U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Act
- ---- of 1934
For the quarterly period ended September 30, 1999
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________________ to ______________________
Commission File number 2-31876
WORLDS INC.
------------
(Exact Name of Small Business Issuer as Specified in its Charter)
New Jersey 22-184316
------------------------------ ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15 Union Wharf, Boston, Massachusetts 0210
------------------------------------------
(Address of Principal Executive Offices)
(617) 725-8900
---------------------------------------------
(Issuer's Telephone Number Including Area Code)
-------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No _____.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At November 12, 1999,
Issuer had outstanding 17,636,631 shares of Common Stock.
<PAGE>
INDEX
Page
----
PART I: FINANCIAL INFORMATION..................................................3
Item 1. Financial Statements..............................................3
Balance Sheets (unaudited) at September 30, 1999 and
December 31, 1998.................................................4
Statements of Operations (unaudited) for the three months
ended September 30, 1999 and September 30, 1998 and for
the nine months ended September 30, 1999 and September
30, 1998 and cumulative period from April 8, 1997 to
September 30, 1999................................................5
Statements of Stockholders' Equity (Deficit) from
April 8, 1997 to September 30, 1999...............................6
Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1999 and September 30, 1998 and
cumulative period from April 8, 1997 to September 30, 1999........7
Summary of Accounting Policies....................................8
Notes to Financial Statements (unaudited)........................13
Item 2. Management's Discussion and Analysis or Plan of Operations.......17
PART II. OTHER INFORMATION ...................................................24
Item 2. Sale of Unregistered Securities..................................24
Item 6. Exhibits and Reports on Form 8-K.................................26
SIGNATURES....................................................................27
2
<PAGE>
PART I : FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLDS INC., doing business as WORLDS.COM
(A DEVELOPMENT STAGE
ENTERPRISE)
================================================================================
FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 1998 AND 1999
3
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
================================================================================
<TABLE>
December 31,
1998 September 30, 1999
------------------------------------------------------------------ --------------------------- ----------------------
ASSETS (unaudited)
CURRENT:
<S> <C> <C>
Cash and cash equivalents $ 1,581,764 $ 2,044,722
Accounts receivable - 106,355
Prepaid expenses and other current assets 53,486 32,229
Inventory 58,516 162,556
------------------------------------------------------------------ --------------------------- ----------------------
TOTAL CURRENT ASSETS 1,693,766 2,345,862
PROPERTY, EQUIPMENT AND SOFTWARE DEVELOPMENT COSTS, NET OF
ACCUMULATED DEPRECIATION AND AMORTIZATION 214,246 651,176
OTHER ASSETS (NOTE 5) - 703,095
------------------------------------------------------------------ --------------------------- ----------------------
$ 1,908,012 $ 3,700,133
------------------------------------------------------------------ --------------------------- ----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT:
Accounts payable $ 319,906 $ 107,721
Accrued expenses 446,333 831,351
Current maturities of notes payable 246,648 269,148
------------------------------------------------------------------ --------------------------- ----------------------
TOTAL CURRENT LIABILITIES 1,012,887 1,208,220
LONG-TERM PORTION, NOTES PAYABLE 1,875,018 1,852,518
------------------------------------------------------------------ --------------------------- ----------------------
TOTAL LIABILITIES 2,887,905 3,060,738
------------------------------------------------------------------ --------------------------- ----------------------
CONTINGENCIES (NOTE 4)
STOCKHOLDERS' EQUITY (DEFICIT) (NOTES 2 AND 3):
Common stock, $.001 par value - shares authorized 30,000,000;
outstanding 18,031,996 and 17,542,281 18,032 17,542
Additional paid-in capital 8,401,970 12,801,091
Deficit accumulated during the development stage (9,335,152) (12,179,238)
------------------------------------------------------------------ --------------------------- ----------------------
(915,150) 639,395
Treasury stock, at cost, 113,465 shares in 1998 (Notes 2 and
4) (64,743) --
------------------------------------------------------------------ --------------------------- ----------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (979,893) 639,395
------------------------------------------------------------------ --------------------------- ----------------------
$ 1,908,012 $ 3,700,133
------------------------------------------------------------------ --------------------------- ----------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS (UNAUDITED)
===============================================================================
<TABLE>
Cumulative
period from
Three months ended Nine months ended April 8, 1997
September 30, September 30, (inception) to
---------------------- ---------------------------- September 30,
1998 1999 1998 1999 1999 (a)
--------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
NET REVENUES $ - $ 148,682 $ 16,132 $ 241,607 $ 272,137
COSTS AND EXPENSES:
Cost of revenues - (98,428) (25,101) (168,783) (198,062)
Selling, general and administrative (683,969) (962,228) (1,991,494) (2,852,723) (6,178,456)
Research and development (353,504) - (887,932) - (992,932)
Acquired research and development - - - - (6,135,538)
--------- ------------ ------------ ------------ -------------
OPERATING LOSS (1,037,473) (911,974) (2,888,395) (2,779,899) (13,232,851)
OTHER INCOME (EXPENSES):
Gain resulting from reversal of
certain predecessor liabilities - - - - 810,140
Interest income 37,825 20,053 114,817 38,019 175,618
Interest expense (35,656) (33,284) (107,768) (102,206) (230,468)
--------- ------------ ------------ ------------ -------------
LOSS BEFORE EXTRAORDINARY ITEM (1,035,304) (925,205) (2,881,346) (2,844,086) (12,477,561)
EXTRAORDINARY ITEM - GAIN ON DEBT SETTLEMENT 20,893 - 172,547 - 298,323
--------- ------------ ------------ ------------ -------------
NET LOSS $(1,014,411) $ (925,205) $ (2,708,799) $ (2,844,086) $(12,179,238)
=========== ============ ============ ============ ============
LOSS PER SHARE (BASIC AND DILUTED):
Loss before extraordinary item $ (.06) $ (0.06) $ (.17) $ (0.16)
Extraordinary item - - .01 -
----------- ------------ ------------ ------------
NET LOSS PER SHARE (BASIC AND DILUTED) $ (.06) $ (0.06) $ (.16) $ (0.16)
=========== ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 17,868,531 16,083,709 16,917,657 17,300,203
=========== ============ ============ ===========
</TABLE>
- --------------
(a) Includes the results of Predecessor and Academic (from December 4, 1997)
which were merged into the Company on December 3, 1997.
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
PERIOD FROM APRIL 8, 1997 (INCEPTION) TO SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
Deficit
accumulated Total
Common stock Additional during the Treasury Stockholders'
----------------------- paid-in development (equity)
Shares Amount capital Stage Stock (deficit)
------------ ---------- -------------- ---------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 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
Sale of shares in public offering
of common stock, net (June 1998) 1,832,000 1,832 1,713,968 - - 1,715,800
Conversion of 113,465 shares to
certain stockholders (June 1998) - - - - (64,743) (64,743)
Conversion of employee stock
options into shares (October
1998) 50,000 50 (50) - - -
Net loss for the year ended
December 31, 1998 - - - (2,648,681) - (2,648,681)
---------- -------- ----------- ------------- --------- ------------
BALANCE, DECEMBER 31, 1998 18,031,996 18,032 8,401,970 (9,335,152) (64,743) (979,893)
Issuance of warrants for consulting
services (April 1999) - - 465,000 - - 465,000
Contribution of 1,500,000 shares by
founders to treasury (April 1999) - - - - - -
Exercise of stock options
(April 1999) 75,000 75 74,925 - - 75,000
Issuance of shares for content
supply agreement (June 1999) 93,750 93 374,907 - - 375,000
Issuance of shares to agent for
supply agreement (July 1999) 50,000 50 199,950 - - 200,000
Sale of shares in private offering
memorandum, net (June through
September 1999) 885,000 885 3,263,089 - - 3,263,974
Issuance of options for consulting
services (August and
September 1999) - - 4,400 - - 4,400
Issuance of shares for legal and
consulting services (September
1999) 20,000 20 79,980 - - 80,000
Cancellation of treasury shares
(September 1999) (1,613,465) (1,613) (63,130) - 64,743 -
Net loss for the nine months ended
September 30, 1999 (unaudited) - - - (2,844,086) - (2,844,086)
---------- -------- ----------- ------------ --------- ----------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED) 17,542,281 $17,542 $12,801,091 $(12,179,238) $ - $ 639,395
========== ======== =========== ============ ========= ===========
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================
<TABLE>
Cumulative
period from
April 8, 1997
Nine months ended September 30, (inception) to
------------------------------- September 30,
1998 1999 1999
------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (2,708,799) $ (2,844,086) $(12,179,238)
------------- ------------ ------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on disposal of fixed assets - - 54,041
Depreciation and amortization 136,012 160,113 306,188
Gain resulting from reversal of certain
predecessor liabilities - - (810,140)
Gain on debt settlement (172,547) - (298,323)
Acquired research and development - - 6,135,538
Issuance of warrants for consulting services - 465,000 465,000
Issuance of options for consulting services - 4,400 4,400
Issuance of shares for legal and consulting
services - 80,000 80,000
Changes in operating assets and liabilities, net
of effects from merger with Predecessor and
Academic:
Trade receivable 538 (106,355) (106,355)
Inventory - (104,040) (162,556)
Prepaid expenses and other assets 29,403 (106,838) 7,567
Accounts payable and accrued expenses (10,306) 172,833 539,023
------------- ------------ -------------
TOTAL ADJUSTMENTS (16,900) 565,113 6,214,383
------------- ------------ -------------
NET CASH USED IN OPERATING ACTIVITIES (2,725,699) (2,278,973) (5,964,855)
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (14,590) (23,178) (51,765)
Additions to software development costs - (573,865) (733,865)
------------- ------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (14,590) (597,043) (785,630)
------------- ------------ -------------
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 3,263,974 6,985,150
Proceeds from exercise of options - 75,000 75,000
Proceeds from sale of common stock in public offering 1,715,800 - 1,715,800
Payment of conversion price of shares to certain
stockholders (64,743) - (64,743)
Payments on note payable (116,000) - (120,000)
------------- ------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,561,557 3,338,974 8,795,207
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,178,732) 462,958 2,044,722
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,541,829 1,581,764 -
------------- ------------ -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,363,097 $ 2,044,722 $ 2,044,722
============= ============ =============
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
WORLDS.COM
(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. The Company is doing business as Worlds.com.
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
utilizing 3D technologies developed by Predecessor.
Basis of The accompanying financial statements are unaudited;
Presentation 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, 1998 and for the Predecessor for the
period ended December 3, 1997.
8
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
SUMMARY OF ACCOUNTING POLICIES
================================================================================
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 instruments, including
Financial cash and short-term debt, approximated fair value as of
Instruments September 30, 1999 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
September 30 1999, 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 Cash and cash equivalents are comprised of highly liquid
Equivalents money market instruments, which have original maturities of
three months or less at the time of purchase.
Property and Property and equipment are stated at cost. Depreciation is
Equipment calculated using the straight-line method over the estimated
useful lives of the assets, which range from two to five
years.
9
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
SUMMARY OF ACCOUNTING POLICIES
================================================================================
Revenue Revenue from technology development and licensing contracts
Recognition 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.
Inventory Inventory consists of merchandise held for resale and is
valued at the lower of cost or market on a first-in,
first-out (FIFO) basis.
Software In accordance with the provisions of SFAS No. 86,
Development Cost "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed", software development costs
incurred by the Company subsequent to establishing
technological feasibility of the resulting product or
enhancement and until the product is available for general
release to customers are capitalized and carried at the
lower of unamortized cost or net realizable value. Net
realizable value is determined based on estimates of future
revenues to be derived from the sale of the software product
reduced by the costs of completion and disposing of the
product. During the fourth quarter of 1998, technological
feasibility of the Company's software was established. In
this regard, $160,000 was capitalized and included in
property, equipment and software development as of December
31, 1998. During the nine months ended September 30, 1999, a
further $574,000 was capitalized in this regard.
Amortization of the costs capitalized commenced in the first
quarter of 1999, based on current and anticipated future
revenues for each product or enhancement with an annual
minimum equal to straight-line amortization over the
remaining estimated economic life of the product or
enhancement.
Research and Research and development costs are expensed as incurred.
Development Costs
10
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
SUMMARY OF ACCOUNTING POLICIES
================================================================================
Income Taxes 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.
Loss Per Share In 1997, the Financial Accounting Standards Board's ("FASB")
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 In October 1995, the FASB issued SFAS No. 123, "Accounting
Compensation for Stock-Based Compensation". 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", 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.
11
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
SUMMARY OF ACCOUNTING POLICIES
================================================================================
Comprehensive Effective January 1, 1998, the Company adopted SFAS No. 130,
Income "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.
12
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. Going Concern As discussed in Notes 2 and 3, the Company completed a
private placement during the fourth quarter of 1997 raising
gross proceeds of $4,415,000, consummated a merger agreement
during December 1997 with a development stage enterprise,
Predecessor, completed a public offering in June 1998
raising gross proceeds of $1,832,000, and completed a
private placement during the third quarter of 1999, raising
gross proceeds of $3,540,000. 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.
13
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
===============================================================================
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.
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 had been classified as treasury stock and
were cancelled during the third quarter of 1999.
While no trading market existed for the securities of
Academic, the Company's common stock is traded on the
Bulletin Board.
14
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
===============================================================================
3. Private The Private Placement called for WAC to offer for sale a
Placements maximum of 50 units (57-1/2 with the over-allotment), each
and Public consisting of 120,000 shares of WAC's common stock (the
Offering "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.
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 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.
During the second and third quarters of 1999, the Company
sold 885,000 shares in a private offering and received gross
proceeds of $3,540,000. Broker-dealers assisting the
Company in the sale of its securities were issued warrants
to purchase 48,000 shares of common stock of the Company.
Net proceeds, after commissions and expenses of this
offering, aggregated $3,263,974.
15
<PAGE>
WORLDS.COM
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
===============================================================================
4. Contingencies On March 23, 1999, the Company entered into a three-year
financial advisory and consulting agreement (that became
effective during April 1999) with a consulting firm
controlled by the Company's Chairman that provides for an
annual fee of $120,000, escalating to $300,000 annually if
the Company raises $5 million in cash and the market value
of the Company's issued and outstanding common stock is no
less than $100 million. In addition, the Company granted
warrants to such firm to purchase 1,000,000 shares of common
stock at $.50 per share. Such warrants were valued at
$465,000 and charged to selling, general and administrative
expenses in the quarter ended June 30, 1999. The warrants
are exercisable through April 13, 2006 and contain
anti-dilution provisions and both "demand" and "piggy-back"
registration rights.
Further, in connection with the above consulting agreement,
three founding stockholders of WAC contributed 1,500,000
shares to the capital of the Company. Such shares had been
classified as treasury stock and were cancelled during the
third quarter of 1999.
5. Content Supply During June 1999, the Company entered into a content supply
Agreement agreement for a 3D internet site offered by an Internet
service provider (the "Provider"). Under the terms of the
agreement, the Company paid $125,000 and issued 93,750
shares of common stock upon signing (included in other
assets aggregating $500,000). The brokerage agent of such
agreement was issued 50,000 sshares of common stock during
July 1999 ($200,000). A further $125,000 was paid and
93,750 shares were issued during November 1999 upon
launch of the site.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION OR PLAN OF
OPERATION.
Forward-Looking Statements
When used in this Form 10-QSB and in future filings by the Company with
the Commission, the words or phrases "will likely result," "management expects"
or "the Company expects," "will continue," "is anticipated," "estimated" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Readers are
cautioned not to place undue reliance on any such forward-looking statements,
each of which speak only as of the date made. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company has no obligation to publicly release the result of any
revisions which may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
The following discussion should be read in conjunction with the
financial statements and related notes which are included under Item 1.
Statements made below 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, our
ability to complete development and then market our products, competitive
factors and other risk factors as stated in other of our public filings with the
Securities and Exchange Commission.
Background
Our 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, our predecessor's operations were limited and consisted
primarily of start-up activities, including recruiting personnel, raising
capital, custom production work, and research and development. In the third
quarter of 1996, our 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. These sales were nominal. In October 1996, our
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, our predecessor became insolvent and terminated most of its
personnel, and management sought to sell the Company and/or its technology. Our
predecessor did not generate significant revenues.
While we have completed development and market testing of our base
technology and have introduced our first Internet sites, we will not generate
significant revenues until after we successfully attract and retain a
significant number of paying community members, sponsors, advertisers and e-
commerce customers. We anticipate continuing to incur significant losses until,
at the earliest, we generate sufficient revenues to offset the substantial
up-front expenditures and operating costs associated with developing and further
commercializing our proposed products. There can be no assurance that we will be
able to attract and retain a sufficient number of paying subscribers and
advertisers to generate significant revenues or achieve profitable operations or
that our products and services will prove to be commercially viable.
We classify our expenses into three broad groups: (1) research and
development; (2) cost of revenues; and (3) selling, general and administration.
Historical revenues prior to 1998 were generated primarily through production
service activities and sales of technology licenses. Current revenues are
17
<PAGE>
generated primarily through VIP membership sign-ups and e-commerce sales from
our online recording artist merchandise stores.
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, we will capitalize software
development costs at such time as the technological feasibility of the product
has been established. We began capitalizing our software costs in the fourth
quarter of 1998 with the commercial release of three products, AnimalHouse.com,
BowieWorld and Worlds Ultimate 3D Chat. For the first nine months of 1999,
approximately $574,000 of such expenditures were capitalized.
Plan of Operation
During the fourth quarter of 1998, we completed the development of our
Gamma development tool kit. This technology is the foundation of our existing
and planned product offerings. To date, we have introduced six products based on
this technology:
o Our first product release was AnimalHouse.com, a 3D environment
created for Universal/Hyundai, targeting the college market. Our 3D technology
is encoded on an enhanced CD with audio tracks of 10 Universal musical artists
and distributed to college students through a variety of Universal distribution
outlets. Our agreement with Universal called for the manufacture and
distribution by Universal of up to 1,000,000 CDs.
o Our second product release was for David Bowie's BowieNet, the first
artist created ISP, or Internet service provider. Our product is named
BowieWorlds and has been released in the US as well as the U.K. by UltraStar
Internet Services LLP, the owners of BowieNet.
o Our third product release was Worlds Ultimate 3D Chat which is being
primarily marketed via our web site, Worlds.com, and our e-commerce site,
WorldsStore.com. Worlds Ultimate 3D Chat is built on our Gamma platform and
incorporates e-commerce, voice-to-voice chat, articulated, customizable avatars
(personification of the on-line user) and video and audio streaming. We also
reached an agreement with BowieNet, to have Worlds Ultimate 3D Chat software
distributed on CD- ROM to BowieNet members.
o Our fourth product release was made pursuant to our agreement with
Hansonopoly Inc. in May, 1999. We integrated our 3D technology on a CD+ that was
distributed in June and July 1999 to members of the Hanson fan club.
o Our fifth product release was made in October 1999. We created and
host NYYankeesWorld.com, the first 3D virtual reality world to be created for a
major sports team.
o Our sixth product release was made in October 1999. We created and
packaged more than 700,000 enhanced CDs containing our Worlds Ultimate 3D Chat
software with the November 1999 issue of GQ.
We have also been actively pursuing strategic alliances with a number
of companies that can provide exposure and distribution of our products and
technology. We recently entered into agreements with three major companies in
the Internet arena. These companies are:
18
<PAGE>
o Excite, the number three portal site on the Internet. We provide
Excite with select e-commerce content;
o Road Runner, the high-speed online service owned by Time Warner,
MediaOne Group, Microsoft, Compaq Computers and Advance/ Newhouse. We provide
Road Runner with a co-branded 3D environment accessible by Road Runner
subscribers through its music channel; and
o Freeserve, the leading Internet service provider in the United
Kingdom. We provide Freeserve with co-branded 2D and 3D interactive chat
environments accessible by Freeserve subscribers.
We currently have eleven full-time employees and are working with six
independent software contractors who were former employees of our predecessor.
We do not anticipate hiring additional employees or purchasing additional plant
or equipment other than that needed on a day-to-day basis until product sales
increase significantly and/or additional financing is obtained.
In June and August 1999, we consummated two tranches of a private
placement, selling an aggregate of 59 units. Each unit cost $60,000 and
consisted of 15,000 shares of common stock and warrants to purchase 7,500 shares
of common stock. At September 30, 1999, we had raised gross proceeds of
$3,540,000 in the private placement.
Results of Our Operations
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998
The following data extracted from the attached unaudited financial
statements compares the results of our operations for the nine months ended
September 30, 1999 to the nine months ended September 30, 1998.
Nine months ended September 30,
--------------------------------
(Unaudited)
1999 1998
---- ----
Net Revenue ............................. $ 241,607 $ 16,132
Costs & Expenses:
Cost of revenues .................. ( 168,783) ( 25,101)
Selling, general & administrative.. (2,852,723) (1,991,434)
Research & development............. - ( 887,932)
Operating Loss.......................... $ (2,779,899) $ (2,888,395)
Other Income (Expense):
Interest Income................... 38,019 114,817
Interest expense.................. ( 102,206) ( 107,768)
Loss before extraordinary item.......... (2,844,086) 2,881,346
Extraordinary item-- gain on debt settlement. - 172,547
Net Loss............................... $ (2,844,086) $ (2,708,799)
In the first nine months of 1999, we continued to upgrade our core
technology and began production on new projects in anticipation of reaching
19
<PAGE>
agreements with other entities with whom we are in negotiation. No assurance can
be given that any negotiations will lead to the consummation of any additional
agreements. In the first nine months of 1999, we continued the implementation of
our new business plan. Significant expenditure was incurred towards completion
of the Gamma technology and also with legal and professional fees.
Revenues are nominal and are derived primarily from Worlds sales from
our 33 e-commerce web sites that currently operate artists and artist-related
merchandise stores, such as DavidBowieStore.com, RickyMartinStore.com,
U2Store.com, EltonJohnStore.com, BruceSpringsteenStore.com and others. In
addition, Worlds reasized revenue from its VIP subscription services on Worlds
Ultimate 3-D Chat, Freeserve and Roadrunner. Nominal revenue was realized from
licensing royalties for Worlds technology from third party licensces. Revenue
was $241,607 and had associated direct costs of $168,783 for the nine months
ended September 30, 1999, compared to $16,132 in revenue and $25,101 of direct
costs for the same period in 1998.
Selling, general and administrative expenses were $2,852,723 for the
nine months ended September 30, 1999. This represented an increase of $861,229
from $1,991,494 compared to the nine months ended September 30, 1998. This
increase was directly attributable to the higher costs associated with
maintaining our new-commerce site, retaining expert software developers to
improve and upgrade our existing products.
We incurred no research and development costs during the nine months
ended September 30, 1999 as compared to $887,932 for the nine months ended
September 30, 1998. This is directly attributable to the fact that since our
technology is now technologically feasible, (i.e., it works), all expenses for
research and development are now capitalized. For the first nine months of 1999,
$573,865 of such expenditures were capitalized.
Other income included $38,019 of interest income in the nine months to
September 30, 1999 earned from the remainder of the proceeds of our share
offerings as compared to $114,817 in the nine months ended September 30, 1998.
Other expenses included interest expense of $102,206 directly attributable to
our predecessor's notes payable in the nine months to September 30, 1999.
Interest expense in the nine months to September 30, 1998 was $107,768.
As a result of the foregoing we incurred a net loss of $2,844,086 for
the nine months ended September 30, 1999, compared to a loss of $2,708,799 for
the nine months ended September 30, 1998, an increase of $135,287. The loss in
the 1998 period was after an extraordinary gain of $172,547.
Three Months Ended September 30, 1999 Compared with Three Months Ended September
30, 1998
Three Months Ended
------------------------------
9/30/99 9/30/98
------- -------
Net Revenue ............................ $ 148,682 $ --
Costs & Expenses:
Cost of revenues .................. ( 98,428) --
Selling, general & administrative.. (962,228) (683,969)
Research & development............. - (353,504)
Operating Loss.......................... $ (911,974) $ (1,037,473)
Other Income (Expense):
Interest Income.................... 20,053 37,825
Interest expense................... (33,284) (35,656)
Loss before extraordinary item.......... (925,205) (1,035,304)
Extraordinary Item-- gain on debt settlement. - 20,893
Net Loss................................ $ (925,205) $ 1,014,411
20
<PAGE>
Revenues are nominal and are derived primarily from Worlds sales from
our 33 e-commerce web sites that currently operate artists and artist-related
merchandise stores, such as DavidBowieStore.com, RickyMartinStore.com,
U2Store.com, EltonJohnStore.com, BruceSpringsteenStore.com and others. In
addition, Worlds reasized revenue from its VIP subscription services on Worlds
Ultimate 3-D Chat, Freeserve and Roadrunner. Nominal revenue was realized from
licensing royalties for Worlds technology from third party licensces. Revenue
was $148,682 and had associated direct costs of $98,428 for the three months
ended September 30, 1999, compared to none in revenue and none of direct costs
for the same period in 1998.
Selling, general and administrative expenses were $962,228 for the
three months ended September 30, 1999. This represented an increase of $278,259
from $683,969 compared to the three months ended September 30, 1998. This
increase was directly attributable to the higher costs associated with
maintaining our new e-commerce site, retaining expert software developers to
improve and upgrade our existing products and costs involved in beginning work
on some of the new projects discussed above.
We incurred no research and development costs during the three months
ended September 30, 1999 as compared to $353,504 for the three months ended
September 30, 1998. This decrease is directly attributable to the fact that
since our technology is now technologically feasible, i.e., it works, all
expenses previously charged to research and development are capitalized. For the
first quarter of 1999, $214,000 for the second and third quarters $225,000 and
$135,000, respectively of such expenditures were capitalized.
Other income included $20,053 of interest income in the three months to
September 30, 1999 earned from the remainder of the proceeds of our share
offerings as compared to $37,825 in the three months ended September 30, 1998.
Other expenses included interest expense of $33,284 directly attributable to the
Predecessor's notes payable in the three months to September 30, 1999. Interest
expense in the three months to September 30, 1998 was $35,656.
As a result of the foregoing we incurred a net loss of $925,205 for the
three months ended September 30, 1999, compared to a loss of $1,014,411 for the
three months ended September 30, 1998, an decrease of $89,206. The loss in the
1998 period was after an extraordinary gain of $20,893.
See Statement of Operations on Page 5.
Liquidity and Capital Resources of the Company
Net cash provided from financing activities, net of operating and
investing activities from January 1, 1999 through September 30, 1999 was
$462,958. At September 30, 1999, we had working capital of $1,137,642 and cash
and cash equivalents in the amount of $2,044,722.
On December 3, 1997, the Mergers were deemed to close as well as the
first round of a private placement of our common stock raising gross proceeds of
$3.8 million, by selling 3.8 million shares, of which we netted approximately
$3,000,000. We also acquired approximately an additional $560,000 from one of
the other parties to the mergers. In addition, as a result of the Mergers by
operation of law, we assumed predecessor's then liabilities of approximately
$4.6 million, the majority of which has since been paid or renegotiated. At
September 30, 1999, our total liabilities were approximately $3,061,000 million,
including the long term portion of notes payable of $1,852,000.
21
<PAGE>
Prior to the Mergers, we had 910,000 shares outstanding. Effective
December 31, 1997, we closed on an additional $585,000 of gross proceeds from
the private offering, of which we netted $529,000, and issued an additional
585,000 shares of common stock and on January 2, 1998 received an additional
$30,000, of which we netted $26,500, and issued an additional 30,000 shares. In
June 1998, we closed on a secondary offering of $1,832,000 gross proceeds, of
which we netted $1,715,800 by selling 1,832,000 shares at $1.00 per share.
In June and August 1999, we consummated two tranches of a private
placement, selling an aggregate of 59 units. Each unit cost $60,000 and
consisted of 15,000 shares of common stock and warrants to purchase 7,500 shares
of common stock. At September 30, 1999, we had raised gross proceeds of
$3,540,000.
Our capital requirements relating to the commercialization of our
technology and the development of our web sites and related content have been
and will continue to be significant. Satisfactory completion of product
development and commercialization will require capital resources substantially
greater than what we have now currently available to us. During the periods that
we experience net losses, we expect to be dependent upon sales of our capital
stock and debt securities to finance our working capital requirements. Based
upon our current plans and assumptions relating to our business plan, we
anticipate that our existing capital resources will satisfy our capital
requirements through at least March 2000. However, if our plans change or our
assumptions prove to be inaccurate, we may need to seek additional financing
sooner than currently anticipated or curtail our operations. Accordingly, we
will need to raise additional capital during 2000, which may be in the form of
equity or debt financing. Any issuance of equity securities would dilute the
interest of our shareholders. Additionally, if we incur debt, our company will
become subject to risks that interest rates may fluctuate and cash flow may be
insufficient to pay the principal and interest on any such debt. While we hope
to raise additional financing, we have no current arrangements with respect to,
or sources of, additional financing and there can be no assurance that any such
financing, particularly the significant amounts of financing that would be
required, will be available to us on commercially reasonable terms, or at all.
Any inability to obtain additional financing will have a material adverse effect
on our business, including possibly requiring us to significantly curtail or
cease operations.
Effect of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the
22
<PAGE>
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The
Company does not presently enter into any transactions involving derivative
financial instruments and, accordingly, does not anticipate the new standard
will have any effect on its financial statements.
Year 2000 Disclosure
We are Year 2000 compliant and we do not anticipate any internal
problems. In the event any internal problems should arise, we have many expert
computer technicians on our payroll and we believe that we will be able to
satisfactorily address any such problems. However, we are dependent on the
integrity of the Internet being maintained to derive income from the sale of
merchandise on our own e-commerce site and through links to the products we
create. We have employed a redundancy system as a safeguard to protect the
viability of our site by having our site hosted by two of the larger Internet
Service Providers. Thus, in the event one of our hosts should fail, we could
continue uninterrupted on the other Internet Service Provider. We have been
advised that our hosts are addressing the Year 2000 issue and hope to be
compliant. We use Wells Fargo to process our e-mail transactions. Wells Fargo
processes a significant portion of all Internet e-commerce transactions and if
it fails due to Year 2000 problems we will be negatively impacted, but not
likely more than many other e-commerce vendors. In summary, we are totally
dependent upon third parties for hosting and processing our e-commerce
activities and while we cannot control the actions of these third parties, we
believe that given our redundant safeguards, the availability of other hosts and
processors to switch to in the event our current hosts and/or processor crashes
and the fact that we only see nominal revenue from our e-commerce at this time,
we do not believe that our profitability or operations will be materially
affected by the Year 2000 problem.
23
<PAGE>
PART II: OTHER INFORMATION
ITEM 2: SALES OF UNREGISTERED SECURITIES
<TABLE>
<CAPTION>
Consideration
received and
description of
Underwriting or other Exemption If option, warrant or
discounts to market from convertible security,
Date of Number price offered to registration terms of exercise or
Sale Title of Security Sold Purchasers claimed conversions
-------- ----------------- ------ ---------------------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
6/25/99 Units: Each unit 41 $60,000 per unit in 4(2) Warrant underlying
consisting 15,000 connection with private Units Exercisable until
shares of Common placement 6/30/02 at an exercise
Stock and warrants price of $5.00 per
to purchase 7,500 share.
shares of Common
Stock
6/25/99 Common Stock 93,750 Issued in connection 4(2) N/A
with agreement with
Internet service provider
7/28/99 Common Stock 50,000 Issued to brokerage 4(2) N/A
agent for services in
connection with agreement
with Internet service
provider
8/10/99 Common Stock 120,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3
1997 Stock Option on 9/3/01 and 1/3 on
Plan; no cash 9/3/02. Exercisable for
consideration received five years from date of
by Company until grant at an exercise
exercise price of $2.46 per
share.
8/10/99 Common Stock 345,000 Options granted under 4(2) Vest monthly based
1997 Stock Option upon number of hours
Plan; no cash worked. Exercisable for
consideration received five years from date of
by Company until grant at an exercise
exercise price of $2.46 per
share.
9/3/99 Common Stock 274,500 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3
1997 Stock Option on 9/3/01 and 1/3 on
Plan; no cash 9/3/02. Exercisable for
consideration five years from date of
received by Company grant at an exercise
until exercise price of $4.00 per
share.
9/3/99 Common Stock 50,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3
1997 Stock Option on 9/3/01; 1/3 on
Plan; no cash 9/3/02. Exercisable for
consideration received five years from date of
by Company until grant at an exercise
exercise price of $7.50 per
share.
9/3/99 Common Stock 50,000 Options granted under 4(2) Vest 1/3 on 9/3/00; 1/3
1997 Stock Option on 9/3/01; 1/3 on
Plan; no cash 9/3/02. Exercisable for
consideration received five years from date of
by Company until grant at an exercise
exercise price of $10.00 per
share.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Consideration
received and
description of
Underwriting or other Exemption If option, warrant or
discounts to market from convertible security,
Date of Number price offered to registration terms of exercise or
Sale Title of Security Sold Purchasers claimed conversions
-------- ----------------- ------ ---------------------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
6/26/99- Units: Each unit 18 $60,000 per unit in 4(2) Warrants underlying
9/13/99 consisting 15,000 connection with private Units exercisable until
shares of Common placement 6/30/02 at an exercise
Stock and warrants price of $5.00 per
to purchase 7,500 share.
shares of Common
Stock
6/26/99- Units: Each unit 11/3 Issued to professionals 4(2) Warrants underlying
9/13/99 consisting 15,000 and consultants for Units exercisable until
shares of Common services rendered in 6/30/02 at an exercise
Stock and warrants connection with private price of $5.00 per
to purchase 7,500 placement share.
shares of Common
Stock
6/26/99- Warrants to 48,000 Issued to broker- 4(2) Exercisable until
9/13/99 purchase Common dealers in consideration 6/30/02 at an exercise
Stock for selling Units in price of $5.00 per
private placement share.
- ------------------- -------------------- ------------ ------------------------ -------------- -----------------------
</TABLE>
25
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (9/30/99)
(b) Reports on Form 8-K
None
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORLDS INC.
-----------
(Registrant)
Dated: November 19, 1999 By: /s/Thomas Kidrin
-------------------------
Thomas Kidrin
President and Chief Financial and
Accounting Officer
27
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
27 Financial Data Schedule (9/30/99) 29
--
28
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
The schedule contains summary information extracted from the financial
statements of Worlds Inc. for the nine months ended September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,044,722
<SECURITIES> 0
<RECEIVABLES> 106,355
<ALLOWANCES> 0
<INVENTORY> 162,556
<CURRENT-ASSETS> 2,345,862
<PP&E> 1,194,644
<DEPRECIATION> 543,468
<TOTAL-ASSETS> 3,700,133
<CURRENT-LIABILITIES> 1,208,220
<BONDS> 0
0
0
<COMMON> 17,542
<OTHER-SE> 621,853
<TOTAL-LIABILITY-AND-EQUITY> 3,700,133
<SALES> 241,607
<TOTAL-REVENUES> 241,607
<CGS> 168,783
<TOTAL-COSTS> 168,783
<OTHER-EXPENSES> 2,852,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102,206
<INCOME-PRETAX> (2,844,086)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,844,086)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,844,086)
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
