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, 1999

       [ ] 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)

                                    22-184316
                        (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  16,637,881  shares as of
August 13, 1999

Transitional Small Business Disclosure Format:    Yes  [  ]   No [X]


<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.

         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.

         We were formed on May 20, 1968.  From 1975 until  December 1997 we were
inactive with no operations and our only income was from  interest,  gain on the
sale of securities and dividends.  In December 1997 a series of mergers occurred
involving  us,  Worlds  Acquisition  Corp.  and  our  predecessor,  Worlds  Inc.
Following  the mergers,  we have been  engaged in the  business  and  operations
formerly conducted by our predecessor and have changed our name to adopt that of
our  predecessor,  Worlds Inc.  Accordingly,  a  discussion  and analysis of our
financial  condition  and  results  of our  operations  without  discussing  our
predecessor would be of limited importance to any reader.  Thus, included herein
is a discussion of our 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,  custom  production  work, 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. These sales were nominal. 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 did
not generate significant revenues.

         While we have completed  development and market testing of Worlds Gamma
and 3D Internet  music sites,  we may not generate  significant  revenues  until
after  we  successfully   attract  and  retain  a  significant   number  of  VIP
subscribers,  customers and/or  advertisers.  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 commercializing our proposed products.  There can be no assurance
that  we will  be  able  to  attract  and  retain  a  sufficient  number  of VIP
subscribers,  customers and/or 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.
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

<PAGE>

such time as the technological  feasibility of the product has been established.
We  began  capitalizing  our  software  in the  4th  quarter  of 1998  with  the
commercial  release  of three  products,  Animal  House,  BowieWorld  and Worlds
Ultimate 3D Chat. For the first quarter of 1999  approximately  $214,000 of such
expenditures  were  capitalized.  For the second  quarter of 1999  approximately
$225,000 of such expenditures were capitalized.

Plan of Operation

         During  the fourth  quarter  of 1998,  we  successfully  completed  the
development of our Gamma  development tool kit and  commercially  released three
products  utilizing  our 3D  Internet  technology.  During  the first and second
quarters of 1999 we continued  holding  discussions  with  several  major record
labels and  companies  for them to  distribute  Worlds  Gamma,  along with music
related web site  access.  Our strategy of  distributing  our products on CD+ is
wholly  dependent upon  obtaining  distribution  agreements  with record labels,
artists or record  companies.  We have also begun to distribute our services via
internet service  providers,  broadband service providers via cable modems and a
mini-downloadable version. To date, we have entered into several agreements.

         We have also been actively pursuing  strategic  alliances with a number
of  companies  that can provide  exposure and  distribution  of our products and
technology.  These meetings  started paying  dividends  during the first half of
1999 as we engaged in serious negotiations that led to the following agreements.


          In June 1999 we launched  HansonWorld,  the first 3D chat  environment
          utilizing our 3D technology on a special CD which was  distributed  to
          the fan club of Hanson.

          We entered into two agreements with Freeserve Plc.,  United  Kingdom's
          largest  Internet  Service  Provider and a leading UK Internet Portal.
          The first  agreement  provides  for us to be the  official 3D Internet
          broadband chat content provider on Freeserve which will include our 3D
          Internet  Technology  and 3D  broadband  content  on  millions  of new
          Freeserve ISP access CDs. The second  agreement  provides for us to be
          the official and exclusive 2D, or HTML, Internet chat content provider
          on the Freeserve ISP service.

          We entered into  agreements  with third party content  providers to be
          integrated into the Road Runner broadband offering, Hang@worlds.com.

          We  added  the   following   artists   to  our   e-commerce   website,
          WorldsStore.com.

         Wu Wear store.com,  Five store.com,  B*Witched  store.com,  Sheryl Crow
store.com,   Eminem  store.com,   Bruce  Springsteen  store.com,   Ricky  Martin
store.com,  Deftones store.com,  Metallica store.com,  Tim McGraw store.com, The
Cranberries store.com and Britney Spears store.com.

         During this  quarter we also  continued to upgrade our  e-commerce  web
site,  WorldsStore.com,  purchased  inventory  for sale  through  our web  site,
enhanced  features  to our core  technology  by  improving  the  audio and video
streaming features,  continued to improve our voice-to-voice  Internet telephony
and increased our customer service program.

<PAGE>

         Our  present  cash  resources  are  insufficient  to  meet  all  of our
requirements  over the next twelve  months  unless  additional  funds are raised
through our current private offering and through other financings.  We currently
have nine full-time  employees and are working with seven  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 significant additional financing is obtained.

         We are currently in the midst of a private offering. We are offering up
to 66 units at a price of $60,000 per unit.  Each unit consists of 15,000 shares
of our common stock and 7,500 warrants to purchase shares of our common stock at
a price of our common  stock at a price of $5.00 per share.  As of June 30, 1999
and through  August 13, 1999,  $2,460,000  has been  released  from escrow.  The
escrow agent for the offering is currently holding an additional  $419,930,  but
is unable to predict how much, if any, of such funds will eventually be released
for our use. The offering is currently schedule to terminate on August 21, 1999.

Results of Our Operations

Six Months Ended June 30, 1999 Compared with Six Months Ended June 30, 1998


         The following  data extracted  from the attached  financial  statements
compares the results of our operations for the six months ended June 30, 1999 to
the six months ended June 30, 1998.

                                                      Six months ended
                                            6/30/99                   6/30/98

Net Revenue                                $ 92,925                   $16,132

Costs & Expenses:
         Cost of revenues                   (70,355)                  (25,101)
         Selling, general
         & administrative                (1,425,495)               (1,307,525)
         Research & development                   -                  (534,428)

Operating Loss                           (1,402,925)               (1,850,922)

Other Income (Expense):
         Interest income                     17,966                    76,992
         Interest expense                   (68,922)                  (72,112)

Loss before taxes & extraordinary item   (1,453,881)               (1,846,042)

Extraordinary item - gain on debt settlement      -                   151,654
Net Loss                                 (1,453,881)               (1,694,388)

<PAGE>

         In the first half of 1999, we continued to upgrade our core  technology
and began  production on various new projects.  We continue to have  discussions
with potential new clients and/or  partners,  no assurance can be given that any
negotiations will lead to the consummation of any additional agreements.  In the
first quarter of 1998 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  from our Worlds  Ultimate 3D Chat
product and from sales on our  e-commerce  web site where we  currently  operate
artist  or  artist  related   Internet   stores  such  as   DavidBowieStore.com,
NinetyEightDegreesStore.com  and  EltonJohnStore.com,  among others. Revenue was
$92,925 and had associated direct costs of $70,355 for the six months ended June
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 $1,425,495 for the
six months ended June 30, 1999.  This  represented  an increase of $117,970 from
$1,307,525  compared to the six months  ended June 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 six months
ended June 30, 1999 as compared  to $534,428  for the six months  ended June 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 six
months ended June 30, 1999 $439,000 of such expenditures were capitalized.

         Other income  included  $17,966 of interest income in the six months to
June 30, 1999 earned from the  remainder of the proceeds of our share  offerings
as compared to $76,992 in the six months  ended June 30,  1998.  Other  expenses
included interest expense of $68,922 directly  attributable to the Predecessor's
notes  payable in the six months to June 30, 1999.  Interest  expense in the six
months to June 30, 1998 was $72,112.

         As a result of the foregoing we incurred a net loss of  $1,453,881  for
the six months ending June 30, 1999,  compared to a loss of  $1,694,388  for the
six months  ending June 30, 1998,  a decrease of $240,507.  The loss in the 1998
quarter was after an extraordinary gain of $151,654. See Statement of Operations
on Page F-4.


<PAGE>

Three Months Ended June 30, 1999 Compared with Three Months Ended June 30, 1998

                                                     Three months ended
                                           6/30/99                    6/30/98

Net Revenue                                $57,748                    $12,130

Costs & Expenses:
         Cost of revenues                  (48,891)                   (22,500)
         Selling, general
         & administrative                 (809,680)                  (759,185)
         Research & development                 -                    (302,516)
Operating Loss                            (800,825)                (1,072,071)

Other Income (Expense):
         Interest income                     5,180                     35,054
         Interest expense                  (30,000)                   (35,656)

Loss before taxes                         (825,643)                (1,072,673)

Net Loss                                  (825,643)                (1,072,623)

Revenues  are nominal and are derived  from our Worlds  Ultimate 3D Chat product
and from sales on our e-commerce  web site where we currently  operate artist or
artist    related     Internet     stores    such    as     DavidBowieStore.com,
NinetyEightDegreesStore.com  and  EltonJohnStore.com,  among others. Revenue was
$57,748 and had  associated  direct  costs of $48,891 for the three months ended
June 30,  1999,  compared to $12,130 in revenue and $22,500 of direct  costs for
the same period in 1998.


Selling,  general and administrative expenses were $809,680 for the three months
ended June 30,  1999.  This  represented  an increase of $50,495  from  $759,185
compared to the three  months ended June 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 June
30, 1999 as compared to $302,516 for the three months ended June 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  second  quarter of 1999,
$225,000 of such expenditures were capitalized.


Other income  included $5,180 of interest income in the three months to June 30,
1999  earned  from the  remainder  of the  proceeds  of our share  offerings  as
compared to $35,054 in the three  months  ended June 30,  1998.  Other  expenses
included interest expense of $30,000 directly  attributable to the Predecessor's
notes  payable in the three  months to June 30,  1999.  Interest  expense in the
three months to June 30, 1998 was $35,656.

<PAGE>

As a result of the  foregoing  we incurred a net loss of $825,643  for the three
months  ending June 30,  1999,  compared to a loss of  $1,072,673  for the three
months ending June 30, 1998, a decrease of $247,030. See Statement of Operations
on Page F-4.

Liquidity and Capital Resources of the Company

         Net cash  provided  from  January  1, 1999  through  June 30,  1999 was
$955,853.  At June 30, 1999, we had working  capital of $1,179,631  and cash and
cash equivalents in the amount of $2,537,617.

         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.

         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. On
May 12,  1999 we  commenced  a new  private  offering.  While  the  offering  is
continuing,  as of August 13, 1999 we received  $2,460,000  and escrow agent for
the  offering  is holding an  additional  $419,930  pending  completion  of some
related paperwork.

         Our capital  requirements  relating to the  commercialization of Worlds
Gamma and development of web site access and content for the music industry have
been and will  continue to be  significant.  We are dependent on the proceeds of
future  financings  in order to  continue  in  business  and develop and further
commercialize our proposed products.

         We  anticipate,   based  on  currently   proposed  business  plans  and
assumptions  relating to our  operations,  including the timetable of, and costs
associated with, product development and commercialization,  that we have only a
portion  of  the  funds   necessary   to  complete   product   development   and
commercialization.   Satisfactory   completion   of  product   development   and
commercialization  will require  capital  resources  substantially  greater than
those  currently  available  to us. 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 June
30, 1999, our total liabilities were approximately $3,360,000 million, including
the long term portion of notes payable of $1,853,000.

         There  can  be no  assurance  that  we  will  be  able  to  obtain  the
substantial  additional  capital  necessary to permit us to attract and retain a

<PAGE>

sufficient  number  of  subscribers  or that  any  assumptions  relating  to our
business  plan  will  prove to be  accurate.  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,  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 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 3rd parties for hosting and processing our e-commerce  activities
and while we cannot  control the actions of these 3rd  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.

                                     PART II
                                OTHER INFORMATION

Item 5.  Other Information.

         On May 12, 1999, we began an exempt private  offering under Rule 506 as
promulgated  under The  Securities  Act of 1933,  as amended.  We are seeking to

<PAGE>

raise $2-4 million through the sale of a unit offering. The offering was offered
solely to "accredited  investors" and pursuant to a Private Placement Memorandum
and  Subscription  Agreement.  The  offering  terminated  on July 31,  1999.  We
received  $2,460,000  and the escrow  agent is holding  an  additional  $419,930
pending  clarification  of some of the  submitted  paperwork.  We can venture no
opinion at this time as to how much additional funds will be released to us.

         On August 8, 1999 we adopted the name  Worlds.com as the new name under
which we will conduct business.

         The previous disclosure in this Item 5 is a "forward looking statement"
which may never eventuate.

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.

<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, 1999


WORLDS INC.



By: /s/

    Thomas Kidrin,
    President, CEO and Treasurer

<PAGE>


                                   Worlds Inc.
                        (a development stage enterprise)
                              Financial Statements
                      Periods Ended June 30, 1998 and 1999




<PAGE>


                                   Worlds Inc.
                        (a development stage enterprise)
                              Financial Statements
                      Periods Ended June 30, 1998 and 1999

                                       F-1

<PAGE>


                                                                Worlds Inc.
                                              (a development stage enterprise)

                                    Contents

        Unaudited financial statements:
           Balance sheets                                           F-3
           Statements of operations                                 F-4
           Statement of stockholders' equity (deficit)              F-5
           Statements of cash flows                                 F-6
           Summary of accounting policies                           F-7 - F-11
           Notes to financial statements                            F-12 - F-15

                                      F-2

<PAGE>


                                                               Worlds Inc.
                                              (a development stage enterprise)

                                                               Balance Sheets


<TABLE>

<S>                                                                   <C>                       <C>


                                                                        December 31, 1998           June 30, 1999
 ------------------------------------------------------------------ --------------------------- ----------------------
 Assets                                                                                              (unaudited)
 Current:
    Cash and cash equivalents                                                $ 1,581,764                $  2,537,617
    Accounts receivable                                                                -                      19,918
    Prepaid expenses and other current assets                                     53,486                      42,512
    Inventory                                                                     58,516                      87,052
 ------------------------------------------------------------------ --------------------------- ----------------------
         Total current assets                                                  1,693,766                   2,687,099
 Property, equipment and software development costs, net of
    accumulated depreciation and amortization                                    214,246                     562,132
 Other assets (Note 5)                                                                 -                     503,095
 ------------------------------------------------------------------ --------------------------- ----------------------
                                                                             $ 1,908,012               $   3,752,326
 ------------------------------------------------------------------ --------------------------- ----------------------
 Liabilities and Stockholders' Equity (Deficit)
 Current:
    Accounts payable                                                        $    319,906              $      468,488
    Accrued expenses                                                             446,333                     769,832
    Current maturities of notes payable                                          246,648                     269,148
 ------------------------------------------------------------------ --------------------------- ----------------------
         Total current liabilities                                             1,012,887                   1,507,468
 Long-term portion, notes payable                                              1,875,018                   1,852,518
 ------------------------------------------------------------------ --------------------------- ----------------------
         Total liabilities                                                     2,887,905                   3,359,986
 ------------------------------------------------------------------ --------------------------- ----------------------
 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 18,815,746                                      18,032                      18,816
    Additional paid-in capital                                                 8,401,970                  11,227,300
    Deficit accumulated during the development stage                          (9,335,152)                (10,789,033)
 ------------------------------------------------------------------ --------------------------- ----------------------
                                                                                (915,150)                    457,083
    Treasury stock, at cost, 113,465 and 1,613,465 shares                        (64,743)                    (64,743)
 ------------------------------------------------------------------ --------------------------- ----------------------
         Total stockholders' equity (deficit)                                   (979,893)                    392,340
 ------------------------------------------------------------------ --------------------------- ----------------------
                                                                             $ 1,908,012               $   3,752,326
 ------------------------------------------------------------------ --------------------------- ----------------------

</TABLE>

                              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>

<S>                                                               <C>                <C>                     <C>                 <C>


                                                                                                                 Cumulative,
                                                                                                                 period from
                                                                                                                 April 8, 1997
                                                                                                                 (inception) to
                                                       Three months ended June 30,   Six months ended June 30,   June 30,

                                                          1998          1999           1998              1999               1999 (a)

 Net revenues                                        $  12,130   $    57,748      $  16,132          $ 92,925         $  123,455
 Costs and expenses:
    Cost of revenues                                   (22,500)      (48,891)       (25,101)          (70,355)           (99,634)
    Selling, general and administrative               (759,185)     (809,680)    (1,307,525)       (1,425,495)        (4,751,228)
    Research and development                          (302,516)            -       (534,428)                -           (992,932)
    Acquired research and development                        -             -              -                 -         (6,135,538)

         Operating loss                             (1,072,071)     (800,823)    (1,850,922)       (1,402,925)       (11,855,877)
 Other income (expenses):
    Gain resulting from reversal of certain predecessor
       liabilities                                           -             -              -                 -            810,140
    Interest income                                     35,054         5,180         76,992            17,966            155,565
    Interest expense                                   (35,656)      (30,000)       (72,112)          (68,922)          (197,184)

         Loss before extraordinary item             (1,072,673)     (825,643)    (1,846,042)       (1,453,881)       (11,087,356)
 Extraordinary item - gain on debt settlement                -             -        151,654                 -            298,323
 Net loss                                          $(1,072,673)    $(825,643)   $(1,694,388)      $(1,453,881)      $(10,789,033)

 Loss per share (basic and diluted):
    Loss before extraordinary item                 $      (.06)    $    (.05)   $      (.11)      $      (.08)
    Extraordinary item                                       -             -            .01                 -

         Net loss per share (basic and diluted)    $      (.06)     $   (.05)   $      (.10)      $      (.08)

 Weighted average common shares outstanding:
    Basic and diluted                               16,716,546    16,723,298     16,434,339        17,304,288

 --------------
 (a)   Includes the results of Predecessor and Academic (from December 4, 1997) which were merged into the Company on
       December 3, 1997.

</TABLE>


                               See accompanying summary of accounting policies
                                             and notes to financial statements.

                                      F-4

<PAGE>


                                                                 Worlds Inc.
                                              (a development stage enterprise)

                                  Statements of Stockholders' Equity (Deficit)


 Period from April 8, 1997 (inception) to June 30, 1999

<TABLE>

<S>                                    <C>           <C>       <C>            <C>              <C>        <C>

 ------------------------------------- ----------------------- -------------- ---------------- ---------- --------------
                                                                                  Deficit
                                                                                accumulated                   Total
                                                                Additional      during the                stockholders'
                                                                  paid-in       development    Treasury      equity
                                            Common stock          capital          stage         stock      (deficit)
                                       -----------------------
                                         Shares      Amount
 ------------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------
 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)
 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         94       374,906               -             -      375,000
 Sale of shares in private offering
    memorandum (June 1999)                615,000        615     2,375,499               -             -    2,376,114
 Net loss for the six months ended
    June 30, 1999 (unaudited)                   -          -             -      (1,453,881)            -   (1,453,881)
 ------------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------
 Balance, June 30, 1999 (unaudited)    18,815,746    $18,816   $11,227,300    $(10,789,033)     $(64,743) $   392,340
 ------------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------

</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>

<S>                                                           <C>                <C>                 <C>

                                                                                                       Cumulative
                                                                                                       period from
                                                                                                      April 8, 1997
                                                                   Six months ended June 30,          (inception) to
                                                             ------------------ -------------------
                                                                   1998                1999           June 30, 1999
 ----------------------------------------------------------- ------------------ ------------------- ------------------
 Cash flows from operating activities:
    Net loss                                                   $  (1,694,388)       $(1,453,881)       $(10,789,033)
 ----------------------------------------------------------- ------------------ ------------------- ------------------
    Adjustments to reconcile net loss to net cash used in operating activities:
         Loss on disposal of fixed assets                                  -                  -              54,041
         Depreciation and amortization                                93,583            105,114             251,189
         Gain resulting from reversal of certain
            predecessor liabilities                                        -                  -            (810,140)
         Gain on debt settlement                                    (151,654)                 -            (298,323)
         Acquired research and development                                 -                  -           6,135,538
         Changes in operating assets and liabilities, net
            of effects from merger with Predecessor and
            Academic:
               Trade receivable                                          538            (19,918)            (19,918)
               Inventory                                                   -            (28,536)            (87,052)
               Prepaid expenses and other assets                      39,888           (117,121)             (2,716)
               Accounts payable and accrued expenses                 (71,395)           472,081             838,271
 ----------------------------------------------------------- ------------------ ------------------- ------------------
                 Total adjustments                                   (89,040)           411,620           6,060,890
 ----------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash used in operating activities            (1,783,428)        (1,042,261)         (4,728,143)
 ----------------------------------------------------------- ------------------ ------------------- ------------------
 Cash flows from investing activities:
    Acquisition of property and equipment                                  -            (14,000)            (42,587)
    Additions to software development costs                                -           (439,000)           (599,000)
 ----------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash used in investing activities                     -           (453,000)           (641,587)
 ----------------------------------------------------------- ------------------ ------------------- ------------------
 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          2,376,114           6,097,290
    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                                         (16,440)                 -            (120,000)
 ----------------------------------------------------------- ------------------ ------------------- ------------------
                 Net cash provided by financing activities         1,661,117          2,451,114           7,907,347
 ----------------------------------------------------------- ------------------ ------------------- ------------------
 Net increase (decrease) in cash and cash equivalents               (122,311)           955,853           2,537,617
 Cash and cash equivalents, beginning of period                    3,541,829          1,581,764                   -
 ----------------------------------------------------------- ------------------ ------------------- ------------------
 Cash and cash equivalents, end of period                       $  3,419,518        $ 2,537,617        $  2,537,617
 ----------------------------------------------------------- ------------------ ------------------- ------------------

</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") 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, 1998 and for the Predecessor for the period ended December 3,
               1997.

                                      F-7

<PAGE>

                                                                   Worlds Inc.
                                               (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 Financial Instruments

               The carrying amounts of financial instruments, including cash and
               short-term  debt,  approximated  fair value as of March 31,  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 June 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 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>

                                                                   Worlds Inc.
                                               (a development stage enterprise)

                                                Summary of Accounting Policies

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.


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 Development Costs

               In accordance with the provisions of SFAS No. 86, "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 six months ended
               June 30, 1999, a further $439,000 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 Development Costs

               Research and development costs are expensed as incurred.

                                      F-9

<PAGE>

                                                                  Worlds Inc.
                                              (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 Compensation

               In October 1995,  the FASB issued SFAS No. 123,  "Accounting  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.

                                      F-10

<PAGE>

                                                                   Worlds Inc.
                                               (a development stage enterprise)

                                                Summary of Accounting Policies

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-11

<PAGE>

                                                     Worlds Inc. - Predecessor
                                               (a development stage enterprise)

                                                 Notes to Financial Statements

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-12

<PAGE>

                                                  Worlds Inc.-Predecessor
                                              (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 have been  classified as treasury
               stock in the accompanying balance sheets.

               While no trading  market  existed for the securities of Academic,
               the Company's common stock is traded on the Bulletin Board.

                                      F-13

<PAGE>

                                                       Worlds Inc.-Predecessor
                                               (a development stage enterprise)

                                                Notes to Financial Statements

3. Private Placement and Public Offering

               The Private  Placement called for WAC to 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.

               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 June 1999,  the Company sold  615,000  shares in a private
               offering  memorandum  and received  gross proceeds of $2,460,000.
               Net proceeds,  after  commissions  and expenses of this offering,
               aggregated $2,376,114.


                                      F-14

<PAGE>

                                                       Worlds Inc.-Predecessor
                                               (a development stage enterprise)

                                                 Notes to Financial Statements

4.       Contingencies

               During  April  1999,  the  Company   entered  into  a  three-year
               financial  advisory and  consulting  agreement  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.  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  agreed  to  contribute  1,500,000
               shares  to the  capital  of the  Company  (included  in  treasury
               stock).


5.     Content Supply Agreement

               During  June 1999,  the  Company  entered  into a content  supply
               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).  A
               further $125,000 and 93,750 shares is required to be delivered to
               the  Provider  upon launch of the site which is expected to occur
               during the quarter ended September 30, 1999.


                                      F-15