**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB/A**


**(Amendment
      No. 2)**




(Mark
      One)




x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                1934FOR
                THE FISCAL YEAR ENDED DECEMBER 31, 2005ORo
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                1934FOR
                THE TRANSITION PERIOD FROM N/A TO
                N/A





COMMISSION
      FILE NUMBER: 000-28675





**TRIBEWORKS,
      INC.**


(Name
      of
      Small Business Issuer in Its Charter)





**DELAWARE**
            
            **94-3370795**(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**2001
                152****nd****AVENUE NE**
              **REDMOND,
                WASHINGTON 98052**(Address
                of Principal Executive Offices)**(425)
                458-2360**(Issuer’s
                Telephone Number, Including Area
                Code)






(Former
        Name, Former Address and Former Fiscal Year, if Changed Since Last
        Report)


**111
                VIA QUITO**
              **NEWPORT
                BEACH, CA 92663**(Address
                of principal executive offices) (zip
                code)


Issuer’s
          Telephone Number, Including Area Code: (949) 274-3633


Securities
      registered pursuant to Section 12(b) of the Act: NONE





Securities
      registered under Section 12(g) of the Exchange Act: COMMON STOCK, par value
      $0.0004 per share





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.  YES x NO o





Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and no disclosure will be contained, to the best of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB.





State
      issuer’s revenues for its most recent fiscal year. $593,595





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant as of April 13, 2006 was approximately $16,582,997 based upon the
      closing price per share of the Common stock of $1.60 on that date.





There
      were 21,607,555 shares of the registrant’s Common Stock issued and outstanding
      as of March 31, 2006.





Transitional
      Small Business Disclosure Format (check one) YES o NO x









**EXPLANATORY
      NOTE**




**1.**
              On
                  December 21, 2006 the Company filed a Form 8-K (and an amended
                  Form 8-K/A
                  the following day correcting a typographical error) and an amended
                  Form
                  10-KSB/A restating the statement of operations and the balance
                  sheet for
                  the year ended December 31, 2005 due to a change in accounting
                  policies.
                  It has been determined that the changes made with regard to the
                  capitalization of software development costs and the acquisition
                  of
                  AtlasTG should have been disclosed as a correction of an error.
                  Consequently, full disclosure of this error has been made in the
                  Notes
                  accompanying this refiled Form 10-KSB/A for the year ended December
                  31,
                  2005. The changes made in this refiled 10-KSB/A pertain solely
                  to the
                  wording of Notes and Disclosure statements. The previous changes
                  to the
                  operating results and financial statements for the year ended December
                  31,
                  2005 as set out below in Note 2 remain unchanged.
  **2.**
              On
                  January 20, 2006, Tribeworks completed the acquisition of 100%
                  of the
                  outstanding shares of TakeCareofIT Holdings Limited and its subsidiaries
                  (d/b/a the Atlas Technology Group) (“AtlasTG”). Tribeworks paid $37,235 in
                  cash in consideration to the selling shareholders of AtlasTG and
                  assumed
                  various liabilities. The effect of this acquisition has been filed
                  in a
                  Form 8-K/A on November 17, 2006, which included a pro forma consolidation
                  of AtlasTG into Tribeworks at December 31, 2005. These changes
                  are now
                  reflected in the restated financial statements for the year ending
                  December 31, 2005 and set out in new Notes N, O and P of this amended
                  filing. As a result of these
                  amendments:


a.
            The
                investment in AtlasTG of $1,073,744 has been brought into the December
                31,
                2005 figures in the Balance Sheet as a change in accounting policies
                to be
                consistent with the accounting policies adopted following the acquisition
                of AtlasTG on January 20, 2006;




b.
            The
                accumulated deficit at December 31, 2005 has been reduced by $1,073,744
                and as a result the Total Stockholders’ Equity is now
                $415,583;




c.
            The
                amount of product development expense has been reduced from $1,141,031
                to
                $67,287 and this in turn has reduced the loss from operations to
                $191,283
                from the previous $1,265,027, the loss before income taxes to $171,021
                (previously $1,244,765) and the net loss to $175,791 from
                $1,249,535;




d.
            The
                loss per share has been reduced to $0.02 from the previous
                $0.06.




e.
            The
                reduced loss from operating activities has been reflected in the
                Consolidated Statement of Cash Flows with a compensating investment
                in
                Atlas of $1,073,744.




**3.**
            Further
                note explanations have been added or amended to explain these changes
                and
                appropriate accounting standards associated with the amended results.




**To
      comply with certain technical requirements of the SEC’s rules in connection with
      the filing of this amendment on Form 10-KSB/A and for convenience, we are
      setting forth in this amendment a restatement of the Form 10-KSB as amended
      hereby, and adding, as exhibits, certain current dated certifications of our
      principal executive and principal financial officers. Except for the matters
      described in this Explanatory Note, this amendment does not modify or update
      disclosures in, or exhibits to the Form 10-KSB originally filed on April 17,
      2006. Furthermore, except for the matters described above, this amendment does
      not materially change any previously reported financial results, nor does it
      reflect events occurring after the date of the original Form 10-KSB**,
      except as set out in NOTE O - SUBSEQUENT
      EVENTS**.**







**TABLE
      OF CONTENTS**





**Page**PART
                I
            
            3Item
                1. Description of Business
            
            3Item
                2. Description of Property
            
            8Item
                3. Legal Proceedings
            
            8Item
                4. Submission of Matters to a Vote of Security Holders
            
            8PART
                II
            
            9Item
                5. Market for Common Equity and Related Stockholder
                Matters
            
            9Item
                6. Management’s Discussion and Analysis or Plan of
                Operation
            
            10Item
                7. Financial Statements
            
            19Item
                8. Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure
            
            39Item
                8A. Controls and Procedures
            
            40PART
                III
            
            40Item
                9. Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act
            
            40Item
                10. Executive Compensation
            
            42Item
                11. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            
            43Item
                12. Certain Relationships and Related Transactions
            
            43Item
                13. Exhibits
            
            44Item
                14. Principal Accountant Fees and Services
            
            45SIGNATURES
            
            46




2




**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS**





**Overview**





Our
      main
      business during 2005 was the sale of software and we generate revenues through
      two main distribution channels: the graphics software tools business and the
      enterprise application development business.





Tools
      customers, usually graphics industry professionals, license our iShell® branded
      multimedia application authoring tools, iShell® or iShell Mobile, by purchasing
      the software via our online store or via telephone with one of our sales
      representatives. Tools customers either buy our software with a permanent
      license or pay an annual subscription fee that includes a license to use our
      software and free software upgrades. Kinoma Media Album (KMA), our first
      consumer multimedia tool, is sold through three online stores: Kinoma.com,
      Handango.com and PalmGear.com.





We
      first
      introduced our multimedia authoring tool iShell® in January 1999, as a
      cross-platform software product to allow developers to create multimedia
      applications in a variety of categories, such as sales and business
      presentations, informational/catalog titles, training courses and modules for
      corporations and/or educational institutions, games, learning aids, enhanced
      CDs
      (audio CDs that also contain videos and other visual digital content), video
      yearbooks, and recruitment presentations.





Beginning
      in 2003, we partnered with Kinoma, Inc. (“Kinoma”) to create new products for
      the mobile software market, specifically targeting Palm OS devices. Kinoma
      makes
      Kinoma Player, which is a high-resolution, interactive movie player for
      handhelds running the Palm OS. To date we have developed two products in
      partnership with Kinoma that create Kinoma Player content, iShell Mobile, an
      iShell-based application development tool, launched in October 2003, and Kinoma
      Media Album, a consumer multimedia management tool, launched in May of 2004.
      Kinoma receives a per unit royalty on sales of iShell Mobile and Kinoma Media
      Album. In addition to building these two products together, we have utilized
      Kinoma as a subcontractor on Enterprise projects.





In
      our
      Enterprise business, most of our customers are large corporations that require
      development of custom multimedia tools or complex multimedia applications.
      Enterprise customers usually pay for consulting services performed by
      Tribeworks’ employees and subcontractors. Certain Enterprise customers also
      license our software, usually for a fixed fee or on a per unit basis. As
      evidenced by results for the second half of the year, we generally anticipate
      Enterprise business growth, particularly Enterprise consulting revenues, to
      be
      less predictable and “bumpier” than our Tools business revenues in the
      foreseeable future, and this could impact whether or not we will be profitable
      on a quarter-to-quarter and annual basis. The primary reason is that our
      Enterprise business has a smaller number of customers.





We
      incorporated in California in August 1998 as California Tribeworks. On November
      2, 1999, we entered into a transaction with Pan World Corporation, a publicly
      traded Nevada corporation (Pan World), whereby Pan World agreed to provide
      financing in connection with the merger of a newly formed subsidiary of Pan
      World into California Tribeworks (the Recapitalization). Prior to the
      Recapitalization, Pan World never had any material operations. As a result
      of
      the Recapitalization, shareholders of California Tribeworks exchanged all their
      shares in California Tribeworks for Pan World common stock. Subsequent to the
      Recapitalization, we reincorporated in Delaware as Tribeworks, Inc. We opened
      a
      wholly owned subsidiary in Japan (Tribeworks Japan) in August 2000, which
      engaged in sales and professional services activities primarily in our
      Enterprise application development business, until it was closed during the
      third quarter of 2004.





We
      experienced a net loss of $175,791 for the year ended December 31, 2005 and
      we closed the quarter and year with a working capital deficit of $660,073.
      As
      announced on March 30, 2005 the previous business stream has proven to be
      of insufficient in scope and profitability to sustain a viable public company,
      and we have decided to instead pursue a plan of reorganization that has the
      potential to be larger in scope and more profitable than our prior
      business.





The
      plan
      of reorganization that our board previously approved included the transfer
      of
      most assets and liabilities (including the accrued salary obligations described
      in NOTE L to our financial statements included herewith) to our operating
      subsidiary, Tribeworks Development Corporation (“TDC”), and to sell the
      subsidiary to current and former members of our management or
      others.




3




On
      January 20, 2006 the Company acquired TakeCareofIT Holdings Ltd., doing business
      as Atlas Technology Group (Atlas), a Malta Corporation that was established
      in
      September 2004 to provide external Information Technology (IT) application
      support services for organizations with large IT functions.





Atlas
      has
      its head office in Malta with a subsidiary office in Wellington, New Zealand
      and
      a data center in Seattle. Atlas has 11 employees and 3 working
      directors.





Atlas
      Technology Group plans to become a leading Information Technology (IT)
      outsourcing support company for custom software applications
      worldwide.





Atlas
      is
      in the business of providing custom, outsourced, application software support
      services to its customers. These will range from supporting specialized networks
      and single applications to providing the entire IT infrastructure management
      for
      customers who want to outsource everything and focus on their core business.
      In
      partnership with other IT development consultancies, a fully outsourced IT
      capability can be provided, with hard performance metrics and predictable
      costs.





The
      company is leveraging the recent advances in software, monitoring systems,
      and
      communications, to build a new, leading edge, global support infrastructure,
      providing 24x7 software support to large and medium sized companies. The new
      application on-boarding and monitoring processes should allow for dramatic
      cost
      savings over existing legacy IT service providers.





The
      services offerings will be worldwide, with the majority of the targeted
      customers having multi- national operations. It is intended to be a highly
      distributable venture, able to place people in the best possible locations,
      yet
      offering a seamless service offering across geographies.





The
      initial support centers are based in Malta, with the second support center
      in
      New Zealand, creating a “follow-the-sun”, 24 hour coverage. As business grows,
      third and fourth locations are projected to increase capacity, as needed. State
      of the art VoIP, Call Tracking and Monitoring technology provide each employee
      with the leverage needed to maximize support delivery to the fullest possible
      extent.





Two
      central data center locations will also be established to run the required
      infrastructure. All of these servers will be in a secure, fully redundant
      configuration, and have on-demand high bandwidth available, as well as onsite
      backup and hands-on support services.





This
      is
      discussed further in Note O (Subsequent Events) to the Consolidated Financial
      Statements and below.





We
      are
      currently a fully reporting company under Section 12(g) of the Securities
      Exchange Act of 1934, as amended, and our common stock is quoted on the OTC
      Bulletin Board under the symbol TWKS.OB





**Products
      and Services**





***Tools
      Business***





Our
      Tools
      business in 2005 was focused on direct sales of licenses and bundled support
      services to our proprietary graphical software application, iShell®, and
      complementary products such as software plug-ins and product documentation.
      For
      the year ended December 31, 2005, the Tools business accounted for 27% of total
      revenues.





iShell®
      is a graphical software application that allows creation of interactive
      rich-media applications. Applications can be deployed via the Internet, a
      CD-ROM, a kiosk (interactive retail display), or a combination thereof. iShell
      offers the ability to reuse common interactive elements in an expandable,
      drag-and-drop, object-oriented environment that can save significant production
      time for developers. iShell has been released for Windows and Macintosh
      operating systems.




4


iShell
      Mobile is an object oriented programming tool used to develop applications
      for
      the Palm OS. iShell Mobile allows developers to rapidly design interactive
      multimedia rich applications including business presentations,
      informational/catalog titles, training courses and modules for corporations
      and/or educational institutions. iShell Mobile extends the benefits of iShell
      to
      software application developers working in the Palm OS handheld
      market.





Kinoma
      Media Album (KMA), our first consumer multimedia tool, allows customers to
      build
      interactive media albums for viewing on Palm OS devices. KMA is sold through
      three online stores: Kinoma.com, Handango.com and PalmGear.com.





We
      attract new iShell and iShell Mobile customers primarily through our websites,
      www.tribeworks.com and www.iShell.com, where iShell and iShell Mobile can be
      downloaded for trial use. Potential Tools customers register on our website
      and
      provide contact information which we use to attempt to convert them to paying
      customers.





iShell®
      customers either buy our software with a permanent license or pay an annual
      subscription fee that includes a license to use our software and customer
      support services. iShell Mobile and Kinoma Media Album customers buy our
      software with a permanent license. No subscriptions are currently available
      for
      iShell Mobile or Kinoma Media Album.




***Enterprise
      Business***





Enterprise
      customers are large companies and other entities that require development of
      customized multimedia authoring tools or multimedia applications or
      presentations. For the year ended December 31, 2005, the Enterprise business
      accounted for 73% of our total revenues.





Enterprise
      customers pay for professional services, which we provide for a fixed fee or
      on
      a daily rate basis via our employees and outside consultants. Enterprise
      customers also license customized versions of our software for a fixed fee
      or on
      a per unit basis. We try to structure our contracts so that we own some of
      the
      work that we create during Enterprise engagements, which helps to underwrite
      our
      research and development costs.





During
      2005, one customer accounted for 42% of our Enterprise revenue. Our relationship
      with this customer is described below:





Pioneer
      Corporation, a consumer electronics company with more than 30,000 employees
      and
      more than $5 billion (USD) in sales, has been a customer since 2000. Under
      the
      contracts that were active during 2004 and 2005, we performed software
      engineering services for Pioneer for the development of software products that
      allow users to create and manage multimedia content for next generation digital
      signs. The main part of this work was completed during the second quarter of
      2005 and since then there has only revenue from some residual and maintenance
      activities.





We
      do not
      have a dedicated sales force for our Enterprise business, as our TDC officers
      serve the role of salesmen and account managers for prospective and current
      Enterprise customers. During 2004 and 2005, the primary thrust of our Enterprise
      sales efforts was to secure new relationships and contracts with mobile device
      manufacturers and carriers, which we view as our primary targets for future
      Enterprise revenue growth if we decide to continue this business.





***IT
      Support Services***





Atlas
      is
      in the business of providing custom, outsourced, application software support
      services to its customers. These will range from supporting specialized networks
      and single applications to providing the entire IT infrastructure management
      for
      customers who want to outsource everything and focus on their core business.
      In
      partnership with other IT development consultancies, a fully outsourced IT
      capability can be provided, with hard performance metrics and predictable
      costs.




5





Atlas
      is
      leveraging the recent advances in software, monitoring systems, and
      communications, to build a new, leading edge, global support infrastructure,
      providing 24x7 software support to large and medium sized companies. The new
      application on-boarding and monitoring processes should allow for dramatic
      cost
      savings over existing legacy IT service providers. The services offerings will
      be worldwide, with the majority of the targeted customers having multi-national
      operations. It is intended to be a highly distributable venture, able to place
      people in the best possible locations, yet offering a seamless service offering
      across geographies.





The
      initial support centers are based in Malta, with the second support center
      in
      New Zealand, creating a “follow-the-sun”, 24 hour coverage. As business grows,
      third and fourth locations are projected to increase capacity, as needed. State
      of the art VoIP, Call Tracking and Monitoring technology provide each employee
      with the leverage needed to maximize support delivery to the fullest possible
      extent.





***Product
      Development***





Our
      iShell products and services enable our customers to save time and cost building
      and deploying rich-media applications. We believe that our future success
      depends on our ability to enhance existing products and develop and introduce
      new products on a timely basis. We maintain an internal staff to develop the
      software that we market and sell to customers. A significant portion of our
      software is created as a result of work that we perform for our Enterprise
      customers. To date, we have structured our contracts with Enterprise customers
      so that we retain most intellectual property rights in the software that we
      develop for them. Due to the changing technological environment for computer
      systems and other electronic devices, we continue to adapt our products to
      new
      hardware and software platforms and to embrace emerging technology standards.
      For the years ended December 31, 2005 and 2004, iShell product development
      expenditures were $39,900 and $94,387





In
      addition the Company advanced $1,073,744 to Atlas to enable Atlas to development
      its new IT Support system. Atlas is now testing a suite of software including
      its unique on-boarding and monitoring processes which allow for dramatic cost
      savings over existing legacy IT service providers. Atlas is leveraging the
      recent advances in software, monitoring systems, and communications, to build
      a
      new, leading edge, global support infrastructure, providing 24x7 software
      support to medium sized companies for their custom software applications
      worldwide.





**Technical
      Support and Education**





We
      provide technical support to purchasers of iShell subscriptions, which include
      rapid response to support questions via discussion lists. We are able to limit
      expenditures for customer support because subscribers are able to answer most
      questions for one another through discussion lists.





We
      also
      hold periodic training sessions in San Francisco and in other locations, where
      we teach new and existing iShell users about our products and latest product
      developments.




**Competition**





Our
      present iShell based business competes in markets that are intensely
      competitive, highly fragmented, and rapidly changing. We have experienced
      increased competition from current and potential competitors, many of which
      are
      larger and more profitable and as a result have greater technical, marketing,
      and other resources. We expect the competition will continue, and we will
      compete with the major graphics and multimedia software tools companies, as
      well
      as service companies building custom multimedia applications for corporate
      clients. We believe that the primary competitive factors in providing multimedia
      software applications to businesses and educational institutions are ease of
      use, price, quality of service, availability of customer support, reliability,
      technical expertise, and experience. Our success will depend on our ability
      to
      provide quality development tools and value-added services,
      including:





·
            Augmenting
                the ability of the software application to function on different
                hardware
                platforms and operating systems, such as Windows and Macintosh
                environments·
            Delivery
                of our software to new devices such as mobile phones and personal
                digital
                assistants (PDA’s)





·
            Providing
                flexibility in the degree and level of customization of software
                applications·
            Increasing
                product functionality and system
                performance


·
            Improving
                quality of product·
            Reducing
                total cost of product development





·
            Improving
                sales and distribution efficiency




·
            Improving
                  brand name recognition; and




·
            Providing
                high quality professional support
                services.




6




We
      experience competition in each area of our business. Companies in the graphics
      software tools area include Macromedia, Adobe Systems, and Autodesk. These
      companies market a variety of products addressing our target markets, including
      software tools for authoring and delivering interactive information targeted
      to
      computer-based training specialists and educators, as well as multimedia
      professionals. They also offer graphics and publishing products for online
      publishing as well as print-based publishing. In addition, competitors also
      provide extensive product training to support their products.





Most
      of
      our current and potential competitors in the Internet services and graphics
      and
      multimedia industries have longer operating histories, greater name recognition,
      and larger existing customer bases than we have. These competitors may be able
      to respond faster to new or emerging technologies and changes in customer
      requirements. Accordingly, there can be no assurance that we will be able to
      compete successfully.





In
      the
      case of Atlas, there are a large number of traditional consultancies endeavoring
      to compete in this space, including IBM Global Services, HP, EDS, and Accenture
      as well as a number of smaller independents. The industry is broken down into
      three segments; first are the hardware manufacturers that provide additional
      IT
      services; second, are the large pure-play IT service providers targeting Fortune
      500 companies, and third are smaller independent companies that generally
      specialize in specific local markets.





The
      largest firms in terms of 2005 revenue are IBM with total sales of $91.1
      billion, of which approximately one half, or $44 billion, represents services,
      and of this amount approximately $17.1 billion is outsourcing services.
      Outsourcing is IBM’s fastest growing business segment and is growing at 17%
      annually, or almost double the rate of the overall company.





HP
      is the
      second largest in terms of revenue, with $87.9 billion in total 2005 revenues,
      of which approximately $14 billion is services including IT outsourcing, and
      which is growing at an annual rate of 22%. HP is currently very interested
      in a
      new service offering, based on ITIL standards, for custom application support.
      It is expected that they will release this new service offering to market during
      2006. This offering is expected to be a reasonably close fit to the custom
      support Atlas intends to offer.





The
      pure-play IT service providers, with 90% or more of their revenues coming from
      IT support services, include EDS, with $19.8 billion in revenue, Computer
      Sciences Corporation with $14.6 billion, Accenture with $17.8 billion, and
      Bearingpoint with $3.4 billion in 2005 revenues.





The
      improvement of infrastructure has meant the introduction of the third group
      to
      the competitive picture, notably in India, where Wipro and Infosys are beginning
      to provide support services and call centers. Many hosting providers are also
      trying to offer ASP services as an add-on. There are other more regional
      players, such as Wavex and Motive that are also targeting the SME
      market.





In
      addition, we believe that the single biggest competitive factor is entrenched
      in-house support groups. In fact, we believe that we will be competing with
      in-house support groups rather than external competitors in over 90% of
      competitive cases.





**Government
      Regulation**





Laws
      relating to the Internet are constantly changing. Federal, state, local and
      foreign governments are considering a number of new legislative and regulatory
      proposals relating to Internet commerce. As a result, a number of laws or
      regulations may be adopted regarding Internet user privacy, security, taxation,
      pricing, quality of products and services, and intellectual property ownership,
      which may also be applicable to us. How existing laws will be applied to the
      Internet, in areas such as property ownership, copyrights, trademarks, trade
      secrets, and obscene or indecent communications, is uncertain.




7




**Proprietary
      Rights**





We
      rely
      on a combination of copyright laws, trademark laws, contract laws, and other
      intellectual property protection methods to protect our technology, including
      our logo and the names “Tribeworks” and “iShell” in the United States and other
      countries and equally we will be relying on the Atlas name for the new business
      stream. We believe that our trademarks and the use of material in our website
      are protected under current provisions of copyright law, although legal rights
      to Internet content and commerce are not clearly settled by law. We were granted
      trademarks to “Tribeworks”, the Tribeworks faces logo, and “iShell” in
      2000.





In
      November 1999, we entered into a software agreement (Keepsake Software
      Agreement) with Keepsake SPRL (Keepsake) and Gilbert Amar (one of our
      co-founders) pursuant to which we acquired the right, title, and interest to
      iShell, our lead product.





In
      April
      2001, we jointly filed a United States patent application with Pioneer Electric
      Corporation in the area of interactive display technology.





On
      January 20, 2006 the Company acquired Atlas and this brings with new proprietary
      rights such as its unique OnBoarding processes well as a range of trade secrets
      to its IT support technologies.





**Employees**





As
      of
      December 31, 2005, TDC had a total of 5 employees and 2 consultants working
      on a
      full-time and part-time basis.





With
      the
      acquisition of Atlas 11 new employees and 3 working directors were added. Atlas
      also uses outside consultants to carry out some of its development and testing
      work.





**ITEM
      2. DESCRIPTION OF PROPERTY**





TDC
      leases approximately 900 square feet in San Francisco, California for our sales,
      engineering, and administrative offices. The current annual rent for the San
      Francisco facility is approximately $23,400 and the lease expires in December
      2006.





Atlas
      has
      a six (6) year office lease covering approximately 471 square meters located
      at
      Level 4, No. 9, Empire Street, Gzira GZR04, Malta expiring on August 14, 2010
      at
      a base annual rent of Lm16,000 (approx US$45,000).





Atlas
      also has a four year office lease of the second floor of 139-141 Featherston
      Street in Wellington, New Zealand expiring on July 31, 2009. The office
      comprises approximately 300 sq meters with a base annual rental of NZ$55,500
      per
      annum (approx US$35,000) plus 12.5% Goods and Services Tax (“GST”) which is
      claimable against GST revenue tax payable or is refundable.





All
      of
      the aforementioned leased facilities are adequate for our current
      needs.





**ITEM
      3. LEGAL PROCEEDINGS**





We
      are
      not aware of any legal proceedings (either presently engaged in or contemplated)
      by any government authority or other party involving our Company, our properties
      or our products except as set out below:





Robert
      Davidorf, a former officer of our subsidiary, TDC, resigned on April 12, 2006.
      In connection with his resignation, Mr. Davidorf has made demand for
      approximately $130,000 in accrued salaries and expenses owed to him allegedly.
      The Company disputes the amounts asserted by Mr. Davidorf as being owed to
      him.
      We have not yet been served with a lawsuit and we are attempting to negotiate
      this claim with Mr. Davidorf. If such a suit is filed, we anticipate that we
      will raise a number of affirmative defenses and file counter claims against
      Mr.
      Davidorf. We are unable at this time to make an assessment of the outcome of
      this dispute.





**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 the fiscal year ended December 31, 2005.




8




**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





Tribeworks,
      Inc. common stock is quoted on the OTC bulletin board under the symbol TWKS.OB.
      The following table sets forth the range of closing high and low bid quotes
      for
      each period indicated as reported by stockwatch.com and reflects all stock
      splits effected by the Company:





**2005**
            
            **2004****High**
            
            **Low**
            
            **High**
            
            **Low**First
                quarter
            $1.395
            
            $0.900
            
            $0.900
            
            $0.360Second
                quarter
            $1.350
            
            $0.720
            
            $0.900
            
            $0.360Third
                quarter
            $1.750
            
            $1.260
            
            $0.600
            
            $0.300Fourth
                quarter
            $1.800
            
            $1.250
            
            $3.450
            
            $0.300





The
      above
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission, and may not represent actual transactions.





We
      have
      approximately 300 stockholders as of April 17, 2006 comprising both registered
      shareholders and those held in Street names.





We
      have
      not declared or paid any cash dividends on our common stock and presently intend
      to retain our future earnings, if any, to fund the development and growth of
      our
      business and, therefore, do not anticipate paying any cash dividends in the
      foreseeable future.





We
      established our 1999 Stock Option Plan (the “1999 Plan”) on November 2, 1999
      with 133,333 shares (on an adjusted basis) approved for issuance. We established
      our 2001 Stock Plan (“2001 Plan”) on August 16, 2001 with 250,000 shares (on an
      adjusted basis) approved for issuance. We established our 2004 Employee Stock
      Incentive Plan (“2004 Plan”) on March 24, 2004 which allows us to issue options
      to staff and consultants up to 25% of our outstanding common stock, as
      determined from time to time, which equalled 5,401,888 shares at December 31,
      2005. The purpose of the 1999 Plan is to grant stock and options to purchase
      our
      common stock to our employees and key consultants, the purpose of the 2001
      Plan
      is to grant stock and warrants to purchase our common stock to employees and
      key
      consultants for outstanding cash payments due, and the purpose of the 2004
      Plan
      is to grant stock options to purchase our common stock, restricted stock, and
      stock bonuses to employees, officers and key consultants. The total amount
      of
      shares subject to the three Plans as of December 31, 2004 was 775,721 shares
      (on
      an adjusted basis). Included in the Equity Compensation Plan line items, but
      outside of the scope of the 1999 Plan, 2001 Plan, and 2004 Plan, was a warrant
      to purchase 15,000 shares of our common stock issued to a former officer and
      director which expired on January 1, 2006.




**Plan
                  Category**
              
              **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
              
              **Weighted-average
                  exercise price of outstanding options, warrants and
                  rights**
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans**Equity
                  Compensation Plans approved by security holders.
              
              
              50,333
              
              $
              6.53
              
              
              5,702,221**Total**
              
              
              50,333
              
              $
              6.53
              
              
              5,702,221






No
      new
      options or warrants were issued to staff during the 2005 year.





We
      made
      no sales of our unregistered common stock during the quarter ended December
      31,
      2005.





On
      December 28, 2005, the 818,000 Series A Preferred Stock were converted into
      818,000 shares of common stock by the company bringing the total number of
      outstanding shares of common stock to 21,607,555.




9




**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





**Forward
      Looking Statements**





The
      following discussion contains “forward-looking statements” within the meaning of
      Section 27A of the Securities Act of 1933 and Section 21E of the Securities
      Exchange Act of 1934 that are subject to risks and uncertainties. These
      forward-looking statements are based on our management’s beliefs as well as
      assumptions and information currently available to us. When used in this report,
      the words “believe,” “expect,” “anticipate,” “estimate” and similar expressions
      are intended to identify forward-looking statements. There are several important
      factors that could cause actual results to differ materially from historical
      results and percentages and results anticipated by the forward-looking
      statements, such as, but not limited to:


·
            whether
                or not our products are accepted by the marketplace and the pace
                of any
                such acceptance, 
 ·
            our
                ability to continue to grow our Tools and Enterprise
                businesses, 
 ·
            Improvements
                in the technologies of our competitors, 
 ·
            changing
                economic conditions, and 
 ·
            other
                factors, some of which will be outside of our
                control.




We
      have
      sought to identify most risks to our business but cannot predict whether or
      to
      what extent any of such risks may be realized. There can be no assurance that
      we
      have identified all possible risks that might arise. Investors should carefully
      consider all such risks before making an investment decision with respect to
      our
      common stock. We caution you not to place undue reliance on any forward-looking
      statements, all of which speak only as of the date of this report. You should
      refer to and carefully review the information in future documents we file with
      the Securities and Exchange Commission.





**Results
      of Operations**





We
      witnessed an unprofitable year in 2005, with a net loss of $175,791. This was
      our second unprofitable year since recording two consecutive profitable years
      in
      2003 and 2002. Our financial success to date has relied on steady or growing
      revenues in our Tools business, and the attainment of sustainable key contracts
      in our Enterprise business, but in 2005 we decided to reorganize the Company
      and
      change its direction. Both the previous Tools and Enterprise businesses
      witnessed significant declines during 2004 and 2005, which had a negative impact
      on our profitability. In addition, having significantly reduced our cost
      structure during 2002 and 2003, during 2004 we began to accrue salaries for
      our
      key officers and employees, who were being paid under-market wages. These salary
      accruals also had a negative impact on our profitability. As previously
      discussed, the future success of our business is not assured, and our financial
      condition has weakened so taking account of these uncertainties in our business,
      and in light of our financial condition, on March 30, 2005, we announced a
      plan
      of reorganization. As explained earlier it has now been decided to sell the
      previous business and to concentrate on the new Atlas IT support business which
      was acquired on January 20, 2006. The results set out below are for the
      Tribeworks business including where noted the new equity funds raised and
      invested into the new business stream via Atlas.





**Revenues**





Total
      revenues were $593,595 for the year ended December 31, 2005, a decrease of
      28%
      compared to total revenues of $821,572 for the year ended December 31, 2004.
      The
      Tools Business, which primarily includes sales of commercial or educational
      use
      of our iShell software, sales of books and third party plug-ins, and a small
      amount of sales of iShell Mobile and Kinoma Media Album, decreased by 47% to
      $159,759 for 2005, compared to $300,799 for 2004. The decrease in Tools revenues
      was due primarily to a decrease in iShell revenues, which we believe is the
      result of a shrinking marketplace for interactive CD-ROM authoring tools. The
      Enterprise business decreased in 2005 by 17% to $433,836, compared with $520,773
      for 2004. Enterprise revenues for 2005 consisted of $426,477 in professional
      services revenues and $7,359 in licensing revenues, compared with $514,687
      in
      professional services revenues and $6,086 in licensing revenues for 2004. The
      decrease in Enterprise revenues is due primarily to a decrease in revenues
      associated with our ongoing relationship with Pioneer Corporation, our only
      ongoing Japanese client. This decrease was partially offset by an increase
      in
      revenues associated with our professional services related to building software
      applications and presentations for mobile devices. International revenues,
      which
      consist of sales to foreign customers, represented 42% of revenues for 2005,
      compared to 53% of revenues for 2004.




10


**Cost
      of Sales**





Cost
      of
      sales includes royalties paid to third parties for licensed technology, costs
      associated with order fulfillment, credit card fees, web hosting fees, and
      costs
      associated with consulting services, including salaries, subcontractor fees,
      and
      out-of-pocket expenses. Cost of sales was $214,606 for the year ended December
      31, 2005, down from $328,862 for the year ended December 31, 2004. The decrease
      in cost of sales was due to a decrease in sales volume. Gross margins on a
      percentage basis were 64% for 2005 compared to 60% for 2004.




**Operating
      Expenses**





Product
      support expenses consist mainly of compensation, benefits and consulting fees
      paid to product support personnel. Product support expenses were $11,673 and
      $40,377 for the years ended December 31, 2005 and 2004, respectively. As a
      percentage of Tools sales, product support expenses were 7% and 13% for 2005
      and
      2004, respectively.





Product
      support and product development expenses for the old business streams were
      reduced substantially during 2005 as the real new development expenditure took
      place in Atlas via the $1,073,744 of money advanced to Atlas to develop the
      new
      IT Support business stream. The iShell® product development expenses for the
      year ended December 31, 2005 were $39,900 compared to the $94,387 spent in
      the
      year ended December 31, 2004. This decrease reflects reduced development work
      on
      iShell® during 2005.





Sales
      and
      marketing expenses consist primarily of compensation and benefits and other
      public relations and marketing costs with regard to the pre-existing Tribeworks
      business. Sales and marketing expenses were $132,262 and $200,488 for the years
      ended December 31, 2005 and 2004, respectively.





General
      and administrative expenses consist primarily of compensation and benefits,
      fees
      for professional services, and overhead. General and administrative expenses
      were $359,050 and $350,671 for the years ended December 31, 2005 and 2004,
      respectively.





**Other
      Income (Expense)**





Interest
      expense was $4,463 for the year ended December 31, 2005 (2004 - $792 of expense)
      and there was also $23,667 of interest earned on the advances made to the Atlas
      Technology Group in the 2 nd half of
      2005. There was also $1,058 of Other income for the year ended December 31,
      2005
      (2004 - Nil).





**Provision
      for Income Taxes**





$4,770
      of
      income tax provision was recorded for the year ended December 31, 2005 which
      related to the taxes due for the 2003 and 2004 years. Note the 2003 tax return
      had not been prepared when the 2004 financial statements were completed and
      therefore there was no tax provided in 2004.





**Net
      Income**





Net
      loss
      for 2005 was $175,791 for the year ended December 31, 2005 that relates to
      the
      pre-existing Tribeworks business (offset by $19,204 of net interest income)
      and
      which compares to a net loss of $194,005 for the year ended December 31,
      2004.





**Liquidity
      and Capital Resources**





At
      December 31, 2005, we had cash of $84,527 compared to $43,729 at December 31,
      2004. Since inception, we have financed our operations through issuance of
      stock
      and revenues derived from our Tools and Enterprise businesses. Through December
      31, 2004, we had raised $2,672,656 from the sale of stock. At December 31,
      2004,
      our principal source of liquidity was $43,729 of cash. We were unprofitable
      in
      2004. Given our financial condition, on March 30, 2005, we announced a plan
      of
      reorganization that was described in *Note
      L - Subsequent Events* to our
      2004 consolidated financial statements.





Following
      the announcement of the plan of reorganization and the new Board’s decision to
      move into a new revenue stream and acquire the Atlas Technology Group,
      $1,061,831 of new equity has been raised in 2005 in the form of convertible
      preferred stock and common stock, with $1,073,744 (before interest) being
      advanced to Atlas to develop the new IT Support systems. The new equity raised
      comprised $451,000 in new Preferred Stock ($409,000 of which was converted
      into
      Common Stock on December 28, 2005), $300,000 on new Common Stock ($190,000
      of
      which was approved for issue at the 2005 AGM) and we received $400,000 of new
      subscription monies for new Common Stock during the 4 th quarter
      of 2005.





The
      net
      loss for 2005 was funded out of a mixture of the proceeds from a loan note
      payable ($91,474 drawn down during 2005), collections of accounts receivables
      and increases in accounts payable and accrued expenses.




11




**Critical
      Accounting Policies**





***Our
      critical accounting policies are described in Note B - Basis of Presentation
      and
      Summary of Significant Accounting Policies of the Notes to our financial
      statements*** .
      Our
      discussion and analysis of financial conditions and results of operations are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of the financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues, expenses, and related disclosure of contingent assets and liabilities.
      On an on-going basis, we evaluate the estimates that we have made. These
      estimates have been based upon historical experience and on various other
      assumptions that we believe to be reasonable under the circumstances. Actual
      results may differ from these estimates under different assumptions or
      conditions. We believe the following critical accounting policies affect our
      more significant judgments and estimates used in the preparation of our
      consolidated financial statements.





***Allowance
      for Doubtful Accounts.*** The
      Company maintains an allowance for doubtful accounts for estimated losses
      resulting from the inability of our customers to make required payments, which
      is included in bad debt expense. Management determines the adequacy of this
      allowance by regularly reviewing our accounts receivable aging and evaluating
      individual customer receivables, considering customers’ financial condition,
      credit history and current economic conditions. If the financial condition
      of
      our customers were to deteriorate, resulting in an impairment of their ability
      to make payments, additional allowances may be required.




***Percentage-of-Completion
      Accounting/Revenue Recognition.*** Revenue
      is generally recognized when all contractual or transfer obligations have been
      satisfied and collection of the resulting receivable is probable. Revenues
      from
      membership subscriptions are recognized proportionally over the membership
      period, usually one year. Revenues and estimated profits on custom development
      services are generally recognized under the percentage-of-completion method
      of
      accounting using a cost-to-cost methodology; profit estimates are revised
      periodically based on changes in facts; any losses on contracts are recognized
      immediately. Revenue from the sale of licenses are recognized when all the
      following criteria are met: persuasive evidence of an agreement exists, delivery
      has occurred, the fee is fixed or determinable and collectability is probable.
      If all aspects but the last have been met or if post contract customer support
      could be material, revenue is recognized as payments from customers are
      received.





***Income
      Taxes.*** We
      account for income taxes in accordance with SFAS No. 109, “Accounting for Income
      Taxes.” Significant judgment is required in determining our provision for income
      taxes. We assess the likelihood that our deferred tax asset will be recovered
      from future taxable income, and to the extent we believe that recovery is not
      likely, we establish a valuation allowance. We consider future taxable income
      projections, historical results and ongoing tax planning strategies in assessing
      the recoverability of deferred tax assets. However, adjustments could be
      required in the future if we determine that the amount to be realized is less
      or
      greater than the amount that we recorded. Such adjustments, if any, could have
      a
      material impact on our results of our operations.





**Risk
      Factors**





These
      risk factors equally apply to both the existing Tribeworks business as well
      as
      the new Atlas business unless otherwise stated.




12




***We
      have a limited operating history and there is a great degree of uncertainty
      as
      to our future results. We have experienced losses recently and may never achieve
      sustained profitability.***





We
      have a
      limited operating history upon which an evaluation of our business and prospects
      can be based. Our prospects must be evaluated with a view to the risks
      encountered by a company in an early stage of development, particularly in
      light
      of the uncertainties relating to the new and evolving markets in which we intend
      to operate and in light of the uncertainty as to market acceptance of our
      business model. We will be incurring costs in marketing our products and
      services to customers and in building and developing an administrative
      organization. To the extent that revenues do not match these expenses, our
      business, results of operations, and financial conditions will be materially
      adversely affected. There can be no assurance that we will be able to generate
      sufficient revenues from the Tools business or Enterprise business to or our
      new
      IT support business to maintain profitability on a quarterly or annual basis
      in
      the future. We may not be able to sustain or increase profitability on a
      quarterly basis or achieve profitability on an annual basis.





***We
      expect high variability and uncertainty as to our future operations and
      financial results.***





Failure
      to continue to operate profitably on an annual basis may adversely affect the
      market price of our common stock and our ability to raise capital and continue
      operations. We expect high variability and uncertainty as to our future
      operations and financial results. As we continue to develop and market our
      business, our quarterly operating results may fluctuate as a result of a variety
      of factors. Many of these factors are outside our control, including demand
      for
      the development of rich-media applications, the introduction of new products
      and
      services by our competitors, price competition or pricing changes in the
      industry, technical difficulties or system downtime, general economic
      conditions, and economic conditions specific to the Internet and related media.
      Due to these factors, among others, our operating results may fall below our
      expectations and the expectations of investors.





***Our
      products and services may not be accepted by the industries that use rich-media
      applications.***





Our
      future success in our present business depends on our ability to create and
      deliver sophisticated rich-media tools and applications. If our products and
      related services are not widely accepted, our ability to make sales in our
      new
      business will be hampered just as has been the case in the present Tools
      business and Enterprise business. There can be no assurance that our new IT
      support business will be attractive to a sufficient number of users to generate
      significant revenues. Just as we have been unable to evolve our present products
      and to develop new products that allow us to attract, retain, and expand a
      loyal
      membership base, if we are unable to establish a sound customer base for our
      new
      business, then results of operations, and financial condition will be materially
      adversely affected.





***The
      rich-media market is intensely competitive. We cannot assure you that we will
      be
      able to achieve market acceptance.***





The
      rich-media market is intensely competitive. We expect the competition to
      increase as new competitors enter the market. Many of our competitors may have
      greater technical, marketing, and other resources. We believe the primary
      competitive factors in providing rich-media application services and tools
      to
      development organizations and large corporations are value-added services,
      ease
      of use, price, quality of service, availability of customer support,
      reliability, technical expertise, and experience. To the extent that we are
      not
      able to attract sources of revenues from the Tools business and the Enterprise
      business, our business, results of operations, and financial condition will
      be
      materially adversely affected as hence the Board has made the decision to sell
      this business.





A
      number
      of companies currently offer services or products that compete directly or
      indirectly with our current products and service offerings. These companies
      include Macromedia and Adobe Systems. These companies market a variety of
      products addressing our target markets, including software tools for authoring
      multimedia content. If we are unable to introduce competitive products with
      competitive training and consulting services, our business, results of
      operations, and financial condition will be materially adversely
      affected.




Most
      of
      our current and potential significant competitors in the Internet services,
      graphics, and multimedia industries have longer operating histories, greater
      name recognition, and larger existing customer bases than us. These competitors
      may be able to respond faster to new or emerging technologies and changes in
      customer requirements. Because of their greater resources, they will be able
      to
      make more responsive changes to market conditions. Accordingly, there can be
      no
      assurance that we will be able to compete successfully in these
      industries.




13




In
      the
      case of Atlas, there are a large number of traditional consultancies endeavoring
      to compete in this space, including IBM Global Services, HP, EDS, and Accenture
      as well as a number of smaller independents. The industry is broken down into
      three segments; first are the hardware manufacturers that provide additional
      IT
      services; second, are the large pure-play IT service providers targeting fortune
      500 companies, and third are smaller independent companies that generally
      specialize in specific local markets.





The
      largest firms in terms of 2005 revenue are IBM with total sales of $91.1
      billion, of which approximately one half, or $44 billion, represents services,
      and of this amount approximately $17.1 billion is outsourcing services.
      Outsourcing is IBM’s fastest growing business segment and is growing at 17%
      annually, or almost double the rate of the overall company. HP is the second
      largest in terms of revenue, with $87.9 billion in total 2005 revenues, of
      which
      approximately $14 billion is services including IT outsourcing, and which is
      growing at an annual rate of 22%. HP is currently very interested in a new
      service offering, based on ITIL standards, for custom application support.
      It is
      expected that they will release this new service offering to market during
      2006.
      This offering is expected to be a reasonably close fit to the custom support
      Atlas intends to offer.





The
      pure-play IT service providers, with 90% or more of their revenues coming from
      IT support services, include EDS, with $19.8 billion in revenue, Computer
      Sciences Corporation with $14.6 billion, Accenture with $17.8 billion, and
      Bearingpoint with $3.4 billion in 2005 revenues.





The
      improvement of infrastructure has meant the introduction of the third group
      to
      the competitive picture, notably in India, where Wipro and Infosys are beginning
      to provide support services and call centers. Many hosting providers are also
      trying to offer ASP services as an add-on. There are other more regional
      players, such as Wavex and Motive that are also targeting the SME
      market.





In
      addition, we believe that the single biggest competitive factor is entrenched
      in-house support groups. In fact, we believe that we will be competing with
      in-house support groups rather than external competitors In over 90% of
      competitive cases.





Having
      stated all of the above we believe that there is a market for Atlas’ IT support
      services and Atlas is at present doing testing with potential customers, albeit
      on a small scale to start with.





***Our
      iShell software depends on Apple’s QuickTime technology to function properly. We
      cannot assure you that Apple will continue to develop the QuickTime technology
      or distribute it free of charge, or will not develop software applications
      which
      compete directly with Tribeworks iShell product.***





Our
      iShell product line currently requires installation of Apple Computer’s
      QuickTime software in order to function properly on both Windows and Macintosh
      systems. We have no control over whether, and cannot assure that, Apple’s
      QuickTime will maintain or enlarge its current market share against competitive
      technologies. In addition, although Apple’s QuickTime technology has been under
      development for more than nine years, we cannot assure that Apple will continue
      to develop the technology or distribute it free of charge to consumers. Apple
      may also substantially alter its business or licensing strategy with QuickTime
      in a way that could adversely impact our business, resulting in increases in
      our
      development costs. In addition, Apple has increased its graphic software
      development efforts and may decide to compete directly in the multimedia
      authoring tool market.





***We
      cannot be certain that we will be able to establish and maintain the Tribeworks
      brand, which is critical to our efforts to attract and expand our
      market.***





We
      believe that establishing and maintaining the Tribeworks brand is a critical
      aspect of our efforts to attract and expand our Internet audience. The
      importance of brand recognition will increase due to the growing number of
      Internet sites and the relative lack of significant barriers to entry in
      providing Internet services, tools, products, and content. If we fail to promote
      and maintain our brand, or if we incur excessive expenses in an attempt to
      promote and maintain our brand, our business, financial condition and operating
      results will be materially adversely affected.





Equally
      so, Atlas as a new ‘start-up’ in the market will also have to establish it’s
      brand and marketing of the brand has already commenced at various trade shows
      in
      Europe.




14




***Our
      success depends on our ability to address potential market opportunities while
      managing our expenses. If we are unable to manage our expenses, our business
      and
      financial conditions will be materially adversely
      affected.***





Our
      success depends upon our ability to address market opportunities while managing
      our expenses to match our ability to finance our operations. Our need to manage
      expenses will place a strain on our management and operational resources. If
      we
      are unable to manage our expenses effectively, our business, financial
      condition, and operating results will be materially adversely affected. We
      have
      experienced an unprofitable year during 2005, and we expect increased expenses
      in future quarters as we begin to comply with the requirements of the
      Sarbanes-Oxley Act of 2002.




***Our
      success depends on our key personnel and the consulting services provided by
      Keepsake. We may be unable to attract and retain qualified employees and may
      not
      be able to retain the services of Keepsake after the expiration of the Keepsake
      Software Agreement.***





Our
      performance and success of the existing business depended substantially on
      the
      services of the existing small group of experienced senior staff as well as
      on
      our ability to recruit, retain and motivate our key employees. This will be
      the
      same with Atlas to start with but as the new business unit will require a much
      larger number of staff this will in itself mitigate some of the risk once
      critical mass in staff numbers has been achieved. Now leading the management
      team are executives such as Robert Altinger who has over 20 years experience
      of
      developing, building, and leading application support teams worldwide, including
      with JP Morgan, Microsoft and Avanade (a joint venture between Microsoft and
      Accenture). Supporting him is a management team that has the experience,
      operating skills, in both the IT sector and with the proven ability to build
      a
      world-class organization. Prior to joining Atlas, Peter Jacobson has had
      experience as the founder and President of Monitor Technologies, Inc., an IT
      network and support company to Fortune 1000 companies, a partner and marketing
      Director of OceanPC, Inc., a leader in computer-based marine GPS navigation
      systems, and, as President of First Call Wireless, LLC., a worldwide cellular
      distribution company. Paddy Marra, the CFO, has spent over 30 years working
      in
      the areas of project development and management, corporate finance,
      troubleshooting and restructuring. His experience has included being CFO of
      Brierley Investments Ltd, a New Zealand based internationally publicly listed
      company, from its formative years to its peak as an international investment
      conglomerate with some US$6 million in gross assets.





We
      do not
      have employment contracts with key officers or employees in either Tribeworks
      or
      Atlas, and their relationships with us are terminable at-will. It is intended
      that we will address the issue of employment contracts in 2006. Our success
      also
      depends on our ability to attract and retain additional qualified employees.
      Competition for qualified personnel in all our locations is intense and there
      are a limited number of persons with the knowledge of and experience in our
      field of business. There can be no assurance that we will be able to attract
      and
      retain key personnel. The loss of one or more key employees or of our key
      service providers could have a material adverse effect on the Company. In the
      case of Atlas, the key initial recruitment areas will be Malta and Wellington,
      New Zealand, and already 10 staff have been recruited. The advantage of the
      new
      business model is that it is easily set up in new locations, so to that extent
      new locations can be established if staff recruitment becomes an issue in any
      location.





***Our
      success depends on our ability to develop services that meet our customers’
requirements. We may not be able to meet those requirements if we are unable
      to
      keep pace with technology trends and the evolving rich-media industry
      standards.***





Our
      success depends on our ability to develop and provide new services that meet
      our
      customers’ changing requirements. The Internet is characterized by rapidly
      changing technology, evolving industry standards, changes in customer needs
      and
      frequent new service and product innovations. Our success will depend, in part,
      on our ability to assess and effectively use unproven technologies and unproven
      standards. We must evaluate and utilize technical standards developed by
      industry committees and continue to develop our technological expertise, enhance
      our current services, develop new services that meet changing customer needs,
      and influence and respond to emerging industry standards and other technological
      changes on a timely and cost-effective basis. If we fail to adequately assess
      or
      utilize these standards or proprietary technologies at the appropriate time
      in
      the marketplace, the competitive advantages of our products and services and
      our
      business, financial condition, and operating results could be materially
      adversely affected.




15




***Increasing
      governmental regulation on electronic commerce and legal uncertainties could
      limit our growth.***





The
      adoption of new laws or the adaptation of existing laws to the Internet may
      decrease the growth in the use of the Internet, which could in turn decrease
      the
      demand for our services, increase our cost of doing business or otherwise harm
      our business. Federal, state, local and foreign governments are considering
      a
      number of legislative and regulatory proposals relating to Internet commerce.
      As
      a result, a number of laws or regulations may be adopted regarding Internet
      user
      privacy, security, taxation, pricing, quality of products and services, and
      intellectual property ownership, which may also be applicable to us. How
      existing laws will be applied to the Internet, in areas such as property
      ownership, copyrights, trademarks, trade secrets, and obscene or indecent
      communications, is uncertain.





***Capacity
      constraints and system disruptions could substantially reduce the products
      we
      sell and undermine our reputation for reliability among our customers and
      potential customers.***





The
      satisfactory performance, reliability and availability of our Internet sites
      and
      our network infrastructure are critical to attracting Internet users and
      maintaining relationships with subscribing customers. System interruptions
      that
      result in the unavailability of our Internet sites and slower response times
      for
      users could reduce the number of products and multi-media services we deliver
      and reduce the attractiveness of our services to Members and subscribers. Any
      disruption of our services would materially adversely affect our business,
      financial condition and results of operations.





***Our
      present Tribeworks internet operations are located in a single facility, which
      is located in the San Francisco Bay Area in California. A natural disaster
      is
      possible and could result in prolonged interruption of our
      business.***





Our
      present Internet operations for the Tribeworks business are located in the
      San
      Francisco Bay Area. This area is seismically active. With our operations
      centralized in a single facility, a natural disaster, such as an earthquake,
      fire, or flood, could substantially disrupt our manufacturing operations or
      destroy our facilities. This could cause delays and cause us to incur additional
      expenses and adversely affect our reputation with our customers. In addition,
      since the real estate market in the San Francisco Bay Area is extremely
      competitive and is likely to remain competitive, an alternative facility may
      not
      be available on commercially reasonable terms if we suffer a catastrophic loss
      from a natural disaster.




The
      new
      Atlas business at present has one main base data center in Seattle, but as
      resources allow and growth develops it is intended that a second data center
      will be installed so that we have redundancy against any natural or other
      disaster. Until this second data center is developed some duplicate files are
      being kept on the local systems in Malta and New Zealand.





***We
      are susceptible to parties who may compromise our security measures, which
      could
      cause us to expend capital and materially adversely affect our financial
      condition and results of operations.***





Hackers
      may be able to circumvent our security measures and could misappropriate
      proprietary information or cause interruptions in our Internet operations.
      In
      the past, computer viruses or software programs that disable or impair computers
      have been distributed and have rapidly spread over the Internet. Computer
      viruses could be introduced into our systems or those of our users, which could
      disrupt our network or make our systems inaccessible to users. Any of these
      events could damage our reputation among our customers and potential
      customers and substantially harm our business. We may be required to expend
      capital and resources to protect against the threat of security breaches or
      to
      alleviate problems caused by these breaches. Consumer concern over Internet
      security has been, and could continue to be, a barrier to commercial activities
      requiring consumers to send their credit card information over the Internet.
      Computer viruses, break-ins, or other security problems could lead to
      misappropriation of proprietary information and interruptions, delays or
      cessation in service to our customers. Moreover, until more comprehensive
      security technologies are developed, the security and privacy concerns of
      existing and potential customers may inhibit the growth of the Internet as
      a
      merchandising medium. Further, our business is subject to the effects of war
      and
      acts of terrorism.




16




***We
      may be unable to protect our intellectual property rights, or we may infringe
      the intellectual property rights of others, which may result in lawsuits and
      prevent us from selling our products.***





We
      rely
      on copyright, patent, and trade secret laws to protect our trademarks, content,
      and proprietary technologies and information. However, there can be no assurance
      that such laws will provide sufficient protection to us, other parties will
      not
      develop technologies that are similar or superior to ours, or, given the
      availability of our products’ source-code, other parties will not copy or
      otherwise obtain and use our content or technologies without
      authorization.





There
      are
      no pending lawsuits against us regarding infringement of any existing patents
      or
      other intellectual property rights or any material notices that we are
      infringing the intellectual property rights of others. However, there can be
      no
      assurance that third parties will not assert infringement claims in the future.
      If any claims are asserted and determined to be valid, there can be no assurance
      that we will be able to obtain licenses of the intellectual property rights
      in
      question or obtain licenses on commercially reasonable terms. Our involvement
      in
      any patent dispute or other intellectual property dispute or action to protect
      proprietary rights may have a material adverse effect on our business, operating
      results, and financial condition. Adverse determinations in any litigation
      may
      subject us to liabilities, require us to seek licenses from third parties,
      and
      prevent us from marketing and selling our products. Any of these situations
      can
      have a material adverse effect on our business, operating results, and financial
      condition.





Effective
      trademark, copyright, and other intellectual property protection may not be
      available in every country in which our technology is distributed or made
      available through the Internet. There can be no assurance that our means of
      protecting our proprietary rights in the United States or abroad will be
      adequate or that competitors will not independently develop similar
      technology.





***Our
      future success depends on our ability to attract customers from outside the
      United States. Jurisdictions outside the United States may impose tax and
      regulatory burdens on our business, which could have a material adverse affect
      on our business, financial condition, and results of
      operations.***





Our
      future success will be affected by our ability to attract customers from
      countries outside the United States. We believe that the growth of the Internet
      in foreign countries will outpace growth of the Internet in the United States
      in
      the next decade. Foreign countries could impose withholding taxes or otherwise
      tax our foreign income, impose tariffs, embargoes or exchange controls, or
      adopt
      other restrictions on foreign trade or restrictions relating to use or access
      of
      or distribution of software through electronic means. The laws of certain
      countries also do not protect our intellectual property rights to the same
      extent as the laws of the United States. In addition, we are subject to the
      United States export control regulations that may restrict our ability to market
      and sell our products to certain countries outside of the United States. Failure
      in successfully marketing our products in international markets could have
      a
      material adverse effect on our business, operating results and financial
      conditions. Atlas intends marketing its products initially in both North America
      and Europe and already we have pilot customers in both the United States and
      Italy.





***We
      expect quarterly revenue and operating results to vary in future periods, which
      could cause our stock price to fluctuate.***





Our
      limited operating results have varied widely in the past, and we expect they
      will continue to vary from quarter to quarter as we attempt to commercialize
      our
      product and develop the new IT support business under Atlas. Our quarterly
      results may fluctuate for many reasons, including:


·
            Limited
                    operating history 
 ·
            Dependence
                on a limited number of customers for a significant portion of our
                revenue;
                and 
 ·
            Dependence
                on membership fees to provide future
                revenue.


As
      a
      result of these fluctuations and uncertainties in our operating results, we
      believe quarter-to -quarter or annual comparisons of our operating results
      are
      not a good indication of our future performance. In addition, at some point
      in
      the future, these fluctuations may likely cause us to perform below the
      expectations of public market analysts or investors. If our results fall below
      market expectations, the price of our common stock will be adversely affected.




17




***Our
      stock price is volatile and, as a result, you could lose some or all of your
      money.***





We
      believe that various factors may cause the market price of our common stock
      to
      fluctuate, including announcements of:


·
              New
                    products by us or our
                    competitors;
 
 ·
            Developments
                  or disputes concerning intellectual property proprietary
                  rights; 
 ·
            Our
                  failing to achieve our operational milestones;
                  and 
 ·
            Changes
                  in our financial conditions or securities = analysts’
                  recommendations.


The
      stock
      markets, in general, and the shares of Internet companies, in particular, have
      experienced extreme price fluctuations. These broad market and industry
      fluctuations may cause the market price of our common stock to decline. In
      addition, the low trading volume of our stock will accentuate price swings
      of
      our stock.




18




**ITEM
      7. FINANCIAL STATEMENTS**




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**YEARS
      ENDED DECEMBER 31, 2005 AND 2004**




19




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**





**TABLE
      OF CONTENTS**





**Page**Report
                of Independent Registered Public Accounting Firm for 2005
            
            
            21Report
                of Independent Registered Public Accounting Firm for 2004
            
            
            22Consolidated
                Balance Sheets
            
            
            23Consolidated
                Statements of Operations
            
            
            24Consolidated
                Statements of Cash Flows
            
            
            25Consolidated
                Statements of Stockholders’ Equity (Deficit)
            
            
            27Notes
                to Consolidated Financial Statements
            
            
            28





20


21


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2004**





To
      the
      Board of Directors and Stockholders Tribeworks, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Tribeworks, Inc. and
      subsidiaries as of December 31, 2004, and the related consolidated statements
      of
      operations, cash flows, and stockholders’ deficit for the year then ended. These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      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 audit provides
      a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Tribeworks, Inc. and
      subsidiaries as of December 31, 2004, and the results of their operations and
      their cash flows for the year then ended in conformity with accounting
      principles generally accepted in the United States of America.




The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note C to the
        financial statements, the Company’s financial position and limited capital
        resources 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 C. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.




/s/
        Tauber & Balser, P.C.


Tauber
      & Balser, P.C.





Atlanta,
      Georgia


March
      30,
      2005




22




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2005 AND 2004**










**2005**
              **(Restated)**
            
            **2004**Current
                AssetsCash
            
            $
            84,527
            
            $
            43,729Accounts
                receivable, net of allowance for doubtful accounts of
                $1,500
            
            
            12,698
            
            
            32,641Prepaid
                expenses
            
            
            27,145
            
            
            31,292**Total
                Current Assets**
            
            
            124,370
            
            
            107,662Other
                AssetsLoans
                to Atlas
            
            
            1,073,744
            
            
            -Equipment,
                net of accumulated depreciation of $51,834 and $50,602,
                respectively
            
            
            1,912
            
            
            1,691**Total
                Other Assets**
            
            
            1,075,656
            
            
            1,691**Total
                Assets**
            
            $
            1,200,026
            
            $
            109,353**LIABILITIES
                AND STOCKHOLDERS’ EQUITY (DEFICIT)**Current
                LiabilitiesAccounts
                payable
            
            $
            381,495
            
            $
            247,703Accrued
                expenses
            
            
            182,108
            
            
            134,887Due
                to shareholders
            
            
            6,232
            
            
            6,232Billings
                in excess of costs and estimated earnings on uncompleted
                contract
            
            
            —
            
            
            53,240Income
                taxes payable
            
            
            3,882
            
            
            —Note
                payable
            
            
            175,175
            
            
            83,701Deferred
                revenue
            
            
            35,551
            
            
            61,971**Total
                Current Liabilities**
            
            
            784,443
            
            
            587,734Stockholders’
                Equity (Deficit)Application
                Monies for new Stock
            
            
            417,289
            
            
            —Redeemable
                convertible preferred stock: $.0004 par value, 10,000,000 shares
                authorized, 84,000 and 0 Series B preferred shares issued and
                outstanding
            
            
            34
            
            
            —Common
                stock: $.0004 par value, 200,000,000 shares authorized, 21,607,555
                and
                1,569,555 shares issued and outstanding at December 31, 2005 and
                2004
            
            
            8,635
            
            
            628Additional
                paid-in capital
            
            
            3,681,613
            
            
            3,036,980Accumulated
                deficit
            
            
            (3,691,988
            )
            
            (3,515,989
            )**Total
                Stockholders’ Equity (Deficit)**
            
            
            415,583
            
            
            (478,381
            )**Total
                Liabilities and Stockholders’ Equity (Deficit)**
            
            $
            1,200,026
            
            $
            109,353




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




23




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**YEARS
      ENDED DECEMBER 31, 2005 AND 2004**










**2005**
              **(Restated)**
            
            **2004****Revenues**
            
            $
            593,595
            
            $
            821,572**Cost
                of Sales**
            
            
            214,606
            
            
            328,862**Gross
                Profit**
            
            
            378,989
            
            
            492,710**Operating
                Expenses**Product
                support
            
            
            11,673
            
            
            40,377Product
                development
            
            
            67,287
            
            
            94,387Sales
                and marketing
            
            
            132,262
            
            
            200,488General
                and administrative
            
            
            359,050
            
            
            350,671570,272
            
            
            685,923**Loss
                from Operations**
            
            
            (191,283
            )
            
            (193,213
            )**Other
                Income (Expense)**Interest
                expense
            
            
            (4,463
            )
            
            —Interest
                income
            
            
            23,667
            
            
            (792
            )Other
                income
            
            
            1,058
            
            
            —20,262
            
            
            (792
            )**Loss
                Before Income Taxes**
            
            
            (171,021
            )
            
            (194,005
            )**Income
                Taxes**
            
            
            4,770
            
            
            —**Net
                Loss**
            
            $
            (175,791
            )
            $
            (194,005
            )**Net
                Loss per Common Share, Basic and Diluted**
            
            $
            (0.02
            )
            $
            (0.12
            )**Weighted
                Average Number of Common Shares Outstanding, Basic and
                Diluted**
            
            
            10,325,995
            
            
            1,569,555




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




24




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2005 AND 2004**










**2005**
              **(Restated)**
            
            **2004****Cash
                Flows from Operating Activities**Net
                loss
            
            $
            (175,791)
            )
            $
            (194,005
            )Adjustments:Depreciation
            
            
            1,130
            
            
            1,232Amortization
                of unearned compensation
            
            
            —
            
            
            3,369Changes
                in:Accounts
                receivable
            
            
            19,943
            
            
            133,777Costs
                and estimated earnings in excess of billings on uncompleted
                contracts
            
            
            (53,240
            )
            
            23,643Prepaid
                expenses
            
            
            4,146
            
            
            26,582Accounts
                payable
            
            
            133,793
            
            
            (1,167
            )Accrued
                expenses
            
            
            47,221
            
            
            116,534Taxes
                Payable
            
            
            3,882
            
            
            —Deferred
                revenue and billings in excess of costs and estimated earnings on
                uncompleted contracts
            
            
            (26,420
            )
            
            (106,008
            )Net
                cash provided (used) by operating activities
            
            
            (45,336
            )
            
            3,957**Cash
                Flows from Investing Activities**Loans
                to Atlas
            
            
            (1,073,744
            )
            
            —Purchase
                of equipment
            
            
            (1,350
            )
            
            —Net
                 cash used in investing activities
            
            
            (1,075,094
            )
            
            —**Cash
                Flows from Financing Activities**Proceeds
                from new equity raised (net of costs)
            
            
            652,466
            
            
            —Application
                monies for new equity (net)
            
            
            417,289
            
            
            —Proceeds
                from note payable
            
            
            91,473
            
            
            —Net
                cash provided by financing activities
            
            
            1,161,228
            
            
            —**Net
                Increase in Cash**
            
            
            40,798
            
            
            3,957**Cash,
                Beginning of Period**
            
            
            43,729
            
            
            39,772**Cash,
                End of Period**
            
            $
            84,527
            
            $
            43,729




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




25




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**


**YEARS
      ENDED DECEMBER 31, 2005 AND 2004**


**2005**
              
              **2004****Supplemental
                  Disclosure of Cash Flow Information**Cash
                  paid for interest
              
              $
              3,675
              
              $
              792**Supplemental
                  Disclosure of Non-Cash Financing Activities**Capitalization
                  of accrued interest into advance to Atlas Technology Group
              
              $
              23,667
              
              $
              —








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




26


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)**


**YEARS
      ENDED DECEMBER 31, 2005 AND 2004**









**Common
                Stock**
            
            **Preferred
                Stock**
            
            **Additional
                Paid-in**
            
            **Accumulated****Shares**
            
            **Amount**
              **$**
            
            **Shares**
            
            **Amount**
              **$**
            
            **Capital**
              **$**
            
            **Deficit**
              **$**
            
            **Total**
              **$**Balances
                at January 1, 2004
            
            
            1,569,555
            
            
            628
            
            
            —
            
            
            —
            
            
            3,036,980
            
            
            (3,321,984
            )
            
            (284,376
            )Net
                income (loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (194,005
            )
            
            (194,005
            )Balances
                at December 31, 2004
            
            
            1,569,555
            
            
            628
            
            
            —
            
            
            —
            
            
            3,036,980
            
            
            (3,515,989
            )
            
            (478,381
            )Common
                stock issued at $0.01 approved at AGM
            
            
            19,000,000
            
            
            7,600
            
            
            —
            
            
            —
            
            
            182,400
            
            
            —
            
            
            190,000Common
                stock issued at $0.50
            
            
            220,000
            
            
            80
            
            
            —
            
            
            —
            
            
            109,920
            
            
            —
            
            
            110,000Preferred
                ‘A’ stock issued at $0.50
            
            
            —
            
            
            —
            
            
            818,000
            
            
            327
            
            
            408,673
            
            
            —
            
            
            409,000Preferred
                ‘A’ stock converted to common stock and warrants
            
            
            818,000
            
            
            327
            
            
            (818,000
            )
            
            (327
            )
            
            —
            
            
            —
            
            
            —Preferred
                ‘B’ Stock issued at $0.50
            
            
            —
            
            
            —
            
            
            84,000
            
            
            34
            
            
            41,966
            
            
            —
            
            
            42,000Net
                costs of new issues
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (98,326
            )
            
            (208
            )
            
            (98,534
            )Application
                monies for unallocated stock
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            417,289Net
                income (loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (175,791
            )
            
            (175,791
            )Balances
                at December 31, 2005
            
            
            21,607,555
            
            $
            8,635
            
            
            84,000
            
            $
            34
            
            $
            3,681,613
            
            $
            (3,691,988
            )
            $
            (415,583
            )





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





27


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










**NOTE
      A - NATURE OF BUSINESS**





The
      Company’s business activity during 2005 and 2004 results from a mixture of
      consulting services based on a technology and the sale of a technology that
      provides tools for creating and delivering multimedia applications. Internet
      media developers use the technology for creation and deployment of electronic
      content that utilizes interactive features combining graphics, video, and audio
      content.





The
      Company exploits its software primarily through the licensing of its software
      tools to multimedia and software developers and through building customized
      licensed versions that include professional engineering to meet contract
      requirements.





During
      2005, the Company began investing in a new business stream via advances to
      Atlas
      Technology Group, which was acquired as a wholly owned subsidiary as of January
      20, 2006, and was treated solely as an investment in these financial
      statements.





**NOTE
      B - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**





Basis
      of Consolidation




The
      financial statements of the Company are presented on a consolidated basis and
      include the Company and its wholly owned subsidiaries, Tribeworks Development
      Corporation and Tribeworks Japan Limited, through the third quarter of 2004,
      the
      date of the termination of Tribeworks Japan Limited. All material inter-company
      transactions have been eliminated.





During
      the quarter ended September 30, 2004, the Company officially terminated its
      Tribeworks Japan subsidiary and office in Japan. The costs of closure were
      not
      material. The Company has continued to conduct its business operations in Japan
      through the use of consultants.





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. Estimates and assumptions
      are
      reviewed periodically and the effects of revisions are reflected in the
      consolidated financial statements in the period they are
      determined.





Significant
      estimates used in preparing these financial statements include those used in
      computing profit percentages under the percentage-of-completion revenue
      recognition method. It is at least reasonably possible that these significant
      estimates used will change within the next year.





Accounts
      Receivable




Accounts
      receivable are reported at the amount management expects to collect on balances
      outstanding at year-end. The amount of the accounting loss that the Company
      is
      at risk for these unsecured accounts receivable is limited to their carrying
      value, which was $12,698 at December 31, 2005. The Company provides an allowance
      for doubtful accounts and records bad debts based on a periodic review of
      accounts receivable to consider the collectibility of each account.





28


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










Customer
      Concentrations




In
      2005,
      three customers accounted for 42%, 20% and 3% of total revenues, respectively.
      In 2004, three customers accounted for 36%, 14% and 7% of total revenues,
      respectively. At December 31, 2005 and 2004, accounts receivable from these
      major customers totalled $3,814 and $17,000, respectively.





Revenues
      from international customers were approximately 42% and 53% of total revenues
      in
      2005 and 2004, respectively. Revenues are paid in U.S. dollars and Japanese
      yen.
      Approximately 42% and 37% of revenues in 2005 and 2004, respectively, were
      generated from Japanese customers. At December 31, 2005 and 2004, accounts
      receivable from all international customers totalled approximately $3,814 and
      $7,000, respectively.





Technology
      License




The
      Company’s principal business activity focuses on the commercialization of
      iShell®, which was developed by a former officer and director of the Company and
      an affiliate of the Company. In November 1999, the Company purchased all rights,
      title and interest in iShell in exchange for $100,000 and warrants to purchase
      25,253 shares of common stock at an exercise price of $3.96 per share, valued
      at
      $30,000. The $130,000 cost was fully amortized at December 31,
      2002.




Revenue
      Recognition




Revenue
      is generally recognized when all contractual or transfer obligations have been
      satisfied and collection of the resulting receivable is probable.





Revenues
      from membership subscriptions are recognized proportionally over the membership
      period, usually one year. Revenues and estimated profits on custom development
      services are generally recognized under the percentage-of-completion method
      of
      accounting using cost-to-cost methodology; profit estimates are revised
      periodically based on changes in facts; with any losses on contracts are
      recognized immediately. Revenue from the sale of licenses are recognized when
      all the following criteria are met: persuasive evidence of an agreement exists,
      delivery has occurred, the fee is fixed or determinable and collectability
      is
      probable. If all aspects but the last have been met, revenue is recognized
      as
      payments from customers are received.





Product
      Development Costs




The
      Company has in the past expensed all of its software development costs in the
      period the costs are incurred and did so during 2004 and 2005. With the new
      software being developed by Atlas now reaching the live beta testing and
      production testing stages, the Board of Directors has decided to adopt Statement
      of Financial Accounting Standards No. 86, “Accounting for the Costs of Computer
      Software to Be Sold, Leased, or Otherwise Marketed” (“SFAS 86”) with effect from
      January 1, 2006, and to capitalize certain enhancement costs that meet the
      requirements of SFAS 86.





Stock-Based
      Awards




Previously,
      the Company had accounted for stock based awards to employees under its “Equity
      Incentive Plan” as compensatory in accordance with Accounting Principles Board
      Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). The
      Company also issues stock-based awards for services performed by consultants
      and
      other non-employees and accounts for them in accordance with Statement of
      Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”).





In
      December 2002, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation
      - Transition and Disclosure” (hereinafter “SFAS No. 148”). SFAS No. 148 amends
      SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative
      methods of transition for a voluntary change to the fair value based method
      of
      accounting for stock-based employee compensation. In addition, the statement
      amends the disclosure requirements of SFAS No. 123 to require prominent
      disclosure in both annual and interim financial statements about the method
      of
      accounting for stock-based employee compensation and the effect of the method
      used on reported results. The provisions of the statement are effective for
      financial statements for fiscal years ending after December 15, 2002. The
      Company has adopted SFAS No. 123(R).




Financial
        Accounting Standards Board Statement No. 148, Accounting for Stock-Based
        Compensation - Transition and Disclosure (“SFAS 148”), requires the Company to
        provide pro forma information regarding net income and earnings per share
        as if
        compensation cost for all awards had been determined in accordance with the
        fair
        value based method prescribed in SFAS 123. For the year ended December 31,
        2004,
        the difference between the reported and pro forma net income (loss) available
        to
        common shareholders was insignificant and, thus, there was no effect on the
        net
        earnings (loss) per common share.
 
 The
        Company estimates the fair value of each stock option at the grant date by
        using
        the Black-Scholes option-pricing model, however, no options were granted
        during
        2004 and 2005.




29







**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










Foreign
      Currency Translation




Prior
      to
      its closure, Tribeworks Japan prepared its financial statements in a currency
      other than U.S. dollars. Results of operations and cash flows were translated
      at
      average exchange rates during the period, and assets and liabilities were
      translated at end-of-period exchange rates. The Company determined that the
      foreign currency translation effect was immaterial and, therefore, translation
      adjustments were not included as a separate component of accumulated other
      comprehensive income (loss) in stockholders’ equity (deficit).





Earnings
      (Loss) per Common Share




Basic
      earnings (loss) per share (“EPS”) is computed based on net income (loss) divided
      by the weighted average number of common shares outstanding. Diluted EPS is
      computed based on net income (loss) divided by the weighted average number
      of
      common shares and potential common share equivalents outstanding. Potential
      common share equivalents are those related to stock options and warrants.
      However, such potential common share equivalents would have no effect on diluted
      earnings per share in 2005 and 2004. Therefore, the basic and diluted earnings
      per share is the same in 2005 and 2004.





**NOTE
      C - GOING CONCERN**




The
        accompanying consolidated financial statements have been prepared in conformity
        with generally accepted accounting principles, which contemplate the
        continuation of the Company as a going concern. The Company reported net
        losses
        during both 2004 and 2005 and had a working capital deficiency of $660,073
        and
        $480,072 for 2005 and 2004. At December 31, 2005, the Company has stockholders’
equity of $415,583 compared to an equity deficiency of $478,381 at December
        31,
        2004. The Company is in default on its note payable and has deferred payment
        of
        certain accounts payable and accrued expenses while further new equity is
        raised.


In
      light
      of the Company’s financial condition, on March 30, 2005, the Company announced a
      plan of reorganization. During 2005, the old business was separated into
      Tribeworks Development Corporation, and approximately $1 million of new equity
      was raised with the intention of investing in a new business stream of offsite
      IT support. On January 20, 2006, the Atlas Technology Group was acquired in
      order to develop this new business stream. This is further explained
      in ** Note
      O -
      Subsequent Events *.*





To
      fully
      develop this new business stream, which is now at the live testing stage,
      further equity will need to be raised and this is currently underway. In view
      of
      the matters described, there is substantial doubt about the Company’s ability to
      continue as a going concern. The recoverability of the recorded assets and
      satisfaction of the liabilities reflected in the accompanying balance sheets
      is
      dependent upon continued operation of the Company, which is in turn dependent
      upon the Company’s ability to raise new equity to meet its cash flow
      requirements on a continuing basis and to succeed in its future operations.
      There can be no assurance that management will be successful in implementing
      its
      plans. The financial statements do not include any adjustments that might result
      from the outcome of this uncertainty.





**NOTE
      D - LOAN TO ATLAS TECHNOLOGY GROUP**





During
      2005 the Company advanced $1,073,744 (plus accrued interest) to Atlas Technology
      Group (Atlas), a group of companies controlled by the directors of Tribeworks,
      in order for Atlas to pursue its business plan. (Also see Note O). At December
      31, 2005, Atlas had not yet established profitable operations, nor was it in
      a
      position to repay the loan. Consequently, The Company has written this balance
      down to its estimated realizable balance, charging the whole of the advance
      to
      product development costs in the Consolidated Statement of
      Operations.





30




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










**NOTE
      E - COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED
      CONTRACTS**





At
      December 31, 2005, there were no costs and estimated earnings in excess of
      billings on uncompleted contracts. At December 31, 2004, billings in excess
      of
      costs and estimated earnings on uncompleted contracts, which was comprised
      of
      two jobs in progress, consisted of $148,000 of billings, less $46,000 of costs
      and $49,000 of estimated earnings.





**NOTE
      F - NOTE PAYABLE**





On
      January 21, 2001, the Company borrowed $100,000 under a private placement
      agreement. Under the terms of the agreement the lender, upon the closing of
      a
“Qualified Financing” (as that term is defined in the agreement), could convert
      the loan to common stock of the Company. Such conversion never took place,
      and
      on June 12, 2003, the Company and the creditor restructured this note. The
      original terms for the $100,000 note accrued simple interest at 10%, with all
      principal and accrued interest due on demand. The restructured note accrues
      interest at 4% and was increased by $20,000 for previously accrued interest.
      The
      new note is nonconvertible, and calls for an initial payment of $30,000, which
      was made during June 2003, and then monthly payments of $3,500 through February
      2005, with a final payment of $24,201 in March 2005. If the Company had made
      all
      of the note payments timely in accordance with the note agreement, the creditor
      would have forgiven $20,000 of the final payment.





The
      Company failed to make the scheduled note payments after September 2003 and
      has
      received notification of default from the lender. As such, the note was due
      in
      full on September 30, 2004 and is accruing default interest at a rate of 4%
      on
      the outstanding payment amounts of the note. At December 31, 2005, this
      obligation had an outstanding principal balance of $83,701.





On
      March 30, 2005, the Company announced a plan of reorganization, intended to
      allow the Company to maintain its public reporting requirements, reduce its
      debt, and explore new business directions. The plan of reorganization included
      the transfer of most assets and liabilities to the registrant’s operating
      subsidiary, Tribeworks Development Corporation, and possible sale of the
      subsidiary to current management or others. After further development, the
      plan
      was expected to be submitted to shareholders for a vote and a separate note
      agreement (“Note”) which provided for unsecured borrowing at 4% in an amount of
      up to $100,000 was entered into as of March 29, 2005 to help cover
      reorganization costs. The funds received under the Note were from the lender
      of
      the aforementioned debt of $83,701 and were to be used only against applicable
      expenses to be incurred. As of December 31, 2005, the Company had borrowed
      $91,474 against the new Note agreement increasing the total amount owing under
      the Note to $175,175. This Note is expected to be repaid from the new equity
      to
      be raised in 2006 and there can be no assurance that management will be
      successful in implementing its plan to raise this new equity.





**NOTE
      G - FAIR VALUE OF FINANCIAL INSTRUMENTS**





The
      Company’s financial instruments include cash, receivables and short-term debt
      for which the Company believes that the fair value approximates their carrying
      amounts.




31


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**









**NOTE
      H - INCOME TAXES**





Deferred
      income tax assets and the related valuation allowances result principally from
      the potential tax benefits of net operating loss carryforwards. The Company
      has
      recorded a valuation allowance to reflect the uncertainty of the ultimate
      utilization of the deferred income tax assets as follows:





**2005**
            
            **2004**Deferred
                income tax assets
            
            $
            1,491,000
            
            $
            1,391,000Less
                valuation allowance
            
            
            (1,491,000
            )
            
            (1,391,000
            )Net
                deferred income tax assets
            
            $
            —
            
            $
            —





The
      following is a reconciliation of the applicable U.S. federal income tax rate
      to
      the effective tax rate included in the consolidated statements of
      operations:





**2005**
            
            **2004**U.S.
                federal income tax rate
            
            
            (34.0
            )%
            
            (34.0
            )%State
                income tax rate, net of federal rate
            
            
            (8.4
            )
            
            (5.8
            )Valuation
                allowance
            
            
            42.4
            
            
            39.80.0
            %
            
            0.0
            %





At
      December 31, 2005, the Company had available net operating loss carryforwards
      for income tax reporting purposes of approximately $3,516,000 which will expire
      in various periods through 2025.





**NOTE
      I—CAPITAL STOCK**





The
      Company has an authorized share capital of: 200,000,000 shares of common stock
      of $0.0004 each; and 10,000,000 shares of preferred stock of $0.0004
      each.





At
      the
      Company’s Annual General Meeting (“ AGM ”)
      held
      on August 19, 2005, the shareholders approved a 1-for-3 reverse share split
      such that post the 1-for-3 reverse split there were 1,569,555 shares of common
      stock issued and outstanding. The reverse share split did not affect the number
      of authorized shares. Subsequent to the Company’s AGM ,
      where
      shareholders approved the private placement of up to 19,000,000 post-reverse
      split shares of common stock at a price of $0.01 per share, subscription monies
      of $190,000 were received and 19,000,000 common shares were issued.





On
      June
      29 2005, the Company announced the closing of a preferred stock issuance whereby
      $409,000 was raised from investors into Series A preferred stock (the
“ Series
      A Stock ”)
      by the
      issuance of 818,000 shares at $0.50 each. These shares were fully convertible
      on
      a 1-for-1 basis into common shares of the company at the discretion of the
      board
      at any time after the approval of the reverse split discussed above and on
      December 28, 2005 the board had these preferred shares converted into 818,000
      shares of common stock and as per the terms of the issue one (1) warrant for
      every two (2) new common shares was attached which will allow the holder to
      subscribe for common shares in the Company at $1.00 per common share within
      one
      year of these new common shares being issued.




32


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**








The
      Company subsequently raised a further $42,000 by placement of 84,000 shares
      of
      Series B preferred stock (the “ Series
      B Stock ”)
      at a
      stated value $0.50 per share during the third quarter. Each share is fully
      convertible on a one-for-one basis into common shares of the Company at the
      discretion of the board (which has not yet been given). Upon conversion into
      common shares each stockholder will receive one (1) warrant for every two (2)
      new common shares to subscribe for common shares in the Company at $1.00 per
      common share within one year. The Series B Stock is entitled to an annual
      cumulative dividend of 10% of the Stated Value from the date of issuance and
      can
      be redeemed at face plus accumulated dividends by the Company at any time by
      giving the required notice.





The
      Company also raised $110,000 by way of a private placement of 220,000 shares
      of
      common stock at a value of $0.50 per share with these shares having attached
      to
      them one(1) warrant for every two(2) new common shares to subscribe for common
      shares in the Company at $1.00 per common share within one year of these new
      common shares being issued.





In
      addition in the fourth quarter of 2005, the Company received $417,289 of
      subscription monies to subscribe for 800,000 common shares at a value of $0.50
      per share. The subscribers will receive one (1) warrant for every two (2) new
      common shares to subscribe for common shares in the Company at $1.00 per common
      share within one year of these new common shares being issued.





Following
      the 2005 reverse stock split and the issue and conversion of the Series A and
      the Series B Stock issues (but without the conversion of any warrants yet to
      be
      issued) plus the issue of common shares for the application monies received
      in
      the 4 th quarter,
      the fully diluted capital of the Company will be 22,491,555 common
      shares.




**NOTE
      J - STOCK OPTIONS AND STOCK WARRANTS**





Stock
      Options




The
      Company maintains a 1999 Equity Incentive Plan for the issuance of stock options
      to employees, directors and consultants. The exercise price is generally the
      estimated fair market value at the grant date as determined by the Company’s
      Board of Directors. The options vest over a period up to four years. At December
      31, 2005, there were 50,333 shares reserved for issuance under the 1999 Equity
      Incentive Plan after adjusting for the two subsequent reverse
      splits.





The
      Company also maintains a 2004 Employee Stock Incentive Plan for the issuance
      of
      stock options, common stock, restricted stock, and stock bonuses to employees,
      officers and key consultants. At December 31, 2005, it was possible to award
      a
      total of options for 5,401,888 shares under the 2004 Employee Stock Incentive
      Plan, which equated to 25% of the issued common stock of the Company, however,
      no awards had been issued from the plan as of December 31, 2005 and therefore
      no
      shares have been reserved for issuance under that Plan.




33




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**





A
      summary
      of the Company’s stock options as of December 31, 2005 and 2004 and changes
      during the years ending on those dates is presented below:




****
            **2005**
            
            **2004****Options**
            
            **Weighted
                AverageExercise
                Price**
            ****
            **Options**
            ****
            **Weighted
                AverageExercise
                Price**Outstanding
                at beginning of year
            
            
            82,833
            
            $
            4.26
            
            
            117,326
            
            $
            4.92Cancelled
            
            
            (32,500
            )
            
            2.16
            
            
            (34,493
            )
            $
            6.63Outstanding
                at end of year
            
            
            50,333
            
            $
            6.53
            
            
            82,833
            
            $
            4.26Options
                exercisable at end of year
            
            
            50,333
            
            $
            6.53
            
            
            82,833
            
            $
            4.26Weighted-average
                fair value of options granted during the year
            
            
            
            
            $
            —
            
            
            
            
            $
            —





The
      following table summarizes information about stock options outstanding at
      December 31, 2005:




**Options
                Outstanding**
            
            **Options
                Exercisable****Options**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Life**
            
            **Weighted**
              **Average**
              ******Exercise**
              **Price**
            
            **Options**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**1,667
            
            
            3.50
                years
            
            $
            0.60
            
            
            1,667
            
            $
            0.602,083
            
            
            4.40
                years
            
            
            33.60
            
            
            2,083
            
            
            33.602,500
            
            
            4.55
                years
            
            
            37.08
            
            
            2,500
            
            
            37.082,000
            
            
            4.65
                years
            
            
            30.00
            
            
            2,000
            
            
            30.001,667
            
            
            4.88
                years
            
            
            12.00
            
            
            1,667
            
            
            12.0015,000
            
            
            5.01
                years
            
            
            4.50
            
            
            15,000
            
            
            4.502,500
            
            
            5.22
                years
            
            
            3.00
            
            
            2,500
            
            
            3.0016,667
            
            
            6.47
                years
            
            
            0.42
            
            
            16,667
            
            
            0.426,250
            
            
            6.78
                years
            
            
            0.48
            
            
            6,250
            
            
            0.4850,333
            
            
            
            
            
            
            
            
            50,333




34




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**







Stock
      Warrants




The
      Company has issued stock warrants in conjunction with the issuance of common
      stock, debt, and the settlement of debt and for services. Activity related
      to
      stock warrants was as follows:





**Warrants**
            
            **Weighted
                Average**
              **Exercise
                Price**Outstanding
                at December 31, 2003
            
            
            18,333
            
            
            3.75Expired
            
            
            (3,333
            )
            
            0.42Outstanding
                at December 31, 2004
            
            
            15,000
            
            
            4.50Issued
                during 2005
            
            
            519,000
            
            
            1.00Outstanding
                at December 31, 2005
            
            
            534,000
            
            
            1.10





No
      warrants were granted during the year ended December 31, 2004. A total of
      519,000 warrants were granted in the year ended December 31, 2005 in conjunction
      with the issue of 220,000 common shares and the issue and conversion of 818,000
      Series ‘A’ Preferred shares. An additional 42,000 warrants will be issued when
      the 84,000 Series ‘B’ Preferred shares are converted to common stock. The 15,000
      (post reverse stock split) warrants outstanding from pre December 31, 2004
      expired on January 1, 2006 and were not exercised.





The
      following table summarizes information about stock warrants outstanding at
      December 31, 2005:




Warrants
                Outstanding
            
            Warrants
                Exercisable**Warrants**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Life**
            
            **Exercise**
              **Price**
            
            **Warrants**
              **Exercisable**
            
            **Exercise**
              **Price**
            
            **Expiration**
              **Date**15,000
            
            
            nil
            
            $
            4.50
            
            
            15,000
            
            $
            4.50
            
            
            1/01/06110,000
            
            
            11
                months
            
            $
            1.00
            
            
            110,000
            
            $
            1.00
            
            
            10/26/06409,000
            
            
            12
                months
            
            $
            1.00
            
            
            409,000
            
            $
            1.00
            
            
            1/05/07534,000
            
            
            
            
            
            
            
            
            534,000




**NOTE
      K - COMMITMENTS**





Leases




On
      December 16, 2004, the Company entered into a two-year lease agreement for
      its
      principal office space. The monthly rent is approximately $1,950 per month.
      Total rent expense for the years ended December 31, 2005 and 2004 was
      approximately $24,000 and $40,000, respectively. At December 31, 2005 the
      Company’s remaining lease commitment is $23,400.





35


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**








**NOTE
      L - RELATED PARTY TRANSACTIONS**





Officer
      and Director Options and Warrants




At
      December 31, 2004, the Company had outstanding the following qualified and
      nonqualified stock options granted to officers and directors of a subsidiary
      which are included in Note J:





**Common
                Shares**
              **Under
                Option**
            
            **Exercise**
              **Price**
            
            **Expiration**
              **Date**7,500
            
            $
            0.72
            
            
            June
                30, 200915,000
            
            
            4.50
            
            
            January
                11, 201125,000
            
            
            0.72
            
            
            March
                26, 201147,500





At
      December 31, 2005 no options were outstanding to the directors and officers
      of
      Tribeworks, Inc.





At
      December 31, 2005, the Company had outstanding the following warrants to
      officers and directors of a subsidiary which are included in Note
      J:




**Common
                Shares**
              **Under
                Warrant**
            
            **Exercise**
              **Price**
            
            **Expiration**
              **Date**15,000
            
            $
            4.50
            
            
            January
                1, 2006





Of
      the
      total outstanding warrants granted to officers and directors as discussed above,
      all are exercisable at December 31, 2005, but were not exercised on January
      1,
      2006 and have therefore expired.





Due
      to
      Shareholders




The
      $6,232 due to shareholders at December 31, 2005 and 2004 is non-interest
      bearing, not collateralized and due on demand.





Accrued
      Payroll




Effective
      July 1, 2004, the Company entered into one-year compensation arrangements with
      two of its executive officers. The arrangements provide for annualized salaries
      of $120,000 and $110,000 for the Company’s chief executive officer, Mr. Duncan
      Kennedy, and chief financial officer, Mr. Robert Davidorf, respectively. As
      part
      of the arrangement, any of this compensation accrued but not paid can be
      converted, at the option of the executive officers, into common shares of the
      Company at any time through June 30, 2007. The conversion rate is equal to
      the
      accrued amount divided by the average closing bid of the Company’s common stock
      for the 20 trading days previous to the election date. As part of the
      arrangement, the Company will hold any issued shares in escrow for one year
      following the date of conversion. Termination of employment during the one-year
      period from July 1, 2004 shall cause the issued stock to be forfeited and
      returned to the Company and, as such, the outstanding salary underlying the
      forfeited stock shall not be owed. At December 31, 2005 and 2004, the Company
      had accrued payroll balances of $41,706 and $35,208 to Mr. Kennedy, and $76,545
      and $51,890 to Mr. Davidorf respectively and have been accrued in the financials
      statements. Note that Mr. Kennedy resigned as CEO on March 29, 2005 and Mr.
      Davidorf resigned as CFO on June 28, 2005. As at December 31, 2004, $34,437
      of
      salary had been accrued for Mr. Glen Pogue who was the CEO of the Company for
      a
      period during 2005.





36




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










**NOTE
      M - REVERSE STOCK SPLIT**





On
      March
      24, 2004, the Board of Directors authorized a one-for-four reverse stock split
      of the Company’s common stock. The reverse split became effective on June 4,
      2004, thereby reducing the number of common shares outstanding by 75% and
      increasing the par value to $0.0004. At the AGM on August 19, 2005 a further
      one-for- three reverse split was approved, which further reduced the number
      of
      common shares by two-thirds. All references in the accompanying consolidated
      financial statements to the number of common shares, number and exercise price
      of stock options and stock warrants, and per share amounts for the periods
      prior
      to the reverse stock split have been restated to reflect the reverse stock
      split.




**NOTE
      N- NEW ACCOUNTING PRONOUNCEMENTS**





In
      January 2003 the Financial Accounting Standards Board issued Interpretation
      No.
      46, “Consolidation of Variable Interest Entities, an interpretation of
      Accounting Research Bulletin No. 51, Consolidated Financial Statements”.
      Interpretation 46 establishes accounting guidance for consolidation of variable
      interest entities that function to support the activities of the primary
      beneficiary. Interpretation 46 applies to any business enterprise both private
      and public that has a controlling interest, contractual relationship or other
      business relationship with a variable interest entity. The Company has no
      investment in or contractual relationship or other business relationship with
      a
      variable interest entity and therefore the adoption did not have any impact
      on
      the Company’s consolidated financial position, results of operations or cash
      flows.





On
      April
      30, 2003 the Financial Accounting Standards Board issued Statement No. 149,
      “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”.
      Statement 149 is intended to result in more consistent reporting of contracts
      as
      either freestanding derivative instruments subject to Statement 133 in its
      entirety, or as hybrid instruments with debt host contracts and embedded
      derivative features. In addition, Statement 149 clarifies the definition of
      a
      derivative by providing guidance on the meaning of initial net investments
      related to derivatives. Statement 149 is effective for contracts entered into
      or
      modified after June 30, 2003. The adoption of Statement 149 did not have any
      effect on the Company’s consolidated financial position, results of operations
      or cash flows.





In
      2004,
      Financial Accounting Standards Board issued a revision of FASB Statement No.
      123, “Accounting for Stock-Based Compensation”. This Statement supersedes APB
      Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related
      implementation guidance. This revised pronouncement requires that all stock
      options and warrants be accounted for using the fair value method. This
      pronouncement will impact on the Company, as the Company currently accounts
      for
      all options and warrants using the intrinsic value method.





FIN
      46(R), “Consolidation of Variable Interest Entities, applies at different dates
      to different types of enterprises and entities, and special provisions apply
      to
      enterprises that have fully or partially applied Interpretation 46 prior to
      issuance of Interpretation 46(R). Application of Interpretation 46 or
      Interpretation 46(R) is required in financial statements of public entities
      that
      have interests in variable interest entities or potential variable interest
      entities commonly referred to as special-purpose entities for periods ending
      after December 15, 2003. Application by public entities (other than small
      business issuers) for all other types of entities is required in financial
      statements for periods ending after March 15, 2004. Application by small
      business issuers to entities other than special-purpose entities and by
      non-public entities is required at various dates in 2004 and 2005. There is
      no
      impact on the Company’s financial statements.





In
      December 2004, the Financial Accounting Standards Board issued SFAS Statement
      No. 153, “Exchanges of Non-monetary Assets”. The statement is an amendment of
      APB Opinion No. 29 to eliminate the exception for non-monetary exchanges of
      similar productive assets and replaces it with a general exception for exchanges
      of non-monetary assets that do not have commercial substance. The Company
      believes that the adoption of this standard will have no material impact on
      its
      financial statements.




37


**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










In
      May
      2005, Financial Accounting Standards Board issued SFAS Statement No. 154,
“Accounting Changes and Error Corrections” requiring retrospective application
      to prior periods financial statements of a change in an accounting policy.
      The
      company believes that the adoption of this standard will have no material impact
      on its financial statements.





The
      Company accounts for stock based awards to employees under its “Equity Incentive
      Plan” as compensatory in accordance with Accounting Principles Board Opinion No.
      25, “Accounting for Stock Issued to Employees” (“APB 25”). The Company also
      issues stock based awards for services performed by consultants and other
      non-employees and accounts for them in accordance with Statement of Financial
      Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS
      123”).





**NOTE
      O - SUBSEQUENT EVENTS**





Disposition
      of Tribeworks Development Corp.




During
      the period ended June 30, 2006 the Company elected to fully dispose of its
      wholly owned subsidiary, Tribeworks Development Corporation (“TDC”) and this
      sale was completed on September 14, 2006 by way of 541368 LLC, a California
      limited liability company, purchasing 100% of the stock of TDC for an aggregate
      consideration of $100 and the settlement of certain disputes between Tribeworks
      and certain members of the management of 541368 LLC, who formerly served as
      the
      management of Tribeworks and TDC (see Note L above). In addition,
      Tribeworks agreed to make a one-time cash payment of $44,500 to TDC in full
      satisfaction of Tribeworks’ obligations under an existing Support Agreement
      dated as of August 1, 2005 between the Tribeworks and TDC, and the Support
      Agreement was terminated pursuant to the sale agreement. The sale agreement
      also
      contained customary representations, warranties, covenants and mutual indemnity
      provisions.





Purchase
      of Atlas Technology Group




On
      January 20, 2006, the Company acquired all of the issued and outstanding capital
      stock of TakeCareofIT Holdings Limited, a Malta corporation, along with its
      wholly owned subsidiaries in Malta, New Zealand and the USA, collectively doing
      business as Atlas Technology Group (“Atlas”) for a consideration of Euros 30,000
      (US$37,237) in cash and the assumption of $1,144,106 of current liabilities
      (of
      which $1,073,744 plus interest was due to Tribeworks), from TakeCareofIT
      Limited, a Gibraltar company.





Atlas
      was
      established in September 2004 and plans to become a leading Information
      Technology (IT) outsourcing support company for custom software applications
      worldwide. Atlas is in the business of providing custom, outsourced, application
      software support services to its customers.





Atlas
      is
      expected to leverage recent advances in software, monitoring systems, and
      communications, to build a new, leading edge, global support infrastructure,
      providing 24x7 software support to large and medium sized companies.





During
      the second half of 2005, Tribeworks made advances totaling $1,073,744 (plus
      accrued interest) to Atlas which Atlas utilized to develop IT software systems
      and to acquire computer hardware. The advances of $1,073,744 have been shown
      as
      an investment in Atlas in the Tribeworks financial statements as of December
      31,
      2005. As part of the acquisition closing, Atlas provided audited financial
      statements at December 31, 2005, which were included with the Form 8-K filing
      made in January 2006 and subsequently a Form 8K/A was filed with these financial
      statements reaudited in accordance with US GAAP and attached thereto a pro
      forma
      balance sheet consolidating Tribeworks with Atlas effective at December 31,
      2005. This was filed with the SEC on November 17, 2006.





The
      acquisition of Atlas will be accounted for using the purchase method of
      accounting and the purchase price will be allocated to the tangible and
      intangible net assets acquired based on the management's evaluation of their
      respective replacement values on the acquisition date in accordance with SFAS
      No. 141.




38




**TRIBEWORKS,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**










**NOTE
        P - CORRECTION OF AN ERROR IN CONNECTION WITH ACQUISITION OF
        ATLAS**
 
 On
        January 20, 2006, Tribeworks completed the acquisition of 100% of the
        outstanding shares of TakeCareofIT Holdings Limited and its subsidiaries
        (d/b/a
        the Atlas Technology Group) (“AtlasTG”). Tribeworks paid $37,235 in cash in
        consideration to the selling shareholders of AtlasTG and assumed various
        liabilities. The effect of this acquisition has been filed in a Current Report
        on Form 8-K/A on November 17, 2006, which included a pro forma consolidation
        of
        AtlasTG 's financial results with those of Tribeworks at December 31, 2005.
        These changes were disclosed in the restated financial statements for the
        year
        ending December 31, 2005 and set out in an amended Form 10-K/A filing made
        on
        December 21, 2006. The changes due to changes in accounting policies due
        to the
        adoption Statement of Financial Accounting Standards No. 86, “Accounting for the
        Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” (“SFAS
        86”) which had been adopted by the Company effective from January 1, 2006, after
        having initially written off an advance of $1,073,744 made to AtlasTG to
        Product
        Development Expenditure under the previous accounting policies.
 
 As
        a
        result the Company re-measured the cost of the business acquired by allocating
        the purchase price of $1,181,015 to the acquired assets, intangibles, and
        assumed liabilities in accordance with Statements of Financial Accounting
        Standards No. 141, "Accounting for Business Combinations" as
        follows:
  Cash
                
                $
                93,273VAT
                    receivable
                
                
                22,596Deposits/Prepaids
                
                
                4,924Equipment
                
                
                225,030IT
                    Technology
                
                
                835,192$
                1,181,015
 The
        Company now has determined that  the
        changes made were not as a result of  an
        adoption of a change in accounting policies but as a correction of an error.
 
 The
        correction and restatement of the advances as an investment rather than an
        expense had the following effect on the reported net loss and earnings per
        share. Previously the Company had expensed the loan to Atlas as software
        development costs. This has been reclassified as an investment in Atlas at
        December 31, 2005, which reduced the net loss at December 31, 2005 from
        $1,249,535 to $175,791 and as a result the reported net loss per share was
        reduced from $0.06 to $0.02.
 
 §
              Advance
                  to AtlasTG of $1,073,744 has been brought into the December 31,
                  2005
                  assets in the Balance Sheet as a correction of an error and change
                  in
                  accounting policies to be consistent with the accounting policies
                  adopted
                  following the acquisition of AtlasTG on January 20, 2006 (the assets
                  acquired in AtlasTG are set out in the table in Note
                  12);
 
 §
              The
                  accumulated deficit at December 31, 2005 was reduced by $1,073,744
                  and as
                  a result the Total Stockholders’ Equity was restated as
                  $415,583;
 
 §
              The
                  amount of product development expense was been reduced from $1,141,031
                  to
                  $67,287 and this in turn reduced the loss from operations to $191,283
                  from
                  the previous $1,265,027, the loss before income taxes to $171,021
                  (previously $1,244,765) and the net loss to $175,791 from $1,249,535,
                  before the subsequent adjustment for discontinued operations on
                  the sale
                  of TDC in September 2006);
 
 §
              The
                  2005 loss per share has been reduced to $0.02 from the previous
                  $0.06.
 
 §
              The
                  reduced loss from operating activities has been reflected in the
                  Consolidated Statement of Cash Flows with a compensating investment
                  in
                  Atlas of $1,073,744.
 
 §
              Further
                  note explanations were added or amended to explain these changes
                  and
                  appropriate accounting standards associated with the amended results.


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





After
      the
      completion of the 2004 audit, Tauber & Balser PC resigned as auditors for
      the Company and at the annual general meeting of shareholders held on August
      19,
      2005, HLB Cinnamon Jang Willoughby & Company was appointed the auditors for
      the Company. On October 13, 2006, the board of directors of Tribeworks, Inc.
      (the “registrant”) approved the dismissal of HLB Cinnamon, Jang, Willoughby,
      Chartered Accountants, as the registrant’s independent registered public
      accounting firm.





No
      report
      of HLB Cinnamon, Jang, Willoughby, Chartered Accountants, on the financial
      statements for either of the past two years contained any adverse opinion or
      disclaimer of opinion or was qualified or modified as to uncertainty, audit
      scope, or accounting principle.  During
      the fiscal years ended December 31, 2005 and 2006 and through October 13, 2006,
      there were no disagreements with HLB Cinnamon, Jang, Willoughby, Chartered
      Accountants, on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope or procedure, which disagreement(s),
      if
      not resolved to the satisfaction of HLB Cinnamon, Jang, Willoughby, Chartered
      Accountants, would have caused it to make reference thereto in any
      report.





During
      the fiscal years ended December 31, 2005 and 2006 and through October 13, 2006,
      there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation
      S-K).  The
      registrant requested that HLB Cinnamon, Jang, Willoughby, Chartered Accountants,
      furnish it with a letter addressed to the Securities and Exchange Commission
      stating whether or not it agrees with the above statements. A copy of such
      letter to the Securities and Exchange Commission is filed as Exhibit 16.1 to
      this Current Report on Form 8-K.





On
      October 13, 2006, the registrant engaged the firm of Williams & Webster,
      P.S. as the registrant’s principal independent accountant to audit the
      registrant’s financial statements. Since the registrant does not currently
      maintain an audit committee, the full board of directors of the registrant
      approved the engagement of Williams & Webster, P.S. Prior to the engagement
      of Williams & Webster, P.S., neither the registrant nor any person on the
      registrant’s behalf consulted Williams & Webster, P.S. regarding either (i)
      the application of accounting principles to a specified completed or proposed
      transaction or the type of audit opinion that might be rendered on the
      registrant’s financial statements, or (ii) any matter that was the subject of a
      disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related
      instructions to such Item) or a reportable event (as defined in Item
      304(a)(1)(v) of Regulation S-K).




39


**ITEM
      8A. CONTROLS AND PROCEDURES**




The
        Chief
        Executive Officer and the Chief Financial Officer of the Registrant have
        concluded, based on their evaluation as of the end of the period covered
        by this
        Report, that the Registrant’s disclosure controls and procedures are effective
        to ensure that information required to be disclosed by the Registrant in
        the
        reports filed or submitted by it under the Securities Act of 1934, as amended,
        is recorded, processed, summarized and reported within the time periods
        specified in the Securities and Exchange Commission’s rules and forms, and
        include controls and procedures designed to ensure that information required
        to
        be disclosed by the Registrant in such reports is accumulated and communicated
        to the Registrant’s management, including the Chief Executive Officer, as
        appropriate to allow timely decisions regarding required
        disclosure.
 
 In
        the
        Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005,
        filed on April 17, 2006, and then amended and reported in  a
        Form
        10-KSB/A on December 21, 2006, our management concluded that our internal
        control over financial reporting disclosures and procedures were effective
        as of
        December 31, 2005. The amended filing made on December 21, 2006 was as result
        of
        the filing of a Form 8-K with regard the acquisition of AtlasTG and the filing
        of pro forma financial statements reflecting the result of the satisfaction
        of
        the purchase agreement between Tribeworks, Inc. and the shareholders of
        AtlasTG.  The
        pro
        forma financial statements were prepared utilizing the historical financial
        statements of Tribeworks and AtlasTG. The pro forma consolidated statement
        of
        operations assumes that the combination occurred at the beginning of the
        periods
        presented in the statements. All intercompany accounts and transactions were
        eliminated and certain adjustments to the December 2005 pro forma balance
        sheets
        were made as set out in Note P above and these were filed in an amended Form
        10-KSB/A on December 21, 2006.
 
 After
        further discussion and reflection, the changes made with regard to the
        capitalization of software development costs and restatement of assets following
        the AtlasTG acquisition need to be disclosed as a correction of an error
        and
        full disclosure of this has been made in the Notes accompanying these financial
        statements and the refiled Forms 8-K/A that have been filed in conjunction
        with
        this Form 10-KSB/A. Internally within AtlasTG when it was acquired by Tribeworks
        on January 20, 2006, AtlasTG had in place internal procedures and controls
        for
        the capitalization of software development costs, whereas Tribeworks had
        an
        accounting policy of writing off all development costs as their software
        was
        regarding a mature product. Therefore the write-off made in the Tribeworks
        financial statements for the year ended December 31, 2005 was in accordance
        with
        their existing Tribeworks accounting policies, but following the acquisition
        and
        subsequent sale of the former business operations of Tribeworks and during
        the
        preparation of restatement of the AtlasTG financial statements for the Form
        8-K
        filed on November 17, 2006, it was thought more appropriate that the AtlasTG
        accounting policies, as by that stage AtlasTG had become the predominate
        business, be adopted as the group policy, which the auditors agreed with.
        We now
        realize the subsequent adjustments should have been filed as corrections
        of an
        error rather than as a change in accounting policy as previously filed.
 
 Therefore
        this revised Form 10-KSB/A makes it clear that this was a correction of an
        error
        with the fundamental change in accounting policy with regard to the adoption
        of
        Statement of Financial Accounting Standards No. 86, “Accounting for the Costs of
        Computer Software to Be Sold, Leased, or Otherwise Marketed” (“ SFAS
        86 ”)
        with
        regard to the capitalized of certain software development costs that meet
        the
        requirements of SFAS 86.
 
 These
        corrections and restatements (see Note P above) had the following effect
        on the
        reported net loss and earnings per share. Previously the Company had expensed
        the loan to AtlasTG as software development costs. This has been reclassified
        as
        part of the investment in AtlasTG at December 31, 2005, which reduced the
        loss
        at December 31, 2005 from $1,249,535 to $175,791 and as a result the reported
        net loss per share was reduced from $0.06 to $0.02.
 
 Apart
        from the maters explained above, there were no significant changes in the
        Company’s internal controls or in other factors that could significantly affect
        these controls subsequent to the date of such evaluation.


**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(a) OF THE EXCHANGE ACT**





**Change
      of Management**





Effective
      March 29, 2005, Duncan Kennedy and Patrick Soquet voluntarily resigned as
      Directors of the Company. Duncan Kennedy also resigned as the CEO and President
      of the registrant effective as of the same date, although he will continue
      to
      serve as President of the registrant’s wholly owned operating subsidiary,
      Tribeworks Development Corporation. On June 28, 2005 Bob Davidorf resigned
      as
      the CFO and was replaced by David C. Hayes who subsequently resigned on
      September 22, 2005 and was replaced that day by B S P (Paddy)
      Marra.





Effective
      March 29, 2005, J. Glenn Pogue was appointed by the Board of Directors as CEO
      of
      the registrant and was also brought onto the Board of Directors as Chairman.
      Mr.
      Pogue was formerly an employee of the Company.





At
      the
      AGM on August 19, 2005 a new board of directors was elected comprising Robert
      Altinger, David C. Hayes, W. Gordon Blankstein, Robert C. Gardner and Peter
      Jacobson. Peter Jacobson was appointed CEO in place of Mr Pogue.





Set
      forth
      below is the name, age, years of service and positions of the executive officers
      and directors of Tribeworks as of March 31, 2006.




**Name**
            
            **Age**
            
            **Position**
            
            **Director
                Since**Robert
                Altinger
            
            
            44
            
            
            Director
            
            
            August,
                2005W.
                Gordon Blankstein
            
            
            55
            
            
            Director
            
            
            August,
                2005Robert
                C. Gardner
            
            
            65
            
            
            Director
            
            
            August,
                2005Peter
                B. Jacobson
            
            
            45
            
            
            Director
                and
              CEO
            
            
            June,
                2005B
                S
                P (Paddy) Marra
            
            
            59
            
            
            Director
                and
              CFO
            
            
            December
                  2005
                CFO
                  since
                September
                  2005





The
      Directors serve until their successors are elected by the stockholders.
      Vacancies on the Board of Directors may be filled by appointment of the majority
      of the continuing directors. The executive officers serve at the discretion
      of
      the Board of Directors. The Directors named above will serve until the next
      annual general meeting of the stockholders of the Company in 2006. Directors
      will be elected for one-year terms at the annual general meeting. All officers
      and directors listed above will remain in office until the next annual general
      meeting of our stockholders, and until their successors have been duly elected
      and qualified.




40




There
      are
      no agreements with respect to the election of Directors. We have not compensated
      our Directors for service on our Board of Directors, any committee thereof,
      or
      reimbursed for expenses incurred for attendance at meetings of our Board of
      Directors and/or any committee of our Board of Directors. Officers are appointed
      annually by our Board of Directors and each Executive Officer serves at the
      discretion of our Board of Directors. We do not have any standing committees.
      Our Board of Directors may in the future determine to pay Directors’ fees and
      reimburse Directors for expenses related to their activities.





None
      of
      our Officers and/or Directors have ever filed any bankruptcy petition, been
      convicted of or been the subject of any criminal proceedings or the subject
      of
      any order, judgment or decree involving the violation of any state or federal
      securities laws.





**Board
      of Directors**





*Robert
      Altinger, 44 - Director*





Prior
      to
      founding Atlas, Robert Altinger was Principal Consultant of WebConsult, Inc,
      a
      Microsoft- approved vendor of IT consulting services since September 2001.
      Prior
      to joining WebConsult, Robert Altinger has over 20 years of IT experience,
      including serving as Director of Worldwide IT Operations for Avanade Corp,
      in
      various capacities at Microsoft, including Director of Product Group IT
      Services, and prior to that at JP Morgan. Mr Altinger obtained a BSc (Eng)
      from
      Exeter University in the United Kingdom in 1986.





*W.
      Gordon Blankstein, 54 - Director*





Gordon
      Blankstein is currently a member of the board of directors of Genco Resources,
      Ltd., a publicly- traded mining company and has been since 2002. He is also
      Director of Digifonica (International) Limited, a publicly-traded telecom
      company. From 1997 through 2002, Gordon Blankstein was Chairman and Chief
      Executive Officer of Global Light Telecommunications, Inc., an American Stock
      Exchange-listed company. Mr. Blankstein obtained a B.Sc. (Agri.) from the
      University of British Columbia in 1973 and an MBA from the University of British
      Columbia in 1976.





*Robert
      C. Gardner, 64 - Director*





Robert
      Gardner is currently Chairman of the Board of Genco Resources Ltd and a partner
      in the law firm of Gardner & Associates in Vancouver, BC, Canada. He is also
      a Director of Kootenay Gold Inc and United Bolero. Mr. Gardner is a corporate
      lawyer and has practiced law there since 1989. Mr. Gardner and obtained a M.A.
      from Cambridge University in Cambridge, United Kingdom in 1961 and a L.L.M.
      degree from Cambridge University in 1962. Robert Gardner acts as Corporate
      Secretary to the board.





*Peter
      B. Jacobson, 45 - Director and CEO*





Prior
      to
      joining Atlas and Tribeworks, Peter Jacobson was founder and President of
      Monitor Technologies, Inc., an IT network and support company to Fortune 1000
      firms from 1985 to 1995, a partner and Marketing Director of OceanPC, Inc.,
      a
      leader in computer-based marine GPS navigation systems from 1995 to 2002, and
      subsequently, was President of First Call Wireless, LLC., a worldwide cellular
      distribution company, from 2002 until 2005. Peter Jacobson has served on
      numerous boards of directors, including The Seattle Center, Northwest Children’s
      Fund, Lakeside Technology Foundation and Creditnet.com. He is a past President
      of the Washington Young Entrepreneurs Organization. Mr Jacobson obtained a
      BA
      from University of Washington in 1985.





*Byran
      S P (Paddy) Marra, 59 - Director and CFO*





Paddy
      Marra has over 30 years of corporate finance experience, including, recently
      with FreshXtend Technologies Corp. (Canada) (CEO and now Deputy Chairman) a
      TSX-V listed company, CFO of the Brierley Investments Limited group (New
      Zealand), and Chairman and CEO, Chamundi Power Corporation Ltd (India). Paddy
      Marra has Degrees in both Accounting and Finance (BCA) and in Economics and
      Economic History (BA) from Victoria University of Wellington, New Zealand.
      He is
      also a Fellow (FCA) of the Institute of Chartered Accountants of New Zealand
      and
      is a former member of the Financial Reporting Standards Board in New Zealand
      and
      numerous other Boards and Directorships of publicly traded
      companies.





Messr
      Jacobson, Marra and Altinger all act as executive officers of the Company and
      subsidiaries on a day-to-day basis.




41


**Family
      Relationships**





None





**Certain
      Legal Proceedings**





No
      director, nominee for director, or executive officer of the Company has appeared
      as a party in any legal proceeding material to an evaluation of his ability
      or
      integrity during the past five years.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Director
      Compensation**





Directors
      do not receive any compensation for their services as members of the Board
      of
      Directors, although this could be subject to change during 2006. Directors
      are
      reimbursed for expenses in connection with attendance at Board of Directors
      and
      committee meetings. Directors are eligible to participate as optionees under
      our
      compensatory equity plans.





**Executive
      Compensation**





The
      following table provides certain summary information concerning compensation
      of
      our former Chief Executive Officer during the year ended December 31, 2004.
      No
      other executive officer received annual salary and bonus in excess of $100,000
      for the year ended December 31, 2005 and the current CEO and CFO do not have
      an
      employment agreement. These are to be negotiated during 2006.




**Long
                Term Compensation****Annual
                  Compensation**
            
            **Awards**
            
            **Payouts****Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Other**
              **Annual**
              **Compensation**
            
            **Restricted**
              **Stock**
              **Awards**
              **($)**
            
            **Securities**
              **Underlying**
              **Options/SARs**
            
            **LTIP**
              **Payout**
              **($)**
            
            **All
                Other Compensation**
              **($)**Duncan
                J. Kennedy,
            
            
            2004
            
            
            68,794
            
            
            0
            
            
            35,208
            
            
            0
            
            
            0
            
            
            0
            
            
            0Chief
                ExecutiveOfficer,
                President and Director





**Option
      Grants in Last Fiscal Year**





There
      were no grants of stock options or warrants to any of the executive officers
      named in the compensation table above during fiscal year 2005.





**Aggregated
      Option Exercises in Last Fiscal Year and Fiscal Year End Option
      Values**





No
      options or warrants were granted or exercised in 2005 by any executive officers.
      In 2004 a named executive officer held 7,500 unexercised in-the-money options
      and warrants based on a value of $0.48 per share, the fair market value of
      our
      common stock as of December 31, 2004, as determined by our board of directors
      minus the actual per share exercise prices, multiplied by the number of shares
      underlying the option or warrant. The listed options and warrants were granted
      under the 1999 Stock Option Plan.




42




**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





**Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a)
      Of The Exchange Act.**





Based
      upon the list of registered shareholders each person known to us to be the
      beneficial owner of more than five percent of the outstanding shares of the
      Company’s Common Stock, each director and each of the executive officers owned
      beneficially as of March 31, 2006, the number and percentage of outstanding
      shares of Tribeworks Common Stock of the Company indicated in the following
      table.





**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner of Beneficial
                Owner**
            
            **Amount
                and Nature**
            
            **Percent
                of Class****Directors
                and Officers**Common
                Stock
            
            Robert
                Altinger
              34
                Main Street
              Mosta,
                Malta
            
            600,000
                - Direct
            
            2.8%Common
                Stock
            
            W.
                Gordon Blankstein
              8011,
                240 St
              Vancouver,
                B.C., Canada
            
            400,000
                - Direct
            
            1.9%Common
                Stock
            
            Robert
                C. Gardner
              2153,
                349 West Georgia St
              Vancouver,
                B.C., Canada
            
            500,000
                - Direct
            
            2.3%Common
                Stock
            
            Peter
                Jacobson
              111
                Via Quito
              Newport
                Beach CA 92663-5503
            
            600,000
                - Direct
            
            2.8%





The
      directors collectively hold 9.8% of Company’s stock. Paddy Marra does not hold
      any stock in the Company.





**Other
      shareholders over 5%**




**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner**
              **of 
                Beneficial Owner**
            
            **Amount
                and Nature**
            
            **Percent
                of Class**Common
                Stock
            
            Robert
                Blankstein
              8032
                Government Rd
              Burnaby,
                B.C., Canada
            
            1,575,000
                - Direct (1)
            
            7.3%Common
                Stock
            
            Michael
                T Murphy
              2812
                West Lake Sammamish Pkwy NE
              Redmond
                WA 98052
            
            3,363,636
                - Direct
            
            15.6%Common
                Stock
            
            Pharoah
                Properties Corporation
              Alves
                De Souza Houman Colart
              6
                Cours De Rive
              1204
                Geneva, Switzerland
            
            2,002,272
                - Direct
            
            9.3%Common
                Stock
            
            WebConsult
                Limited
              Watergardens
                5
              PO
                Box 417, Gibraltar
            
            2,202,274
                - Direct
            
            10.2%





(1) Includes
      575,000 shares held in trust for the benefit of Charlie Blankstein.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





On
      April
      1, 2005, our wholly owned subsidiary Tribeworks Development Corporation entered
      into a contract with a Canadian company wholly owned by our former CEO,
      Chairman, and President, Duncan Kennedy, to provide the services of Mr. Kennedy
      to continue to serve as President of Tribeworks Development
      Corporation.





On
      January 1, 2004, we entered into a consulting contract with a Belgian software
      company that is wholly owned by the brother of Patrick Soquet, a former Director
      and then a beneficial owner of more than 5% of our common stock. Under the
      contract, the Belgian company will perform software engineering services for
      us.





WebConsult,
      Inc and WebConsult Ltd, companies with which Robert Altinger was formerly a
      consultant to or associated with has over the past twelve months carried out
      consulting work for the Atlas Technology Group and still carries out such work
      on normal commercial terms.





As
      of
      March 31, 2006, we have not entered into any other contractual arrangements
      with
      related parties. There is not any other currently proposed transaction, or
      series of the same, to which we are a party, in which the amount involved
      exceeds $60,000 and in which, to our knowledge, any director, executive officer,
      nominee, 5% Shareholder or any member of the immediate family of the foregoing
      persons, have or will have a direct or indirect material interest.




43




**ITEM
      13. EXHIBITS**





(a)  The
      following is a list of exhibits, some of which are incorporated by
      reference:




**Exhibit
                  Number**
              
              **Description
                  of Exhibits**2.1
              
              Agreement
                  of Merger between Tribeworks, Inc., a California corporation, and
                  Tribeworks Acquisition Corporation, dated November 2, 1999 (Incorporated
                  by reference to Exhibit 2.1 to the Registrant’s Form 10-SB/A filed July
                  10, 2000)*2.2
              
              Share
                  Transfer Agreement between Tribeworks Inc. and TakeCareofIT Limited,
                  dated
                  January 20, 2006 (incorporated by reference to Exhibit 2.01 to
                  the
                  Registrant’s Current Report in Form 8-K filed January 26,
                  2006)*3.1
              
              Certificate
                  of Incorporation of Tribeworks, Inc., a Delaware Corporation (incorporated
                  by reference to Exhibit 3.1 to the Registrant’s Form 10-SB/A filed July
                  10, 2000 and Exhibit A to the Registrant’s Proxy Statement on Schedule 14A
                  filed April 14, 2004)*3.2
              
              Bylaws
                  of Tribeworks, Inc., a Delaware Corporation (incorporated by reference
                  to
                  Exhibit 3.2 to the Registrant’s Form 10-SB/A filed July 10,
                  2000)*4.1
              
              Certificate
                  of Designation, Preferences, Rights and Limitations of Series B
                  Convertible Redeemable Preferred Stock of Tribeworks Inc. (incorporated
                  by
                  reference to Exhibit 4.1 to the Registrant’s Current Report in Form 8-K
                  filed October 11, 2005)*10.1
              
              Pan
                  World Corporation 1999 Stock Option Plan (incorporated by reference
                  to
                  Exhibit 4.1 to the Registrant’s Registration Statement on Form S-8 filed
                  September 26, 2001)*10.2
              
              Tribeworks,
                  Inc. 2001 Stock Plan (incorporated by reference to Exhibit 4.1
                  to the
                  Registrant’s Registration Statement on Form S-8 filed September 26,
                  2001)*10.3
              
              Tribeworks,
                  Inc. 2004 Employee Stock Incentive Plan (incorporated by reference
                  to
                  Exhibit B to the Registrant’s Proxy Statement on Schedule 14A filed April
                  14, 2004)*21.1
              
              Subsidiaries
                  of the Issuer (Incorporated by reference to Exhibit B to the Registrant's
                  Form 10-KSB filed April 17, 1006)23.1
              
              Consent
                  of Tauber
                  & Balser, P.C.23.2
              
              Consent
                  of Williams
                  & Webster, P.S.31.1
              
              Certification
                  of Chief Executive Officer Pursuant to Rule 13a-14(a) and
                  15d-14(a)31.2
              
              Certification
                  of Chief Financial Officer Pursuant to Rule 13a-14(a) and
                  15(d)-14(a)32.1
              
              Certification
                  of Chief Executive Officer Pursuant to Section 1350 of Title 18
                  of the
                  United States Code32.2
              
              Certification
                  of Chief Financial Officer Pursuant to Section 1350 of Title 18
                  of the
                  United States Code99.1
              
              Asset
                  and Liability Assignment and Indemnification Agreement, dated March
                  29,
                  2005 (incorporated by reference to Exhibit 99.2 to the Registrant’s
                  Current Report on Form 8-K filed on March 31, 2005)*99.2
              
              Promissory
                  Note, dated March 29, 2005 (incorporated by reference to Exhibit
                  99.3 to
                  the Registrant’s Current Report on Form 8-K filed on March 31,
                  2005)*
  (b)
                The
                      following reports on Form 8-K were filed during the quarter
                      ended December
                      31, 2005:
 4.1
              
              Certificate
                  of Designation, Preferences, Rights and Limitations of Series B
                  Convertible Redeemable Preferred Stock of Tribeworks Inc. (incorporated
                  by
                  reference to Exhibit 4.1 to the Registrant’s Current Report in Form 8-K
                  filed October 11, 2005)*4.1
              
              Form
                  of Subscription Agreement for Common Stock of Tribeworks Inc.
                  (incorporated by reference to Exhibit 4.1 to the Registrant’s Current
                  Report in Form 8-K filed November 3,
                  2005)*


*
      Previously filed




44




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





Set
      out
      below are the various fees paid to or accrued for our previous auditors, Tauber
      & Balser, P.C. and our present auditors, HLB Cinnamon Jang Willoughby &
Company for services provided during the years ended December 31, 2004 and
      2005:




**Fees
                for the Year Ended****December
                31,**
              **2005**
            
            **December
                31,**
              **2004**(in
                thousands)Audit
                fees (1)
            
            $
            41,342
            
            $
            34,494Audit-related
                fees (2)
            
            
            13,836
            
            
            —Tax
                fees (3)
            
            
            —
            
            
            —All
                other fees (4)
            
            
            1,158
            
            
            —Total
                fees for services
            
            $
            56,336
            
            $
            34,494





(1)
            Audit
                fees are the fees billed for professional services rendered for the
                audit
                of our annual financial statements. This category also includes fees
                for
                statutory audits required domestically and internationally, comfort
                letters, consents, assistance with and review of documents filed
                with the
                SEC, attest services, work done by tax professionals in connection
                with
                the audit or quarterly reviews, and accounting consultations and
                research
                work necessary to comply with generally accepted auditing
                standards.





(2)
            Audit
                Related fees are the fees billed for assurance and related services
                by the
                principal accountant that are reasonably related to the performance
                of the
                audit or review and are not reported as audit
                fees.





(3)
            Tax
                fees are the fees billed for professional services rendered for tax
                compliance, tax advice and tax planning, except those provided in
                connection with the audit or quarterly
                reviews.





(4)
            All
                other fees include fees billed for professional services not covered
                by
                (1) through (3) above.





The
      Board
      of Directors, acting as the Audit Committee, pre-approves all audit and
      permitted non-audit services (including the fees and terms thereof) to be
      performed for the Company by its independent auditor.




45


**SIGNATURES**





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




Tribeworks,
              Inc.,
              a
                Delaware corporationDate: April
                  4, 2007
            By:
            /s/ Peter
                B. JacobsonPeter
                B. Jacobson, Chief Executive Officer
                (Registrant’s
                    Principal Executive
                    Officer)


Date: April
                    4, 2007
            By:
            /s/  B.S.P.
                MarraB.S.P.
                Marra, Chief Financial Officer
                (Registrant’s
                  Principal Financial Officer)




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




Date: April
                    4, 2007
            
            
            /s/ Robert
                AltingerRobert
                Altinger, Director


Date: April
                  4, 2007
            
            
            /s/ W.
                Gordon BlanksteinW.
                Gordon Blankstein, Director




Date: April
                    4, 2007
            
            
            /s/ Robert
                  C. GardnerRobert
                  C. Gardner, Director


Date: April
                      4, 2007
              
              
              /s/ Peter
                      B. JacobsonPeter
                      B. Jacobson,Director
 Date: April
                          4, 2007
                  
                  
                  /s/ B.S.P.
                            MarraB.S.P.
                            Marra, Director
 46