and
      liability method in accordance with SFAS No. 109, "Accounting
      for Income Taxes".  Deferred tax assets and liabilities are
      recognized for the estimated future tax consequences
      attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable
      income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on deferred
      tax assets and liabilities of a change in tax rates is
      recognized in the statement of operations in the period that
      includes the enactment date. A valuation allowance is recorded
      to reduce deferred tax assets to an amount where realization
      is not considered to be more likely than not.


 (j)  Stock-based compensation:

      The Company accounts for its stock-based employee
      compensation arrangements in accordance with the provisions
      of Accounting Principles Board ("APB") Opinion No. 25,
      "Accounting for Stock Issued to Employees" and complies
      with the disclosure provisions of SFAS No. 123, "Accounting
      for Stock-Based Compensation".  Deferred stock-based
      compensation is recorded on the measurement date, which is
      generally the date of grant, when the market value of the
      underlying common stock exceeds the exercise price for
      stock options or the purchase price for the shares of
      common stock.  Non-employee options are accounted for under
      SFAS No. 123 and are recognized at the fair value of the
      options as determined by an option pricing model as the
      related services are provided and the options are earned.

      Stock-based compensation resulting from employee option
      grants is recognized on an accelerated basis over the
      vesting period of the individual options consistent with
      FIN 28.  Non-employee grants with future service
      requirements are not recognized until the service is
      performed and the options vest.


 (k)  Comprehensive income (loss):

      In accordance with the provisions of SFAS No. 130,
      "Reporting Comprehensive Income", the Company reports
      comprehensive income (loss), which includes net earnings
      (loss) as well as changes in equity from other non-owner
      sources specifically the foreign currency cumulative
      translation adjustments and unrealized holding gain on
      short-term investments.

 (l)  Website development costs:

      The Company's website is in the development stage.  In
      accordance with EITF 00-2, "Accounting for Website
      Development Costs", costs are expensed as incurred.

                                                            10
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

3.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

 (m)  Research and development:

      In accordance with SFAS No. 86, "Accounting for the Costs of
      Computer Software to be Sold, Leased, or Otherwise Marketed",
      software development costs are expensed as incurred until
      technological feasibility of the underlying software product
      is achieved, at which time any additional costs will be
      capitalized and amortized prospectively over their estimated
      economic life.  To date, technological feasibility and general
      availability of such software have occurred simultaneously and
      software development costs qualifying for capitalization have
      been insignificant. Accordingly, the Company has not
      capitalized any software development costs.

 (n)  Advertising costs:

      Advertising costs are expensed as incurred and totaled
      $21,014, $1,044,012, and $68,941 during the years ended
      December 31, 2001, 2000 and 1999, respectively.

 (o)  Revenue recognition:

     (i) In accordance with the provisions of SOP 00-2 - "Accounting by
         Producers or Distributors of Films", the Company recognizes
         revenue from Chalk.com's sale or licensing arrangement of a
         television and airline segment production when persuasive
         evidence of a sale or licensing arrangement exists, the film is
         complete, and has been delivered and accepted in accordance with
         the terms of the arrangement, the license period of the
         arrangement has begun, the arrangement fee is fixed and
         determinable, and the collection of the arrangement fee is
         reasonably assured.  If Chalk.com does not meet any one of the
         criteria described above, all revenue from the arrangement is
         deferred until such time as the conditions are met.


   (ii)	The Company recognizes revenue for Chalk.com interactive media in
         accordance with SAB 101 which states that revenue generally is
         realized or realizable and earned when all of the following
         criteria are met: persuasive evidence of an arrangement exists,
         delivery has occurred or services have been rendered, the
         seller's price to the buyer is fixed or determinable, and
         collectibility is reasonably assured. If Chalk.com does not meet
         any one of the criteria described above, all revenue from the
         arrangement is deferred until such time as the conditions are
         met.


                                                                  11
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

3.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

  (iii) The Company recognized revenue from its electronic
        Customer Relationship Management ("eCRM") software in
        accordance with SOP 97-2, "Software Revenue Recognition".
        SOP 97-2, as amended, generally requires revenue
        from software arrangements involving multiple elements
        to be allocated to each element of the arrangement
        based on the relative fair values of the elements,
        such as software products, post contract customer
        support, installation, or training and recognized
        as the element is delivered and the Company has no
        significant remaining performance obligations.  For
        multiple element contracts where maintenance is
        bundled with the software license, the residual method
        in accordance with SOP 98-9 is used and Vendor
        Specific Objective Evidence ("VSOE") established for
        the undelivered element, being the maintenance support
        through the sale of separate maintenance agreements, to
        determine the value to be assigned to the software license.
        For contracts where maintenance is not bundled with the
        software license, the Company uses the sale value of the
        software license as its fair value to record revenue.

        In addition to the establishment of fair value, license
        revenue is recognized when there is persuasive evidence of
        an arrangement and delivery to the customer has occurred,
        provided the arrangement does not require significant
        customization of the software, the fee is fixed and
        determinable, and collectibility is considered probable.

        Service revenue from maintenance contracts is recognized
        ratably over the term of the maintenance contract, on a
        straight-line basis.  Other service revenue is recognized
        at the time the service is performed.

        The Company recognizes sales of equipment to external and
        related parties in revenues and the related costs of the
        sale in cost of revenues.  The Company takes title to and
        holds the equipment, bearing all of the risks and rewards
        of ownership, prior to sale.

 (p)  Foreign currency translation:

      Prior to January 1, 2001, the functional currency of the
      Company was the Canadian dollar.  Effective for its fiscal
      year beginning January 1, 2001, the Company established the
      U.S. dollar as its functional currency for all of its
      operations as it represented the primary market of revenues
      and Company operations, including the primary currency in
      which expenses associated with its eCRM business were
      incurred.  Monetary assets and liabilities denominated in a
      foreign currency are translated into the Company's functional
      currency at the rate of exchange in effect at the balance
      sheet date.  Other assets, revenue and expense items are
      measured using the rate of exchange prevailing at their
      respective transaction dates.  Exchange gains and losses
      resulting from the translation of foreign denominated monetary
      assets and liabilities to the functional currency are
      reflected in earnings for the period.

                                                                  12
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

3.  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

 (p)  Foreign currency translation (continued):

      Commencing with the discontinuance of the eCRM business and
      the acquisition of Chalk.com (note 9) the functional currency
      was determined to be the Canadian dollar.  Accordingly,
      foreign currency denominated balances of the Company are
      remeasured into Canadian dollars as described in the preceding
      paragraph.

      For the fiscal years ended December 31, 2001, 2000 and 1999, the
      Company adopted the U.S. dollar as its reporting currency.  Where
      the Company's functional currency is the Canadian dollar it
      translates the Canadian dollar statements into U.S. dollar
      reporting currency using the current rate method.  The assets and
      liabilities are translated in U.S. dollars using period end rates
      and revenue and expense are translated at the average exchange
      rate for the period.  Exchange gains and losses resulting from
      the translation are recorded as a separate component of
      shareholders' equity and reported as other comprehensive income.

 (q)  Net loss per share:

      Net loss per share is calculated in accordance with SFAS No.
      128, "Earnings per Share".  Under SFAS No. 128, basic net
      loss per share is computed using the weighted-average number
      of outstanding shares of common stock, excluding common stock
      subject to repurchase. Diluted net loss per share is computed
      using the weighted-average number of outstanding shares of
      common stock and, when dilutive, potential common shares from
      options and warrants to purchase common stock and common stock
      subject to repurchase using the treasury stock method, and
      from convertible securities using the as-if converted basis.
      All potential common shares have been excluded from the
      computation of diluted net loss per share for all periods
      presented because the effect would have been anti-dilutive.

      All performance escrow shares as disclosed in note 14(a) are
      excluded from the calculation.

 (r)  Comparative figures:

      Certain comparative figures have been reclassified to conform
      to the financial statement presentation adopted in the current
      year.

                                                                  13
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


4.  SHORT-TERM INVESTMENTS:

    The short-term investments in debt instruments of $17,265 at
    December 31, 2001 are classified as held to maturity.

    The amortized cost, gross unrealized holding gain and fair value
    of available-for-sale securities at December 31, 2000 is as
    follows:

    ===================================================================
                                                    Gross
                                               unrealized
                                    Amortized     holding          Fair
                                         cost        gain         value
    -------------------------------------------------------------------
    Available-for-sale
    commercial paper             $  5,846,038  $  136,550  $  5,982,588
    ===================================================================

5.  ALLOWANCE FOR DOUBTFUL ACCOUNTS:

    The movements in the allowance for doubtful accounts for 2001 and
    2000 are set out below:

    ========================================================================
                                          2001           2000           1999

    Balance as at January 1       $    142,047     $        -      $       -
    Expense for the year                12,368        142,047              -
    Write-offs during the year        (142,047)             -              -

    ------------------------------------------------------------------------
    Balance as at December 31     $     12,368     $  142,047      $       -
    ========================================================================

6.  Note receivable:

    The note receivable is due from a party with which the Company has
    signed an agreement and Plan of Merger (note 21).  The amount is
    unsecured, payable on demand and bears interest at 5% per annum.


                                                                    14
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


7.	Related party transactions:

 (a)  Transactions with related parties:

      The following table summarizes the Company's related party
      transactions with certain directors of the Company:

    ===================================================================

                                         Years ended December 31,
                                  -------------------------------------
                                  2001             2000            1999
    -------------------------------------------------------------------
    Services rendered       $  112,071     $    257,860     $   445,296

    ===================================================================

    Hardware resales to related parties are disclosed in note 16, are
    to companies with certain common directors to the Company.

 (b)  Due (to) from related parties:

      At December 31, 2001, the Company was owed nil (2000 - $29,859
      with respect to costs incurred by the Company on behalf of
      BrainTech Inc. and TechWest Management Inc., companies with
      directors in common.  These amounts are unsecured, payable on
      demand and bear no interest.

(c)   Related party transactions:

    The following table summarizes Chalk.com's related party
    transactions, which were recorded at the exchange amounts agreed
    upon between the related parties.

    ========================================================================
                                               Years ended December 31,
                                              --------------------------
                                           2001          2000           1999
    ------------------------------------------------------------------------

    Rent payments owed and paid
     to stockholder                  $   94,066   $   137,355   $      3,231
    Management fees paid to
     principal stockholder                    -       157,695              -

    Rent payments owed and paid to:
     CML Global Capital Ltd.,
     a stockholder                   $        -        22,623         26,651
    Management fees paid to CML
     Global Capital Ltd.                 59,961       126,986              -

    Interest paid to minority
     shareholders                             -             -          4,265
    ========================================================================

    Accounts payable includes $42,627 (2000 - $36,384) due to
    shareholders and directors of Chalk.com.

                                                            15
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

8.  LONG-TERM RECEIVABLES AND DEFERRED FINANCE CHARGES:

    ===================================================================
                                                        2001       2000

    Employee loan, maturing September 30, 2024,
    bearing interest at 1% per annum,
    repayable in bi-monthly blended
    instalments of $376, except if employment
    is terminated in which case it is
    repayable immediately, real estate has
    been pledged as security, net of
    unamortized discount of $95,583               $        -   $ 98,593

    Employee loans, maturing September 30,
    2002, bearing interest at prime plus 1%
    per annum.                                             -     13,843
    -------------------------------------------------------------------
                                                           -    112,436
    Current portion                                        -      6,849
    -------------------------------------------------------------------
                                                  $        -   $105,587
    ===================================================================

    The employee loan secured by real estate has been discounted to
    fair market value calculated at prime plus 1%, which was the
    prevailing rate of similar financial instruments at the arrangement
    date, over 25 years.  The discount was recorded as deferred
    financing charges.

    As a result of the restructuring and termination of employees
    (note 16), all employee loans, except for approximately $65,000,
    as at December 31, 2000, were repaid.  Approximately $65,000 of
    long-term receivables was forgiven as part of a severance package
    to an employee.

9.  BUSINESS ACQUISITION:

    On September 7, 2001, the Company acquired 66.7% of the
    outstanding common shares of Chalk.com.  In December 2001,
    Sideware Systems Inc. entered into six share exchange agreements
    and one special warrant agreement with minority stockholders of
    Chalk.com.  In total, the minority stockholders exchanged
    3,725,050 common shares and 100,000 special warrants of Chalk.com
    they held for 3,233,346 Sideware common shares with a market value
    of $614,335.  The minority stockholders also received 646,668
    Sideware common stock share purchase warrants at a value of
    $58,850 based on the Black-Scholes fair value method.  Upon
    completion of this transaction, Sideware holds an 80.7%
    interest in Chalk.com.

                                                                 16
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

9.  BUSINESS ACQUISITION (CONTINUED):


    The business combination was accounted for using the purchase
    method of accounting with effect from the date of acquisition.
    Accordingly, these consolidated statements include the operations
    of Chalk.com from the date ownership was assumed by the Company
    until December 31, 2001.

    ===================================================================

    Net assets acquired (at fair value):
    Cash                                               $      1,078,705
      Fixed assets                                              274,390
      Intangible assets                                       1,490,358
      Goodwill                                                  673,185
      Capital leases                                            (60,753)
      Due to stockholders                                      (942,771)
    Net non-cash operating working capital deficiency          (732,177)
    -------------------------------------------------------------------
    Net assets acquired                                $      1,780,937
    ===================================================================
    Consideration given for net assets acquired:
      Cash                                             $      1,107,752
      Shares issued (3,233,346 common stock)                    614,335
      Warrants issued (646,688 warrants)                         58,850
    -------------------------------------------------------------------
                                                       $      1,780,937
    ===================================================================

    The intangibles assets that make up the amount of $1,490,358
    include future revenue based intangibles of $49,500, and
    employment contract based intangibles of $1,440,858.  Future
    revenue intangibles are being amortized over the weighted average
    life of the contracts, which is one year.  Accumulated
    amortization is $15,139. The employment contract intangibles are
    being amortized over the life of the contract, which is five
    years. Accumulated amortization is $89,954.

    Aggregate amortization expense:

    For the year ended December 31, 2001                   $    105,093

    Estimated amortization expense:

    For the year ended December 31:

    2002                                                   $    322,529
    2003                                                        288,168
    2004                                                        288,168
    2005                                                        288,168
    2006                                                        148,732
    ===================================================================

                                                                    17
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


9.  BUSINESS ACQUISITION (CONTINUED):

    Goodwill of $673,185 arose on the step-acquisition in December
    2001 as the fair value increments to the individual identifiable
    assets and liabilities of Chalk.com were recognized in the September
    2001 acquisition accounting.


    The following information represents the pro forma statement
    of operations and earnings per share date as if the
    acquisition of Chalk.com occurred at the beginning of each
    fiscal year:

    ======================================================================
    Pro forma information                             2001            2000
    ----------------------------------------------------------------------
    Revenues                                  $  1,326,982   $   1,079,951
    Loss from continuing operations before
     extraordinary items                        (6,369,776)    (15,231,058)
    Loss for the year                          (16,664,398)    (36,036,652)
    Basic and diluted loss per share                 (0.25)          (0.62)
    ======================================================================

10. FIXED ASSETS:

    ===================================================================
                                                     2001          2000
    -------------------------------------------------------------------

    Automobiles                               $    27,193  $          -
    Computer equipment                            180,668     1,553,279
    Computer software                                   -       289,881
    Furniture and fixtures                        194,510       710,518
    Trade show assets                                   -       150,193
    Leasehold improvements                         15,429       843,452
    -------------------------------------------------------------------
                                                  417,800     3,547,323
    Accumulated amortization                     (143,295)   (1,579,505)
    -------------------------------------------------------------------
    Net book value                            $   274,505   $ 1,967,818
    ===================================================================

11. SETTLEMENT OF ACCOUNTS PAYABLE

    During 2001, Chalk.com entered into agreements with several of its
    trade vendors to settle outstanding obligations.  In aggregate,
    accounts payable with a net book value of $341,592 were settled for
    aggregate cash payments of $86,773, resulting in an extraordinary gain
    of $254,819.

                                                                    18
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

12.  OBLIGATIONS UNDER CAPITAL LEASE:

    Chalk.com has obligations under operating lease arrangements
    which require the following minimum payments:

    ===================================================================
    Year ending December 31:

    2002                                                 $       59,726
    2003                                                         57,193
    2004                                                          8,265
    -------------------------------------------------------------------
    Future minimum lease payments                               125,184

    Amount representing interest                                 14,041
    -------------------------------------------------------------------
                                                                111,143

    Current portion                                              49,990
    -------------------------------------------------------------------

    Non-current portion                                 $        61,153

    ===================================================================

13.  NOTES PAYABLE:

    ===================================================================
                                                      2001         2000
    -------------------------------------------------------------------
    Unsecured notes payable, 7% per
    annum, payable in blended
    instalments of 15% of amount owing
    on note every six months until
    paid (note 13(i))                           $  700,000   $        -

    Current portion                                262,500            -
    -------------------------------------------------------------------
                                                $  437,500   $        -
    ===================================================================

    At the date of the Company's acquisition of 66.7% ownership of
    Chalk.com on September 7, 2001, Chalk.com owed $942,771 to
    various stockholders.  These loans were exchanged for notes payable
    in December of 2001.

    In December 2001, the Company acquired the common stock owned by
    the holders of the stockholder loans of Chalk.com (note 9).  In
    conjunction with this transaction, the Company reached an
    agreement with the stockholders to exchange their existing
    stockholder loans for notes payable with equal face value.  Upon
    execution of this agreement, the stockholders forgave the
    accumulated accrued interest on stockholder loans which totaled
    $83,041 and Chalk.com repaid $175,000 of the principal portion
    on the new notes payable.  The gain on the settlement of
    stockholder loans has been presented as extraordinary.

                                                                 19
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

13. NOTES PAYABLE (CONTINUED):

    Chalk.com is required to use 10% of every $1 million of equity
    financing that it raises to repay the principal amount of the
    notes payable.

  (i)  The notes payable require the following minimum payments:

    ===================================================================

    Year ending December 31:

    2002                                                     $  308,068
    2003                                                        288,519
    2004                                                        182,677
    -------------------------------------------------------------------
    Future minimum payments                                     779,264

    Amount representing interest                                 79,264
    -------------------------------------------------------------------
                                                                700,000

    Current portion                                             262,500
    -------------------------------------------------------------------
                                                             $  437,500
    ===================================================================

14.  STOCKHOLDERS' EQUITY:

 (a)  Performance shares and escrow securities:

      Included in issued shares at December 31, 2000 are nil performance
      and  escrow securities (December 31, 2000 and 1999 - 750,000 and
      280,378, respectively) held in escrow to be released based on
      achievement of a cash flow formula.  During fiscal 2001 all
      performance and escrow securities were cancelled.

 (b)  Private placements:

      On February 22, 2001, the Company issued, through a private
      placement, 5,229,752 common shares, for net proceeds of
      $3,732,418.  Additionally, the Company issued 5,229,752 share
      purchase warrants.  The Company also issued brokers' warrants,
      permitting the holders to acquire 526,316 units at a price of
      $0.76 per unit, with each unit consisting of one share and one
      share purchase warrant.  Each share purchase warrant entitles
      the holder to purchase one additional common share of the
      Company, for a period of three years, at a price of $1.00 per
      share. As a result of an additional private placement on
      September 7, 2001, anti-dilution provisions related to these
      share purchase warrants came into effect, which reduced the
      price per share to $0.92.

      On September 7, 2001, the Company issued, through a private
      placement, 2,941,176 common shares, for net proceeds of
      $1,000,000.

                                                              20
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

14.	STOCKHOLDERS' EQUITY (CONTINUED):


(b)   Private placements (continued):

      On December 11, 2001, the Company issued, through a private
      placement, 13,500,000 common shares for net proceeds
      of $1,350,000


 (c)  Stock compensation plans:

      Effective February 8, 2000, the Company adopted its 2000 Stock
      Option Plan ("the 2000 Plan"), which reserved 7,000,000
      shares for issuance pursuant to stock options to be granted to
      directors, officers, employees, and consultants.  The 2000
      Plan was approved by the Company's shareholders at the
      Company's June 28, 2000 general meeting.

      Effective December 6, 2000, the Company adopted its 2001 Stock
      Option Plan ("the 2001 Plan"), which reserved 6,000,000
      shares for issuance pursuant to stock options to be granted to
      directors, officers, employees, and consultants.  On February
      9, 2001, the Board of Directors approved an increase of the
      reserved amount to 7,000,000 shares pursuant to the 2001 plan.
      The 2001 Plan was approved by the Company's shareholders at
      the Company's June 28, 2001 general meeting.

      The Company's Board of Directors have discretion to set the
      price, term, vesting schedules, and other terms and conditions
      for options granted under the plan, subject to the
      requirements of any stock exchange on which the Company's
      shares are listed.

      As at December 31, 2001, no options granted under either the
      2000 or 2001 Plans have been exercised.

    (i)  A summary of the Company's stock option activity is as
         follows:

         =============================================================
                                                              Weighted
                                                Number         average
                                             of shares  exercise price
         -------------------------------------------------------------
         Balance, December 31, 1998          2,590,000          $ 0.37
         Options granted                     2,960,000            1.38
         Options exercised                  (1,343,500)           0.61
         Options cancelled / expired          (100,000)           0.45
         -------------------------------------------------------------
         Balance, December 31, 1999          4,106,500            1.02
         Options granted                     8,860,000            5.55
         Options exercised                  (1,584,100)           0.92
         Options cancelled / expired          (470,000)           4.60
         -------------------------------------------------------------
         Balance, December 31, 2000         10,912,400            4.56
         Options granted                    11,083,500            0.65
         Options cancelled / expired        (9,584,400)           3.42
         -------------------------------------------------------------
         Balance, December 31, 2001         12,411,500            1.95
         =============================================================

                                                                  21
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999


14.  STOCKHOLDERS' EQUITY (CONTINUED):

 (c)  Stock compensation plans (continued):

      (ii)  Additional information regarding options outstanding as
            at December 31, 2001 is as follows:

<TABLE>
<CAPTION>
         ======================================================================================
                                           Outstanding                         Exercisable
                             ------------------------------------------   ---------------------

                                           Weighted
                                            Average                                    Weighted
                                          remaining            Weighted                 average
                Range of        Number  contractual             average      Number    exercise
         exercise prices     of shares  life (years)e    exercise price   of shares       price
         --------------------------------------------------------------------------------------
         <S>                <C>         <C>            <C>                <C>          <C>
         $ 0.24 - $ 1.00     8,197,500         4.30            $ 0.53     4,390,000      $ 0.54
         $ 1.55 - $ 2.25     1,750,000         3.21              1.99     1,331,250        1.91
         $ 5.10              1,852,000         3.30              5.10     1,812,625        5.10
         $ 11.08               612,000         3.06             11.08       612,000       11.08
         --------------------------------------------------------------------------------------
                            12,411,500         3.93            $ 1.95     8,145,875      $ 2.57
         ======================================================================================

</TABLE>

      (iii)  Stock-based compensation:

      With respect to the stock options granted from inception
      through December 31, 2001, the Company recorded cumulative
      stock-based compensation costs of $12,049,121.

      Pursuant to SFAS No. 123, the Company is required to
      disclose the pro-forma effects on net loss and net loss per
      share data as if the Company had elected to use the fair
      value approach to account for its employee stock-based
      compensation plans.  If this approach had been applied, the
      Company's net loss and net loss per share would have been as
      indicated below:


      =============================================================
                                      Years ended December 31
                               ------------------------------------
                                  2001          2000           1999
      -------------------------------------------------------------
      Loss for the year:
        As reported       $ 14,142,090  $ 27,794,388   $  5,687,468
        Proforma            15,645,805    43,301,838      7,680,247
      =============================================================
       Basic and diluted
       loss per share:
        As reported       $       0.21  $       0.48   $       0.15
        Proforma                  0.23          0.75           0.21
      =============================================================

                                                            22
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

14.	STOCKHOLDERS' EQUITY (CONTINUED):

 (c)  Stock compensation plans (continued):

      (iii) Stock-based compensation (continued):

      The fair value for the options was estimated using the
      Black-Scholes option pricing model assuming no expected
      dividends and the following weighted average assumptions:

      ==============================================================
                                                  Options
                                      ------------------------------
                                       Interest
                                           rate     Term  Volatility

      Year ended December 31, 2001        3.88%    3 yrs         70%
      Year ended December 31, 2000        6.55%    3 yrs         70%
      Year ended December 31, 1999        5.88%    3 yrs         70%
      ==============================================================

      The weighted-average fair value of stock options granted for
      the year ended December 31, 2001, 2000 and 1999:

       ====================================================================
                              Weighted average          Weighted average
                               exercise price              fair value
                           -----------------------  -----------------------
                           Year ended December 31,  Year ended December 31,
                           -----------------------  -----------------------
                            2001    2000    1999       2001    2000    1999
      ---------------------------------------------------------------------
      Exercise price is
       less than market
       value on
       grant date         $ 1.00  $    -  $ 1.30     $ 0.11  $    -  $ 0.62

      Exercise price is
       equal to market
       value on
       grant date           0.28       -       -       0.14       -       -

      Exercise price
       exceeds market
       value on
       grant date              -    5.55    1.40          -    4.12    0.79

      Total options        $0.65  $ 5.55  $ 1.38     $ 0.12  $ 4.12  $ 0.77
      =====================================================================

                                                                 23
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

14.  STOCKHOLDERS' EQUITY (CONTINUED):

 (d) Share purchase warrants:

     A summary of the Company's warrant activity for the year ended
     December 31, 2001 is as follows (exercises prices in United
     States dollars except where otherwise indicated):

<TABLE>
<CAPTION>

      =====================================================================================
                           Exercise    Outstanding                              Outstanding
                              price   December 31,                             December 31,
      Expiry date         per share           2000      Granted       Expired          2001
      -------------------------------------------------------------------------------------
      <S>                   <C>          <C>         <C>         <C>             <C>

      March 26, 2001         $0.383      $  197,882  $        -  $  (197,882)    $        -
      April 7, 2001          $0.63 CDN    2,000,000           -	  (2,000,000)             -
      September 14, 2001     $1.89        1,417,254           -   (1,417,254)             -
      December 14, 2001      $1.89        1,901,271           -   (1,901,271)             -
      April 13, 2002        $11.50           45,000           -            -         45,000
      April 13, 2002        $10.00/3.00     139,000           -            -        139,000
      April 13, 2002         $2.82/1.00     900,000           -            -        900,000
      June 13, 2003          $0.13                -     646,668            -        646,668
      February 22, 2004      $1.00                -   5,229,752            -      5,229,752
      -------------------------------------------------------------------------------------
                                         $6,600,407  $5,876,420  $(5,516,407)    $6,960,420
      =====================================================================================

</TABLE>

      The share purchase warrants issued in consideration for
      financing, outstanding at December 31, 2000, having an
      exercise price of $10.00 and $2.82 expiring April 13, 2002
      were repriced to $3.00 and $1.00 in March 2001.  The term
      of the re-priced warrants will be reduced to 30 days if,
      over any period of twenty consecutive days, the weighted
      average trading price for the Company's shares exceeds the
      new exercise price by 25% or more.

15. INCOME TAXES:

    Deferred income taxes reflect the tax effects of temporary
    differences between the carrying amount of assets and liabilities
    for financial reporting purposes and the amounts used for income
    tax purposes, as well as net operating loss and tax credit carry
    forwards.

    The Company's deferred income tax assets are comprised of the
    following at December 31:

    ========================================================================
                                                       2001             2000
    ------------------------------------------------------------------------
    Net deferred tax assets and liabilities:
     Net operating loss carry forwards         $ 14,742,129  $    10,553,386
     Other timing differences                       127,878         (186,442)
     Excess of amortization recorded for
      accounting over tax                           693,401          695,703
    ------------------------------------------------------------------------
    Total deferred tax assets                    15,563,408       11,062,647
    Valuation allowances                        (15,563,408)     (11,062,647)
    ------------------------------------------------------------------------
    Net deferred tax assets                    $          -  $             -
    ========================================================================

                                                                      24
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

15. INCOME TAXES (CONTINUED):

    Deferred income taxes reflect the tax effects of temporary
    differences between the carrying amount of assets and liabilities
    for financial reporting purposes and the amounts used for income
    tax purposes, as well as non-operating losses and tax credit
    carry forwards.

    At December 31, 2001, management believes that sufficient
    uncertainty exists as to whether the deferred tax assets will be
    realized, and accordingly, a valuation allowance is required.

    As of December 31, 2001, the Company had net operating losses of
    $21,600,000 available to offset taxable income earned in Canada
    to 2008 and $20,700,000 available to offset taxable income
    earned in the United States to 2021.

16. DISCONTINUED OPERATIONS:

    In April 2001, the Company began a restructuring that involved
    the termination of a substantial portion of its work force, the
    transferring of the research and development operations from
    North Vancouver, British Columbia to its head office in Reston,
    Virginia, a reduction in sales, marketing, general and
    administrative expenditures, and the closing of several remote
    sales offices.  On September 14, 2001, the Company announced and
    terminated all operations relating to the development and sales
    of its eCRM software.

    On September 10, 2001, the Company adopted a plan to suspend
    operations relating to the development and sales of its eCRM
    software.  The Company reduced its work force to approximately
    ten employees in the U.S. and Canada, six of which are working on
    a transitional basis, with the remaining expected to be
    integrated into the operations of Chalk.com.  Fixed assets
    have been written down to market value and the Company is in
    the process of selling the assets.  The Company has been removed
    as the leasee from the Reston, Virginia facilities as of
    November 15, 2001 and is currently negotiating to remove itself
    from the leased offices in Vancouver, British Columbia.

                                                            25
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

16. DISCONTINUED OPERATIONS (CONTINUED):

    The results of operations for the eCRM software business segment
    to the date of discontinuance of its operations are as follows:

<TABLE>
<CAPTION>

    =================================================================================
                                                2001             2000            1999
    ---------------------------------------------------------------------------------
    <S>                               <C>              <C>             <C>
    Revenue:
     Licenses                         $       41,315   $      461,962  $            -
     Services                                 58,603           96,217               -
     Hardware and software resales             4,536           27,504           2,533
     Hardware resales to related
      parties (note 7(a))                     31,384           81,945          30,856
      -------------------------------------------------------------------------------
                                             135,838          667,628          33,389

    Cost of revenues:
     Licenses                                    400            1,532               -
     Services                                  4,591           28,843               -
     Hardware and software resales             4,536           27,504           2,044
     Hardware resales to related
      parties (note 7(a))                     31,384           81,945          30,856
      -------------------------------------------------------------------------------
                                              40,911          139,824          32,900
    ---------------------------------------------------------------------------------
    Gross margin                              94,927          527,804             489

    Operating expenses:
     Sales and marketing (including
      stock-based compensation of
      $193,746, $5,767,155, and
      $124,479)                            5,198,976       16,807,001       2,281,827
      Research and development
      (including stock-based
      compensation of $127,515,
      $1,131,887, and $55,508)             2,740,947        4,526,397       1,490,352
    Costs of discontinued
     operations                            1,660,486                -               -
    Restructuring costs                    1,127,000                -               -
     --------------------------------------------------------------------------------
                                          10,727,409       21,333,398       3,772,179
    ---------------------------------------------------------------------------------
    Net loss from discontinued
     operations                        $ (10,632,482)   $ (20,805,594)   $ (3,771,690)
    =================================================================================
</TABLE>

    Restructuring costs which consisted of $611,000 of severance
    payments to terminated employees and $516,000 relating to the
    write-down of fixed assets.

    Costs of discontinued operations included $372,000 of severance
    payments to terminated employees and $1,253,486 relating to the
    write-down of fixed assets.

                                                                26
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

16. DISCONTINUED OPERATIONS (CONTINUED):

    At December 31, 2000, the Company's operations related solely to
    the eCRM business segment and all reported assets and liabilities
    on the consolidated balance sheet were used in that segment.

    The following represents the revised carrying values of the
    remaining assets and liabilities of the discontinued operations
    included on the balance sheet as at December 31, 2001:

    ===============================================================
    Deposit on lease                                 $       75,762
    Accounts payable and accrued liabilities                137,341
    ---------------------------------------------------------------
                                                     $      213,103
    ===============================================================

17. Commitments:

    The Company has obligations under operating lease arrangements
    which require the following minimum annual payments:

    ===============================================================
    2002                                             $      128,000
    2003                                                      1,000
    ---------------------------------------------------------------
                                                     $      129,000
    ===============================================================


    During the year, the Company vacated its leased premises in the
    United States and Canada.  The Company is currently sub-letting
    the premises, however, the Company is ultimately responsible for
    future lease payments if the tenant fails to pay the rent.  The
    total of future payments under the leases is approximately $425,000.

18. SETTLEMENT OF LEGAL CLAIM:

    During the year ended December 31, 2000, the Company settled its
    outstanding legal disputes with former management.  The Company
    made a cash payment of $20,135 and issued 80,000 shares to opposing
    parties.  The Company also received cash payments totaling $167,786
    from opposing parties.

19. LEGAL CONTINGENCY:

    In July 2001, an employee filed a claim against Chalk.com and a
    stockholder for breach of an employment contract.  Management
    expects this claim to be settled within the year and has accrued
    the expected amount of settlement as at December 31, 2001.

                                                               27
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

20. Financial instruments:

 (a)  Fair values of financial instruments:
      The Company's short-term financial instruments consist of cash
      and cash equivalents, short-term investments, accounts
      receivable, , notes receivable and accounts payable and
      accrued liabilities. The fair value of these financial
      instruments approximate their carrying values due to
      their short-term maturity.

      The fair value of notes payable and capital lease obligations
      are estimated to approximate their carrying value based on
      borrowing rates currently available to the Company for loans
      with similar terms.  The Company's long-term financial instruments
      consist principally of notes payable and capital lease obligations.
      The fair value of the long-term receivables, calculated using the
      current market rate for such instruments of the same remaining
      maturity term and credit risk, approximate their carrying value.

 (b)  Foreign currency risk:

      Foreign currency risk reflects the risk that the Company's net
      assets or operations will be negatively impacted due to
      fluctuations in exchange rates.  Revenues and expenses of the
      Company denominated in foreign currencies come due in the
      short-term and accordingly, management of the Company believes
      there is no significant exposure to foreign currency
      fluctuations.  The Company does not have foreign currency
      derivatives in place.

 (c)  Credit risk:

      Financial instruments subjecting the Company to concentrations
      of credit risk consist primarily of cash and cash equivalents,
      short-term investments and trade accounts receivable. The
      Company maintains cash and cash equivalents with high quality
      financial institutions.

      The Company's customers are currently concentrated in the
      United States and Canada.  The Company performs ongoing credit
      evaluations, generally does not require collateral and
      establishes an allowance for doubtful accounts based upon
      factors surrounding the credit risk of customers, historical
      trends and other information.

                                                               28
<PAGE>

SIDEWARE SYSTEMS INC.
Consolidated Notes to Financial Statements
(Expressed in United States dollars)
(Prepared in accordance with generally accepted accounting
principles in the United States)

Years ended December 31, 2001, 2000 and 1999

21. Subsequent events:

 (a)  Issuance of common stock:

      In January 2002, the Company issued 332,222 common shares in
      the Company to directors and employees in satisfaction of
      $47,667 of unpaid salaries and bonus.

 (b)  Merger with KnowledgeMax, Inc.:

      On December 7, 2001, the Company entered into an
      agreement and Plan of Merger with KnowledgeMax, Inc.
      ("KnowledgeMax"), a private Company incorporated in the United
      States.  On March 20, 2002, shareholders' approval was
      obtained for the merger.  Approximately 24.35
      shares of the Company's common stock will be issued for each
      share of KnowledgeMax common stock, resulting in the issuance
      of approximately 93 million common stock.  Immediately
      following the merger, former KnowledgeMax stockholders will
      own approximately 55% of the outstanding common stock of the
      Company.  The business of KnowledgeMax will become the
      business of the Company, and the Company will change its name
      to KnowledgeMax.  The business combination will be accounted
      for using the purchase method of accounting.  As the merger
      results in the former stockholders of KnowledgeMax owning
      greater than 50% of the merged entity, the acquisition will be
      accounted for as an acquisition by KnowledgeMax of the net
      assets of the Company at their carrying value.

                                                            29
<PAGE>