UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549









Form
10-K







(Mark
One)




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




For the fiscal year ended December 31, 2008




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




For the transition period from 
to




Commission
File Number: 0-24115







WORLDS.COM
INC.


(Exact
Name of Registrant as Specified in Its Charter)




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





11 Royal Road, Brookline,
MA  02445


(Address
of Principal Executive Offices)





(617)
725-8900


(Registrant’s
Telephone Number, Including Area Code)







Securities
registered pursuant to Section 12(b) of the
Act:




Title of Each Class
                Name
      Of Each Exchange
                  On Which RegisteredNone
                Not
      Applicable




Securities
registered pursuant to Section 12(g) of the Act:




Common
Stock, $.001 par value


(Title
of Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YesoNo
x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes      No
x





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.     YesxNo
o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained herein, and disclosure will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o





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





 Large
Accelerated Filer          
  Accelerated Filer


  Non-Accelerated
Filer            x  Smaller
reporting company


(Do not
check if a smaller reporting company)




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





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked closing price of such common equity, as
of March 2, 2009 (a date within the past 60 days) was approximately
$9,429,795.





At April
15, 2009, the issuer had outstanding 52,387,749 shares of par value $.001 Common
Stock, of which 45,543,729 shares were held by non-affiliates.









Table of Contents





CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION





This
report includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements involve risks and uncertainties and our actual results
could differ significantly from those discussed herein. These include statements
about our expectations, beliefs, intentions or strategies for the future, which
we indicate by words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "believe," and similar language, including those set forth in
the discussion under "Description of Business," including the "Risk Factors"
described in that section, and "Management's Discussion and Analysis or Plan of
Operation" as well as those discussed elsewhere in this Form 10-K. We base our
forward-looking statements on information currently available to us, and we
believe that the assumption and expectations reflected in such forward-looking
statements are reasonable, and we assume no obligation to update them.
Statements contained in this Form 10-K that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.




2




TABLE OF CONTENTS




PART
      IItem
      1
                                                                                            Business
                                                                                            4Item
      1A
                                                                                            Risk
      Factors
                                                                                            10Item
      1B
                                                                                            Unresolved
      Staff Comments
                                                                                            NAItem
      2
                                                                                            Properties
                                                                                            16Item
      3
                                                                                            Legal
      Proceedings
                                                                                            16Item
      4
                                                                                            Submissions
      of Matters to a Vote of Security Holders
                                                                                            16PART
      IIItem
      5
                                                                                            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                                                            17Item
      6
                                                                                            Selected
      Financial Data
                                                                                            NAItem
      7
                                                                                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                                                            18Item
      7A
                                                                                            Quantitative
      and Qualitative Disclosures About Market Risk
                                                                                            NAItem
      8
                                                                                            Financial
      Statements
                                                                                            23Item
      9
                                                                                            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                                                                            33Item
      9A(T)
                                                                                            Controls
      and Procedures
                                                                                            33Item
      9B
                                                                                            Other
      Information
                                                                                            33PART
      IIIItem
      10
                                                                                            Directors,
      Executive Officers and Corporate Governance
                                                                                            34Item
      11
                                                                                            Executive
      Compensation
                                                                                            37Item
      12
                                                                                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                                                            39Item
      13
                                                                                            Certain
      Relationships and Related Transaction, and Director
      Independence
                                                                                            40Item
      14
                                                                                            Principal
      Accountant Fees and Services
                                                                                            40Item
      15
                                                                                            Exhibits
                                                                                            41
 
 3
 Table of Contents




PART
I




ITEM
1. BUSINESS.




General




Worlds.com
is a leading 3D entertainment portal which leverages our proprietary technology
to offer visitors a network of virtual, multi-user environments which we call
"worlds". These worlds are visually engaging online environments featuring
animation, motion and content where people can come together and, by navigating
through the website, shop, interact with others, attend events and be
entertained. In support of this portal and our overall business strategy, we
design and develop software, content and related technology for the creation of
interactive, three-dimensional ("3D") Internet web sites. Using our technology,
we create our own Internet sites, as well as sites available through third-party
online service providers.




Sites
using our technology allow numerous simultaneous visitors to enter, navigate and
share interactive "worlds". Our 3D Internet sites are designed to promote
frequent, repeat and prolonged visitation by users by providing them with unique
online communities featuring dynamic graphics, highly useful and entertaining
information content, and interactive capabilities. We believe that our sites are
highly attractive to advertisers because they offer access to
demographic-specific user bases comprised of people that visit the site
frequently and stay for relatively long periods of time.





Recent
developments





Worlds
terminated all full time employees in June 2001 and ceased SEC reporting as a
result of the internet market meltdown and an aborted financing the company had
planned for September 2001.  Although essentially inactive since
mid-2001, the company has continued to maintain its service since daily
operations ceased as well as continued software development on an as needed
basis and under contract licenses.





While the
company has kept the service up there have been thousands of customer created
worlds and Avatars developed using Worlds’ tools and hosted on the members’
PCs.





As a
result of the renewed public interest in 3D sites during the second quarter of
2007, management began to explore the possibility of becoming more active
operationally.  As detailed below, beginning during the third quarter
of 2007 and continuing through 2008 we, among other things, expanded our Board,
completed two small financings, began upgrading our technology and more actively
sought business opportunities.





Over the
past year we have completed the restructuring and restart of the Company’s
operations. As a result, we are now current with our SEC periodic reporting
obligations.  We also raised an additional $481,000 in 2008 through a
private placement at a price of $0.30 per share.





Based
upon our knowledge of the industry, we believe we hold the key patents in 3D
online technology. During 2008 we entered into a contingency enforcement
agreement for our patents with General Patent Corporation (GPC) and Lerner David
Littenberg Krumholz & Mentlik LLP.





In
December 2008, we filed a patent infringement suit against NC Soft of Korea, one
of the largest online game companies worldwide. GPC continues to prosecute our
patent portfolio and we were awarded a 3rd U.S.
patent on March 6, 2009.




4
 Table of Contents





We
upgraded our 3D platform making it competitive with, and even exceeding, current
industry standards. We have retained a Bulgarian development team who are
continuing to upgrade our new rendering engine for photo realistic 3D
environments and avatars.  Finally, we have also developed a
micro-economy system which is tied into a Visa debit card platform for online
and off line usage.





During
the last 12 months, we (i) developed a prototype 3D world for MTV; (ii)
contracted and developed a demonstration world for theater circuit National
Amusements; and (iii) developed and are preparing to launch a new world for Rock
‘n Roll Hall of Fame inductee – DMC. In addition, we are currently negotiating
with a number of other top music performers to develop personalized worlds,
although no assurance can be given that any of these negotiations or discussions
will ever result in signed contracts.




Our
Technology





There has
been a tremendous amount of activity and press with respect to the 3D space on
the Internet this past year supporting our belief that the timing is right for
our strategy and it is our intention, as the pioneers in 3D, to position Worlds
as a leading participant in this market.  For example:




The Gartner Group
reports: 80% of Internet Users in Virtual Worlds by 2011




“The
collaborative and community-related aspects of these environments will dominate
in the future, and significant transaction-based commercial opportunities will
be limited to niche areas, which have yet to be clearly identified,” said Steve
Prentice, vice president and distinguished analyst at Gartner.




Fleishman
Hillard





“While
everyone was buzzing about Second Life, a lot was happening under the radar
regarding avatars and virtual worlds. It's early still, but it is developing
rapidly. If these applications continue to become easier to use and 3D content
is further developed, the opportunity in this area will explode.”




We use
our proprietary technology to produce three-dimensional portals and web sites
for Worlds.com and third parties. We believe that our core technology delivers a
considerably faster frame rate for user experiences and, in some cases, a
meaningful productivity increase in art production and integration over its
previous generation production tools. Our technology permits the development of
virtual worlds which have broad applications. These applications include but are
not limited to:




- a
virtual meeting place (such as a fan club);




- a
3D e-commerce store (where merchandise can be viewed in 3D and purchased
online); and




- a
virtual classroom (where content can be viewed via video streaming and then
discussed in real time).




Our core
technology has substantial elements written in Sun Microsystem's programming
language, Java, including WorldsBrowser and WorldsShaper, so we expect that it
can be made portable across Windows and UNIX Platforms because of Java's
platform independence.




5
 Table of Contents




Our core
technology includes:




●
            WorldsShaper:
      WorldsShaper is the visual authoring component of our platform. It allows
      for quick assembly of pieces to create multi-user, shared state, virtual
      worlds. The WorldsShaper is an advanced compositing 3D building tool that
      integrates pre-existing or custom content, such as 3D models, textures or
      images created in Adobe's Photoshop, or midi or wave sound files, with
      architectural geometry and interactive behaviors and actions written in
      Java. The architectural building blocks for creating 3D worlds, the
      flexibility and power of integrating professional modeling and imaging
      tools, and the extensibility via Java make the WorldsShaper a tool
      well-suited for rapid creation of 3D
  environments.




●
            WorldsServer:
      WorldsServer is the scalable software that we use to control and operate
      our on-line virtual communities. WorldsServer manages the registration and
      authentication of users, the locations of users within the 3D environment,
      the physical structure of the 3D environment, all information regarding
      objects that are "shared" by the participants and any of the interactions
      between the users such as text chat. This platform also integrates an HTTP
      server for the delivery of other content such as audio and video streaming
      and secure e-commerce applications.




●
            WorldsBrowser:
      WorldsBrowser is used to access the 3D environments. The browser is
      optimized for speed, delivering relatively fast frame rates per second in
      highly textured virtual 3D worlds.




●
            WorldsPlayerTM: The WorldsPlayer allows
      users to view and experience our multi-user, interactive technology. Any
      world created with the WorldsShaper will be viewable and navigable with
      the WorldsPlayer. The WorldsPlayer has a high frame rate for fast, quality
      graphics, an easy-to-use graphic user interface, 2D web browser
      integration, automatic upgrade capability over the internet and a complete
      communication tool set including text chat, voice-to-voice chat, e-mail
      and animation.




●
            Worlds
      Gamma Libraries: The Worlds Gamma Libraries are composed of sample worlds,
      textures, models, avatars, actions, sensors, sounds, motion sequences, and
      other behaviors.




Worlds
Ultimate 3D Chat




We
operate a proprietary online 3D Internet chat site known as Worlds Ultimate 3D
Chat, an interactive site employing our 3D technology. This site is targeted
toward the music industry and fans. Our 3D technology enhances users' chat
experiences by allowing users to see a representation of each other in the form
of highly textured characters, known as avatars, and to explore a 3D environment
together. Users have the option to create their own avatars or choose from
pre-defined figures in our library. Users communicate with each other through
text chat, as well as voice-to-voice chat and can move through the many virtual
"worlds" of the 3D environment.




The user
moves his or her avatar through these worlds using a mouse or keyboard arrow
keys and can:




● engage
other avatars in one-on-one text-based or real voice-to-voice
discussions;




● enter
theme-based chat rooms featuring group discussions on numerous music styles,
specific recording artists and other topics;




● experience
interactive advertising and promotions;




6
 Table of Contents




● access
information on various recording artists, concert schedules and other
music-related and non-music-related information;




● view
new music videos by leading recording artists;




● listen
to selections from newly released CDs by numerous recording
artists;




●
purchase music and recording artist-related merchandise online; and




● design
their own unique avatar as a VIP subscriber.




We
believe that the user base to the Worlds Ultimate 3D Chat site will develop into
a valuable asset. Worlds Ultimate 3D Chat also contains an e-commerce component,
which we believe is the first commercial real 3D virtual store online, selling
music merchandise of various major recording artists.




In order
to increase the number of potential subscribers to our 3D music sites, we offer
a modified demo version of our Worlds Ultimate 3D Chat product as a free
download. By reducing the price barrier, we hope to generate new members to our
Chat service. The proliferation of Worlds Ultimate 3D Chat may also increase
corporate brand identity that could translate into valuable consumer data and
related advertising potential.  For a limited time, the free demo can
be accessed by going to www.worlds.com and
following instructions for a temporary log-in account.




We
believe that there is an opportunity to further exploit the Worlds Ultimate 3D
Chat product in modified form. We are now exploring the modification of Worlds
Ultimate 3D Chat as a corporate Intranet chat and information service for
corporate clients. The modified application of Worlds Ultimate 3D Chat, if
successfully modified and then marketed, could provide us with an ongoing
revenue stream based on the licensing fees for our server technology, as well as
annual membership subscription fees.




Our
Strategy




Our goal
is to become a leading provider of interactive 3D Internet sites where
entertainment content, interactive chat and e-commerce opportunities converge to
provide communities for users and advertisers. Keys to achieving our goal
are:




●
            Producing
      interactive multimedia 3D sites. We believe that music and entertainment
      brands readily lend themselves to exploitation through web sites utilizing
      our technology. We also believe that the highly graphic, interactive
      nature of sites using our technology appeals to users drawn to music and
      entertainment based sites, differentiates such sites from other non-3D
      music and entertainment based sites and thereby encourages repeat
      visitation. Because our technology allows for the creation of multiple
      worlds accessible from a web site, it allows such sites to segregate users
      of different tastes and
demographics.




●
            Creating
      effective offline distribution partnerships with recording artists and
      their record companies. We are now actively seeking to enter into
      alliances with recording artists and their record
  companies




●
            Creating
      Brand Identity for Worlds.com. Public awareness of our site and products
      is critical to our success. We are now actively seeking to build this
      awareness by entering into co-branding arrangements with other
      high-profile Internet companies and music and entertainment
      companies.




●
            Creating
      Other Services Using Our Interactive 3D
  Technology.




7
 Table of Contents




●
            Pursuing
      Alliances and Cross Promotional Opportunities. Our strategy for expanding
      brand recognition through online advertising depends to some extent on our
      relationships with our distribution and content partners. We have entered
      into strategic alliances with several leading enterprises and regularly
      seek additional opportunities to provide our 3D Internet technology and
      content to other companies for their use in connection with the marketing
      and delivery of their own products and services.





Now that
we have successfully completed our initial private placement, SEC compliance and
is nearing completion of its technology upgrades, we are negotiating Joint
Venture partnerships with brand leaders in seven primary strategic verticals
which we believe have the potential to provide us with growth opportunities in
each vertical for substantial revenue.





We have
identified the following primary verticals which we are pursuing with current
potential strategic partners and in which we are engaged in discussions with for
world development and deployment:





-
            Music/entertainment


-
            Publishing


-
            Web
      to Mobile interface


-
            Hispanic
      language markets


-
            Eastern
      Europe


-
            Education
      – Distant learning


-
            Health
      and rehabilitation




No
assurance can be given that we will be successful in closing any deals or, even
if we successfully close any deals, that we will see any revenues from such
transactions.




Representative
alliances and customers




We have
established strategic relationships and/or provided 3D content related services
to the music group Aerosmith, among others.  In January 2001, we
entered into a revenue sharing agreement with Aerosmith to create and operate an
official 3D Aerosmith environment entitled "Aerosmith World" and to redesign
Aerosmith's official website, which currently resides at www.Aerosmith.com. We
plan to begin to offer memberships to "Aerosmith interactive", which gives
subscribers access to advance ticket sales and exclusive merchandise and
discounts. "Aerosmith World" is currently available for download from www.Worlds.com.




Competition




The
markets in which we currently operate and those we intend to enter are
characterized by intense competition and an increasing number of new market
entrants which have developed or are developing competitive products. We will
face competition from numerous sources, including prospective customers which
may develop and market their own competitive products and services, software
companies, and online and Internet service providers. We believe that
competition will be based primarily on ease of use, price and features,
including communications capabilities and content.




In
addition, certain companies have developed, and others may be expected to
develop, technologies or products in related market segments which could compete
with certain technologies or products we have and/or are developing. We expect
that such companies, as well as other companies including established and newly
formed companies, may attempt to develop products that will be in direct
competition with ours. Many of our competitors have advantages over us,
including:




8
 Table of Contents




●
            longer
      operating histories and greater financial, technical, marketing and other
      resources;


●
            a
      wider range of services and financial
products;


●
            greater
      name recognition and larger customer
bases;


●
            more
      extensive promotional activities;
and


●
            cooperative
      relationships among themselves and with third parties to enhance services
      and products.




Currently,
there are many companies collaborating to establish standardization of 3D usage
on the Internet, the adoption of which may require changes to our technology. If
we fail to recognize or address the need for new service or product
introductions our business and financial condition could be materially adversely
affected. Competitors may develop superior technology or determine as a group to
adopt standards with which our technology is not compatible.




Many
companies now compete with us in one way or another and new ones may emerge in
the future. The competition may be through entry into the same markets, or
through technology that either obviates our advantages or lowers the barrier to
entry in one of our markets. The markets in which we compete are characterized
by rapid changes in technology and customer requirements, frequent new service
and product introductions and evolving industry standards which could result in
product obsolescence or short product life cycles. Accordingly, our ability to
compete will be dependent upon our ability to develop and successfully introduce
new products into the marketplace in a timely manner and to continually enhance
and improve our technology to meet the increasingly sophisticated and varied
needs of our users and prospective users.




Intellectual
Property





U.S.
Patents: Worlds has been granted U.S patent 6,219,045 and 7,181,690 B1 for
multi-server technology for 3D applications, which is Worlds' core
technology.  We are now looking into the implications and breadth of
the patent in order to maximize its benefits.  The description of the
initial patent is as follows:





"The
present invention provides a highly scalable architecture for a three
dimensional, multi-user, interactive virtual world system.  In a
preferred embodiment a plurality of users interact in the three-dimensional,
computer-generated graphical space where each user executes a client process to
view a virtual world from the perspective of that user.  The virtual
world shows Avatars representing the other users who are neighbors of the user
viewing the virtual world.  In order that the view can be updated to
reflect the motion of the remote user's Avatar, motion information is
transmitted to a central server process that provides position updates to client
processes for neighbors of the user at that client process.  The
client process also uses an environment database to determine which background
objects to render as well as to limit the number of displayable Avatars to a
maximum number of Avatars displayable by that client."





Trademark:
Worldsplayer - The WorldsPlayer is especially designed to allow users to view
and experience the multi-user, interactive Worlds Gamma technology. Any world
created with the WorldsShaper will be viewable and navigable with
WorldsPlayer.  Utilizing the WorldsPlayer, a user assumes a persona
(via a digital actor, or Avatars), and can then move, view, chat, play, express
one's self via gestures and animations, voice chat, send email, join discussion
groups, listen to music, shop at Worlds 3D stores, and watch videos, all in the
company of users from around the world, within the 3D
environment.  The WorldsPlayer boasts high frame rate for fast, high
quality graphics, an easy to use graphic user interface, seamless 2D Web browser
integration, auto-upgrade capability over the Internet, and a complete
communication tool set including chat, voice-to-voice chat, email and animation.
The WorldsPlayer offers users the unique and creative experience of customizing
their Avatars, while maintaining the ability to animate and activate their
Avatars.




In
addition to our patents and  trademark, we intend to enter into
confidentiality agreements with key employees and consultants to protect our IP
and general know-how.




9
 Table of Contents




Employees




As of
December 31, 2008, we had one full time employee, our
president, Thomas Kidrin.




Corporate
History




We were
formed as a result of the contemporaneous mergers on December 3, 1997 of Worlds
Inc., a Delaware corporation formed on April 26, 1994 with and into Worlds
Acquisition Corp., a Delaware corporation formed on April 8, 1997 and of Worlds
Acquisition Corp. with and into Academic Computer Systems, Inc., a New Jersey
corporation formed on May 20, 1968 (the "Mergers"). Academic Computer Systems
changed its name to Worlds Inc. after the Mergers. In December 1999, we changed
our name from Worlds Inc. to Worlds.com Inc. in order to better reflect our
business as a consumer Internet web site that offers virtual "worlds" in which
consumers interact, conduct e-commerce and receive entertainment.




ITEM 1A.RISK
FACTORS




Our
business is subject to numerous risks, including but not limited to those set
forth below. Our operations and performance could also be subject to risks that
do not exist as of the date of this report but emerge thereafter as well as
risks that we do not currently deem material.




Risks
related to our operations




Our
auditors have expressed doubt about our ability to continue as a going concern.
If we do not generate substantial revenue from our new relationships and are
also unable to obtain capital from other resources, we will significantly
curtail our operations or halt them entirely.




Our
capital requirements for the development and commercialization of our
technology, creation of our 3D sites and our general operations have been and
will continue to be significant. Historically, we have been dependent on
financings to fund our development and working capital needs. As of December 31,
2008, we had only $166,535 in cash and cash equivalents. Accordingly, if we do
not develop any new projects, we would have to continue to severely diminish our
operations or halt them entirely. The opinion of our auditors contains an
explanatory paragraph regarding our ability to continue as a going
concern.




We
have experienced relatively large losses during our development and, without
significant increases in the market penetration of our services and improvements
to our operating margins, we will not achieve profitability.




Since
inception, we have incurred significant net losses as set forth in the financial
information included elsewhere in this report. We anticipate that we will
continue to incur significant losses for at least the short-term. We will not
achieve profitable operations until we successfully attract and retain a
significant number of advertisers to and users of our 3D sites and customers for
our other services and generate revenues from these sources that are sufficient
to offset the substantial up-front expenditures and operating costs associated
with developing and commercializing our services. We may never be able to
accomplish these objectives.




10
 Table of Contents




It
will be difficult for you to evaluate us based on our past performance because
we are a relatively new company with a limited operating history.




We have
been actively engaged in the commercial sale of our 3D Internet-based services
for a relatively short period of time and, accordingly, have only limited
financial results on which you can evaluate our company and operations. We are
subject to, and have not been successful in addressing, the risks typically
encountered by new enterprises and companies operating in the rapidly evolving
Internet marketplace, including those risks relating to:




●o the
failure to develop brand name recognition and reputation;




● the
failure to achieve market acceptance of our services;




● a slow
down in general consumer acceptance of the Internet as a vehicle for commerce;
and




● an
inability to grow and adapt our business and technology to evolving consumer
demand.




We
may not be able to successfully compete in our markets, which are characterized
by intense competition and the presence of large competitors and rapidly
changing technology.




Given our
relatively limited resources, we have not been able to effectively compete in
our target markets. These markets are characterized by intense competition,
rapidly changing technology and increasing numbers of new market entrants who
have developed or are developing potentially competitive products and services,
often resulting in product obsolescence or short product life cycles. Our
competitors include other enterprises utilizing 3D-based technology for online
entertainment and marketing purposes, online and Internet service providers,
online shopping malls, online direct music retailers, online music and book
sites and traditional music retailers. Most of our competitors have
significantly greater financial and operating resources compared to
us.  Our ability to compete will be dependent on our ability to
enhance and upgrade our technology platform in a timely manner and to
effectively offer our target customers attractive and exciting 3D content and
services, all of which require the expenditure of funds that we currently do not
have. In addition, the very companies with which we do business, such as the
larger Internet service providers and record labels, may determine to create and
distribute their own 3D Internet sites.




We
may not be able to develop and maintain marketing relationships with other
Internet companies.




Our
strategy for expanding brand recognition through online advertising depends to
some extent on our relationship with other Internet companies. We are now
seeking to enter into marketing agreements with those companies that will permit
us to advertise our products and services on their web pages. There can be no
assurance that we will be able to negotiate these agreements on favorable terms
or at all. Additionally, other e-commerce and music-related sites whichadvertise on popular web sites may have exclusive advertising
relationships with such sites or may otherwise object to our attempts to enter
into marketing agreements or relationships with such sites. If we cannot secure
or maintain these marketing agreements on favorable terms, our business
prospects could be substantially harmed.




11
 Table of Contents




Our
limited resources may restrict our ability to manage any growth we may
experience.




Growth of
our business may place a significant strain on our management systems and
resources and may require us to implement new operating and financial systems,
procedures and controls. Our failure to manage our growth and expansion could
adversely affect our business, results of operations and financial condition.
Moreover, our present technology backbone may not be adequate to accommodate
rapid growth in user demand. Our inability to add additional hardware and
software to upgrade our existing technology or network infrastructure to
accommodate increased traffic may cause decreased levels of customer service and
satisfaction. Failure to implement new systems effectively or within a
reasonable period of time could adversely affect our business, results of
operations and financial condition.




In
addition to our own technology, we use the technology of others in the creation
of our products and we are dependent upon our continued ability to access these
other technologies.




Although
our proprietary technology is the foundation of our products, we also use the
technology of other companies in the creation and delivery of our products.
Accordingly, any delay or termination by any of these third-party providers in
the provision of their technologies to us because of our failure, or perceived
inability, to pay such vendors or otherwise could cause a disruption in the
commercial distribution of our own products. Further, any material increases in
the prices these providers charge us for use of their technologies could force
us to increase the prices we charge for our own products or possibly make the
creation and distribution of our products no longer economically feasible or
desirable. We cannot assure you that any of these companies will continue to
provide their technology to us in an efficient, timely and cost-effective
manner. An interruption in or termination in our access to any necessary third
party technologies, and our subsequent inability to make alternative
arrangements in a timely manner, if at all, would likely have a material adverse
effect on our business and financial condition.




We
are dependent, in part, on the sale of our services to foreign customers, and
accordingly, are subject to the risks of doing business
internationally.




We market
and provide our services both in the United States and internationally.
Servicing our foreign clients and marketing our services abroad requires the
dedication of significant management and financial resources, which we currently
do not have. Our international operations are, and will be, subject to a variety
of risks associated with conducting business internationally, many of which are
beyond our control. Operating internationally subjects us to risks relating to
the following areas:




●
expenses associated with customizing products for foreign
countries;




●
political and economic instabilities;




●
potentially adverse tax consequences and regulatory requirements;




●
uncertainty of product acceptance by different cultures;




●
dependence on local partners who may not be able to meet the needs of a growing
international market;




● greater
difficulty in accounts receivable collection and longer collection
periods;




●
difficulties and costs of staffing and managing foreign operations;




●
unexpected changes in regulatory requirements related to the Internet;
and




● limited
or unfavorable intellectual property protection.




12
 Table of Contents




The
market may not readily accept our products.




Demand
and market acceptance for relatively new products, such as our 3D chat, are
subject to a high level of uncertainty. The successful introduction of any new
product requires a focused, efficient strategy to create awareness of and desire
for the products. For example, in order to achieve market acceptance for our
Worlds 3D chat sites, we will need to educate the members of the music industry,
such as record companies, record labels and recording artists, about the
marketing benefits this product could provide them. Similarly, we will have to
make music buyers and Internet consumers aware of this product's existence, draw
users to the site and compel them to return to the site for repeat
visitations.




Our
marketing strategy may be unsuccessful and is subject to change as a result of a
number of factors, including changes in market conditions (including the
emergence of market segments other than music which in our judgment can be
readily exploited through the use of our technology), the nature of possible
license and distribution arrangements and strategic alliances which may become
available to us in the future and general economic, regulatory and competitive
factors. There can be no assurance that our strategy will result in successful
product commercialization or that our efforts will result in initial or
continued market acceptance for our proposed products.




If
we are unable to protect our intellectual property rights, competitors may be
able to use our technology or trademarks, which could weaken our competitive
position.




In
addition to our patents, we rely on a combination of copyright, trademark and
trade secret laws and restrictions on disclosure to protect our intellectual
property rights. We also intend to enter into confidentiality or license
agreements with our employees, consultants and customers, and control access to
and distribution of our software, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or otherwise obtain and use our products or
technology, particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States. Although we have never been
involved as a defendant in any intellectual property litigation, we could become
a party to litigation as a result of alleged infringement of others'
intellectual property. These claims and any resulting lawsuits could subject us
to significant liability for damages and invalidation of our proprietary
rights.




If
we lose any of our key personnel or fail to hire and retain other talented
employees, our operations could be harmed.




Our
success is currently dependent, in large part, on the personal efforts of Thomas
Kidrin, our president and chief executive officer.  The loss of Mr.
Kidrin's services could have a material adverse effect on our business and
prospects. Our success is also dependent upon our ability to hire and retain
additional qualified management, marketing, technical, financial, and other
personnel. Competition for qualified personnel is intense and we may not be able
to hire or retain additional qualified personnel. Any inability to attract and
retain qualified managementand other personnel would have a
material adverse effect on our ability to grow our business and
operations.




In
order to be successful, we must be able to enhance our existing technology and
products and develop and introduce new products and services to respond to
changing market demand.




The
markets in which we operate are characterized by frequently changing customer
demand and the introduction of new technologies. In order to be successful, we
must be able to enhance our existing technology and products and develop and
introduce new products and services to respond to changing market demand. The
development and enhancement of services and products entails significant risks,
including:




13
 Table of Contents




● the
inability to effectively adapt new technologies to our business;




● the
failure to conform our services and products to evolving industry
standards;




● the
inability to develop, introduce and market enhancements to our existing services
and products or new services and products on a timely basis; and




● the
nonacceptance by the market of such new service and products.




We
currently have only limited resources to enhance our technology or to develop
new products.




Our
future results depend on continued evolution of the Internet.




Our
future results depend on continued growth in the use of the Internet for
information, publication, distribution and commerce. Our growth is also
dependent on increasing availability to residential consumers of broadband
Internet access which will allow such persons to access higher-capacity content
through the Internet. Our business could suffer if Internet usage and broadband
availability does not continue to grow and evolve.




In
addition, changes in network infrastructure, transmission and content delivery
methods and underlying software platforms, and the emergence of new Internet
access, such as television set-top boxes, could dramatically change the
structure and competitive dynamic of the market for Internet realtime 3D
products. We may not be able to adopt our technology and services for use in
connection with other emerging technologies.




We
may not be able to economically comply with any new government regulation that
may be adopted with respect to the Internet.




New
Internet legislation or regulation, or the application of existing laws and
regulations to the Internet and e-commerce could add additional costs and risks
to doing business on the Internet. We are subject to regulations applicable to
businesses generally and laws or regulations directly applicable to
communications over the Internet and access to e-commerce. Although there are
currently few laws and regulations directly applicable to e-commerce, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet, covering issues such as user privacy, pricing, content,
copyrights, distribution, antitrust, taxation and characteristics and quality of
products and services.




Legislation
regarding privacy of personal information about users may affect our
communities.




We are
subject to and must comply with data protection legislation which restricts our
ability to collect and exploit users' personal data. Our business is
particularly dependent on the existing and future data protection laws in
Europe, the United States and in each specific country where we operate or have
members. European data protections legislation is drafted in very broad terms,
and there are few sources of guidance as to its interpretation. It is difficult
to foresee the extent to which its enforcement by relevant authorities will
restrict our operations. We believe that a rigid interpretation of data
protection legislation could hinder our ability to conduct our business as
planned. Our failure to comply with applicable law could subject us to severe
legal sanctions which could have a material adverse effect on our business and
results of operations. We maintain a privacy policy which is to not disclose
individually identifiable information about any user of our products or services
to a third party without the user's consent. Despite this policy, however, if
third persons were able to penetrate our network security or otherwise
misappropriate users' personal information, we could be subject to liability
claims.




14
 Table of Contents




We
face potential liability for the content delivered over our sites.




While we
intend to acquire all licenses and other rights necessary to conduct our
business without violating any copyrights, there can be no assurance that we
will be able to do so. Due to the nature of our business, we could become
involved in litigation regarding the music, video and other content transmitted
over our sites which could force us to incur significant legal defense costs,
could result in substantial damage awards against us and could otherwise damage
our brand name and reputation.




In
addition, because music materials may be downloaded from our sites and may be
subsequently distributed to others, claims could be made against us for
"pirating" and copyright or trademark infringement. Claims could also be made
against us if material deemed inappropriate for viewing by children is accessed
or accessible through our sites. While we intend to carry insurance policies,
our insurance may not cover these types of claims or may not be otherwise
adequateto cover liability that may be imposed. Any partially
or completely uninsured claim against us, if successful and of sufficient
magnitude, would have a material adverse effect on us.




Risks
related to our common stock




Possible
issuances of our capital stock would cause dilution to our existing
shareholders.




While we
currently have approximately 52,387,749 shares of common stock outstanding, we
are authorized to issue up to 65,000,000 shares of common stock. Therefore, we
will be able to issue a substantial number of additional shares without
obtaining shareholder approval. In the event we elect to issue additional shares
of common stock in connection with any financing, acquisition or otherwise,
current shareholders could find their holdings substantially diluted, which
means they will own a smaller percentage of our company.




Certain
shareholders control a substantial portion of our outstanding common
stock.




Our chief
executive officer owns a significant portion of the outstanding shares of our
common stock and Mr. Kidrin may be issued an additional 15 million shares of our
common stock upon the exercise of outstanding stock options. Accordingly, he
will be able to influence the election of our directors and thereby influence or
direct our policies.




No
dividends have been paid on our common stock.




To date,
we have not paid any cash dividends on our common stock and we do not expect to
declare or pay dividends on the common stock in the foreseeable future. In
addition, the payment of cash dividends may be limited or prohibited by the
terms of any future loan agreements.




We
are subject to "penny stock" regulations which may adversely impact the
liquidity and price of our common stock.




Our
common stock is currently deemed a "penny stock." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document that
provides information on penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally, those persons with
assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse), the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction.




15
 Table of Contents




These
requirements could reduce the level of trading activity, if any, in the
secondary market for our common stock. As a result of the foregoing, our
shareholders may find it more difficult to sell their shares.




The
exercise or conversion of outstanding options into common stock will dilute the
percentage ownership of our other shareholders. The sale of such common stock or
other common stock in the open market could adversely affect the market price of
our common stock.




As of
April 15, 2009, there are outstanding options to purchase an aggregate of
approximately 15,887,500 shares of our common stock and more options will
likely be granted in the future to our officers, directors, employees and
consultants. The exercise of outstanding stock options will dilute the
percentage ownership of our other shareholders. Sales, or the expectation of
sales, of a substantial number of shares of our common stock in the public
market, including shares of our common stock issuable upon exercise of our stock
options, could adversely affect the prevailing market price of our common
stock.




ITEM
2. DESCRIPTION OF PROPERTIES.





We do not
own any property nor do we have any contracts or options to acquire any property
in the future. Presently, we are operating out of offices in our president's
residence in 11 Royal Road, Brookline, Massachusetts 02445, where we occupy
approximately 800 square feet.  This space is adequate for our present
and our planned future operations. We pay no rent to our president for use of
this space. In addition we have no written agreement or formal arrangement with
our president pertaining to the use of this space. No other businesses operate
from this office. We have no current plans to occupy other or additional office
space.




ITEM
3. LEGAL PROCEEDINGS.




In Cosmo
Communications v. Worlds Inc. (our former name) in the Superior Court Of New
Jersey Law Division, Bergen County, the court rendered a decision in favor of
the plaintiff, Cosmo Communications on February 13, 2001. The judgment amount
entered in April 2001, is approximately $205,000, of which the full amount is
accrued.  The judgment related to a consulting agreement for raising
capital. The court ruled that the terms of the contract are binding on
successors of the company and that Worlds.com is a successor
company.







ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.




None.




16
 Table of Contents




PART II




ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.




Our
common stock began trading on the OTC Bulletin Board on October 20, 1998 under
the symbol "WLDI." On February 11, 2000, in connection with the change in our
name from Worlds Inc. to Worlds.com Inc., our symbol was changed to "WDDD."
During 2001, our stock was no longer quoted on the OTC Bulletin Board and was
quoted on the Pink Sheets. The following table sets forth, for the periods
indicated, the high and low bids for our common stock as reported on the OTC
Bulletin Board or the Pink Sheets (representing interdealer quotations, without
retail mark-ups, mark-downs or commissions, and may not necessarily represent
actual transactions):





Year
      Ended December 31, 2008:
              
              High
              
              
              Low3/31/2008
              
              $
              0.45
              
              
              $
              0.156/30/2008
              
              $
              0.45
              
              
              $
              0.209/30/2008
              
              $
              0.40
              
              
              $
              0.1612/31/2008
              
              $
              0.27
              
              
              $
              0.11Year
      Ended December 31, 2007:
              
              High
              
              
              Low3/31/2007
              
              $
              0.001
              
              
              $
              0.0016/30/2007
              
              $
              0.004
              
              
              $
              0.0049/30/2007
              
              $
              0.008
              
              
              $
              0.00812/31/2007
              
              $
              0.020
              
              
              $
              0.015




Holders




As of
April 15, 2009, we had  610 shareholders of record of our common
stock.




Dividends




We have
never paid a dividend on our common stock and do not anticipate paying any
dividends in the near future.




Recent
Sales of Unregistered Securities




During 2008, we sold an
additional 1,609,415 shares of our common stock at a price of $0.30 per share
for approximately $481,000. For each 20 shares purchased, each investor also
acquired one warrant to purchase an additional share of our common stock for 18
months at a price of $0.50 per share for an aggregate of 80,166
warrants.  No underwriters were utilized in the placement but a broker
fee of $20,000 was paid.  The offer, sale and issuance of the shares
were exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended inasmuch as: all of the investors were “accredited” as defined in
Rule 501 of Regulation D promulgated under such Section 4(2); the investors took
their shares for investment purposes without a view to distribution; the
investors had access to information concerning the Company and its business
prospects; there was no advertising or general solicitation involved in the sale
of the shares; no commissions were paid; and the securities that were issued
contain standard restrictive legends.




During
2008 we also issued stock options to various persons, who are not directors, as
follows:





350,000
exercisable at $0.30


212,500
exercisable at $0.35





17
 Table of Contents








Company
Equity Compensation Plans




The
following table sets forth information as of December 31, 2008, with respect to
compensation plans (including individual compensation arrangements) under which
equity securities of the Company are authorized for issuance.




Plan
      Category
                  
                  Number
      of securities to be issued upon exercise of outstanding
      options
                  
                  Weighted-average
      exercise price of outstanding options
                  
                  Number
      of securities remaining available for future issuance under equity
      compensation plans2007
      Stock Option Plan, not yet approved by stockholders
                  
                  
                  15,887,500
                  
                  
                  $
                  0.063
                  
                  
                  
                  8,812,500Stock
      option grants approved by stockholders
                  
                  
                  0
                  
                  
                  $
                  N/A
                  
                  
                  
                  -Total
                  
                  
                  15,887,500
                  
                  
                  $
                  0.063
                  
                  
                  
                  8,812,500







ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





Forward
Looking Statements





When used
in this form 10-K and in future filings by the Company with the Commission, The
words or phrases such as "anticipate," "believe," "could," "would," "estimate,"
"expect," "intend," "may," "plan," "predict," "project," "will" or similar
expressions are intended to identify “forward-looking statements”
within  the meaning of the Private Securities Litigation Reform Act of
1995.  Readers are cautioned not to place undue reliance on any such
forward looking statements, each of which speak only as of the date
made.  Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected.  The Company has no
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.





These
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause actual results to be materially different. These
factors include, but are not limited to, changes that may occur to general
economic and business conditions; changes in current pricing levels that we can
charge for our services or which we pay to our suppliers and business partners;
changes in political, social and economic conditions in the jurisdictions in
which we operate; changes to regulations that pertain to our operations; changes
in technology that render our technology relatively inferior, obsolete or more
expensive compared to others; foreign currency fluctuations; changes in the
business prospects of our business partners and customers; increased
competition, including from our business partners; delays in the delivery of
broadband capacity to the homes and offices of persons who use our services;
general disruptions to Internet service; and the loss of customer faith in the
Internet as a means of commerce.




18
 Table of Contents





The
following discussion should be read in conjunction with the financial statements
and related notes which are included under Item 7.





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





Overview





General





Worlds.com
is a leading 3D entertainment portal which leveraged its proprietary technology
to offer visitors a network of virtual, multi-user environments which we call
"worlds". These worlds are visually engaging online environments featuring
animation, motion and content where people can come together and, by navigating
through the website, shop, interact with others, attend events and be
entertained.





Sites
using our technology allow numerous simultaneous visitors to enter, navigate and
share interactive "worlds". Our 3D Internet sites are designed to promote
frequent, repeat and prolonged visitation by users by providing them with unique
online communities featuring dynamic graphics, highly useful and entertaining
information content, and interactive capabilities. We believe that our sites are
highly attractive to advertisers because they offer access to
demographic-specific user bases comprised of people that visit the site
frequently and stay for relatively long periods of time.





Starting
in mid-2001 we were not able to generate enough revenue to sustain operations at
previous levels and inasmuch as other sources of capital were not available we
have had to limit our operations since that time.





Revenues





We
generated only modest revenue during the year as we have reduced operations
since mid 2001 when we ran out of funds.  The revenue that was
generated resulted from VIP subscriptions to our Worlds Ultimate 3-D Chat
service.





Expenses





We
classify our expenses into two broad groups:





●
            cost
      of revenues; and





●
            selling,
      general and administration.





During
the year, as more funds became available from our financing, we were able to
increase operations and become more active operationally.




19
 Table of Contents





Liquidity
and Capital Resources





We have
had to limit our operations since mid 2001 due to a lack of
liquidity.  We were able to issue equity in the last two years and
raise a small amount of capital that enabled us to begin upgrading our
technology, develop new products and actively solicit additional
business.  We continue to pursue additional sources of capital though
we have no current arrangements with respect to, or sources of, additional
financing at this time and there can be no assurance that any such financing
will become available. If we cannot start to generate sufficient revenues, we
may need to scale back operations.





RESULTS
OF OPERATIONS





Our net
revenues for each of the years ended December 31, 2008 and 2007 were $92,549 and
$5,269, respectively.  Management believes that this increase was due
to a paid pilot but that the amount of business from reduced operations is
inconsequential.





Year
ended December 31, 2008 compared to year ended December 31, 2007





Revenue
increased by $87,280, to $92,549 for the year ended December 31, 2008 from
$5,269 in the prior year.  Although this represents a significant
increase, it is still reflective of the fact that the business is running in a
limited mode due to the lack of available funds.





Cost of
revenues increased by $143,820 to $201,132 in 2008 from $57,312 in 2007
reflecting the increased business activities following the paid pilot and the
upgrades to the product as compared to 2007.





Selling
general and administrative expenses decreased by $5,567 from $510,958 to
$505,391 for the years ended December 31, 2007 and 2008,
respectively.  The balances reflect a consistent activity level in
these areas.





Other
expenses include a financing fee of $20,000 in the year ended December 31,
2008.  Other expenses for the year ended December 31, 2007 include
interest expense of $115,383 directly attributable to outstanding notes
payable.  For 2008 there was no interest because the notes were either
converted to equity or legally extinguished due to expiration of the statute of
limitations for such debts under state laws.





Extraordinary
gains of $1,005,763 and $2,740,751 were recorded in 2008 and 2007, respectively.
These pertained to debt that was legally extinguished due to expiration of the
statute of limitations for such debts under state laws.





As a
result of the foregoing, we realized net income of $287,941 for the year ended
December 31, 2008 compared to a gain of $2,062,367 in the year ended December
31, 2007, although as disclosed above the gain resulted from non-operational
bookkeeping entries from the extinguishment of debt.  Excluding the
gains attributable to the extinguishment of debt, we had a loss from operations
of $717,822 in 2008 and $678,384 in 2007.




20
 Table of Contents





Liquidity and Capital Resources





At
December 31, 2008, cash, cash equivalents, short-term marketable securities and
marketable equity securities was $166,535 at December 31, 2008. We sold
1,609,415 shares of our common stock to raise approximately $481,000 during the
year. At December 31, 2007, cash, cash equivalents, short-term marketable
securities and equity securities was $271,334.  This decrease of
$104,799 was the result of an increase in costs relating to a pilot and
upgrading the functionality of our product.  There were capital
expenditures of $9,375 in December of 2007.  No capital expenditures
were made in 2008.





Historically,
our primary cash requirements have been used to fund the cost of operations,
development of our products and patent protection, with additional funds having
been used in promotion and advertising and in connection with the exploration of
new business lines.





The funds
raised in our 2008 and 2007 equity financings are being used to upgrade our
existing technology, purchase hardware (capital expenditures), develop new
products and services, pay salaries to management and pay professional fees to
our attorneys and auditors to prepare and file reports with the Securities and
Exchange Commission to bring us “current” in our filings so we can attempt to
qualify to have our stock quoted on the OTC Bulletin Board or listed on
NASDAQ.  We hope to raise additional funds to be used for advertising
our existing products and services and to fund the development of additional
products and services.  No assurances can be given that we will be
able to raise any additional funds.





As
described above, we have commenced litigation to enforce our intellectual
property rights under our patents.  If we are successful in the
litigation, we expect to collect compensation for past infringement and license
fees.  No assurance can be given that we will be successful in the
litigation or that we will receive any funds as a result of the
litigation.





Also as
described above, we are currently negotiating with various musical artists and
other entities to develop worlds for them.  While no assurance can be
given that any of these deals will be concluded, if successful they would likely
generate additional cash flows.





Recent
Accounting Pronouncements




In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007. However, in February 2008 the FASB Staff Position
No. 157-2 was issued, which delays the effective date of the requirements
of SFAS 157 as to nonfinancial assets and nonfinancial liabilities except for
items that are recognized or disclosed at fair value in the financial statements
on a recurring basis. The effective date has been deferred to fiscal years
beginning after November 15, 2008 for these nonfinancial assets and
liabilities. The Company’s adoption of SFAS 157 on January 1, 2008 did not
have a material impact on its consolidated financial position, results of
operations or cash flows during the year ended December 31, 2008. The
Company does not expect the deferred portion of the adoption of SFAS 157 to have
a material impact on its consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”).  SFAS 141R establishes principles and
requirements for how the acquirer in a business combination recognizes and
measures in its financial statements the fair value of identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree at the acquisition date.  SFAS 141R determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination.  SFAS 141R is effective for
fiscal years beginning after December 15, 2008. The Company is currently
evaluating the impact of adopting SFAS 141R on its consolidated results of
operations and financial condition and plans to adopt it as required in the
first quarter of fiscal 2009.




21
 Table of Contents





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements” (“SFAS 160”), an amendment of Accounting
Research Bulletin No. 51, “Consolidated Financial Statements” (“ARB
51”).  SFAS 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Minority interests will be recharacterized as noncontrolling
interests and will be reported as a component of equity separate from the
parent’s equity, and purchases or sales of equity interests that do not result
in a change in control will be accounted for as equity transactions. In
addition, net income attributable to the noncontrolling interest will be
included in consolidated net income on the face of the income statement and upon
a loss of control, the interest sold, as well as any interest retained, will be
recorded at fair value with any gain or loss recognized in earnings. This
pronouncement is effective for fiscal years beginning after December 15,
2008. The Company is currently evaluating the impact of adopting SFAS 160 on its
consolidated results of operations and financial condition and plans to adopt it
as required in the first quarter of fiscal 2009.




In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities — an amendment to FASB Statement
No. 133.” SFAS No. 161 is intended to improve financial standards for
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity’s financial
position, financial performance, and cash flows. Entities are required to
provide enhanced disclosures about: (a) how and why an entity uses
derivative instruments; (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations; and
(c) how derivative instruments and related hedged items affect an entity’s
financial position, financial performance, and cash flows. It is effective for
financial statements issued for fiscal years beginning after November 15,
2008, with early adoption encouraged. The adoption of this statement, which is
expected to occur in the first quarter of 2009, is not expected to have a
material effect on the Company’s consolidated financial statements.




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles.” The adoption of this statement is not expected to have a material
effect on the Company’s consolidated financial statements.




In
May 2008, the FASB issued SFAS No. 163, “Accounting for Financial
Guarantee Insurance Contracts — An interpretation of FASB Statement
No. 60.” SFAS No. 163 requires that an insurance enterprise recognize
a claim liability prior to an event of default when there is evidence that
credit deterioration has occurred in an insured financial obligation. It also
clarifies how Statement No. 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities, and requires expanded disclosures about
financial guarantee insurance contracts. It is effective for financial
statements issued for fiscal years beginning after December 15, 2008,
except for some disclosures about the insurance enterprise’s risk-management
activities. SFAS No. 163 requires that disclosures about the
risk-management activities of the insurance enterprise be effective for the
first period beginning after issuance. Except for those disclosures, earlier
application is not permitted. The adoption of this statement is not expected to
have a material effect on the Company’s consolidated financial
statements.




22
 Table of Contents




ITEM
8. FINANCIAL STATEMENTS.






CONTENTSREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  24BALANCE
      SHEETS
                  25STATEMENTS
      OF OPERATIONS
                  26STATEMENTS
      OF CASH FLOWS
                  27STATEMENT
      OF STOCKHOLDERS’ DEFICIT
                  28NOTES
      TO FINANCIAL STATEMENTS
                  29-32








Table of Contents




BONGIOVANNI
& ASSOCIATES, PA





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of Worlds.com Inc.





We have
audited the accompanying balance sheet of Worlds.com Inc. (the “Company”) as of
December 31, 2008 and 2007 and related statements of operations, stockholders’
deficit, and cash flows for the two years then ending. These financial
statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Worlds.com Inc. (a New Jersey
corporation) as of December 31, 2008 and 2007 and the results of its operations
and its cash flows for two years then ended in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring operating
losses, has an accumulated stockholders’ deficit, has negative working capital,
has had minimal revenues from operations, and has yet to generate an internal
cash flow that raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 2.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.





/s/Bongiovanni
& Associates, PA


Bongiovanni
& Associates, PA


Cornelius,
North Carolina


April 10,
2009





Table of Contents




Worlds.com,
      Inc.Balance
      SheetsAs
      of December 31, 2008 and 20072008
                                                                                                    
                                                                                                    
                                                                                                    2007Current
      AssetsCash
      and cash equivalents
                                                                                                    
                                                                                                    $
                                                                                                    84
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    271,334Certificate
      of deposit
                                                                                                    
                                                                                                    
                                                                                                    166,451
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    -Deferred
      costs
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    55,695Prepaid
      expenses
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    9,860Total
      Current Assets
                                                                                                    
                                                                                                    
                                                                                                    166,535
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    336,889Property
      and equipment, net of accumulated depreciation
                                                                                                    
                                                                                                    
                                                                                                    7,387
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    9,375TOTAL
      ASSETS
                                                                                                    
                                                                                                    $
                                                                                                    173,922
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    346,264LiabilitiesCurrent
      LiabilitiesAccounts
      payable
                                                                                                    
                                                                                                    $
                                                                                                    19,300
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    180,813Accrued
      expenses
                                                                                                    
                                                                                                    
                                                                                                    280,000
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    525,484Deferred
      revenue
                                                                                                    
                                                                                                    
                                                                                                    631,950
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    631,950Current
      maturities notes payable
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    773,281Total
      Current Liabilities
                                                                                                    
                                                                                                    
                                                                                                    931,250
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    2,111,528Stockholders'
      (Deficit)Common
      stock (Par value $.001, authorized 65,000,000 shares, issued and
      outstanding 52,387,749 and 44,824,314 at December 31, 2008 and 2007,
      respectively)
                                                                                                    
                                                                                                    
                                                                                                    52,387
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    44,824Common
      stock subscribed but not yet issued (none and 5,411,764 common shares at
      December 31, 2008 and 2007, respectively)
                                                                                                    
                                                                                                    
                                                                                                    -
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    5,411Additional
      paid in capital
                                                                                                    
                                                                                                    
                                                                                                    21,858,603
                                                                                                    
                                                                                                    
                                                                                                    
                                                                                                    21,140,760Accumulated
      deficit
                                                                                                    
                                                                                                    
                                                                                                    (22,668,318
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (22,956,259
                                                                                                    )Total
      stockholders' deficit
                                                                                                    
                                                                                                    
                                                                                                    (757,328
                                                                                                    )
                                                                                                    
                                                                                                    
                                                                                                    (1,765,264
                                                                                                    )Total
      Liabilities and stockholders' deficit
                                                                                                    
                                                                                                    $
                                                                                                    173,922
                                                                                                    
                                                                                                    
                                                                                                    $
                                                                                                    346,264




See notes to audited financial statements and
auditors' report


25
 Table of Contents
  Worlds.com,
      Inc.Statements
      of operationsFor
      the years ended December 31, 2008 and 20072008
                                                                                    
                                                                                    
                                                                                    2007RevenuesRevenue
                                                                                    
                                                                                    $
                                                                                    92,549
                                                                                    
                                                                                    
                                                                                    $
                                                                                    5,269Total
                                                                                    
                                                                                    
                                                                                    
                                                                                    92,549
                                                                                    
                                                                                    
                                                                                    
                                                                                    5,269Cost
      and ExpensesCost
      of Revenue
                                                                                    
                                                                                    
                                                                                    201,132
                                                                                    
                                                                                    
                                                                                    
                                                                                    57,312Selling
      General & Administrative
                                                                                    
                                                                                    
                                                                                    590,690
                                                                                    
                                                                                    
                                                                                    
                                                                                    510,958Operating
      loss
                                                                                    
                                                                                    
                                                                                    (699,273
                                                                                    )
                                                                                    
                                                                                    
                                                                                    (563,001
                                                                                    )Other
      Income/ExpenseInterest
      Income
                                                                                    
                                                                                    
                                                                                    1,451
                                                                                    
                                                                                    
                                                                                    
                                                                                    -Interest
      Expense
                                                                                    
                                                                                    
                                                                                    -
                                                                                    
                                                                                    
                                                                                    
                                                                                    (115,383
                                                                                    )Financing
      Fee
                                                                                    
                                                                                    
                                                                                    (20,000
                                                                                    )
                                                                                    
                                                                                    
                                                                                    -Gain
      on Debt Forgiveness
                                                                                    
                                                                                    
                                                                                    1,005,763
                                                                                    
                                                                                    
                                                                                    
                                                                                    2,740,751Net
      Income
                                                                                    
                                                                                    $
                                                                                    287,941
                                                                                    
                                                                                    
                                                                                    $
                                                                                    2,062,367
  See notes
to audited financial statements and auditors' report




26
 Table of Contents




Worlds.com,
      Inc.Statements
      of Cash FlowsFor
      the years ended December 31, 2008 and 20072008
                                                                                                                        
                                                                                                                        
                                                                                                                        2007Cash
      flows from operating activitiesNet
      income
                                                                                                                        
                                                                                                                        $
                                                                                                                        287,941
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        2,062,367Adjustments
      to reconcile net income to net cash used in
      operating activitiesDepreciation
                                                                                                                        
                                                                                                                        
                                                                                                                        3,504
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -Common
      stock issued for services rendered
                                                                                                                        
                                                                                                                        
                                                                                                                        31,098
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -Fair
      value of stock options issued
                                                                                                                        
                                                                                                                        
                                                                                                                        85,292
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        296,506Forgiveness
      of notes payable
                                                                                                                        
                                                                                                                        
                                                                                                                        (650,683
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        (904,447
                                                                                                                        )Deferred
      costs
                                                                                                                        
                                                                                                                        
                                                                                                                        55,695
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (55,695
                                                                                                                        )Prepaid
      expenses and other current assets
                                                                                                                        
                                                                                                                        
                                                                                                                        9,860
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (9,860
                                                                                                                        )Accounts
      payable and accrued expenses
                                                                                                                        
                                                                                                                        
                                                                                                                        (406,997
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        (1,660,203
                                                                                                                        )Net
      cash used in operating activities
                                                                                                                        
                                                                                                                        
                                                                                                                        (584,291
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        (271,332
                                                                                                                        )Cash
      flows from investing activitiesAcquisition
      of property and equipment
                                                                                                                        
                                                                                                                        
                                                                                                                        (1,516
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        (9,375
                                                                                                                        )Net
      cash used in investing activities
                                                                                                                        
                                                                                                                        
                                                                                                                        (1,516
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        (9,375
                                                                                                                        )Cash
      flows from financing activitiesProceeds
      from sale of common stock
                                                                                                                        
                                                                                                                        
                                                                                                                        481,007
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        550,000Net
      cash provided from investing activities
                                                                                                                        
                                                                                                                        
                                                                                                                        481,007
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        550,000Net
      increase (decrease) in cash
                                                                                                                        
                                                                                                                        
                                                                                                                        (104,800
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        269,293Cash
      beginning of year
                                                                                                                        
                                                                                                                        
                                                                                                                        271,334
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        2,041Cash
      end of year
                                                                                                                        
                                                                                                                        $
                                                                                                                        166,534
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        271,334Supplemental
      disclosure of cash flow information:Cash
      paid during the year forInterest
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -Income
      taxes
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -Non-cash
      financing activities:Conversion
      of debt to equity
                                                                                                                        
                                                                                                                        $
                                                                                                                        122,598
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        -


See notes to audited financial statements and
auditors' report




27
 Table of Contents




Worlds.com,
      Inc.Statement
      of Stockholders' DeficitFor
      the Years Ending December 31, 2008 and 2007Common
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            CommonShares
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Stock
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            TotalAdditional
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Subscriber
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Subscriber
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Accumulated
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            stockholders'Common
      stock
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Paid-in
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            but
      not
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            but
      not
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Deficit
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            equityShares
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Amount
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            capital
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Issued
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            Issued
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (deficit)Balance,
      January 1, 2007
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            33,824,314
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            33,824
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            20,146,723
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (25,018,626
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (4,838,079
                                                                                                                                                                            )Equity
      investment
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            11,000,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            11,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            539,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            550,000Conversion
      of note payable
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            69,589
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            411,764
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            411
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            70,000Conversion
      of officer loan payable
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            88,942
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            5,000,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            5,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            93,942Issuance
      of options
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            296,506
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            296,506Net
      Income for the year ended December 31, 2007
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2,062,367
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            2,062,367Balances,
      December 31, 2007
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            44,824,314
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            44,824
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            21,140,760
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            5,411,764
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            5,411
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (22,956,259
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (1,765,264
                                                                                                                                                                            )Issuance
      of common stock previously subscribed in prior year
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            411,764
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            411
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (411,764
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (411
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -Issuance
      of common stock previously subscribed in prior year
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            5,000,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            5,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (5,000,000
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            (5,000
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -Conversion
      of debt to equity
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            400,000
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            400
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            122,198
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            122,598Common
      stock issued for services rendered
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            142,256
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            142
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            30,956
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            31,098Equity
      investment
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            1,609,415
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            1,610
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            479,397
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            481,007Issuance
      of stock options at fair value
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            85,292
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            85,292Net
      Income for the year ended December 31, 2008
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            287,941
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            287,941Balances,
      December 31, 2008
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            52,387,749
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            52,387
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            21,858,603
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            -
                                                                                                                                                                            
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (22,668,318
                                                                                                                                                                            )
                                                                                                                                                                            
                                                                                                                                                                            $
                                                                                                                                                                            (757,328
                                                                                                                                                                            )
  See notes to audited
financial statements and auditors' report




28
 Table of Contents




Worlds.com,
Inc.


NOTES TO
FINANCIAL STATEMENTS


Years
Ended December 31, 2008 and 2007







NOTE 1 –
DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES





Description
of Business





Worlds.com,
Inc. (the "Company") designs and develops software content and related
technologies for the creation of interactive, three-dimensional ("3D") Internet
sites on the World Wide Web. Using in-house technology the Company creates its
own Internet sites, as well as sites available through third party on-line
service providers.





Basis of
Presentation





The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America ("US
GAAP"), which contemplates continuation of the Company as a going concern. The
Company has always been considered a developmental stage business, has incurred
significant losses since its inception and has had minimal revenues from
operations.  The Company will require substantial additional funds for
development and marketing of its products. 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 has not been able to
generate sufficient revenue or obtain additional financing which has had a
material adverse effect on the Company, including requiring the Company to
reduce operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern.  For most of the past year the
Company has been operating at a significantly reduced capacity, with no full
time employees, performing primarily consulting services and licensing software
and using consultants to perform any work that may be required.





Use of
Estimates





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





Cash and
Cash Equivalents





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





Revenue
Recognition





The
Company has the following sources of revenue: (1) consulting/licensing revenue
from the performance of development work performed on behalf of the Company or
from the sale of certain software to third parties; and (2) VIP subscriptions to
our Worlds Ultimate 3-D Chat service.   The Company recognizes
revenue when all of the following criteria are met: evidence of an arrangement
exists such as a signed contract, delivery has occurred, the price is fixed or
determinable, and collectibility is reasonable assured.  This will be
in the form of a receipt of a customers acceptance indicating the product has
been completed to their satisfaction except for development work and service
revenue which is recognized when the services have been
performed.  Deferred revenue represents cash payments received in
advance to be recorded as revenue when earned.  The corresponding cost
associated with those contracts is also deferred as deferred costs until the
revenue is ultimately recognized.




Table of Contents




Worlds.com,
Inc.
 NOTES TO
FINANCIAL STATEMENTS
 Years
Ended December 31, 2008 and 2007
 
  NOTE 1 –
DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)


Research
and Development Costs





Research
and development costs are charged to operations as incurred.





Property
and Equipment





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





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 net
operating loss carry forwards using enacted tax rates. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.





Extraordinary
Item





The
Company had accrued expenses on its books which during the year ended December
31, 2008 were legally extinguished pursuant to applicable statue of limitations.
The amount was treated as an extraordinary item on the accompanying statements
of income.





The
Company had notes payables on its books in the amount of $759,871. During the
year ended December 31, 2008 these notes payables were legally extinguished
pursuant to applicable statues of limitations. The amount was treated as an
extraordinary item extraordinary item on the accompanying statements of
income.




Commitments
and Contingencies





During
2000 the Company was involved in a lawsuit relating to unpaid consulting
services. In April, 2001 a judgment against the Company was rendered for
approximately $205,000. As of December 31, 2007 and 2008 the Company recorded a
reserve of $205,000 for this lawsuit, which is included in accrued expenses in
the accompanying balance sheets.





During
2003, a law firm obtained a judgment against the Company for unpaid legal fees
and other debt in the aggregate amount of $182,075. During 2008, the debt was
converted into 400,000 shares of common stock.




Table of Contents




Worlds.com,
Inc.
 NOTES TO
FINANCIAL STATEMENTS
 Years
Ended December 31, 2008 and 2007




NOTE 1 – DESCRIPTION
OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)




The SEC
has challenged our write-down of long-term debt in the amount of $1,005,763 in
2008 and $2,740,751 in 2007.  The result of the write-downs was to
lower the liabilities on the Balance Sheet and increase Net Income on the Income
Statement by said amounts. The Company believes that it has properly treated
these entries since the applicable statute of limitations has passed with
respect to these liabilities and it is highly improbable that the Company would
have to pay them. For the above reason, the Company does not believe that the
accompanying financial statements are materially inaccurate and the Balance
Sheet presents an accurate picture of the Company’s liabilities.





Impairment
of Long Lived Assets





The
Company reviews the carrying value of long-lived assets to determine if
circumstances exist indicating whether there has been any impairment of the
carrying value of property and equipment or whether the depreciation periods
should be modified.  Long-lived assets are reviewed for impairment
whenever events or changes in business circumstances indicate that the carrying
value of the assets may not be fully recoverable.  The Company, as of
the date of these financial statements, has no long lived assets.





NOTE 2 -
GOING CONCERN





Since
2001, the Company has had to reduce operations due to lack of resources. The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has had only minimal revenues from
operations over the last few years, has negative cash flows from operations, has
a stockholders’ deficit, has a retained deficit, and negative working capital.
There can be no assurance that the Company will be able to obtain the
substantial additional capital resources necessary to implement its business
plan or that any assumptions relating to its business plan will prove to be
accurate. The Company is pursuing sources of additional financing and there can
be no assurance that any such financing will be available to the Company on
commercially reasonable terms, or at all. Any inability to obtain additional
financing will have a material adverse effect on the Company, including possibly
requiring the Company to cease operations.





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





NOTE 3 -
PRIVATE PLACEMENTS OF EQUITY





During
the years ended December 31, 2008 and 2007, the Company completed a private
placement of 1,609,415 and 11,000,000 shares of its common stock for aggregate
proceeds of $481,000 and $550,000, respectively. Stock options were issued to
these investors in conjunction with the 2008 equity issuances. See Note 7 below
for discussion.





One
officer of the Company and a consultant received common shares totaling 142,256
for services rendered to the Company during 2008. $31,098 was expensed during
2008 which equates to the fair value of services rendered during 2008. This also
approximated the closing stock prices at the dates of the common stock
issuances.




Table of Contents




Worlds.com,
Inc.
 NOTES TO
FINANCIAL STATEMENTS
 Years
Ended December 31, 2008 and 2007




NOTE 4 –
DEFERRED REVENUE





Deferred
revenue represents advance payments for the license, the design and development
of the software, content and related technology for the creation of an
interactive, 3D entertainment portal on the internet.  As part of a
debt refinancing in 2000, $631,950 of debt was renegotiated to deferred revenue
representing future services to be provided by the Company.





NOTE 5 -
NOTES PAYABLE





There was
no long-term or short-term debt outstanding at December 31, 2008. All prior year
debts were legally extinguished under the relevant state statute of limitations
and recorded as an extraordinary gain on the accompanying income
statements.





Note 6-
PROPERTY AND EQUIPMENT





The
detail composition of property and equipment at December 31, 2008 is as
follows:





Computer
equipment                                              $9,375


Less: accumulated
depreciation          
                     1,988


$7,387


=====





Depreciation
expense recorded for 2008 and 2007 was $1,988 and $-0-,
respectively.





NOTE 7 –
STOCK OPTIONS





Stock
Options





During
2008, the Company issued stock options to various parties in conjunction with
the equity raise. The stock options allow the parties to purchase shares of the
Company’s common stock at various prices per share per each individual option
agreement. The options allow the various parties to purchase one common share of
its stock for each option. The options expire at various times through September
2012 per each individual option agreement. The Company did not grant any
registration rights with respect to any shares of common stock issuable upon
exercise of the options. There were no forfeited options during 2008. During the
year ended December 31, 2008, the Company recorded an expense of $85,292, equal
to the estimated fair value of the options at the date of grants. Some if the
options did not vest during the year ended December 31, 2008 but accounting
recognition was applied ratable between the dates of issuances and the dates of
vesting. The fair market value was calculated using the Black-Scholes options
pricing model, assuming approximately 3.0% risk-free interest, 0% dividend
yield, 60% volatility, and expected lives ranging from one to five
years.




Table of Contents




ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.




ITEM 9A(T).  CONTROLS
AND PROCEDURES.





We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our management, currently embodied by our Chief
Executive Officer and our Principal Accounting and Financial Officer
(collectively, the “Certifying Officers”), are responsible for establishing and
maintaining adequate internal control over our financial
reporting.  The controls and procedures established by us are designed
to provide reasonable assurance that information required to be disclosed by the
issuer in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Commission’s rules and forms.




As of the end of the period covered by
this report, our most recent fiscal year end, the Certifying Officers evaluated
the effectiveness of our disclosure controlsbased on the framework
inInternal Controls —
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and the related guidance provided inInternal Control Over Financial
Reporting — Guidance for Smaller Public Companies also issued by the
Committee of Sponsoring Organizations of the Treadway Commission.. Based on the evaluation, the
Certifying Officers concluded that our internal controls over financial
reporting were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.




The
Certifying Officers have also concluded, based on our evaluation of our controls
and procedures that as of December 31, 2008, our internal controls over
financial reporting are effective and provide a reasonable assurance of
achieving their objective.





The
Certifying Officers have also concluded that there was no change in our internal
controls over financial reporting identified in connection with the evaluation
that occurred during our fourth fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.





Due to
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements under all potential conditions. Therefore,
effective internal control over financial reporting provides only reasonable,
and not absolute, assurance that a restatement of our financial statements would
be prevented or detected.




Changes
in Internal Control Over Financial Reporting




There
were no changes in the Company’s internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.





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




ITEM
9B.  OTHER INFORMATION.




None.




Table of Contents




PART
III




ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.




The
following table sets forth the name, age and position of our directors and
executive officers. Our directors are elected annually and serve until the next
annual meeting of stockholders.  Except for Mr. Kidrin, all of our
directors are independent







Name
              Age
              PositionThomas
      Kidrin
              56
              President,
      Chief Executive Officer, Secretary, Treasurer, DirectorChristopher
      J. Ryan
              48
              Vice
      President- Finance, Principal Accounting and Chief Financial
      OfficerBernard
      Stolar
              62
              DirectorJay
      Coleman
              58
              DirectorRobert
      Fireman
              60
              Director




Thomas
Kidrin has been president, chief executive officer, secretary and treasurer
since December 1997. Mr. Kidrin was also president and a director of Worlds
Acquisition Corp. from April 1997 to December 1997. He has been the chairman and
president of Datastream Corporation, a designer and developer of interactive
products and services, since 1993. Since October 1999, Mr. Kidrin has also
served as a director of EMT Corporation, which is engaged in the development and
marketing of an interactive web-browser with user customized features focused on
affinity online marketing. From December 1991 to June 1996, Mr. Kidrin was a
founder, director, and President of UC Television Network Corp., a company
engaged in the design and manufacture of interactive entertainment/advertising
networks in the college market under the brand name College Television Network,
the largest private network on college campuses in the United States. Mr. Kidrin
is a graduate of the New School of Social Research.




Christopher
J. Ryan has been Vice President- Finance since May 2000 and principal accounting
and finance officer since August 2000. From August 1991 through April 2000, Mr.
Ryan held a variety of financial management positions at Reuters America, an
information services company.  From 2001 through 2003, Mr. Ryan was
the founder and President of CJR Advisory Services, a personal corporation
through which he provided financial consulting services to various
entities.  Since 2004, Mr. Ryan has been the VP Finance of Peminic,
Inc.  Mr. Ryan is a certified public accountant. He is a graduate of
Montclair State College in New Jersey and received an M.B.A. degree from Fordham
University in New York.





Bernard
Stolar is noted for his expertise in both identifying and developing
market-driving content and forging successful business partnerships, brings to
the board over twenty years of senior-level experience within the interactive
entertainment industry in all phases of company operations, including sales and
marketing, product development, licensing, distribution, strategic planning and
management. Mr. Stolar has served in high profile leadership roles at publicly
and privately held interactive entertainment companies. Currently, Mr. Stolar is
Dean of Games and Game Evangelist for Google, Inc. From February 2006 until its
purchase by Google, Inc. in February 2007, Mr. Stolar was the Chairman of the
Board of Adscape Media. Prior to this, he was president and chief operating
office of BAM! Entertainment, where he transformed the company from a hand-held
content company to a developer and marketer of interactive entertainment for
next generation video game consoles. In 2000, Mr. Stolar joined Mattel, Inc. as
president of Mattel Interactive, where he was responsible for directing and
reorganizing the $1 billion Mattel Interactive division. From 1996 to 1999, Mr.
Stolar served as president and chief operating officer of Sega of America, Inc.
where he helped increase sales from $200 million to over $1 billion in three
years, and orchestrated the launch of the Sega Dreamcast(TM), the fastest
selling video game console in US history at that time. Mr. Stolar also served as
executive vice president of Sony Computer Entertainment of America, where he was
a key leader of the Sony Playstation® launch team, directing all third-party
publishing in the U.S. Prior to that, Mr. Stolar served as president of Atari
America's game division.




Table of Contents




Jay
Coleman is the founder and CEO, since 1976, of Entertainment Marketing &
Communications International, a leading independent company linking worldwide
consumer marketing with the broad spectrum of contemporary music, entertainment
and technology.  Major deals include the Rolling Stones with American
Express; Michael Jackson with Pepsi; and Sponsorship for Live Aid and Live
Earth, among other major media events. Coleman is best known for pioneering
music sponsorship and marketing, creating landmark deals, and expanding the
company's marketing capabilities beyond pop music, creating breakthrough
concepts in all areas of entertainment.




Robert
Fireman joins the Worlds team as a seasoned executive in the building of
technology and consumer driven companies. He brings to Worlds vast experience in
the development of real time, loyalty based, stored value products and
services.  Mr. Fireman was a founder and former Director and General
Manager of SmartSource Direct, Inc., a subsidiary of News America Marketing
(News Corp).  Mr. Fireman as responsible for the development, marketing and
distribution of card-based loyalty, financial, and database products &
services in retail, grocery and drug store chains encompassing over 50,000
stores throughout the U.S.  Mr. Fireman has been a practicing attorney
for over 25 years and is the managing attorney of Fireman & Associates
LLP.




The board
of directors met one time during during 2008 and acted by written consent six
times.  All of the directors attended the meeting.  The
board does not have any standing committees and when necessary, the entire board
acts to perform such functions.





Family
Relationships




None.





Legal
Proceedings





None.





Audit
Committee





We do not
have a separately designated standing audit committee. Pursuant to Section
3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit
committee for the purpose of overseeing the accounting and financial reporting
processes, and audits of our financial statements. The Commission recently
adopted new regulations relating to audit committee composition and functions,
including disclosure requirements relating to the presence of an "audit
committee financial expert" serving on its audit committee.  We have
only recently begun increasing our operations, and we are not in a position at
this time to attract, retain and compensate additional directors in order to
acquire a director who qualifies as an "audit committee financial expert" or to
so designate one of our current directors, but we intend to either retain an
additional director who will qualify as such an expert or designate one of our
current directors as such an expert, as soon as reasonably practicable. Our
current directors, by virtue of their past employment experience, have
considerable knowledge of financial statements, finance, and accounting, and
have significant employment experience involving financial oversight
responsibilities. Accordingly, we believe that our current directors capably
fulfill the duties and responsibilities of an audit committee in the absence of
such a designated expert at this time.




Table of Contents





Code
of Ethics





We have
adopted a code of ethic (the "Code of Ethics") that applies to our principal
chief executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions.  A
draft of the Code of Ethics is filed herewith as Exhibit 14.1 hereto. The Code
of Ethics is being designed with the intent to deter wrongdoing, and to promote
the following:






            Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships





            Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that we file with, or submit to, the Commission and in other
      public communications we make





            Compliance
      with applicable governmental laws, rules and
  regulations





            The
      prompt internal reporting of violations of the code to an appropriate
      person or persons identified in the
code





            Accountability
      for adherence to the code







Section
16(a) Beneficial Ownership Reporting Compliance




Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each
person who is the beneficial owner of more than 10% of the common stock of a
company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and we are required to report, in this Form 10-K, any failure
to comply therewith during the fiscal year ended December 31,
2008.  Except as disclosed below, we believe that all of these filing
requirements were satisfied by its executive officers, directors and by the
beneficial owners of more than 10% of our common stock. In making this
statement, we have relied solely on copies of any reporting forms received by
us, and upon any written representations received from reporting persons that no
Form 5 (Annual Statement of Changes in Beneficial Ownership) was required to be
filed under applicable rules of the Commission.  Each of our directors
did not timely file one Form 4.




Table of Contents




ITEM
11. EXECUTIVE COMPENSATION.




The
following table sets forth the compensation paid by us during the fiscal periods
ending December 31, 2008 and 2007, to our chief executive officer and to our
other most highly compensated executive officers whose compensation exceeded
$100,000 for those fiscal periods.




SUMMARY
      COMPENSATION TABLE (1)(2)Name
      and principal position
                                                (a)
                                              Year
                                                (b)
                                              Salary
      ($)
                                                (c)
                                              Bonus
      ($)
                                                (d)
                                              Stock
      Awards ($)
                                                (e)
                                              Option
      Awards ($)
                                                (f)
                                              Securities
      underlying options
                                                (g)
                                              All
      Other Compensation ($)
                                                (i)
                                              Total
      ($)
                                                (j)Thomas
      Kidrin
                                                President
      and CEO
                                              2008
                                              $200,000
                                              0
                                              0
                                              0
                                              
                                              0
                                              $2007
                                              $71,100
                                              0
                                              0
                                              $252,932
                                              15,000,000
                                              0
                                              $324,032




(1)
The above compensation does not include other personal benefits, the total value
of which do not exceed $10,000.




(2)
Pursuant to the regulations promulgated by the SEC, the table omits columns
reserved for types of compensation not applicable to us.





Stock
Option Grants





The
following table sets forth information as of December 31, 2008 concerning
unexercised options, unvested stock and equity incentive plan awards for the
executive officers named in the Summary Compensation Table.





OUTSTANDING
EQUITY AWARDS AT YEAR-ENDED DECEMBER 31, 2008




Name
                      
                      Number
      of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        (#)
                        Exercisable
                      
                      
                      Number
      of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        (#)
                        Unexercisable
                      
                      
                      
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number of
                        Securities
                        Underlying
                        Unexercised
                        Unearned
                        Options
                        (#)
                      
                      
                      Option
                        Exercise
                        Price
                        ($)
                      
                      
                      
                      
                      Option
                        Expiration
                        DateThom
      Kidrin
                      
                      
                      10,000,000
                      
                      
                      
                      5,000,000
                      
                      
                      
                      (1)
                      
                      
                      
                      0
                      
                      
                      $
                      0.05
                      
                      
                      
                      
                      
                      08-31-12





(1)
              The
      balance vests on 8/31/09.




Table of Contents




Compensation
of Directors




On
September 5, 2007, the Board of Directors adopted a compensation program for the
directors whereby each director will receive compensation in the form of stock
options for serving on the board. Five-year non-qualified stock options to
purchase 100,000 shares of the Corporation’s common stock are to be granted
annually on January 1 to each director then in office at an exercise price equal
to the last reported trading price of our common stock on that day, with such
option to vest in 12 months, provided the director serves for at least six
months, following the date of grant.  In addition, every director upon
first joining our board receives 150,000 stock options that vest immediately and
are exercisable for five years at a price equal to the last reported trading
price of our common stock on that day.




The
following table sets forth information concerning the compensation paid to each
of our non-employee directors during 2008 for their services rendered as
directors.





DIRECTOR
COMPENSATION




Name
                          
                          Fees
                            Earned
                            or Paid
                            in Cash
                            ($)
                          
                          
                          Stock
                            Awards
                            ($)
                          
                          
                          Option
                            Awards
                            ($)(1)
                          
                          All Other
                            Compensation
                            ($)
                          
                          Total
                            ($)Jay
      Coleman
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          892
                          
                          
                          
                          
                          892Robert
      Fireman
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          
                          0Bernard
      Stolar
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          
                          0


___________





(1)
This column represents the dollar amount recognized for financial statement
reporting purposes with respect to the 2008 fiscal year for the fair value of
stock options granted to the named director in fiscal year 2008, in accordance
with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting conditions. These amounts
reflect our accounting expense for these awards, and do not correspond to the
actual value that will be recognized from these awards by the named
director.




Employment
Agreements





On
September 4, 2007, our board approved entry into an employment agreement with
our president, Thom Kidrin.  The agreement, dated as of September 1,
2007, is for five years with a one-year renewal option held by Mr.
Kidrin.  The agreement provides for a base salary of $200,000, which
increases 10% on January 1 of each year; a monthly car allowance of $1,000; an
annual bonus equal to 2.5% of Pre-Tax Income (as defined in the agreement); an
additional bonus as follows: $75,000, if Pre-Tax Income for the year is between
150% and 200% of the prior fiscal year’s Pre-Tax Income or (B) $100,000, if
Pre-Tax Income for the year is between 201% and 250% of the prior fiscal year’s
Pre-Tax Income or (C) $200,000, if Pre-Tax Income for the year is 251% or
greater than the prior fiscal year’s Pre-Tax Income, but in no event shall this
additional bonus exceed five (5%) percent of Pre-Tax Income for such year;
payment of up to $10,000 in life insurance premiums; options to purchase 15
million shares of our common stock at an exercise price of  $0.05 per
share, of which one-third vested on September 4, 2007, one-third vest on August
31, 2008 and the balance vest on August 31, 2009; a death benefit equal to one
year of the then base salary and a disability benefit equal to two years of the
then base salary; and a payment equal to 2.99 times his base amount (as defined
in the agreement) in the event of a Change of Control (as defined in the
agreement).  The agreement also provides that Mr. Kidrin can be
terminated for cause (as defined in the agreement) and that he is subject to
restrictive covenants for 12 months after
termination.




Table of Contents




Stock
Option Plan





On
September 4, 2007, our board of directors adopted the 2007 Stock Option Plan
which we intend to present to our shareholders for their approval at our next
annual meeting.  The plan provides for the issuance of up to 25
million options of which not more than 22 million can be incentive stock
options.  To date, 15,887,500 options have been issued under the
plan.




ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.




The
following table sets forth as of April 15, 2009, certain information with
respect to the beneficial ownership of Common Stock by (i) each Director,
nominee and executive officer of us; (i) each person who owns beneficially more
than 5% of the common stock; and (iii) all Directors, nominees and executive
officers as a group. The percentage of shares beneficially owned is based on
there having been 52,387,749 shares of common stock outstanding as of April 15,
2009.





OFFICERS,
DIRECTORS AND BENEFICIAL OWNERS, AS OF APRIL 15, 2009





Name
      & Address of Beneficial Owner(1)
                                          Amount
      & Nature of Beneficial Owner
                                          %
      of Class(2)Thomas
      Kidrin
                                          11,290,000(3)
                                          21.55%Jay
      Coleman
                                          175,000(4)
                                          0.3%Robert
      Fireman
                                          150,000(4)
                                          0.3%Bernard
      Stolar
                                          150,000(4)
                                          0.3%All
      directors and executive officers as a group (one person)
                                          11,765,000(5)
                                          22.46%




(1)
Unless stated otherwise, the business address for each person named is
Worlds.com, Inc., 11 Royal Road, Brookline, MA  02445.





(2)
Calculated pursuant to Rule 13d-3(d) (1) of the Securities Exchange Act of 1934.
Under Rule 13d-3(d), shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned by a
person, but not deemed outstanding for the purpose of calculating the percentage
owned by each other person listed. We believe that each individual or entity
named has sole investment and voting power with respect to the shares of common
stock indicated as beneficially owned by them (subject to community property
laws where applicable) and except where otherwise noted.





(3)
Includes 10 million currently exercisable stock options.





(4)
Consists of currently exercisable stock options.





(5)
Includes 10,475,000 currently exercisable stock options.




Table of Contents




ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.




Jay
Coleman, one of our directors, received 50,000 stock options exercisable for 3
years at a price of $0.30 per share, which was the closing price of our common
stock on the date of grant, as compensation for his efforts in generating new
business for the Company. The issuance was approved by the board of directors,
including of all of the independent directors.





ITEM 14. PRINCIPAL ACCOUNTANT
FEES AND SERVICES.





Fees
Billed For Audit and Non-Audit Services





The
following table represents the aggregate fees billed for professional audit
services rendered to the independent auditor, Bongiovanni & Associates, P.A.
(“Bongiovanni”), for our audit of the annual financial statements for the years
ended December 31, 2008 and 2007. Bongiovanni was retained as our auditor in
2007. Audit fees and other fees of auditors are listed as follows:





Year Ended December 31
                
                2008
                
                
                
                2007Bongiovanni
                
                
                
                BongiovanniAudit
      Fees (1)
                
                $
                17,000
                
                
                (3)
                
                $
                10,000
                
                
                (2)Audit-Related
      Fees (4)
                
                
                
                
                
                
                
                
                --Tax
      Fees (5)
                
                $
                5,000
                
                
                
                
                
                7,000All
      Other Fees (6)
                
                
                
                
                
                
                
                
                --Total
      Accounting Fees and Services
                
                $
                22,000
                
                
                
                
                $
                17,000




(1)
            Audit Fees. These are
      fees for professional services for the audit of our annual financial
      statements, and for the review of the financial statements included in our
      filings on Form 10-QSB, and for services that are normally provided in
      connection with statutory and regulatory filings or
      engagements.




(3)
            The
      amounts shown for Bongiovanni in 2008 and 2007 relate to (i) the audit of
      our annual financial statements for the years ended December 31, 2008 and
      2007, and (ii) the review of the financial statements included in our
      filings on Form 10-Q for the first, second and third quarters of 2008 and
      2007.




(4)
            Audit-Related Fees.
      These are fees for the assurance and related services reasonably related
      to the performance of the audit or the review of our financial
      statements.




(5)
            Tax Fees. These are
      fees for professional services with respect to tax compliance, tax advice,
      and tax planning.




(6)
            All Other Fees. These
      are fees for permissible work that does not fall within any of the other
      fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax
      Fees.




Table of Contents




Pre-Approval
Policy For Audit and Non-Audit Services





We do not
have a standing audit committee, and the full Board performs all functions of an
audit committee, including the pre-approval of all audit and non-audit services
before we engage an accountant. All of the services rendered to us by
Bongiovanni & Associates, P.A. were pre-approved by our Board of
Directors.




We are
presently working with our legal counsel to establish formal pre-approval
policies and procedures for future engagements of our accountants. The new
policies and procedures will be detailed as to the particular service, will
require that the Board or an audit committee thereof be informed of each
service, and will prohibit the delegation of pre-approval responsibilities to
management. It is currently anticipated that our new policy will provide (i) for
an annual pre-approval, by the Board or audit committee, of all audit,
audit-related and non-audit services proposed to be rendered by the independent
auditor for the fiscal year, as specifically described in the auditor's
engagement letter, and (ii) that additional engagements of the auditor, which
were not approved in the annual pre-approval process, and engagements that are
anticipated to exceed previously approved thresholds, will be presented on a
case-by-case basis, by the President or Controller, for pre-approval by the
Board or audit committee, before management engages the auditors for any such
purposes. The new policy and procedures may authorize the Board or audit
committee to delegate, to one or more of its members, the authority to
pre-approve certain permitted services, provided that the estimated
fee for any such service does not exceed a specified dollar amount (to be
determined). All pre-approvals shall be contingent on a finding, by the Board,
audit committee, or delegate, as the case may be, that the provision of the
proposed services is compatible with the maintenance of the auditor's
independence in the conduct of its auditing functions. In no event shall any
non-audit related service be approved that would result in the independent
auditor no longer being considered independent under the applicable rules and
regulations of the Securities and Exchange Commission.




ITEM
15. EXHIBITS.




3.1
                                      Certificate
      of Incorporation (a)3.1.1
                                      Certificate
      of Amendment of the Certificate of Incorporation (b)3.2
                                      By-Laws
      - Restated as Amended (c)4.1
                                      2007
      Stock Option Plan (d)10.1
                                      Consulting
      Agreement between the Registrant and SGC Advisory, Inc. (b)14.1.
                                      Code of Ethics (e)31.1.
                                      Rule 13a-14(a)/15d-14(a)
      Certifications of Chief ExecutiveOfficer **31.2.
                                      Rule 13a-14(a)/15d-14(a)
      Certifications of Chief FinancialOfficer **32.1.
                                      Section 1350
      Certifications of Chief Executive Officer **32.2.
                                      Section 1350
      Certifications of Chief Financial Officer
  **


_______________________


(a)
            Filed
      previously as an exhibit to Registrant's Registration Statement No.
      2-31876, and incorporated herein by
reference.


(b)
            Filed
      previously as an exhibit to Registrant's Annual Report on Form 10-KSB
      filed on March 30, 2000, and incorporated herein by
    reference.


(c)
            Filed
      previously as an exhibit to Registrant's Post-Effective Amendment No. 3 to
      Registration Statement on Form SB-2 (File No. 333-10838), and incorporated
      herein by reference.


(d)
            Filed
      previously as an exhibit to Registrant's Current Report on Form 8-K filed
      on September 7, 2007, and incorporated herein by
  reference.


(e)
            Filed
      previously as an exhibit to Registrant's Annual Report on Form 10-KSB
      filed on April 3, 2008, and incorporated herein by
    reference.


** Filed
herewith





Table of Contents


SIGNATURES




In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.




WORLDS.COM INC.(Registrant)Dated:
      April 15, 2009
                  By:
                  /s/ Thomas
      KidrinThomas
      KidrinPresident
      and Chief Executive Officer




In
accordance with the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.






Signatures
                                                                        Title
                                                                        Date/s/
      Thomas Kidrin
                                                                        President,
      Chief Executive Officer and Director
                                                                        April
      15, 2009Thomas
      Kidrin/s/
      Christopher J. Ryan
                                                                        Vice
      President - Finance and
                                                                        April
      15, 2009Christopher
      J. Ryan
                                                                        Principal
      Accounting andFinancial
      Officer/s/
      Bernard Stolar
                                                                        Director
                                                                        April
      15, 2009Bernard
      Stolar/s/
      Jay Coleman
                                                                        Director
                                                                        April
      15, 2009Jay
      Coleman/s/
      Robert Fireman
                                                                        Director
                                                                        April
      15, 2009Robert
      Fireman