(101127.1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 3, 1997
Worlds Inc.(formerly Academic Computer Systems, Inc.)
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
New Jersey 22-1848316
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
15 Union Wharf, Boston, MA 02109
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (617) 725-8900
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Academic Computer Systems, Inc.
c/o Unity Venture Capital Associates Ltd.
245 Fifth Avenue, New York, New York 10016
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(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As stated in Item 1 above, the Company acquired, through a
merger, all of the assets (and liabilities) of WAC which had previously, but
almost simultaneously, acquired all of the assets (and liabilities) of Worlds.
The acquisition was accomplished by the Company issuing an aggregate of
14,200,000 shares of its common stock to the former shareholders of WAC (which
then included the former shareholders of Worlds and WAC and the investors in
WAC's financing) and 425,000 shares as a financial advisory fee.
Since prior to the Mergers, the Company was inactive with no
business activities, the business of the Company will now be the business of
Worlds and WAC. As used herein, the term "Company" means the currently
constituted Company following the Mergers.
WAC was engaged in designing, developing and marketing
three-dimensional ("3D") music oriented Internet sites on the World Wide Web.
These web sites are anticipated to utilize 3D technologies developed by Worlds.
The Company intends to (i) produce interactive, 3D, music related web
sites and (ii) distribute access to these web sites on compact discs of various
recording artists via traditional retail record outlets, working in conjunction
with major record labels.
The Company believes it can combine 3D Internet technology with the
extra available capacity on the CD to create an interactive experience for the
CD purchaser. By utilizing the Company's technology distributed on a CD+ (a
standard CD with its excess memory carrying a "bonus" as an enhancement), a
consumer using the CD ROM drive of his computer and an internet access or
services provider could enter into the interactive 3D world or site of the
recording artist, be able to interact with other fans utilizing voice or text
chat via the PC, visit the artist's merchandise shops, visit secret rooms of the
artist, see and hear advance videos and record clips of the artist, and enter
special VIP areas that would give away free concert tickets, among other things.
Worlds under its previous management, and the record labels in their
use of CD+, have not been able to generate meaningful revenues from their
products or services. The Company perceives a unique opportunity to combine
Worlds' technology with a unique
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distribution methodology in CD+ which, if successfully implemented, would lead
to a concrete revenue generation model. The Company anticipates generating
revenues, and in some instances, revenue sharing with recording labels and
artists, from (i) VIP on-line subscriber membership which will enable
subscribers to enter special areas, (ii) selling merchandise of the artist on
the site, and (iii) advertising on the sites.
Worlds was formed with the intention of creating servers, 3D browsers,
and 3D toolsets to aid programmers in the creation of unique 3D user experiences
on the Internet that would be sold or offered as turnkey solutions, such as
custom production of 3D environments on the Internet. Worlds expected that it
would host newly created 3D environments on its own computers and charge license
fees to the owners of such 3D environments. This market did not develop as
rapidly as Worlds had anticipated. Until meaningful 3D Internet license fees
could be developed using Worlds' technology, Worlds entered the custom
production business to showcase its 3D Internet technology, hiring as many as 60
full-time artists and independent contractors, integrators, and producers to
help create 3D virtual Internet environments or other experiences for companies
such as, among others, Steven Spielberg's Starbright Worlds, IBM, Visa
International, MGM, Disney, and Tandem Computers Inc. ("Tandem").
In December 1996, after almost all of Worlds' funds had been depleted,
including approximately $17 million in equity financing,Pearson Inc. and Tandem
loaned Worlds $1.5 million to sustain Worlds until such time as new capital
could be invested in Worlds or Worlds could be acquired.
Recognizing the extent of its poor and rapidly deteriorating financial
condition, in late 1996, Worlds began substantial layoffs to reduce costs. In
March 1997, Worlds' Board of Directors decided to retain an outside crisis
management organization, as Worlds' general manager, which determined to proceed
with the transactions with WAC (including the financing) and the Company.
From inception in April 1994 through 1997, Worlds' operations were
limited and consisted primarily of start-up activities, including recruiting
personnel, raising capital, and research and development. In the third quarter
of 1996, Worlds launched its first commercial user-oriented 3D chat site, Worlds
Chat 1.0 and began selling the client interface software through direct sales
channels. In October of 1996, Worlds introduced its first commercial toolset for
developing 3D multi-user applications.
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Worlds did not generate any meaningful revenues, and the company will
not generate any meaningful revenues until after the company successfully
completes development and market testing of Worlds Platinum (the Company's
newest 3D toolset, as further described below) and its 3D Internet music sites,
and attracts and retains a significant number of subscribers. The Company
anticipates that it will continue to incur significant losses until, at the
earliest, the Company generates sufficient revenues to offset the substantial
up-front expenditures and operating costs associated with developing and
commercializing its proposed products. There can be no assurance that the
Company will be able to attract and retain a sufficient number of subscribers to
generate meaningful revenues or achieve profitable operations or that its
products and services will prove to be commercially viable.
The Company has developed a highly focused and phased market entry
strategy that will pursue two key applications segments. First, developing
proprietary 3D music sites for record companies, record labels, and recording
artists, and second, Strategic Partnership Alliances/Technology licensing. The
former would provide revenues from advertising on the music sites of World
Center and the recording artist, merchandise sales and VIP Tier Level
Subscription sales and the latter through fees and royalties.
In order for the Company to develop sales, it is imperative that
relationships be developed between the Company and record companies, record
labels (which are either owned and/or distributed by the record companies or
independently owned), and the recording artist or group and their management
companies.
While it is best to have the full commitment and support of all the
abovementioned in implementing the Company's artist site program on an enhanced
CD or CD+, the Company believes that record company support is the most
important because with their commitment to a particular effort or format, the
record company can give the Company access to labels it either owns and/or
distributes and the hundreds of artists that record for these labels.
Toward this end, during the second and third quarters of 1997 and prior
to the mergers, WAC's management has had numerous conversations and/or meetings
with representatives and/or high level management and/or executives from all six
major record companies. The Company believes it has received a positive response
to its concept and online artist's prototype from each of the companies and
intends to continue discussions with each of them.
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Worlds also owns its own proprietary online 3D Internet chat site known
as Worlds Chat. Worlds Chat is the 3D environment originally created by Worlds
to test its technologies and to learn about user behaviors and preferences. The
client interface for the Worlds Chat environment was originally distributed
through a free download. Worlds Chat enhances users' chat experiences by
allowing users to see a representation of each other in the form of highly
textured avatars and to explore a 3D environment together. Worlds believes that
its Worlds Chat site is one of the leading sites of its kind.
In the Worlds Chat community, people are represented by avatars that
can be created by the individual or chosen from pre- defined figures chosen from
the Worlds library of avatars. Users communicate with each other through text
chat.
The Company believes that the user base to Worlds Chat site will be a
valuable asset. Although Worlds has no current plans to build advertising or
subscription revenues through this site, such revenues may be possible in the
future.
Worlds' principal recent efforts have been devoted to the design and
development of Worlds Platinum, also known as its Gamma technology.
Although the Company's development efforts relating to the
technological aspects of the basic Worlds Platinum platform are substantially
completed, the Company is continually seeking to refine and enhance the
capabilities of its products.
The markets in which Worlds operated and those the Company intends to
enter are characterized by intense competition and an increasing number of new
market entrants which have developed or are developing competitive products. The
Company will face competition from numerous sources, including prospective
customers which may develop and market their own competitive products and
services, software companies, and online and Internet service providers. The
Company believes that competition will be based primarily on ease of use,
features (including communications capabilities and content) and price.
The Company currently has four full time employees, of which one is an
executive officer, two are engaged in product development, and one is engaged
in financial activities. The Company has also re-established relationships with
at least five independent contractors (software developers/programmers) who
until early 1997
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were performing technological development work on its Worlds Platinum platform.
The Company intends to hire up to twelve additional employees, at least
two of whom will be in the area of artist/integration production of music sites,
and up to three of whom will be in artist relations and/or administration. It is
possible that one or more of the people who might be hired for one or more of
these positions will be retained as independent consultants.
The Company's employees are not represented by a collective bargaining
unit. The Company believes that its relations with its employees are good.
The Company now has facilities located in approximately 2,500 square
feet of leased office space in San Francisco, California and 2,500 square feet
of leased office space in Boston, Massachusetts. The lease in San Francisco is
on a month by month basis with $2,500 monthly payments and in Boston the lease
expires in September 2000 and provides for an annual rental of approximately
$50,000.
Worlds (and since the Mergers, the Company) is currently a defendant in
two lawsuits filed by a former employee. One suit filed in December 1995 in San
Francisco Superior Court alleges various contract and tort claims for wrongful
termination and seeks damages ranging from $500,000 to $2,000,000. A second suit
filed in January 1997 in U.S. District Court Northern District of California
asserts claims for damages of $200,000 in connection with the use of the Worlds'
name on the World Wide Web. Pursuant to mediation in July 1996, Worlds executed
a settlement agreement in connection with the wrongful termination case and paid
the former employee $225,000 pursuant to the settlement agreement. In February
1997, Worlds executed an amendment to the July 1996 settlement involving a
proposed settlement of both cases. The proposed settlement has not been
completed but the Company anticipates the settlement will be concluded, for a
maximum liability of $150,000. The Company has recently received a favorable
court ruling in San Francisco Superior Court and it is hoped that this ruling
could lead to an overall resolution of both the San Francisco Superior Court and
U.S. District Court lawsuits.
Although, to the best of the Company's knowledge, no legal proceedings
other than those referenced above have been instituted, current management has
been informed that potential claims may exist in the areas of unpaid taxes,
unpaid wages and expenses to employees and consultants, unpaid vacation pay and
indemnification claims by certain entities and individuals. The Company is also
informed that certain employees and consultants may assert claims
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based on alleged grants of options or other equity interest formerly held in
Worlds and there is the possibility of further claims made by individuals and
entities who may assert that they were mislead in connection with their work or
financial dealings with Worlds.
The current directors and executive officers of the Company, are as
follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Michael J. Scharf 54 Chairman of the Board
Thomas Kidrin 45 President, Chief Executive Officer,
Treasurer and Director
Kenneth A. Locker 49 Director
</TABLE>
Michael J. Scharf has been Chairman of the Board and Secretary of WAC since June
4, 1997 and has been a Director since its inception. Since 1993 he has been
Chairman and President of Niagara Corporation, a company engaged in the
manufacturing and distribution of steel bars. Prior thereto, Mr. Scharf from
1983 until 1989, was Chairman and Chief Executive Officer of Edgcomb
Corporation, the largest independent distributor of steel in the United States.
Mr. Scharf has an A. B. degree from Princeton University and an M. B. A. from
Harvard Business School. From 1989 (when Edgcomb was sold) until 1993 (when
Niagara was founded) Mr. Scharf managed his personal investments.
Thomas Kidrin has been President of WAC since its inception, Treasurer since
June 4, 1997 and a Director since inception. He has been engaged in developing
the business plan and prototype for the Company's business for over one year.
From 1991 to 1996, Mr. Kidrin was a founder, director, and President of UC
Television Network Corp.("UCTN"), a company engaged in the design and
manufacture of interactive entertainment/advertising networks in public venues.
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Kenneth A. Locker has been a Director of WAC since June 4, 1997. Since 1996 he
has been Executive Producer for MGM Interactive where he is responsible for
creating and implementing the MGM Interactive online business strategy. Prior
thereto, from 1994 to 1996, Mr. Locker was a founder and Vice President of
Worlds. From 1993 to 1994, Mr. Locker was Senior Program Consultant for Ziff
Davis Communications. From 1990 to 1993, Mr. Locker was Executive Vice President
and Head of Production for RHI Entertainment ("RHI") which at the time was 50%
owned by New Line Cinema. Mr. Locker is also on the Board of Directors of
Softbank Forums, Inc., a division of Softbank Corp.
Each officer serves at the discretion of the Board of Directors. There
are no family relationships among any of the directors or officers of the
Company.
Steven A. Greenberg is a founder of WAC and was substantially involved in the
implementation of the early and current stages of its business. It is
anticipated that Mr. Greenberg will remain involved in the Company as a
consultant. From 1991 until the present, Mr. Greenberg has been a financial
consultant and private investor. On or about June 30, 1994, Mr. Greenberg
entered into a settlement agreement in the form of a consent decree with the
SEC, settling SEC allegations against him that he had engaged in certain
insider-trading activities prohibited by the federal securities laws. Mr.
Greenberg neither admitted nor denied the allegations in such civil action. The
Company's Board of Directors is aware of the SEC's civil lawsuit and Mr.
Greenberg's settlement thereof and understands that several factors come into
play in settling a pending legal action, not the least of which is the
curtailment of ongoing litigation costs.
The Company intends to enter into a three-year employment agreement
with its President, Thomas Kidrin. The agreement, among other things, provides
for base compensation payable to Mr. Kidrin of $175,000 in the first year, and
bonuses to be determined. The agreement also provides for employment on a
full-time basis and contains a provision that the employee will not compete or
engage in a business competitive with the Company for a period of one year after
termination.
The Company intends to enter into a month-to-month consulting agreement
with Steven A. Greenberg, a founder of WAC. The agreement will provide for
monthly compensation of $15,000 plus
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reimbursement of reasonable expenses actually incurred. In addition to providing
consulting services, Mr. Greenberg will also make his offices and support staff
available to Company employees.
As a result of the Mergers, the Company now has a Stock Option Plan
(the "Option Plan") as an incentive for, and to encourage share ownership by,
the Company's officers, directors and other key employees and/or consultants and
potential management of possible future acquired companies. The Option Plan
provides that options to purchase a maximum of 1,000,000 shares of Common Stock
(subject to adjustment in certain circumstances) may be granted under the Option
Plan. The Option Plan also allows for the granting of stock appreciation rights
("SARs") in tandem with, or independently of, stock options. Any SARs granted
will not be counted against the 1,000,000 limit.
There are currently outstanding options to purchase 165,000 shares of
common stock at an exercise price of $.50 per share, which vest in equal amounts
over a three year period, including 60,000 to one of the Company's outside
directors.
Non-employee directors of the Company, excluding Mr. Scharf, will be
reimbursed for reasonable travel and lodging expenses incurred in attending
meetings of the Board of Directors and any committee on which they may serve, as
well as $2,000 per Board meeting. The Company estimates total Board related
expenses, including travel, lodging, and director's fees, will be approximately
$40,000 per year.
The holders of an aggregate of 4,979,000 shares of Common Stock are
entitled to certain rights with respect to the registration of their shares for
offer and sale to the public under the Act. Under these provisions, whenever the
Company proposes to register any of its securities under the Act for its own
account or for the account of other security holders, the Company is required,
on two occasions, to promptly notify each holder of the proposed registration
and include all Common Stock which the holder may request to be included in the
registration, subject to certain limitations. Generally, the Company is required
to bear all expenses (except underwriting discounts and selling commissions) of
all registrations. The Company currently plans to file a registration statement
registering such shares no later than the middle of January 1998. The Company
also intends to register under the Securities Exchange Act of 1934 and to use
its best efforts to have its shares traded publicly through the OTC Bulletin
Board or the Pink Sheets.
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This report contains forward-looking statements that involve risks
and uncertainties. Investors should consider carefully the risks
associated with an investment in the Company's securities.
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SIGNATURE
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, hereunto duly authorized.
Date: December 30, 1997
WORLDS INC.
By: /s/ Thomas Kidrin
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Thomas Kidrin, President
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