<PAGE>


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

                                   FORM 10-QSB

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

                 For the Quarterly Period Ended: March 31, 2002

                                       or

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

            For the Transition Period From __________ to __________.

                        Commission File Number: 001-15819

                               ACTIVEWORLDS CORP.
             (Exact name of registrant as specified in its charter)

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

               95 PARKER STREET, NEWBURYPORT, MASSACHUSETTS 01950
              (Address of principal executive offices and zip code)

       Registrant's telephone number, including area code: (978) 499-0222.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]


         As of March 31, 2002, there were outstanding 8,515,235 shares of Common
Stock, par value $.001, of the registrant.


<PAGE>



                               ACTIVEWORLDS CORP.
                 MARCH 31, 2002 QUARTERLY REPORT ON FORM 10-QSB

                                TABLE OF CONTENTS


                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                                                        Page Number
                                                                                                        -----------
<S>                                                                                                     <C>
Item 1.           Financial Statements
                  Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001..........................4
                  Consolidated Statements of Operations
                       for the three months ended March 31, 2002 and 2001.........................................5
                  Consolidated Statements of Cash Flows
                       for the three months ended March 31, 2002 and 2001.........................................6
                  Notes to Consolidated Financial Statements......................................................7
Item 2.           Management's Discussion and Analysis of Financial Condition and
                       Results of Operations......................................................................9

                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings..............................................................................12

Item 2.               Changes in Securities......................................................................12

Item 3.               Defaults upon Senior Securities............................................................12

Item 4.               Submission of Matters to a vote of Security Holders........................................12

Item 5.               Other Information..........................................................................12

Item 6.               Exhibits and Reports on Form 8-k...........................................................12

                      Signatures................................................................................ 13


</TABLE>

<PAGE>


                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Quarterly Report on Form 10-QSB contains forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other than statements of historical facts. These
statements are subject to uncertainties and risks including, but not limited to,
product and service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government regulation, and
other risks defined in this document and in statements filed from time to time
with the Securities and Exchange Commission. All such forward-looking statements
are expressly qualified by these cautionary statements and any other cautionary
statements that may accompany the forward-looking statements. In addition,
Activeworlds Corp. disclaims any obligations to update any forward-looking
statements to reflect events or circumstances after the date hereof.



<PAGE>


PART I -  FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                           Consolidated Balance Sheet

<TABLE>
<CAPTION>


                                                                                               March 31,        December 31,
                                                                                                 2002              2001 *
                                                                                               ---------        ------------
                                                                                              (Unaudited)
<S>                                                                                           <C>                <C>
                                     Assets

Current assets
    Cash ..................................................................................     $ 1,480,481      $ 1,840,430
    Accounts receivable, trade ............................................................          13,459              774
    Prepaid expenses and other ............................................................          78,101           42,950
    Investments ...........................................................................          65,307           65,307
                                                                                                -----------      -----------
              Total current assets ........................................................       1,637,348        1,949,461
                                                                                                -----------      -----------
Property and equipment, at cost
    Leasehold improvements ................................................................          27,334           27,334
    Equipment and fixtures ................................................................         396,576          395,141
                                                                                                -----------      -----------
                                                                                                    423,910          422,475
    Less: accumulated depreciation and amortization .......................................         190,690          181,341
                                                                                                -----------      -----------
              Property and equipment, net .................................................         233,220          241,134
                                                                                                -----------      -----------

              Total assets ................................................................     $ 1,870,568      $ 2,190,595
                                                                                                -----------      -----------


                      Liabilities and Stockholders' Equity
Current liabilities
    Current portion - capital lease .......................................................   $           -      $       878
    Accounts payable ......................................................................          19,263           21,287
    Accrued liabilities ...................................................................          37,358           52,857
    Deferred revenue ......................................................................         169,735          185,665
                                                                                                -----------      -----------
              Total current liabilities ...................................................         226,356          260,687
                                                                                                -----------      -----------
Commitments and contingencies

Stockholders' equity
    Preferred stock, $.001 par value, 500,000 shares authorized, no shares issued
      or outstanding ......................................................................               -                -
    Common stock, $.001 par value, 50,000,000 shares authorized, 8,515,235 shares
      issued and outstanding ..............................................................           8,515            8,515
    Additional paid-in capital ............................................................       6,344,393        6,344,393
    Note receivable for shares issued .....................................................          (6,500)          (6,500)
    Treasury stock ........................................................................        (118,403)        (118,403)
    Accumulated deficit ...................................................................      (4,518,323)      (4,232,627)
    Accumulated other comprehensive income (loss) .........................................         (65,470)         (65,470)
                                                                                                -----------      -----------
              Total stockholders' equity ..................................................       1,644,212        1,929,908
                                                                                                -----------      -----------

              Total liabilities and stockholders' equity ..................................     $ 1,870,568      $ 2,190,595
                                                                                                -----------      -----------
</TABLE>


*Derived from audited financial statements

See notes to consolidated financial statements

<PAGE>



                      Consolidated Statement of Operations


<TABLE>
<CAPTION>

                                                                                           Three Months Ended
                                                                                                 March 31
                                                                                    -------------------------------
                                                                                       2002                 2001
                                                                                    ---------             ---------
                                                                                              (Unaudited)
<S>                                                                                 <C>                   <C>

Revenues ........................................................................   $ 137,845             $ 128,798
                                                                                    ---------             ---------

Operating expenses
    Selling, general and administrative expenses ................................     325,510               666,497
    Research and development expenses ...........................................     105,525                40,038
                                                                                    ---------             ---------
              Total operating expenses ..........................................     431,035               706,535
                                                                                    ---------             ---------

    Loss from operations ........................................................    (293,190)             (577,737)

Interest income .................................................................       7,494                43,580
                                                                                    ---------             ---------
    Loss before (provision for) benefit from income taxes .......................    (285,696)             (534,157)
(Provision for) benefit from income taxes .......................................           -                     -
                                                                                    ---------             ---------

    Net loss ....................................................................   $(285,696)            $(534,157)
                                                                                    ---------             ---------

Net (loss) per share of common stock
    Basic .......................................................................   $   (.034)            $   (.063)
                                                                                    ---------             ---------

</TABLE>


See notes to consolidated financial statements

<PAGE>



                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>


                                                                                                    Three Months Ended
                                                                                                         March 31
                                                                                              -------------------------------
                                                                                                  2002               2001
                                                                                              -----------        ------------
                                                                                                         (Unaudited)
<S>                                                                                           <C>                <C>
Operating activities
    Net loss ..........................................................................       $  (285,696)       $  (534,157)
    Adjustment to reconcile net loss to net cash provided (used) by operating
      activities
       Depreciation and amortization ..................................................             9,349             12,989
       Options issued for compensation and services ...................................                 -             13,500
       Contracts in progress in excess of billings ....................................                 -            (30,848)
       Changes in operating assets and liabilities which provided (used) cash
          Accounts receivable .........................................................           (12,685)           135,402
          Prepaid expenses and other ..................................................           (35,151)           (27,970)
          Accounts payable ............................................................            (2,024)           134,952
          Accrued liabilities .........................................................           (15,499)           (13,328)
          Deferred revenue ............................................................           (15,930)            24,865
                                                                                              -----------        -----------
              Net cash (used in) operating activities .................................          (357,636)          (284,595)
                                                                                              -----------        -----------

Investing activities
    Purchases of equipment and leasehold improvements .................................            (1,434)           (26,953)
                                                                                              -----------        -----------
              Net cash (used in) investing activities .................................            (1,434)           (26,953)
                                                                                              -----------        -----------

Financing activities
    Payments on capital lease obligation ..............................................              (879)            (2,489)
                                                                                              -----------        -----------
              Net cash (used in) financing activities .................................              (879)            (2,489)
                                                                                              -----------        -----------

Net decrease in cash ..................................................................          (359,949)          (314,037)
Cash at beginning of period ...........................................................         1,840,430          3,491,818
                                                                                              -----------        -----------

              Cash at end of period ...................................................       $ 1,480,481        $ 3,177,781
                                                                                              -----------        -----------

Supplemental disclosure information
    Cash paid for interest during the period ..........................................       $         5        $       157
                                                                                              -----------        -----------
    Cash paid for income taxes during the period ......................................     $           -      $           -
                                                                                              -----------        -----------

</TABLE>



<PAGE>



                   Notes to Consolidated Financial Statements


Note 1 - Basis of presentation

              The accompanying 2002 and 2001 unaudited interim consolidated
              financial statements included herein have been prepared by the
              Company, without audit, pursuant to the rules and regulations of
              the Securities and Exchange Commission (the "SEC"). Certain
              information and footnote disclosures normally included in
              financial statements prepared in accordance with accounting
              principles generally accepted in the United States of America have
              been condensed or omitted pursuant to such rules and regulations.
              However, the Company believes that the disclosures are adequate to
              prevent the information presented from being misleading. These
              financial statements should be read in conjunction with the
              financial statements and the notes thereto included in the
              Company's Form 10-KSB, which contains financial information for
              the years ended December 31, 2001 and 2000.

              The information provided in these financial statements reflects
              all adjustments (consisting solely of normal recurring accruals)
              that are, in the opinion of management, necessary to present
              fairly the results of operations for this period. The results for
              this period are not necessarily indicative of the results to be
              expected for the full year.

              The consolidated financial statements include the accounts of the
              Company and its wholly owned subsidiary.

              The Company suffered a substantial consolidated net loss during
              the year ended December 31, 2001 and has net capital at December
              31, 2001 in an amount less than its net loss for 2001. The Company
              expended significant funds towards its marketing effort and for
              investments in people to expand the Company's revenue during 2001.
              These costs are expected to continue to impact operating results
              in the future, however management has implemented a plan to reduce
              that impact. During 2001, the Company also incurred a number of
              significant non-recurring charges associated with the settlement
              of a customer contract and a revenue sharing agreement which is
              now in litigation. The Company realized a net loss from operations
              of $293,190 during the first quarter ended March 31, 2002. This
              was a decrease from the comparable period ended March 31, 2001 of
              approximately 49%.


Note 2 - Deferred revenue

         Deferred revenue consists of the following:

                                                   March 31,       December 31,
                                                     2002              2001*
                                                  -----------     -------------
                                                  (Unaudited)

                  Deferred memberships             $    54,714     $  71,293
                  Advances on royalties                 24,227        24,227
                  Deferred licenses                     90,794        90,145
                                                   -----------     ---------
                                                   $   169,735     $ 185,665
                                                  ------------     ---------


*Derived from audited financial statements

<PAGE>


Note 3 - Income taxes

              At March 31, 2002, the Company has a net operating loss
              carryforward of approximately $4,000,000 that may be used to
              offset future taxable income.

              An allowance has been established for the full amount of gross
              deferred tax asset of approximately $1,600,000 due to the
              uncertainty of utilizing the deferred taxes in the future.

Note 4 - Net (loss) per share of common stock

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

                                                 Weighted Average
               Three Months Ended March 31,      Number of Shares
               ----------------------------      -----------------
                       (Unaudited)

                           2002                      8,515,235

                           2001                      8,515,235

         Diluted net (loss) per share of common stock has not been presented for
the three months ended March 31, 2002 and 2001 since the effect of including the
stock options and warrants outstanding would be antidilutive.

Note 5 - Long-term contracts

In 1999, the Company entered into a significant long-term contract. Revenue from
the contract was recognized as the phases were accepted by the customer. At
December 31, 1999, the Company had not completed a phase under the contract and
contract payments received were recognized as deferred revenue. At December 31,
2000, as the contract developed and more reliable estimates were available, the
percentage-of-completion method of accounting was determined to be the
preferable method of accounting for long-term contracts. Under the
percentage-of-completion method of accounting, costs and estimated gross margins
are recorded as revenue as work is performed based on the percentage that
incurred costs bear to estimated total costs utilizing the most recent estimates
of costs. Billings on the contracts are recorded as advance billings on the
contract until the contract is substantially completed. As of March 31, 2002 and
December 31, 2001, costs and estimated gross margin on the contract in excess of
advanced billings was $-0- as there was not any significant contracts in
progress as of those dates.

Note 6 - Revenue Sharing Agreement - litigation

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
requires Activeworlds Corp. to make four quarterly installments in the amount of
$112,500 each as a guarantee against further revenues earned from memberships
derived from the on-line provider. As of March 31, 2002 and December 31, 2001,
the Company made three installments in the total amount of $337,500.
Approximately $18,039 was received from memberships under the contract as of
December 31, 2001. The contract expired in 2001. The Company is currently in
litigation regarding adjustments to the contract due to the lack of
registrations received under the agreement. At this time the outcome of the
litigation process cannot be determined.


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion and analysis should be read in conjunction
with our Financial Statements and Notes thereto and other financial information
included elsewhere in this Form 10-QSB. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including those discussed elsewhere in this
report.

OVERVIEW

         Activeworlds Corp. is a provider of Internet software products and
services that enable the efficient delivery of three-dimensional content over
the Internet and intranets. Our comprehensive software platform is comprised of
proprietary three-dimensional server software, browser, and authoring tools.
Using our Active Worlds technology users are able to create objects and
structures in virtual worlds which other users can see and explore in real time.
We believe that the emergence of the Internet as a global communications medium
has increased the demand for efficient delivery of rich multimedia and
three-dimensional content.

         Our goals are to be the leader in three-dimensional Internet
environments and interactive communication and to position our software platform
as a standard for the delivery of three-dimensional content over the Internet.
In furtherance of these goals, we have chosen to offer our three-dimensional
browser to users free of charge to promote the use our software platform. There
have been over 1.5 million downloads of the Active Worlds browser.

         We believe that by continually enhancing our technology, developing new
applications for the three-dimensional Internet market, and entering into
strategic partnerships, we will be able to achieve our goals. We believe that
three-dimensional Internet applications provide enhanced richness that will be
of interest to users developing Internet-based advertising, distance learning,
training, entertainment, e-commerce, leisure time and chat applications and
other on-line activities. As three-dimensional Internet technology becomes more
accepted, we believe that a market will develop for our technology in these
areas.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 AS COMPARED WITH THREE MONTHS ENDED
MARCH 31, 2001

         Our principal source of revenue to date has been from the license of
our uniservers and galaxervers and from development projects for our customers.
We also generate revenue from the monthly $6.95 registration fee, which is paid
by our users who become citizens, and from technical support services which we
offer to our licensees. Revenue from advertising has been nominal. We recognize
revenue from membership fees and licenses ratably over the periods the
memberships and licenses are in effect.

         Revenue for the three months ended March 31, 2002 increased
approximately 7%, to $137,845 from $128,798 for the three months ended March 31,
2001. During the first quarter of 2002, we switched our subscription model from
an annual charge of $19.95 to a monthly charge of $6.95. Our belief is that a
monthly subscription charge model will increase our annual registration
revenues. The new subscription model has not been in effect long enough for us
to be able to determine if it will increase or decrease our overall registration
revenues. The new plan could also have the effect of decreasing our annual
registration revenues.

<PAGE>


         Our selling, general and administrative expenses in the three months
ended March 31, 2002 decreased approximately 51% to $325,510 from $666,497 for
the same period in 2001. The decrease was the result of staff reductions,
tradeshow reductions, legal expense reductions and overall cost cutting
measures.

         Research and development expenses in the three months ended March 31,
2002 increased 163% to $105,525 from $40,038 for the same period in 2001. This
increase reflects a general increase in our research and development efforts.

         As a result of the foregoing, we sustained a net loss of $285,696, or
$(.034) per share (basic), for the three months ended March 31, 2002, as
compared with net loss of $534,157, or ($.063) per share basic for the same
period in 2001. Diluted net (loss) per share of common stock has not been
presented for the three months ended March 31, 2002 and March 31, 2001 since the
effect of including the stock options and warrants outstanding would be
antidilutive.



         LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2002, we had working capital of $1,410,992, of which
$1,480,481 was cash. The working capital reflected the remaining cash from our
May 2000 public offering, from which we received aggregate net proceeds of
approximately $4.8 million. We have no credit facility. Our cash balances
represent substantially our only current asset. At March 31, 2002, our accounts
receivable was $13,459. We believe that at March 31, 2002, our working capital
was sufficient to meet our near cash requirements for the next twelve months.

         We have a net operating loss carry forward in the amount of $4,000,000
as of March 31, 2002, which may be used to reduce our income taxes in the future
if we recognize a profit. We cannot assure you we will make a profit.

         To the extent that our strategic partnership program is not successful
and these expenses exceed our expectations and we are unable to generate cash
flow from our operations, we may require additional funding during the next
twelve months. We may not be able to obtain financing when we require it, and
any financing may be offered on terms which are unacceptable to us and may
result in substantial dilution to our stockholders. If we are unable to raise
needed funds, we may have to reduce the scope or our marketing and development
activities, which would have a material adverse effect upon our business and
financial condition.

         We may also acquire other businesses or software, including other
companies that would help us expand our business in the area of the
three-dimensional Internet environments. However, we may acquire companies or
businesses in other industries if we are unable to develop our present business.
To the extent that we make any acquisition, we may require additional funds to
be used for the purchase price in the acquisitions, to integrate the acquired
business with our existing business and to fund the operations of the combined
businesses. In addition, we may incur expenses negotiating acquisitions which
are not consummated.

<PAGE>


         Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations and SFAS
No. 142, Goodwill and Other Intangible Assets. 18 SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under SFAS No. 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of SFAS No. 142 apply to goodwill and intangible assets acquired
after June 30, 2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, we are required to adopt SFAS No.142 effective December
1, 2002.

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets. SFAS No. 144
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. The Company is
required to adopt SFAS No. 144 on December 1, 2002 and does not expect the
adoption of SFAS No. 144 to have a material impact on our results of operations
and financial position.


<PAGE>


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES

         none

ITEM 4.  DEFAULTS UPON SENIOR SECURITIES

         none

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

         none

ITEM 5.  OTHER INFORMATION


         none


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         None.

(b)      Reports on Form 8-K.

         No reports on Form 8-K were filed by Activeworlds during the quarter
for which this report is filed.



<PAGE>




SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




                                ACTIVEWORLDS.COM, INC.


Date: May 15, 2002              By: /s/ J. P. McCormick
                                   ---------------------------------------------
                                   J. P. McCormick,
                                   Chief Financial Officer
                                   (Principal Financial Officer and Officer
                                   Duly Authorized to Sign on Behalf of
                                   Registrant)