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 September 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 November 10, 1998

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



<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

Item 1.  Financial Statements.

       
                                   Worlds Inc.
                        (a development stage enterprise)
                              Financial Statements
           Period from April 8, 1997 (Inception) to September 30, 1998



<PAGE>



                                   Worlds Inc.
                        (a development stage enterprise)
                              Financial Statements
           Period from April 8, 1997 (Inception) to September 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-14

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

          Financial statements (unaudited):
             Statements of operations                                      F-17
             Statements of cash flows                                      F-18
             Summary of accounting policies                         F-19 - F-22
             Notes to financial statements                          F-23 - F-24



                                      F-2

<PAGE>


                                  Worlds Inc.
                        (a development stage enterprise)


                                 Balance Sheets

<TABLE>

                                                                 December 31,  September 30, 
                                                                    1997           1998
<S>                                                              <C>            <C>

   

                                                                                (Unaudited)
Assets                                                                          
Current: Cash and cash equivalents                               $ 3,541,829    $ 2,363,097
   Trade receivables, less allowances for doubtful
       accounts of $140,318 and $140,318                                 538           --
   Prepaid expenses and other current assets                          74,175         44,772
        Total current assets                                       3,616,542      2,407,869
Property and equipment, net of accumulated
depreciation and amortization                                        209,452         88,030

                                                                 $ 3,825,994    $ 2,495,899

Liabilities and Stockholders' Deficit
Current:
   Accounts payable                                              $   568,707    $   264,992
   Accrued expenses                                                  592,250        713,112
   Advanced customer billings and deferred revenue                   436,140        436,140
   Current maturities of notes payable                               269,333        184,166
        Total current liabilities                                  1,866,430      1,598,410
Long-term portion, notes payable                                   1,968,333      1,937,500
        Total liabilities                                          3,834,763      3,535,910
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)    (9,395,270)
                                                                      (8,679)      (975,268)
   Treasury stock, at cost, 113,465 shares                              --          (64,743)

        Total stockholders' deficit                                   (8,769)    (1,040,011)
                                                                 $ 3,825,994    $ 2,495,899

                                See accompanying summary of accounting policies
                                              and notes to financial statements 


                                      F-3

</TABLE>


<PAGE>



                                   Worlds Inc.
                        (a development stage enterprise)


                      Statements of Operations (Unaudited)



<TABLE>
                                                                                                      
                                                           Period from                                    Cumulative
                                             Three           April 8,                                     period from
                                             months           1997        Three months   Nine months    April 8, 1997
                                              ended       (inception) to      ended         ended       (inception) to
                                          September 30,    September 30,   September 30, September 30,   September 30,
                                              1997            1997           1998             1998           1998(a)
                                                                                               
                                                                                                   
                                                                                                         
     
   
<S>                                         <C>          <C>               <C>            <C>               <C>


Net revenues                                $   --        $    --          $   --         $16,132     $17,552
Costs and expenses:
   Cost of revenues                             --             --              --         (25,101)    (25,101)
   Selling, general and administrative       (16,779)      (167,995)       (683,969)   (1,991,494) (2,666,524)
   Research and development                     --             --          (353,504)     (887,932)   (887,932)
   Acquired research and development            --             --              --            --    (6,135,538)
      (Note 1)

        Operating loss                       (16,779)      (167,995)     (1,037,473)   (2,888,395) (9,697,543)
Other income (expenses):
   Interest income                              --             --            37,825       114,817     128,410
   Interest expense                             --             --           (35,656)     (107,768)   (124,460)

        Loss before extraordinary item       (16,779)      (167,995)     (1,035,304)   (2,881,346) (9,693,593)
Extraordinary item - gain on debt               --             --            20,893       172,547     298,323
   settlement

Net loss                                 $   (16,779)   $  (167,995)   $ (1,014,411)  $(2,708,799)$(9,395,270)

Loss per share (basic and diluted):
   Loss before extraordinary item        $      --           $ (.02)   $       (.06)  $      (.17)
   Extraordinary item                           --               --              --           .01

     Net loss per share (basic and       $      --           $ (.02)   $       (.06)  $      (.16)
                           diluted) 
           

Weighted average common shares
   outstanding:
      Basic and diluted                    8,400,000      8,400,000      17,868,531    16,917,657

</TABLE>


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

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


<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)
                       Statement of Stockholders' Deficit

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

<TABLE>


                                                                            Deficit                
                                                                          accumulated                              
                                                                           during the                     Total
                                     Common stock         Additional       development     Treasury     stockholders'
                                  Shares         Amount  paid-in 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
     (Note 2)                    1,999,996          2,000      1,998,000             -              -      2,000,000
  Capital contribution             
     resulting from
     forgiveness of debt to
     shareholders of
     predecessor                         -              -        221,000             -              -        221,000
  Net loss for the period
     April 8 to
     December 31, 1997                   -              -              -    (6,686,471)             -     (6,686,471)  
  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)(unaudited)      30,000             30         26,470             -              -         26,500
  Sale of shares in public       
     offering of common
     stock, net (June 1998)
     (unaudited)                 1,832,000          1,832      1,713,968             -              -      1,715,800
  Conversion of 113,465          
     shares to certain
     stockholders
     (June 1998) (Note 2)
     (unaudited)                         -              -              -             -        (64,743)       (64,743)
  Net loss for the nine          
     months ended
     September 30, 1998
     (unaudited)                         -              -              -    (2,708,799)             -     (2,708,799)
  Balance, September 30,
     1998 (unaudited)           17,981,996        $17,982     $8,402,020   $(9,395,270)      $(64,743)   $(1,040,011)

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



</TABLE>

                                      F-5

<PAGE>


                                   Worlds Inc.
                        (a development stage enterprise)
                      Statements of Cash Flows (Unaudited)

<TABLE>

                                                  Period from April 8,                              Cumulative, period
                                                   1997 (inception) to       Nine months ended      from April 8, 1997
                                                   September 30, 1997        September 30, 1998     (inception) to
                                                                                                     September 30, 1998



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


   Cash flows from operating activities:
      Net loss                                           $(167,955)           $(2,708,799)           $(9,395,270)

      Adjustments  to  reconcile   net  loss  to  net  
           cash  used  in  operating activities:
           Depreciation and amortization                         -                136,012                152,336
           Gain on debt settlement                               -               (172,547)              (298,323)
           Acquired research and development                     -                      -              6,135,538
           Changes in operating assets and
              liabilities, net of effects from
              merger with Predecessor and
              Academic:
                 Trade receivables                               -                    538                      -
                 Prepaid expenses and other 
                   assets                                        -                 29,403                123,119
                 Accounts payable and accrued               
                   expenses                                 55,276                (10,306)               204,054
                   Total adjustments                        55,276                (16,900)             6,316,724

                   Net cash used in operating             
                      activities                          (112,679)            (2,725,699)            (3,078,546)

   Cash flows from investing activities:
      Advance to Predecessor                              (100,000)                     -                      -
      Acquisition of property and equipment                      -                (14,590)               (14,590)

                   Net cash used in investing             
                      activities                          (100,000)               (14,590)               (14,590)

   Cash flows from financing activities:
      Proceeds from sale of common stock to                
         founding stockholders                             204,000                      -                204,000
      Proceeds from sale of common stock in                 
         private offering memorandum                             -                 26,500              3,721,176
      Proceeds from sale of common stock in                      
         public offering                                         -              1,715,800              1,715,800
      Payment of conversion price of shares to                   
         certain stockholders                                    -                (64,743)               (64,743)
      Payments on note payable                                   -               (116,000)              (120,000)
      Loan from stockholder                                 11,724                      -                      -

                   Net cash provided by financing            
                     activities                            215,724              1,561,557              5,456,233

   Net increase (decrease) in cash and cash                  
      equivalents                                            3,045             (1,178,732)             2,363,097
   Cash and cash equivalents, beginning of                   
      period                                                     -              3,541,829                      -

   Cash and cash equivalents, end of period             $    3,045            $ 2,363,097            $ 2,363,097

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


</TABLE>

                                      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 Financial Instruments

                    The  carrying  amounts of financial  instruments,  including
                    cash and  short-term  Instruments  debt,  approximated  fair
                    value as of  September  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 September  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

                    Research and development costs are expensed as incurred.


Income Taxes

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


                                       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
                    September 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.

                    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").


                                      F-12

<PAGE>

                    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 Public Offering

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

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


                                      F-13

<PAGE>


4.    Agreement and 
      Plan of Merger

                    On June 25, 1998, the Company  entered into an agreement and
                    plan of merger and Merger  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  called 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 was, among other  conditions,
                    subject  to  approval  by  both  Unity  and  the   Company's
                    stockholders.

                    On October 29, 1998,  the  Company's  stockholders  voted in
                    favor of the  Agreement,  however,  Unity did not obtain the
                    super majority of 80% required by Unity's  charter,  thereby
                    canceling the proposed plan of merger and reorganization.


                                      F-14

<PAGE>


                            Worlds Inc. - Predecessor
                        (a development stage enterprise)
                              Financial Statements
              Nine Months Ended September 30, 1997 and Period from
                 April 26, 1994 (Inception) to December 3, 1997

 

<PAGE>



                            Worlds Inc. - Predecessor
                        (a development stage enterprise)
              Nine Months Ended September 30, 1997 and Period from
                 April 26, 1994 (Inception) to December 3, 1997


                                      F-15

<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-17
             Statements of cash flows                                       F-18
             Summary of accounting policies                          F-19 - F-22
             Notes to financial statements                           F-23 - F-24


                                      F-16

<PAGE>



                           Worlds Inc. - Predecessor
                        (a development stage enterprise)

                            Statements of Operations

<TABLE>
                                                        Three months ended    Nine months ended   Cumulative, period
                                                        September 30, 1997   September 30, 1997    from inception to
                                                            (unaudited)          (unaudited)      December 3, 1997(a)


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


   Net revenues                                               $   4,771        $      69,098         $  6,026,691

   Costs and expenses:
      Cost of revenues                                            1,927               29,556           11,279,348
      Selling, general and administrative                       458,795            2,259,283           10,602,749
      Research and development                                   13,186              401,345            5,388,340
      Lawsuit settlements                                             -                    -              509,200

           Total costs and expenses                             473,908            2,690,184           27,779,637

           Operating loss                                      (469,137)          (2,621,086)         (21,752,946)
   Other income (expenses):
      Interest income                                                 -               10,344              237,629
      Interest expense                                                -              (71,338)            (171,082)
      Gain (loss) on disposal of property and                         -                4,070              (79,125)
         equipment
      Income from sale of technology                                  -              260,100              260,100

           Loss before income taxes and extraordinary          (469,137)          (2,417,910)         (21,505,424)
              item
   Income taxes                                                       -               (5,000)            (120,000)

           Loss before extraordinary item                      (469,137)          (2,422,910)         (21,625,424)
   Extraordinary item - gain on debt settlement                 373,333              373,333              389,285

   Net loss                                                   $ (95,804)         $(2,049,577)        $(21,236,139)

</TABLE>

  (a)      Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)


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


                                      F-17

<PAGE>



                            Worlds Inc. - Predecessor
                        (a development stage enterprise)

                            Statements of Cash Flows


<TABLE>
                                                                           Nine months ended     Cumulative, period
                                                                          September 30, 1997      from inception to
                                                                              (unaudited)        December 3, 1997(a)


<S>                                                                           <C>                   <C>                   


   Cash flows from operating activities:
      Net loss                                                                $(2,049,577)          $(21,236,139)
      Adjustments to reconcile net loss to net cash used in operating
         activities:
           Depreciation and amortization                                          174,083                721,097
           (Gain) loss on disposal of property and equipment                       (4,070)                79,125
           Gain on debt settlement                                               (373,333)              (389,284)
           Compensation related to stock options                                   13,263                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                                   100,150               (167,891)
              Accounts payable and accrued liabilities                           (101,156)             1,856,619
              Advanced customer billings and deferred revenue                           -                436,140

                 Net cash used in operating activities                         (1,549,278)           (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                          (841,341)                56,345
   Cash and cash equivalents, beginning of period                                 894,692                      -

   Cash and cash equivalents, end of period                                  $     53,351          $      56,345

   Supplemental disclosures of cash flow information:
      Interest paid                                                      $               -         $      23,916
      Income taxes paid                                                             2,128                  5,620

</TABLE>


   Disclosure of Noncash Financing and Investing Activities:
      In the nine months ended September 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.

   (a)      Date of merger with Worlds Inc. (formerly Worlds Acquisition Corp.)

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


                                      F-18

<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-19

<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-20

<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 September 30,
                    1997 and December 3, 1997, no individual  customer accounted
                    for more than 10% of revenues.

                                      F-21

<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-22

<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-23

<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-24

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition
                  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,
competitive  factors and other risks as stated in other of the Company's  public
filings with the Securities and Exchange Commission.

         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,  gain  on  the  sale  of  securities  and  dividends.   Following  the
contemporaneous  mergers (the  "Mergers") of Worlds Inc, a Delaware  corporation
formed on April  26,  1994  ("Predecessor"),  with and into  Worlds  Acquisition
Corp.,  a Delaware  corporation  formed on April 8, 1998 ("WAC") and of WAC with
and into the Company, then called Academic Computer Systems, Inc., which changed
its name to Worlds Inc.,  the Company is engaged in the business and  operations
formerly conducted by 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,  and  comparison  to,  the
financial  condition and results of the operations of Predecessor's  pre-Mergers
operations.  The following  discussion  should be read in  conjunction  with the
Financial Statements and related notes thereto included elsewhere herein.

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

         Predecessor  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.

<PAGE>


         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 administrative.  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.

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) offer the
Company's 3D technology for non-music  applications such as corporate intranets,
and (iii) release a new version of Worlds Chat.

         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.  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 entered
into four agreements.

         The Company  currently has  sufficient  cash resources for at least the
next twelve  months.  The Company  currently  has 11 full-time  employees and is
working with eight independent software contractors who were former employees of
Predecessor.  The Company does not  anticipate  hiring  additional  employees or
purchasing  additional plant or equipment other than that needed on a day-to-day
basis until product sales increase  significantly and/or additional financing is
obtained.


<PAGE>


Results of Operations  of the Company  (Note to Results of  Operations.
The Predecessor merged into WAC and Academic on December 3, 1997)

         Nine Months Ended  September  30, 1998  Compared with nine months Ended
September 30, 1997


         The following  data extracted  from the attached  financial  statements
compares  the results of  operations  of the  Company for the nine months  ended
September 30, 1998 to those of Predecessor  for the nine months ended  September
30, 1997.


                            Statements of Operations


                                              Worlds Inc.      Worlds Inc. 
                                                                Predecessor
                                                     Nine months ended
                                                9/30/98           9/30/97

      Net Revenues                             $ 16,132            69,098

      Costs & Expenses:
      Cost of revenues                         (25,101)           (29,556)
      Selling, general & administrative     (1,991,494)        (2,259,283)
      Research & development                  (887,932)          (401,345)
                                                            
                Operating Loss              (2,888,395)        (2,621,086)

      Other income (Expense)
          Interest income                      114,817             10,344
          Interest expense                    (107,768)           (71,338)
                                              --------            ------- 
          Gain on disposal of equipment          ---                4,070       
          Income from the sale of technology     ---              260,100
          Loss before taxes & extraordinary 
          item                              (2,881,346)        (2,417,910)

      Income taxes                               ---               (5,000)
      Loss before extraordinary item        (2,881,346)        (2,422,910)

      Extraordinary item -
         gain on debt settlement               172,547            373,333

      Net Loss                              (2,708,799)        (2,049,577)
                                                        
         In  the  first  nine   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 and
aborted  merger  with Unity  First  Acquisition  Corp.  ("Unity").  In the first
quarter of 1997 Predecessor was insolvent and had failed to raise any additional
capital.  

<PAGE>

         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
approximately $260,100.

         Revenues  are  nominal and are derived  from the  company's  WorldsChat
product  and  one  custom  production  product.  Revenue  was  $16,132  and  had
associated  direct costs of $25,101 for the nine months ended September 30, 1998
compared to $69,098 in revenue  and $29,556 of direct  costs for the same period
in 1997.

         Selling,  general and  administrative  expenses were $1,991,494 for the
nine months ended  September 30, 1998.  This  represented a decrease of $267,789
from  $2,259,283  compared to the nine months ended  September  30,  1997.  This
decrease  was  directly   attributable  to  the  higher  costs  associated  with
Predecessor ceasing normal operations in the first quarter of 1997.

         Research and  development  costs  increased by $486,587 to $887,932 for
the nine months ended September 30, 1998 from $401,345 for the nine months ended
September  30,  1998.  This  increase  is directly  attributable  to the company
ceasing development technology at the end of the first quarter of 1997.

         Other income included $114,817 of interest income in the nine months to
September 30,1998 earned from the proceeds of the recent share offerings.  Other
income in the nine months to  September  30, 1997  included  interest  income of
$10,344, the sale of the Activeworlds technology in the amount of $260,100 and a
property  disposal gain of $4,070.  Other expenses  included interest expense of
$107,768 directly  attributable to the  Predecessor's  notes payable in the nine
months to September 30, 1998.  Interest  expense in the nine months to September
30,  1997  was  $71,338.   Settlement  of   Predecessor's   debts  generated  an
extraordinary  gain of $172,547 for the nine months ended September 30, 1998 and
$373,333 for the nine months ended September 30, 1997.

         As a  result  of the  foregoing  Worlds  Inc.  incurred  a net  loss of
$2,708,799  for the nine  months  to  September  30,  1998,  compared  to a loss
$1,953,577 for the nine months to September 30, 1997 an increase of 39%.



<PAGE>

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

         The following  data extracted  from the attached  financial  statements
compares  the results of  operations  of the Company for the three  months ended
September 30, 1998 to those of Predecessor  for the three months ended September
30, 1997.


                                       Statements of Operations

                                               Worlds Inc.        Worlds Inc. 
                                                                  Predecessor
                                                   Three months ended
                                                 9/30/98             9/30/97
      Net Revenues                                ---                   4,771
                                                        
      Costs & Expenses:
        Cost of revenues                           ---                 (1,927)
        Selling, general & administrative      (683,969)             (458,795)
        Research & development                 (353,504)              (13,186)
        Operating Loss                       (1,037,473)             (469,137)
                                             
      Other income (Expense)
        Interest income                          37,825                ---
        Interest expense                        (35,656)               ---
      Loss before extraordinary item         (1,035,304)             (469,137)

      Extraordinary item - 
          gain on debt settlement                20,893               373,333
                                     
      Net Loss                               (1,014,411)              (95,804)
                 

         In the third quarter of 1998 the company  continued the  implementation
of  the  new  business  plan.  Significant   expenditure  was  incurred  towards
completion of the Platinum technology and the aborted Unity transaction.

         There was no revenue  for the three  months  ended  September  30, 1998
compared to $4,771 in revenue and $1,927 of direct  costs for the same period in
1997.

         Selling,  general and  administrative  expenses  were  $683,969 for the
three months ended September 30, 1998.  This  represented a increase of $225,174
from  $458,795  compared to the three months  ended  September  30,  1997.  This
increase was directly  attributable to the Predecessor ceasing normal operations
in the first quarter of 1997.


<PAGE>


         Research and  development  costs  increased by $340,318 to $353,504 for
the three  months  ended  September  30, 1998 from  $13,186 for the three months
ended September 30, 1997. This increase was directly attributable to Predecessor
ceasing normal operations in the first quarter of 1997

         Other income included $37,825 of interest income in the three months to
September  30,  1998 earned from the  proceeds  of the recent  share  offerings.
Interest expense in the three months to September 30, 1998 was $35,656 directly
attributable to the  Predecessor's  notes payable.  Settlement of  Predecessor's
debts  generated  an  extraordinary  gain of $20,893 for the three  months ended
September 30, 1998 and $373,333 for the nine months ended September 30, 1997.

         As a  result  of the  foregoing  Worlds  Inc. incurred  a net  loss  of
$1,014,411 for the three months to September 30,1998, compared to a loss $95,804
for the three months to September 30, 1997, an increase of $918,607.


Liquidity and Capital Resources of the Company

         Net cash used by the Company's operating activities from January 1,1998
through September 30, 1998 was $2,725,699. At September 30, 1998 the Company had
working capital of $809,459.

         The Company's  capital  requirements  relating to the  development  and
commercialization  of  Worlds  Platinum  have  been  and  will  continue  to  be
significant and is currently  estimated at  approximately  $3.0 to $5.0 million.
The  Company is  dependent  on the  proceeds  of future  financings  in order to
continue in business and develop and commercialize its proposed products.

         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  public  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 public offering or otherwise  currently  available to the
Company.  In  addition,  as a result of the  Mergers by  operation  of law,  the
Company assumed the Company's liabilities of approximately $4 million.  Although
the Company is in the process of negotiating the amount and timing of payment of
some of its liabilities,  there is no assurance that such  negotiations  will be
successful.  The Company's 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 has sufficient funds to operate for the next twelve months.


<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 5. Other Information.

         On May 7, 1998,  the Company signed a Letter of Intent 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, par value $.0001 per share. The transaction  called 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   consummation  of  the  contemplated
transaction was subject to, among other things, the approval of the shareholders
of each corporation.  On October 29, 1998, the Company's  stockholders  voted in
favor of the Agreement,  however, Unity did not obtain the super majority of 80%
required by Unity's charter,  thereby  canceling the proposed plan of merger and
reorganization.


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

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

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


<PAGE>

                                   SIGNATURES

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

                             Date: November 13, 1998

                                                    WORLDS INC.

                                              By: ____________________________
                                                    Thomas Kidrin,
                                                    President, CEO and Treasurer