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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
TRIBEWORKS, INC.
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3308801
(State or other jurisdiction of (IRS Employer
Incorporation of organization) Identification Number)
</TABLE>
1620 Montgomery Street, Suite 220, San Francisco, CA 94111
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (415) 773-2200
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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TITLE OF CLASS
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INTRODUCTORY NOTE
Tribeworks, Inc., a Delaware corporation, has prepared and filed this
Form 10-SB on a voluntary basis to make available reportable information about
the company to existing shareholders and others interested in the activities of
the Company.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF TRIBEWORKS, INC.
Tribeworks, Inc. is a development stage company formed in August 1998 to
develop a new service-based business model for the Internet based graphics and
multimedia software industry. We have developed a rich-media authoring
environment for the creation of rich-media Internet applications, such as TV and
radio stations, video jukeboxes, MP3 players and Webcast applications. We market
and sell our products and services through a unique membership model that allows
us to distribute our software directly to our customers through our website. Our
full-paying members can customize their applications through access to the
underlying source code of our software products. As an integral part of our
business model, we provide complete high-end graphics and multimedia development
and deployment solutions to customers building specialized Internet multimedia
applications.
On November 2, 1999, Tribeworks, Inc., a California corporation, entered
into merger transaction (the "Merger") pursuant to which its shareholders
exchanged all their company shares for shares of Pan World Corporation, a Nevada
corporation ("Pan World"), in consideration for an investment by Pan World.
After the Merger, Pan World reincorporated in Delaware as Tribeworks, Inc.
("Tribeworks"). The financial statements presented with this registration give
retroactive effect to the Merger. The Merger is accounted as a recapitalization
of Tribeworks, Inc.
Prior to reincorporation in Delaware as Tribeworks, Pan World
Corporation had incorporated in Nevada on August 20, 1996 but never had any
significant operations since it was incorporated.
As used in this Registration Statement, the terms "we," "us" "our,"
"Tribeworks" and the "Company" mean Tribeworks, Inc., a Delaware corporation,
and its subsidiary Tribeworks Development Corporation, a California corporation,
unless the context indicates a different meaning.
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BUSINESS STRATEGY
Tribeworks was formed in August 1998 with a vision of developing a new
service-based business model for the graphics and multimedia software industry.
Most traditional graphics and multimedia software tools companies do not provide
their customers with access to the underlying source code of the software. In
addition, they inefficiently distribute and sell their software in boxes through
multiple tiers of distribution using single and multiple unit licenses.
In contrast to traditional companies, we allow our paying subscribers to
customize the functionality of their applications through access to the
underlying source code of our software products. By allowing customization by
our customers, we benefit from the experience of our customers and are able to
share their developments with our members. In addition, we distribute our
software directly to our customers via our website and charge customers an
annual or monthly subscription fee for use of our products.
THE ONLINE GRAPHICS AND MULTIMEDIA INDUSTRY
The Internet has had a tremendous impact upon the way companies
communicate, do business, and implement their business strategies. To take full
advantage of the benefits of the Internet, companies and businesses need to
develop a presence on the Internet. The competition for the attention of
customers has led to high demand for visually rich graphics and media materials.
To satisfy this demand, a variety of companies have evolved to provide graphics
and multimedia software tools and professional services. The software tools and
the sophistication of the attendant professional services have developed at a
very fast pace. At the same time, newly emerging online resources have made it
possible for large and small companies to develop unique and highly
sophisticated applications to leverage the power of the Internet.
The online graphics and multimedia industry has been characterized for
its rapid growth. The industry has also come under pressure to reduce prices,
incorporate new features, and accelerate the release of new product versions.
All these factors have resulted in short product life cycles and rapid price
declines. A number of companies currently offer products that compete in this
industry, including Macromedia, Adobe Systems, Meta Creations, Asymetrix, and
Autodesk.
SOFTWARE VERSUS SERVICES
We believe that the traditional application software business is rapidly
changing to a service-based business. The traditional software business relies
on the manufacturing and distribution of packaged software, physical inventory,
multiple tiers of product distribution, and indirect customer relationships.
While some segments of the software business are making a transition to a
service-based business, we believe that the graphics and multimedia application
software business has been slow to move toward the service end of the spectrum.
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DISTRIBUTION STRATEGY
We market and sell our services through a two-level membership model.
Customers register at Tribeworks.com to download free tools and access
entry-level technical support. The "Free Membership" level allows access to our
basic visual editing environment which permits development of fully-functional
software applications. Free members, who are often students, hobbyists, and
freelance developers can upgrade to full-membership at any time. At the higher,
or "Full Membership" level, which is held primarily by companies and
professional multimedia developers, we charge an annual or monthly per seat
subscription fee. Full members receive full access to the source code of our
software products and free software plug-ins which extend the functionality of
our software products.
MARKET OPPORTUNITY
Our products and services are used to create and deploy applications in
the following areas:
1) Media and Entertainment Industries - Using Tribeworks tools
and services customers can create Internet TV stations, video
jukeboxes, Internet radio, MP3 players and webcast players that
are unique.
2) Advertising Agencies - Agencies can provide clients with
rich-media advertising such as interstitials and integrated
branding campaigns that truly stand out.
3) Corporate Communications - Sales presentations, video news
releases and event webcasts can be incorporated into a company's
communications strategy and reflect corporate culture.
4) Educational Institutions and Providers - Training, distance
learning and course materials can be interactive, engaging and
updated with timely information.
PRODUCTS AND SERVICES
(1) TRIBEWORKS CUSTOM SOLUTIONS
We provide complete high-end graphics and multi-media development and
deployment solutions to customers who are building Internet multimedia
applications. Our services include custom programming, design, and player and
media distribution. We take advantage of our worldwide network of full members
to participate in the development of media solutions for our customers. We
expect that over time a growing portion of our revenues will be derived from the
delivery of custom solutions to our customers.
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(2) SOFTWARE PRODUCTS
Our principal software product is iShell. iShell is a rich-media
authoring environment built from the ground up to meet the challenges of
building Internet multimedia applications such as Internet TV and radio
stations, full-screen interactive sales and marketing presentations, internet
based training programs, and MP3 music players.
The iShell environment, which has been released for Windows and
Macintosh, allows functionality to be added through the development of plug-ins
(e.g. back-end database integration, and event synchronization). Plug-ins are
integrated seamlessly into the user-interface of the visual authoring
environment. Rich-media projects can be delivered as standalone Internet
applications or can be delivered through a browser.
We announced iShell 2 in October, 1999. This new version of iShell is
currently available to paying subscribers. With this version of the software
customers can create and deploy their own rich-media Internet browser.
Commercial products built with the iShell software are being developed by third
parties for companies such as Sapient, Activision, Airbus, and Apple Computer.
In addition, we intend to develop and distribute additional software to
aid in the development and deployment of Internet multimedia applications. We
have entered into a letter of intent with Electric Cafe, a San Francisco-based
start-up company to distribute an as of yet unannounced graphics product.
Although we have an executed letter of intent, there can be no guarantee that
the plans with Electric Cafe will go forward or that the graphics product to be
distributed with Electric Cafe will be completed or will be successful.
(3) TRIBEWORKS FULL MEMBERSHIP
We offer monthly or annual subscriptions to our paying members. Paying
members receive email and telephone support, access to source code, free
software plug-ins, which extend the functionality of our products, discounts on
third party products, and complementary access to customer events.
(4) TRIBEWORKS STORE
Through our online Tribeworks Store we offer a variety of products
created by subscribers including: (i) iShell Book, (ii) Glaz Effects, (iii) i3M
Fun Pack, (iv) i3M Visual Key, (v) iVR-Advanced Quick Time VR Support for
iShell, (vi) Kromo and Kromo Extras, and (vii) Artful Ambient Sound Plug-In.
These products enhance the capabilities of iShell. We receive a percentage of
the sales of third-party products made through the Tribeworks Store.
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COMPETITION AND COMPETITIVE FORCES AFFECTING OUR BUSINESS
The market for Internet services and applications is highly competitive
and rapidly changing. Since the Internet's commercialization in the early
1990's, the number of websites on the Internet competing for consumers'
attention and spending has proliferated exponentially. Although barriers may
exist in the particular business area where we operate, due to the fluidity of
the Internet and its rapidly changing nature, we can expect that competition
will continue to intensify. We expect to 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 rich-media
applications tools to Internet-based organizations, will be name recognition,
value-added services, ease of use, price, quality of service, availability of
customer support, reliability, technical expertise and experience. Our success
will depend upon our ability to provide high quality development tools, along
with cutting-edge technology and value-added Internet services. Our failure to
compete successfully in the applications business will have a material adverse
effect on our business, results of operations and financial condition. In
addition, the competition for advertising revenues, both on Internet websites
and in more traditional media is intense. To the extent we are not able to
attract significant sources of revenues from paid memberships and sale of our
products and advertisements on our website, our business, results of operations
and financial condition will be materially and adversely affected.
A number of companies currently offer services or products that compete
directly or indirectly with our current product and service offerings. These
companies include Macromedia, Broadcast.com, Intervu, Adobe Systems, and
Real Networks.
Most of our current and potential competitors in the Internet services
and graphics and multimedia industries have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and larger existing customer bases than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements and to devote greater resources to the development,
promotion and sale of their products or services than us. There can be no
assurance that we will be able to compete successfully in the Internet business.
SALES AND REVENUES
We expect to generate revenue primarily by sale of high-end services to
the members of Tribeworks through our membership program and custom development
services to businesses. We charge an initiation fee and a monthly or annual
subscription fee. Membership is promoted by providing a wide variety of services
to our members, which include: access to support email lists, telephone support,
confidential technical help, emergency shipping, free and discounted iShell
Plug-ins, and a variety of other services designed to facilitate technical
support provided by Tribeworks engineers as well as access to support lists
containing users of our products that may help our other
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users in their development applications. Revenues from custom development
services are typically earned on either a fixed-fee or time and materials basis.
In addition to sales of memberships, our Tribeworks online store offers
a variety of support tools and products that complement the iShell environment.
We also sell on a discounted basis third-party Plug-ins and other products.
Current items include i3M's Fun Pack, which contains special tools for game
builders, iDot's Kromo and Kromo Extras, which provide a wide range of
developmental tools, and "Introducing iShell" an iShell reference book from
Electric Tours.
Although we expect to derive revenue and generate sales from a variety
of sources, there can be no assurance that we will be able to generate revenues
or sales from any of the foregoing, or that the amount of revenues generated
will be sufficient to sustain our business as a going concern.
Our website is fully operational and allows users to become members of
Tribeworks and to download versions of our software.
INTELLECTUAL PROPERTY
We rely upon a combination of copyright law, trademark law, contract
law, and other intellectual property protection methods to protect our
intellectual capital and technology, including our "Faces 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 websites
are protected under current provisions of copyright law. However, legal rights
to Internet content and commerce are not clearly settled by law. There can be no
assurance that we will be able to continue to maintain rights to our trademarks
and other information. The failure to be able to retain such matters would have
a material adverse effect on our business, results of operations and financial
condition. We pursue the registration of our trademarks in the United States
and have applied for an "intent to use" trademark registration for a number of
our trademarks, including "Tribeworks", "iShell", and the "Tribeworks Faces
Logo" in the United States Patent & Trademark Office.
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.
There are no pending lawsuits against the Company regarding infringement
of any existing patents or other intellectual property rights or any material
notices that the Company is infringing the intellectual property rights of
others. However, there can be no assurance that such infringement claims will
not be asserted by third parties in the
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future. If any such claims are asserted and determined to be valid, there can be
no assurance that the Company will be able to obtain licenses of the
intellectual property rights in question on reasonable terms. The Company's
involvement in any patent dispute or other intellectual property dispute or
action to protect proprietary rights may have a material adverse effect on the
Company's business, operating results and financial condition. Adverse
determinations in any litigation may subject the Company to significant
liabilities to third parties, require the Company to seek licenses from third
parties and prevent the Company from manufacturing and selling its products. Any
of these situations can have a material adverse effect on the Company's
business, operating results and financial condition.
RESEARCH AND DEVELOPMENT EXPENDITURES OVER THE LAST TWO YEARS
We have spent approximately $200,204 on product development activities
in the nine-month period ending September 30, 1999. The research and development
has focused on iShell and iShell2 and other unannounced products. The core
technology behind iShell and iShell2 was acquired in November 1999 for $100,000
cash and warrants to purchase 303,030 shares of the Company's Common Stock. The
cash costs have been capitalized and are being amortized and are not included in
the research and development costs above.
EMPLOYEES
As of September 30, 1999 we had a total of seven full time employees. In
addition the Company regularly uses the services of three consultants on part-
time basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
The following discussion contains forward-looking statements that are
subject to significant 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 significant risks to our
business, but cannot predict whether or to what extent any of such risks may be
realized nor can there be any assurance that we have identified all possible
risks that might arise. Investors should carefully consider all of such risks
before making an investment decision with respect to the Company's stock. In
particular, investors should refer to the section entitled, "Factors That May
Affect Future Results."
RESULTS OF OPERATIONS
The Company was formed in August 1998. We are a development stage
enterprise.
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We began to earn revenues in 1998 but expect to experience significant
fluctuations in operating results in future periods due to a variety of factors,
including, but not limited to, (i) market acceptance of the Internet as a medium
for commerce and rich media (ii) ability to develop and market compelling
products for the graphics and multimedia industry, (iii) level of traffic on our
Website, (iv) intense competition from other providers who may copy our business
model or who may develop products similar to ours (v) ability to upgrade and
develop our systems and infrastructure in a timely and effective manner (vi)
technical difficulties, system downtime or Internet brownouts, (viii) ability to
attract customers at a steady rate and maintain customer satisfaction, (ix)
amount and timing of operating costs and capital expenditures relating to
expansion of our business, operations and infrastructure and the implementation
of marketing programs, key agreements and strategic alliances.
NET REVENUES AND EARNINGS
During the fiscal year ending December 31, 1998, we generated a total
of $5,562 in net revenues. During the nine-month period ending September 30,
1999, we generated a total of $103,517 in net revenues. During our limited
operating history, our revenues have not appeared to be seasonal.
We have not generated any profits from our operations and do not expect
to be profitable in the near future. During our 1998 fiscal year we lost $60,553
from our operations. For the nine-month period ending September 30, 1999 we lost
$685,263 from our operations. We expect to continue to incur losses for the
foreseeable future.
As we execute our Internet strategy, we expect to derive revenue from
custom development services, memberships, and sales of products through our
online store. However, we may not generate these revenues if our products and
services are not widely accepted and we are unable to increase the number our
members.
PRODUCT DEVELOPMENT AND SUPPORT EXPENSES
Product development expenses consist principally of software
engineering, graphic design, and the cost of computer operations, including
related salaries, rent and depreciation, that support our business. We began our
development efforts in August 1998, incurring costs of $7,569 in the fiscal year
ending December 31, 1998 and additional costs of $248,709 through the nine month
period ending September 30, 1999, related to software engineering and graphic
design of our principal software products and website.
We continue to incur significant product development expenses. Our focus
has been on expanding the features of our iShell product and developing other
unannounced products. We will continue to incur development expenses to expand
the capabilities of our iShell product in an attempt to remain competitive in
our markets. If we are unable to further expand and develop the features of our
iShell products we may not be able to remain competitive and our business and
financial condition will suffer accordingly.
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SALES AND MARKETING EXPENSES
Sales and marketing expenditures consist primarily of costs associated
with our strategic alliances, external advertising, promotion, trade show,
advertising sales and personnel expenses associated with marketing of our
website, products and services. For the fiscal year ending December 31, 1998 our
sales and marketing expenses were $3,980. For the nine-month period ending
September 30, 1999 our sales and marketing expenses were $174,998.
We expect to increase our sales and marketing expenses. Our focus has
been on improving the "brand recognition" of our "Face Logo" and the
"Tribeworks" and "iShell" brand names, converting registered free members to
paying full members, and identifying custom development opportunities. We will
continue to incur sales and marketing expenses to promote our brand names and
products, including iShell2. If we are unable to effectively market our brand
names and our products, we may not be able to remain competitive and our
business and financial condition will suffer accordingly.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist of executive management,
accounting, legal costs and expenditures for applicable overhead costs,
including related rent, insurance and depreciation. For the fiscal year ending
December 31, 1998 our general and administrative expenses were $54,566. For the
nine-month period ending September 30, 1999 our general and administrative
expenses came to a total of $332,579. We expect our general and administrative
expenses to continue to increase in absolute dollars as we expand our staff and
incur additional costs related to the growth of our business.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30th, 1999, we had a cash balance $141,731. Purchases of
property and equipment totaled $15,367 in 1999. We expect to incur negative cash
flow from operations for the foreseeable future, as we continue to develop our
products and operations.
We have financed our operations from inception through a variety of
sources. These have included: (1) $64,000 raised during December 1998 through
the issuance of equity securities, (2) $18,737 borrowed from our officers and
directors, and (3) $35,188 in deferred revenues as of December 31, 1998.
In addition, as a result of the Merger of November 2, 1999, we received
an aggregate of $1,000,000 in separate stages to fund our operations. These
funds are being used for a variety of capital and other expenditures, including
$660,000 advanced prior to Merger to fund operations from April 1999 through
October 1999.
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In order to finance our operations for the foreseeable future, we will
seek to raise funds through private sales of equity or debt securities. We
cannot be assured that we will raise any funds from our contemplated placement
of securities or that we will in the future be able to raise sufficient funds to
continue our operations. Our failure to raise sufficient additional funds,
either through additional financing or continuing operations, will have a
material adverse effect on our business and financial condition. In addition,
the issuance of additional equity securities or rights to acquire equity
securities may dilute the interest of our then current stockholders.
YEAR 2000 COMPLIANCE
We will depend on the delivery of information over the Internet, a
medium that is susceptible to the Year 2000 problem. Many computers, software
and other equipment include computer code or chips in which calendar year data
is abbreviated to only two digits. As a result of this design decision, some
systems could fail to operate or fail to produce correct results if "00" is
interpreted to mean 1900, rather than 2000. This could result in system failures
or miscalculations causing disruptions of operations, including, among others, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities. These problems are widely expected to increase in
frequency and severity as the year 2000 approaches, and are commonly referred to
as the "Year 2000" problem. We believe that our systems and products are Year
2000 compliant. However, any undetected Year 2000 problems in our products which
cannot be solved in a timely and cost-effective manner could substantially
damage our customer relationships, disrupt our business, subject us to
threatened or actual litigation and result in reduced revenues.
The Year 2000 problem also affects the computers, software, other
equipment that we use, operate or maintain internally for our operations, and
services provided by third party vendors. We employ widely available software
applications and other products from leading third-party vendors. Any failure of
third-party computer products used by us could interrupt and disrupt our
business. To fix any of these systems could require us to invest substantially
in our operating systems and to hire additional personnel and could adversely
affect our operations.
If Year 2000 compliance issues are discovered, we will have to evaluate
the impact of such issues upon our operations. We intend to actively work with
our vendors and service providers to minimize the risks of business disruptions
resulting from Year 2000 issues and to develop contingency plans where
necessary. Such plans may include using alternative suppliers and service
providers.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
AND MARKET PRICE OF STOCK
WE HAVE A LIMITED OPERATING HISTORY AND THERE IS A GREAT DEGREE OF UNCERTAINTY
AS TO OUR FUTURE RESULTS
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 uncertain 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 such expenses are not matched by commensurate revenues, 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 memberships, custom development solutions, and third party
products to achieve or maintain profitability on a quarterly or annual basis in
the future. We expect negative cash flow from operations to continue for the
foreseeable future as we continue to develop and market our business.
We also expect high variability and uncertainty as to our future
operations and results. Our quarterly operating results may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control, including demand for the development of Internet-based
rich-media applications, the level of traffic on our Internet sites, the amount
and timing of capital expenditures and other costs relating to the expansion of
our Internet operations, the introduction of new sites and services by us or 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 Internet media. Due to the foregoing
factors, among others, it is likely that our operating results will fall below
our expectations and the expectations of investors in some future quarter.
WE WILL NEED ADDITIONAL FUNDS TO MAINTAIN OUR SHORT TERM OPERATIONS
Based on current levels of operations, we anticipate that our existing
capital resources will not be sufficient to enable us to maintain our operations
through the first Quarter of 2000. In addition, we will require additional funds
to sustain and expand our sales and marketing and research and development
activities. Adequate funds for these and other purposes, whether through
additional equity financing, debt financing or other sources, may not be
available when needed or on terms acceptable to us, or may result in significant
dilution to existing stockholders. The inability to obtain sufficient funds from
operations and external sources would have a material adverse effect on our
business, results of operations and financial condition.
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THE OPEN SOURCE AND FREE SOFTWARE BUSINESS MODELS ARE UNPROVEN IN THE GRAPHICS
AND MULTIMEDIA INDUSTRY
We have not demonstrated the success of our business model, which gives
our customers the right to freely use and modify our software. No other company
has built a successful business following such a model and few open source
software products have gained widespread commercial acceptance partly due to the
lack of viable open source industry participants to offer adequate service and
support on a long-term basis. In addition, we are not able to provide industry
standard warranties and indemnities for our products since components of these
products may be developed by independent parties over whom we exercise no
control or supervision. If open source software should fail to gain widespread
commercial acceptance, we will not be able to sustain our revenue growth and
our business could fail.
NEGATIVE REACTION WITHIN THE LINUX OPEN SOURCE COMMUNITY OR WITHIN THE
TRIBEWORKS DEVELOPER COMMUNITY TO OUR BUSINESS STRATEGY COULD HARM OUR
REPUTATION AND BUSINESS
Although we allow customers access to the underlying source code of our
software products, we believe that many of our customers do not wish to license
product enhancements to us or to potential customers. Therefore, we do not
follow a strict open source model with respect to our software. In particular,
we allow proprietary product enhancement, we limit the redistribution of our
software, and we do not make our products available under a General Public
License, which is available on www.opensource.org. These restrictions on our
software run counter to current trends in the Linux open source community, which
advocate unlimited distribution of software and the use of General Public
Licenses. The Linux open source community is a diverse group of software
developers, gurus and companies that have advocated the use of Linux, an
alternative operating systems to Microsoft's Windows. One of the most important
characteristics of Linux is that it has developed essentially as an open source
system.
The approach we take towards our software, which allows proprietary
product enhancements and our decision to forego use of General Public Licenses,
may result in a negative reaction from the Linux based open source community.
This type of negative reaction, if widely shared by our customers, developers or
the rest of the open source community, could harm our reputation, diminish the
Tribeworks brand and result in decreased revenue.
In addition, the Tribeworks developer community, which contributes
software, testing, and technical support to other members could react negatively
to our current or future business strategy. A negative reaction by our community
could have a negative effect upon the willingness of our members and
contributors to share their improvements to our software. We would then have to
develop our own improvements without the benefit of the potentially valuable
contributions of third parties. As a result, we would incur higher development
costs and our business and revenues could be adversely affected.
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WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE
We have incurred operating losses since our inception. We expect to
incur significant losses at least through our 2001 fiscal year as we expect to
increase our sales and marketing, research and development and administrative
expenses. As a result, we cannot be certain when or if we will achieve sustained
profitability. Failure to become and remain profitable may adversely affect the
market price of our common stock and our ability to raise capital and continue
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Results of Operations" and "Liquidity and Capital
Resources."
DEPENDENCE ON APPLE'S QUICKTIME TECHNOLOGIES
Our iShell product line currently requires the installation of Apple
Computer's QuickTime software in order to function properly on both Windows and
Macintosh systems. Apple's QuickTime technology competes directly with
rich-media technologies from Microsoft and Real Networks which our technology
does not currently support. There can be no assurance that Apple's QuickTime
will maintain or enlarge its current market share against these competitive
technologies, and although Apple's QuickTime technology has been under
development for more than 8 years, there can be no assurance that Apple will
continue to develop the technology or distribute it freely to consumers. In
addition, Apple may substantially alter its business or licensing strategy with
QuickTime in a way which could adversely impact our business, resulting in
significant increases in our development costs.
UNCERTAIN ACCEPTANCE OF THE INTERNET AS A VEHICLE FOR RICH MEDIA APPLICATIONS
Use of the Internet-based rich media by individuals and business users
is at a very early stage of development, and 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. If
Internet-based rich-media applications are not widely accepted by consumers or
businesses, or network infrastructure providers fail to develop adequate network
bandwidth, our business, financial condition and operating results will be
materially adversely affected.
UNCERTAIN ACCEPTANCE OF OUR SERVICES AND SOFTWARE TOOLS
Our future success will be significantly dependent upon our ability to
create, license and deliver sophisticated tools for the development of
rich-media applications in the (i) Media and Entertainment Industries, (ii)
Advertising Industry, (iii) Corporate Communications, and (iv) Educational
Institutions and Providers. If our tools and related services are not widely
accepted, our ability to sell custom solutions and increase the Tribeworks
memberships 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
13
<PAGE> 15
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.
UNCERTAIN ACCEPTANCE AND MAINTENANCE OF THE TRIBEWORKS BRAND
We believe that establishing and maintaining the Tribeworks brand is a
critical aspect of our efforts to attract and expand our Internet audience and
that the importance of brand recognition will increase due to the growing number
of Internet sites and the relatively low 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 improve our products
and business model or promote and maintain our brand, our business, financial
condition and operating results will be materially adversely affected.
MANAGING EXPENSES
Our future success depends upon our ability to address potential market
opportunities while managing our expenses to match our ability to finance our
operations. This need to manage our expenses will place a significant 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.
DEPENDENCE ON KEY PERSONNEL AND KEEPSAKE SPRL
Our performance is substantially dependent on the services of Duncan
Kennedy (President and CEO), Steven Bennet (CFO), Gilbert Amar (CTO) as well as
on our ability to recruit, retain and motivate our other officers and key
employees.
Keepsake SPRL, which is an affiliate of Patrick Soquet, is presently
developing substantial components of the iShell software under an independent
consulting agreement, however there can be no assurance that this agreement will
be renewed.
Our success also depends on our ability to attract and retain additional
qualified employees in the San Francisco Bay Area. Competition for qualified
personnel in the San Francisco Bay Area is intense and there are a limited
number of persons with knowledge of and experience in the Internet and
rich-media applications software development. There can be no assurance that we
will be able to attract and retain key personnel. The loss of one or more key
employees could have a material adverse effect on the Company.
14
<PAGE> 16
RISKS OF TECHNOLOGY TRENDS AND EVOLVING RICH MEDIA INDUSTRY STANDARDS
Our success will also depend upon 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 introductions.
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 committees such as the W3C SMIL
standard and must evaluate and use proprietary multimedia development software
provided by companies such as Apple, Microsoft, and Real Networks to continue to
develop our technological expertise, to enhance our current services, to develop
new services that meet changing customer needs and to influence and respond to
merging 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 market place, the
competitive differentiation of our product and services offerings would be
negatively impacted and our business, financial condition, and operating results
could be materially adversely affected.
WE ARE HIGHLY DEPENDENT ON THE INTERNET WHICH REMAINS AN UNCERTAIN MEDIUM FOR
COMMERCE
Use of the Internet by consumers is at an early stage of development,
and market acceptance of the Internet as a medium for commerce is subject to a
high level of uncertainty. Our future success will depend on our ability to
significantly increase revenues, which will require the development and
widespread acceptance of the Internet as a medium for commerce. There can be no
assurance that the Internet will be a successful commercial channel. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as reliable network
backbones, or complementary services, such as high-speed modems and security
procedures for financial transactions. The viability of the Internet may prove
uncertain due to delays in the development and adoption of new standards and
protocols (for example, the next generation Internet Protocol) to handle
increased levels of Internet activity or due to increased government regulation.
If use of the Internet does not continue to grow, or if the necessary Internet
infrastructure or complementary services are not developed to effectively
support growth that may occur, our business, results of operations and financial
condition could be materially adversely affected.
CAPACITY CONSTRAINTS AND SYSTEM DISRUPTIONS
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 or slower
response times for users would reduce the number of products and multi-media
services delivered and reduce the attractiveness of
15
<PAGE> 17
our services to members, subscribers and advertisers. Our Internet operations
are also vulnerable to interruption by fire, earthquake, power loss,
telecommunications failure and other events beyond our control. All of our
servers and Internet equipment are currently located in San Francisco Bay Area,
an area that is susceptible to earthquakes.
LIABILITY FOR INTERNET CONTENT
Although we do not engage in the publishing business, we may place
content on the Internet through our websites about the products and services of
other companies or as a demonstration of our products and services. As such, we
may face potential liability for defamation, negligence, copyright, patent or
trademark infringement and other claims based on the nature and content of the
materials that we place in our websites or otherwise distributes.
SECURITY RISKS
A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our Internet
operations. We may be required to expend significant capital and resources to
protect against the threat of such security breaches or to alleviate problems
caused by such 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.
DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; RISKS OF INFRINGEMENT
We rely on copyright and trade secret laws to protect our content and
proprietary technologies and information, but there can be no assurance that
such laws will provide sufficient protection to us, that others will not develop
technologies that are similar or superior to ours, or given the availability of
the source-code of the company's products, that third parties will not copy or
otherwise obtain and use our content or technologies without authorization.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTY
Although there are currently few laws and regulations directly
applicable to the Internet, it is possible that new laws and regulations will be
adopted covering issues such as privacy, copyrights, obscene or indecent
communications, and the pricing, characteristics and quality of Internet
products and services. The adoption of restrictive laws or regulations could
decrease the growth of the Internet or expose us to significant liabilities. We
believe that our use of material on our websites is protected under current
16
<PAGE> 18
provisions of copyright law. However, legal rights to certain aspects of
Internet content and commerce are not clearly settled. There can be no assurance
that we will be able to continue our operation free of governmental regulation
or other legal requirements. New laws or regulations could have a material
adverse effect on our business, results of operations and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
Our future success will depend in part on our ability to generate
international sales. While a substantial proportion of our current and potential
customers are in Europe or in Asia, there can be no assurance, that we will be
successful in generating international sales of our products. Sales to customers
in certain foreign countries will be subject to a number of risks, including
foreign currency risk, the risks that agreements may be difficult or impossible
to enforce and receivables difficult to collect through a foreign country's
legal system; foreign customers may have longer payment cycles; or 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. In addition, the laws of certain countries do not protect our
offerings and intellectual property rights to the same extent as the laws of the
United States. Failure of our efforts to compete successfully or to expand the
distribution of our offerings in international markets could have a material
adverse effect on our business, operating results and financial condition.
FORWARD-LOOKING STATEMENTS
This Form 10-SB contains forward looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, including, but not
limited to statements related to the business objectives and strategy of
Tribeworks, Inc., a Delaware corporation, our Internet website and the
development of our software. Such forward-looking statements are based on
current expectations, estimates and projections about our industry, management
beliefs, and certain assumptions made by our management. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict; therefore, actual results may differ materially from
those expressed, forecasted, or contemplated by any such forward-looking
statements.
Factors that could cause actual events or results to differ materially
include, among others, the following: our ability to market our technical
services on a membership fee basis, competition from other providers of
Internet-related, user-interface customization software, our early state of
development, delays or errors in our ability to effect electronic commerce
transactions, potential liability for negligence, intellectual property
infringement, and other risks inherent in software industry and associated with
doing business over the Internet.
17
<PAGE> 19
Given these uncertainties, investors are cautioned not to place undue reliance
on any such forward-looking statements.
Unless required by law, we undertake no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 3. DESCRIPTION OF PROPERTY
We currently sub-lease space on a month-to-month basis approximately
1500 square feet of space for our corporate headquarters located in San
Francisco, California, for $3,200 per month.
We have grown beyond our current office space requirements and plan to
lease or sub-lease approximately 4,000 feet of space for our operations during
the first quarter of 2000. The market of office space in the San Francisco Bay
Area is extremely tight and there is a very low vacancy rate. There can be no
guarantee that we will be able to find suitable office space.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of November 30, 1999, 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. The term "beneficial
ownership," as defined by the Instructions to Item 403 governing the disclosures
of this ITEM 4, includes any person who directly or indirectly, through any
contract, has or shares voting power, including the power to vote or to direct
the vote of such security; or has investment power which includes the power to
dispose or to direct the disposition of such security; and any person who
directly or indirectly creates or uses a trust, proxy, pooling agreement, or any
other contract, arrangement or device with the purpose of divesting such person
of such beneficial ownership. This information is based upon information that
has been received from and on behalf of the named individuals. Unless otherwise
noted below, the persons named in the table have sole voting and sole investment
powers with respect to each of the shares reported as beneficially owned by such
person:
18
<PAGE> 20
Common Stock
<TABLE>
<CAPTION>
Shares of
Directors and Common Stock Percent of
Executive Officers Beneficially Owned Class Address(1)
- -------------------------------- -------------------- ------------- -------------
<S> <C> <C> <C>
Duncan J. Kennedy 1,622,760(2) 10.08%
Patrick Soquet 2,456,856(3) 15.18
Gilbert Amar 2,505,250(4) 15.44
Steven Bennet 40,537(5) 0.25
Thomas J.L. Williams 300,000(6) 1.88 (7)
All Directors and Officers
As a Group (5 persons) 6,925,403 42.83
D. Hodges 2,000,000 12.50 (8)
</TABLE>
(1) Unless otherwise noted, the address of each of the named directors and
officers individuals is: c/o Tribeworks, Inc., 1620 Montgomery Street,
Suite 220, San Francisco, CA 94111.
(2) Includes options to purchase 100,000 shares of Common Stock.
(3) All of the shares are owned of record by Keepsake SPRL which is an
affiliate of Mr. Soquet. Includes Warrants to purchase up to 181,818
Common Shares at any time prior to November 2, 2004.
(4) Includes Warrants to purchase up to 121,212 Common Shares at any time
prior to November 2, 2004. It also includes options to purchase 100,000
shares of Common Stock.
(5) Includes options to purchase 8,000 shares of Common Stock.
(6) All of the shares are owned by Talisman Venture Partners Ltd., of which
Mr. Williams is a Senior Partner.
(7) Mr. Williams' address is #51-1101 Nicola Street, Vancouver, B.C.,
CANADA, V6G 2E3.
(8) Mr. Hodges' address is 505 N. Indian Trial, Tucson, AZ 85759.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and positions of our
directors, officers, executive officers and key employees.
<TABLE>
<CAPTION>
Director or
Name Age Position Officer Since
- ------ ----- ----------- -------------
<S> <C> <C> <C>
Duncan J. Kennedy 35 President and
Chief Executive Officer 1998
Patrick Soquet 38 Software Architect 1998
</TABLE>
19
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
Gilbert Amar 43 Chief Technology Officer 1998
Thomas J.L. Williams 20 Director 1999
Steven Bennet 36 Chief Financial Officer 1999
</TABLE>
All Directors hold office until the next annual meeting of shareholders
or the election and qualification of their successors. There is no family
relationship between any of the directors or officers of the Company.
Duncan Kennedy, President and Chief Executive Officer. Mr. Kennedy is a
founding member of Tribeworks and has been a director and officer of the Company
since its inception. In 1998 Mr. Kennedy served as Senior Vice President of
business development at Mjuice.com, a leading distributor of syndicated digital
music. From 1990 through 1997 he worked at Apple Computer, Inc. where he led
product marketing for QuickTime and initiated Apple's QuickTime for Windows
project, the most widely distributed software product in Apple's history.
Patrick Soquet, Director. Mr. Soquet is one of the founding members of
Tribeworks and has been an officer and director of the Company since its
inception. From 1990 to 1998, Mr. Soquet, and his affiliate Keepsake SPRL,
was the engineering visionary behind numerous successful multimedia software
products, including the creation of almost one hundred CD/ROM titles and an
Internet Service Provider ("ISP") in France. He also developed Apple Media Tool.
Mr. Soquet has been a member of the W3C standards committee where he helped
develop the standards for multimedia Internet protocols.
Gilbert Amar, Chief Technology Officer and Co-founder. Mr. Amar has been
a director and officer of the Company since its inception in August 1998. He
leads the engineering efforts of the Company as its CTO. Prior to co-founding
Tribeworks, Mr. Amar directed the engineering efforts of the Research and
Development group at Arborescence 1991-98, a French technology consortium, as a
Senior Engineer. While at Arborescence he directed the technical implementation
in the creation of Havas Online, one of the largest ISPs in France. He also
developed image recording, animation and multimedia software. Prior to that he
co-developed the product that eventually became Apple Media Tool.
Thomas J.L. Williams, Director. Mr. Williams has been a director of
Tribeworks since November 1999. He is currently a senior executive at Nextera
Enterprises Inc. and is also a founder and Senior Partner at Talisman Venture
Partners Ltd. Previously, Mr. Williams was a Senior Technology Analyst at
Whalen, Beliveau and Associates, an Investment Dealer in Toronto, Canada.
Steven Bennet, Chief Financial Officer. Mr. Bennet joined Tribeworks in
April of 1999. He has been the Company's CFO since he joined and is also the
principal of
20
<PAGE> 22
Bodega Partners, a consulting firm in Palo Alto, California which he co-founded
in 1994. He is also an instructor at the University of California at Berkeley,
teaching a business course he designed, "Financing the Software Venture." He has
held the positions of President, COO, CFO, and VP of Business Development at
several early stage technology ventures. Prior to forming Bodega Partners, he
was product manager at IMS, Senior Financial Analyst at Digital Microwave
Corporation, and tax consultant with Arthur Andersen. Mr. Bennet holds a B.S. in
Economics from the Wharton School of the University of Pennsylvania and an MBA
from UCLA. He is a licensed CPA.
ITEM 6. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation to be paid to the executive officers of the Company. No other
current executive officer has received or is expected to receive total
compensation in excess of $100,000 during fiscal 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------
Annual Compensation Awards Payouts
- -------------------- ------------------------- --------------------- --------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Name and Annual Restricted Underlying LTIP Other
Principal Salary Bonus Compen- Stock Options/ Payouts Compen-
Position Year ($) ($) sation Awards SARs ($) sation
- -------------------- ------------------------- --------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Duncan 1999-
Kennedy, 2000 130,000 0 0 0 0 0 (1)
CEO
Gilbert Amar, 1999- 120,000 0 0 0 0 0 (2)
CTO 2000
S. Bennet,
CFO (3) 1999- 45,000 0 0 0 0 0 (4)
2000
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Kennedy received in 1999 options to purchase 100,000 shares of
Common Stock at an exercise price of $0.05 per share.
(2) Mr. Amar received in 1999 options to purchase 100,000 shares of Common
Stock at an exercise price of $0.05 per share.
(3) Mr. Bennet is a consultant to the Company and works on a part-time
basis.
(4) Mr. Bennet received in 1999 a total of 150,537 options to purchase
common stock. Of this amount, Mr. Bennet has exercised his right to
purchase 32,537 options. Of the remaining 118,000 options, 8,000 have
vested and the remaining options are unvested and vest in Mr. Bennet as
follows: (1) 2,000 options a month over a nine-month period, and (2)
100,000 options will vest contingent upon certain performance milestones
over the same nine-month period. The exercise price of the options is
$0.75 per share.
21
<PAGE> 23
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 2, 1999, we entered into a transaction whereby the Series A
Preferred and Common Stock shareholders of the former Tribeworks, a California
Corporation (the "Former Tribeworks") exchanged all their Capital Stock for
shares of Pan World Corporation Common Stock in a merger transaction. In
connection with the Merger, Pan World exchanged 8,700,000 shares of its Common
Stock for all outstanding capital stock of the Former Tribeworks, and assumed
all outstanding Former Tribeworks options in exchange for issuance of 579,097
shares of the Pan World options. After the Merger, the directors and
officers of the Former Tribeworks became the directors and officers of Pan
World.
In connection with the Merger, Pan World issued to Keepsake, an
affiliate of Patrick Soquet, Warrants to purchase 181,818 shares of our Common
Stock at $0.33 per share and $60,000 in cash in consideration for the assignment
to Pan World of the source code for iShell, which was developed by Keepsake. We
also agreed to award to Gilbert Amar Warrants to purchase 121,212 shares of Pan
World at the purchase price of $0.33 per share and $40,000 in cash.
We also issued 300,000 shares of Pan World Common Stock to Talisman
Venture Partners Limited ("Talisman") in consideration for services rendered by
Talisman in consummation of the Merger. In addition, we entered into a
consulting Agreement with Talisman pursuant to which Talisman will receive
$5,000 a month for financial consulting services.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 200,000,000 shares of
authorized Common Stock, par value $0.0001 per share, and 10,000,000 shares of
Preferred Stock, par value $0.0001 per share. There are presently 16,000,000
shares of common stock issued and outstanding. There are no shares of Preferred
Stock outstanding. Under the Company's 1999 Incentive Plan ("1999 Plan"), the
Company is authorized to issue 1,600,000 options. There are presently 579,097
outstanding options under the 1999 Plan. In addition, there are presently a
total of 303,030 Warrants for purchase of Common Stock outstanding.
22
<PAGE> 24
The following summary of certain provisions of our Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
Articles of Incorporation and Bylaws of the Company that are included as
exhibits to this Form 10-SB and by the provisions of applicable law.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted on by stockholders. Subject to the prior right of any series
of Preferred Stock that may be issued by us in the future, holders of common
stock are entitled to receive dividends, if any, as may be declared from time to
time by the Board of Directors from funds legally available for the payment of
dividends. If we are liquidated or dissolved, the holders of common stock are
entitled to receive all assets available for distribution to the stockholders,
subject to the prior payment of all of our indebtedness, and subject to any
preferential rights or other rights of other security holders. The common stock
has no preemptive rights or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares. All of the shares of common stock are fully paid and nonassessable, and
will not be protected by any anti-dilution provisions.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
There is no established public trading market for our common stock.
However, the following table sets forth, for the periods indicated, the high and
low bid information for the limited trading of our common stock, as reported on
the NQB Pink Sheets. Our common stock commenced quotation on the NQB Pink Sheets
under the symbol "PNWR" on March 1, 1999. Our new trading symbol is "TRWX."
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
FISCAL 1999:
Second Quarter $ 2.50 $ .50
Third Quarter (through September 15, 1999) $ 2.66 $ 1.63
</TABLE>
- ----------
On June 28, 1999, the Company effected a 2:1 split of its common stock.
As of November 30, 1999, there were 579,097 options to purchase shares of common
stock outstanding or committed for issuance. In addition, as of November 30,
1999 there are 303,030 Warrants outstanding for the purchase of our Common
Stock.
HOLDERS. As of November 30, 1999, there were approximately 42 holders of
record of the common stock.
23
<PAGE> 25
DIVIDENDS. We have never declared or paid any dividends on our common
stock and we do not intend to pay dividends on our common stock in the
foreseeable future. We anticipate that we will retain any earnings to finance
the growth and development of our business and for general corporate purposes.
ITEM 2. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In tandem with the Merger, in November 1999, we received an aggregate
of $1,000,000, in separate stages to fund our operations. In that financing
transaction, we issued 3,000,000 shares of common stock to the investors at a
purchase price of $0.33 per share. In the Merger, we also issued 300,000 shares
of common stock to Talisman in connection with services rendered by Talisman in
consummating the Merger.
After the Merger, we issued warrants to purchase 181,181 shares of
common stock to Keepsake with an exercise price of $0.33 per share and warrants
to purchase 121,212 shares of common stock to Gilbert Amar with an exercise
price of $0.33 per share.
In December 1998 the Former Tribeworks raised $64,000 pursuant to the
sale of its equity securities at a purchase price of $0.45 per share.
24
<PAGE> 26
On January 24, 1997, 100,000 shares of Common Stock were issued to
Raymond Willey for consultative services provided to Pan World.
The issuance of securities described above were deemed to be exempt from
registration under the Securities Act in reliance on Regulation D, Section 4(2).
The issuance of Common Stock and Warrants was exempt pursuant to Rule 506 of the
Securities Act. The Merger was a transaction by an issuer not involving any
public offering. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about the companies affected by the Merger or had access, through employment or
other relationships, to such information.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation includes provisions (i) to eliminate
the personal liability of our directors for monetary damages resulting from
breaches of their fiduciary duty and (ii) to require us to indemnify our
directors to the fullest extent permitted by applicable laws.
In connection with the Merger dated November 2, 1999, we entered into
indemnity agreements with each of the following directors and officers: Duncan
Kennedy, Patrick Soquet, Gilbert Amar, Steven Bennet, Thomas Williams and Arman
Pahlavan. These indemnity agreements provide for the indemnification of these
individuals in their capacities as directors and/or officers to the fullest
extent permitted by the provisions of our Bylaws and Delaware corporate law.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to indemnify directors, officers, employees or agents
of the corporation in non-derivative suits if such party acted in good faith and
in a manner which he or she reasonably believed to be in or not opposed to the
best interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe this conduct was unlawful, as
determined in accordance with the Delaware General Corporation Law.
25
<PAGE> 27
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
--------
<S> <C>
TRIBEWORKS, INC. AUDITED FINANCIAL STATEMENTS FOR
FISCAL YEAR ENDING DECEMBER 31, 1998
Report of Independent Accountants .............................. F-2
Balance Sheet .................................................. F-3
Statement of Operations ........................................ F-4
Statement of Stockholders' Equity .............................. F-5
Statement of Cash Flows ........................................ F-6
Notes to Financial Statements .................................. F-7
TRIBEWORKS, INC. UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIOD ENDING SEPTEMBER 30, 1999
Balance Sheet .................................................... F-11
Statement of Operations .......................................... F-12
Statement of Cash Flows .......................................... F-13
</TABLE>
F-1
<PAGE> 28
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Tribeworks, Inc.
San Francisco, CA
I have audited the accompanying balance sheet of Tribeworks, Inc as of
December 31, 1998 and the related statements of operations, stockholders'
equity, and cash flows for the year ended December 31, 1998. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Tribeworks, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
Tribeworks, Inc. will continue as a going concern. There is substantial doubt
about the Company's ability to continue as a going concern relating to funding
of operations and achieving successful operations. Management's plans in regard
to these matters are also described in Note 5 to the financial statements. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
W. Alan Jorgensen
Certified Public Accountant
November 2, 1999
Seattle, WA
F-2
<PAGE> 29
TRIBEWORKS, INC.
BALANCE SHEETS
December 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 37,723
Accounts receivable, net 19,650
Subscriptions receivable 19,492
Total current assets 76,865
Organization costs 4,800
--------
TOTAL ASSETS 81,665
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 20,298
Due to shareholders 18,732
Deferred revenue 35,188
--------
TOTAL CURRENT LIABILITIES 74,218
Stockholders' Equity:
Preferred stock: 50,000,000 shares authorized, none issued
Common stock: 200,000,000 shares authorized, no par
value, 16,000,000 shares issued and outstanding 16,000
Additional Paid in Capital 52,000
Accumulated deficit (60,553)
--------
Total stockholders' equity 7,447
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,665
========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 30
TRIBEWORKS, INC
STATEMENT OF OPERATIONS
Year Ended December 31, 1998
<TABLE>
<S> <C>
REVENUES $ 5,562
Expenses:
Product development and support costs 7,569
Sales and marketing 3,980
General and administrative 54,566
-----------
Total expenses 66,115
-----------
LOSS FROM OPERATIONS $ (60,553)
===========
Basic and Diluted Loss per share $ (0.015)
===========
Weighted average number of shares outstanding 4,000,000
===========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 31
TRIBEWORKS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
From Inception (August 20, 1998) to December 31, 1998
<TABLE>
<CAPTION>
Paid in
Per Common Stock Preferred Stock Capital Accumulated
share Shares $ Amount Shares $ Amount $ Amount Deficit Total
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balances -- -- -- -- -- -- --
Issued at Inception for cash $ 0.001 1,492,000 $ 1,492 $ 1,492
Founders shares for Services $ 0.001 2,508,000 $ 2,508 $ 2,508
Preferred shares $ 0.45 142,223 $ 64,000 64,000
Net loss $ (60,553) (60,553)
RETROACTIVE RECAPITALIZATION
(See Notes 2 and 8)
Exercise of options $ 0.001 276,634 277 (277)
Convert preferred to common $ 0.001 289,216 289 (142,223) (64,000) 63,711 --
Recapitalization shares $ 0.001 11,434,150 11,434 (11,434) --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 $ 0.001 16,000,000 $ 16,000 -- $ -- $ 52,000 $ (60,553) $ 7,447
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE> 32
TRIBEWORKS, INC.
STATEMENT OF CASH FLOWS
Year ended December 31, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from operations $(60,553)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED BY OPERATING ACTIVITY
Amortization of organization costs 1,200
Stock grants for services 2,508
CHANGES IN OPERATING ASSETS AND LIABILITY
Accounts receivable (19,650)
Accounts payable 20,299
Deferred revenue 35,188
--------
CASH USED IN OPERATING ACTIVITIES (21,008)
INVESTING ACTIVITIES
Increase in organization costs (6,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of preferred shares 46,000
Proceeds from loan from shareholders 18,732
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 64,732
Increase in cash 37,723
Beginning of period --
--------
END OF PERIOD $ 37,723
========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 33
TRIBEWORKS, INC.
Notes to the financial statements
December 31, 1998
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION On August 20, 1998 ("Inception") Tribeworks, Inc. began its
business activities. The Company's principal business activity is developing
software applications for Web media developers through the internet and
marketing a technology known as "ishell". This software was developed by an
officer, director and an affiliate of the Company. See Note 7 below. The
Company's business activities have been financed primarily through the issuance
of equity securities for cash and sales of prepaid memberships.
REVENUE RECOGNITION The Company's principal revenue source is from the sale of
service contracts to provide technical support for its software. The service
contracts are in the form of membership agreements. The memberships typically
cover twelve months. Revenue is deferred and recognized in the income statement
pro rata, on a straight line basis, over the period covered by the service
contracts.
GOING CONCERN The Company's ability to continue as a going concern is dependent
upon its success in finding adequate financing for operations, and in
transforming its technology into profitable operations. Management plans to
address these issues by increasing membership sales through additions to
marketing and technical support staff. Additionally, management plans to seek
equity financing to cover the costs of operations until the Company can become
profitable. The accompanying financial statements have been prepared on the
basis that the Company will be able to continue in existence as a going concern.
These statements do not include any adjustments that might result from the
outcome of this uncertainty.
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
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.
CASH AND CASH EQUIVALENTS The Company considers, and the financial statements
reflect, all highly liquid short-term investments with original maturity of
three months or less as cash.
RECEIVABLES An allowance for doubtful accounts has been established based on a
percentage of sales made during the year. Management reviews the allowance
account for adequacy on an interim and annual basis.
INCOME TAXES Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income.
NET LOSS PER COMMON SHARE Net Loss per common share is computed based on the
weighted average number of common shares and common share equivalents
outstanding. When dilutive, stock options are included as common share
equivalents using the treasury stock method. There was no difference between
basic and fully diluted earnings per share for the period presented.
F-7
<PAGE> 34
Con't
NOTE 2 COMMON STOCK
REVERSE MERGER RECAPITALIZATION The Company's financial statements are presented
after giving retroactive effect to the issuance of common shares and conversion
of all of the preferred shares effected by a reverse merger recapitalization
entered into on November 2, 1999 with Pan World Corporation. Pan World
Corporation has nominal assets and liabilities. The "reverse acquisition merger"
will be accounted for as if it were a pooling of interest. The majority of
common share ownership remains with the same group of owners of the Company
after the merger as before. The reverse acquisition merger increased the number
of shares authorized to 200,000,000 (from 10,000,000), and reduced the par value
per share to $0.001(from $0.01 per share).
NOTE 3 PREFERRED STOCK
The Articles of Incorporation authorized issuance of up to 50 million shares of
preferred stock. 257,201 shares of preferred stock have been designated as
Series A. The Board of Directors has the authority, without further stockholder
action, to determine the preferences, limitations, and relative rights of the
preferred stock.
During 1998 some Series A preferred shares were issued for cash. However, as
part of the merger, described above all of the preferred share were exchanged
for common stock of the company. Series A, when issued, has a non-cumulative
dividend preference of $0.027 per share per annum on each outstanding share,
payable quarterly when and if declared and; a preference of $0.45 per share for
any liquidation or deemed liquidation including, among other things, any merger
or reorganization where the prior common shareholders end up with less than 50%
of the reorganized or merged entity.
NOTE 4 INCOME TAXES
Deferred tax assets primarily consist of net operating loss carryforward as the
Company has not generated taxable income since inception. There are no
significant deferred tax liabilities. A valuation allowance has been established
to reduce the deferred tax assets to zero due to the uncertainties concerning
the future ability of the Company to benefit from the net operating loss
carryforward. Net operating loss carryforwards for federal income tax purposes
which are available to offset future taxable income are not material to the
financial statements. Additionally, there may be restrictions related to tax law
which may further limit the value of any deferred tax asset.
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, receivables, and accounts
payable. The Company believes that the fair value of these financial instruments
approximates their carrying amounts based on current market indicators, such as
prevailing market rates.
NOTE 6 COMMITMENTS AND CONTINGENCIES
LEASES The Company has no long-term lease commitments for equipment nor for
office capacity. Office and work space is rented on a month to month basis.
F-8
<PAGE> 35
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE The Year 2000 Issue arises because many
computerized systems use two digits rather than identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date, resulting in
errors when data using year 2000 is processed. In addition, similar problems may
arise in some systems that use certain dates in 1999 to represent something
other than a date.
The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000 and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant system failure, which could
affect an entity's ability to conduct normal business operations. However, it is
not possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
Management depends on the delivery of information over the Internet, a medium
which is susceptible to the Year 2000 problem. Interruptions in Internet traffic
could result in significant disruption of the Company's business. The Company
relies on representations from Microsoft and Apple to the effect that their
operating systems will continue to operate properly into the twenty-first
century Management. The Company has not developed a Year 2000-specific
contingency plan. However, the Company works with vendors and service providers
to minimize the risk of business disruptions resulting from the Year 2000
issues.
The most reasonably likely worst case scenario related to the Year 2000 Issue
would involve a major shutdown of the Internet or there may be serious
disruptions in shipping products resulting in severe loss of revenue.
Additionally, if the Company's customers are not Year 2000 compliant, then they
may not be able to access the Company's Web site without serious disruptions,
again resulting in severe loss of revenue.
NOTE 7 RELATED PARTY TRANSACTIONS
During the period ended 1998, Certain officers of the Company loaned $18,732 to
the Company to finance some of its start-up costs. The loan is non interest
bearing and due on demand.
NOTE 8 STOCK BASED COMPENSATION
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 (SFAS 123) addresses the accounting for stock-based compensation
arrangements. SFAS 123 permits a company to choose either a new fair-value-based
method or the current APB Opinion 25 intrinsic-value-based method of accounting
for stock-option-based compensation arrangements. Management will continue to
record stock-based compensation using current APB Opinion 25
intrinsic-value-based method and, therefore, believes adoption of SFAS 123 will
not impact the Company's financial position and results of operations.
NOTE 9 SUBSEQUENT EVENTS
REVERSE MERGER RECAPITALIZATION The Company's financial statements are presented
to give retroactive effect to the issuance of common shares and conversion of
all of the preferred shares effected by a reverse merger recapitalization
entered into on November 2, 1999 with Pan World Corporation. Part of the
agreement calls for Pan World Corporation to raise $1 million through the issue
of its securities. (See note 2 above). The financial statements at December 31,
1998 are presented to give effect to the change in common and preferred shares
outstanding after the merger.
STOCK OPTION PLAN In February 1999, the Company adopted an Incentive Stock
Option Plan
F-9
<PAGE> 36
(Plan). The Company has reserved 1,600,000 shares for the exercise of options
under the plan. The exercise price at the date of grant is the estimated fair
market value at the grant date as determined by the Company's Board of
Directors.
SOFTWARE AGREEMENT The Company's principal business activity centers around the
commercialization of certain software known as "ishell", which was developed by
Keepsake sprl, a Belgian corporation with offices in Brussels, Belgium, and
Gilbert Amar, an officer and director of the Company. During October 1999, the
Company entered into an agreement with Amar and Keepsake wherein Amar and
Keepsake, assigned all of their right, title and interest to the "ishell" to the
Company in exchange for an aggregate consideration of $100,000 and warrants to
purchase 303,030 shares of common stock at an exercise price of $0.33 per share.
F-10
<PAGE> 37
TRIBEWORKS, INC.
Balance Sheet
(unaudited)
As of September 30, 1999
PREPARED BY MANAGEMENT
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 56,414
Accounts receivable, net 33,684
Subscription Receivable 1,122
Prepaid Expenses 3,986
Deposits 3,500
---------
Total current assets 98,705
Property and Equipment, Net 6,429
Organization Costs, Net 3,900
---------
Total assets $ 109,035
=========
Current liabilities:
Accounts payable and accrued expenses $ 110,864
Deferred Revenue 96,986
Due to shareholders 18,732
Convertible Debt 559,768
---------
Total current liabilities 786,350
---------
Stockholders' Equity:
Preferred stock 64,000
Common stock 4,500
Retained Earnings (60,553)
Current Year Earnings (685,263)
---------
Total stockholders' deficit (677,315)
---------
Total liabilities and stockholders' deficit $ 109,035
=========
</TABLE>
F-11
<PAGE> 38
TRIBEWORKS, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited - prepared by management)
<TABLE>
<S> <C>
Revenues $ 103,517
Cost of Sales $ 31,693
---------
Gross Margin $ 71,824
Expenses:
Product Support $ 48,505
Product Development $ 200,204
Sales and marketing $ 174,998
General and administrative $ 332,579
---------
Total operating expenses $ 756,287
---------
Operating Loss $(684,463)
---------
Interest expense $ --
Interest income $ --
Income before income taxes $(684,463)
Income taxes 800
---------
Net Income $(685,263)
=========
</TABLE>
F-12
<PAGE> 39
TRIBEWORKS, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited - prepared by management)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from operations $(685,263)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED BY OPERATING ACTIVITY
Amortization of organization costs 900
Depreciation 478
CHANGES IN OPERATING ASSETS AND LIABILITY
Accounts receivable 4,336
Accounts payable 90,566
Prepaid Expenses and Deposits (7,486)
Deferred revenue 61,798
---------
CASH USED IN OPERATING ACTIVITIES (534,671)
INVESTING ACTIVITIES
Increase in organization costs --
Acquisition of Capital Equipment (6,907)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of preferred shares --
Proceeds from issue of common shares 500
Proceeds from bridge loan 559,768
Proceeds from loan from shareholders --
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 560,268
Increase in cash 18,691
Beginning of period 37,723
---------
END OF PERIOD $ 56,414
=========
</TABLE>
See accompanying notes to financial statements
F-13
<PAGE> 40
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
TRIBEWORKS, INC.
By /s/ Duncan Kennedy
----------------------------------------
Duncan Kennedy
Its President and Chief Executive Officer
<PAGE> 41
PART III
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
- ------- -------------------------------------------------------
<S> <C>
1. Form of Agreement of Merger between Tribeworks,
Inc., a California corporation and Tribeworks
Acquisition Corporation, dated November 2, 1999
2. Articles of Incorporation of Tribeworks, Inc., a
Delaware Corporation
3. Bylaws of Tribeworks, Inc., a Delaware Corporation
4. Software Agreement by and between Tribeworks, Inc., a
California corporation, Keepsake sprl, and Gilbert Amar
dated November 2, 1999
</TABLE>
<PAGE> 1
EXHIBIT 1
AGREEMENT OF MERGER
BETWEEN
TRIBEWORKS, INC.
AND
TRIBEWORKS ACQUISITION CORP.
AGREEMENT OF MERGER ("Agreement") by and between Tribeworks, Inc., a
California corporation ("Tribeworks"), and Tribeworks Acquisition Corp., a
Delaware corporation (the "Sub") and a wholly owned subsidiary of Pan World
Corporation, a Nevada Corporation ("Pan World").
WHEREAS, Tribeworks and the Sub have entered into a Plan of Merger,
dated August 19, 1999 (the "Plan of Merger"), pursuant to which the Sub is to
merge with and into Tribeworks, with Tribeworks as the surviving corporation
(the "Surviving Corporation");
WHEREAS, Surviving Corporation and the Sub are entering into this
Agreement pursuant to the terms of the Plan of Merger, to consummate the
transactions set forth therein;
FIRST: The Sub shall be merged into Surviving Corporation.
SECOND:The Articles of Incorporation of the Surviving Corporation shall
be amended and restated in their entirety in the form attached hereto as Exhibit
A.
THIRD: (a) At the Effective Time (i) the separate existence of Sub
shall cease and Sub shall be merged with and into Surviving Corporation (Sub and
Surviving Corporation are sometimes referred to herein as the "Constituent
Corporations"), (ii) the Articles of Incorporation of Surviving Corporation as
amended and restated shall be the Articles of
<PAGE> 2
Incorporation of the Surviving Corporation, and (iii) the Bylaws of Surviving
Corporation as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
(b) The directors of Sub immediately prior to the Effective Time
shall become the directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation, and the officers of Sub immediately prior to the Effective Time
shall become the officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
FOURTH: Upon the effectiveness of the merger, the capital stock of
Surviving Corporation and the Sub shall be converted as follows:
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of the capital stock of
Surviving Corporation or Sub, each issued and outstanding share of the capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, $0.01 per share, of the Surviving Corporation.
(b) Each issued and outstanding share of Surviving Corporation
Common Stock shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive 2.033537474 shares
of fully paid and nonassessable shares of Pan World Common Stock, and each
issued and outstanding share of Surviving Corporation Series A Preferred Stock
("Surviving Corporation Preferred Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive 2.033537474 shares of fully paid and nonassessable shares of
Pan World Common Stock. All such shares of Surviving Corporation Common Stock
and Surviving Corporation
2
<PAGE> 3
Preferred Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares of Pan World Common
Stock in the case of Surviving Corporation Common Stock or Surviving Corporation
Preferred Stock, upon the surrender of such certificates of Surviving
Corporation capital stock.
(c) All options to purchase Surviving Corporation Common Stock
(the "Surviving Corporation Options") issued and outstanding under Surviving
Corporation's 1999 Equity Incentive Plan (the "Surviving Corporation Stock
Option Plan"), whether or not exercisable, whether or not vested, and whether or
not performance-based, shall remain outstanding following the Effective Time. At
the Effective Time, the Surviving Corporation Options shall, by virtue of the
Merger and without any further action on the part of Surviving Corporation or
the holder thereof, be assumed by Pan World. Each such Surviving Corporation
Option so assumed by Pan World under this Agreement shall continue to have, and
be subject to, the same terms and conditions set forth in the Surviving
Corporation Stock Option Plan immediately prior to the Effective Time, except
that (i) such Surviving Corporation Option will be exercisable for that number
of whole shares of Pan World Common Stock equal to the product of the number of
shares of Surviving Corporation Common Stock that were issuable upon exercise of
such Surviving Corporation Option immediately prior to the Effective Time
multiplied by the Option Exchange Ratio (defined below) and rounded down to the
nearest whole number of shares of Pan World Common Stock, and (ii) the per share
exercise price for the shares of Pan World Common Stock issuable upon exercise
of such assumed option will be equal
3
<PAGE> 4
to the quotient determined by dividing the exercise price per share of Surviving
Corporation Common Stock at which such Surviving Corporation Option was
exercisable immediately prior to the Effective Time by the Option Exchange
Ratio, rounded down to the nearest whole cent. The Option Exchange Ratio shall
be 1.00.
(d) For purposes of this Agreement, the term "Effective Time"
shall mean the time upon which the due and valid filing of this Agreement with
the Secretary of State of the State of California has occurred.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement of
Merger to be executed by their respective officers thereunto duly authorized on
this ___ day of November, 1999.
TRIBEWORKS, INC.
-----------------------------
Name: Duncan Kennedy
Title: President
-----------------------------
Name: Arman Pahlavan
Title: Secretary
TRIBEWORKS ACQUISITION CORP.
-----------------------------
Name: Duncan Kennedy
Title: President
-----------------------------
Name: Arman Pahlavan
Title: Secretary
5
<PAGE> 6
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
----------------------------------
TRIBEWORKS, INC.
----------------------------------
ARTICLE I
The name of this corporation is Tribeworks Development Corporation (the
"Corporation").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The Corporation is authorized to issue only one class of shares of
stock; and the total number of shares which the Corporation is authorized to
issue is 1,000 shares of Common Stock, par value $0.01.
ARTICLE IV
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
ARTICLE V
The Corporation is authorized to provide indemnification of agents, as
that term is defined in Section 317 of the California General Corporation Law
for breach of duty to the corporation and its shareholders, in excess of that
expressly permitted by said Section 317, under any bylaw, agreement, vote of
shareholder of disinterested directors or otherwise, to the fullest extent such
indemnification may be authorized hereby, subject to the limits on such excess
indemnification set forth in Section 204 of the California General Corporation
Law. The Corporation is further authorized to provide insurance for agents as
set forth in Section 317 of the California Corporations Code, provided that, in
cases where the corporation owns all or a portion of the shares of the company
issuing the insurance policy, the company and/or the policy must meet on the two
sets of conditions set forth in Section 317, as amended. Any repeal or
6
<PAGE> 1
EXHIBIT 2
CERTIFICATE OF INCORPORATION OF
TRIBEWORKS, INC.
ARTICLE I
The name of the corporation is Tribeworks, Inc. (the "Corporation").
ARTICLE II
The address of the registered office of this corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of Newcastle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated common stock ("Common Stock") and preferred stock ("Preferred
Stock"). The number of shares of Common Stock authorized to be issued is Two
Hundred Million (200,000,000), par value $.0001 per share, and the number of
shares of Preferred Stock authorized to be issued is Ten Million (10,000,000),
par value $.0001 per share.
The board of directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware (such certificate being hereinafter referred to as a "Preferred
Stock Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences,
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of any such holders is required pursuant to the terms of
any Preferred Stock Designation.
ARTICLE V
The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
<PAGE> 2
A. The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
C. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called
only by the Chairman of the Board or the President or by the board of directors
acting pursuant to a resolution adopted by a majority of the Whole Board. For
purposes of this Certificate of Incorporation, the term "Whole Board" shall mean
the total number of authorized directors whether or not there exist any
vacancies in previously authorized directorships.
ARTICLE VI
A. Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors shall be fixed from time to time by the board of directors pursuant to
a resolution adopted by a majority of the Whole Board.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless otherwise provided by law or by resolution
of the board of directors, be filled only by a majority vote of the directors
then in office, though less than a quorum.
C. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire board of directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of all of the then-outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE VII
<PAGE> 3
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article
by the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of, or increase
the liability of any director of this Corporation with respect to any acts or
omissions of such director occurring prior to, such repeal or modification.
ARTICLE VIII
The board of directors is expressly empowered to adopt, amend or repeal
the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws
of the Corporation by the board of directors shall require the approval of a
majority of the Whole Board. The stockholders shall also have power to adopt,
amend or repeal the Bylaws of the Corporation; provided, however, that, in
addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the Bylaws of the Corporation.
ARTICLE IX
In addition to any vote of the holders of any class or series of the
stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal the provisions of Article I,
Article II, and Article III of this Certificate of Incorporation.
Notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors,
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voting together as a single class, shall be required to amend or repeal any
provision of this Certificate of Incorporation not specified in the preceding
sentence.
* * * *
The name and mailing address of the Sole Incorporator is as follows:
Arman Pahlavan, Esq.
Georgopoulos & Pahlavan LLP
935 Hamilton Avenue
Menlo Park, CA 94025
IN WITNESS WHEREOF, this Certificate of Incorporation has been executed
in Menlo Park, California this _________ day of December 1999.
By:
-----------------------------------
Arman Pahlavan, Sole Incorporator
<PAGE> 1
EXHIBIT 3
BYLAWS
OF
TRIBEWORKS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of Newcastle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of San Francisco, State of California, at
such place as may be fixed from time to time by the Board of Directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
2000, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by
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any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning at least ten
percent (10%) in amount of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any
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action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual
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meeting and no notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present. In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of Directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the president
on two (2) days' notice to each director by mail or forty-eight (48) hours
notice to each director either personally or by telegram; special meetings shall
be called by the president or secretary in like manner and on like notice on the
written request of two (2) directors unless the board consists of only one
director, in which case special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors
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as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
ARTICLE IV
NOTICES
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Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be a president, treasurer and a secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also choose one or more vice-
presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a president, a treasurer, and a secretary
and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the board and as may be provided by law.
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Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or
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in the event of his inability or refusal to act, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
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If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholder or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive
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payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting .
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
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Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized under
the laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director of the corporation or a predecessor
corporation or, at the corporation's request, a director or officer of another
corporation, provided, however, that the corporation shall indemnify any such
agent in connection with a proceeding initiated by such agent only if such
proceeding was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be a director, and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Expenses incurred by a director of the corporation in defending a civil
or criminal action, suit or proceeding by reason of the fact that he is or was a
director of the corporation (or was serving at the corporation's request as a
director or officer of another corporation) shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized by relevant sections of the General Corporation Law of
Delaware. Notwithstanding the foregoing, the corporation shall not be required
to advance such expenses to an agent who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors of the corporation which alleges willful misappropriation of corporate
assets by such agent, disclosure of confidential information in violation of
such agent's fiduciary or contractual obligations to the corporation or any
other willful and deliberate breach in bad faith of such agent's duty to the
corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract
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between the corporation and each director who serves in such capacity at any
time while this bylaw is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
12
<PAGE> 13
CERTIFICATE OF ASSISTANT SECRETARY OF
TRIBEWORKS, INC.
The undersigned, Arman Pahlavan, hereby certifies that he is the duly
elected and acting Secretary of Tribeworks, Inc., a Delaware corporation (the
"Corporation"), and that the Bylaws attached hereto constitute the Bylaws of
said Corporation as duly adopted by Written Consent of Sole Director on
________, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
this ___ day of _______, 1999.
- ------------------------------
Name: Arman Pahlavan
Title: Secretary
13
<PAGE> 1
EXHIBIT 4
Execution Copy
Software Agreement
Between: Tribeworks, Inc., a California corporation ("Tribeworks"), with
offices located 1620 Montgomery Street, Suite 220, San Francisco,
California 94111;
And: Keepsake sprl, a Belgian corporation ("Keepsake") with offices
located at Avenue Eugene Demolder 38 at 1030 Brussels, Belgium;
And: Mr. Gilbert Amar ("Amar"), residing at 5, rue Helene at 75017
Paris, France.
Dated: November 2, 1999
Preamble
Tribeworks is engaged in developing software applications for web media
developers through the Internet.
Keepsake has extensive experience in development of multimedia publishing
software tools.
Keepsake has developed a software authoring tool distributed under the tradename
"iShell" (the "Software").
Amar has assisted Keepsake in development of the Software.
Tribeworks is commercializing the Software.
In consideration for the premises and covenants included herein, the parties
agree to enter into this Agreement.
Agreement
1. Keepsake is holder of all intellectual property rights, including copyrights
to the Software. The specifications to the Software are specified on Annex A.
The credits regarding the authors of the Software that are imbedded in the
source code shall remain unchanged.
2. Keepsake and Amar warrant to Tribeworks that they are authorized to enter
this Agreement. To the best of the knowledge of Amar and Keepsake, execution of
this Agreement by Keepsake and Amar will not conflict with any rights granted by
Keepsake or Amar in the Software to any third party .Keepsake and Amar further
represent that (i) the Software is proprietary to Keepsake and Amar, and (ii) to
the best of their knowledge, the Software does not infringe upon or conflict
with the intellectual property rights of any third parties in the Software.
3. Keepsake and Amar hereby assign to Tribeworks all of their right, title and
interest to the Software (including without limitation the source code, the
tradename, and other related intellectual property rights). Tribeworks agrees to
pay Keepsake the consideration as specified in Annex B.
4. KEEPSAKE AND AMAR EXPRESSLY DISCLAIM ANY WARRANTIES WITH RESPECT TO THE
SOFTWARE EXCEPT THOSE SPECIFIED IN SECTION 2 ABOVE. THE SOFTWARE IS PROVIDED ON
AN "AS IS BASIS". ANY WARRANTY OF MERCHANT ABILITY OR FITNESS FOR A PARTICULAR
USE OR PURPOSE IS EXPRESSLY DISCLAIMED.
<PAGE> 2
5. Unless there would be a breach of Section 2 above, Keepsake and Amar shall in
no event be liable for any damages (including without limitation, damages for
loss of business profits, business interruption, loss of business information,
or any other pecuniary loss) related directly or indirectly to the Software. In
the event that the provisions of preceding sentence set forth in this Section 5
shall be considered invalid under the laws of the applicable jurisdiction, or in
the event of breach by Keepsake and/or Amar of the provisions of Section 2
hereunder, the parties acknowledge that the total damages due and payable by
Keepsake and/or Amar hereunder shall not exceed twenty-five percent (25%) of the
total aggregate consideration paid by Tribeworks to Keepsake and Amar under this
Agreement.
6. Tribeworks undertakes on a "best effort basis" to commercialize and to
develop the worldwide notoriety of the Software. Tribeworks shall organize a
professional team to support the Software and to respond to any queries
regarding the Software by users.
7. Upon (i) institution by or against Tribeworks of any action for insolvency,
receivership or bankruptcy or any other proceedings for settlement of
Tribeworks' debts, or (ii) Tribeworks' making an assignment for the benefit of
creditors, or (iii) Tribeworks, dissolution or insolvency (the events specified
in clauses (i) through (iii) hereof being referred to herein as "Insolvency
Events"), Tribeworks will grant to Keepsake a royalty-free license to the
Software and any derivative works based on the Software. For purposes hereof,
term "Derivative Works" shall mean all work based on the Software such as a
revision, modification, translation, compilation, or any other form, including a
new work in which the Software may be recast, transformed or adapted (including
but not limited to error corrections or enhancements to the Software). In
connection with the foregoing, Tribeworks shall make available to Keepsake all
documentation relating to the Software or the Derivative Works upon occurrence
of an Insolvency Event.
8. Keepsake shall assist Tribeworks for a period of 12 months after execution of
this Agreement in development of the Software on a "best effort basis". The
relationships of Tribeworks and Keepsake shall be that of an independent
contractor for work performed by Keepsake for Tribeworks under this Section 8.
All work product developed by Keepsake for Tribeworks after the date hereof
under this Section 8 shall constitute the property of Tribeworks. The fees
payable by Tribeworks to Keepsake for this development work are specified in
Annex C. Tribeworks shall deliver to Keepsake such copies of the Software and
Derivative Works to enable Keepsake to perform its duties under this Agreement.
Any copies of the Software and Derivative Works delivered by Tribeworks to
Keepsake for this purpose shall be used by Keepsake for internal purpose only.
9. Commencing as of the effective date of this Agreement, Tribeworks will
perform all development with respect to the Software. Tribeworks' development
work will be headed by Amar.
10. Failure by either party to enforce any provision of this Agreement will not
be deemed a waiver of future enforcement of that or any other provision. This
Agreement is governed by and construed in accordance with the laws of Belgium.
In case of litigation, the courts having exclusive jurisdiction shall always be
the courts in which judicial area the registered office of the defendant is
located. This Agreement, including all annexes thereto, constitutes the entire
Agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understandings or
agreements, written or oral regarding such subject matter. Any amendment to this
Agreement should be made exclusively by written means.
IN WITNESS WHEREOF, that parties have executed this Agreement by their duly
authorized representative as of the date specified below.
TRIBEWORKS, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 3
KEEPSAKE SPRL
By:
-------------------------------
Name:
Title:
- -----------------------------------
Gilbert Amar
Acknowledged:
PAN WORLD CORPORATION
By:
--------------------------------
Name: Thomas Williams
Title: President
