UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

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

                   For the fiscal year ended December 31, 2001

                                       OR

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

                    For 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             (I.R.S. Employer
  Organization)                                              Identification No.)

                                988 MARKET STREET
                             SAN FRANCISCO, CA 94102
               (Address of principal executive offices) (zip code)
         Issuer's Telephone Number, Including Area Code: (415) 674-5555

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

         Securities registered under Section 12(g) of the Exchange Act:
                                  COMMON STOCK

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


     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-8 is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

     State issuer's revenues for its most recent fiscal year. $1,521,839

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days.  (See  definition of affiliate in Rule
12b-2 of the Exchange Act.)

     Note.  If  determining  whether a person is an  affiliate  will  involve an
unreasonable  effort and expense,  the issuer may calculate the aggregate market
value of the common  equity held by  non-affiliates  on the basis of  reasonable
assumptions, if the assumptions are stated.

     There were 18,434,628  shares of the  registrant's  Common Stock issued and
outstanding as of December 31, 2001.


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

PART I                                                                        3

Item 1.  Description of Business                                              3

Item 2.  Description of Properties                                            6

Item 3.  Legal Proceedings                                                    6

Item 4.  Submission of Matters to a Vote of Security
         Holders                                                              7

PART II                                                                       7

Item 5.  Market for Common Equity and Related Stockholder
         Matters                                                              7

Item 6.  Management's Discussion and Analysis or Plan of Operation            7

Item 7.  Financial Statements                                                16

Item 8.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure                              34

PART III                                                                     34

Item 9.  Directors, Executive Officers, Promoters and
         Control Persons; Compliance with Section 16(a)
         of the Exchange Act                                                 34

Item 10. Executive Compensation                                              35

Item 11. Security Ownership of Certain Beneficial
         Owners and Management                                               37

Item 12. Certain Relationships and Related Transactions                      37

Item 13. Exhibits, Lists and Reports on Form 8-K                             38

SIGNATURES                                                                   39

Exhibit Index                                                                40


                                       2


<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

    OVERVIEW

     Tribeworks  provides  next-generation  tools for  creating  and  delivering
multimedia  applications.  We generate  revenue in two ways:  our Tools business
where we sell our  software  directly  to buyers of  graphics  software  and our
Enterprise  business  where we  create  custom  versions  of our tools for large
customers.

     Tools customers license our multimedia authoring tool iShell(R),  which was
introduced in January 1999.  iShell is a  cross-platform  software  product that
allows developers to create multimedia  applications in a variety of categories,
including  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 have videos and other
visual digital content on the disk), video yearbooks,  recruitment presentations
and more. Tools customers,  usually graphics industry professionals who also use
complementary  graphics  software  products from other companies,  pay an annual
membership  fee to  use  our  iShell  software  and  supplemental  products  and
services.

     Enterprise  customers,  usually large corporations that require development
of custom  multimedia  tools or complex  multimedia  applications,  license  our
software for a fixed fee or on a per unit basis.  Enterprise  customers also pay
for professional  engineering  services  performed by Tribeworks'  employees and
consultants.

    As of December 31, 2001, hundreds of companies in twenty countries have
delivered applications based on our technology at some of world's largest
organizations and most respected educational institutions including: Apple
Computer, AMD, 3Com, Pioneer Electronics, Morgan Stanley Dean Witter, Burger
King, Tower Records, Airbus, United Airlines, Nike, Nokia, the US Navy, New York
University, UCLA, Michigan State, CalTech, The University of Iowa, Brigham Young
University, The University of Hong Kong, and The Canadian Film Center.

    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
engages in sales and professional services activities primarily in our
Enterprise application development business.

    PRODUCTS AND SERVICES

    TOOLS BUSINESS

    Our Tools business is focused on direct sales of licenses and bundled
support services to our proprietary graphical software application, iShell(R),
and complementary products such as software plug-ins and product documentation.
For the year ended December 31, 2001, the Tools business accounted for 26% 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.

    We attract new tools customers primarily through our website,
Tribeworks.com, where iShell 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. As of December 31, 2001, more
than 47,000 users had registered at Tribeworks.com. Tools customers, referred to
as Members, who use iShell for commercial purposes pay an annual membership fee
that includes a license to use our software and customer support services. We
currently sell three membership levels: Gold, Silver, and Educational. Gold and
Silver Members have the right to use the iShell editor to create and the iShell
runtime environment to distribute commercial products during their annual


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<PAGE>


membership period. Educational Members, who must be students or faculty at an
accredited educational institution, are not permitted to use their software for
any type of commercial purpose. Gold and Educational Members also receive a
license to utilize, but not to distribute, the iShell source code, the computer
language used in writing a software program, which allows them to more
effectively customize and modify their software applications. In addition, we
provide an option to purchase a permanent license for iShell in lieu of paying
for a license via a membership.

    Members can also develop software tools that enhance the functionality of
our products. These functional plug-ins are either incorporated into updated
versions of iShell or sold on a consignment basis through our website.
Tribeworks retains ownership of all plug-ins that are incorporated into iShell.

    ENTERPRISE BUSINESS

    Enterprise customers are large companies and other entities that require
development of customized multimedia authoring tools or multimedia applications
that we provide though specialized enhancements to our iShell software. For the
year ended December 31, 2001, the Enterprise business accounted for 74% of our
revenue.

    Enterprise customers license our software for a fixed fee or on a per unit
basis. Enterprise customers, who are frequently subscribers to our tools
products, also pay for professional services, which we provide for a fixed fee
or on an hourly basis via our employees and outside consultants. Unlike most
services businesses, we own most of the work we create during Enterprise
engagements which, in turn, helps underwrite our research and development costs.
Often, new business opportunities for the Enterprise division grow from the
Tools membership base and, as a result, we have been able to secure large
Enterprise customers without a dedicated sales force. Ultimately, we do not
intend to grow a large professional services organization, but at this stage in
our growth, we believe it is vital that we provide direct services for certain
key customers. We believe this allows us to develop new products suitable for
large customers who carry the potential for large, recurring licensing fees.

    During 2001, three customers accounted for 89% of our Enterprise revenue.
Our relationships with these customers are 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. We have created customized tools for
               Pioneer to complement a number of their hardware products,
               including DVD drives and Plasma Display Screens. During 2001,
               Tribeworks and Pioneer filed a joint patent application related
               to certain interactive display technologies.

           -   iVAST, Inc., developers of end-to-end MPEG-4 solutions, hired us
               in late 2001 to develop a set of MPEG-4 authoring tools that
               harness the power of the MPEG-4 standard. Building on the success
               of MPEG-1 and MPEG-2 standards, MPEG-4 enables integrated,
               interactive, targeted multimedia delivery across any network --
               whether broadcast or broadband, wireless or wireline -- and via
               electronic or physical distribution to any device, from set-top
               boxes to PCs and personal digital assistants. We expect that
               iVAST will begin to market the tools during 2002.

           -   Licross Inc., a Japanese digital media services company,
               contracted with us on several projects during 2001. During Q1
               2001, we won a competitive bidding process with Licross to become
               the provider of E-learning software to Nihon Tsushin Kyoiku
               Renmei's (NTKR). NTKR is Japan's largest correspondence course
               institution with approx 12 million students registered,
               approximately 6 million students taking courses each year, and
               nearly 1 billion $USD in annual sales. During Q2 2001, we were
               hired by Licross to build a customized version of iShell, branded
               as LiShell, to serve the Japanese streaming media market.

    Our wholly-owned Japanese subsidiary was incorporated in August 2000, and we
believe it will significantly contribute to future revenues. In January 2001, we
announced iShell-J, the Japanese language version of our iShell


                                       4



<PAGE>


software product, which includes support for two-byte characters.  We anticipate
that we will derive most of our Japanese revenues from Enterprise customers.

    PRODUCT DEVELOPMENT

    Our 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. Therefore, we invest a significant
portion of our money into research and development. 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 that are connected
to one another via the Internet, we continue to adapt our products to new
hardware and software platforms and to embrace emerging technology standards.
For the years ended December 31, 2001, and December 31, 2000, respectively,
research and development expenditures were $186,981 and $461,350.

    TECHNICAL SUPPORT AND EDUCATION

    We provide technical support to Members, which includes rapid response to
support questions via email and phone, a project upload and test service,
discussion lists, a web board, and printed documentation. Technical support
varies with membership levels. We are able to limit expenditures for customer
support because Members are able to answer most questions for one another
through our discussion lists and web boards.

    We offer a training course for iShell, "Train with the Tribe," which is a
one-day introductory training session to iShell offered in a growing number of
locations worldwide. Training serves as a sales mechanism and more than 30% of
trainees decide to purchase a membership. Gold Members receive complementary
"Train with the Tribe" passes with an annual membership, and other training
attendees pay per session. Advanced iShell fee-based training sessions are also
offered, which are not available with the complementary passes received by Gold
Members.

    We also hold an annual iShell user conference in San Francisco, a two-day
event that provides Members an opportunity to meet one another, to meet
Tribeworks' engineers, and learn about the latest iShell developments.

    COMPETITION

    We compete in markets that are new, 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 Internet 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, Windows NT, Macintosh, and Macintosh OSX 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 ownership;
           -   Improving sales and distribution efficiency;
           -   Improving brand name recognition; and
           -   Providing high quality professional support services.


                                       5


<PAGE>


    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
on-line 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.

    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. 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. Mr. Patrick Soquet (one of our co-founders and a
Director) performs software development services for us through Keepsake, a
Belgian entity wholly owned by him.

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

    EMPLOYEES

     As of December 31, 2001, we had a total of 7 employees and 4 consultants
working on a full-time basis.

ITEM 2. DESCRIPTION OF PROPERTIES.

     The Company leases approximately 3,300 square feet, which includes
approximately 2,600 square feet in San Francisco, California for its sales,
engineering, and administrative offices and 700 square feet in Tokyo, Japan for
its Japanese subsidiary. The current annual rent for the San Francisco facility
is approximately $69,000 and the lease expires in February 2004 with an option
to extend the lease for two years. The annual rent for the Tokyo facility is
approximately $24,000 and the sublease expires March 31, 2002. Both facilities
are in satisfactory condition for their purposes. At the termination of the
lease on the Tokyo facility lease, we plan to enter into a new lease in a
different facility.

ITEM 3. LEGAL PROCEEDINGS.

         The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject that are pending, threatened or
contemplated or any unsatisfied judgments against the Company.


                                       6


<PAGE>


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

None.

                                     PART II

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

    Tribeworks, Inc. common stock is traded on the OTC bulletin board under the
symbol TRWX. The following table sets forth the range of high and low closing
sales prices for each period indicated and reflects all stock splits effected by
the Company:

            _________________________________________________________

                                   2001                  2000
            _________________________________________________________

                              High       Low        High        Low
            _________________________________________________________

            First quarter     $0.800     $0.250     $7.050     $1.625
            _________________________________________________________

            Second quarter    $0.390     $0.080     $6.875     $3.000
            _________________________________________________________

            Third quarter     $0.140     $0.050     $4.500     $1.438
            _________________________________________________________

            Fourth quarter    $0.150     $0.040     $2.375     $0.375
            _________________________________________________________


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


    The Company had approximately 177 stockholders of record as of December 31,
2001. The Company has not declared or paid any cash dividends on its common
stock and presently intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.

    We issued warrants for purchase of our unregistered common stock during the
quarter ended December 31, 2001. These warrants were issued pursuant to section
4(2) of the Securities Act of 1933, as amended, and were not issued with the
assistance of underwriters.

    On October 26, 2001 we issued a warrant to an employee who had provided
services to us valued in total at $20,000, giving him a right to purchase a
total of 200,000 shares of our common stock at a price of $0.05 per share. The
warrants were issued pursuant to our 2001 Tribeworks, Inc. Stock Plan.
One-quarter of the shares underlying the warrant issuance were registered
pursuant to the to the S-8 registration statement filed on September 26, 2001.We
have no plans to register the remaining three-quarters of the shares underlying
the warrant issuance.

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

    The following discussion contains forward-looking statements that are
subject to risks and uncertainties. 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. We have
sought to identify the 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 the Company's stock.

RESULTS OF OPERATIONS

    Our revenue base continued to grow during 2001 while we cut operating costs
during the same period. For 2001, we reported a net loss from operations of
$496,524, compared to a net loss from operations of $1,948,213 for 2000.


                                       7


<PAGE>

This  improvement  is a  result  of  operating  improvements  in  the  business,
including  increased  revenue and reduced costs.  While we currently operate our
business with limited resources and significant debt, we have been cash-positive
for the past three  quarters.  Because we have been able to achieve  this result
and  because  raising  money at our  current  market  valuation  would be highly
dilutive for  existing  shareholders,  we do not have  current  plans for equity
financing.

    REVENUES

    Revenues were $1,521,839 for the year ended December 31, 2001, an increase
of 110% over revenues of $725,872 for the year ended December 31, 2000. The
Tools Business, which includes sales of memberships, and sales of books and
third party plug-ins from our website, grew in 2001 by 31% to $391,257, compared
with $298,350 for 2000. The increase was primarily due to membership renewals
and increased awareness of iShell by multimedia developers. The Enterprise
business grew in 2001 by 186% to $1,130,582, compared with $394,872 for 2000.
Enterprise revenues in 2001 consisted of $1,020,963 in professional services
revenues and $109,619 in licensing revenues, compared with $389,872 in
professional services revenues and $5,000 in licensing revenues in 2000. The
Enterprise business was substantially initiated in 2000. International revenues,
which consist of sales to foreign customers, represented 74% of revenues in
2001, compared to 25% of revenues in 2000. The Company's revenues from Japanese
customers increased to 64% of total revenues in 2001 from 7% in 2000.

    The largest contributor to 2001 revenue was our NTKR contract in Japan,
which contributed $524,887 in professional services revenue. A significant
portion of the non-software programming work on this contract was outsourced to
third parties, who were paid in full upon completion of this contract.
Accordingly, we booked $169,039 in accounts payable at December 31, 2001 for
amounts owed to these consultants. During 2002 in Japan, we plan to focus our
business on our core skill, software development, while simultaneously reducing
our role as a project manager. We anticipate this change will significantly
reduce our expenses in Japan, but when combined with a potentially negative
change in the value of the yen, this may result in a significant decrease in
gross revenue in Japan.

    COST OF SALES

    Cost of sales includes royalties paid to third parties for licensed
technology, amortization costs related to acquired technology, costs associated
with order fulfillment, and costs associated with customer development services.
Cost of sales was $716,737 for the year ended December 31, 2001, up from
$192,233 for the year ended December 31, 2000. Gross margins decreased on a
percentage basis to 53% for 2001 from 74% for 2000. This decrease was primarily
due to our role as project manager in the Enterprise business on the NTKR
project, and was partially offset by increased efficiencies in our Tools
business. We believe that our gross margins in the Enterprise business will
improve if we are able to sell more software licenses relative to professional
services, which we believe will occur as our product suite matures for our
Enterprise markets, and as we move away from the role of project manager on
large contracts.

    OPERATING EXPENSES

    Product support expenses consist mainly of compensation, benefits and
consulting fees paid to product support personnel. Product support expenses were
$77,387 and $110,577 for the years ended December 31, 2001 and 2000,
respectively. As a percentage of Tools sales, product support expenses were 20%
and 37% for 2001 and 2000, respectively. The decrease is due to a reduction in
product support staff, efficiencies achieved in the support process, and
reallocation of part of the product support manpower to Enterprise projects.

    Product development expenses consist primarily of compensation and benefits
to support product development. Product development expenses were $186,981 and
$461,350 for the years ended December 31, 2001 and 2000, respectively. This
decrease primarily reflects the assignment of several software engineers to
billable professional services projects, and also a small decrease in
engineering headcount. The reduction in product development expenses does not
reflect a diminished emphasis on growing our base of intellectual property, as
we have been effective to date at retaining intellectual property rights for
software created by way of billable projects to outside parties. We expect to
remain effective in retaining of these intellectual property rights in the
future.


                                       8


<PAGE>


    Sales and marketing expenses consist primarily of compensation and benefits,
advertising, mail order costs, trade show expenses, and other public relations
and marketing costs. Sales and marketing expenses were $241,406 and $663,368 for
the years ended December 31, 2001 and 2000, respectively. This decrease reflects
a reduction in personnel and discretionary spending in the sales and marketing
areas. We reduced headcount in the sales and marketing areas so we could
position ourselves toward profitability. We do not believe that such reductions
adversely affected our sales efforts.

    General and administrative expenses consist primarily of compensation and
benefits, fees for professional services, and overhead. General and
administrative expenses were $795,852 and $1,246,557 for the years ended
December 31, 2001 and 2000, respectively. The decrease was due primarily to
cost-cutting measures enacted beginning in the second quarter of 2001. During
the year we paid reduced salaries and fees to key employees and consultants.
Should our cash position materially improve, we expect to pay increased salaries
and fees to these key employees and consultants, and therefore experience
increased operating expenses, especially in the general and administrative
category.

    PROVISION (BENEFIT) FOR INCOME TAXES

    We recorded an income tax benefit of $72,800 for the year ended December 31,
2001, compared to $0 for the year ended December 31, 2000. This benefit relates
to the utilization of our loss to offset the income taxes from the gain of the
settlement of outstanding payables to certain employees and consultants in
exchange for equity that occurred during the third and fourth quarters of 2001.

    EXTRAORDINARY INCOME

    We recorded an extraordinary income of $110,129 for the year ended December
31, 2001, compared to $0 for the year ended December 31, 2000. This
extraordinary item relates to a settlement of outstanding payables to certain
employees and consultants in exchange for equity that occurred during the third
and fourth quarters of 2001. In the fourth quarter, an adjustment of $172,929
was made to recognize as an extraordinary item the effects of the settlement
that occurred in the third quarter, which was originally recognized as an equity
transaction.

    NET LOSS

    Net loss was $313,595 for the year ended December 31, 2001, compared to a
net loss of $1,948,213 for the year ended December 31, 2000.

    LIQUIDITY AND CAPITAL RESOURCES

    At December 31, 2001, the Company had cash and cash equivalents of $47,753
compared to $13,033 at December 31, 2000.

    Since inception, the Company has financed its operations through issuance of
stock and revenues derived from the Tools and Enterprise businesses. Through
December 31, 2001, the Company had raised $2,672,656 from the sale of stock. At
December 31, 2001, the principal source of liquidity for the Company was $47,753
of cash and cash equivalents.

    For the year ended December 31, 2001 and 2000, cash used in operating
activities was $110,807 and $1,595,371 respectively. The decrease was due
primarily to increased revenue and cost-cutting measures.

    Cash used in investing activities for the year ended December 31, 2001 and
2000 was $4,473 and $28,755, respectively. Expenditures were for equipment
purchases in 2001 and for a combination of equipment purchases and a technology
license purchase in 2000.


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<PAGE>


    Cash provided by financing activities for the year ended December 31, 2001
and 2000 was $150,000 and $1,479,806, respectively. Cash inflow during 2001 was
from sales of our stock, via direct stock purchases, and issuance of a
convertible note.

    Our capital requirements depend on numerous factors, including market
acceptance of our products, resources we devote to developing, marketing,
selling and supporting our products, timing of our operations, extent and timing
of investments, potential acquisition of other concerns, and other factors. We
expect to devote substantial capital resources to hire and expand our sales,
support, marketing and product development organizations, to expand marketing
programs, and for other general corporate activities.

    RISK FACTORS

WE HAVE A LIMITED OPERATING HISTORY AND THERE IS A GREAT DEGREE OF UNCERTAINTY
AS TO OUR FUTURE RESULTS. WE HAVE NEVER BEEN PROFITABLE 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 clients and in building 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 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 TO INCUR OPERATING LOSSES FOR THE FORESEEABLE FUTURE AS WE CONTINUE TO
DEVELOP AND MARKET OUR BUSINESS.

    We have incurred operating losses each year since our inception. As a
result, we cannot be certain when or if we will achieve sustained profitability.
Failure to become profitable 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 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 the Tools
business and Enterprise business will be hampered. There can be no assurance
that our products and tools will be attractive to a sufficient number of users
to generate significant revenues. If we are unable to evolve our present
products and to develop new products that allow us to attract, retain, and
expand a loyal membership base, our business, 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.


                                       10


<PAGE>


    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 that the primary
competitive factors in providing rich-media application services and tools to
development organizations and large corporations to be 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.

    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, Tekadence and MatchWare. 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.


OUR 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 ASSURE YOU THAT THE MARKET WILL ACCEPT THE INTERNET AS A VEHICLE FOR
RICH-MEDIA APPLICATIONS.

    Use of the Internet-based rich-media by individuals and business users is at
an early stage of development. Market acceptance of the Internet as a medium for
rich-media applications, information, entertainment, commerce, advertising, and
education is subject to a high level of uncertainty. We depend on the Internet
to market our rich-media products. Our ability to succeed will depend, in part,
on the development of Internet infrastructure to support delivery of rich-media
content. If Internet-based rich-media applications are not widely accepted by
consumers or businesses, or appropriate Internet infrastructure does not become
available, our business, financial condition, and operating results will be
materially adversely affected.

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.


                                       11


<PAGE>


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 future 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.

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 depend substantially on the services of Duncan
Kennedy, our President and CEO, and Robert Davidorf, our Chief Financial
Officer, as well as on our ability to recruit, retain and motivate our other
officers and key employees.

    We do not currently have employment contracts with key officers or
employees, and their relationships with us are terminable at-will. Our success
also depends on our ability to attract and retain additional qualified employees
in the San Francisco Bay Area and in Tokyo. Competition for qualified personnel
in the San Francisco Bay Area and Tokyo is intense and there are a limited
number of persons with 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 addition, Mr. Soquet (one of our co-founders and a Director) performs
software development services for us through Keepsake, the Belgian entity
wholly-owned by him. Pursuant to a consulting agreement, Keepsake agreed to
provide necessary services to us through June 2002. In the event that we are
unable to retain Mr. Soquet's services after termination of Keepsake's
agreement, our business and financial condition could be materially and
adversely affected.

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 future 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. We must also evaluate and use
proprietary multimedia development software provided by companies such as Apple,
Microsoft, and RealNetworks to 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.

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


                                       12


<PAGE>


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 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 Internet operations 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.

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.

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.


                                       13


<PAGE>


    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 and
subscribe Members from countries outside the United States including Japan where
we maintain a wholly-owned subsidiary. 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.

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. 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.

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;


                                       14


<PAGE>

           -   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.











                                       15


<PAGE>


ITEM 7. FINANCIAL STATEMENTS.














                        TRIBEWORKS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

















                                       16


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES


                                Table of Contents


                                                                            Page

Independent Auditors' Report.................................................18

Consolidated Balance Sheet...................................................19

Consolidated Statements of Operations........................................20

Consolidated Statements of Cash Flows........................................21

Consolidated Statements of Stockholders' Deficit.............................23

Notes to Consolidated Financial Statements...................................24















                                       17


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


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, 2001, and the related consolidated
statements of operations, cash flows, and stockholders' deficit for the years
ended December 31, 2001 and 2000. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, 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, 2001, and the results of their operations and
their cash flows for the years ended December 31, 2001 and 2000 in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note C to the
financial statements, the Company's recurring losses from operations 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.
-------------------------
Atlanta, Georgia
March 25, 2002


                                       18


<PAGE>


<TABLE>
<CAPTION>

                        TRIBEWORKS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001



                                     ASSETS

<S>                                                                             <C>
Current Assets
   Cash                                                                         $           47,753
   Accounts receivable, net of $3,400 allowance                                             37,511
   Billed                                                                                  200,433
   Unbilled                                                                                 28,945
                                                                               -------------------
     Total Current Assets                                                                  314,642
                                                                               -------------------

Other Assets
   Equipment, net of accumulated depreciation of $27,318                                    21,277
   Technology license, net of accumulated amortization of $95,381                           34,619
                                                                               -------------------
                                                                                            55,896
                                                                               -------------------
TOTAL ASSETS                                                                    $          370,538
                                                                               ===================

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
   Accounts payable                                                             $          414,994
   Accrued expenses                                                                         51,963
   Due to shareholders                                                                       6,232
   Billings in excess of costs and estimated earnings on uncompleted contracts              62,800
   Deferred revenue                                                                        138,074
                                                                               -------------------
     Total Current Liabilities                                                             674,063
                                                                               -------------------

Convertible Note Payable                                                                   100,000
                                                                               -------------------

Stockholders' Deficit
   Preferred stock: 50,000,000 shares authorized, none issued
   Common stock: 200,000,000 shares authorized, $.0001 par
     value, 18,434,628 shares issued and outstanding
                                                                                             1,846
   Additional paid-in capital                                                            3,030,825
   Unearned compensation                                                                  ( 52,760)
   Accumulated deficit                                                                  (3,383,436)
                                                                               -------------------
     Total Stockholders' Deficit                                                          (403,524)
                                                                               -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                     $          370,538
                                                                               ===================


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

</TABLE>


                                       19


<PAGE>

<TABLE>
<CAPTION>

                        TRIBEWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                                2001               2000
                                                                ----               ----
<S>                                                      <C>                <C>

REVENUES                                                 $    1,521,839     $      725,872

COST OF SALES                                                   716,737            192,233
                                                         --------------     --------------
GROSS PROFIT                                                    805,102            533,639
                                                         --------------     --------------

OPERATING EXPENSES
   Product support                                               77,387            110,577
   Product development                                          186,981            461,350
   Sales and marketing                                          241,406            663,368
   General and administrative                                   795,852          1,246,557
                                                         --------------     --------------
                                                              1,301,626          2,481,852
                                                         --------------     --------------

LOSS FROM OPERATIONS                                           (496,524)        (1,948,213)

INCOME TAX BENEFIT                                              (72,800)                 -
                                                         --------------     --------------

LOSS BEFORE EXTRAORDINARY ITEM                           $     (423,724)     $  (1,948,213)

EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT
  OB DEBT (NET OF INCOME TAXES OF $72,800)                      110,129                  -
                                                         --------------     --------------

NET LOSS                                                 $     (313,595)    $   (1,948,213)
                                                         ==============     ==============

BASIC AND DILUTED LOSS PER COMMON SHARE
  Loss before extraordinary item                         $        (0.03)     $       (0.12)
  Extraordinary item                                               0.01                  -
                                                         --------------     --------------
  Net loss                                               $        (0.02)    $        (0.12)
                                                         ==============     ==============

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                           17,377,545         16,538,827
                                                         ==============        ===========


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

</TABLE>


                                       20


<PAGE>

<TABLE>
<CAPTION>

                        TRIBEWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                                                  2001                 2000
                                                                                  ----                 ----
<S>                                                                          <C>                <C>

CASH FLOWS FROM OPERATING ACTIVITIES
      Net loss                                                               $(313,595)         $(1,948,213)
                                                                             ---------          -----------
     Adjustments:
         Depreciation and amortization                                          59,700               54,548
         Common stock issued for services                                       24,334              158,514
         Amortization of unearned compensation                                  50,890               64,985
         Gain on extinguishment of debt                                       (182,929)                   -
         Changes in:
             Accounts receivable                                              (198,247)              (8,457)
             Other assets                                                       35,494              (42,925)
             Note receivable, employee                                           5,622               (5,622)
             Accounts payable                                                  394,720              (17,190)
             Deferred revenue and billings in excess of costs
               and estimated earnings on uncompleted contracts                   6,180               96,711
             Other liabilities                                                   7,024               52,278
                                                                             ---------          -----------
                 Total adjustments                                             202,788              352,842
                                                                             ---------          -----------
         Net cash used in operating activities                                (110,807)          (1,595,371)
                                                                             ---------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of equipment                                                      (4,473)             (28,755)
                                                                             ---------          -----------
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock                                     50,000            1,479,806
     Proceeds from convertible note payable                                    100,000                    -
                                                                             ---------          -----------
         Net cash provided by financing activities                             150,000            1,479,806
                                                                             ---------          -----------

NET INCREASE (DECREASE) IN CASH                                                 34,720             (144,320)

CASH, BEGINNING OF YEAR                                                         13,033              157,353
                                                                             ---------          -----------

CASH, END OF YEAR                                                            $  47,753          $    13,033
                                                                             =========          ===========


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

</TABLE>

                                       21


<PAGE>

<TABLE>
<CAPTION>

                        TRIBEWORKS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2001 AND 2000


                                                                               2001                2000
                                                                             ---------          -----------
<S>                                                                               <C>               <C>

SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES

    Reclassification between additional paid-in capital and
      unearned compensation                                                  $(13,775)          $   117,425
                                                                             =========          ===========


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


</TABLE>


                                       22


<PAGE>

<TABLE>
<CAPTION>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2001 AND 2000


                                           Common Stock        Additional
                                       ---------------------    Paid-In      Unearned     Accumulated   Related Party
                                         Shares       Amount    Capital    Compensation     Deficit      Receivable        Total
                                       ----------     ------   ----------  ------------   -----------   -------------   ------------
<S>                                    <C>            <C>      <C>          <C>           <C>              <C>          <C>

Balances at December 31, 1999          16,010,000     $1,601   $1,103,801   $         -   $(1,151,628)     $(5,257)     $   (51,483)

Exercise of options and warrants          347,126         35      103,570             -             -            -          103,605
Issuance of common stock                  745,000         75    1,410,869             -             -            -        1,416,201
Stock issued for services                  74,855          7      158,507             -             -        5,257          158,514
Unearned compensation                           -          -      182,410      (117,425)            -            -           64,985
Net loss                                        -          -            -             -    (1,948,213)           -       (1,948,213)
                                       ----------    -------   ----------  ------------   -----------   -------------   ------------
Balances at December 31, 2000,
  as previously reported               17,176,981      1,718    2,959,157      (117,425)   (3,099,841)           -         (256,391)

Cancellation of stock for services        (13,332)        (1)     (29,999)            -        30,000            -                -
                                       ----------     ------   ----------  ------------   -----------   -------------   ------------

Restated Balances at December 31, 2000 17,163,649      1,717    2,929,158      (117,425)   (3,069,841)           -         (256,391)

Issuance of common stock                  200,000         20       49,980             -             -            -           50,000
Return of stock issued in error           (25,000)         -            -             -             -            -                -
Stock issued for services                 322,738         32       24,302             -             -            -           24,334
Stock issued in extinguishment of debt    773,241         77       33,812             -             -            -           33,889
Stock warrants issued in extinguishment
  of debt                                       -          -        7,348             -             -            -            7,348
Stock options issued for services               -          -        8,959        (8,959)            -            -                -
Stock warrants issued for services              -          -          366          (366)            -            -                -
Cancellation of stock options                   -          -      (23,100)       23,100             -            -                -
Amortization of unearned compensation           -          -            -        50,890             -            -           50,890
Net loss                                        -          -            -             -      (313,595)           -         (313,595)
                                       ----------     ------   ----------  ------------   -----------   -------------   ------------
Balances at December 31, 2001          18,434,628     $1,846   $3,030,825   $   (52,760)  $(3,383,436)     $     -      $  (403,525)
                                       ==========     ======   ==========  ============   ===========   =============   ============

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

</TABLE>


                                       23


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE A - NATURE OF BUSINESS AND ORGANIZATION


On August 20, 1998, the Company began its business activities. The Company's
business activity results from a technology that provides next-generation 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 audio, video, animation and graphics
content. The Company exploits its software primarily through memberships and
customized licensed versions that include professional engineering to meet
contract requirements.


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 and Tribeworks Japan, which started business on August 30, 2000. The
Company's operations are conducted through the subsidiaries. All material
intercompany transactions have been eliminated.

     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 requires 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 necessary.

     CUSTOMER CONCENTRATIONS

Accounts receivable are unsecured, and the Company is at risk to the extent that
such amounts become uncollectible. In 2001 revenues from three customers
accounted for 16%, 14% and 40% of total revenue, respectively. In 2000 revenues
from two customers accounted for 23% and 12% of total revenue, respectively. At
December 31, 2001, the unbilled portion of the receivables was from one
customer. The full amount was collected in February 2002.

Revenues from international customers were approximately 74% and 25% of total
revenues in 2001 and 2000, respectively. Revenues are paid in U.S. dollars and
Japanese yen. Approximately 64% of revenues in 2001 were generated from Japanese
customers.


                                       24


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE B - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

     EQUIPMENT

Equipment is stated at cost less accumulated depreciation. Depreciation is
determined using the straight-line method over the estimated useful lives of the
assets. Useful lives are estimated to be three years.

     TECHNOLOGY LICENSE

The Company's principal business activity centers around the commercialization
of iShell, which was developed by an 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
303,030 shares of common stock at an exercise price of $0.33 per share, valued
at $30,000. This agreement is reflected in the financial statements as a
technology license valued at $130,000 and is being amortized on a straight-line
basis over an estimated three year useful life.

     IMPAIRMENT

The technology license asset is reviewed quarterly for impairment. Impairment
will be recognized when events and circumstances indicate that the carrying
amount may not be recoverable. The Company considers factors such as significant
changes in the business climate and projected cash flows from the asset.
Impairment losses are measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset.

     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 customer
development services are generally recognized under the percentage-of-completion
method of accounting using an input measurement 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 and collectability is probable. If all
aspects but the last have not been met or if post contract customer support
could be material, revenue is recognized ratably over the life of the contract.


                                       25


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE B - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)


     COMPENSATED ABSENCES

The Company accrues vacation pay for all full-time employees.

     SOFTWARE DEVELOPMENT COSTS

The Company expenses all software development costs in the period the costs are
incurred.

     STOCK-BASED AWARDS

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." 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."

     FOREIGN CURRENCY TRANSLATION

Tribeworks Japan prepares its financial statements in a currency other than U.S.
dollars. Results of operations and cash flows are translated at average exchange
rates during the period, and assets and liabilities are translated at
end-of-period exchange rates. For the year ended December 31, 2001, 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).

     NET LOSS PER COMMON SHARE

Basic loss per share (EPS) is computed based on net loss divided by the weighted
average number of common shares outstanding. Diluted EPS is computed based on
net loss divided by weighted average number of common and potential common share
equivalents. The only potential common share equivalents are those related to
stock options and warrants and the convertible note payable; however, such
potential common share equivalents are anti-dilutive. Therefore the diluted EPS
is the same as basic EPS.


                                       26


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


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. However, the Company incurred a
net loss of approximately $314,000 and $1,950,000 for the years ended December
31, 2001 and 2000, respectively, and had a working capital deficiency of
approximately $360,000 and an equity deficiency of approximately $404,000 at
December 31, 2001. The Company has sustained continuous losses from operations.
The Company has used, rather than provided, cash from its operating activities
during the years ended December 31, 2001 and 2000 and has deferred payment of
certain accounts payable and accrued expenses. Given these results, additional
capital or improved operations will be needed to sustain the Company's
operations.

Management's plans in this regard include additional marketing of its product
line with special emphasis on its new customer development services in the U.S.
and in Japan via its U.S. entity or its Tribeworks Japan subsidiary.

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
sheet is dependent upon continued operation of the Company, which is in turn
dependent upon the Company's ability to meet its financing 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 - COSTS, ESTIMATED EARNINGS AND BILLINGS ON UNCOMPLETED CONTRACTS


At December 31, 2001, billings in excess of costs and estimated earnings on
uncompleted contracts consisted of approximately $125,000 of costs, $210,000 of
estimated earnings, less $398,000 of billings.


NOTE E - INCOME TAXES


Deferred income taxes 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 tax assets as follows:

                                                      2001              2000
                                                  ------------      ------------

         Deferred tax assets                      $ 1,360,000       $ 1,230,000
         Less valuation allowance                  (1,360,000)       (1,230,000)
                                                  ------------      ------------
         Net deferred tax assets                  $          -       $         -
                                                  ============      ============


                                       27


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE E - INCOME TAXES (CONTINUED)


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

                                                      2001              2000
                                                  ------------      ------------

         U.S. federal income tax rate               (34.0)%           (34.0)%
         State income tax rate, net of
            federal rate                             (5.8)             (5.8)
         Valuation allowance                         39.8              39.8
                                                    -----             -----
                                                      0.0%              0.0%
                                                    ======            ======

At December 31, 2001, the Company had available net operating loss carryforwards
for income tax reporting purposes of approximately $3,224,000, which will expire
in various periods through 2021. The potential tax benefit of the net operating
loss carryforwards resulting from 2001 and 2000 operations amounted to
approximately $325,000 and $1,900,000, respectively. The Company has not filed
its 2000 federal and state income tax returns and its 2001 return is under
extension.


NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS


The Company's financial instruments include cash and receivables for which the
Company believes that the fair value approximates their carrying amounts. It was
impracticable to estimate the fair value of the other financial instruments.


NOTE G - STOCK OPTIONS AND STOCK WARRANTS


     STOCK OPTIONS

The Company has reserved 1,600,000 shares of its common stock for the exercise
of options under its 1999 Equity Incentive Plan. The exercise price is 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, 2001, there were approximately 1,400,000 shares reserved for issuance under
the 1999 Equity Incentive Plan.


                                       28


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE G - STOCK OPTIONS AND STOCK WARRANTS (CONTINUED)


A summary of the Company's stock option plan as of December 31, 2001 and 2000
and changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>

                                                            2001                              2000
                                                -----------------------------     ------------------------------
                                                                  Weighted                          Weighted
                                                                   Average                           Average
                                                  Options      Exercise Price        Options     Exercise Price
                                                 ---------     --------------       ---------    --------------
<S>                                                <C>              <C>               <C>             <C>

Outstanding at beginning of year                   872,668          $1.59             757,097         $0.27
Granted                                            365,000           0.26             746,000          2.64
Exercised                                                -              -             (44,096)         0.08
Cancelled                                         (398,753)          1.70            (586,333)         1.33
                                                 ---------         ------           ---------        ------
Outstanding at end of year                         838,915          $0.95             872,668         $1.59
                                                 =========          =====           =========         =====
Options exercisable at end of year                 535,897          $0.94             294,347         $0.39
                                                 =========          =====           =========         =====
Weighted-average fair value of options
     granted during the year                                        $0.08                             $0.64
                                                                    =====                             =====

</TABLE>


The following table summarizes information about stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>

                                           Options Outstanding                           Options Exercisable
                             -------------------------------------------------    --------------------------------
                                                Weighted           Weighted                           Weighted
                                 Options         Average            Average          Options           Average
                               Outstanding   Remaining Life     Exercise Price     Outstanding     Exercise Price
                               -----------   --------------     --------------     -----------     --------------
<S>                              <C>            <C>                  <C>              <C>               <C>

                                 141,000        8.54 years           $3.09            94,626            $3.09
                                  34,000        8.82 years            2.50            13,500             2.50
                                  45,000        8.40 years            2.80            35,000             2.80
                                  12,000        8.10 years            1.75             5,438             1.75
                                  32,000        8.88 years            1.00             8,501             1.00
                                 180,000         .48 years            0.38           120,000             0.38
                                  55,000        1.14 years            0.25            20,625             0.25
                                 190,000        7.50 years            0.06           190,000             0.06
                                 149,915        3.58 years            0.05            48,207             0.05
                                --------                                           ---------
                                 838,915                                             535,897
                                ========                                            ========

</TABLE>


                                       29

<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE G - STOCK OPTIONS AND STOCK WARRANTS (CONTINUED)


The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options rather than Statement of Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 requires the Company to provide pro forma
information regarding net loss and loss per share as if compensation cost for
the Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS 123. The Company estimates the fair value
of each stock option at the grant date by using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in 2001
and 2000: no dividend yield for each year; expected volatility of 25%;
weighted-average risk-free interest rates of 4.55% and 6.33%, respectively; and
weighted-average expected option lives of three years in 2001 and 2000.

                                                       2001            2000
                                                   ------------     -----------

    Net loss available to common shareholders:
         As reported                                  $(313,595)    $(1,948,213)
         Pro forma                                     (371,041)     (1,949,713)

Since the difference between the reported and pro forma net loss available to
common shareholders is insignificant, there is no effect on the net loss per
common share.

     STOCK WARRANTS

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

                                                            Weighted Average
                                              Warrants       Exercise Price
                                            -----------     ----------------
    Outstanding at December 31, 1999           303,030            $0.33
         Granted                               745,000             2.50
         Exercised                            (303,030)            0.33
         Expired                              (745,000)            2.50
                                            ----------           ------
    Outstanding at December 31, 2000                 -                -
         Granted                             3,415,915             0.26
         Cancelled                            (700,000)            0.38
                                            ----------            -----
    Outstanding at December 31, 2001         2,715,915            $0.23
                                            ==========            =====


                                       30


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE G - STOCK OPTIONS AND STOCK WARRANTS (CONTINUED)


                                                           2001           2000
                                                         --------       --------

         Weighted-average fair value of warrants
           granted during the year                         $0.06          $0.62
                                                           =====          =====

The following table summarizes information about stock warrants outstanding at
December 31, 2001:

<TABLE>
<CAPTION>


                  Warrants Outstanding                          Warrants Exercisable
     -------------------------------------------------    --------------------------------
                        Weighted           Weighted                           Weighted
        Warrants         Average            Average         Warrants           Average
       Outstanding   Remaining Life     Exercise Price     Outstanding     Exercise Price
       -----------   --------------     --------------     -----------     --------------
<S>      <C>            <C>                  <C>             <C>                <C>

         125,000        1.74 years           $1.75           125,000            $1.75
         792,500        1.67 years            0.38           320,833             0.38
         300,000        4.59 years            0.10            50,000             0.10
         851,340        1.74 years            0.06           851,340             0.06
         617,075        1.72 years            0.05           617,075             0.05
          30,000        1.07 years            0.01            30,000             0.01
     -----------                                         -----------
       2,715,915                                           1,994,248
      ==========                                          ==========

</TABLE>


NOTE H - COMMITMENTS


     LEASES

On January 22, 2001, the Company and its lessor revised an existing lease
agreement for office space. The revised lease term is at a monthly rental rate
of $5,774 through May 2004. The lease agreement contains an option to extend for
two years at a negotiated rate not to exceed $31 per square foot. In addition,
the monthly rent in Japan is approximately $2,000 on a month-to-month lease
agreement. Total rent expense for the years ended December 31, 2001 and 2000 was
$48,269 and $62,045, respectively.

Future minimum lease payments under the long-term lease at December 31, 2001 are
approximately:

             Year Ending
             December 31
             -----------

               2002                    $  69,288
               2003                       69,288
               2004                       23,096
                                      ----------
                                        $161,672
                                      ==========


                                       31


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE H - COMMITMENTS (CONTINUED)


     DIRECTOR COMPENSATION

In October 2000 the Company entered into an agreement with a new member of the
Board of Directors that provided for the issuance of 700,000 shares of common
stock over twenty-four months in consideration for his services on the Board.
Through February 4, 2001, 87,500 shares were issued under the terms of the
agreement. On February 4, 2001, the Board of Directors cancelled the remaining
portion of the agreement, 612,500 shares. The Board then agreed to issue 612,500
stock warrants at $0.375 per share. These warrants vest pro rata over a twenty
month period. If the director's services cease prior to vesting, all unvested
warrants are forfeited.


NOTE I - RELATED PARTY TRANSACTIONS


     OFFICER AND DIRECTOR OPTIONS AND WARRANTS

At December 31, 2001, the Company had outstanding the following qualified and
nonqualified stock options granted to officers and directors which are included
in Note G:

     Common Shares      Exercise           Expiration
      Under Option        Price               Date
     --------------     ---------     --------------------
          90,000          $0.06         June 30, 2009
         180,000           0.38         June 1, 2002
       ---------
         270,000
       =========

Of the total outstanding options granted to officers and directors as discussed
above, options to acquire up to an aggregate of 210,000 shares of common stock
are exercisable at December 31, 2001.

At December 31, 2001, the Company had outstanding the following warrants to
officers and directors which are included in Note G:

             Common Shares      Exercise           Expiration
             Under Warrant        Price               Date
           ----------------     ---------     --------------------
                 125,000          $1.75        October 5, 2003
                 612,500           0.38        February 4, 2003
                 180,000           0.38        January 1, 2006
                 601,340           0.06        September 26, 2003
                  10,000           0.01        February 21, 2003
            ------------
               1,528,840
            ============

Of the total outstanding warrants granted to officers and directors as discussed
above, warrants to acquire up to an aggregate of 1,057,173 shares of common
stock are exercisable at December 31, 2001.


                                       32


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE I - RELATED PARTY TRANSACTIONS (CONTINUED)


     DUE TO SHAREHOLDERS


During the period ended December 31, 1998, certain shareholders of the Company
loaned $18,732 to the Company to finance some of its start-up costs. The $6,232
remaining balance of the loan at December 31, 2001 is non-interest bearing and
payable on demand.


NOTE J - CONVERTIBLE NOTE


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), can convert
the loan to common stock of the Company. The note is convertible at a price per
share equal to the lesser of (1) the average closing price of the Company's
stock for ten days prior to issuance of the note or (2) the price per share paid
by investors in the Qualified Financing. As part of the agreement, the Company
issued 20,000 two-year warrants to purchase common stock at $0.01 per share. The
note bears interest at 10% per annum payable at maturity. The note matures on
January 4, 2003 or upon a "Company Sale" and is unsecured.


NOTE K - EXTRAORDINARY ITEM


During 2001 the Company settled approximately $224,000 of accounts payable and
accrued expenses for shares of common stock and warrants for common stock having
a combined value of approximately $41,000. This extinguishment of debt resulted
in an extraordinary gain of approximately $183,000.


NOTE L - SIGNIFICANT FOURTH QUARTER ADJUSTMENT


During the fourth quarter of 2001, the Company reclassified the approximately
$183,000 of gain on the extinguishment of debt from paid-in-capital to
extraordinary gain.


                                       33


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


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

    Effective March 9, 2001, the Board of Directors approved a change in
certifying accountants from W. Alan Jorgensen, CPA ("Jorgensen") to Tauber &
Balser, P.C. The previous accountant, Jorgensen, sold his business and resigned
as the principal accountant for Tribeworks, Inc. ( the "Company"). The reports
of Jorgensen on the financial statements for the past two fiscal years contained
no adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope or accounting principles, except that Jorgensen
has advised the Company that his opinion on the Company's financial statements
has been modified to express a "going concern qualification" regarding his
uncertainties about the Company's ability to continue as a going concern.

    During the Company's fiscal years ended December 31, 1998 and December 31,
1999, and the period subsequent to November 14, 2000 preceding Jorgensen's
resignation, there were no disagreements between the Company and Jorgensen on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. Attached hereto as Exhibit 16.1 is a
letter from Jorgensen stating whether he agrees with the statements made by the
Company in this Form 10-KSB.

    On March 9, 2001, the Board of Directors of the Company selected Tauber &
Balser, P.C., as the independent public accountants to examine the financial
statements of the Company for fiscal year 2000. The Company had not consulted
with Tauber & Balser, P.C. prior to its engagement regarding (i) either the
application of accounting principles to a specific transaction, either completed
or prosposed, or the type of audit opinion that might be rendered on the
Company's financial statements; or (ii) any matter that was either the subject
of a disagreement or a reportable event within the meaning of Item 304(a)(1) of
Regulation S-B.

                                    PART III

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

    The following table sets forth the name, age and positions of our directors,
officers, executive officers and key employees.

                                                                  DIRECTOR OR
          NAME                  AGE  POSITION                     OFFICER
                                                                   SINCE

          Duncan J. Kennedy     37   President, Chief Executive    1998
                                     Officer and Director
          Robert C. Davidorf    33   Chief Financial Officer
                                     and Director                  2001
          Patrick Soquet        40   Director                      1998
          William R. Woodward   42   Director                      2000

     DUNCAN KENNEDY,  President,  Chief  Executive  Officer,  and Director.  Mr.
Kennedy  is a  co-founder  of  Tribeworks  and has  served as  President,  Chief
Executive Officer and Director since our inception in August 1998. From December
1997 to July 1998,  Mr.  Kennedy  served as Senior  Vice  President  of business
development at Mjuice.com, a distributor of syndicated digital music. From March
1997  to  November  1997,  Mr.  Kennedy  was  Senior  Vice  President,  Business
Development  at MYCD,  a  distributor  of digital  music.  From  January 1990 to
February 1997, Mr. Kennedy worked at Apple Computer,  Inc. where he held various
positions, the most recent of which was Senior Manager. Mr. Kennedy holds a B.S.
from the University of British Columbia.

     ROBERT C. DAVIDORF,  Chief Financial  Officer,  and Director.  Mr. Davidorf
joined  Tribeworks in January 2001 as CFO, and served as a Director since August
2001. Mr.  Davidorf most recently served as General Manager of the San Francisco
office for Los  Angeles-based  ARTISTdirect,  Inc.,  where he oversaw  the group
responsible  for the Company's  digital  music  distribution  efforts.  Prior to
ARTISTdirect,  Mr. Davidorf founded  Mjuice.com,  an Internet technology company
focusing  on the secure  delivery  of MP3 music  files,  which was later sold to
ARTISTdirect.  At Mjuice.com, Mr. Davidorf served as the CFO and was a member of
the  Board  of  Directors.  Before  founding  Mjuice.com,   Davidorf  served  as
Controller and  interim-CFO of Oceania,  Inc. and prior to that was a Consultant
for the Corporate  Finance,  Recovery & Disputes  division


                                       34


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


of Price  Waterhouse,  LLP. Mr.  Davidorf  holds a B.S. in Economics,  magna cum
laude, from The University of Pennsylvania and is a Certified Public Accountant.

     PATRICK SOQUET,  Director. Mr. Soquet is a co-founder of Tribeworks and has
served as Director  since our  inception  in August  1998.  From  February  1998
through July 1998, Mr. Soquet was  self-employed as a software  developer.  From
January 1990 to January 1998, Mr. Soquet served as consultant to Arborescence, a
French software development company, and Havas Interactive,  a European software
company.  Mr.  Soquet  holds a  Masters  Degree  from the  ENSAV de La Cambre in
Belgium.

     WILLIAM R.  WOODWARD,  Director.  Mr.  Woodward has served as a Director of
Tribeworks   since   September  2000.  He  is  chairman  and  founder  of  Pulse
Entertainment.  In 1994 he co-founded  Launch Media,  a leading  Internet  music
publisher. Mr. Woodward founded Paracomp in 1987, which merged with Macromind in
1991 to form what is now known as Macromedia.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

    Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's securities with the Securities and
Exchange Commission (the "SEC"). Such officers, directors and 10% stockholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) forms that they file.

    Based solely on its review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16(a)-(e) and Forms 5 and amendments
thereto furnished to the Company with respect to the last fiscal year, and any
written representations referred to in Item 405(b)(2)(i) of Regulation S-B
stating that no Forms 5 were applicable to the Company's officers, directors and
10% stockholders were complied with.

ITEM 10.   EXECUTIVE COMPENSATION.

DIRECTOR COMPENSATION

    One Director, William R. Woodward, receives stock compensation for serving
as a Director. The other Directors do not receive any compensation for their
services as members of the Board of Directors. 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 1999
Stock Option Plan.

EXECUTIVE COMPENSATION

    The following table provides certain summary information concerning
compensation of our Chief Executive Officer. No other current executive officer
received annual salary and bonus in excess of $100,000 for the year ended
December 31, 2001.

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE

-------------------------------- --------- --------------------------------- -----------------------------------------------------
                                                     ANNUAL COMPENSATION                        LONG-TERM COMPENSATION
-------------------------------- --------- --------------------------------- -----------------------------------------------------
                                                                                       AWARDS                    PAYOUTS
                                                                             --------------------------- -------------------------
                                                                                            SECURITIES
                                                                     OTHER                  UNDERLYING
                                                                     ANNUAL    RESTRICTED     OPTIONS/       LTIP       ALL OTHER
                                             SALARY       BONUS  COMPENSATION STOCK AWARD(S)    SARS        PAYOUTS    COMPENSATION
                                   YEAR        ($)         ($)         ($)         ($)            (#)          ($)          ($)
NAME AND PRINCIPAL POSITION(a)     (b)         (c)         (d)         (e)         (f)            (g)          (h)          (i)
-------------------------------- --------- ------------ ---------- --------- ------------- ------------ ------------ -------------
<S>                                <C>      <C>           <C>         <C>        <C>        <C>            <C>           <C>

Duncan   Kennedy,    President,    2001     $ 69,123         --          --         --         325,000        --            --
Chief  Executive  Officer,  and
Director
-------------------------------- --------- ------------ ---------- --------- ------------- ------------ ------------ -------------
                                   2000     $126,583       --          --         --           --           --            --
-------------------------------- --------- ------------ ---------- --------- ------------- ------------ ------------ -------------
                                   1999     $101,750       --          --         --         100,000        --            --
-------------------------------- --------- ------------ ---------- --------- ------------- ------------ ------------ -------------
</TABLE>

                                       35


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


                        OPTION GRANTS IN LAST FISCAL YEAR

    The following table sets forth information concerning grants of stock
options and warrants to each of the executive officers named in the compensation
table above during fiscal year 2001. All options and warrants granted to these
executive officers in the last fiscal year were granted under our Tribeworks,
Inc. 2001 Stock Plan. The percent of the total options and warrants set forth
below is based on an aggregate of 3,050,415 options and warrants granted to
employees and consultants during fiscal year 2001. All options and warrants were
granted at a fair market value as determined by our Board of Directors on the
date of

<TABLE>
<CAPTION>

                                                                             % Of Total
                                                                               Options
                                                              Number Of      Granted To
                                                             Securities       Employees       Exercise
                                                             Underlying       In Fiscal         Price      Expiration
           Name And Principal Position                         Options          Year           ($/Sh)         Date
           ---------------------------                    ---------------  --------------   -----------  ---------
<S>                                                           <C>               <C>            <C>          <C>

           Duncan Kennedy, President, Chief Executive         325,000           10.7%          $0.06        9/26/03
           Officer, and Director

</TABLE>


                   AGGREGATED OPTION EXERCISES IN LAST FISCAL
                     YEAR AND FISCAL YEAR END OPTION VALUES


    The following table sets forth information concerning option and warrant
exercises in fiscal 2001 and exercisable and unexercisable stock options and
warrants held by the executive officers named in the summary compensation table
at December 31, 2001. The value of unexercised in-the-money options and warrants
is based on a value of $0.07 per share, the fair market value of our common
stock as of December 31, 2001, 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. All options and warrants were granted under the 1999
Stock Option Plan or the Tribeworks, Inc. 2001 Stock Plan.

<TABLE>
<CAPTION>

                                                                   Number Of Securities                Value Of Unexercised
                                                                  Underlying Unexercised              In-The-Money Options At
                                 Shares        Value                   Options At                            F-Y End
                                Acquired       Value                     F-Y End                               ($)
Name And Principal                 On         Realized   ----------------------------------- ------------------------------------
Position                        Exercise         ($)         Exercisable       Unexercisable     Exercisable        Unexercisable
----------------------        ------------  -----------  ------------------ ---------------- ------------------  ----------------
<S>                                  <C>           <C>         <C>                  <C>             <C>                 <C>

Duncan Kennedy, President,            --           --          415,000              --              $4,150               --
Chief
Executive Officer and
Director

</TABLE>


CHANGE OF CONTROL ARRANGEMENTS

    Upon consummation of the Recapitalization, each of Duncan Kennedy, Gilbert
Amar and Keepsake exchanged their shares of California Tribeworks common stock
for shares of our common stock pursuant to Restricted Stock Purchase Agreements.
Each of these agreements provided for Company's repurchase rights of the shares
upon termination of each of these person's employment. Duncan Kennedy received
2,022,759 shares of common stock; we had the right to repurchase 500,000 as of
the consummation of the Recapitalization. Gilbert Amar received 3,034,037 shares
of our common stock; we had the right to repurchase 750,000 of those shares as
of the consummation of the Recapitalization. Keepsake received 3,034,037 shares
of common stock; we had the right to repurchase 750,000 of those shares as of
the consummation of the Recapitalization. Each of these agreements provided that
upon a change of control, the expiration of certain milestones, or by a
resolution of the Board of Directors, the lapsing of the repurchase right will
be accelerated such that our repurchase right with respect to 100% of the common
stock would lapse.


                                       36


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The following table sets forth information regarding the beneficial
ownership of our common stock at March 31, 2001, by (i) each of our directors
and named executive officers; (ii) all of our directors and executive officers
as a group, and (iii) each person or group known to us to own beneficially more
than 5% of the outstanding common stock.

<TABLE>
<CAPTION>

                                               Amount And
                                                Nature Of
          Name And Address Of                  Beneficial      Percent Of
          Beneficial Owner(1)                   Ownership         Class
          ------------------------          ---------------  ----------

<S>                                            <C>               <C>
          Duncan J. Kennedy (2)                2,367,760         12.56%
          Robert C. Davidorf (3)                 761,440         4.00%
          Patrick Soquet (4)                   3,480,668         18.88%
          William R. Woodward (5)                805,312         4.25%
          All Directors and Officers                             39.69%
                As a Group (4 persons)
          Gilbert Amar (6)                     3,084,038         16.42%

<FN>

(1) Unless  otherwise  noted,  the  address  of each of the named  directors,
    officers  and  individuals  is:  c/o Tribeworks, Inc., 988 Market Street,
    San Francisco, CA 94102.

(2) Includes 415,000 shares issuable upon the exercise of options and warrants
    that are exercisable within 60 days of March 31, 2002.

(3) Includes 601,340 shares issuable upon the exercise of options and warrants
    that are exercisable within 60 days of March 31, 2002.

(4) All of the shares are owned of record by Keepsake, a Belgian entity owned by
    Mr. Soquet.

(5) Includes 517,812 shares issuable upon the exercise of options and warrants
    that are exercisable within 60 days of March 31, 2002.

(6) Includes 350,000 shares issuable upon the exercise of options and warrants
    that are exercisable within 60 days of March 31, 2002.

</FN>
</TABLE>


ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    On August 21, 2001 we retained the services of the investor relations firm,
de Jong & Associates, for a period of one year. As compensation for services
rendered, the firm has received 200,000 shares of our restricted common stock.
We have also granted to the firm a warrant to purchase an additional 300,000
shares of our common stock, subject to the firm's ability to meet certain
milestones. The warrant exercise price is $0.10 per share.

    In September 2000, we had entered into a contract with GF Consulting Corp
(GF), a Canadian entity wholly owned by Gary Freeman, to assist us with its fund
raising efforts. We had issued GF 60,852 shares of common stock during the
fourth quarter of 2000 and the first quarter of 2001. On September 28, 2001 GF
transferred these shares back to us due to non-performance of services. GF has
signed an agreement to fully and completely release us from any and all claims,
actions or causes of actions that GF may have against us for payment for GF's
past consulting services.


                                       37


<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


                                     PART IV

ITEM 13.       EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

(a) The following exhibits are incorporated by reference into this report:

EXHIBIT
NUMBER       DESCRIPTION OF EXHIBITS

  2.1        Form of 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).

  3.1        Articles 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).

  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).

 16.1        Letter dated March 28, 2001 by W. Alan Jorgensen to Securities
             and Exchange Commission (Incorporated by reference to Exhibit
             16.1 to the Registrant's Form 10-KSB filed April 2, 2001).

 24.1        Power of Attorney (appears on the signature page of this report).




(b) The following reports on Form 8-K were filed during the quarter ended
    December 31, 2001:

None


                                       38

<PAGE>


                        TRIBEWORKS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                TRIBEWORKS, INC.


                                By: /s/ ROBERT C. DAVIDORF
                                    -------------------------------------
                                        Robert C. Davidorf
                                        Chief Financial Officer

Date: April 1, 2002


                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert C. Davidorf and Duncan J. Kennedy,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes may do or cause to be
done by virtue hereof.

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

      Signature                       Title                         Date

/s/ DUNCAN J. KENNEDY        Chief Executive Officer           April 1, 2002
----------------------       (Principal Executive Officer)
Duncan J. Kennedy



/s/ ROBERT C. DAVIDORF       Chief Financial Officer           April 1, 2002
-----------------------      (Principal Financial and
Robert C. Davidorf           Accounting Officer)



/s/ PATRICK SOQUET           Director                          April 1, 2002
-------------------
Patrick Soquet



/s/ WILLIAM R. WOODWARD      Director                          April 1, 2002
------------------------
William R. Woodward


                                       39


<PAGE>


EXHIBIT INDEX

EXHIBIT
NUMBER      DESCRIPTION OF EXHIBITS

 2.1        Form of 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).

 3.1        Articles 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).

 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).

16.1        Letter dated March 28, 2001 by W. Alan Jorgensen to Securities
            and Exchange Commission (Incorporated by reference to Exhibit
            16.1 to the Registrant's Form 10-KSB filed April 2, 2001).

24.1        Power of Attorney (appears on the signature page of this report).











                                       40