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

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

                                 AMENDMENT NO. 1
                                     TO THE
                                   FORM 10-KSB

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

                  For the fiscal year ended December 31, 2004
                                            -----------------

                        Commission File Number: 001-15819
                                                ---------

                               Activeworlds Corp.
           -----------------------------------------------------------
           (Name of small business issuer as specified in its charter)

          Delaware                                     13-3883101
          --------                                     ----------
(State or other jurisdiction of                       (IRS Employer
 incorporation or organization)                     Identification No.)

                 40 Wall Street, 58th Floor, New York, NY 10005
               ---------------------------------------------------
               (Address of principal executive offices) (Zip code)

                                 (212) 509-1700
                           --------------------------
                           (Issuer's telephone number)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

       Securities Registered Pursuant to Section 12(g) of the Exchange Act

                                  Common Stock



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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be

<PAGE>

contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $0

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of
August 4, 2005. (See definition of affiliate in Rule 12b-2 of the Exchange
Act.).
                                   $1,756,418

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 5,317,116 shares of common stock and
were outstanding as of August 4, 2005.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Not applicable


<PAGE>

                                EXPLANATORY NOTE

         This Report has been amended to include the name of our Independent
Registered Public Accounting Firm as well as the city and state of the office
that performed the audit.


                                       2
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.

         See pages F-1 through F-14 at the end of this Report.

ITEM 13. EXHIBITS.

         (a) EXHIBIT INDEX

Exhibit Number   Description
--------------   -----------
21       Subsidiaries(1)
31       CEO and CFO certifications required under Section 302 of the
         Sarbanes-Oxley Act of 2002
32       CEO and CFO certifications required under Section 906 of the
         Sarbanes-Oxley Act of 2002
----------
(1) Contained in Form 10-KSB filed on April 8, 2005.

                                       3
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 5 day of August 2005.

                                                 Activeworlds Corp.


                                         By: /s/ Sean Deson
                                             -----------------------------------
                                             Sean Deson, Chief Executive Officer

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


SIGNATURES              TITLE                                     DATE
----------              -----                                     ----

/s/ Sean Deson         Chief Financial Officer,               August 5, 2005
----------------
Sean Deson             Chief Accounting Officer and
                       Director


                                       4
<PAGE>


                               ACTIVEWORLDS CORP.

                        Consolidated Financial Statements
                    at December 31, 2004 and for years ended
                           December 31, 2004 and 2003


<PAGE>


                                TABLE OF CONTENTS



                                                                      Page

Report of Independent Registered Public Accounting Firm               F-2

Consolidated Financial Statements

    Consolidated Balance Sheet - December 31, 2004                    F-3

    Consolidated Statement of Operations for Years Ended
        December 31, 2004 and 2003                                    F-4

    Consolidated Statement of Changes in Stockholders' Equity
       for Years Ended December 31, 2004 and 2003                     F-5

    Consolidated Statement of Cash Flows for Years Ended
       December 31, 2004 and 2003                                     F-6

    Notes to Consolidated Financial Statements                  F-7 to 14



<PAGE>

             Report of Independent Registered Public Accounting Firm


To the Stockholders
Activeworlds Corp.


We have audited the accompanying consolidated balance sheet of Activeworlds
Corp., as of December 31, 2004, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the two
years in the period then ended. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Activeworlds Corp. at December 31, 2004, and the consolidated results of their
operations and their consolidated cash flows for each of the two years in the
period then ended in conformity with accounting principles generally accepted in
the United States of America.


/s/ Pannell Kerr Forster, P.C.
------------------------------
Pannell Kerr Forster, P.C.
Boston, Massachusetts
February 4, 2005, except for note 1
  as to which the date is April 4, 2005



                                      F-2

<PAGE>



                               ACTIVEWORLDS CORP.

                           Consolidated Balance Sheet
                                December 31, 2004



                                     Assets

Current assets
    Cash                                                            $   346,823
    Investments                                                          91,875
                                                                    -----------
              Total current assets                                      438,698
                                                                    -----------

              Total assets                                          $   438,698
                                                                    -----------


                      Liabilities and Stockholders' Equity
Current liabilities
    Accounts payable                                                $     2,602
    Accrued liabilities                                                   8,500
                                                                    -----------
              Total current liabilities                                  11,102
                                                                    -----------

Commitments and contingencies

Stockholders' equity
    Preferred stock, $.001 par value, 500,000 shares
      authorized, no shares issued or outstanding                            --
    Common stock, $.001 par value, 100,000,000 shares
      authorized, 5,317,116 shares  issued                                5,317
    Additional paid-in capital                                        5,659,510
    Accumulated deficit                                              (5,198,329)
    Accumulated other comprehensive income (loss)                       (38,902)
                                                                    -----------
              Total stockholders' equity                                427,596
                                                                    -----------

              Total liabilities and stockholders' equity            $   438,698
                                                                    -----------








                 See notes to consolidated financial statements

                                       F-3

<PAGE>

                               ACTIVEWORLDS CORP.

                      Consolidated Statement of Operations



                                                         Year Ended December 31
                                                        -----------------------
                                                           2004          2003
                                                        ---------     ---------

Revenues                                                $      --     $      --
                                                        ---------     ---------
Operating expenses
    Selling, general and administrative expenses          114,694        40,910
                                                        ---------     ---------
              Total operating expenses                    114,694        40,910
                                                        ---------     ---------
    (Loss) from operations                               (114,694)      (40,910)
Litigation settlement                                          --       105,000
                                                        ---------     ---------
    Income (loss) before income taxes                    (114,694)       64,090
Income taxes                                                   --            --
                                                        ---------     ---------
              Net income (loss)                          (114,694)       64,090

Other comprehensive income (loss) -
  unrealized gain (loss) on securities                      4,764        36,855
                                                        ---------     ---------
              Comprehensive income (loss)               $(109,930)    $ 100,945
                                                        ---------     ---------
Net income (loss) per share of common stock
    Basic                                               $   (.021)    $    .019
                                                        ---------     ---------
Net income per share of common stock
    Diluted                                                           $    .011
                                                                      ---------







                 See notes to consolidated financial statements

                                       F-4

<PAGE>

                               ACTIVEWORLDS CORP.

           Consolidated Statement of Changes in Stockholders' Equity
                     Years Ended December 31, 2004 and 2003


<TABLE>
<CAPTION>
                                                                                                  Accumulated
                                                                                                     Other
                                Preferred Stock      Common Stock     Additional                 Comprehensive             Total
                               ----------------  -------------------   Paid-in       Accumulated    Income    Treasury Stockholders'
                                Shares   Amount   Shares      Amount   Capital         Deficit      (Loss)      Stock      Equity
                               -------- -------  ---------   -------   ----------    -----------   ---------   ---------  ---------
<S>                 <C>        <C>      <C>      <C>         <C>       <C>           <C>           <C>         <C>        <C>
Balances at January 1, 2003    $    --  $    --  5,317,116   $ 5,317   $ 5,725,913   $(5,147,725)  $ (80,521)  $(118,403) $ 384,581
                               -------  -------  ---------   -------   -----------   -----------   ---------   ---------  ---------
Accumulated other
  comprehensive income                       --         --        --            --            --      36,855          --     36,855

Net income for year                 --       --         --        --            --        64,090          --          --     64,090
                               -------  -------  ---------   -------   -----------   -----------   ---------   ---------  ---------

    Balances at
       December 31, 2003            --       --  5,317,116     5,317     5,725,913    (5,083,635)    (43,666)   (118,403)   485,526
                               -------  -------  ---------   -------   -----------   -----------   ---------   ---------  ---------
Retirement of Treasury stock                 --         --        --      (118,403)           --          --     118,403         --

Accumulated other
  comprehensive income                       --         --        --            --            --       4,764          --      4,764

Issuance of stock options/
  warrants for services                      --         --        --        52,000            --          --          --     52,000

Net (loss) for year                 --       --         --        --            --      (114,694)         --          --   (114,694)
                               -------  -------  ---------   -------   -----------   -----------   ---------   ---------  ---------
    Balances at
       December 31, 2004            --  $    --  5,317,116   $ 5,317   $ 5,659,510   $(5,198,329)  $ (38,902)  $      --  $ 427,596
                               -------  -------  ---------   -------   -----------   -----------   ---------   ---------  ---------
</TABLE>






                 See notes to consolidated financial statements

                                       F-5




<PAGE>

                               ACTIVEWORLDS CORP.

                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31
                                                                                  ----------------------
                                                                                    2004         2003
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
Operating activities
    Net income (loss)                                                             $(114,694)   $  64,090
    Adjustment to reconcile net income (loss) to net cash provided by (used in)
      operating activities
       Issuance of stock options for services                                        52,000           --
       Changes in operating assets and liabilities which provided (used) cash
          Due from Activeworlds, Inc.                                                    --        6,916
          Prepaid expenses                                                               --       10,519
          Accounts payable                                                            2,199      (18,920)
          Accrued liabilities                                                            --       (1,500)
                                                                                  ---------    ---------
              Net cash provided by (used in) operating activities                   (60,495)      61,105
                                                                                  ---------    ---------
Investing activities                                                                     --           --
                                                                                  ---------    ---------
Financing activities                                                                     --           --
                                                                                  ---------    ---------
Net increase (decrease) in cash                                                     (60,495)      61,105
Cash at beginning of year                                                           407,318      346,213
                                                                                  ---------    ---------
              Cash at end of year                                                 $ 346,823    $ 407,318
                                                                                  ---------    ---------

Supplemental schedule of noncash investing and financing activities
    Retirement of Treasury stock                                                  $ 118,403    $      --
                                                                                  ---------    ---------
</TABLE>







                 See notes to consolidated financial statements

                                       F-6

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements



Note 1 -      Organization and basis of presentation

              Activeworlds Corp. (the "Company") became inactive in July 2002
              when we entered into an agreement to sell all of the issued and
              outstanding stock of its operating subsidiary, Activeworlds, Inc.
              The agreement closed in September 2002 and the Company's former
              management purchased Activeworlds, Inc. in exchange for their
              selling 2,595,445 shares or approximately 30% of the Company's
              common stock to the Company. The Company has been actively seeking
              to merge, invest in or aquire other companies.

              On September 9, 2004, the Company entered into a letter of intent
              to acquire Hi-G-Tek, Ltd., an Israeli company, ("Hi-G-Tek") in a
              transaction expected to be treated as a reverse acquisition (the
              "Reverse Acquisition"). In connection with the Reverse
              Acquisition, the Company formed a wholly-owned subsidiary, AWLD,
              Inc., a Delaware corporation. AWLD, Inc. then formed a
              wholly-owned subsidiary AWLD, Ltd., an Israeli company.

              On December 13, 2004 the Company signed an Agreement and Plan of
              Merger (the "Plan") by and among the Company, AWLD, Inc., AWLD
              Ltd., Baytree LLC (a related company, substantially owned by a
              significant stockholder of the Company) and Hi-G-Tek. The Plan
              called for the merger of Hi-G-Tek and the Company's wholly-owned
              subsidiary AWLD, Ltd. in exchange for 24,683,303 shares of the
              Company's outstanding common stock. The terms of the Plan expired
              on February 28, 2005, although the parties continued discussions
              through March 31, 2005, at which time the parties ended
              discussions.

              All intercompany accounts and transactions have been eliminated in
              consolidation. The consolidated financial statements are presented
              as those of Activeworlds Corp.

Note 2 -      Summary of significant accounting policies

              A. Nature of operations

                  The Company provided computer software products and on-line
                  services that permitted users to enter, move about and
                  interact with others in computer-generated, three-dimensional
                  virtual environment using the Internet prior to the
                  subsidiary, Activeworlds, Inc. being sold. As discussed in
                  note 1, the Company is actively seeking to merge, invest in or
                  acquire other companies to generate revenues and profits.

              B.  Accounting estimates

                  The preparation of financial statements in conformity with
                  accounting principles generally accepted in the United States
                  of America requires management to make estimates and
                  assumptions that affect the 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.

                                      F-7

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              C.  Financial instruments

                  The estimated fair value of the Company's financial
                  instruments, which include cash, accounts payable and accrued
                  liabilities, approximates carrying value.

              D.  Investments

                  Management determines the appropriate classification of
                  securities at the time of acquisition. If management has the
                  intent and the Company has the ability at the time of
                  acquisition to hold securities until maturity, they are
                  classified as investments held to maturity and carried at
                  amortized historical cost. Securities to be held for
                  indefinite periods of time and not intended to be held to
                  maturity are classified as available for sale and carried at
                  fair value.

                  Realized gains and losses on dispositions are based on the net
                  proceeds and the adjusted book value of the securities sold,
                  using the specific identification method. Unrealized gains and
                  losses on investment securities available for sale are based
                  on the difference between book value and fair value of each
                  security. Unrealized gains and losses are reported in
                  accumulated other comprehensive income (loss), whereas
                  realized gains and losses are included in other income.

              E. Net income (loss) per share of common stock

                  Net income (loss) per share of common stock is computed by
                  dividing net income (loss) by the weighted-average number of
                  common shares outstanding for the year.

              F.  Income taxes

                  The Company reports income for tax purposes on the cash basis.
                  Deferred taxes result from temporary differences and the net
                  operating loss carryforward. An allowance for the full amount
                  of the gross deferred tax asset has been established due to
                  the uncertainty of utilizing the deferred tax asset in the
                  future.

              G.  Stock Plans

                  In December 2002, the Financial Accounting Standards Board
                  issued Statement of Financial Accounting Standards No. 148,
                  ACCOUNTING FOR STOCK BASED COMPENSATION - TRANSITION AND
                  DISCLOSURE. SFAS 148 amends SFAS 123, ACCOUNTING FOR STOCK
                  BASED COMPENSATION, to provide alternative methods of
                  transition for an entity that voluntarily changes to the fair
                  value based method of accounting for stock based compensation.
                  It also amends the disclosure provisions of that statement.
                  The disclosure provisions of this statement are effective for
                  the December 31, 2003 financial statements and have been
                  included in the current presentation (see note 4).

                                      F-8

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              H.  Capitalization

                  In 2004 the Board of Directors approved an increase in its
                  authorized capital to 50,000,000 additional shares of common
                  stock with a par value of $.001, which increase is subject to
                  stockholder approval.

              I.  Recent accounting pronouncement - SFAS 123(R)

                  On December 16, 2004 the FASB issued SFAS No. 123 (revised
                  2004), SHARE-BASED PAYMENT (SFAS 123(R)), which is a revision
                  of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS
                  123(R) supersedes APB Opinion No. 25, ACCOUNTING FOR STOCK
                  ISSUED TO EMPLOYEES and Amends SFAS No. 95, STATEMENT OF CASH
                  FLOWS. Generally, the approach in SFAS 123(R) is similar to
                  the approach described in Statement 123. However, SFAS 123(R)
                  requires all share-based payments to employees, including
                  grants of employee stock options, to be recognized in the
                  income statement based on their fair values. Pro forma
                  disclosure is not an alternative. SFAS 123(R) must be adopted
                  by small business issuers for periods beginning after December
                  15, 2005. The Company plans to adopt SFAS 123(R) effective
                  January 1, 2006. SFAS 123(R) permits public companies to adopt
                  its requirements using one of two methods: (1) a "modified
                  prospective" approach or (2) a "modified retrospective"
                  approach. Under the modified prospective approach,
                  compensation cost is recognized beginning with the effective
                  date based on (a) the requirements of SFAS 123(R) for all
                  share based payments granted after the effective date and (b)
                  the requirements of SFAS 123(R) for all awards granted to
                  employees prior to the effective date of SFAS 123(R) that
                  remain unvested on the effective date. The modified
                  retrospective approach, includes the requirements of the
                  modified prospective approach, but also permits entities to
                  restate based on the amounts previously recognized under SFAS
                  123 for purposes of pro forma disclosures either all prior
                  periods presented or prior interim periods of the year of
                  adoption.
                  The Company is evaluating which method to adopt.

Note 3 -      Investments

              In 2001 the Company agreed to accept 9,800,000 shares of common
              stock of its largest contract customer in full and final payment
              on the work completed to date on the contract. The fair market
              value at the date the common stock was transferred was $130,770.
              The fair market value of the investment increased by $4,764 and
              $36,855 at December 2004 and 2003, respectively. Accordingly, the
              value of the investment has been adjusted to $91,875 and $87,111
              at December 31, 2004 and 2003, respectively.


                                      F-9


<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


Note 4 -      Stock options and warrants

              Stock options

              In 1999, the Company established a qualified Stock Incentive Plan
              for its employees. From time to time, the Company issues non
              qualified stock options to independent contractors and others. In
              2004, the Company adopted the 2004 Stock Option Plan granting
              500,000 options to its sole director. (See below).

              STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 ("SFAS 123")
              allows the Company to account for stock-based compensation,
              including options, granted to employees under the provisions of
              ACCOUNTING PRINCIPLES BOARD OPINION NO. 25 ("APB 25") and disclose
              in a footnote the pro forma effect on net income (loss) if the
              fair value accounting method of SFAS 123 had been used.

              The methodology used in estimating the fair value of the stock
              options was the Minimum Value Method adjusted for the facts and
              circumstances of the stock option agreements. Significant
              assumptions included a risk free interest rate of 6% and an
              expected life of one year. The value of the options issued after
              January 22, 1999 is determined based on the fair value of the
              stock traded at the date granted.

              In 2004 the Board of Directors adopted the 2004 Stock Plan
              authorizing 1,000,000 shares of common stock to be available under
              the Plan and approved the granting of 500,000 options to its sole
              director for services rendered to the company. 50% of the options
              granted vest immediately. The remaining 250,000 vest only if an
              acquisition occurs in which control of the Company changes as a
              result of the acquisition. The options are exercisable at $.25
              over a five-year period.

              The Company also granted options to individuals for services
              rendered as follows:

                  Administrative services                      25,000
                  Consulting/legal services                   175,000

              The options are exercisable at $.25 and vest immediately. The
              options expire in May of 2009. Compensation in the amount of
              $45,000 has been recognized for the services provided by the
              director and the individuals based on the fair value of the
              services rendered.

              On April 11, 2003, the Company cancelled the 200,000 stock options
              granted to two members of the Board of Directors on July 15, 2002
              because the Company's sole director believed the grant of the
              options involved a breach of fiduciary duty. Based upon advice of
              counsel, the options were cancelled.

              Under APB 25, no compensation was recognized in the financial
              statements for the value of the stock options issued to employees
              as the exercise price was equal to or in excess of the estimated
              fair value of the Company stock at the time of grant. Pro forma
              information as if SFAS 123 had been used is not presented, as the
              pro forma compensation amounts are immaterial.


                                      F-10

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              The table below sets forth information as to options in 2004 and
              2003:
<TABLE>
<CAPTION>
                                                            Number        Weighted       Number of Shares       Weighted
                                                           of Shares       Average        Under Option in        Average
                                                             Under        Exercise        Excess or Less       Fair Value
                                                            Option          Price         Than Fair Value         Price
                                                        --------------  -------------   ------------------     ----------
                  <S>                                    <C>            <C>                  <C>               <C>
                  Outstanding at January 1, 2003          1,936,906      $   2.70             50,889            $   4.16

                  Granted during the year                        --            --                 --                  --
                  Cancelled during the year                (400,000)         (.04)                --                  --
                                                         ----------                         --------
                    Outstanding at December 31, 2003      1,536,906          3.41             50,889                4.16

                  Granted during the year                   700,000           .25                 --                  --
                  Expired during the year                   (45,889)        (3.83)           (45,889)               2.54
                                                         ----------                         --------
                    Outstanding at December 31, 2004      2,191,017          4.61              5,000                 .77
                                                         ----------                         --------

                  Exercisable at December 31, 2004        1,875,817          3.08              5,000                 .77
                  Exercisable at December 31, 2003        1,356,172          3.08             50,889                4.38

</TABLE>
              The shares under options at December 31, 2004 were in the
              following exercise price ranges:
<TABLE>
<CAPTION>
                                                                             December 31, 2004
                                                  --------------------------------------------------------------------
                                                             Options Outstanding         Options Currently Exercisable
                                                  ------------------------------------   -----------------------------
                                                               Weighted     Weighted                       Weighted
                                                                Average      Average                        Average
                                                    Number     Exercise    Contractual       Number         Exercise
                        Exercise Range            of Options     Price        Life         of Options         Price
                        --------------            ----------   ---------   -----------    ------------      ----------
                                                                              (in years)

                          <S>                     <C>            <C>            <C>        <C>                <C>
                         $-0- - $6.75              1,938,350     $  1.50        6            1,523,150        $ 1.97
                         $6.76- $13.12               252,667        8.06        5              252,667          9.09
                                                 -----------                               -----------
                                                   2,191,017                                 1,775,817
                                                 -----------                               -----------
</TABLE>
              Warrants

              In December 2004 the Company issued 750,000 common stock warrants
              to a company controlled by its principal stockholder. The
              consulting contract is for two years from the date of the
              contract. The warrants can be exercised at $2.00 per share and
              expire three years from the date of the contract. A prior
              consulting contract had expired in August 2003.



                                      F-11

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              Warrants outstanding as of December 31, 2004 are as follows:

<TABLE>
<CAPTION>
                                                                  Date        Exercise        Exercise   Shares under
                               Description                       Granted       Price           Period       Warrant
                  ----------------------------------------      ---------    ---------       ----------    --------
                   <S>                                             <C>       <C>                 <C>      <C>
                  Marketing services                               4/99     $    3.80            4/04        166,667
                  Financial services                               5/99          5.70            5/04     *  166,667
                  Services in connection with
                   private placement                               6/99          5.70            6/04        119,999
                  Placement agent warrants                         6/99          8.52-8.55       6/04     *   22,560
                  Public offering                                  5/00          4.675           5/05      1,260,000
                  Underwriter unit purchase warrants               5/00          4.675           5/05        126,000
                  Marketing and financial services                 8/00          1.187           8/05        300,000
                  Marketing services                               9/00          1.40            9/05         25,000
                  Marketing services                              10/01          3.00           10/06         50,000
                  Marketing services                               8/02           .06            8/07        300,000
                  Consulting services                             12/04          2.00           12/07        750,000
                                                                                                          ----------
                                                                                                           3,286,893
                  Cancellations                                                                             (189,227)
                  Expirations                                                                               (286,666)
                                                                                                          ----------
                                                                                                           2,811,000
</TABLE>

                  *   Warrants cancelled in connection with May 2000 public
                      offering

              The estimated value of stock warrants during 2004 and 2003 ranged
              between $.06 and $8.55. The expense recognized for compensation
              and services for these stock warrants granted in 2004 and 2003 was
              $7,000 and $-0-, respectively.

Note 5 -      Treasury stock

              In 2003, Treasury stock is shown at a cost of $118,403, which
              represents 87,527 shares of common stock. During 2002, 2,595,445
              shares were purchased under the Agreement to sell the subsidiary
              (see note 1). In conjunction with the Agreement to sell the
              subsidiary the Company also purchased 600,000 shares for $100,000
              from X3D Technologies, Inc. The Company retired shares totaling
              3,195,445 on October 16, 2002. On March 29, 2004 the Company
              retired the remaining 87,527 shares of common stock held as
              Treasury stock.

Note 6 -      Income taxes

              The net operating loss carryforward at December 31, 2004
              attributable to Activeworlds Corp. on the income tax reporting
              basis is approximately $1,626,000. An allowance has been
              established for the full amount of the gross deferred tax asset
              due to the uncertainty of utilizing the deferred taxes in the
              future.

                                      F-12

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              The tax effect of each type of temporary difference and
              carryforward is reflected in the following table as of December
              31, 2004:

                 Net operating loss carryforward                      $  649,000
                 Accrual basis versus cash basis tax reporting             1,000
                                                                      ----------
                 Deferred tax asset before valuation allowance           650,000
                 Valuation allowance                                     650,000
                                                                      ----------

                 Net deferred tax asset                               $       --
                                                                      ----------

              The effective combined Federal and State tax rate used in the
              calculation of the deferred tax asset was 40%.

              The operating loss carryforward is available to reduce Federal and
              State taxable income and income taxes, respectively, in future
              years, if any. The realizability of deferred taxes is not assured
              as it depends upon future taxable income. However, there can be no
              assurance that the Company will ever realize any future cash flows
              or benefits from these losses.

Note 7 -      Net income (loss) per share of common stock

              The number of shares on which the basic net income (loss) per
              share of common stock has been calculated is as follows:

                                                             Weighted Average
                            Year Ended December 31,          Number of Shares
                            -----------------------          ----------------
                                    2004                        5,317,116

                                    2003                        5,317,116

              The diluted income per share of common stock for 2003 has been
              calculated using 9,348,113 weighted average number of shares for
              the year. Diluted net (loss) per share of common stock has not
              been presented for 2004 since the effect of including the stock
              options and warrants outstanding (note 4) would be antidilutive.

Note 8 -      Related party transactions

              The Company entered into a consulting agreement in 2004 with a
              company controlled by its principal stockholder. The agreement is
              for two years and grants 750,000 warrants for services (see note
              4). Compensation relating to the contract was recognized in the
              amount of $7,000 in 2004. Also see notes 1 and 4.

Note 9 -      Commitments and contingencies

              Revenue Sharing Agreement - litigation settlement

              During 2000 the Company entered into an agreement with an internet
              on-line service provider to promote and market the Activeworlds
              Corp. services to the service provider's members. The term of the
              agreement was one year. Revenue from new members generated under
              the agreement is shared equally. The agreement required
              Activeworlds Corp. to make four quarterly installments in the


                                      F-13

<PAGE>

                               ACTIVEWORLDS CORP.

                   Notes to Consolidated Financial Statements


              amount of $112,500 each as a guarantee against future revenues
              earned from memberships derived from the on-line service provider.
              As of December 31, 2002, the Company had made three installments
              in the total amount of $337,500. Approximately $-0- and $18,000
              was received from memberships under the contract as of December
              31, 2002 and 2001, respectively. The contract expired in 2001. The
              Company entered into litigation regarding adjustments to the
              contract due to the lack of registrations received under the
              Agreement. On July 9, 2003 a settlement was reached between the
              parties. Under the settlement agreement, the on-line provider paid
              the Company $105,000 to settle all claims associated with the
              litigation.















                                      F-14