SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

             [X] Quarterly report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  For the quarterly period ended June 30, 1998

       [ ] Transition report under Section 13 or 15(d) of the Exchange Act

                         Commission file number 2-31876

                                   WORLDS INC.
        (Exact name of small business issuer as specified in its charter)

                                   New Jersey
                         (State or other jurisdiction of
                         incorporation or organization)

                                   13-3768554
                        (IRS Employer Identification No.)

                   15 Union Wharf, Boston, Massachusetts 02109
               (Address of principal executive offices)(Zip Code)


                                 (617) 725-8900
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during  the past 12  months,  and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X]  No [  ]

The  number of  shares of Common Stock  outstanding was  17,868,531 shares as of
June 30, 1998

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



<PAGE>





                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.


<PAGE>




                                                                     Worlds Inc.
                                                (a development stage enterprise)

                                                            Financial Statements
                          Period from April 8, 1997 (Inception) to June 30, 1998

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)

                                                            Financial Statements
                          Period from April 8, 1997 (Inception) to June 30, 1998




<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                                                        Contents

--------------------------------------------------------------------------------



          Worlds Inc. (the "Company")

          Financial statements (unaudited):
             Balance sheets                                                  F-3
             Statements of operations                                        F-4
             Statement of stockholders' deficit                              F-5
             Statements of cash flows                                        F-6
             Summary of accounting policies                           F-7 - F-10
             Notes to financial statements                           F-11 - F-15

          Worlds Inc. ("Predecessor")
             [Predecessor company - information prior to date of
                merger with the Company herein disclosed]:

          Financial statements (unaudited):
             Statements of operations                                       F-18
             Statements of cash flows                                       F-19
             Summary of accounting policies                          F-21 - F-24
             Notes to financial statements                           F-25 - F-26




<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                                                  Balance Sheets

--------------------------------------------------------------------------------

                                                      December 31,     June 30,
                                                          1997           1998
----------------------------------------------------  -----------   -----------
                                                                     (Unaudited)
Assets
Current:
   Cash and cash equivalents                          $ 3,541,829   $ 3,419,518
   Trade receivables, less allowances for
        doubtful accounts of $140,318 and $140,318            538          --
   Prepaid expenses and other current assets               74,175        34,287
----------------------------------------------------  -----------   -----------
        Total current assets                            3,616,542     3,453,805
Property and equipment, net of accumulated
   depreciation and amortization                          209,452       115,869
----------------------------------------------------  -----------   -----------
                                                      $ 3,825,994   $ 3,569,674
----------------------------------------------------  -----------   -----------
Liabilities and Stockholders' Deficit
Current:
   Accounts payable                                   $   568,707   $   303,074
   Accrued expenses                                       592,250       634,834
   Advanced customer billings and deferred revenue        436,140       436,140
   Current maturities of notes payable                    269,333       314,560
----------------------------------------------------  -----------   -----------
        Total current liabilities                       1,866,430     1,688,608
Long-term portion, notes payable                        1,968,333     1,906,666
----------------------------------------------------  -----------   -----------
        Total liabilities                               3,834,763     3,595,274
----------------------------------------------------  -----------   -----------
Stockholders' deficit (Notes 2 and 3):
   Common stock, $.001 par value - shares authorized
      30,000,000; issued 16,119,996 and 17,981,996         16,120        17,982
   Additional paid-in capital                           6,661,582     8,402,020
   Deficit accumulated during the development stage    (6,686,471)   (8,380,859)
----------------------------------------------------  -----------   -----------
                                                           (8,769)       39,143
   Treasury stock, at cost, 113,465 shares                   --         (64,743)
----------------------------------------------------  -----------   -----------
        Total stockholders' deficit                        (8,769)      (25,600)
----------------------------------------------------  -----------   -----------
                                                      $ 3,825,994   $ 3,569,674
----------------------------------------------------  -----------   -----------

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


                                      F-3

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                            Statements of Operations (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                              Cumulative,
                                                                                              period from
                                               Period from   Three months     Six months     April 8, 1997
                                              April 8, 1997      ended          ended         (inception)
                                                   to           June 30,       June 30,       to June 30,
                                              June 30, 1997     1998(a)        1998(a)          1998(a)
-------------------------------------------   -----------    ------------    ------------    -----------
<S>                                           <C>            <C>             <C>             <C>        
Net revenues                                  $      --      $     12,130    $     16,132    $    17,552
Costs and expenses:
   Cost of revenues                                  --           (22,500)        (25,101)       (25,101)
   Selling, general and administrative           (151,176)       (759,185)     (1,307,525)    (1,982,555)
   Research and development                          --          (302,516)       (534,428)      (534,428)
   Acquired research and development
      (Note 1)                                       --              --              --       (6,135,538)
-------------------------------------------   -----------    ------------    ------------    -----------
        Operating loss                           (151,176)     (1,072,071)     (1,850,922)    (8,660,070)
Other income (expenses):
   Interest income                                   --            35,054          76,992         90,585
   Interest expense                                  --           (35,656)        (72,112)       (88,804)
-------------------------------------------   -----------    ------------    ------------    -----------
        Loss before extraordinary item           (151,176)     (1,072,673)     (1,846,042)    (8,658,289)
Extraordinary item - gain on debt
   settlement                                        --              --           151,654        277,430
-------------------------------------------   -----------    ------------    ------------    -----------
Net loss                                      $  (151,176)   $ (1,072,673)   $ (1,694,388)   $(8,380,859)
-------------------------------------------   -----------    ------------    ------------    -----------
Loss per share (basic and diluted):
   Loss before extraordinary item             $      (.02)   $       (.06)           (.11)
   Extraordinary item                                --              --               .01
                                              -----------    ------------    ------------ 
        Net loss per share (basic and
           diluted)                           $      (.02)   $       (.06)   $       (.10)
                                              -----------    ------------    ------------ 
Weighted average common shares
   outstanding:
      Basic and diluted                         8,400,000      16,716,546      16,434,339
                                              -----------    ------------    ------------ 

   --------
<FN>
   (a) Includes the results of  Predecessor  and Academic which were merged into
       the Company on December 3, 1997.
</FN>
</TABLE>
                                 See accompanying summary of accounting policies
                                              and notes to financial statements.

                                      F-4

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                              Statement of Stockholders' Deficit

--------------------------------------------------------------------------------


Period from April 8, 1997 (inception) to June 30, 1998

<TABLE>
<CAPTION>
                                                                    Deficit
                                                                  accumulated
                                  Common stock       Additional   during the                    Total
                               Shares      Amount     paid-in     development    Treasury    stockholders'
                                                      capital       stage         stock        deficit
--------------------------   ----------    ------    ---------    ----------     --------    ----------
<S>                          <C>          <C>       <C>          <C>             <C>        <C>
Issuance of common stock
   to founding stockholders   8,400,000   $ 8,400   $  195,600   $      --       $  --      $   204,000
Sale of shares in private
   offering memorandum and
   shares issued to placement
   agent, net (Note 3)        4,810,000     4,810    3,689,866          --          --        3,694,676
Issuance of shares to
   Academic Computer
   Systems, Inc. (Note 2)       910,000       910      557,116          --          --          558,026
Issuance of shares
   pursuant to merger
   with Predecessor           1,999,996     2,000    1,998,000          --          --        2,000,000
   (Note 2)
Capital contribution
   resulting from
   forgiveness of debt to          --        --        221,000          --          --          221,000
   shareholders of
   Predecessor
Net loss for the period
   April 8 to                      --        --           --      (6,686,471)       --       (6,686,471)
   December 31, 1997
--------------------------------------------------------------------------------------------------------
Balance, December 31, 1997   16,119,996    16,120    6,661,582    (6,686,471)       --           (8,769)
Sale of shares in private
   offering memorandum
   (January 1998)                30,000        30       26,470          --          --           26,500
   (unaudited)
Sale of shares in public
   offering of common
   stock, net (June 1998)     1,832,000     1,832    1,713,968          --          --        1,715,800
   (unaudited)
Conversion of 113,465
   shares to certain
   stockholders
   (June 1998) (Note 2)            --        --           --            --       (64,743)       (64,743)
   (unaudited)
Net loss for the six
   months ended June 30,
   1998 (unaudited)                --        --           --      (1,694,388)       --       (1,694,388)
--------------------------------------------------------------------------------------------------------
Balance, June 30, 1998
   (unaudited)               17,981,996   $17,982   $8,402,020   $(8,380,859)   $(64,743)   $   (25,600)
</TABLE>
                                 See accompanying summary of accounting policies
                                              and notes to financial statements.

                                      F-5

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                            Statements of Cash Flows (Unaudited)

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                              Cumulative, period
                                                                              from April 8, 1997
                                                            Six months ended  (inception) to
                                                              June 30, 1998   June 30, 1998
--------------------------------------------------             -----------    -----------
<S>                                                            <C>            <C>
Cash flows from operating activities:
   Net loss                                                    $(1,694,388)   $(8,380,859)
--------------------------------------------------             -----------    -----------
   Adjustments to reconcile net loss to net cash used in
     operating activities:
        Depreciation and amortization                               93,583        109,906
        Gain on debt settlement                                   (151,654)      (277,430)
        Acquired research and development                             --        6,135,538
        Changes in operating assets and liabilities, net of
           effects from merger with Predecessor and
           Academic:
              Trade receivables                                        538           --
              Prepaid expenses and other assets                     39,888        133,604
              Accounts payable and accrued expenses                (71,395)       142,966
--------------------------------------------------             -----------    -----------
                Total adjustments                                  (89,040)     6,244,584
--------------------------------------------------             -----------    -----------
--------------------------------------------------             -----------    -----------
                Net cash used in operating activities           (1,783,428)    (2,136,275)
--------------------------------------------------             -----------    -----------
--------------------------------------------------             -----------    -----------
Cash flows from financing activities:
   Proceeds from sale of common stock to founding
      stockholders
                                                                      --          204,000
   Proceeds from sale of common stock in private
      offering memorandum                                           26,500      3,721,176
   Proceeds from sale of common stock in a public offering       1,715,800      1,715,800
   Payment of conversion price of shares to certain
      stockholders                                                 (64,743)       (64,743)
   Payment on note payable                                         (16,440)       (20,440)
--------------------------------------------------             -----------    -----------
              Net cash provided by financing activities          1,661,117      5,555,793
--------------------------------------------------             -----------    -----------
Net increase (decrease) in cash and cash equivalents              (122,311)     3,419,518
Cash and cash equivalents, beginning of period                   3,541,829           --
--------------------------------------------------             -----------    -----------
Cash and cash equivalents, end of period                       $ 3,419,518    $ 3,419,518
--------------------------------------------------             -----------    -----------
</TABLE>
                                 See accompanying summary of accounting policies
                                              and notes to financial statements.

                                      F-6

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)


                                                  Summary of Accounting Policies

--------------------------------------------------------------------------------

Definitions                         The Company is the  resulting  entity of two
                                    contemporaneous  mergers (the  "Mergers") of
                                    Worlds   Inc.,   a   Delaware    corporation
                                    ("Predecessor"),   with  and   into   Worlds
                                    Acquisition  Corp.,  a Delaware  corporation
                                    ("WAC"),  and WAC  with  and  into  Academic
                                    Computer   Systems,   Inc.,   a  New  Jersey
                                    corporation ("Academic"),  which changed its
                                    name to  Worlds  Inc.  (see  Note 2).  While
                                    Academic was the legal entity that  survived
                                    the mergers, WAC was the accounting acquiror
                                    in  both  mergers.   The  Company's   fiscal
                                    year-end is December 31.

                                    The  term  the  "Company,"  as used  herein,
                                    refers to the consolidated  entity resulting
                                    from  the two  contemporaneous  mergers,  as
                                    well  the  pre-merger  Predecessor,  WAC and
                                    Academic;  however,   Predecessor,  WAC  and
                                    Academic are hereinafter  sometimes referred
                                    to separately as the context requires.


Nature of Business                  WAC was  incorporated  on April  8,  1997 to
                                    design, develop and market three-dimensional
                                    ("3D") music oriented  Internet sites on the
                                    World   Wide   Web.   These  web  sites  are
                                    anticipated   to  utilize  3D   technologies
                                    developed by Predecessor.


Basis of Presentation               The  accompanying  financial  statements are
                                    unaudited;   however,   in  the  opinion  of
                                    management,  all adjustments necessary for a
                                    fair  statement  of  financial  position and
                                    results  for the  stated  periods  have been
                                    included.  These adjustments are of a normal
                                    recurring nature.  Selected  information and
                                    footnote  disclosures  normally  included in
                                    financial  statements prepared in accordance
                                    with    generally    accepted     accounting
                                    principles  have been  condensed or omitted.
                                    Results   for   interim   periods   are  not
                                    necessarily  indicative of the results to be
                                    expected for an entire  fiscal  year.  It is
                                    suggested  that  these  condensed  financial
                                    statements be read in  conjunction  with the
                                    audited     financial     statements     and
                                    accompanying  notes for the  Company for the
                                    year  ended  December  31,  1997 and for the
                                    Predecessor for the period ended December 3,
                                    1997.

                                      F-7

<PAGE>

                                    The financial statements include the results
                                    of Predecessor and Academic from December 4,
                                    1997,  the date of the Mergers  (the "Merger
                                    Date").

                                    The financial  statements have been prepared
                                    in   accordance   with  the   provisions  of
                                    Statement of Financial  Accounting Standards
                                    ("SFAS") No. 7,  "Accounting,  and Reporting
                                    by  Development  Stage  Enterprises,"  which
                                    requires  development  stage  enterprises to
                                    employ  the same  accounting  principles  as
                                    operating companies.


Fair Value of                       The    carrying    amounts   of    financial
Financial Instruments               instruments,  including  cash and short-term
                                    debt, approximated fair value as of June 30,
                                    1998   because  of  the   relatively   short
                                    maturity of the  instruments.  The  carrying
                                    value  of  long-term  debt,   including  the
                                    current portion,  approximates fair value as
                                    of June  30,1998,  based upon  estimates for
                                    similar debt issues.


Use of Estimates                    The  preparation of financial  statements in
                                    conformity    with    generally     accepted
                                    accounting principles requires management to
                                    make estimates and  assumptions  that affect
                                    the   reported   amounts   of   assets   and
                                    liabilities  and  disclosures  of contingent
                                    assets  and  liabilities  at the date of the
                                    financial   statements   and  the   reported
                                    amounts of revenues and expenses  during the
                                    reporting   period.   Actual  results  could
                                    differ from these estimates


Cash and Cash Equivalents           Cash and cash  equivalents  are comprised of
                                    highly  liquid  money  market   instruments,
                                    which  have  original  maturities  of  three
                                    months or less at the time of purchase.


Property and Equipment              Property and  equipment  are stated at cost.
                                    Depreciation   is   calculated   using   the
                                    straight-line   method  over  the  estimated
                                    useful lives of the assets, which range from
                                    two to five years.

                                      F-8

<PAGE>

Revenue Recognition                 Revenue  from  technology   development  and
                                    licensing  contracts is recognized  upon the
                                    attainment   of    contractual    milestones
                                    (approximating the  percentage-of-completion
                                    method).   Cash   received   in  advance  of
                                    revenues  earned  is  recorded  as  deferred
                                    revenue.


Software                            Development Costs Software development costs
                                    are charged to expense when  incurred  until
                                    the technological feasibility of the product
                                    has been  established.  After  technological
                                    feasibility   has  been   established,   any
                                    additional  costs would be  capitalizable in
                                    accordance  with  the  Financial  Accounting
                                    Standards   Board's  ("FASB")  SFAS  No.  86
                                    ("SFAS  No.  86").  No such  costs have been
                                    capitalized to date.


Research and Development Costs      The  Company  uses the  liability  method of
                                    accounting  for income  taxes in  accordance
                                    with SFAS No.  109,  "Accounting  for Income
                                    Taxes."   Deferred  income  tax  assets  and
                                    liabilities  are  recognized  based  on  the
                                    temporary  differences between the financial
                                    statement  and  income  tax bases of assets,
                                    liabilities and carryforwards  using enacted
                                    tax   rates.    Valuation   allowances   are
                                    established,   when  necessary,   to  reduce
                                    deferred  tax assets to the amount  expected
                                    to be realized.

                                      F-9

<PAGE>

Loss Per Share                      In 1997, the FASB's SFAS No. 128,  "Earnings
                                    per  Share,"  replaced  the  calculation  of
                                    primary and fully  diluted  earnings  (loss)
                                    per share  with basic and  diluted  earnings
                                    (loss) per share.  Unlike  primary  earnings
                                    per share, basic earnings per share excludes
                                    any  dilutive  effects of options,  warrants
                                    and convertible securities. Diluted earnings
                                    per share is very similar to the  previously
                                    reported  fully diluted  earnings per share.
                                    The  loss  per  share   amounts   have  been
                                    presented   to   conform  to  SFAS  No.  128
                                    requirements.  The common stock  equivalents
                                    which would arise from the exercise of stock
                                    options  and  warrants  are  excluded   from
                                    calculation  of diluted loss per share since
                                    their  effect is  anti-dilutive.  Therefore,
                                    the amounts  reported  for basic and diluted
                                    loss per share are the same.

Stock-Based Compensation            In October  1995,  the FASB  issued SFAS No.
                                    123,     "Accounting     for     Stock-Based
                                    Compensation" ("SFAS No. 123"). SFAS No. 123
                                    encourages  entities to adopt the fair value
                                    method  in  place  of  the   provisions   of
                                    Accounting  Principles Board Opinion No. 25,
                                    "Accounting  for Stock Issued to  Employees"
                                    ("APB No. 25"), for all  arrangements  under
                                    which  employees  receive shares of stock or
                                    other equity  instruments of the employer or
                                    the employer incurs liabilities to employees
                                    in amounts  based on the price of its stock.
                                    The  Company  has not adopted the fair value
                                    method  encouraged  by SFAS No. 123 and will
                                    continue to account for such transactions in
                                    accordance with APB No. 25.


Comprehensive Income                Effective   January  1,  1998,  the  Company
                                    adopted    SFAS    No.    130,    "Reporting
                                    Comprehensive   Income",  which  establishes
                                    standards   for  reporting  and  display  of
                                    comprehensive  income,  its  components  and
                                    accumulated  balances.  Comprehensive income
                                    is defined to include  all changes in equity
                                    except those  resulting from  investments by
                                    owners and distributions to owners. Adoption
                                    of  the   standard  has  had  no  effect  on
                                    financial statement  disclosures since there
                                    were no items of comprehensive income during
                                    the periods presented.

                                      F-10

<PAGE>



                                                                     Worlds Inc.
                                                (a development stage enterprise)

                                                   Notes to Financial Statements
                                    (information pertaining to the periods ended
                                            June 30, 1997 and 1998 is unaudited)
--------------------------------------------------------------------------------

1. Going Concern                    As   discussed   in  Note  3,  the   Company
                                    completed a private  placement raising gross
                                    proceeds of $4,415,000, consummated a merger
                                    agreement    with   a   development    stage
                                    enterprise,  Predecessor,  and  completed  a
                                    public  offering in June 1998 raising  gross
                                    proceeds of $1,832,000.  Predecessor had not
                                    generated    significant    revenues    from
                                    operations  and had an  accumulated  deficit
                                    from   inception   to  the  Merger  Date  of
                                    $21,236,139   and  a  capital   deficit   of
                                    $4,135,538.  The  acquisition of Predecessor
                                    by  the  Company  was  accounted  for  as  a
                                    purchase.   Accordingly,   $6,135,538,   the
                                    portion  of  the   purchase   allocable   to
                                    in-process research and development projects
                                    that   had   not    reached    technological
                                    feasibility and had no probable  alternative
                                    future uses,  was expensed by the Company at
                                    the date of merger.

                                    The accompanying  financial  statements have
                                    been prepared assuming that the Company will
                                    continue as a going concern.  The Company is
                                    in the development stage and has had minimal
                                    revenues from operations since the series of
                                    merger transactions. The Company anticipates
                                    that it currently  has only a portion of the
                                    funds   necessary   to   complete    product
                                    development and commercialization. There can
                                    be no  assurance  that the  Company  will be
                                    able to obtain  the  substantial  additional
                                    capital  resources  necessary  to pursue its
                                    business   plan  or  that  any   assumptions
                                    relating to its business  plan will prove to
                                    be accurate. The Company is pursuing sources
                                    of additional  financing and there can be no
                                    assurance  that any such  financing  will be
                                    available  to the  Company  on  commercially
                                    reasonable  terms,  or at all. Any inability
                                    to obtain  additional  financing will have a
                                    material  adverse  effect  on  the  Company,
                                    including  possibly requiring the Company to
                                    significantly curtail or cease operations.

                                    These factors raise  substantial doubt about
                                    the  ability of the Company to continue as a
                                    going concern.  The financial  statements do
                                    not  include  any  adjustments   that  might
                                    result from the outcome of this uncertainty.

                                      F-11

<PAGE>

2. The Mergers                      On December 3, 1997,  Predecessor was merged
                                    with and into  WAC in a  series  of  related
                                    transactions  which  included a simultaneous
                                    capital  transaction between the Company and
                                    Academic  (the   "Mergers")  and  a  private
                                    offering of WAC's  securities  (the "Private
                                    Placement").   In  both  the   merger   with
                                    Predecessor and the capital transaction with
                                    Academic,   WAC   was   the   acquiror   for
                                    accounting purposes.

                                    The acquisition of Predecessor was accounted
                                    for as a purchase  whereby all of the common
                                    and  preferred  stock  of  Predecessor  were
                                    exchanged for  1,999,996  shares of WAC. The
                                    shares  issued  to  Predecessor  common  and
                                    preferred  shareholders were valued at $1.00
                                    per share which  represented the share value
                                    in  the  private   placement  that  occurred
                                    during  this  time  period  (see  Note 3); a
                                    purchase price of approximately  $2,000,000.
                                    The  exchange  ratio  was  determined  after
                                    extensive  negotiation between management of
                                    Predecessor  and  WAC.   Predecessor  was  a
                                    development stage company, had not generated
                                    significant revenues from operations and had
                                    an  accumulated  deficit  from  inception to
                                    December  3,  1997  of  $21,236,139   and  a
                                    capital  deficit of  $4,135,538.  The assets
                                    acquired  of  Predecessor   (cash,   prepaid
                                    expenses,   property  and  equipment)   were
                                    recorded   at  fair   market   value   which
                                    approximated book value at December 3, 1997,
                                    and,  as  discussed  in Note 1 above,  since
                                    technological  feasibility  of  the  various
                                    Predecessor  technologies  acquired  had not
                                    been established,  the excess purchase price
                                    over   Predecessor's   capital   deficit  of
                                    $6,135,538 was expensed as acquired research
                                    and development.

                                      F-12

<PAGE>

                                    Academic  was an  inactive  company  with no
                                    operations.   The  value   assigned  to  the
                                    910,000  shares in the  capital  transaction
                                    with    Academic   on   December   3,   1997
                                    represented  Academic's net tangible  assets
                                    (primarily  cash) of  $558,026.  During June
                                    1998,  113,465  shares of common  stock were
                                    converted at $0.57 per share  ($64,743) as a
                                    result of  certain  stockholders  dissenting
                                    with  respect  to the  Academic/WAC  capital
                                    transaction   of  December  3,  1997.   Such
                                    reacquired  shares have been  classified  as
                                    treasury stock in the  accompanying  balance
                                    sheets.  Academic voluntarily reported under
                                    the  Securities  Exchange  Act of 1934  (the
                                    "Exchange Act").

                                    The Company  intends to  continue  reporting
                                    under the  Exchange  Act.  While no  trading
                                    market   existed  for  the   securities   of
                                    Academic,   or  currently   exists  for  the
                                    securities  of  the  Company,   the  Company
                                    intends  to  cause  its  common  stock to be
                                    traded on the Bulletin Board.


3. Private Placement and            The  Private  Placement  called  for  WAC to
   Public Offering                  offer for sale a maximum of 50 units (57-1/2
                                    with the over-allotment), each consisting of
                                    120,000  shares of WAC's  common  stock (the
                                    "Units") at a price of $120,000 per Unit. In
                                    connection with the Private  Placement,  the
                                    placement  agent was to receive  one warrant
                                    to purchase  one share of WAC's common stock
                                    at $1 per  share  for  every  $40  of  gross
                                    proceeds  from  the  sale of the  Units.  On
                                    November 21, 1997, WAC sold 31.67 Units with
                                    gross  proceeds  of  $3,800,000   (3,800,000
                                    shares)  (the  "Initial  Private   Placement
                                    Closing") and the placement agent was issued
                                    425,000 shares of common stock.  On December
                                    31,  1997,  the Company sold 4.88 Units with
                                    gross proceeds of $585,000 (585,000 shares).
                                    On January 2, 1998 a further  30,000  shares
                                    were issued with gross  proceeds of $30,000.
                                    Cumulative net proceeds,  after  commissions
                                    and  expenses  of the  offering,  aggregated
                                    $3,721,176.

                                      F-13

<PAGE>

                                    WAC agreed to  include  the shares of common
                                    stock  underlying  the  Units  sold  in  the
                                    Private  Placement  (the "Private  Placement
                                    Shares") in a  registration  statement to be
                                    filed  with  the   Securities  and  Exchange
                                    Commission  (the "SEC").  Such  registration
                                    statement was declared  effective by the SEC
                                    on May 1, 1998.  During June 1998,  WAC sold
                                    1,832,000 shares in a public offering of its
                                    stock  and   received   gross   proceeds  of
                                    $1,832,000.  Net proceeds, after commissions
                                    of this offering, aggregated $1,715,800.

4. Agreement and Plan of Merger     On June 25, 1998,  the Company  entered into
                                    an   agreement   and  plan  of  merger   and
                                    reorganization  (the "Agreement") with Unity
                                    First   Acquisition    Corp.,   a   Delaware
                                    corporation  ("Unity"),  whereby Unity would
                                    acquire all of the outstanding shares of the
                                    Company  in  exchange  for shares of its own
                                    common   stock.    The    acquisition,    if
                                    consummated,  calls  for  each  share of the
                                    Company's  stock being  converted  into .357
                                    shares  of  Unity's  common  stock.  At that
                                    point,  the  Company  would  "reverse-merge"
                                    into Unity  which would then change its name
                                    to "Worlds  Inc." The  Agreement  is,  among
                                    other  conditions,  subject to  approval  by
                                    both Unity and the  Company's  stockholders.
                                    The  Company's   current   management   will
                                    continue   as   management   following   the
                                    transaction.

                                      F-14

<PAGE>

                                    Unity is a  "blank  check"  company  with no
                                    operations,  formed in May 1996 for the sole
                                    and   exclusive   purpose  of  acquiring  an
                                    operating   business.   Certain  of  Unity's
                                    management and stockholders are stockholders
                                    of the Company.  In the aggregate,  directly
                                    and indirectly,  they own  approximately 1.1
                                    million  shares  of  the  Company's   common
                                    stock.     Unity's    unaudited    financial
                                    statements  as of April 30, 1998 showed that
                                    Unity had  approximately  $6,360,000  in net
                                    worth, almost all of which is in the form of
                                    cash or cash equivalents.  On June 25, 1998,
                                    Unity had  outstanding  1,875,000  shares of
                                    common  stock;  1,350,000  Class A  warrants
                                    exercisable   at  $5.50   per   share;   and
                                    1,350,000  Class B warrants  exercisable  at
                                    $7.50  per  share.  Unity  also has  125,000
                                    underwriter's      warrants     outstanding,
                                    exercisable  at a price of $6.60 per warrant
                                    to purchase up to a like number of shares of
                                    common  stock,  and  Class  A  and  Class  B
                                    warrants.  Unity's common stock is quoted on
                                    the Bulletin Board under the symbol "UFAC".

                                    The Agreement  contemplates  that  following
                                    the  consummation  of the  transaction,  the
                                    officers,     directors     and    principal
                                    stockholders  of the  Company and Unity will
                                    lock up their shares for twelve months.

                                      F-15
<PAGE>




                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)

                                                            Financial Statements
                                  Six Months Ended June 30, 1997 and Period from
                                  April 26, 1994 (Inception) to December 3, 1997



<PAGE>




                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)

                                                            Financial Statements
                                  Six Months Ended June 30, 1997 and Period from
                                  April 26, 1994 (Inception) to December 3, 1997



<PAGE>



                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)


                                                                        Contents

--------------------------------------------------------------------------------

          Worlds Inc. ("Predecessor") is  considered a predecessor  company  and
             the information  disclosed herein is as of and prior to the date of
             merger with Worlds Inc. (formerly Worlds Acquisition Corp.) ("WAC")
             on December 3, 1997.

          Financial statements (unaudited):
             Statements of operations                                       F-19
             Statements of cash flows                                       F-20
             Summary of accounting policies                          F-21 - F-24
             Notes to financial statements                           F-25 - F-26



<PAGE>



                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)


                                                        Statements of Operations

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                          Three months    Six months ended
                                                          ended June 30,  ended June 30,    Cumulative, period
                                                          1997            1997              from inception to
                                                          (unaudited)     (unaudited)       December 3, 1997(a)
----------------------------------------------------      ---------       -----------       ------------
<S>                                                       <C>             <C>               <C>         
Net revenues                                              $  24,342       $    64,327       $  6,026,691
----------------------------------------------------      ---------       -----------       ------------
Costs and expenses:
   Cost of revenues                                           9,026            27,629         11,279,348
   Selling, general and administrative                      556,395         1,800,488         10,602,749
   Research and development                                  76,595           388,159          5,388,340
   Lawsuit settlements                                         --                --              509,200
----------------------------------------------------      ---------       -----------       ------------
        Total costs and expenses                            642,016         2,216,276         27,779,637
----------------------------------------------------      ---------       -----------       ------------
        Operating loss                                     (617,674)       (2,151,949)       (21,752,946)
Other income (expenses):
   Interest income                                              431            10,344            237,629
   Interest expense                                         (34,511)          (71,339)          (171,082)
   Gain (loss) on disposal of property and
      equipment                                              (2,085)            4,070            (79,125)
   Income from sale of technology                              --             260,100            260,100
----------------------------------------------------      ---------       -----------       ------------
        Loss before income taxes and extraordinary
           item                                            (653,839)       (1,948,774)       (21,505,424)
Income taxes                                                 (2,500)           (5,000)          (120,000)
----------------------------------------------------      ---------       -----------       ------------
        Loss before extraordinary item                     (656,339)       (1,953,774)       (21,625,424)
Extraordinary item - gain on debt settlement
                                                               --                --              389,285
----------------------------------------------------      ---------       -----------       ------------
Net loss                                                  $(656,339)      $(1,953,774)      $(21,236,139)
----------------------------------------------------      ---------       -----------       ------------

--------
<FN>
(a)      Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)
</FN>
</TABLE>
                                 See accompanying summary of accounting policies
                                              and notes to financial statements.


                                      F-19

<PAGE>


                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)


                                                        Statements of Cash Flows

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                           Six months ended  Cumulative, period
                                                                           June 30, 1997     from inception to
                                                                           (unaudited)       December 3, 1997(a)
---------------------------------------------------------------------      -----------       ------------
<S>                                                                        <C>               <C>          
Cash flows from operating activities:
   Net loss                                                                $(1,953,774)      $(21,236,139)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation and amortization                                          120,357            721,097
        (Gain) loss on disposal of property and equipment                       (4,070)            79,125
        Gain on debt settlement                                                   --             (389,284)
        Compensation related to stock options                                    6,801            761,453
        Compensation related to common stock issuance                             --               58,525
        Licensed technology expense                                               --              750,000
        Changes in operating assets and liabilities:
           Trade receivables                                                   489,050               --
           Prepaid expenses and other assets                                   111,250           (167,891)
           Accounts payable and accrued liabilities                           (118,503)         1,856,619
           Advanced customer billings and deferred revenue                        --              436,140
---------------------------------------------------------------------      -----------       ------------
              Net cash used in operating activities                         (1,348,889)       (17,130,355)
---------------------------------------------------------------------      -----------       ------------
Cash flows used in investing activities:
   Acquisition of property and equipment                                        (2,063)          (999,302)
---------------------------------------------------------------------      -----------       ------------
Cash flows from financing activities:
   Proceeds from issuance of common stock                                         --              116,857
   Proceeds from issuance of preferred stock, net of issuance costs               --           16,163,766
   Advance from Worlds Inc. (formerly Worlds Acquisition Corp.                 100,000            561,397
   Payments on capital lease                                                      --             (116,018)
   Payments on note payable                                                    (40,000)          (190,000)
   Proceeds from note payable                                                  650,000          1,650,000
---------------------------------------------------------------------      -----------       ------------
              Net cash provided by financing activities                        710,000         18,186,002
---------------------------------------------------------------------      -----------       ------------
Net increase (decrease) in cash and cash equivalents                          (640,952)            56,345
Cash and cash equivalents, beginning of period                                 894,692               --
---------------------------------------------------------------------      -----------       ------------
Cash and cash equivalents, end of period                                   $   253,740       $     56,345
---------------------------------------------------------------------      -----------       ------------
Supplemental disclosures of cash flow information:
   Interest paid                                                           $      --         $     23,916
   Income taxes paid                                                             2,128              5,620
---------------------------------------------------------------------      -----------       ------------
Disclosure of Noncash Financing and Investing Activities:
   In the six months ended June 30,  1997,  as part of the  restructuring  of
      operations,  the Predecessor  disposed of property and equipment with a
      net book value of $252,180,  which included $138,439 of equipment under
      capital  leases.  The  related  capital  lease  obligations,   totaling
      $123,013, were assumed by the lessor and a party which acquired certain
      assets  used  in  the  Predecessor's  prior  Seattle  operations.   The
      agreement  with  this  party  also  resulted  in a  reduction  of trade
      payables totaling $87,226.
--------
<FN>
(a)      Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)
</FN>
</TABLE>
                                 See accompanying summary of accounting policies
                                              and notes to financial statements.

                                      F-20

<PAGE>



                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)


                                                  Summary of Accounting Policies

--------------------------------------------------------------------------------

Nature of Business                  Worlds   Inc.   (the    "Predecessor")   was
                                    incorporated  under the laws of  Delaware on
                                    April 26, 1994. The  Predecessor  was formed
                                    to develop and  commercialize  3D multi-user
                                    tools  and  technologies  for  the  Internet
                                    market.    The   Predecessor   is   in   the
                                    development  stage  and,  as  such,  has not
                                    generated    significant    revenues    from
                                    operations.


Basis of Presentation               The  accompanying  financial  statements are
                                    unaudited;   however,   in  the  opinion  of
                                    management,  all adjustments necessary for a
                                    fair  statement  of  financial  position and
                                    results  for the  stated  periods  have been
                                    included.  These adjustments are of a normal
                                    recurring nature.  Selected  information and
                                    footnote  disclosures  normally  included in
                                    financial  statements prepared in accordance
                                    with    generally    accepted     accounting
                                    principles  have been  condensed or omitted.
                                    Results   for   interim   periods   are  not
                                    necessarily  indicative of the results to be
                                    expected for an entire  fiscal  year.  It is
                                    suggested  that  these  condensed  financial
                                    statements be read in  conjunction  with the
                                    audited     financial     statements     and
                                    accompanying  notes for the  Predecessor for
                                    the period ended December 3, 1997.

                                    The accompanying  financial  statements have
                                    been prepared  assuming that the Predecessor
                                    will  continue  as  a  going  concern.   The
                                    Predecessor is in the development stage (see
                                    Note 1) and has  suffered  recurring  losses
                                    from  operations  since its  inception  that
                                    raises  substantial  doubt about its ability
                                    to   continue  as  a  going   concern.   The
                                    financial  statements  do  not  include  any
                                    adjustments   that  might  result  from  the
                                    outcome of this  uncertainty.  As more fully
                                    described  in Note 2, on  December  3, 1997,
                                    the   Predecessor   consummated   a   merger
                                    agreement with Worlds Inc.  (formerly Worlds
                                    Acquisition  Corp.) ("WAC"), a company which
                                    had completed a private  placement  offering
                                    of securities.

                                      F-21

<PAGE>

                                    The financial  statements have been prepared
                                    in   accordance   with  the   provisions  of
                                    Statement of Financial  Accounting Standards
                                    ("SFAS") No. 7, "Accounting and Reporting by
                                    Development   Stage    Enterprises,"   which
                                    requires  development  stage  enterprises to
                                    employ  the same  accounting  principles  as
                                    operating companies.


Restructuring of Operations         Due  to   recurring   losses,   insufficient
                                    revenue, a working capital deficit and a net
                                    stockholders'   deficit,  the  Predecessor's
                                    management  made  significant  reductions in
                                    operations   in   February   1997  that  are
                                    reflected  in  the  Predecessor's  financial
                                    statements  for the period ended December 3,
                                    1997. In March 1997, the Predecessor engaged
                                    an outside  management  firm to assist  with
                                    the  downsizing  of  operations   which  has
                                    included a major  reduction in employees and
                                    a  consolidation  of all  operations  to one
                                    location in San Francisco.


Use of Estimates                    The  preparation of financial  statements in
                                    conformity    with    generally     accepted
                                    accounting principles requires management to
                                    make estimates and  assumptions  that affect
                                    the   reported   amounts   of   assets   and
                                    liabilities  and  disclosures  of contingent
                                    assets  and  liabilities  at the date of the
                                    financial   statements   and  the   reported
                                    amounts of revenues and expenses  during the
                                    reporting   period.   Actual  results  could
                                    differ from these estimates.


Revenue Recognition                 Revenue  from  technology   development  and
                                    licensing  contracts is recognized  upon the
                                    attainment   of    contractual    milestones
                                    (approximating the  percentage-of-completion
                                    method).   Cash   received   in  advance  of
                                    revenues  earned  is  recorded  as  deferred
                                    revenue.

                                      F-22

<PAGE>

Software Development Costs          Software  development  costs are  charged to
                                    expense    when    incurred     until    the
                                    technological feasibility of the product has
                                    been   established.    After   technological
                                    feasibility   has  been   established,   any
                                    additional  costs would be  capitalizable in
                                    accordance  with SFAS No.  86. No such costs
                                    have been capitalized to date.


Research and Development Costs      Research and development costs are  expensed
                                    as incurred.


Income Taxes                        The Predecessor uses the liability method of
                                    accounting  for income  taxes in  accordance
                                    with SFAS No.  109,  "Accounting  for Income
                                    Taxes.".  Deferred  income  tax  assets  and
                                    liabilities  are  recognized  based  on  the
                                    temporary  differences between the financial
                                    statement  and  income  tax bases of assets,
                                    liabilities and carryforwards  using enacted
                                    tax   rates.    Valuation   allowances   are
                                    established,   when  necessary,   to  reduce
                                    deferred  tax assets to the amount  expected
                                    to be realized.


Concentration of Credit Risk        The   Predecessor   derives   revenues  from
                                    corporate   customers   in  a   variety   of
                                    industries.  For the periods  ended June 30,
                                    1997 and  December  3, 1997,  no  individual
                                    customer  accounted  for  more  than  10% of
                                    revenues.

                                      F-23

<PAGE>

New Accounting Standards            Effective  January 1, 1996, the  Predecessor
                                    adopted  the  provisions  of SFAS  No.  123,
                                    "Accounting for  Stock-Based  Compensation".
                                    Under   this    standard,    companies   are
                                    encouraged,  but not required,  to adopt the
                                    fair value method of accounting for employee
                                    stock-based  transactions.  Under  the  fair
                                    value method,  compensation cost is measured
                                    at the grant date based on the fair value of
                                    the award and is recognized over the service
                                    period, which is usually the vesting period.
                                    Companies   are  permitted  to  continue  to
                                    account     for     employee     stock-based
                                    transactions  under  Accounting   Principles
                                    Board  Opinion  ("APB") No. 25,  "Accounting
                                    for  Stock  Issued  to  Employees,"  but are
                                    required  to  disclose  pro forma net income
                                    and  earnings per share as if the fair value
                                    method has been adopted. The Predecessor has
                                    elected   to   continue   to   account   for
                                    stock-based compensation under APB No. 25.

                                      F-24

<PAGE>



                                                       Worlds Inc. - Predecessor
                                                (a development stage enterprise)


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

1. Going Concern                    The accompanying  financial  statements have
                                    been  prepared  on  a  going-concern  basis,
                                    which contemplates the realization of assets
                                    and the  satisfaction  of liabilities in the
                                    normal  course of business.  As shown in the
                                    financial statements, the Predecessor, as of
                                    December  3, 1997,  had  incurred  recurring
                                    losses since inception totaling $21,236,139.
                                    As discussed in Note 2, on December 3, 1997,
                                    the   Predecessor   consummated   a   merger
                                    agreement  with  WAC,  a  company  which had
                                    completed  a private  placement  offering of
                                    securities   whereby   $4,415,000  of  gross
                                    proceeds was raised.

                                    The Predecessor  anticipates,  however, that
                                    it currently has only a portion of the funds
                                    necessary  to permit it to complete  product
                                    development and commercialization. There can
                                    be no assurance that the Predecessor will be
                                    able to obtain  the  substantial  additional
                                    capital  resources  necessary  to permit the
                                    Predecessor  to pursue its business  plan or
                                    that  any   assumptions   relating   to  its
                                    business plan will prove to be accurate. WAC
                                    is pursuing sources of additional  financing
                                    and there can be no assurance  that any such
                                    financing   will  be  available  to  WAC  on
                                    commercially  reasonable  terms,  or at all.
                                    Any inability to obtain additional financing
                                    will have a material  adverse  effect on the
                                    Predecessor  and  WAC,   including  possibly
                                    requiring   the   Predecessor   or   WAC  to
                                    significantly curtail or cease operations.

                                    These factors raise  substantial doubt about
                                    the ability of the  Predecessor  to continue
                                    as a going concern. The financial statements
                                    do not  include any  adjustments  that might
                                    result from the outcome of this uncertainty.

                                      F-25

<PAGE>

2. Merger                           On December  3, 1997,  the  Predecessor  was
                                    merged with and into  Worlds Inc.  (formerly
                                    Worlds   Acquisition  Corp.)  ("WAC")  in  a
                                    series   of   related   transactions   which
                                    included  the  simultaneous  merger with and
                                    into Academic Computer Systems,  Inc., a New
                                    Jersey    corporation    ("Academic")   (the
                                    "Mergers")  and a private  offering of WAC's
                                    securities (the "Private Placement"). All of
                                    the  common  and  preferred   stock  of  the
                                    Predecessor  were  exchanged  for  1,999,996
                                    shares  of  WAC.  WAC  was  incorporated  in
                                    Delaware  on  April  8,  1997 to  engage  in
                                    designing,    developing    and    marketing
                                    three-dimensional   ("3D")  music   oriented
                                    Internet  sites on the World Wide Web. These
                                    web  sites are  anticipated  to  utilize  3D
                                    technologies  developed by the  Predecessor.
                                    Academic  was an  inactive  company  with no
                                    operations.  Academic  voluntarily  reported
                                    under the  Securities  Exchange  Act of 1934
                                    "Exchange  Act").  The combined  entity that
                                    resulted  from the  Mergers  (the  "Combined
                                    Entity") intends to continue reporting under
                                    the Exchange  Act.  While no trading  market
                                    existed for the  securities of Academic,  or
                                    currently  exists for the  securities of the
                                    Combined Entity, the Combined Entity intends
                                    to cause  its  common  stock to be traded on
                                    the Bulletin Board.

                                      F-26

<PAGE>

Item 2. Management's Discussion And Analysis Of Financial Conditions And Results
        Of Operations.

Statements  contained herein which are not historical facts are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not limited to, general economic conditions,  the
Company's  ability to  complete  development  and then market its  products  and
competitive factors and other risk factors detailed in the Companys filings with
the Securities and Exchange Commission.

The following  material and the financial  statements  included herein should be
read in conjunction with the Company's audited financial statements.

The Company was  originally  formed on May 20, 1968.  Since 1975 the Company has
been inactive with no operations  and its only income has come from interest and
dividends.  Following a series of mergers in December 1997 (the "Mergers"),  the
Company is engaged in the business and operations  formerly  conducted by Worlds
Inc., a Delaware  corporation  ("Predecessor").  Accordingly,  a discussion  and
analysis of the  Company's  financial  condition  and results of its  operations
would be of limited  import to any reader as it would only cover  activities (or
lack  thereof)  which have no meaning in the  context of the  Company's  current
operations.  Thus, included herein is a discussion and analysis of the financial
condition and results of the operations of Predecessor's pre-Mergers operations.

Background

Predecessor  was formed in April 1994 to design,  develop and  commercialize  3D
multi-user  tools and  technologies  for the  Internet  market.  From  inception
through 1997,  Predecessor's  operations were limited and consisted primarily of
start-up  activities,  including  recruiting  personnel,  raising  capital,  and
research and development. In the third quarter of 1996, Predecessor launched its
first commercial  user-oriented 3D chat site,  Worlds Chat 1.0 and began selling
the client interface software through direct sales channels. In October of 1996,
Predecessor introduced its first commercial toolset for developing 3D multi-user
applications.  In the first  quarter of 1997,  after an  unsuccessful  effort to
raise capital,  Predecessor became insolvent and released most of its personnel,
and management sought to sell Predecessor and/or its technology.

Predecessor  has not generated  significant  revenues,  and the Company will not
generate significant  revenues,  if ever, until after it successfully  completes
development  and market  testing of Worlds  Platinum  and its 3D Internet  music
sites,  and  attracts and retains a  significant  number of  subscribers  and/or
advertisers.  The Company anticipates that it will continue to incur significant
losses until,  at the earliest,  the Company  generates  sufficient  revenues to
offset the substantial up-front expenditures and operating costs associated with
developing and commercializing its proposed products.  There can be no assurance
that the  Company  will be able to  attract  and retain a  sufficient  number of
subscribers  and/or  advertisers  to  generate  significant  revenues or achieve
profitable  operations  or that  its  products  and  services  will  prove to be
commercially viable.

Predecessor  (and now the  Company),  classified  its expenses  into three broad
groups: (i) research and development;  (ii) cost of revenues; and (iii) selling,
general and  administration.  Revenues consisted primarily of production service
activities and sales of technology licenses.

Software  development  costs  (consisting  primarily  of  salaries  and  related
expenses) incurred prior to establishing  technological feasibility are expensed
in accordance with Financial Accounting Standards Board (FASB) Statement No. 86.
In accordance  with FASB 86, the Company will  capitalize  software  development
costs at such time as the  technological  feasibility  of the  product  has been
established.

                                       1

<PAGE>

Plan of Operation

During the next twelve months of operation the Company intends to (i) refine and
commercialize the technology of Predecessor by producing interactive,  3D, music
related  websites and distribute  access to these web sites on enhanced  compact
discs  ("CD+")  of various  recording  artists  via  traditional  retail  record
outlets,  working in  conjunction  with major  record  labels,  (ii) provide the
Company's  proprietary 3D toolsets to aid  programmers in the creation of unique
3D user experiences on the Internet, and (iii) offer the Company's 3D technology
for non-music applications such as corporate intranets.

The Company is presently completing work on Worlds Platinum,  the latest version
of the Company's 3D internet  software,  to adapt it for distribution and use on
CD+ media.  The Company is also in discussions  with several major record labels
and companies for them to distribute  Worlds Platinum,  along with music related
web site access and graphics files co-authored by the Company and the particular
record label or company.  While the Company  foresees no particular  obstacle to
completing  work on Worlds  Platinum,  the development of software is inherently
fraught with unforeseen  delays resulting from bugs, lack of coordination  among
development  staff,  integration  with other software and hardware,  and general
design flaws,  among other  problems.  In addition,  the  Company's  strategy of
distributing its products on CD+ is wholly dependent upon obtaining distribution
agreements  with record  labels or companies.  To date,  the Company has no such
agreements and does not expect to have any until it can demonstrate  that it has
successfully adapted Worlds Platinum for distribution on CD+ media as planned.

The Company  currently has sufficient cash resources to meet the requirements of
its  business  plan over the next twelve  months.  The Company  currently  has 8
full-time employees and is working with eight independent  software  contractors
who were former employees of Predecessor. The Company does not anticipate hiring
more than 2-3 additional  employees or purchasing  additional plant or equipment
until  product  sales  increase  significantly  and/or  additional  financing is
obtained.

By  agreement  dated  as of June  25,  1998,  the  Company  agreed,  subject  to
shareholder approval and other conditions, to merge into Unity First Acquisition
Corp.  ("Unity"),  a publicly  traded  blank check  company  with  approximately
$6,000,000 in liquid  assets,  by exchanging  each Company share of Common Stock
for .357  shares of Unity  resulting  in the  Company's  shareholders  retaining
ownership of in excess of 75% of the merged entity (the "Unity Merger").

                                       2

<PAGE>

Results of Operations of the Company

(Note to Results of Operations.
 The Mergers with Predecessor occurred on December 3, 1997)


   Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997

                            Statements of Operations


                                         Worlds Inc.   Worlds Inc. -
                                                       Predecessor

                                           6/30/98       6/30/97
                                         ----------    ----------
Net Revenues                                 16,132        64,327
Costs & Expenses:
  Cost of revenues                          (25,101)      (27,629)
  Selling, general & administrative      (1,307,525)   (1,800,488)
  Research & development                   (534,428)     (388,159)
                                         ----------    ----------
Operating Loss                           (1,850,922)   (2,151,949)
                                         ----------    ----------


Other income (expense):
  Interest income                            76,992        10,344
  Interest expense                          (72,112)      (71,339)
  Gain on disposal of equipment                             4,070
  Income from sale of technology                           26,100
                                         ----------    ----------
Loss before taxes & extraordinary item   (1,846,042)   (1,948,774)

Income taxes                                               (5,000)

                                         ----------    ----------
Loss before extraordinary item           (1,846,042)   (1,953,774)

Extraordinary item - gain on debt
settlement                                  151,654

                                         ----------    ----------
Net Loss                                 (1,694,388)   (1,953,774)
                                         ----------    ----------



     In the first six months of 1998 the company continued the implementation of
     the  new  business  plan.  Significant  expenditure  was  incurred  towards
     completion of the Platinum  technology and also with legal and professional
     fees as the company proceeds with its fund raising activities. In the first
     quarter  of 1997  Predecessor  was  insolvent  and had  failed to raise any
     additional   capital.   In  January  and  February  1997  the  majority  of
     Predecessor's  personnel  were  released  and most of its  management  team
     resigned. Normal operations of Predecessor ceased and significant wind down
     costs were  incurred.  The  Seattle  network  operations  center and Active
     Worlds, an earlier generation of Predecessor's technology,  were both sold,
     resulting in net proceeds of $260,100

                                       3

<PAGE>

     Revenues are nominal and are derived from the company's  WorldsChat product
     and one custom production  project.  Revenue was $16,132 and had associated
     direct costs of $25,101 for the six months ended June 30, 1998  compared to
     $64,327 in revenue and $27,629 of direct costs for the same period in 1997.

     Selling,  general and  administrative  expenses were $1,307,525 for the six
     months ended June 30, 1998.  This  represented  a decrease of $492,963 from
     $1,800,488  compared to the six months ended June 30, 1997.  This  decrease
     was  directly   attributable  to  the  higher  costs  associated  with  the
     Predecessor ceasing normal operations in the first quarter of 1997.

     Research and  development  costs  increased by $146,269 to $534,428 for the
     six months ended June 30, 1998 from  $388,159 for the six months ended June
     30, 1997.  This increase is directly  attributable  to the company  ceasing
     development technology at the end of the first quarter of 1997.

     Other income included  $76,992 of interest income in the six months to June
     30,1998  earned from the  proceeds  of the recent  share  offerings.  Other
     income  in the six  months to June 30,  1997  included  interest  income of
     $10,344,  the sale of the  Activeworlds  technology  in the net  amount  of
     $260,100 and a property  disposal gain of $4,070.  Other expenses  included
     interest  expense of $72,112  directly  attributable  to the  Predecessor's
     notes payable in the six months to June 30, 1998.  Interest expenses in the
     six months to June 30, 1997 were $71,339.

     As a result of the  foregoing,  plus a gain on debt  settlement of $151,654
     during  the  first  quarter  of 1998,  Worlds  Inc  incurred  a net loss of
     $1,694,388  for  the  six  months  to  June  30,1998,  compared  to a  loss
     $1,953,774 for the six months to June 30,1997 a decrease of 13%.




   Three Months Ended June 30, 1998 Compared with 3 months Ended June 30, 1997

                            Statements of Operations


                                      Worlds Inc.   Worlds Inc. -
                                                    Predecessor

                                        6/30/98      6/30/97
                                      ----------    --------
Net Revenues
                                          12,130      24,342

Costs & Expenses:
  Cost of revenues                       (22,500)     (9,026)
  Selling, general & administrative     (759,185)   (556,395)
  Research & development                (302,516)    (76,595)
                                      ----------    --------
Operating Loss                        (1,072,071)   (617,674)
                                      ----------    --------
Other income
(expense):
  Interest income                         35,054         431
  Interest expense                       (35,656)    (34,511)
  Loss on disposal of equipment                       (2,085)
                                      ----------    --------
Loss before taxes                     (1,072,673)   (653,839)

Income taxes                                --        (2,500)
                                      ----------    --------
Net Loss                              (1,072,673)   (656,339)
                                      ----------    --------

                                       4

<PAGE>

     In the second quarter of 1998 the company  continued the  implementation of
     the  new  business  plan.  Significant  expenditure  was  incurred  towards
     completion of the Platinum technology.


     Revenues are nominal and are derived from the company's  WorldsChat product
     and one custom production  project.  Revenue was $12,130 and had associated
     direct costs of $22,500 for the three  months ended June 30, 1998  compared
     to  $24,342 in revenue  and $9,026 of direct  costs for the same  period in
     1997.

     Selling,  general and  administrative  expenses were $759,185 for the three
     months ended June 30, 1998.  This  represented  a increase of $202,790 from
     $556,395  compared to the three months ended June 30, 1997.  This  increase
     was directly  attributable to the Predecessor  ceasing normal operations in
     the first quarter of 1997.

     Research and  development  costs  increased by $225,921 to $302,516 for the
     three  months  ended June 30, 1998 from  $76,595 for the three months ended
     June 30, 1998.  This increase was directly  attributable to the Predecessor
     ceasing normal operations in the first quarter of 1997

     Other  income  included  $35,054 of interest  income in the three months to
     June 30,1998 earned from the proceeds of the recent share offerings.  Other
     income in the three  months to June 30, 1997  included  interest  income of
     $431.  Interest  expenses in the three months to June 30, 1998 were $35,656
     directly  attributable to the Predecessor's  notes payable.  Other expenses
     included interest expense of $34,511 and a property disposal loss of $2,085
     in the three months to June 30, 1997.

     As a result of the  foregoing  Worlds Inc incurred a net loss of $1,072,673
     for the three months to June  30,1998,  compared to a loss $656,339 for the
     three months to June 30,1997 a increase of 63%.


     Liquidity and Capital Resources of the Company

     Net cash used  by the  Company's operating  activities from  January 1,1998
     through  June 30, 1998 was  $1,783,428.   At June 30, 1998 the  Company had
     working capital of $1,765,197

     The Company  completed a public round of financing on June 16, 1998 raising
     $1,832,000  of which it netted  $1,715,800  and paid $64,743 to  dissenting
     shareholders  of the Mergers  resulting  in 113,465  shares  being added to
     treasury.

     The  Company's  capital  requirements   relating  to  the  development  and
     commercialization  of Worlds  Platinum  have been and will  continue  to be
     significant.  The Company is dependent  on the proceeds of Unity  resulting
     from the Unity Merger and other future  financings  in order to develop and
     commercialize its proposed products.

                                       5

<PAGE>

     The Company  anticipates,  based on currently  proposed  business plans and
     assumptions  relating to its  operations  (including  the timetable of, and
     costs associated with, product development and commercialization), that the
     proceeds of its recent  offering,  will provide only a portion of the funds
     necessary  to permit  the  Company  to  complete  product  development  and
     commercialization.  Satisfactory  completion  of  product  development  and
     commercialization will require capital resources substantially greater than
     the proceeds of its recent offering or otherwise currently available to the
     Company.

     While the Company  hopes to raise an  additional  $6 million from the Unity
     Merger, the Company has no current arrangements with respect to, or sources
     of,  additional  financing  and  there  can be no  assurance  that any such
     financing  will be  available  to the  Company on  commercially  reasonable
     terms, or at all. Any inability to obtain additional  financing will have a
     material adverse effect on the Company,  including  possibly  requiring the
     Company  to  significantly  curtail  operations.  Based  upon  its  current
     projections,  the Company  believes it currently  has  sufficient  funds to
     operate for the next  twelve  months and at least two years  following  the
     Unity Merger.


                                     PART II

                                OTHER INFORMATION



Item 6.       Exhibits and Reports on Form 8-K.



     (a)     A financial data schedule is filed herewith as an exhibit.



     (b)     No reports on Form 8-K were filed during the quarter for which this
             report is being filed.



                                       6

<PAGE>











                                   SIGNATURES







     In accordance  with the  requirements  of the Exchange Act, the  Registrant
caused this Report to be signed on its behalf by the  undersigned  thereto  duly
authorized.



Date: August 12, 1998



                                                WORLDS INC.





                                                By: ________________________
                                                    Thomas Kidrin,
                                                    President, CEO and Treasurer

                                       7