form10qsb.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C.
20549
FORM
10-QSB
(X)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934:
For
the Quarterly Period ended March 31, 2006
(
)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE
ACT
For
the
transition period from __________________ to __________________
Commission
File number 0-24115
WORLDS.COM,
INC.
(not
affiliated with Worldcom, Inc.)
(Exact
name of registrant as specified in its charter)
New
Jersey
22-1848316
-------------------------------
-----------------------
(State or other jurisdiction
of
(I.R.S. Employer ID No.)
incorporation or organization)
|
11
Royal Road, Brookline, MA
02445
(Address
of principal executive offices)
(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 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 [ ] No [X
]
As
of
March 31, 2006, 33,830,393 shares of the Issuer's Common Stock were
outstanding.
As
of
March 4, 2008, 49,830,393 shares of the Issuer's Common Stock were
outstanding.
Transitional
Small Business Disclosure Format (check one): Yes [ ] No [X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X]
Item
1. Financial Statements
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Page
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Condensed
Balance Sheets as of March 31, 2006
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3
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Condensed
Statements of Operations for the three months ended March 31, 2006
and 2005
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4
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Condensed
Statement of Cash Flows for the three months ended March 31, 2006
and
2005
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5
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Notes
to Financial Statements
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6-9
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Worlds.com,
Inc.
Balance
Sheets
(Unaudited)
As
of
March 31, 2006
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Current
Assets
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Cash
and cash
equivalents
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$ |
4,595 |
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Total
Current
Assets
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4,595 |
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Property
and
equipment net of
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accumulated
depreciation
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- |
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TOTAL
ASSETS
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4,595 |
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Current
Liabilities
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Accounts
payable
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1,145,704 |
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Accrued
expenses
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1,137,444 |
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Deferred
Revenue
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631,950 |
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Current
maturities notes
payable
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1,840,671 |
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Total
Current
Liabilities
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4,755,769 |
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Stockholders
Equity
(Deficit)
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Common
stock
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33,824 |
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Additional
Paid in
Capital
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20,146,723 |
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Accumulated
Deficit
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(24,931,720 |
)
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Total
stockholders
deficit
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$ |
(4,751,174 |
)
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Total
Liabilities and stockholders
deficit
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$ |
4,595 |
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The
accompanying notes are an integral part of these financial
statements.
Worlds.com,
Inc.
Statements of
Operations
(Unaudited)
For
the three months ended
March 31, 2006 and 2005
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Three
months ended March
31,
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2006
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2005
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Revenues
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Revenue
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- |
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53,674.00 |
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Cost
and
Expenses
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Cost
of
Revenue
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- |
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53,243 |
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Selling
General &
Admin
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778 |
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2,535 |
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(778 |
)
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(2,104 |
)
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Other
Income
Expense
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Interest
Income
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- |
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- |
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Interest
Expense
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38,461 |
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38,461 |
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Offering
Expense
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- |
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- |
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Net
Loss
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|
$ |
(39,239 |
)
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$ |
(40,565 |
)
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The
accompanying notes are an integral part of these financial
statements.
Worlds.com,
Inc.
Statements
of Cash Flows
(Unaudited)
For
the three months ended
March 31, 2006 and 2005
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2006
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2005
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Cash
flows from operating
activities
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Net
Income/(loss)
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$ |
(39,239 |
)
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$ |
(40,565 |
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Adjustments
to reconcile net loss to net cash used
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in
operating activities
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- |
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- |
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Dep
&
amort
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- |
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- |
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Accretion
of
deferred revenue
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- |
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- |
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Accounts
receivable
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- |
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- |
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Prepaid
expenses and other current assets
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- |
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- |
|
inventories
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- |
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- |
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accounts
payable and accrued expenses
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38,461 |
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38,461 |
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Loan
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2,000 |
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7,750 |
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Net
cash used in
operating activities
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1,222 |
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5,646 |
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Cash flows from investing activities
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Acquisition
of property and equipment
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- |
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- |
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Net
cash used in
investing activities
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- |
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- |
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Cash
flows from financing activities
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Net
cash
provided from investing activities
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- |
|
|
|
- |
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Net
increase(decrease) in cash
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1,222 |
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5,646 |
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Cash
beginning of period
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3,373 |
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2,032 |
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Cash end
of
period |
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$ |
4,595 |
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$ |
7,678 |
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Supplemental disclosure of cash flow information:
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Cash
paid
during the year for
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Interest
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- |
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- |
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Income
taxes
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- |
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|
- |
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The
accompanying notes are an integral part of these financial
statements.
Worlds.com,
Inc.
NOTES
TO
FINANCIAL STATEMENTS
Quarter
Ended March 31, 2006
NOTE
1 –
DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Description
of Business
Worlds.com,
Inc. (the "Company") designs and develops software content and related
technologies for the creation of interactive, three-dimensional ("3D") Internet
sites on the World Wide Web. Using in-house technology the Company creates
its
own Internet sites, as well as sites available through third party on-line
service providers.
Basis
of
Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America ("US
GAAP"), which contemplates continuation of the Company as a going concern.
The
Company has always been considered a developmental stage business, has incurred
significant losses since its inception and has had minimal revenues from
operations. The Company will require substantial additional funds for
development and marketing of its products. 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 has not been able to
generate sufficient revenue or obtain additional financing which has had a
material adverse effect on the Company, including requiring the Company to
severely diminish operations and at times halting them entirely. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. The Company has been operating at a significantly reduced
capacity with no full time employees and performing primarily consulting
services and licensing software using consultants to perform any work that
may
be required.
Use
of
Estimates
The
preparation of financial statements in conformity with US GAAP 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
There
is
no property or equipment owned by the Company as of March 31, 2006.
Income
Recognition
The
Company has the following sources of revenue: (1) consulting/licensing revenue
from the performance of development work performed on behalf of the Company
or
from the sale of certain software to third parties; and (2) VIP subscriptions
to
our Worlds Ultimate 3-D Chat service.
Deferred
revenue represents cash payments received in advance to be recorded as licensing
revenue as earned.
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 net
operating loss carry forwards using enacted tax rates. Valuation allowances
are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Worlds.com,
Inc.
NOTES
TO
FINANCIAL STATEMENTS
Quarter
Ended March 31, 2006
Impairment
of Long Lived Assets
The
Company reviews the carrying value of long-lived assets to determine if
circumstances exist indicating whether there has been any impairment of the
carrying value of property and equipment or whether the depreciation periods
should be modified. Long-lived assets are reviewed for impairment
whenever events or changes in business circumstances indicate that the carrying
value of the assets may not be fully recoverable. The Company as of
the date of the financial statements has no long lived assets.
NOTE
2 -
GOING CONCERN
Since
mid
2001 the Company has had to significantly curtail and essentially cease
operations due to lack of resources. The accompanying financial statements
have
been prepared assuming that the Company will continue as a going concern. Since
its inception, the Company has had minimal revenues from operations. 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 permanently 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.
Note
3 –
Deferred Revenue
Deferred
revenue represents advance payments for the license, the design and development
of the software, content and related technology for the creation of an
interactive, three-dimensional 3D entertainment portal on the
internet.
NOTE
4 -
Notes Payable
Short-term
debt at March 31, 2006 consists of the following:
The
Company has promissory notes payable due to four shareholders. The principal
amounts are, $124,230, $635,642, $631,950 and $350,000 with interest accruing
at
8% per annum, 10% per annum, 5% per annum, and 6% per annum, respectively.
The
principal amounts plus all accrued interest are past due.
As
part
of a debt refinancing in 2000, $631,950 of debt was renegotiated to deferred
revenue representing future services to be provided by the Company.
NOTE 5
- COMMITMENT AND CONTINGENCIES
During
2003, a law firm obtained a judgment against the company for unpaid legal
fees
and other debt in the aggregate amount of $182,075.24, for which a reserve
has been recorded on the balance sheet for this liability.
During
2000 the Company was involved in a lawsuit relating to
unpaid consulting services. On March 20, 2001 a judgment against the Company
was
rendered for approximately $205,000. As of March 31, 2006 the Company
recorded a reserve of $205,000 for this lawsuit, which is included in accrued
expenses in the accompanying balance sheet.
Item
2. Management's Discussions and Analysis of Financial Condition and Results
of
Operations
Forward
Looking Statements
When
used
in this Form 10-QSB and in future filings by the Company with the Commission,
the words or phrases such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "plan," "predict," "project," "will" 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.
These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results to be materially different. These
factors include, but are not limited to, changes that may occur to general
economic and business conditions; changes in current pricing levels that we
can
charge for our services or which we pay to our suppliers and business partners;
changes in political, social and economic conditions in the jurisdictions in
which we operate; changes to regulations that pertain to our operations; changes
in technology that render our technology relatively inferior, obsolete or more
expensive compared to others; foreign currency fluctuations; changes in the
business prospects of our business partners and customers; increased
competition, including from our business partners; delays in the delivery of
broadband capacity to the homes and offices of persons who use our services;
general disruptions to Internet service; and the loss of customer faith in
the
Internet as a means of commerce.
The
following discussion should be read in conjunction with the financial statements
and related notes which are included under Item
1,
as well as with the audited financial statements and related notes and risk
factors included in our Annual Report on Form 10-KSB for the most recently
completed fiscal year.
We
do not
undertake to update our forward-looking statements or risk factors to reflect
future events or circumstances.
Overview
General
Worlds.com
is a leading 3D entertainment portal which leveraged our proprietary technology
to offer visitors a network of virtual, multi-user environments which we call
"worlds". These worlds are visually engaging online environments featuring
animation, motion and content where people can come together and, by navigating
through the website, shop, interact with others, attend events and be
entertained.
Sites
using our technology allow numerous simultaneous visitors to enter, navigate
and
share interactive "worlds". Our 3D Internet sites are designed to promote
frequent, repeat and prolonged visitation by users by providing them with unique
online communities featuring dynamic graphics, highly useful and entertaining
information content, and interactive capabilities. We believe that our sites
are
highly attractive to advertisers because they offer access to
demographic-specific user bases comprised of people that visit the site
frequently and stay for relatively long periods of time.
Starting
in mid 2001 we were not able to generate enough revenue to sustain operations
and other sources of Capital were not available. We have had to essentially
curtail our operations inorder to remain alive.
Revenues
We
generated very little or no revenue during the quarter as we have
significantly curtailed operations since mid 2001. The revenue that
was generated since that time was generated in the following
manner:
o the
production of 3D promotion sites for third parties;
o VIP
subscriptions to our Worlds Ultimate 3-D Chat service; and/or
o development,
licensing and operation of 3D chat and entertainment sites for third
parties.
Expenses
We
classify our expenses into two broad groups:
o cost
of revenues; and
o selling,
general and administration.
During
the quarter, our operations were minimal.
Liquidity
and Capital Resources
We
have
had to severely diminish our operations since mid 2001 due to a lack of
liquidity. We intend to try to continue to operate in this manner
until we find an additional source of capital. We have no current arrangements
with respect to, or sources of, additional financing and there can be no
assurance that any such financing would become available. We may need
to completely halt all operations for an indefinite period of time.
RESULTS
OF OPERATIONS
Our
net
revenues for each of the three months ended March 31, 2006 and 2005 were $0
and
$53,674, respectively. Management believes that this increase was due
to a software development project in 2005 that did not recur in 2006, but that
the amount of business from dramatically reduced operations is
inconsequential.
Three
months ended March 31, 2006 compared to three months ended March 31,
2005
Revenue
decreased by $53,674, to $0 for the three months ended March 31, 2006 from
$53,674 in the prior year. The business has been running in a
severely diminished mode due to the lack of liquidity and had to cease
operations in 2006. We expect minimal if any operating results until
such time, if ever, that we can raise additional capital to provide the
resources required to generate sales.
Our
cost
of revenues during the three months ended March 31, 2006 and 2005 are primarily
comprised of (1) cost of goods sold - 0% and 95%, respectively, and (2)
selling general and administrative expenses - 100% and 5%,
respectively. Cost of sales decreased $53,243, or 100%, to $0 for the
three months ended March 31, 2006, from $53,243 in the three months ended
March 31, 2005. One reason for this decrease was that there were
no software development projects in 2006 as there was in the three
months ended March 31, 2005.
Selling
general and administrative expenses decreased by approximately $1,757, from
$2,535 to approximately $778 for the three months ended March 31, 2005 and
2006,
respectively. The balances are so low that any change is irrelevant
to the operations of the Company.
Other
expenses include interest expense of $38,461 directly attributable to the notes
payable in the three months ended March 31, 2006. Interest expense in
the three months ended March 31, 2005 was also $38,461.
As
a
result of the foregoing we incurred a net loss of $39,239 for the three months
ended March 31, 2006
compared to a net loss of $40,565 in the three months ended March 31,
2005.
Our
financial and liquidity position remained weak as exhibited by our cash, cash
equivalents, short-term marketable securities and marketable equity securities
of $4,595 at March 31, 2006. Cash, cash equivalents, short-term
marketable securities and equity securities were $7,678 at March 31,
2005. This decrease of $3,083 was the net result of cash used in
operating activities. There were no capital
expenditures and no financing activities.
Historically,
our primary cash requirements have been used to fund the cost of operations,
development of our products and patent protection, with additional funds having
been used in promotion and advertising and in connection with the exploration
of
new business lines.
We
have
had to severely diminish our operations due to a lack of
liquidity. We intend to try to continue to operate in this manner
until we find an additional source of capital. We have no current arrangements
with respect to, or sources of, additional financing and there can be no
assurance that any such financing would become available. We may need
to permanently halt all operations.
Item
3. Controls And Procedures
We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act
of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and our Chief Financial
Officer (collectively, the “Certifying Officers”) are responsible for
maintaining our disclosure controls and procedures. The controls and procedures
established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act are recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms.
PART
II OTHER INFORMATION
Item
1.
Legal Proceedings.
Item
2.
Unregistered Sales of Equaty Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities.
During
the quarter covered by this Report, we defaulted on $1,741,822 payment of
principal and $846,751 of interest with respect to outstanding promissory
notes. As of the date of the filing of this report we have
$759,872 outstanding in arrearages.
Item
4.
Submission of Matters to a Vote of Security Holders.
None.
Item
5.
Other Information
None.
Item
6.
Exhibits and Reports on Form 8-K
(a)
Exhibits
Exhibit
31.1 Certification
of Chief Executive Officer
Exhibit
31.2 Certification
of Chief Financial Officer
Exhibit 32.1 Statement
required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibiy
32.2 Statement
required by
18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002.
(b)
Reports on Form 8-K
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:
March 4, 2008
WORLDS.COM,
INC.
By:
/s/
Thomas
Kidrin
Thomas
Kidrin
President,
CEO and Treasurer
By: /s/
Christopher
Ryan
Christopher
Ryan
Chief
Financial Officer and
Principal
Accounting Officer
|
|
Exhibit
No.
|
|
Description
|
|
|
|
31.1
|
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|
|
|
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31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|