UNITED
STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM
10-Q

(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the Quarterly Period ended June 30, 2011

(
) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the transition period from __________________ to __________________

Commission
File number 0-24115

WORLDS
INC.

(not
affiliated with Worldcom, Inc.)
(Exact Name of Registrant as Specified in Its Charter)



|Delaware                                                           | 22-1848316                              
|------------------------------------------------------------------ | ----------------------------------------
|(State
    or Other Jurisdiction of Incorporation or Organization) | (I.R.S.
    Employer Identification No.)
|                                                                   |                                         

11
Royal RoadBrookline, MA 02445(Address of Principal Executive Offices)

(617) 725-8900(Registrant's Telephone Number, Including Area Code)

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).Yes [ ] No [ ]

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,”  “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large
accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated
filer [ ]	Smaller reporting company [X]

(Do
not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As
of August 9, 2011, 71,361,909 shares of the Issuer's Common Stock were outstanding.





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Table of Contents




Worlds Inc.

Table
of Contents





|                                                                                                             | Page
|------------------------------------------------------------------------------------------------------------ | ----
|Condensed Balance Sheets as of
    June 30, 2011 (unaudited) and December 31, 2010 (audited)                 | 3   
|Condensed Statements of
    Operations for the three and six months ended June 30, 2011 and 2010 (unaudited) | 4   
|Condensed Statements of
    Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited)           | 5   
|Notes
    to Condensed Financial Statements                                                                  | 6   
|                                                                                                             |     







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PART
I – FINANCIAL INFORMATION



Item
1. Financial Statements







Worlds
Inc.

Balance
Sheets

June
30, 2011 and December 31, 2010





|                                                                                                                                                                             | Unaudited |             | Audited  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ----------- | ---------
|                                                                                                                                                                             | 30-Jun-11 |             | 31-Dec-10
|Current Assets                                                                                                                                                               |           |             |          
|Cash and cash equivalents                                                                                                                                                    | $         | 170,946     |          
|Due from related party                                                                                                                                                       |           | 23,339      |          
|                                                                                                                                                                             |           |             |          
|                                                                                                                                                                             |           |             |          
|Total Current Assets                                                                                                                                                         |           | 194,285     |          
|                                                                                                                                                                             |           |             |          
|Property and equipment, net of                                                                                                                                               |           |             |          
|accumulated depreciation                                                                                                                                                     |           | —           |          
|                                                                                                                                                                             |           |             |          
|                                                                                                                                                                             |           |             |          
|Total
    Assets                                                                                                                                                             | $         | 194,285     |          
|                                                                                                                                                                             |           |             |          
|                                                                                                                                                                             |           |             |          
|                                                                                                                                                                             |           |             |          
|Current Liabilities                                                                                                                                                          |           |             |          
|Accounts payable                                                                                                                                                             | $         | 777,809     |          
|Accrued expenses                                                                                                                                                             |           | 1,791,904   |          
|Loan payable officer                                                                                                                                                         |           | —           |          
|Deferred revenue                                                                                                                                                             |           | —           |          
|Notes payable                                                                                                                                                                |           | 773,279     |          
|                                                                                                                                                                             |           |             |          
|Total Current Liabilities                                                                                                                                                    |           | 3,342,992   |          
|                                                                                                                                                                             |           |             |          
|                                                                                                                                                                             |           |             |          
|Stockholders (Deficit)                                                                                                                                                       |           |             |          
|                                                                                                                                                                             |           |             |          
|Common stock (Par value $0.001
    authorized 100,000,000 shares, issued and outstanding 71,361,909 and 62,781,122 at June 30, 2011 and December 31, 2010,
    respectively) | $         | 71,360      |          
|Common stock subscribed but not yet
    issued (325,000 and 3,358,331 at June 30, 2011 and December 31, 2010, respectively)                                                  |           | 325         |          
|Additional Paid in Capital                                                                                                                                                   |           | 24,611,264  |          
|Accumulated Deficit                                                                                                                                                          |           | (27,831,656 | )        
|Total stockholders deficit                                                                                                                                                   |           | (3,148,707  | )        
|                                                                                                                                                                             |           |             |          
|Total Liabilities
    and stockholders deficit                                                                                                                               | $         | 194,285     |          



See
Notes to Condensed Financial Statements









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Worlds
Inc.

Statement
of Operations

Six
and Three Month Ending June 30, 2011 and June 30, 2010





|                                           | (Unaudited)                  | (Unaudited)                   
|------------------------------------------ | ---------------------------- | ------------------------------
|                                           | Six months ended June
    30 | Three months
    ended June 30
|                                           | 2011                         |                               
|Revenues                                   |                              |                               
|Revenue                                    | $                            | 199                           
|                                           |                              |                               
|Total Revenue                              |                              | 199                           
|                                           |                              |                               
|Cost and Expenses                          |                              |                               
|                                           |                              |                               
|Cost of Revenue                            |                              | 16,959                        
|                                           |                              |                               
|Gross Profit/(Loss)                        |                              | (16,760                       
|                                           |                              |                               
|Common Stock issued for services rendered  |                              | 683,430                       
|Selling, General & Admin                   |                              | 225,425                       
|Salaries                                   |                              | 134,209                       
|                                           |                              |                               
|Operating loss                             |                              | (1,059,825                    
|                                           |                              |                               
|Other Income/Expense                       |                              |                               
|Interest Expense                           |                              | —                             
|                                           |                              |                               
|Net (Loss)                                 | $                            | (1,059,825                    
|                                           |                              |                               
|Weighted Average Loss per share            |                              | (0.02                         
|Weighted Average Common Shares Outstanding |                              | 67,503,361                    









See
Notes to Condensed Financial Statements







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Worlds
Inc.

Statement
of Cash Flow

Six
Months Ending June 30, 2011 and June 30, 2010









|                                                                           |  | (Unaudited) |            | (Unaudited)
|-------------------------------------------------------------------------- |  | ----------- | ---------- | -----------
|                                                                           |  | 30-Jun-11   |            | 30-Jun-10  
|Cash flows from operating activities:                                      |  |             |            |            
|Net (loss)                                                                 |  | $           | (1,059,825 | )          
|Adjustments to reconcile net loss to net cash used in operating activities |  |             |            |            
|Depreciation                                                               |  |             | 759        |            
|Common stock issued for services rendered                                  |  |             | 683,430    |            
|Bank Overdraft                                                             |  |             | —          |            
|Accounts payable and accrued expenses                                      |  |             | (4,972     | )          
|Contingent Deposit                                                         |  |             | —          |            
|Deferred revenue                                                           |  |             | —          |            
|                                                                           |  |             |            |            
|Net cash used in operating activities:                                     |  |             | (380,608   | )          
|                                                                           |  |             |            |            
|Cash flows from financing activities                                       |  |             |            |            
|Proceeds from exercise of warrants                                         |  |             | 118,446    |            
|Proceeds from exercise of options                                          |  |             | 58,000     |            
|Due from related party                                                     |  |             | (23,339    | )          
|Repayment of officer loan payable                                          |  |             | (2,400     | )          
|                                                                           |  |             |            |            
|Net cash provided by financing activities                                  |  |             | 150,707    |            
|                                                                           |  |             |            |            
|Net increase/(decrease) in cash                                            |  |             | (229,901   | )          
|                                                                           |  |             |            |            
|Cash beginning of period                                                   |  |             | 400,848    |            
|                                                                           |  |             |            |            
|Cash end of period                                                         |  | $           | 170,947    |            
|                                                                           |  |             |            |            
|Non-cash financing activities                                              |  |             |            |            
|                                                                           |  |             |            |            
|Common stock issued for payable                                            |  | $           | 72,375     |            
|Deferred revenue                                                           |  |             | 276,950    |            
|                                                                           |  |             |            |            
|Supplemental disclosure of cash flow information:                          |  |             |            |            
|Cash paid during the year for:                                             |  |             |            |            
|Interest                                                                   |  | $           | —          |            
|Income taxes                                                               |  | $           | —          |            









See
Notes to Condensed Financial Statements









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Worlds
Inc.

NOTES
TO FINANCIAL STATEMENTS

Three
and Six Months Ended June 30, 2011

(Unaudited)



NOTE
1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES



Description
of Business



On May 16, 2011,
the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations
and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more
aggressively enforce against infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense
patented technologies.



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 enforcement  of its patent portfolio. There can be no assurance that the Company will be able to obtain the
substantial additional capital resources 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 sufficient
financing which has had a material adverse effect on the Company, including requiring the Company to reduce operations. These
factors raise substantial doubt about the Company's ability to continue as a going concern.  For the past
year the Company has been operating at a significantly reduced capacity, with only one full time employee, performing
primarily consulting services and licensing software and using consultants to perform any additional 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.



Due from
Related Party



Due
from related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc.



Revenue
Recognition



Effective
for the second quarter of 2011, the Company spun off its  online businesses to Worlds Online Inc. The Company’s sources
of revenue after the spin off will be from sublicensing the patented technology and any revenue that may be generated from
enforcing those patents in the market. The Company had the following sources of revenue: (1) consulting/licensing revenue
from the performance of development work performed on behalf of the Company, licensing revenue or from the sale of certain
software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service.   The Company
recognizes revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract,
delivery has occurred, the price is fixed or determinable, and collectibility is reasonable assured.  This will
usually be in the form of a receipt of a customer’s acceptance indicating the product has been completed to their
satisfaction except for development work and service revenue which is recognized when the services have been
performed.  Deferred revenue represents cash payments received in advance to be recorded as revenue when
earned.  The corresponding cost associated with those contracts is also deferred as deferred costs until the
revenue is ultimately recognized.







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NOTE 1
– DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (con’t)



Research
and Development Costs



Research
and development costs are charged to operations as incurred.



Property
and Equipment



Property
and equipment are stated at cost.   Depreciation is provided on a straight line basis over the estimated useful
lives of the assets ranging from three to five years.  When assets are retired or disposed of, the cost and accumulated
depreciation are removed from the accounts, and any resulting gains or losses are included in income.  Maintenance and
repairs are charged to expense in the period incurred.



Impairment
of Long Lived Assets



The
Company evaluates the recoverability of its fixed assets and other assets in accordance with section 360-10-15 of the FASB Accounting
Standards Codification for disclosures about Impairment or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment
of long-lived assets in the event the net book value of such assets exceeds its expected cash flows. If so, it is considered to
be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values.
The Company adopted the statement on inception. No impairments of these types of assets were recognized during the six months
ended June 30, 2011 and 2010.



Stock-Based
Compensation



The
Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of
the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity
to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required
to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost
is recognized for equity instruments for which employees do not render the requisite service.



Income Taxes



The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets
and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the
enactment date.





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NOTE 1 –
DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (con’t)



Notes
Payable



The
Company has $773,279 in short term notes outstanding at June 30, 2011.



Deferred
Revenue



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. $355,000 has been amortized into income since then. The balance was transferred over to Worlds Online Inc. and
no longer appears on the Company’s balance sheet.





Call Option
Agreements



The
Company has entered into call option agreements with 13 of its major shareholders. The call options give the Company the right
to purchase up to 4,150,000 shares of stock back at prices ranging from $0.15 per share up to $0.40 per share. The Company issued
an aggregate of 680,000 shares of stock to these shareholders as an inducement to enter into these call option agreements. The
call option agreements have expiration dates of 1 and 2 years.



Comprehensive
Income (Loss)



The
Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting
Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in
the consolidated financial statements. There were no items of comprehensive income (loss) applicable to the Company during the
period covered in the consolidated financial statements.



Loss Per
Share



Net
loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss
per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding as of June 30, 2011
and 2010.







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NOTE
1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (con’t)



Stockholders
Equity



3,173,382
shares of common stock were issued for services rendered during the six months ended June 30, 2011.



Commitments
and Contingencies



During
2000 the Company was involved in a lawsuit relating to unpaid consulting services. In April, 2001 a judgment against the Company
was rendered for approximately $205,000. As of June 30, 2011 and December 31, 2010 the Company recorded a reserve of $205,000
for this lawsuit, which is included in accrued expenses in the accompanying balance sheets.



Risk and
Uncertainties



The
Company is subject to risks common to companies in the service and technology industries, including, but not limited to, litigation,
development of new technological innovations and dependence on key personnel.



Recent Accounting
Pronouncements



The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.



FASB
Accounting Standards Codification

(Accounting
Standards Update (“ASU”) 2009-01)



In
June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source
of authoritative nongovernmental US GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified
Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange
Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature
not included in the Codification has become nonauthoritative. The Codification did not change US GAAP, but instead introduced
a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification
is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s consolidated
financial statements as all future references to authoritative accounting literature will be referenced in accordance with the
Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result
of implementing the Codification during the fiscal year ended December 31, 2010 or the six months ended June 30, 2011.



As
a result of the Company’s implementation of the Codification during the fiscal year ended December 31, 2009, previous references
to new accounting standards and literature are no longer applicable. In the current annual consolidated financial statements,
the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting
literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.





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NOTE 1
– DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (con’t)



Subsequent
Events

(Included
in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent
Events”)



SFAS
No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date,
but before the consolidated financial statements are issued or available to be issued (“subsequent events”). An entity
is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities,
this is the date the consolidated financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions
that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company.
SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s
consolidated financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s
consolidated financial statements. No recognized or non-recognized subsequent events were noted.



Determination
of the Useful Life of Intangible Assets

(Included
in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the
Useful Lives of Intangible Assets”)



FSP
SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was
intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows
used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for
determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure
requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP
SFAS No. 142-3 became effective for consolidated financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s consolidated
financial statements.



Non-controlling
Interests

(Included
in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51”)



SFAS
No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling
interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15,
2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records
an intangible asset when the purchase price of a non-controlling interest exceeds the book value at the time of buyout. The adoption
of SFAS No. 160 did not have any other material impact on the Company’s financial statements.



Consolidation
of Variable Interest Entities — Amended

(To be
included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)



SFAS
No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance
for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary
of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose
entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when
it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual
reporting period beginning after November 15, 2009, with earlier adoption prohibited. The adoption of SFAS No. 167 in 2010
did not have a material impact on the Company’s financial statements.





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NOTE
2 - GOING CONCERN





From
mid-2001 through most of 2007, the Company had to significantly curtail and at times almost 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 periods where it had only minimal revenues from operations. There can be no assurance that the
Company will be able to obtain the additional capital resources to fully implement 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 likely have a material adverse effect on the Company, including possibly
requiring the Company to reduce and/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.





NOTE 3 -
PRIVATE PLACEMENTS OF EQUITY



During
2010, the Company completed a private placement of 1,454,590 shares of its common stock at a price per share of $0.10 for aggregate
proceeds of $145,459.  The five “accredited” investors also received an aggregate of 975,338 warrants as
part of the equity investment exercisable at $0.15 per share.

The
Company also converted the $175,000 in notes payable from the 2009 financing into 1,750,000 shares of its common stock. Also in
2010, the Company completed a private placement of 3,333,331 shares of its common stock at a price per share of $0.12 for aggregate
proceeds of $400,000.



During
2010, the Company issued an aggregate of 5,912,774 shares of common stock as payment for services rendered. During the six months
ended June 30, 2011 the Company issued an aggregate of 3,173,382 shares of common stock as payment for services rendered.



During
the six months ended June 30, 2011, the Company raised $118,446 with the exercise of warrants covering 1,160,804 shares of its
common stock at a price per share ranging from $0.01 to $0.15 per share.



During
the six months ended June 30, 2011, the Company raised $58,000 with the exercise of options covering 928,529 shares of
its common stock at a price ranging from $0.05 to $0.30 per share. 128,529 of those shares were exercised on a cashless basis
by the surrender to the Company of an aggregate of 131,747 options with a value of $38,558 being equal to the difference
in price between the exercise price and the market price on the date of exercise.







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NOTE 4 –
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, 3D entertainment portal on the internet.  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.  During
2010, $265,000 worth of services was provided leaving a balance of $276,950 at December 31, 2010. As part of the spin off, the
deferred revenue agreement was transferred to Worlds Online Inc. As of June 30, 2011 the balance is $0.





NOTE
5 - NOTES PAYABLE





|Short term notes
    payable at June 30, 2011 consist of the following: |                
|----------------------------------------------------------------------- | ---------------
|                                                                        |                
|Unsecured note payable to
    a shareholder bearing 8% interest.       
|Entire balance
    of principal and unpaid interest due on demand.      | $124,230       
|                                                                        |                
|Unsecured note
    payable to a shareholder bearing  10% interest       |                
|Entire balance
    of principal and unpaid interest due on demand.      | $649,049       
|                                                                        |                
|Total current                                                           | $773,279       
|                                                                        |                
|2011                                                                    | $773,279       
|2012                                                                    | $       -0-    
|2013                                                                    | $      
    -0-
|2014                                                                    | $       -0-    
|2015                                                                    | $      
    -0-
|                                                                        | $773,279       







NOTE 6-
PROPERTY AND EQUIPMENT



The detail
composition of property and equipment at June 30, 2011 and December 31, 2010 is as follows:





|                               |  |   | 30-Jun |  |  |   | 31-Dec | 
|------------------------------ |  | - | ------ |  |  | - | ------ | 
|                               |  |   | 2011   |  |  |   | 2010   | 
|Computer equipment             |  | $ | 10,891 |  |  | $ | 10,891 | 
|Less: accumulated depreciation |  |   | 10,891 |  |  |   | 10,132 | 
|                               |  | $ | 0      |  |  | $ | 759    | 











Depreciation
expense recorded for the three months ended June 30, 2011 and 2010 was $0 and $781, respectively.









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NOTE 7 –
STOCK OPTIONS



During
2010 the Company issued stock options to various parties.  The stock options allow the parties to purchase shares of
the Company’s common stock at various prices per share per each individual option agreement.  The options allow
the various parties to purchase one share of its stock for each option.  The options expire at various times through
October 28, 2013 per each individual option agreement. The Company did not grant any registration rights with respect to any shares
of common stock issuable upon exercise of the options. There were no forfeited options during 2010. During the year ended December
31, 2010, the Company recorded an expense of $42,543, equal to the estimated fair value of the options at the date of grants.  The
fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 5.0% risk-free interest,
0% dividend yield, 60% volatility, and expected lives ranging from one to three years.



During
2010 we also issued 500,000 stock options exercisable at $0.05 per share to one person, who is not an officer or a director.
No stock options have been issued in the six months ended June 30, 2011.



During
the three months ended June 30, 2011, 928,529 stock options were exercised and 920,160 warrants were exercised. There are no outstanding
warrants as of June 30, 2011.





|Stock Options
|-------------
|
|             



|Exercise Price per Share |  | Shares Under Option |            | Remaining Life in Years
|------------------------ |  | ------------------- | ---------- | -----------------------
|                         |  |                     |            |                        
|Outstanding              |  |                     |            |                        
|$0.35                    |  |                     | 212,500    |                        
|$0.30                    |  |                     | 60,000     |                        
|$0.20                    |  |                     | 300,000    |                        
|$0.20                    |  |                     | 300,000    |                        
|$0.11                    |  |                     | 15,000     |                        
|$0.11                    |  |                     | 15,000     |                        
|$0.11                    |  |                     | 300,000    |                        
|$0.05                    |  |                     | 15,450,000 |                        
|$0.05                    |  |                     | 100,000    |                        
|                         |  |                     |            |                        
|Exercisable              |  |                     |            |                        
|$0.35                    |  |                     | 212,500    |                        
|$0.30                    |  |                     | 60,000     |                        
|$0.20                    |  |                     | 300,000    |                        
|$0.20                    |  |                     | 300,000    |                        
|$0.11                    |  |                     | 15,000     |                        
|$0.11                    |  |                     | 15,000     |                        
|$0.11                    |  |                     | 300,000    |                        
|$0.05                    |  |                     | 15,450,000 |                        
|$0.05                    |  |                     | 100,000    |                        













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NOTE 8 -
INCOME TAXES



At
June 30, 2011, the Company had federal and state net operating loss carry forwards of approximately $40,000,000 that expire in
various years through the year 2024.



Due
to operating losses, there is no provision for current federal or state income taxes for the six months ended June 30, 2011 and
2010.



Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for federal and state income tax purposes.



The
Company’s deferred tax asset at June 30, 2011 consists of net operating loss carry forwards calculated using federal and
state effective tax rates equating to approximately $16,000,000 less a valuation allowance in the amount of approximately $16,000,000.
Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance.



The
Company’s total deferred tax asset as of June 30, 2011 is as follows:





|Net operating loss carry forwards |  | $ | 16,000,000   | 
|--------------------------------- |  | - | ------------ | 
|Valuation allowance               |  |   | (16,000,000) | 
|                                  |  |   |              | 
|Net deferred tax asset            |  | $ | —            | 





The reconciliation
of income taxes computed at the federal and state statutory income tax rate to total income taxes for the six months ended June
30, 2011 is as follows:







|Income tax computed at the federal statutory rate | 34%  
|------------------------------------------------- | -----
|Income tax computed at the state statutory rate   | 5%   
|Valuation allowance                               | (39%)
|Total deferred tax asset                          | 0%   







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



Forward
Looking Statements



When
used in this form 10-Q 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 unaudited financial statements and related notes which are included
under Item 1.



We
do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.



Overview



General





On May 16, 2011,
the Company transferred, through a spin-off to its then wholly owned subsidiary, Worlds Online Inc., the majority of its operations
and related operational assets. The Company retained its patent portfolio which it intends to continue to increase and to more
aggressively enforce against infringers. The Company also entered into a License Agreement with Worlds Online Inc. to sublicense
patented technologies.



Starting
in mid-2001 we were not able to generate enough revenue to sustain full operations and other sources of capital were not available.
As a result, we have had to significantly curtail our operations since that time and at times almost halt them all together.







Revenues



We
generated no revenue during the quarter because we transferred the operations of the Company to Worlds Online Inc.







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Item
2. Management's Discussions and Analysis of Financial Condition and Results of Operations (con’t)



Expenses



We
classify our expenses into two broad groups:



o
cost of revenues; and



o
selling, general and administration.







Liquidity
and Capital Resources



We
have had to severely diminish our operations from mid-since 2001 until the last half of 2007 due to a lack of liquidity. We were
able to issue equity and/or debt in the last few years and raise capital that we expect will help us to be better positioned to
compete for new business. We continue to pursue additional sources 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. If we cannot
start to generate sufficient revenues, we may need to halt operations.



RESULTS
OF OPERATIONS



Our
net revenues for each of the three months ended June 30, 2011 and 2010 were $0 and $38, respectively. Our net revenue for each
of the six months ended June 30, 2011 and 2010 were $199 and $75,574, respectively. The decrease in revenue is due to spinning
off the online business to Worlds Online Inc.



Three
and six months ended June 30, 2011 compared to three and six months ended June 30, 2010



Revenue
decreased by $38, to $0 for the three months ended June 30, 2011 from $38 in the prior year. Revenue decreased to $0 because VIP
subscription business has been transferred to Worlds Online Inc. The business up to the spin off continued to run in a severely
diminished mode due to the lack of liquidity. We need to raise a sufficient amount of capital to provide the resources required
that would enable us to continue running the business.





Cost
of revenues increased by $1,319 to $4,650 in the three months ended June 30, 2011 from $3,331 in the three months ended June 30,
2010.



Selling
general and administrative (S, G & A) expenses increased by $50,905 from $122,271 to $173,176 for the three months ended
June 30, 2010 and 2011, respectively.  Increase is primarily due to the increase in professional service fees including
consulting, legal and accounting fees. Common stock issued for services rendered increased by $210,000 to $210,000 in 2011 compared
to $0 for 2010. The increase is due to the strategic business consulting and advice agreements signed during the quarter and in
the last quarter of the prior year.



As
a result of the foregoing, we realized a net loss of $387,826 for the three months ended June 30, 2011 compared to a loss of $125,564
in the three months ended June 30, 2010, an increased loss of $262,262.



Revenue
decreased by $75,375 to $199 for the six months ended June 30, 2011 from $75,574 in the prior year. The Company spun off the online
businesses to Worlds Online Inc. The VIP subscriptions and revenue related to the deferred revenue agreement has been transferred
over to Worlds Online Inc. Before the spin off, the business was running in a severely diminished mode due to the lack of liquidity.
We still need to raise a sufficient amount of capital to provide the resources required that would enable us to continue to operate
the business.



Our
cost of revenues during the six months ended June 30, 2011 and 2010 are primarily comprised of (1) cost of goods sold: 2%
and 4%, respectively, and (2) selling general and administrative expenses: 34% and 96%, respectively (3) Common stock issued
for services rendered: 64% and 0%, respectively. Cost of sales on a consolidated basis increased $8,847 to $16,959 for the
six months ended June 30, 2011, from $8,112 in the six months ended June 30, 2010. Increase was due to a data recovery
project undertaken during the six months ended June 30, 2011 and not the result of sales. Selling general and administrative
expenses increased by approximately $152,959, from $206,675 to approximately $359,634 for the six months ended June 30, 2010
and 2011, respectively. Increase is due to an increase in professional service fees including business consulting, legal,
accounting and an increase in sales activity.



Common
stock issued for services rendered increased by $683,430 to $683,430 in 2011 compared to $0 for 2010. The increase is due to the
strategic business consulting and advice agreements signed during the quarter and in the last quarter of the prior year, and shares
issued to individuals who have been performing valuable services for the company over the years without any form of compensation.



As
a result of the foregoing we had a net loss of $1,059,825 for the six months ended June 30, 2011 compared to a loss of $139,213
in the six months ended June 30, 2010.





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Item
2. Management's Discussions and Analysis of Financial Condition and Results of Operations (con’t)



Liquidity
and Capital Resources



Our
financial and liquidity position has improved somewhat from the prior year period. Our unrestricted cash and cash equivalents
was $170,946 at June 30, 2011. At June 30, 2010, cash and cash equivalents was $27,380. There were no capital expenditures
in the three months ended June 30, 2011 or in the three months ended June 30, 2010.



Historically,
our primary cash requirements have been to fund the cost of operations, to keep the Company in compliance of its reporting requirements,
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 from mid-2001 through most of 2007. We were able to find
a small source of additional capital in 2007, 2008, 2009 and another in 2010. There can be no assurance that any significant financing
would become available to us at this time. The additional capital that we secured in previous years enabled us to bid on new business.
There can be no assurance that any such new business would be sold in the future.



On
December 24, 2008 we filed a patent infringement suit against NCSoft Corp in the United States District Court, Eastern District
of Texas in order to enforce our intellectual property rights under our patents. In April 2010, the parties agreed to settle the
matter, which settlement was later disputed in August 2010 but was resolved finally in September 2010, the terms of which the
parties have contractually agreed to keep confidential.





On
May 11, 2009, our management concluded that our audited financial statements for the years ended December 31, 2007 and 2008 and
our unaudited quarterly financial statements for the quarterly periods in such years should no longer be relied upon.  Specifically,
our liabilities were understated by approximately $1,714,179 on December 31, 2007 and by approximately $2,719,942 on December
31, 2008 (which amount is cumulative and includes the amount understated in 2007) with an overstatement of income on such dates
of $1,714179 and $1,005,763, respectively.  The facts underlying our original conclusion is that all of such liabilities
have exceeded the applicable statutes of limitations and based upon an opinion of counsel which stated that the likelihood of
our having to pay these liabilities was highly improbable, our independent auditor concurred with our decision to write off all
of such liabilities.  The staff (“Staff”) of the Securities and Exchange Commission, without disagreeing
with our position that payment of such liabilities was highly improbable, advised us that under the facts of our situation, it
was their conclusion that GAAP accounting required that the liabilities not be written off at this time.  Following
a series of calls with various Staff members, our management, in consultation with our counsel and independent auditor, agreed
to accept the Staff’s position.  We have received guidance from the Staff as to the necessary steps we need to
take to properly write off these liabilities and we expect to begin that process with certain of the largest creditors.  Regardless
of whether we are ultimately successful in writing off all or some of these liabilities, we do not believe that these restatements
will have any impact on our results of operations or cash flows as the fact remains that the statute of limitations has indeed
passed with respect to these liabilities and the likelihood of our having to pay them remains highly improbable.





Item
4. Controls And Procedures



As
of June 30, 2011, we carried out an evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended).
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of June 30, 2011. The above statement notwithstanding, you are cautioned that no system is foolproof.

Changes
in Internal Control Over Financial Reporting

During
the quarter covered by this report there were no changes in our internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.



This
quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company
to provide only management’s reports in this quarterly report.





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PART
II OTHER INFORMATION

Item
1. Legal Proceedings.





On
December 24, 2008 we filed a patent infringement suit against NC Soft Corp. in the United States District Court, Eastern District
of Texas in order to enforce our intellectual property rights under our patents. In April 2010, the parties agreed to settle the
matter, which settlement was later disputed in August 2010 but was resolved finally in September 2010, the terms of which the
parties have contractually agreed to keep confidential.





Item
1A. Risk Factors

We
are not obligated to disclose our risk factors in this report, however, limited information regarding our risk factors appears
in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
under the caption “Forward-Looking Statements” contained in this Quarterly Report on Form 10-Q and in “Item 1A.
RISK FACTORS” of our 2010 Annual Report on Form 10-K. There have been no material changes from the risk factors previously
disclosed in our 2010 Annual Report on Form 10-K.



Item
2. During the first quarter of 2011, 680,000 shares of unregistered common stock were issued to the
existing shareholders who entered into call option agreements with the Company. All of the shareholders were
“accredited” investors, no public advertising was used, and the stock certificates issued all contained
restrictive legends. Accordingly, the issuances were exempt under section 4(2) as not involving a public offering. The board
approved the issuance of 1,200,000 shares of unregistered common stock to be issued to individuals who have been performing
valuable services over the years to the company without any form of compensation.





Item
3. Defaults Upon Senior Securities



None.



Item
4. Reserved by the SEC.





Item
5. Other Information



None.



Item
6. Exhibits



|31.1 |  | Certification of Chief Executive
    Officer                                                                           
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                        
|31.2 |  | Certification of Chief Financial Officer                                                                               
|     |  |                                                                                                                        
|32.1 |  | Statement required by 18 U.S.C. Section
    1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                                        
|32.2 |  | Statement required by 18 U.S.C. Section
    1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.





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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 22, 2011

WORLDS
INC.



|By:
    /s/ Thomas KidrinThomas Kidrin
    President and CEO 
    By: /s/ Christopher RyanChristopher Ryan
    Chief Financial Officer
|--------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                      





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INDEX
TO EXHIBITS



|Exhibit
    No. |  | Description                                                                                                            
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------
|                |  |                                                                                                                        
|31.1            |  | Certification of Chief
    Executive Officer                                                                           
|                |  |                                                                                                                        
|31.2            |  | Certification of Chief
    Financial Officer                                                                           
|                |  |                                                                                                                        
|32.1            |  | Statement required
    by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
|                |  |                                                                                                                        
|32.2            |  | Statement required
    by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.