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 June 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
Commission file number 2-31876
WORLDS INC.
(Exact name of small business issuer as specified in its charter)
New Jersey
(State or other jurisdiction of
incorporation or organization)
13-3768554
(IRS Employer Identification No.)
15 Union Wharf, Boston, Massachusetts 02109
(Address of principal executive offices)(Zip Code)
(617) 725-8900
(Issuer's telephone number)
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock outstanding was 17,868,531 shares as of
June 30, 1998
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
<PAGE>
Worlds Inc.
(a development stage enterprise)
Financial Statements
Period from April 8, 1997 (Inception) to June 30, 1998
<PAGE>
Worlds Inc.
(a development stage enterprise)
Financial Statements
Period from April 8, 1997 (Inception) to June 30, 1998
<PAGE>
Worlds Inc.
(a development stage enterprise)
Contents
- --------------------------------------------------------------------------------
Worlds Inc. (the "Company")
Financial statements (unaudited):
Balance sheets F-3
Statements of operations F-4
Statement of stockholders' deficit F-5
Statements of cash flows F-6
Summary of accounting policies F-7 - F-10
Notes to financial statements F-11 - F-15
Worlds Inc. ("Predecessor")
[Predecessor company - information prior to date of
merger with the Company herein disclosed]:
Financial statements (unaudited):
Statements of operations F-18
Statements of cash flows F-19
Summary of accounting policies F-21 - F-24
Notes to financial statements F-25 - F-26
<PAGE>
Worlds Inc.
(a development stage enterprise)
Balance Sheets
- --------------------------------------------------------------------------------
December 31, June 30,
1997 1998
- ---------------------------------------------------- ----------- -----------
(Unaudited)
Assets
Current:
Cash and cash equivalents $ 3,541,829 $ 3,419,518
Trade receivables, less allowances for
doubtful accounts of $140,318 and $140,318 538 --
Prepaid expenses and other current assets 74,175 34,287
- ---------------------------------------------------- ----------- -----------
Total current assets 3,616,542 3,453,805
Property and equipment, net of accumulated
depreciation and amortization 209,452 115,869
- ---------------------------------------------------- ----------- -----------
$ 3,825,994 $ 3,569,674
- ---------------------------------------------------- ----------- -----------
Liabilities and Stockholders' Deficit
Current:
Accounts payable $ 568,707 $ 303,074
Accrued expenses 592,250 634,834
Advanced customer billings and deferred revenue 436,140 436,140
Current maturities of notes payable 269,333 314,560
- ---------------------------------------------------- ----------- -----------
Total current liabilities 1,866,430 1,688,608
Long-term portion, notes payable 1,968,333 1,906,666
- ---------------------------------------------------- ----------- -----------
Total liabilities 3,834,763 3,595,274
- ---------------------------------------------------- ----------- -----------
Stockholders' deficit (Notes 2 and 3):
Common stock, $.001 par value - shares authorized
30,000,000; issued 16,119,996 and 17,981,996 16,120 17,982
Additional paid-in capital 6,661,582 8,402,020
Deficit accumulated during the development stage (6,686,471) (8,380,859)
- ---------------------------------------------------- ----------- -----------
(8,769) 39,143
Treasury stock, at cost, 113,465 shares -- (64,743)
- ---------------------------------------------------- ----------- -----------
Total stockholders' deficit (8,769) (25,600)
- ---------------------------------------------------- ----------- -----------
$ 3,825,994 $ 3,569,674
- ---------------------------------------------------- ----------- -----------
See accompanying summary of accounting policies
and notes to financial statements.
F-3
<PAGE>
Worlds Inc.
(a development stage enterprise)
Statements of Operations (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative,
period from
Period from Three months Six months April 8, 1997
April 8, 1997 ended ended (inception)
to June 30, June 30, to June 30,
June 30, 1997 1998(a) 1998(a) 1998(a)
- ------------------------------------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net revenues $ -- $ 12,130 $ 16,132 $ 17,552
Costs and expenses:
Cost of revenues -- (22,500) (25,101) (25,101)
Selling, general and administrative (151,176) (759,185) (1,307,525) (1,982,555)
Research and development -- (302,516) (534,428) (534,428)
Acquired research and development
(Note 1) -- -- -- (6,135,538)
- ------------------------------------------- ----------- ------------ ------------ -----------
Operating loss (151,176) (1,072,071) (1,850,922) (8,660,070)
Other income (expenses):
Interest income -- 35,054 76,992 90,585
Interest expense -- (35,656) (72,112) (88,804)
- ------------------------------------------- ----------- ------------ ------------ -----------
Loss before extraordinary item (151,176) (1,072,673) (1,846,042) (8,658,289)
Extraordinary item - gain on debt
settlement -- -- 151,654 277,430
- ------------------------------------------- ----------- ------------ ------------ -----------
Net loss $ (151,176) $ (1,072,673) $ (1,694,388) $(8,380,859)
- ------------------------------------------- ----------- ------------ ------------ -----------
Loss per share (basic and diluted):
Loss before extraordinary item $ (.02) $ (.06) (.11)
Extraordinary item -- -- .01
----------- ------------ ------------
Net loss per share (basic and
diluted) $ (.02) $ (.06) $ (.10)
----------- ------------ ------------
Weighted average common shares
outstanding:
Basic and diluted 8,400,000 16,716,546 16,434,339
----------- ------------ ------------
--------
<FN>
(a) Includes the results of Predecessor and Academic which were merged into
the Company on December 3, 1997.
</FN>
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
F-4
<PAGE>
Worlds Inc.
(a development stage enterprise)
Statement of Stockholders' Deficit
- --------------------------------------------------------------------------------
Period from April 8, 1997 (inception) to June 30, 1998
<TABLE>
<CAPTION>
Deficit
accumulated
Common stock Additional during the Total
Shares Amount paid-in development Treasury stockholders'
capital stage stock deficit
- -------------------------- ---------- ------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
to founding stockholders 8,400,000 $ 8,400 $ 195,600 $ -- $ -- $ 204,000
Sale of shares in private
offering memorandum and
shares issued to placement
agent, net (Note 3) 4,810,000 4,810 3,689,866 -- -- 3,694,676
Issuance of shares to
Academic Computer
Systems, Inc. (Note 2) 910,000 910 557,116 -- -- 558,026
Issuance of shares
pursuant to merger
with Predecessor 1,999,996 2,000 1,998,000 -- -- 2,000,000
(Note 2)
Capital contribution
resulting from
forgiveness of debt to -- -- 221,000 -- -- 221,000
shareholders of
Predecessor
Net loss for the period
April 8 to -- -- -- (6,686,471) -- (6,686,471)
December 31, 1997
- --------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 16,119,996 16,120 6,661,582 (6,686,471) -- (8,769)
Sale of shares in private
offering memorandum
(January 1998) 30,000 30 26,470 -- -- 26,500
(unaudited)
Sale of shares in public
offering of common
stock, net (June 1998) 1,832,000 1,832 1,713,968 -- -- 1,715,800
(unaudited)
Conversion of 113,465
shares to certain
stockholders
(June 1998) (Note 2) -- -- -- -- (64,743) (64,743)
(unaudited)
Net loss for the six
months ended June 30,
1998 (unaudited) -- -- -- (1,694,388) -- (1,694,388)
- --------------------------------------------------------------------------------------------------------
Balance, June 30, 1998
(unaudited) 17,981,996 $17,982 $8,402,020 $(8,380,859) $(64,743) $ (25,600)
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
F-5
<PAGE>
Worlds Inc.
(a development stage enterprise)
Statements of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative, period
from April 8, 1997
Six months ended (inception) to
June 30, 1998 June 30, 1998
- -------------------------------------------------- ----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,694,388) $(8,380,859)
- -------------------------------------------------- ----------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 93,583 109,906
Gain on debt settlement (151,654) (277,430)
Acquired research and development -- 6,135,538
Changes in operating assets and liabilities, net of
effects from merger with Predecessor and
Academic:
Trade receivables 538 --
Prepaid expenses and other assets 39,888 133,604
Accounts payable and accrued expenses (71,395) 142,966
- -------------------------------------------------- ----------- -----------
Total adjustments (89,040) 6,244,584
- -------------------------------------------------- ----------- -----------
- -------------------------------------------------- ----------- -----------
Net cash used in operating activities (1,783,428) (2,136,275)
- -------------------------------------------------- ----------- -----------
- -------------------------------------------------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock to founding
stockholders
-- 204,000
Proceeds from sale of common stock in private
offering memorandum 26,500 3,721,176
Proceeds from sale of common stock in a public offering 1,715,800 1,715,800
Payment of conversion price of shares to certain
stockholders (64,743) (64,743)
Payment on note payable (16,440) (20,440)
- -------------------------------------------------- ----------- -----------
Net cash provided by financing activities 1,661,117 5,555,793
- -------------------------------------------------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (122,311) 3,419,518
Cash and cash equivalents, beginning of period 3,541,829 --
- -------------------------------------------------- ----------- -----------
Cash and cash equivalents, end of period $ 3,419,518 $ 3,419,518
- -------------------------------------------------- ----------- -----------
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
F-6
<PAGE>
Worlds Inc.
(a development stage enterprise)
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Definitions The Company is the resulting entity of two
contemporaneous mergers (the "Mergers") of
Worlds Inc., a Delaware corporation
("Predecessor"), with and into Worlds
Acquisition Corp., a Delaware corporation
("WAC"), and WAC with and into Academic
Computer Systems, Inc., a New Jersey
corporation ("Academic"), which changed its
name to Worlds Inc. (see Note 2). While
Academic was the legal entity that survived
the mergers, WAC was the accounting acquiror
in both mergers. The Company's fiscal
year-end is December 31.
The term the "Company," as used herein,
refers to the consolidated entity resulting
from the two contemporaneous mergers, as
well the pre-merger Predecessor, WAC and
Academic; however, Predecessor, WAC and
Academic are hereinafter sometimes referred
to separately as the context requires.
Nature of Business WAC was incorporated on April 8, 1997 to
design, develop and market three-dimensional
("3D") music oriented Internet sites on the
World Wide Web. These web sites are
anticipated to utilize 3D technologies
developed by Predecessor.
Basis of Presentation The accompanying financial statements are
unaudited; however, in the opinion of
management, all adjustments necessary for a
fair statement of financial position and
results for the stated periods have been
included. These adjustments are of a normal
recurring nature. Selected information and
footnote disclosures normally included in
financial statements prepared in accordance
with generally accepted accounting
principles have been condensed or omitted.
Results for interim periods are not
necessarily indicative of the results to be
expected for an entire fiscal year. It is
suggested that these condensed financial
statements be read in conjunction with the
audited financial statements and
accompanying notes for the Company for the
year ended December 31, 1997 and for the
Predecessor for the period ended December 3,
1997.
F-7
<PAGE>
The financial statements include the results
of Predecessor and Academic from December 4,
1997, the date of the Mergers (the "Merger
Date").
The financial statements have been prepared
in accordance with the provisions of
Statement of Financial Accounting Standards
("SFAS") No. 7, "Accounting, and Reporting
by Development Stage Enterprises," which
requires development stage enterprises to
employ the same accounting principles as
operating companies.
Fair Value of The carrying amounts of financial
Financial Instruments instruments, including cash and short-term
debt, approximated fair value as of June 30,
1998 because of the relatively short
maturity of the instruments. The carrying
value of long-term debt, including the
current portion, approximates fair value as
of June 30,1998, based upon estimates for
similar debt issues.
Use of Estimates The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosures 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 these estimates
Cash and Cash Equivalents Cash and cash equivalents are comprised of
highly liquid money market instruments,
which have original maturities of three
months or less at the time of purchase.
Property and Equipment Property and equipment are stated at cost.
Depreciation is calculated using the
straight-line method over the estimated
useful lives of the assets, which range from
two to five years.
F-8
<PAGE>
Revenue Recognition Revenue from technology development and
licensing contracts is recognized upon the
attainment of contractual milestones
(approximating the percentage-of-completion
method). Cash received in advance of
revenues earned is recorded as deferred
revenue.
Software Development Costs Software development costs
are charged to expense when incurred until
the technological feasibility of the product
has been established. After technological
feasibility has been established, any
additional costs would be capitalizable in
accordance with the Financial Accounting
Standards Board's ("FASB") SFAS No. 86
("SFAS No. 86"). No such costs have been
capitalized to date.
Research and Development Costs The Company uses the liability method of
accounting for income taxes in accordance
with SFAS No. 109, "Accounting for Income
Taxes." Deferred income tax assets and
liabilities are recognized based on the
temporary differences between the financial
statement and income tax bases of assets,
liabilities and carryforwards using enacted
tax rates. Valuation allowances are
established, when necessary, to reduce
deferred tax assets to the amount expected
to be realized.
F-9
<PAGE>
Loss Per Share In 1997, the FASB's SFAS No. 128, "Earnings
per Share," replaced the calculation of
primary and fully diluted earnings (loss)
per share with basic and diluted earnings
(loss) per share. Unlike primary earnings
per share, basic earnings per share excludes
any dilutive effects of options, warrants
and convertible securities. Diluted earnings
per share is very similar to the previously
reported fully diluted earnings per share.
The loss per share amounts have been
presented to conform to SFAS No. 128
requirements. The common stock equivalents
which would arise from the exercise of stock
options and warrants are excluded from
calculation of diluted loss per share since
their effect is anti-dilutive. Therefore,
the amounts reported for basic and diluted
loss per share are the same.
Stock-Based Compensation In October 1995, the FASB issued SFAS No.
123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123
encourages entities to adopt the fair value
method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees"
("APB No. 25"), for all arrangements under
which employees receive shares of stock or
other equity instruments of the employer or
the employer incurs liabilities to employees
in amounts based on the price of its stock.
The Company has not adopted the fair value
method encouraged by SFAS No. 123 and will
continue to account for such transactions in
accordance with APB No. 25.
Comprehensive Income Effective January 1, 1998, the Company
adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes
standards for reporting and display of
comprehensive income, its components and
accumulated balances. Comprehensive income
is defined to include all changes in equity
except those resulting from investments by
owners and distributions to owners. Adoption
of the standard has had no effect on
financial statement disclosures since there
were no items of comprehensive income during
the periods presented.
F-10
<PAGE>
Worlds Inc.
(a development stage enterprise)
Notes to Financial Statements
(information pertaining to the periods ended
June 30, 1997 and 1998 is unaudited)
- --------------------------------------------------------------------------------
1. Going Concern As discussed in Note 3, the Company
completed a private placement raising gross
proceeds of $4,415,000, consummated a merger
agreement with a development stage
enterprise, Predecessor, and completed a
public offering in June 1998 raising gross
proceeds of $1,832,000. Predecessor had not
generated significant revenues from
operations and had an accumulated deficit
from inception to the Merger Date of
$21,236,139 and a capital deficit of
$4,135,538. The acquisition of Predecessor
by the Company was accounted for as a
purchase. Accordingly, $6,135,538, the
portion of the purchase allocable to
in-process research and development projects
that had not reached technological
feasibility and had no probable alternative
future uses, was expensed by the Company at
the date of merger.
The accompanying financial statements have
been prepared assuming that the Company will
continue as a going concern. The Company is
in the development stage and has had minimal
revenues from operations since the series of
merger transactions. The Company anticipates
that it currently has only a portion of the
funds necessary to complete product
development and commercialization. There can
be no assurance that the Company will be
able to obtain the substantial additional
capital resources necessary to pursue its
business plan or that any assumptions
relating to its business plan will prove to
be accurate. The Company is pursuing sources
of additional financing and there can be no
assurance that any such financing will be
available to the Company on commercially
reasonable terms, or at all. Any inability
to obtain additional financing will have a
material adverse effect on the Company,
including possibly requiring the Company to
significantly curtail or cease operations.
These factors raise substantial doubt about
the ability of the Company to continue as a
going concern. The financial statements do
not include any adjustments that might
result from the outcome of this uncertainty.
F-11
<PAGE>
2. The Mergers On December 3, 1997, Predecessor was merged
with and into WAC in a series of related
transactions which included a simultaneous
capital transaction between the Company and
Academic (the "Mergers") and a private
offering of WAC's securities (the "Private
Placement"). In both the merger with
Predecessor and the capital transaction with
Academic, WAC was the acquiror for
accounting purposes.
The acquisition of Predecessor was accounted
for as a purchase whereby all of the common
and preferred stock of Predecessor were
exchanged for 1,999,996 shares of WAC. The
shares issued to Predecessor common and
preferred shareholders were valued at $1.00
per share which represented the share value
in the private placement that occurred
during this time period (see Note 3); a
purchase price of approximately $2,000,000.
The exchange ratio was determined after
extensive negotiation between management of
Predecessor and WAC. Predecessor was a
development stage company, had not generated
significant revenues from operations and had
an accumulated deficit from inception to
December 3, 1997 of $21,236,139 and a
capital deficit of $4,135,538. The assets
acquired of Predecessor (cash, prepaid
expenses, property and equipment) were
recorded at fair market value which
approximated book value at December 3, 1997,
and, as discussed in Note 1 above, since
technological feasibility of the various
Predecessor technologies acquired had not
been established, the excess purchase price
over Predecessor's capital deficit of
$6,135,538 was expensed as acquired research
and development.
F-12
<PAGE>
Academic was an inactive company with no
operations. The value assigned to the
910,000 shares in the capital transaction
with Academic on December 3, 1997
represented Academic's net tangible assets
(primarily cash) of $558,026. During June
1998, 113,465 shares of common stock were
converted at $0.57 per share ($64,743) as a
result of certain stockholders dissenting
with respect to the Academic/WAC capital
transaction of December 3, 1997. Such
reacquired shares have been classified as
treasury stock in the accompanying balance
sheets. Academic voluntarily reported under
the Securities Exchange Act of 1934 (the
"Exchange Act").
The Company intends to continue reporting
under the Exchange Act. While no trading
market existed for the securities of
Academic, or currently exists for the
securities of the Company, the Company
intends to cause its common stock to be
traded on the Bulletin Board.
3. Private Placement and The Private Placement called for WAC to
Public Offering offer for sale a maximum of 50 units (57-1/2
with the over-allotment), each consisting of
120,000 shares of WAC's common stock (the
"Units") at a price of $120,000 per Unit. In
connection with the Private Placement, the
placement agent was to receive one warrant
to purchase one share of WAC's common stock
at $1 per share for every $40 of gross
proceeds from the sale of the Units. On
November 21, 1997, WAC sold 31.67 Units with
gross proceeds of $3,800,000 (3,800,000
shares) (the "Initial Private Placement
Closing") and the placement agent was issued
425,000 shares of common stock. On December
31, 1997, the Company sold 4.88 Units with
gross proceeds of $585,000 (585,000 shares).
On January 2, 1998 a further 30,000 shares
were issued with gross proceeds of $30,000.
Cumulative net proceeds, after commissions
and expenses of the offering, aggregated
$3,721,176.
F-13
<PAGE>
WAC agreed to include the shares of common
stock underlying the Units sold in the
Private Placement (the "Private Placement
Shares") in a registration statement to be
filed with the Securities and Exchange
Commission (the "SEC"). Such registration
statement was declared effective by the SEC
on May 1, 1998. During June 1998, WAC sold
1,832,000 shares in a public offering of its
stock and received gross proceeds of
$1,832,000. Net proceeds, after commissions
of this offering, aggregated $1,715,800.
4. Agreement and Plan of Merger On June 25, 1998, the Company entered into
an agreement and plan of merger and
reorganization (the "Agreement") with Unity
First Acquisition Corp., a Delaware
corporation ("Unity"), whereby Unity would
acquire all of the outstanding shares of the
Company in exchange for shares of its own
common stock. The acquisition, if
consummated, calls for each share of the
Company's stock being converted into .357
shares of Unity's common stock. At that
point, the Company would "reverse-merge"
into Unity which would then change its name
to "Worlds Inc." The Agreement is, among
other conditions, subject to approval by
both Unity and the Company's stockholders.
The Company's current management will
continue as management following the
transaction.
F-14
<PAGE>
Unity is a "blank check" company with no
operations, formed in May 1996 for the sole
and exclusive purpose of acquiring an
operating business. Certain of Unity's
management and stockholders are stockholders
of the Company. In the aggregate, directly
and indirectly, they own approximately 1.1
million shares of the Company's common
stock. Unity's unaudited financial
statements as of April 30, 1998 showed that
Unity had approximately $6,360,000 in net
worth, almost all of which is in the form of
cash or cash equivalents. On June 25, 1998,
Unity had outstanding 1,875,000 shares of
common stock; 1,350,000 Class A warrants
exercisable at $5.50 per share; and
1,350,000 Class B warrants exercisable at
$7.50 per share. Unity also has 125,000
underwriter's warrants outstanding,
exercisable at a price of $6.60 per warrant
to purchase up to a like number of shares of
common stock, and Class A and Class B
warrants. Unity's common stock is quoted on
the Bulletin Board under the symbol "UFAC".
The Agreement contemplates that following
the consummation of the transaction, the
officers, directors and principal
stockholders of the Company and Unity will
lock up their shares for twelve months.
F-15
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Financial Statements
Six Months Ended June 30, 1997 and Period from
April 26, 1994 (Inception) to December 3, 1997
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Financial Statements
Six Months Ended June 30, 1997 and Period from
April 26, 1994 (Inception) to December 3, 1997
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Contents
- --------------------------------------------------------------------------------
Worlds Inc. ("Predecessor") is considered a predecessor company and
the information disclosed herein is as of and prior to the date of
merger with Worlds Inc. (formerly Worlds Acquisition Corp.) ("WAC")
on December 3, 1997.
Financial statements (unaudited):
Statements of operations F-19
Statements of cash flows F-20
Summary of accounting policies F-21 - F-24
Notes to financial statements F-25 - F-26
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months Six months ended
ended June 30, ended June 30, Cumulative, period
1997 1997 from inception to
(unaudited) (unaudited) December 3, 1997(a)
- ---------------------------------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Net revenues $ 24,342 $ 64,327 $ 6,026,691
- ---------------------------------------------------- --------- ----------- ------------
Costs and expenses:
Cost of revenues 9,026 27,629 11,279,348
Selling, general and administrative 556,395 1,800,488 10,602,749
Research and development 76,595 388,159 5,388,340
Lawsuit settlements -- -- 509,200
- ---------------------------------------------------- --------- ----------- ------------
Total costs and expenses 642,016 2,216,276 27,779,637
- ---------------------------------------------------- --------- ----------- ------------
Operating loss (617,674) (2,151,949) (21,752,946)
Other income (expenses):
Interest income 431 10,344 237,629
Interest expense (34,511) (71,339) (171,082)
Gain (loss) on disposal of property and
equipment (2,085) 4,070 (79,125)
Income from sale of technology -- 260,100 260,100
- ---------------------------------------------------- --------- ----------- ------------
Loss before income taxes and extraordinary
item (653,839) (1,948,774) (21,505,424)
Income taxes (2,500) (5,000) (120,000)
- ---------------------------------------------------- --------- ----------- ------------
Loss before extraordinary item (656,339) (1,953,774) (21,625,424)
Extraordinary item - gain on debt settlement
-- -- 389,285
- ---------------------------------------------------- --------- ----------- ------------
Net loss $(656,339) $(1,953,774) $(21,236,139)
- ---------------------------------------------------- --------- ----------- ------------
- --------
<FN>
(a) Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)
</FN>
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
F-19
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended Cumulative, period
June 30, 1997 from inception to
(unaudited) December 3, 1997(a)
- --------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,953,774) $(21,236,139)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 120,357 721,097
(Gain) loss on disposal of property and equipment (4,070) 79,125
Gain on debt settlement -- (389,284)
Compensation related to stock options 6,801 761,453
Compensation related to common stock issuance -- 58,525
Licensed technology expense -- 750,000
Changes in operating assets and liabilities:
Trade receivables 489,050 --
Prepaid expenses and other assets 111,250 (167,891)
Accounts payable and accrued liabilities (118,503) 1,856,619
Advanced customer billings and deferred revenue -- 436,140
- --------------------------------------------------------------------- ----------- ------------
Net cash used in operating activities (1,348,889) (17,130,355)
- --------------------------------------------------------------------- ----------- ------------
Cash flows used in investing activities:
Acquisition of property and equipment (2,063) (999,302)
- --------------------------------------------------------------------- ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 116,857
Proceeds from issuance of preferred stock, net of issuance costs -- 16,163,766
Advance from Worlds Inc. (formerly Worlds Acquisition Corp. 100,000 561,397
Payments on capital lease -- (116,018)
Payments on note payable (40,000) (190,000)
Proceeds from note payable 650,000 1,650,000
- --------------------------------------------------------------------- ----------- ------------
Net cash provided by financing activities 710,000 18,186,002
- --------------------------------------------------------------------- ----------- ------------
Net increase (decrease) in cash and cash equivalents (640,952) 56,345
Cash and cash equivalents, beginning of period 894,692 --
- --------------------------------------------------------------------- ----------- ------------
Cash and cash equivalents, end of period $ 253,740 $ 56,345
- --------------------------------------------------------------------- ----------- ------------
Supplemental disclosures of cash flow information:
Interest paid $ -- $ 23,916
Income taxes paid 2,128 5,620
- --------------------------------------------------------------------- ----------- ------------
Disclosure of Noncash Financing and Investing Activities:
In the six months ended June 30, 1997, as part of the restructuring of
operations, the Predecessor disposed of property and equipment with a
net book value of $252,180, which included $138,439 of equipment under
capital leases. The related capital lease obligations, totaling
$123,013, were assumed by the lessor and a party which acquired certain
assets used in the Predecessor's prior Seattle operations. The
agreement with this party also resulted in a reduction of trade
payables totaling $87,226.
- --------
<FN>
(a) Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)
</FN>
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
F-20
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Nature of Business Worlds Inc. (the "Predecessor") was
incorporated under the laws of Delaware on
April 26, 1994. The Predecessor was formed
to develop and commercialize 3D multi-user
tools and technologies for the Internet
market. The Predecessor is in the
development stage and, as such, has not
generated significant revenues from
operations.
Basis of Presentation The accompanying financial statements are
unaudited; however, in the opinion of
management, all adjustments necessary for a
fair statement of financial position and
results for the stated periods have been
included. These adjustments are of a normal
recurring nature. Selected information and
footnote disclosures normally included in
financial statements prepared in accordance
with generally accepted accounting
principles have been condensed or omitted.
Results for interim periods are not
necessarily indicative of the results to be
expected for an entire fiscal year. It is
suggested that these condensed financial
statements be read in conjunction with the
audited financial statements and
accompanying notes for the Predecessor for
the period ended December 3, 1997.
The accompanying financial statements have
been prepared assuming that the Predecessor
will continue as a going concern. The
Predecessor is in the development stage (see
Note 1) and has suffered recurring losses
from operations since its inception that
raises substantial doubt about its ability
to continue as a going concern. The
financial statements do not include any
adjustments that might result from the
outcome of this uncertainty. As more fully
described in Note 2, on December 3, 1997,
the Predecessor consummated a merger
agreement with Worlds Inc. (formerly Worlds
Acquisition Corp.) ("WAC"), a company which
had completed a private placement offering
of securities.
F-21
<PAGE>
The financial statements have been prepared
in accordance with the provisions of
Statement of Financial Accounting Standards
("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises," which
requires development stage enterprises to
employ the same accounting principles as
operating companies.
Restructuring of Operations Due to recurring losses, insufficient
revenue, a working capital deficit and a net
stockholders' deficit, the Predecessor's
management made significant reductions in
operations in February 1997 that are
reflected in the Predecessor's financial
statements for the period ended December 3,
1997. In March 1997, the Predecessor engaged
an outside management firm to assist with
the downsizing of operations which has
included a major reduction in employees and
a consolidation of all operations to one
location in San Francisco.
Use of Estimates The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosures 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 these estimates.
Revenue Recognition Revenue from technology development and
licensing contracts is recognized upon the
attainment of contractual milestones
(approximating the percentage-of-completion
method). Cash received in advance of
revenues earned is recorded as deferred
revenue.
F-22
<PAGE>
Software Development Costs Software development costs are charged to
expense when incurred until the
technological feasibility of the product has
been established. After technological
feasibility has been established, any
additional costs would be capitalizable in
accordance with SFAS No. 86. No such costs
have been capitalized to date.
Research and Development Costs Research and development costs are expensed
as incurred.
Income Taxes The Predecessor uses the liability method of
accounting for income taxes in accordance
with SFAS No. 109, "Accounting for Income
Taxes.". Deferred income tax assets and
liabilities are recognized based on the
temporary differences between the financial
statement and income tax bases of assets,
liabilities and carryforwards using enacted
tax rates. Valuation allowances are
established, when necessary, to reduce
deferred tax assets to the amount expected
to be realized.
Concentration of Credit Risk The Predecessor derives revenues from
corporate customers in a variety of
industries. For the periods ended June 30,
1997 and December 3, 1997, no individual
customer accounted for more than 10% of
revenues.
F-23
<PAGE>
New Accounting Standards Effective January 1, 1996, the Predecessor
adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation".
Under this standard, companies are
encouraged, but not required, to adopt the
fair value method of accounting for employee
stock-based transactions. Under the fair
value method, compensation cost is measured
at the grant date based on the fair value of
the award and is recognized over the service
period, which is usually the vesting period.
Companies are permitted to continue to
account for employee stock-based
transactions under Accounting Principles
Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees," but are
required to disclose pro forma net income
and earnings per share as if the fair value
method has been adopted. The Predecessor has
elected to continue to account for
stock-based compensation under APB No. 25.
F-24
<PAGE>
Worlds Inc. - Predecessor
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Going Concern The accompanying financial statements have
been prepared on a going-concern basis,
which contemplates the realization of assets
and the satisfaction of liabilities in the
normal course of business. As shown in the
financial statements, the Predecessor, as of
December 3, 1997, had incurred recurring
losses since inception totaling $21,236,139.
As discussed in Note 2, on December 3, 1997,
the Predecessor consummated a merger
agreement with WAC, a company which had
completed a private placement offering of
securities whereby $4,415,000 of gross
proceeds was raised.
The Predecessor anticipates, however, that
it currently has only a portion of the funds
necessary to permit it to complete product
development and commercialization. There can
be no assurance that the Predecessor will be
able to obtain the substantial additional
capital resources necessary to permit the
Predecessor to pursue its business plan or
that any assumptions relating to its
business plan will prove to be accurate. WAC
is pursuing sources of additional financing
and there can be no assurance that any such
financing will be available to WAC on
commercially reasonable terms, or at all.
Any inability to obtain additional financing
will have a material adverse effect on the
Predecessor and WAC, including possibly
requiring the Predecessor or WAC to
significantly curtail or cease operations.
These factors raise substantial doubt about
the ability of the Predecessor to continue
as a going concern. The financial statements
do not include any adjustments that might
result from the outcome of this uncertainty.
F-25
<PAGE>
2. Merger On December 3, 1997, the Predecessor was
merged with and into Worlds Inc. (formerly
Worlds Acquisition Corp.) ("WAC") in a
series of related transactions which
included the simultaneous merger with and
into Academic Computer Systems, Inc., a New
Jersey corporation ("Academic") (the
"Mergers") and a private offering of WAC's
securities (the "Private Placement"). All of
the common and preferred stock of the
Predecessor were exchanged for 1,999,996
shares of WAC. WAC was incorporated in
Delaware on April 8, 1997 to engage 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 the Predecessor.
Academic was an inactive company with no
operations. Academic voluntarily reported
under the Securities Exchange Act of 1934
"Exchange Act"). The combined entity that
resulted from the Mergers (the "Combined
Entity") intends to continue reporting under
the Exchange Act. While no trading market
existed for the securities of Academic, or
currently exists for the securities of the
Combined Entity, the Combined Entity intends
to cause its common stock to be traded on
the Bulletin Board.
F-26
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Conditions And Results
Of Operations.
Statements contained herein which are not historical facts are forward-looking
statements. Forward-looking statements involve a number of risks and
uncertainties including, but not limited to, general economic conditions, the
Company's ability to complete development and then market its products and
competitive factors and other risk factors detailed in the Companys filings with
the Securities and Exchange Commission.
The following material and the financial statements included herein should be
read in conjunction with the Company's audited financial statements.
The Company was originally formed on May 20, 1968. Since 1975 the Company has
been inactive with no operations and its only income has come from interest and
dividends. Following a series of mergers in December 1997 (the "Mergers"), the
Company is engaged in the business and operations formerly conducted by Worlds
Inc., a Delaware corporation ("Predecessor"). Accordingly, a discussion and
analysis of the Company's financial condition and results of its operations
would be of limited import to any reader as it would only cover activities (or
lack thereof) which have no meaning in the context of the Company's current
operations. Thus, included herein is a discussion and analysis of the financial
condition and results of the operations of Predecessor's pre-Mergers operations.
Background
Predecessor was formed in April 1994 to design, develop and commercialize 3D
multi-user tools and technologies for the Internet market. From inception
through 1997, Predecessor's 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, Predecessor 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,
Predecessor introduced its first commercial toolset for developing 3D multi-user
applications. In the first quarter of 1997, after an unsuccessful effort to
raise capital, Predecessor became insolvent and released most of its personnel,
and management sought to sell Predecessor and/or its technology.
Predecessor has not generated significant revenues, and the Company will not
generate significant revenues, if ever, until after it successfully completes
development and market testing of Worlds Platinum and its 3D Internet music
sites, and attracts and retains a significant number of subscribers and/or
advertisers. 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 and/or advertisers to generate significant revenues or achieve
profitable operations or that its products and services will prove to be
commercially viable.
Predecessor (and now the Company), classified its expenses into three broad
groups: (i) research and development; (ii) cost of revenues; and (iii) selling,
general and administration. Revenues consisted primarily of production service
activities and sales of technology licenses.
Software development costs (consisting primarily of salaries and related
expenses) incurred prior to establishing technological feasibility are expensed
in accordance with Financial Accounting Standards Board (FASB) Statement No. 86.
In accordance with FASB 86, the Company will capitalize software development
costs at such time as the technological feasibility of the product has been
established.
1
<PAGE>
Plan of Operation
During the next twelve months of operation the Company intends to (i) refine and
commercialize the technology of Predecessor by producing interactive, 3D, music
related websites and distribute access to these web sites on enhanced compact
discs ("CD+") of various recording artists via traditional retail record
outlets, working in conjunction with major record labels, (ii) provide the
Company's proprietary 3D toolsets to aid programmers in the creation of unique
3D user experiences on the Internet, and (iii) offer the Company's 3D technology
for non-music applications such as corporate intranets.
The Company is presently completing work on Worlds Platinum, the latest version
of the Company's 3D internet software, to adapt it for distribution and use on
CD+ media. The Company is also in discussions with several major record labels
and companies for them to distribute Worlds Platinum, along with music related
web site access and graphics files co-authored by the Company and the particular
record label or company. While the Company foresees no particular obstacle to
completing work on Worlds Platinum, the development of software is inherently
fraught with unforeseen delays resulting from bugs, lack of coordination among
development staff, integration with other software and hardware, and general
design flaws, among other problems. In addition, the Company's strategy of
distributing its products on CD+ is wholly dependent upon obtaining distribution
agreements with record labels or companies. To date, the Company has no such
agreements and does not expect to have any until it can demonstrate that it has
successfully adapted Worlds Platinum for distribution on CD+ media as planned.
The Company currently has sufficient cash resources to meet the requirements of
its business plan over the next twelve months. The Company currently has 8
full-time employees and is working with eight independent software contractors
who were former employees of Predecessor. The Company does not anticipate hiring
more than 2-3 additional employees or purchasing additional plant or equipment
until product sales increase significantly and/or additional financing is
obtained.
By agreement dated as of June 25, 1998, the Company agreed, subject to
shareholder approval and other conditions, to merge into Unity First Acquisition
Corp. ("Unity"), a publicly traded blank check company with approximately
$6,000,000 in liquid assets, by exchanging each Company share of Common Stock
for .357 shares of Unity resulting in the Company's shareholders retaining
ownership of in excess of 75% of the merged entity (the "Unity Merger").
2
<PAGE>
Results of Operations of the Company
(Note to Results of Operations.
The Mergers with Predecessor occurred on December 3, 1997)
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
Statements of Operations
Worlds Inc. Worlds Inc. -
Predecessor
6/30/98 6/30/97
---------- ----------
Net Revenues 16,132 64,327
Costs & Expenses:
Cost of revenues (25,101) (27,629)
Selling, general & administrative (1,307,525) (1,800,488)
Research & development (534,428) (388,159)
---------- ----------
Operating Loss (1,850,922) (2,151,949)
---------- ----------
Other income (expense):
Interest income 76,992 10,344
Interest expense (72,112) (71,339)
Gain on disposal of equipment 4,070
Income from sale of technology 26,100
---------- ----------
Loss before taxes & extraordinary item (1,846,042) (1,948,774)
Income taxes (5,000)
---------- ----------
Loss before extraordinary item (1,846,042) (1,953,774)
Extraordinary item - gain on debt
settlement 151,654
---------- ----------
Net Loss (1,694,388) (1,953,774)
---------- ----------
In the first six months of 1998 the company continued the implementation of
the new business plan. Significant expenditure was incurred towards
completion of the Platinum technology and also with legal and professional
fees as the company proceeds with its fund raising activities. In the first
quarter of 1997 Predecessor was insolvent and had failed to raise any
additional capital. In January and February 1997 the majority of
Predecessor's personnel were released and most of its management team
resigned. Normal operations of Predecessor ceased and significant wind down
costs were incurred. The Seattle network operations center and Active
Worlds, an earlier generation of Predecessor's technology, were both sold,
resulting in net proceeds of $260,100
3
<PAGE>
Revenues are nominal and are derived from the company's WorldsChat product
and one custom production project. Revenue was $16,132 and had associated
direct costs of $25,101 for the six months ended June 30, 1998 compared to
$64,327 in revenue and $27,629 of direct costs for the same period in 1997.
Selling, general and administrative expenses were $1,307,525 for the six
months ended June 30, 1998. This represented a decrease of $492,963 from
$1,800,488 compared to the six months ended June 30, 1997. This decrease
was directly attributable to the higher costs associated with the
Predecessor ceasing normal operations in the first quarter of 1997.
Research and development costs increased by $146,269 to $534,428 for the
six months ended June 30, 1998 from $388,159 for the six months ended June
30, 1997. This increase is directly attributable to the company ceasing
development technology at the end of the first quarter of 1997.
Other income included $76,992 of interest income in the six months to June
30,1998 earned from the proceeds of the recent share offerings. Other
income in the six months to June 30, 1997 included interest income of
$10,344, the sale of the Activeworlds technology in the net amount of
$260,100 and a property disposal gain of $4,070. Other expenses included
interest expense of $72,112 directly attributable to the Predecessor's
notes payable in the six months to June 30, 1998. Interest expenses in the
six months to June 30, 1997 were $71,339.
As a result of the foregoing, plus a gain on debt settlement of $151,654
during the first quarter of 1998, Worlds Inc incurred a net loss of
$1,694,388 for the six months to June 30,1998, compared to a loss
$1,953,774 for the six months to June 30,1997 a decrease of 13%.
Three Months Ended June 30, 1998 Compared with 3 months Ended June 30, 1997
Statements of Operations
Worlds Inc. Worlds Inc. -
Predecessor
6/30/98 6/30/97
---------- --------
Net Revenues
12,130 24,342
Costs & Expenses:
Cost of revenues (22,500) (9,026)
Selling, general & administrative (759,185) (556,395)
Research & development (302,516) (76,595)
---------- --------
Operating Loss (1,072,071) (617,674)
---------- --------
Other income
(expense):
Interest income 35,054 431
Interest expense (35,656) (34,511)
Loss on disposal of equipment (2,085)
---------- --------
Loss before taxes (1,072,673) (653,839)
Income taxes -- (2,500)
---------- --------
Net Loss (1,072,673) (656,339)
---------- --------
4
<PAGE>
In the second quarter of 1998 the company continued the implementation of
the new business plan. Significant expenditure was incurred towards
completion of the Platinum technology.
Revenues are nominal and are derived from the company's WorldsChat product
and one custom production project. Revenue was $12,130 and had associated
direct costs of $22,500 for the three months ended June 30, 1998 compared
to $24,342 in revenue and $9,026 of direct costs for the same period in
1997.
Selling, general and administrative expenses were $759,185 for the three
months ended June 30, 1998. This represented a increase of $202,790 from
$556,395 compared to the three months ended June 30, 1997. This increase
was directly attributable to the Predecessor ceasing normal operations in
the first quarter of 1997.
Research and development costs increased by $225,921 to $302,516 for the
three months ended June 30, 1998 from $76,595 for the three months ended
June 30, 1998. This increase was directly attributable to the Predecessor
ceasing normal operations in the first quarter of 1997
Other income included $35,054 of interest income in the three months to
June 30,1998 earned from the proceeds of the recent share offerings. Other
income in the three months to June 30, 1997 included interest income of
$431. Interest expenses in the three months to June 30, 1998 were $35,656
directly attributable to the Predecessor's notes payable. Other expenses
included interest expense of $34,511 and a property disposal loss of $2,085
in the three months to June 30, 1997.
As a result of the foregoing Worlds Inc incurred a net loss of $1,072,673
for the three months to June 30,1998, compared to a loss $656,339 for the
three months to June 30,1997 a increase of 63%.
Liquidity and Capital Resources of the Company
Net cash used by the Company's operating activities from January 1,1998
through June 30, 1998 was $1,783,428. At June 30, 1998 the Company had
working capital of $1,765,197
The Company completed a public round of financing on June 16, 1998 raising
$1,832,000 of which it netted $1,715,800 and paid $64,743 to dissenting
shareholders of the Mergers resulting in 113,465 shares being added to
treasury.
The Company's capital requirements relating to the development and
commercialization of Worlds Platinum have been and will continue to be
significant. The Company is dependent on the proceeds of Unity resulting
from the Unity Merger and other future financings in order to develop and
commercialize its proposed products.
5
<PAGE>
The Company anticipates, based on currently proposed business plans and
assumptions relating to its operations (including the timetable of, and
costs associated with, product development and commercialization), that the
proceeds of its recent offering, will provide only a portion of the funds
necessary to permit the Company to complete product development and
commercialization. Satisfactory completion of product development and
commercialization will require capital resources substantially greater than
the proceeds of its recent offering or otherwise currently available to the
Company.
While the Company hopes to raise an additional $6 million from the Unity
Merger, the Company has no current arrangements with respect to, or sources
of, additional financing and there can be no assurance that any such
financing will be available to the Company on commercially reasonable
terms, or at all. Any inability to obtain additional financing will have a
material adverse effect on the Company, including possibly requiring the
Company to significantly curtail operations. Based upon its current
projections, the Company believes it currently has sufficient funds to
operate for the next twelve months and at least two years following the
Unity Merger.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) A financial data schedule is filed herewith as an exhibit.
(b) No reports on Form 8-K were filed during the quarter for which this
report is being filed.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned thereto duly
authorized.
Date: August 12, 1998
WORLDS INC.
By: ________________________
Thomas Kidrin,
President, CEO and Treasurer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF WORLDS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,419,518
<SECURITIES> 0
<RECEIVABLES> 140,318
<ALLOWANCES> (140,318)
<INVENTORY> 0
<CURRENT-ASSETS> 3,453,805
<PP&E> 650,557
<DEPRECIATION> (534,688)
<TOTAL-ASSETS> 3,569,674
<CURRENT-LIABILITIES> 1,688,608
<BONDS> 0
0
0
<COMMON> 17,982
<OTHER-SE> (43,582)
<TOTAL-LIABILITY-AND-EQUITY> 3,569,674
<SALES> 16,132
<TOTAL-REVENUES> 16,132
<CGS> 25,101
<TOTAL-COSTS> 25,101
<OTHER-EXPENSES> 1,841,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,112
<INCOME-PRETAX> (1,846,042)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,846,042)
<DISCONTINUED> 0
<EXTRAORDINARY> 151,654
<CHANGES> 0
<NET-INCOME> (1,694,388)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
