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 March 31, 1999

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

                         Commission file number 2-31876

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

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

                                   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 16,418,531 shares as 
of May 10, 1999

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
                                         Periods Ended March 31, 1998 and 1999



<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                         Financial Statements
                                         Periods Ended March 31, 1998 and 1999

                                      F-1
<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                                                  Contents

Unaudited financial statements:
        Balance sheets                                             F-3
        Statements of operations                                   F-4
        Statement of stockholders' deficit                         F-5
        Statements of cash flows                                   F-6
        Summary of accounting policies                             F-7 - F-11
        Notes to financial statements                              F-12 - F-14

                                      F-2

<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                 Balance Sheets

<TABLE>

<S>                                                                 <C>                         <C> 

                                                                        December 31, 1998          March 31, 1999  
   ---------------------------------------------------------------- --------------------------- ----------------------
   Assets                                                                                            (unaudited)
   Current:
      Cash and cash equivalents                                              $ 1,581,764               $     894,421
      Prepaid expenses and other current assets                                   53,486                      26,133
      Inventory                                                                   58,516                      37,052
   ---------------------------------------------------------------- --------------------------- ----------------------
           Total current assets                                                1,693,766                     957,606
   Property, equipment and software development costs, net of                                         
      accumulated depreciation and amortization                                  214,246                     378,246
   ---------------------------------------------------------------- --------------------------- ----------------------
                                                                             $ 1,908,012               $   1,335,852
   ---------------------------------------------------------------- --------------------------- ----------------------
   Liabilities and Stockholders' Deficit
   Current:
      Accounts payable                                                     $     319,906              $      242,708
      Accrued expenses                                                           446,333                     579,609
      Current maturities of notes payable                                        246,648                     269,148
   ---------------------------------------------------------------- --------------------------- ----------------------
           Total current liabilities                                           1,012,887                   1,091,465
   Long-term portion, notes payable                                            1,875,018                   1,852,518
   ---------------------------------------------------------------- --------------------------- ----------------------
           Total liabilities                                                   2,887,905                   2,943,983
   ---------------------------------------------------------------- --------------------------- ----------------------
   Stockholders' deficit (Notes 2 and 3):
      Common stock, $.001 par value - shares authorized                           18,032                      18,032
         30,000,000; outstanding 18,031,996
      Additional paid-in capital                                               8,401,970                   8,401,970
      Deficit accumulated during the development stage                        (9,335,152)                 (9,963,390)
   ---------------------------------------------------------------- --------------------------- ----------------------
                                                                                (915,150)                 (1,543,388)
      Treasury stock, at cost, 113,465 shares                                    (64,743)                    (64,743)
   ---------------------------------------------------------------- --------------------------- ----------------------
           Total stockholders' deficit                                          (979,893)                 (1,608,131)
   ---------------------------------------------------------------- --------------------------- ----------------------
                                                                             $ 1,908,012               $   1,335,852
   ---------------------------------------------------------------- --------------------------- ----------------------

</TABLE>
                               See accompanying summary of accounting policies
                                      and notes to financial statements.

                                      F-3

<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                           Statements of Operations (Unaudited)



<TABLE>

<S>                                                          <C>                                    <C>           
                                                                                                       Cumulative,
                                                                                                       period from
                                                                                                      April 8, 1997
                                                                                                     (inception) to
                                                                 Three months ended March 31,           March 31,
                                                             --------------------------------------
                                                                   1998                1999             1999 (a)
   ---------------------------------------------------------                                        ------------------
                                                             ------------------ -------------------
   Net revenues                                                 $       4,002       $     35,177     $        65,707
   Costs and expenses:
      Cost of revenues                                                 (2,601)           (21,464)            (50,743)
      Selling, general and administrative                            (548,340)          (615,815)         (3,941,548)
      Research and development                                       (231,912)                 -            (992,932)
      Acquired research and development                                     -                  -          (6,135,538)
   --------------------------------------------------------- ------------------ ------------------- ------------------
           Operating loss                                            (778,851)          (602,102)        (11,055,054)
   Other income (expenses):
      Gain resulting from reversal of certain predecessor                   -                  -             810,140
         liabilities
      Interest income                                                  41,938             12,786             150,385
      Interest expense                                                (36,456)           (38,922)           (167,184)
   --------------------------------------------------------- ------------------ ------------------- ------------------
           Loss before extraordinary item                            (773,369)          (628,238)        (10,261,713)
   Extraordinary item - gain on debt settlement                       151,654                  -             298,323
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Net loss                                                       $  (621,715)      $   (628,238)        $(9,963,390)
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Loss per share (basic and diluted):
      Loss before extraordinary item                          $          (.05)   $          (.04)
      Extraordinary item                                                  .01                  -
   --------------------------------------------------------- ------------------ -------------------
           Net loss per share (basic and diluted)             $          (.04)   $          (.04)
   --------------------------------------------------------- ------------------ -------------------
   Weighted average common shares outstanding:
      Basic and diluted                                            16,149,996         17,918,531
   --------------------------------------------------------- ------------------ -------------------

</TABLE>

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

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

                                      F-4

<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)


                                            Statements of Stockholders' Deficit
<TABLE>

   Period from April 8, 1997 (inception) to March 31, 1999
   ----------------------------------- ----------------------- -------------- ---------------- ---------- --------------

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

                                            Common stock        Additional        Deficit      Treasury       Total
                                                                  paid-in       accumulated      stock    stockholders'
                                                                  capital       during the                   deficit  
                                                                                development
                                                                                   stage
                                       -----------------------
                                         Shares      Amount
   ----------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------
   Balance, January 1, 1998            16,119,996    $16,120    $6,661,582    $  (6,686,471)   $          $      (8,769)
   Sale of shares in private               30,000         30        26,470               -             -       26,500
      offering memorandum
      (January 1998)
   Sale of shares in public offering    1,832,000      1,832     1,713,968               -             -    1,715,800
      of common stock, net
      (June 1998)
   Conversion of 113,465 shares to              -          -             -               -       (64,743)     (64,743)
      certain stockholders (June
      1998)
   Conversion of employee stock            50,000         50           (50)              -             -            -
      options into shares (October
      1998)
   Net loss for the year ended                  -          -             -      (2,648,681)            -   (2,648,681)
      December 31, 1998
   ----------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------
   Balance, December 31, 1998          18,031,996     18,032     8,401,970      (9,335,152)      (64,743)    (979,893)
   Net loss for the three months                -          -             -        (628,238)            -     (628,238)
      ended March 31, 1999
      (unaudited)
   ----------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------
   Balance, March 31, 1999             18,031,996    $18,032    $8,401,970     $(9,963,390)     $(64,743) $(1,608,131)
      (unaudited)
   ----------------------------------- ------------ ---------- -------------- ---------------- ---------- --------------

</TABLE>
                               See accompanying summary of accounting policies
                                             and notes to financial statements.

                                      F-5

<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                           Statements of Cash Flows (Unaudited)


<TABLE>

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

                                                                                                       Cumulative
                                                                                                       period from
                                                                                                      April 8, 1997
                                                                 Three months ended March 31,         (inception) to
                                                             ------------------ -------------------
                                                                   1998                1999          March 31, 1999
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Cash flows from operating activities:
      Net loss                                                   $  (621,715)      $   (628,238)        $(9,963,390)
   --------------------------------------------------------- ------------------ ------------------- ------------------
      Adjustments  to  reconcile   net  loss  to  net  cash  used  in  operating
         activities:
           Loss on disposal of fixed assets                                -                  -              54,041
           Depreciation and amortization                              54,041             50,000             196,075
           Gain resulting from reversal of certain                         -                  -            (810,140)
              predecessor liabilities
           Gain on debt settlement                                  (151,654)                 -            (298,323)
           Acquired research and development                               -                  -           6,135,538
           Changes in  operating  assets and  liabilities,  net of effects  from
              merger with Predecessor and Academic:
                 Trade receivable                                        538                  -                   -
                 Inventory                                                 -             21,464             (37,052)
                 Prepaid expenses and other assets                    26,737             27,353             141,758
                 Accounts payable and accrued expenses               (46,524)            56,078             422,268
   --------------------------------------------------------- ------------------ ------------------- ------------------
                   Total adjustments                                (116,862)           154,895           5,804,165
   --------------------------------------------------------- ------------------ ------------------- ------------------
                   Net cash used in operating activities            (738,577)          (473,343)         (4,159,225)
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Cash flows from investing activities:
      Acquisition of property and equipment                                -                  -             (28,587)
      Additions to software development costs                              -           (214,000)           (374,000)
   --------------------------------------------------------- ------------------ ------------------- ------------------
                   Net cash used in investing activities                   -           (214,000)           (402,587)
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Cash flows from financing activities:
      Proceeds from sale of common stock to founding                       -                  -             204,000
         stockholders
      Proceeds from sale of common stock in private                   26,500                  -           3,721,176
         offering memorandum
      Proceeds from sale of common stock in public offering                -                  -           1,715,800
      Payment of conversion price of shares to certain                     -                  -             (64,743)
         stockholders
      Payments on note payable                                        (8,280)                 -            (120,000)
   --------------------------------------------------------- ------------------ ------------------- ------------------
                   Net cash provided by financing                     18,220                  -           5,456,233
                      activities
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Net increase (decrease) in cash and cash equivalents             (720,357)          (687,343)            894,421
   Cash and cash equivalents, beginning of period                  3,541,829          1,581,764                   -
   --------------------------------------------------------- ------------------ ------------------- ------------------
   Cash and cash equivalents, end of period                       $2,821,472        $   894,421      $      894,421
   --------------------------------------------------------- ------------------ ------------------- ------------------

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

                                      F-7

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                 Summary of Accounting Policies

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

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

Fair Value of Financial Instruments

         The  carrying  amounts of  financial  instruments,  including  cash and
short-term  Instruments  debt,  approximated  fair  value as of March  31,  1999
because of the relatively short maturity of the instruments.  The carrying value
of long-term debt, including the current portion,  approximates fair value as of
March 31, 1999, based upon estimates for similar debt issues.


Use of Estimates                   

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

Cash and Cash Equivalents          

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

Property and  Equipment  

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

                                      F-8

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                Summary of Accounting Policies

Revenue Recognition 

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

Inventory                          

         Inventory  consists of merchandise held for resale and is valued at the
lower of cost or market on a first-in, first-out (FIFO) basis.

Software Development Costs         

         In accordance  with the provisions of SFAS No. 86,  "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed",  software
development   costs   incurred  by  the  Company   subsequent  to   establishing
technological  feasibility of the resulting product or enhancement and until the
product is  available  for general  release to  customers  are  capitalized  and
carried at the lower of unamortized cost or net realizable value. Net realizable
value is determined based on estimates of future revenues to be derived from the
sale of the software product reduced by the costs of completion and disposing of
the product. During the fourth quarter of 1998, technological feasibility of the
Company's software was established. In this regard, $160,000 was capitalized and
included in  property,  equipment  and software  development  as of December 31,
1998.  During  the  quarter  ended  March  31,  1999,  a  further  $214,000  was
capitalized in this regard.  Amortization of the costs capitalized  commenced in
the first quarter of 1999  ($14,000),  based on current and  anticipated  future
revenues  for each  product  or  enhancement  with an  annual  minimum  equal to
straight-line  amortization  over the remaining  estimated  economic life of the
product or enhancement.

Research  and  Development  Costs  

         Research and development costs are expensed as incurred.

                                      F-9
<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                 Summary of Accounting Policies

Income Taxes                       

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

Loss Per Share                     

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

Stock-Based Compensation           

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

                                      F-10

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                Summary of Accounting Policies

Comprehensive Income               

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

                                      F-11

<PAGE>

                                   Worlds Inc.
                        (a development stage enterprise)

                                                  Notes to Financial Statements

1.   Going  Concern 

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

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

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

                                      F-12

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                  Notes to Financial Statements

2.     The Mergers               

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

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

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

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

                                      F-13

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                  Notes to Financial Statements

3.  Private Placement
    and Public Offering

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

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


                                      F-14

<PAGE>

                                  Worlds Inc.
                        (a development stage enterprise)

                                                  Notes to Financial Statements

4.     Subsequent Events         

         During April 1999,  the Company  entered  into a  three-year  financial
advisory and  consulting  agreement  with a consulting  firm  controlled  by the
Company's  Chairman that  provides for an annual fee of $120,000,  escalating to
$300,000  annually if the Company raises $5 million in cash and the market value
of the  Company's  issued  and  outstanding  common  stock is no less  than $100
million.  In  addition,  the Company  granted  warrants to such firm to purchase
1,000,000 shares of common stock at $.50 per share. The warrants are exercisable
through April 13, 2006 and contain  anti-dilution  provisions  and both "demand"
and "piggy-back" registration rights.

         Further,  in  connection  with the above  consulting  agreement,  three
founding  stockholders of WAC contributed 1,500,000 shares to the capital of the
Company.

                                      F-15

<PAGE>

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

                  The following  discussion  should be read in conjunction  with
the  financial  statements  and related  notes which are included  under Item 1.
Statements  made  below  which  are not  historical  facts  are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not limited to, general economic conditions,  our
ability  to  complete  development  and then  market our  products,  competitive
factors and other risk factors as stated in other of our public filings with the
Securities and Exchange Commission.

         We were formed on May 20, 1968.  From 1975 until  December 1997 we were
inactive with no operations and our only income was from  interest,  gain on the
sale of securities and dividends.  In December 1997 a series of mergers occurred
involving  us,  Worlds  Acquisition  Corp.  and  our  predecessor,  Worlds  Inc.
Following  the mergers,  we have been  engaged in the  business  and  operations
formerly conducted by our predecessor and have changed our name to adopt that of
our  predecessor,  Worlds Inc.  Accordingly,  a discussion  and analysis of our
financial  condition  and  results  of our  operations  without  discussing  our
predecessor would be of limited importance to any reader.  Thus, included herein
is a discussion of our predecessor's pre-mergers operations.

Background

         Predecessor   was  formed  in  April  1994  to  design,   develop   and
commercialize 3D multi-user tools and technologies for the Internet market. From
inception  through  1997,  predecessor's  operations  were limited and consisted
primarily  of  start-up  activities,  including  recruiting  personnel,  raising
capital,  custom  production  work, and research and  development.  In the third
quarter of 1996, predecessor launched its first commercial user-oriented 3D chat
site,  Worlds Chat 1.0, and began selling the client interface  software through
direct sales channels. These sales were nominal. In October of 1996, predecessor
introduced   its  first   commercial   toolset  for   developing  3D  multi-user
applications.  In the first  quarter of 1997,  after an  unsuccessful  effort to
raise capital,  predecessor became insolvent and released most of its personnel,
and management sought to sell predecessor and/or its technology. Predecessor did
not generate significant revenues.

         While we have completed  development and market testing of Worlds Gamma
and 3D Internet music sites,  we may not generate  significant  revenues,  until
after  we  successfully   attract  and  retain  a  significant   number  of  VIP
subscribers,  customers and/or  advertisers.  We anticipate  continuing to incur
significant losses until, at the earliest,  we generate  sufficient  revenues to
offset the substantial up-front expenditures and operating costs associated with
developing and commercializing our proposed products.  There can be no assurance
that  we will  be  able  to  attract  and  retain  a  sufficient  number  of VIP
subscribers,  customers and/or advertisers to generate  significant  revenues or
achieve profitable operations or that our products and services will prove to be
commercially viable.

                  We classify our expenses into three broad groups: (1) research
and  development;   (2)  cost  of  revenues;   and  (3)  selling,   general  and
administration. Software development costs, consisting primarily of salaries and
related expenses,  incurred prior to establishing  technological feasibility are
expensed  in  accordance  with  Financial   Accounting  Standards  Board  (FASB)
Statement  No.  86. In  accordance  with FASB 86,  we will  capitalize  software
development costs at such time as the  technological  feasibility of the product
has been established.  We began  capitalizing our software in the 4th quarter of

<PAGE>

1998 with the commercial release of three products, Animal House, BowieWorld and
Worlds Ultimate 3D Chat. For the first quarter of 1999 approximately $214,000 of
such expenditures were capitalized.

Plan of Operation

         During  the fourth  quarter  of 1998,  we  successfully  completed  the
development of our Gamma  development tool kit and  commercially  released three
products utilizing our 3D Internet technology.  During the first quarter of 1999
we continued holding  discussions with several major record labels and companies
for them to distribute  Worlds Gamma,  along with music related web site access.
Our  strategy  of  distributing  our  products on CD+ is wholly  dependent  upon
obtaining  distribution   agreements  with  record  labels,  artists  or  record
companies. To date, we have entered into several agreements.

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

         We recently entered into previously announced agreements with two major
companies in the Internet arena.  The first is with Excite,  the number 3 portal
site  on  the  Internet,  which  calls  for us to  provide  Excite  with  select
e-commerce  content.  The second  agreement is with Road Runner,  the high-speed
online service owned by Time Warner, MediaOne Group, Microsoft,  Compaq Computer
and Advance/Newhouse.

         In May 1999 we entered  into an  agreement  with  Hansonopoly  Inc.  to
produce our 3D technology on a special CD to be  distributed  in June to the fan
club of Hanson.

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

         Our  present  cash  resources  are  insufficient  to  meet  all  of our
requirements  over the next twelve  months  unless  additional  funds are raised
through  our  currently   contemplated   private   offering  and  through  other
financings.  In fact, we currently have a negative working capital and unless we
shortly raise  additional  funds we may have to cease  operations.  We currently
have nine full-time  employees and are working with seven  independent  software
contractors who were former employees of our  predecessor.  We do not anticipate
hiring  additional  employees or purchasing  additional plant or equipment other
than  that  needed  on  a  day-to-day   basis  until  product   sales   increase
significantly and/or additional financing is obtained.

<PAGE>

Results of Our Operations


                  The  following  data  extracted  from the  attached  financial
statements  compares  the results of our  operations  for the three months ended
March 31, 1999 to the three months ended March 31, 1998.

                                                     Three months ended
                                                   3/31/99         3/31/98

Net Revenue                                       $ 35,177         $ 4,002

Costs & Expenses:
         Cost of revenues                          (21,464)         (2,601)
         Selling, general
         & administrative                         (615,815)       (548,340)
         Research & development                         --        (231,912)
Operating Loss                                    (602,102)       (778,851)
                                                 ---------        ---------

Other Income (Expense):
         Interest income                             12,786         41,938
         Interest expense                           (38,922)       (36,456)

Loss before taxes & extraordinary item             (628,238)      (773,369)

Extraordinary item - gain on debt settlement             --        151,654
                                                                   -------
Net Loss                                           (628,238)      (621,715)
                                                  ---------      ---------

         In the  first  quarter  of  1999,  we  continued  to  upgrade  our core
technology  and began  production  on new projects in  anticipation  of reaching
agreements with other entities with whom we are in negotiation. No assurance can
be given that any  negotiation  will lead to the  consummation of any additional
agreements.  In the first quarter of 1998 we continued the implementation of our
new business plan.  Significant  expenditure was incurred towards  completion of
the Gamma technology and also with legal and professional fees.

         Revenues are nominal and are derived  from our Worlds  Ultimate 3D Chat
product and from sales on our  e-commerce  web site where we  currently  operate
artist  or  artist  related   Internet   stores  such  as   DavidBowieStore.com,
NinetyEightDegreesStore.com  and  EltonJohnStore.com,  among others. Revenue was
$35,177 and had  associated  direct  costs of $21,464 for the three months ended
March 31, 1999, compared to $4,002 in revenue and $2,601 of direct costs for the
same period in 1998.

         Selling,  general and  administrative  expenses  were  $615,815 for the
three months ended March 31, 1999. This  represented an increase of $67,475 from
$548,340  compared to the three months ended March 31, 1998.  This  increase was
directly  attributable to the higher costs  associated with  maintaining our new
e-commerce site, retaining

<PAGE>

expert  software developers  to improve  and  upgrade our  existing  products
and costs involved  in  beginning  work on some of the new  projects  discussed
above  in anticipation of reaching final agreements.

                  We incurred no research and development costs during the three
months  ended March 31, 1999 as compared to $231,912  for the three months ended
March 31, 1998.  This decrease is directly  attributable  to the fact that since
our technology is now  technologically  feasible,  i.e., it works,  all expenses
previously  charged to research and development are  capitalized.  For the first
quarter of 1999 $214,000 of such expenditures were capitalized.

         Other income included $12,786 of interest income in the three months to
March 31, 1999 earned from the remainder of the proceeds of our share  offerings
as compared to $41,938 in the three months ended March 31, 1998.  Other expenses
included interest expense of $38,922 directly  attributable to the Predecessor's
notes  payable in the three months to March 31, 1999.  Interest  expense in the
three months to March 31, 1998 was $36,456.

         As a result of the foregoing we incurred a net loss of $628,238 for the
three months ending March 31, 1999, compared to a loss of $621,715 for the three
months ending March 31, 1998, a negligible  increase of $6,523.  The loss in the
1998  quarter was after an  extraordinary  gain of  $151,654.  See  Statement of
Operations on Page F-4.

Liquidity and Capital Resources of the Company

                  Net cash used from January 1, 1999 through March 31, 1999 was
 $687,343. At March 31, 1999, we had a working capitaldeficit of $133,859 and
 cash and cash equivalents in the amount of $894,421.

                  On December 3, 1997,  the mergers were deemed to close as well
as the first round of a private  placement  of our common  stock  raising  gross
proceeds of $3.8  million,  by selling 3.8  million  shares,  of which we netted
approximately  $3,000,000. We also acquired approximately an additional $560,000
from one of the other parties to the mergers.

                  Prior  to the  mergers,  we had  910,000  shares  outstanding.
Effective  December  31,  1997,  we closed on an  additional  $585,000  of gross
proceeds from the private offering,  of which we netted $529,000,  and issued an
additional  585,000  shares of common  stock and on January 2, 1998  received an
additional $30,000, of which we netted $26,500,  and issued an additional 30,000
shares.  In June 1998,  we closed on a secondary  offering of  $1,832,000  gross
proceeds, of which we netted $1,715,800 by selling 1,832,000 shares at $1.00 per
share.

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

                  We anticipate,  based on currently proposed business plans and
assumptions  relating to our  operations,  including the timetable of, and costs
associated with, product development and commercialization,  that we have only a
portion  of  the  funds   necessary   to  complete   product   development   and
commercialization.   Satisfactory   completion   of  product   development   and
commercialization  will require  capital  resources  substantially  greater than
those  currently  available  to  us.  We are  continuing  to  explore  financing
opportunities  and are currently seeking to raise  approximately  $2-$4 million,
plus an option to raise up to an  additional  $2  million,  in a private  equity

<PAGE>

         financing. In addition, as a result of the mergers by operation of law,
we assumed  predecessor's  then liabilities of approximately  $4.6 million,  the
majority of which has since been paid or  renegotiated.  At March 31, 1999,  our
total  liabilities  were  approximately  $2.9  million,  including the long term
portion of notes payable of $1.8 million.

                  There  can be no  assurance  that we will be able to raise any
proceeds from our current private offering of our securities or otherwise obtain
the substantial  additional capital necessary to permit us to attract and retain
a  sufficient  number of  subscribers  or that any  assumptions  relating to our
business  plan  will  prove to be  accurate.  While we hope to raise  additional
financing,  we have no current  arrangements  with  respect  to, or sources  of,
additional  financing  and there can be no  assurance  that any such  financing,
particularly the significant  amounts of financing that would be required,  will
be available to us on commercially reasonable terms, or at all. Any inability to
obtain  additional  financing will have a material  adverse effect, including
possibly requiring us to significantly curtail or cease operations.

Effect of Recent Accounting Pronouncements

                  In June 1998, the Financial  Accounting Standards Board issued
Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging  Activities." ("SFAS No. 133"), which requires companies
to recognize all derivatives as either assets or liabilities in the statement of
financial  position and measure those instruments at fair value. SFAS No. 133 is
effective for fiscal years  beginning  after June 15, 1999. The Company does not
presently enter into any transactions involving derivative financial instruments
and,  accordingly,  does not anticipate the new standard will have any effect on
its financial statements.

Year 2000 Disclosure

                  We are  Year  2000  compliant  and we do  not  anticipate  any
internal problems. In the event any internal problems should arise, we have many
expert  computer  technicians on our payroll and we believe that we will be able
to satisfactorily  address any such problems.  However,  we are dependent on the
integrity of the Internet  being  maintained  to derive  income from the sale of
merchandise  on our own  e-commerce  site and through  links to the  products we
create.  We have  employed a  redundancy  system as a  safeguard  to protect the
viability  of our site by having our site  hosted by two of the larger  Internet
Service  Providers.  Thus,  in the event one of our hosts should fail,  we could
continue  uninterrupted  on the other Internet  Service  Provider.  We have been
advised  that our  hosts  are  addressing  the Year  2000  issue  and hope to be
compliant.  We use Wells Fargo to process our e-mail  transactions.  Wells Fargo
processes a significant portion of all Internet  e-commerce  transactions and if
it fails due to Year  2000  problems  we will be  negatively  impacted,  but not
likely  more than many other  e-commerce  vendors.  In  summary,  we are totally
dependent upon 3rd parties for hosting and processing our e-commerce  activities
and while we cannot  control the actions of these 3rd  parties,  we believe that
given our redundant  safeguards,  the availability of other hosts and processors
to switch to in the event our current  hosts  and/or  processor  crashes and the
fact that we only see nominal  revenue from our  e-commerce  at this time, we do

<PAGE>

not believe that our profitability or operations will be materially  affected by
the Year 2000 problem.

                                     PART II
                                OTHER INFORMATION

Item 5.  Other Information.

         On May 12, 1999, we began an exempt private  offering under Rule 506 as
promulgated  under The  Securities  Act of 1933,  as amended.  We are seeking to
raise $2-4 million  through the sale of a unit  offering.  We also  reserved the
right to sell  additional  units to raise up to an additional  $2 million.  This
offering is being offered  solely to  "accredited  investors"  and pursuant to a
Private  Placement  Memorandum  and  Subscription  Agreement.  We can venture no
opinion at this time as to the success of this offering.

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


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

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

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



<PAGE>

                                   SIGNATURES



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

Date: May 14, 1999


WORLDS INC.



By:   /s/

    Thomas Kidrin,
    President, CEO and Treasurer