-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IMsrqlVYE6Hw4396vMmWuF+thoHFKeLx3Zbm+AERCX3uYWoKwTonuC8GNWWWyi+s 5Gx46H6QrKt971M+fGHw7Q== 0001116502-05-002105.txt : 20060815 0001116502-05-002105.hdr.sgml : 20060815 20050912171920 ACCESSION NUMBER: 0001116502-05-002105 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050912 DATE AS OF CHANGE: 20050912 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVEWORLDS COM INC CENTRAL INDEX KEY: 0001089531 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 133883101 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-15819 FILM NUMBER: 051080584 BUSINESS ADDRESS: STREET 1: 95 PARKER STREET CITY: NEWBURYPORT STATE: MA ZIP: 01950 BUSINESS PHONE: 9784990222 MAIL ADDRESS: STREET 1: 95 PARKER ST CITY: NEWBURYPORT STATE: MA ZIP: 01950 10QSB/A 1 activeworldscorp10qsb-a.txt AMENDMENT TO FORM 10-QSB/A U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A NO. 2 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended: March 31, 2005 Commission File No. 001-15819 ACTIVEWORLDS CORP. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) DELAWARE 513-3883101 ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 40 Wall Street, 58th Floor, New York, NY 10005 (212) 509-1700 (Address and telephone number of principal executive offices) 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 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: We had 5,317,116 shares of our common stock outstanding as of September 12, 2005. Transitional Small Business Disclosure Format (check one): [X] Yes [ ] No INDEX
Page ------ PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2005 (restated) (unaudited) and December 31, 2004 1 Condensed Consolidated Statements of Income for the three ended March 31, 2005 and 2004 (restated) (unaudited) 2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (restated) (unaudited) 3 Notes to unaudited condensed consolidated interim financial statements 4 - 5 PART 2 - OTHER INFORMATION ITEM 6. Exhibits 6
i Explanatory Note This Report has been amended to add Note 6 to our financial statements which explains the error that we corrected in our first amendment to Form 10-QSB for the quarter ended March 31, 2005. ii PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ACTIVEWORLDS CORP. Consolidated Financial Statements for three months ended March 31, 2005 (Restated) (Unaudited) ACTIVEWORLDS CORP. Consolidated Balance Sheet
March 31, December 31, 2005 2004* ----------- ----------- (Restated) (Unaudited) Assets Current assets Cash $ 339,837 $ 346,823 Investments 91,875 91,875 ----------- ----------- Total current assets 431,712 438,698 ----------- ----------- Total assets $ 431,712 $ 438,698 ----------- ----------- Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 2,000 $ 2,602 Accrued liabilities 10,500 8,500 ----------- ----------- Total current liabilities 12,500 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 5,317 Additional paid-in capital 5,701,696 5,659,510 Accumulated deficit (5,248,899) (5,198,329) Accumulated other comprehensive income (loss) (38,902) (38,902) ----------- ----------- Total stockholders' equity 419,212 427,596 ----------- ----------- Total liabilities and stockholders' equity $ 431,712 $ 438,698 =========== ===========
- ------------ *Derived from audited financial statements See notes to consolidated financial statements 1 ACTIVEWORLDS CORP. Consolidated Statement of Operations Three Months Ended March 31 2005 2004 -------- -------- (Restated) (Unaudited) Revenues $ -- $ -- -------- -------- Operating expenses Selling, general and administrative expenses 50,570 17,340 -------- -------- Total operating expenses 50,570 17,340 -------- -------- Loss from operations (50,570) (17,340) -------- -------- Loss before (provision for) benefit from income taxes (50,570) (17,340) (Provision for) benefit from income taxes -- -- -------- -------- Net loss $(50,570) $(17,340) -------- -------- Net (loss) per share of common stock Basic $ (.010) $ (.003) -------- -------- See notes to consolidated financial statements 2 ACTIVEWORLDS CORP. Consolidated Statement of Cash Flows
Three Months Ended March 31 2005 2004 --------- --------- (Restated) (Unaudited) Operating activities Net loss $ (50,570) $ (17,340) Adjustment to reconcile net (loss) to net cash used in operating activities Stock options issued for services 42,186 -- Changes in operating assets and liabilities which provided (used) cash Accounts payable (602) -- Accrued liabilities 2,000 1,963 --------- --------- Net cash used in operating activities (6,986) (15,377) --------- --------- Net decrease in cash (6,986) (15,377) Cash at beginning of period 346,823 407,318 --------- --------- Cash at end of period $ 339,837 $ 391,941 --------- --------- Supplemental disclosure information Cash paid for interest during the period $ -- $ -- --------- --------- Non-cash transaction cancellation of Treasury stock $ -- $ 118,403 --------- ---------
See notes to consolidated financial statements 3 ACTIVEWORLDS CORP. Notes to Consolidated Financial Statements March 31, 2005 Note 1 - Basis of presentation The accompanying 2005 and 2004 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, 2004 and 2003. 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. Activeworlds Corp. (the "Company") became inactive in July 2002 when the Company 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 acquire 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") 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. The Plan called for the merger of Hi-G 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. The Company is actively seeking to merge, invest in or acquire other companies to generate revenues and profits. 4 ACTIVEWORLDS CORP. Notes to Consolidated Financial Statements March 31, 2005 Note 2 - Investments In 2001 the Company agreed to accept 9,800,000 shares of common stock of its largest contract customer, 3D Global Limited, 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 $130,777. The fair market value of the investment had decreased by $38,902 at December 31, 2004. Accordingly, the value of the investment was adjusted to $91,875 at December 31, 2004. The trading of the common stock of Green X Global Limited (Green X), formerly known as 3D Global Limited, has been suspended pending the acquisition of Red X Property Pty. Ltd. The proposed acquisition has been extended to June 20, 2005. It is difficult to predict the outcome of the proposed acquisition at this time or the effect that it may have on the value of Green X's stock value. In light of this uncertainty the Company will continue to carry the value of the investment at $91,875, the value at December 31, 2004. Note 3 - Income taxes At March 31, 2005, the Company has a net operating loss carryforward of approximately $1,633,000 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 $654,000 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) 2005 5,317,116 2004 5,317,116 Diluted net (loss) per share of common stock has not been presented for the three months ended March 31, 2005 and 2004 since the effect of including the stock options and warrants outstanding would be antidilutive. Note 5 - Related party transactions - 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 (measurement date). The warrants can be exercised at $2.00 per share and expire three years from the date of the contract. The fair value of the publicly-traded stock at the date of contract of $2.45 exceeded the exercise price of the stock warrants of $2.00. The total value of the consulting services was determined by using the excess fair value ($0.45) and the total number of stock warrants issued (750,000) for a total value of $337,500. The total value of the consulting services will be expensed over the life of the consulting contract and is not affected by changes in the fair value of the Company's stock subsequent to the measurement date. Expenses for consulting services under the contract were recognized in the amount of $42,186 for the three months ended March 31, 2005. Note 6 - Correction of an error The accompanying financial statements for the three months ended March 31, 2005 have been restated to correct an error in connection with a non-cash expense. Expenses of $42,186 for consulting services under a consulting contract (note 5) were not recorded in the March 31, 2005 financial statements. The effect of the restatement was to increase the net loss for the three months ended March 31, 2005 by $42,186 and increase the net loss per share by $.008. 5 ITEM 6. EXHIBITS (a) EXHIBIT INDEX Exhibit Number Description - -------- ------------------------------------------------------------------ 31 Certification of CEO and CFO 32 Section 1350 certification of CEO and CFO 6 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf on September 12, 2005 by the undersigned, thereunto duly authorized. ACTIVEWORLDS CORP. /s/ Sean Deson ----------------------------------- Sean Deson, Chief Executive Officer 7 EX-31 2 cert-exh31.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS EXHIBIT 31 CERTIFICATION I, Sean Deson, certify that: 1. I have reviewed this Form 10-QSB of Activeworlds Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)): (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 12, 2005. /s/ Sean Deson ----------------------- Sean Deson, Chief Executive Officer and Chief Financial Officer EX-32 3 cert-exh32.txt SECTION 1350 CERTIFICATIONS EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Activeworlds Corp. (the "Company") on Form 10-QSB for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I Sean Deson, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Sean Deson ----------------------- Sean Deson, Chief Executive Officer and Chief Financial Officer Date: September 12, 2005 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. CORRESP 4 filename4.txt Activeworlds Corp. 40 Wall Street, 58th Floor New York, NY 10005 Phone: (212) 509-1700 Fax: (212) 363-4231 - -------------------------------------------------------------------------------- September 12, 2005 VIA EDGAR Mr. Robert F. Telewicz, Jr. Staff Accountant Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Activeworlds Corp. File No. 001-15819 Dear Mr. Telewicz: This letter is responding to the Staff's comment letter of August 18, 2005. We have filed another amendment to our Form 10-QSB and made the appropriate change to the footnote describing the prior error. The numbers below are keyed to the two comments in the Staff's comment letter: 1. As the only certifying officer, I have reconsidered the adequacy of our disclosure controls and procedures. Our financial statements for the quarter ended March 31, 2005 contained an error which occurred as a result of human error on the part of at least four persons from three different entities, and involved a non-cash charge. Because we have no business operations, copies of our financial records are sent to an outside accounting firm which prepares our quarterly and annual financial statements. The error that occurred related to the 2005 first quarter financial statements which did not give effect to the issuance of warrants last year to our principal stockholder, which warrants were issued as consideration for a service agreement. In order to prevent errors such as this from occurring in the future, we have adopted a written procedure for recognizing accounting charges from the issuance of options, warrants and other derivative securities. 2. Upon further review, and in order to comply with the disclosure requirements of APB 20 and APB 9, we have today filed another amendment to our Form 10-QSB for the quarter ended March 30, 2005 to include a better explanation of the correction of an error. Mr. Robert F. Telewicz, Jr. September 12, 2005 Page 2 If you have any questions, please contact our counsel, Michael D. Harris, Esq. at 561-689-4441. Sincerely yours, Sean Deson President G:\Activeworlds\Letters\SEC 9-12.doc -----END PRIVACY-ENHANCED MESSAGE-----