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,
2010



|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 INC.

(Exact Name of Registrant as Specified in
Its Charter)





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



11 Royal 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 Registered
|------------------- |  | -------------------------------------------------
|                    |  |                                                  
|None                |  | 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. YesoNox



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YesoNox



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.     YesxNoo



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





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and 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 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
FilerxSmaller
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 Act.):    YesoNox



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 June 30, 2010 (closing price was $0.09) was approximately $4,519,140.



At February 17, 2011, the issuer had outstanding 67,307,995 shares
of par value $.001 Common Stock, of which 55,427,336 shares were held by non-affiliates.















TABLE OF CONTENTS

|PART I     
|-----------
|Item  1    
|Item  1A   
|Item  1B   
|Item  2    
|Item  3    
|Item  4    
|           
|           
|           
|Item  5    
|Item  6    
|Item  7    
|Item  7A   
|Item  8    
|Item  9    
|Item  9A(T)
|Item 9B    
|           
|           
|           
|Item  10   
|Item  11   
|Item  12   
|Item  13   
|Item  14   
|Item  15   





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," "Risk Factors" 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.








Table of Contents




PART I



ITEM 1. BUSINESS.



General



Worlds is a leading 3D entertainment portal which leverages 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. 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



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 2010 we, among other things, expanded our Board, completed some small financings, began upgrading our technology
and more actively sought business opportunities.



In 2008 we completed a restructuring and restart of the Company’s
operations. As a result, we are now current with our SEC periodic reporting obligations.



In February 2010, the Company completed a private placement of 1,454,590
shares of its common stock at a price per share of $0.10 for aggregate proceeds of $145,459.  The five investors also
received an aggregate of 975,338 warrants as part of the equity investment exercisable at $0.15 per share.  The Company
also converted the $175,000 in notes payable from the 2009 financing into 1,750,000 shares of its common stock. In December 2010,
the Company completed a private placement to five investors of 3,333,331 shares of its common stock at a price per share of $0.12
for aggregate proceeds of $400,000.



Based upon our knowledge of the industry, we believe we hold the
key patents in 3D online technology. We were awarded a 3rd U.S. patent on March 6, 2009.



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



We upgraded our 3D platform making it competitive with, and even
exceeding, current industry standards.  We 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 two additional
prototype 3D worlds for Pearson Education Group; and (ii) completed development of a demonstration world for Circle Bank of California.

Our board has determined it will be in the best interest
of our shareholders toestablish a subsidiary, Worlds Online, into which all of Worlds’ online
and operational technologies will be transferred. If implemented, it is currently anticipated that these assets will include:Worlds’
technology platform,Worlds Ultimate Chat, Aerosmith World, DMC
Worlds, Cinema Virtual, Pearson contracts and related revenue,
URLs: Worlds.com, Cybersexworld.com, Hang.com,
and Worldsfunds.com, a digital inventory of over 10,000 3D objects, animation sequences, an extensive avatar library, texture maps
and virtual world architectures.

Worlds Inc. will retain all of the related Intellectual  Property
( IP) consisting of the three existing patents, 6,219,045 - 7,181,690 and 7,493,558 and all continuance claims currently before
the USPTO including any to be filed going forward.



Worlds Inc. will endeavor to prosecute it’s issued patents
and any future issued patents against all parties that the company and our legal counsel believe to be infringing on said patents.



Enforcement actions are subject to the analysis of all relevant
prior art and the costs associated with litigation.



The company is pursuing contingency arrangements with potential
law firms as well as exploring financing options associated with retaining legal representation.



The company may also seek to acquire additional patents it believes
will enhance it’s portfolio position in the markets within which it’s existing patents cover.



There can be no assurance that the company will be successful in
our ability to prosecute our IP portfolio nor that we will be able to acquire additional patents.

Worlds expects to maintain an equity
interest in the new Worlds Online subsidiary and each of Worlds’ shareholders of record on the date of the transfer are expected
to be issued a pro rata number of shares in new Worlds Online.

Worlds intends to prepare and file a registration statement
with the SEC for this new subsidiary during the first quarter of 2011.

Worlds Online plans to facilitate revenue generation through
the acquisition of target companies that are either related to Worlds Online’s core online virtual world properties or are
operating in the areas of mobile content, casual games, virtual currency/ micro transactions, online advertising and e-learning.
The company believes that targeted acquisition candidates offer a new cross platform opportunity to acquire customers and revenue
while synergistically complimenting Worlds Online’s core competencies and technology platforms.

Discussions with respect to the proposed structure, and with
respect to any acquisitions, are in a preliminary stage and no assurance can be made that this restructuring will be implemented
or that any transactions will be consummated.

We are currently negotiating with a number of educational
content companies for distant learning applications as well as with online banking groups for development of virtual worlds, although
no assurance can be given that any of these negotiations or discussions will ever result in signed contracts.

On February 7, 2011 we changed our domicile from New Jersey
to Delaware, changed our name to Worlds Inc., increased our authorized common stock to 100 million shares and added 5 million shares
of blank check preferred stock.



(1)


Table of Contents






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:



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



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



o 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.



Our core technology includes:



|o | 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.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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:



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



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



o experience interactive advertising and promotions;



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



o view new music videos by leading recording artists;



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



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



o 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.



(2)


Table of Contents






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:



|o | 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | 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.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o | Creating Other Services Using Our Interactive 3D Technology.
|- | ------------------------------------------------------------



|o | 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 (i) successfully completed our initial private
placement, (ii) are SEC compliant, and (iii) and nearing completion of our 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. "Aerosmith World" is currently available
for download from www.Worlds.com.



Worlds has developed DMC World for Hip Hop Rapper, Darryl McDaniels,
and this service is available for download from WWW.dmcworlds.com.



We have also established a strategic relationship with Pearson to
develop a series of virtual worlds to potentially be used within the existing Pearson education programs.



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:





|o | longer operating histories and greater financial, technical, marketing and other resources;
|- | -------------------------------------------------------------------------------------------
|o | a wider range of services and financial products;                                          



|o | greater name recognition and larger customer bases;
|- | ---------------------------------------------------
|o | more extensive promotional activities; and         



|o | 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, 7,181,690
and 7,493,558 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. We spent $4,000 on software
development in 2010 and $146,000 in 2009.



Employees



As of December 31, 2010, 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.



(3)


Table of Contents






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, 2010, we had only limited
cash or cash equivalents. Accordingly, if we do not develop any new projects, we would have 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.



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;



o the failure to achieve market acceptance of
our services;



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



o 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
which advertise 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.



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 of, 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:



o expenses associated with customizing products
for foreign countries;



o political and economic instabilities;



o potentially adverse tax consequences and regulatory
requirements;



o uncertainty of product acceptance by different
cultures;



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



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



o difficulties and costs of staffing and managing
foreign operations;



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



o limited or unfavorable intellectual property
protection.



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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 management and
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:













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.



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 adequate to 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 67,307,995 shares of common
stock outstanding, we are authorized to issue up to 100,000,000 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. There are now 5 million shares of blank preferred stock
that the board can issue under any terms it wants and without any shareholder approval.



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.



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 February 17, 2011, there are outstanding options and warrants
to purchase an aggregate of approximately 19,051,146 shares of our common stock and more options and warrants 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 at 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 currently pay no rent to our president for use of this space, although when funds are available
we may do so in the future. 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.



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





ITEM 4. RESERVED BY THE SEC.



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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, but returned to the Bulletin Board in the third quarter of 2008. 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, 2010: |  | High |   | Low  | 
|First quarter                 |  |      | $ | 0.27 |  |  | $
|Second quarter                |  |      | $ | 0.12 |  |  | $
|Third quarter                 |  |      | $ | 0.13 |  |  | $
|Fourth quarter                |  |      | $ | 0.18 |  |  | $
|Year Ended December 31, 2009: |  | High |   | Low  | 
|First quarter                 |  |      | $ | 0.22 |  |  | $
|Second quarter                |  |      | $ | 0.21 |  |  | $
|Third quarter                 |  |      | $ | 0.15 |  |  | $
|Fourth quarter                |  |      | $ | 0.10 |  |  | $



Holders



As of December 31, 2010, we had 620 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



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



The Company also converted the $175,000 in notes payable from the
2009 financing into 1,750,000 shares of its common stock. The eight investors were all “accredited” and were existing
shareholders. In December 2010, the Company completed a private placement to five “accredited” investors of 3,333,331
shares of its common stock at a price per share of $0.12 for aggregate proceeds of $400,000.



During 2010 we issued an aggregate of 5,912,774 shares of common
stock as payment for services rendered.

During 2010 we also issued stock options to various persons, who
are not directors, as follows:



500,000 exercisable at $0.05

150,000 exercisable at $0.11



During 2009 we issued promissory notes with penny warrants raising
an aggregate of $175,000 from eight investors, all of whom were “accredited” and were existing shareholders.  As
mentioned above all the notes were converted into 1,750,000 shares of common stock.



During 2009 we also issued an aggregate of 100,000 stock options
exercisable at $0.11 per share to various persons for consulting services.



During 2009 we also issued an aggregate of 751,009 shares of common
stock as payment for services rendered and another 500,000 shares as part of a settlement agreement to pay an outstanding  balance
to a former vendor.



All of these issuances were exempt pursuant to Rule 506 inasmuch
as they were sold only to accredited investors, in private placements and without advertising.





Company Equity Compensation Plans



The following table sets forth information as of December 31, 2010
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, warrants and rights |            | Weighted-average exercise price of outstanding options, warrants and rights |  | Number of securities remaining available for future issuance under equity compensation plans |      
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | -----
|Equity compensation plans approved by stockholders |  |                                                                                                     | 17,812,500 |                                                                             |  | $                                                                                            | 0.064
|Stock option grants approved by stockholders       |  |                                                                                                     | 0          |                                                                             |  | $                                                                                            | N/A  
|Total                                              |  |                                                                                                     | 17,812,500 |                                                                             |  | $                                                                                            | 0.063







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



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



The following discussion should be read in conjunction with the
financial statements and related notes which are included in this report under Item 8.



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



Overview



General



Worlds is a leading 3D entertainment portal which leverages 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 due to a lack of funds.  The revenue that was generated resulted from VIP subscriptions to our Worlds
Ultimate 3-D Chat service, software license revenue and software development to provide a site for a 3-D world under our deferred
revenue agreement.



Expenses



We classify our expenses into two broad groups:



|O | cost of revenues; and
|- | ---------------------



|O | selling, general and administration.
|- | ------------------------------------



Since mid-2007, as more funds became available from our financings,
we were able to increase operations and become more active operationally.



Liquidity and Capital Resources



We have had to limit our operations since mid 2001 due to a lack
of liquidity.  However, we were able to issue equity and convertible debt in the last few years and raise small amounts
of capital from time to time 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 raise additional capital, form an alliance of some nature with another entity, or start to generate sufficient revenues,
we may need to once again scale back operations.



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RESULTS OF OPERATIONS



Our net revenues for each of the years ended December 31, 2010 and
2009 were $415,856 and $101,115, respectively.  We had revenue in 2010 from licensing our software, developing a 3-D
world under our deferred revenue agreement and VIP subscriptions to our Worlds 3-D chat service and for 2009 we had revenue from
developing a 3-D world under our deferred revenue agreement and VIP subscriptions to our Worlds 3-D chat service. While this amount
of business from operations is still relatively inconsequential, we believe it is indicative of our recent awakening and return
to active operations.



Year ended December 31, 2010 compared to year ended December
31, 2009



Revenue increased by $314,741 to $415,856 for the year ended December
31, 2010 from $101,115 in the prior year.  The increase is due to software license revenue and revenue from developing
a 3D world under our deferred revenue agreement but is still relatively inconsequential and reflects the fact that the business
is running in a limited mode due to the lack of available funds.



Cost of revenues decreased by $151,921 to $13,074 in 2010 from $164,995
in 2009 reflecting the efficiencies obtained from the prior year’s development activities resulting in our ability to create
new worlds with less expense.



Selling general and administrative (S, G & A) expenses
increased by $152,972 from $372,158 to $525,130 for the years ended December 31, 2009 and 2010, respectively.    Increase
is primarily due to the legal fees related to the lawsuit which was settled in April 2010 and the costs relating to the proxy sent
out in the 3rd quarter of 2010. Common stock issued for services rendered increased by $190,447 to $415,750 in 2010
compared to $225,303 for 2009. The increase is due to the strategic business consulting and advice agreements signed during the
year.



Other expenses include warrants expense of $14,992 and options expense
of $42,543 for the year ended December 31, 2010 compared to warrant expense of $35,833, options expense of $25,031 and interest
expense of $4,815 in the year ended December 31, 2009.



As a result of the foregoing, we realized a net loss of $595,563
for the year ended December 31, 2010 compared to a loss of $727,020 in the year ended December 31, 2009, a decreased loss of $131,457.



Liquidity and Capital Resources



At December 31, 2010, we had cash, cash equivalents, short-term
marketable securities or marketable equity securities of $400,848.  We raised an aggregate of $145,459 in February 2010
from a private placement and in December 2010 we raised an aggregate of $400,000 through a private placement of common stock.

At December 31, 2009, we had no cash, cash equivalents, short-term
marketable securities or marketable equity securities.  We raised an aggregate of $175,000 through the issuance of convertible
notes in May of 2009.  This increase of $400,848 was the result of the private placements.  No capital expenditures
were made in 2010 or 2009.



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 2009 and 2010  financings were
and will be used to 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.  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 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.



Subsequent Events



In June 2010 the Company conducted a proxy to consider and act upon
the following matters all of which were approved by the requisite vote of our shareholders:



1.To elect 4 directors toservefor the ensuing year.

2.To approve and authorize amending our Certificate of Incorporation to increase our authorized capital to 105,000,000 shares
consisting of 100,000,000 shares of common stock and 5,000,000 shares of newly authorized blank check preferred stock, par value
of $0.001 per share.

3.To approve and authorize our Board of Directors to implement a reverse split of our outstanding Common Stock, at its discretion,
in a ratio ranging from 1:2 to 1:20.

4.To change our domicile from New Jersey to Delaware, which would also serve to change our name to Worlds Inc.

5.To ratify and approve the adoption of the Company’s 2007 Stock Option Plan, and the awards previously issued there
under.

6.To ratify the selection bytheBoard of Directors of the firm of Bongiovanni & Associates,
CPA’S, as the Company’s independent auditors for the current fiscal year.

7.To transact such otherbusinessas may properly come before the meeting or any adjournment
thereof.

On February 7, 2011 we acted upon items 2 and 4 as we changed our
domicile and our name and increased our authorized capital.



As described above, the Company is currently contemplating spinning
off its operating assets into a new operating subsidiary while the Company retains ownership of the patents and primarily devotes
its activities to expanding the Company’s patent profile and increase prosecution of lawsuits to protect against infringement
on our patented technology. To that extent we are actively looking to retain a law firm specializing in patent protection.



Recent Accounting Pronouncements



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



FASB Accounting Standards Codification

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



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



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



Subsequent Events

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



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



Determination of the Useful Life of Intangible Assets

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



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



Noncontrolling Interests

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



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



Consolidation of Variable Interest Entities — Amended

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



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





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ITEM 8. FINANCIAL STATEMENTS.





--------

AUDITED

FINANCIAL STATEMENTS



Worlds Inc.





December 31, 2010

--------





Bongiovanni & Associates, PA

Certified Public Accountants





|CONTENTS                                               
|-------------------------------------------------------
|                                                       
|                                                       
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|                                                       
|BALANCE SHEETS                                         
|                                                       
|STATEMENTS OF OPERATIONS                               
|                                                       
|STATEMENTS OF CASH FLOWS                               
|                                                       
|STATEMENT OF STOCKHOLDERS’ DEFICIT                     
|                                                       
|NOTES TO FINANCIAL STATEMENTS                          
|                                                       



(8)













BONGIOVANNI & ASSOCIATES, CPA'S



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To the Board of Directors and

Stockholders of Worlds Inc.



We have audited the accompanying balance sheet of Worlds Inc. (the
“Company”) as of December 31, 2010 and 2009 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 audits.



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 Inc. (a Delaware corporation) as of December 31, 2010 and 2009
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, CPA'S

Bongiovanni & Associates, CPA'S

Cornelius, North Carolina

February 17, 2011



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|Worlds.com Inc                                                                                                                                                         |  |              |  |             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------
|Balance Sheets                                                                                                                                                         |  |              |  |             
|December 31, 2010 and December 31, 2009                                                                                                                                |  |              |  |             
|                                                                                                                                                                       |  | Audited      |  | Audited     
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  | 31-Dec-10    |  | 31-Dec-09   
|Current Assets                                                                                                                                                         |  |              |  |             
|Cash and cash equivalents                                                                                                                                              |  | $400,848     |  | $-          
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|Total Current Assets                                                                                                                                                   |  | 400,848      |  | 0           
|                                                                                                                                                                       |  |              |  |             
|Property and equipment, net of                                                                                                                                         |  |              |  |             
|accumulated depreciation                                                                                                                                               |  | 759          |  | 3,883       
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|TOTAL ASSETS                                                                                                                                                           |  | $401,607     |  | $3,883      
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|Current Liabilities                                                                                                                                                    |  |              |  |             
|Cash overdraft                                                                                                                                                         |  | $-           |  | $1,175      
|Accounts payable                                                                                                                                                       |  | 782,809      |  | 782,784     
|Accrued expenses                                                                                                                                                       |  | 1,818,751    |  | 1,589,587   
|Loan payable officer                                                                                                                                                   |  | 2,400        |  | 4,000       
|Deferred revenue                                                                                                                                                       |  | 276,950      |  | 541,950     
|Notes payable                                                                                                                                                          |  | 773,279      |  | 948,279     
|                                                                                                                                                                       |  |              |  |             
|Total Current Liabilities                                                                                                                                              |  | 3,654,189    |  | 3,867,776   
|                                                                                                                                                                       |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|Stockholders (Deficit)                                                                                                                                                 |  |              |  |             
|                                                                                                                                                                       |  |              |  |             
|Common stock (Par value $0.001 authorized 65,000,000 shares, issued and outstanding 62,781,122 and 53,663,758 at December 31, 2010 and December 31, 2009 respectively) |  | $62,780      |  | $53,663     
|Common stock subscribed but not yet issued (3,358,331 and 0 at December 31, 2010 and December 31, 2009 respectively)                                                   |  | 3,358        |  |             
|Additional Paid in Capital                                                                                                                                             |  | 23,453,111   |  | 22,258,713  
|Accumulated Deficit                                                                                                                                                    |  | (26,771,831) |  | (26,176,269)
|Total stockholders deficit                                                                                                                                             |  | (3,252,582)  |  | (3,863,893) 
|                                                                                                                                                                       |  |              |  |             
|Total Liabilities and stockholders deficit                                                                                                                             |  | $401,607     |  | $3,883      
|                                                                                                                                                                       |  |              |  |             
|See Notes to Condensed Financial Statements and Report of Independent Registered Public Accounting Firm                                                                |  |              |  |             





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|Worlds.com Inc                                                                                          |  |                     |  |           
|------------------------------------------------------------------------------------------------------- |  | ------------------- |  | ----------
|Statements of Operations                                                                                |  |                     |  |           
|For Years Ended December 31, 2010 and December 31, 2009                                                 |  |                     |  |           
|                                                                                                        |  |                     |  |           
|                                                                                                        |  | Year ended Dec. 31, |  |           
|                                                                                                        |  |                     |  |           
|                                                                                                        |  | 2010                |  | 2009      
|Revenues                                                                                                |  |                     |  |           
|Revenue                                                                                                 |  | $415,856            |  | $101,115  
|                                                                                                        |  |                     |  |           
|Total                                                                                                   |  | 415,856             |  | 101,115   
|                                                                                                        |  |                     |  |           
|                                                                                                        |  |                     |  |           
|Cost and Expenses                                                                                       |  |                     |  |           
|                                                                                                        |  |                     |  |           
|Cost of Revenue                                                                                         |  | 13,074              |  | 164,995   
|                                                                                                        |  |                     |  |           
|Gross Profit                                                                                            |  | 402,782             |  | (63,880)  
|                                                                                                        |  |                     |  |           
|Warrants expense                                                                                        |  | 14,922              |  | 35,833    
|Options Expense                                                                                         |  | 42,543              |  | 25,031    
|Common Stock issued for services renderred                                                              |  | 415,750             |  | 225,303   
|Selling, General & Admin                                                                                |  | 258,930             |  | 130,158   
|Salaries                                                                                                |  | 266,200             |  | 242,000   
|                                                                                                        |  |                     |  |           
|Operating loss                                                                                          |  | (595,563)           |  | (722,204) 
|                                                                                                        |  |                     |  |           
|                                                                                                        |  |                     |  |           
|Other Income Expense                                                                                    |  |                     |  |           
|Interest Expense                                                                                        |  | -                   |  | 4,815     
|                                                                                                        |  |                     |  |           
|Net Profit/(Loss)                                                                                       |  | $(595,563)          |  | $(727,019)
|                                                                                                        |  |                     |  |           
|Weighted Average Loss per share                                                                         |  | $(0.01)             |  | $(0.01)   
|Weighted Average Common Shares Outstanding                                                              |  | 56,470,966          |  | 53,663,758
|                                                                                                        |  |                     |  |           
|See Notes to Condensed Financial Statements and Report of Independent Registered Public Accounting Firm |  |                     |  |           













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|Worlds.com Inc                                                                                          |  |            |  |           
|------------------------------------------------------------------------------------------------------- |  | ---------- |  | ----------
|Statements of Cash Flows                                                                                |  |            |  |           
|December 31, 2010 and December 31, 2009                                                                 |  |            |  |           
|                                                                                                        |  |            |  |           
|                                                                                                        |  | 31-Dec-10  |  | 31-Dec-09 
|Cash flows from operating activities:                                                                   |  |            |  |           
|Net (loss)                                                                                              |  | $(595,563) |  | $(727,019)
|Adjustments to reconcile net loss to net cash used in operating activities                              |  |            |  |           
|                                                                                                        |  |            |  |           
|Warrants expense                                                                                        |  | 14,922     |  | 35,833    
|Depreciation                                                                                            |  | 3,124      |  | 3,504     
|Fair value of stock options issued                                                                      |  | 42,543     |  | 25,031    
|Common stock issued for services renderred                                                              |  | 368,949    |  | 225,303   
|Bank Overdraft                                                                                          |  | (1,175)    |  | 1,175     
|Accounts payable and accrued expenses                                                                   |  | 289,189    |  | 13,938    
|Deferred revenue                                                                                        |  | (265,000)  |  | (90,000)  
|                                                                                                        |  |            |  |           
|Net cash used in operating activities:                                                                  |  | (143,011)  |  | (512,235) 
|                                                                                                        |  |            |  |           
|                                                                                                        |  |            |  |           
|Cash flows from investing activities:                                                                   |  |            |  |           
|Maturity of certificate of deposit                                                                      |  | -          |  | 166,451   
|                                                                                                        |  |            |  |           
|                                                                                                        |  |            |  |           
|Net cash used in investing activities:                                                                  |  | -          |  | 166,451   
|                                                                                                        |  |            |  |           
|Cash flows from financing activities:                                                                   |  |            |  |           
|Proceeds from issuance of common stock                                                                  |  | 400,000    |  | -         
|Proceeds  from exercise of warrants                                                                     |  | 145,459    |  | 250       
|Proceeds from issuance of notes payable                                                                 |  | -          |  | 175,000   
|Proceeds from officer loan payable                                                                      |  | -          |  | 4,000     
|Repayment of officer loan payable                                                                       |  | (1,600)    |  | -         
|                                                                                                        |  |            |  |           
|Net cash provided by financing activities                                                               |  | 543,859    |  | 179,250   
|                                                                                                        |  |            |  |           
|Net increase/(decrease) in cash                                                                         |  | 400,848    |  | (166,535) 
|                                                                                                        |  |            |  |           
|Cash beginning of year                                                                                  |  | -          |  | 166,535   
|                                                                                                        |  |            |  |           
|Cash end of year                                                                                        |  | $400,848   |  | $0        
|                                                                                                        |  |            |  |           
|Non-cash financing activities                                                                           |  |            |  |           
|                                                                                                        |  |            |  |           
|Conversion of debt to equity                                                                            |  | 175,000    |  | -         
|                                                                                                        |  |            |  |           
|                                                                                                        |  |            |  |           
|Supplemental disclosure of cash flow information:                                                       |  |            |  |           
|Cash paid during the year for:                                                                          |  |            |  |           
|Interest                                                                                                |  | $-         |  | $-        
|Income taxes                                                                                            |  | $-         |  | $-        
|                                                                                                        |  |            |  |           
|See Notes to Condensed Financial Statements and Report of Independent Registered Public Accounting Firm
|                                                                                                        |  |            |  |           







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|                                                                                                        |  |              |  |         |  |             |  | Common     |  | Common     |  |               |  |              
|------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------- |  | ----------- |  | ---------- |  | ---------- |  | ------------- |  | -------------
|                                                                                                        |  |              |  |         |  |             |  | Shares     |  | Stock      |  |               |  | Total        
|                                                                                                        |  |              |  |         |  | Additional  |  | Subscribed |  | Subscribed |  | Accumulated   |  | stockholders'
|                                                                                                        |  | Common stock |  |         |  | Paid-in     |  | but not    |  | but not    |  | Deficit       |  | equity       
|                                                                                                        |  | Shares       |  | Amount  |  | capital     |  | Issued     |  | Issued     |  |               |  | (deficit)    
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|Balance, January 1, 2009                                                                                |  | 52,387,749   |  | $52,387 |  | $21,858,603 |  | -          |  | -          |  | (25,449,249)  |  | $(3,538,259) 
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|Issuance of warrants                                                                                    |  | 25,000       |  | 25      |  | 36,058      |  |            |  |            |  |               |  | 36,083       
|Common stock issued for payment of vendor balance                                                       |  | 500,000      |  | 500     |  | 139,500     |  |            |  |            |  |               |  | 140,000      
|Common stock issued for services rendered                                                               |  | 751,009      |  | 751     |  | 224,552     |  |            |  |            |  |               |  | 225,303      
|Net Loss for the year ended December 31, 2009                                                           |  |              |  |         |  |             |  |            |  |            |  | (727,019)     |  | (727,019)    
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|Balances, December 31, 2009                                                                             |  | 53,663,758   |  | $53,663 |  | $22,258,713 |  |            |  |            |  | $(26,176,269) |  | $(3,863,893) 
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|Conversion of debt to equity                                                                            |  | 1,750,000    |  | 1,750   |  | 173,250     |  |            |  |            |  |               |  | 175,000      
|Common stock issued for services rendered                                                               |  | 500,000      |  | 500     |  | 59,500      |  |            |  |            |  |               |  | 60,000       
|Exercise of warrants                                                                                    |  | 1,454,590    |  | 1,455   |  | 144,004     |  |            |  |            |  |               |  | 145,459      
|Issuance of warrants                                                                                    |  |              |  |         |  | 14,922      |  |            |  |            |  |               |  | 14,922       
|Issuance of common stock for services rendered                                                          |  | 112,774      |  | 113     |  | 13,086      |  |            |  |            |  |               |  | 13,199       
|Issuance of common stock for cash investment                                                            |  |              |  |         |  | 396,667     |  | 3,333,331  |  | 3,333      |  |               |  | 400,000      
|Common stock issued for services rendered                                                               |  | 5,300,000    |  | 5,300   |  | 350,425     |  | 25,000     |  | 25         |  |               |  | 355,750      
|Issuance of stock options                                                                               |  |              |  |         |  | 42,543      |  |            |  |            |  |               |  | 42,543       
|Net Loss for the year ended December 31, 2010                                                           |  |              |  |         |  |             |  |            |  |            |  | (595,563)     |  | (595,563)    
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|Balances, December 31, 2010                                                                             |  | 62,781,122   |  | $62,780 |  | $23,453,111 |  | 3,358,331  |  | 3,358      |  | (26,771,832)  |  | $(3,252,582) 
|                                                                                                        |  |              |  |         |  |             |  |            |  |            |  |               |  |              
|See Notes to Condensed Financial Statements and Report of Independent Registered Public Accounting Firm



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Worlds Inc.

NOTES TO FINANCIAL STATEMENTS

Years Ended December 31, 2010 and 2009



NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
POLICIES



Description of Business



Worlds 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 only one full time employee, performing primarily consulting services and licensing software
and using consultants to perform any additional work that may be required.



Use of Estimates



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



Cash and Cash Equivalents



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



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, licensing revenue or from the sale of certain
software to third parties; and (2) VIP subscriptions to our Worlds Ultimate 3-D Chat service.   The Company recognizes
revenue when all of the following criteria are met: evidence of an arrangement exists such as a signed contract, delivery has occurred,
the price is fixed or determinable, and collectibility is reasonable assured.  This will 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.



Research and Development Costs



Research and development costs are charged to operations as incurred.



Property and Equipment



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



Impairment of Long Lived Assets



The Company evaluates the recoverability of its fixed assets and
other assets in accordance with section 360-10-15 of the FASB Accounting Standards Codification for disclosures about Impairment
or Disposal of Long-Lived Assets. Disclosure requires recognition of impairment of long-lived assets in the event the net book
value of such assets exceeds its expected cash flows. If so, it is considered to be impaired and is written down to fair value,
which is determined based on either discounted future cash flows or appraised values. The Company adopted the statement on inception.
No impairments of these types of assets were recognized during the years ended December 31, 2010 and 2009.



Stock-Based Compensation



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



Income Taxes



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



Comprehensive Income (Loss)



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



Loss Per Share



Net loss per common share is computed pursuant to section 260-10-45
of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by
the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There
were no potentially dilutive shares outstanding as of December 31, 2010 and 2009.

Stockholders Equity



5,912,774 shares of common stock were issued for services
rendered.

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,
2008 and 2009 the Company recorded a reserve of $205,000 for this lawsuit, which is included in accrued expenses in the accompanying
balance sheets.



Risk and Uncertainties



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



Recent Accounting Pronouncements



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



FASB Accounting Standards Codification

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



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



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



Subsequent Events

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



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



Determination of the Useful Life of Intangible Assets

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



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



Noncontrolling Interests

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



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



Consolidation of Variable Interest Entities — Amended

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



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



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Table of Contents




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

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



During 2010, the Company issued an aggregate of 5,912,774 shares
of common stock as payment for services rendered.



During 2009, the Company issued notes with penny warrants raising
$175,000 in cash.  These notes were converted into 1,750,000 shares of common stock as mentioned above.  The
warrants represent another 975,338 shares of common stock if converted. The effects on dilutive earnings per share are not applicable
due to its anti-dilutive effect.





NOTE 4 – DEFERRED REVENUE



Deferred revenue represents advance payments for the license, the
design and development of the software, content and related technology for the creation of an interactive, 3D entertainment portal
on the internet.  As part of a debt refinancing in 2000, $631,950 of debt was renegotiated to deferred revenue representing
future services to be provided by the Company.  During 2010, $175,000 worth of services was provided leaving a balance
of $366,950 at December 31, 2010.



NOTE 5 - NOTES PAYABLE



Short term notes payable at December 31, 2010 consist of the following:



Unsecured note payable to a shareholder bearing 8% interest.

Entire balance of principal and unpaid interest due on demand.     $124,230



Unsecured note payable to a shareholder bearing  10% interest.

Entire balance of principal and unpaid interest due on demand.     $649,049



Total
current                                                                                     
       $773,279

2010                           
$773,279

2011                           
$         -0-

2012                           
$         -0-

2013                           
$         -0-

2014                           
$         -0-

$773,279



NOTE 6- PROPERTY AND EQUIPMENT



The detail composition of property and equipment at December 31,
2009 and 2008 is as follows:





|                               |  | 2010    |  | 2009   
|------------------------------ |  | ------- |  | -------
|                               |  |         |  |        
|Computer equipment             |  | $10,891 |  | $10,891
|                               |  |         |  |        
|Less: accumulated depreciation |  | 10,132  |  | 7,008  
|                               |  | 759.00  |  | 3883.00











Depreciation expense recorded for 2010 and 2009 was $3,124 and $3,504,
respectively.



NOTE 7 – STOCK OPTIONS



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



During 2010 we also issued 500,000 stock options exercisable at
$0.05 per share to one person, who is not a director.



During 2009 the Company issued stock options to various parties.  The
stock options allow the parties to purchase shares of the Company’s common stock at various prices per share per each individual
option agreement.  The options allow the various parties to purchase one share of its stock for each option.  The
options expire at various times through September 25, 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 2009. During the year ended December 31, 2009, the Company recorded an expense of $25,031, equal to the estimated fair value
of the options at the date of grants.  The fair market value was calculated using the Black-Scholes options pricing model,
assuming approximately 5.0% risk-free interest, 0% dividend yield, 60% volatility, and expected lives ranging from one to five
years.





|Stock Warrants and Options                                                                  |      |  |                             | 
|------------------------------------------------------------------------------------------- | ---- |  | --------------------------- | 
|                                                                                            |      |  |                             | 
|Stock warrants and options outstanding and exercisable on December 31, 2010 are as follows: |     
|                                                                                            |      |  |                             | 
|Exercise Price per Share                                                                    |      |  | Shares Under Option/Warrant | 
|                                                                                            |      |  |                             | 
|Outstanding                                                                                 |      |  |                             | 
|$                                                                                           | 0.35 |  |                             | 
|$                                                                                           | 0.30 |  |                             | 
|$                                                                                           | 0.30 |  |                             | 
|$                                                                                           | 0.20 |  |                             | 
|$                                                                                           | 0.20 |  |                             | 
|$                                                                                           | 0.11 |  |                             | 
|$                                                                                           | 0.11 |  |                             | 
|$                                                                                           | 0.11 |  |                             | 
|$                                                                                           | 0.05 |  |                             | 
|$                                                                                           | 0.05 |  |                             | 
|$                                                                                           | 0.01 |  |                             | 
|                                                                                            |      |  |                             | 
|                                                                                            |      |  |                             | 
|                                                                                            |      |  |                             | 
|Exercisable                                                                                 |      |  |                             | 
|$                                                                                           | 0.35 |  |                             | 
|$                                                                                           | 0.30 |  |                             | 
|$                                                                                           | 0.30 |  |                             | 
|$                                                                                           | 0.20 |  |                             | 
|$                                                                                           | 0.20 |  |                             | 
|$                                                                                           | 0.11 |  |                             | 
|$                                                                                           | 0.11 |  |                             | 
|$                                                                                           | 0.05 |  |                             | 
|$                                                                                           | 0.05 |  |                             | 
|$                                                                                           | 0.01 |  |                             | 



NOTE 8 - INCOME TAXES



At December 31, 2010, the Company had federal and state net operating
loss carry forwards of approximately $40,000,000 that expire in various years through the year 2024.



Due to operating losses, there is no provision for current federal
or state income taxes for the years ended December 31, 2010 and 2009.



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



The Company’s deferred tax asset at December 31, 2010 consists
of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $16,000,000
less a valuation allowance in the amount of approximately $16,000,000. Because of the Company’s lack of earnings history,
the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased by approximately $251,000
and $290,000 for the years ended December 31, 2010 and 2009, respectively.



The Company’s total deferred tax asset
as of December 31, 2010 is as follows:



Net operating loss carry forwards                                                               $16,000,000

Valuation allowance                                                                                     (16,000,000)



Net deferred tax asset                                                                    
$      --

========

The reconciliation of income taxes computed at the federal and state
statutory income tax rate to total income taxes for the years ended December 31, 2009 and 2008 is as follows:



Income tax computed at the federal statutory rate                                        
   	      34%

Income tax computed at the state statutory rate                                          5%

Valuation allowance                                                                                       (39%)



Total deferred tax asset                                                                              
  0%





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Table of Contents






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



None.



ITEM 9A(T).  CONTROLS AND PROCEDURES.



Conclusion Regarding the Effectiveness of Disclosure Controls
and Procedures



Under the supervision and with the
participation of our principal executive officer and principal financial officer, we conducted an evaluation of our
disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including
its principal executive and principal financial officers, or persons performing similar functions as appropriate to allow
timely decisions regarding required disclosure.  We concluded that our disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d -15(e) under the Exchange Act were effective as of December 31, 2010 to ensure that
information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, and
summarized and reported within the time periods specified in SEC rules and forms and our disclosure controls and procedures
are also effective to ensure that the information required to be disclosed in reports that we file under the Exchange Acts is
accumulated and communicated to our principal executive financial officers to allow timely decisions regarding required disclosures.



Management’s Annual Report on Internal Control over Financial
Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange
Act. Our internal control over financial reporting are designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted
accounting principles. Our internal control over financial reporting includes those policies and procedures that:



(i)  pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii)  provide reasonable assurance
that transactions are recorded as necessary to permit the preparation of our consolidated financial statements in accordance with
U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and

(iii)  provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material
effect on the consolidated financial statements.



Management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used
the criteria set forth in Internal Control Over Financial Reporting — Guidance for Smaller Public Companies issued by the
Committee of Sponsoring Organizations of the Treadway Commission.



Subject to the inherent limitations described
in the following paragraph, our management has concluded that our internal controls over financial reporting was effective as December 31,
2010 at the reasonable assurance level.



Inherent Limitations Over Internal Controls



Internal control over financial reporting cannot
provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility
of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system
may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.  Accordingly, our internal controls and procedures are designed to provide
reasonable assurance of achieving their objectives.



Changes in Internal Control over Financial Reporting



We have made no change in our internal control
over financial reporting during the fourth quarter that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.



Attestation Report of the Registered Public Accounting Firm



This annual report does not include an attestation
report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s
report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC
that permit us to provide only management’s report in this annual report on Form 10-K.



ITEM 9B.  OTHER INFORMATION.



None.



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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 | Position                                                                
|------------------- | --- | ------------------------------------------------------------------------
|Thomas Kidrin       | 58  | President, Chief Executive Officer, Secretary, Treasurer, Director      
|Christopher J. Ryan | 50  | Vice President-Finance, Principal Accounting and Chief Financial Officer
|Bernard Stolar      | 64  | Director                                                                
|Jay Coleman         | 60  | Director                                                                
|Robert Fireman      | 62  | Director                                                                



Thomas Kidrin has been president, secretary and treasurer from December
1997 through July 2007 then added the title chief executive officer since August 2007. 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. 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 sold to MTV in 1996 now operating under MTVU. Mr. Kidrin has attended Drake University and 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 an inactive
certified public accountant. He is a graduate of Montclair State University in New Jersey and received an M.B.A. degree from Fordham
University in New York.



Bernard Stolar, 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.



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 and he brings to the board his experience and expertise in marketing
as well as his contacts in the music industry, the initial area in which we are directing our 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. Mr. Coleman is best known for pioneering music sponsorship and marketing, creating landmark deals, and expanding
his company's marketing capabilities beyond pop music, creating breakthrough concepts in all areas of entertainment.



Robert Fireman is 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 was 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 once during 2010 and acted by written
consent four other times during the year.  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.



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 copy of the Code of Ethics was filed  as Exhibit 14.1 to a previous
annual report. 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, 2010.  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.



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Table of Contents




ITEM 11. EXECUTIVE COMPENSATION.



The following table sets forth the compensation paid by us during
the fiscal periods ending December 31, 2010 and 2009, 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)  
|Thomas Kidrin President and CEO  
|2009                             



(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.



(3) Mr. Kidrin has an employment agreement with a 2010 salary of
$266,200.  The balance of his compensation has been deferred due to lack of funds.



Stock Option Grants



The following table sets forth information as
of December 31, 2010 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, 2010



|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
        Date |         
|----------- |  | ------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------- | ---- | -------------------------------------- | --------
|Thom Kidrin |  | 15,000,000                                                                                                          |  | 0                                                                                                                     |  | 0                                                                                                                                                                              |  | $                                                 | 0.05 |                                        | 09-04-12
|            |  |                                                                                                                     |  |                                                                                                                       |  |                                                                                                                                                                                |  |                                                   |      |                                        |         
|            |  |                                                                                                                     |  |                                                                                                                       |  |                                                                                                                                                                                |  |                                                   |      |                                        |         



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. During
the year Robert Fireman received an additional 100,000 options for extra duties he performed for the Company.



The following table sets forth information concerning the compensation
paid to each of our non-employee directors during 2010 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                                |  | 5,886                                |  |  | Value |                                            |  | 5,886            
|Robert Fireman |  | 0                                                               |  | 0                                |  | 5,886                                |  |  |       |                                            |  | 5,886            
|Bernard Stolar |  | 0                                                               |  | 0                                |  | 5,886                                |  |  |       |                                            |  | 5,886            
|               |  |                                                                 |  |                                  |  |                                      |  |  |       |                                            |  |                  



(1) This column represents the dollar amount recognized for
financial statement reporting purposes with respect to the 2010 fiscal year for the fair value of stock options granted to the
named director in fiscal year 2010, 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 vested 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.



Stock Option Plan



On September 4, 2007, our board of directors adopted the 2007 Stock
Option Plan which was presented 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,
18,287,500 options have been issued under the plan. In 2010 475,000 options expired, at December 31, 2010 17,812,500 options were
outstanding.





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Table of Contents




Compensation Committee Interlocks and Insider Particiaption



None.



SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS



|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
        Date |         
|----------- |  | ------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------- | ---- | -------------------------------------- | --------
|Thom Kidrin |  | 15,000,000                                                                                                          |  | 0                                                                                                                     |  | 0                                                                                                                                                                              |  | $                                                 | 0.05 |                                        | 09-04-12
|            |  |                                                                                                                     |  |                                                                                                                       |  |                                                                                                                                                                                |  |                                                   |      |                                        |         
|            |  |                                                                                                                     |  |                                                                                                                       |  |                                                                                                                                                                                |  |                                                   |      |                                        |         



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





The following table sets forth as of February 17, 2011, certain
information with respect to the beneficial ownership of Common Stock by (i) each Director, nominee and executive officer of us;
(ii) 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 67,307,995 shares of common stock outstanding
as of February 17, 2010.



OFFICERS, DIRECTORS AND BENEFICIAL OWNERS, AS
OF FEBRUARY 17, 2010



|Name & Address of Beneficial Owner(1)                        | Amount & Nature of Beneficial Owner | % of Class(2)
|------------------------------------------------------------ | ----------------------------------- | -------------
|Thomas Kidrin                                                | 16,290,000(3)                       | 24.20%       
|Jay Coleman                                                  | 500,000(4)                          | 0.74%        
|Robert Fireman                                               | 550,000(4)                          | 0.82%        
|Bernard Stolar                                               | 450,000(4)                          | 0.67%        
|Steven Chrust                                                | 6,023,661(5)                        | 8.95%        
|All directors and executive officers as a group (one person) | 23,813,661(6)                       | 35.38%       



(1) Unless stated otherwise, the business address for each
person named is Worlds 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 15 million currently exercisable stock options.



(4) Consists of stock options all but 100,000 are currently exercisable.



(5) Includes common shares and warrants directly and indirectly
owned.



(6) Includes 16,200,000 currently exercisable stock options.



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



Jay Coleman, one of our directors, received 125,000 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
all of the independent directors Robert Fireman, another one of our directors, received 100,000 stock options exercisable for 3
years at a price of $0.05 per share, which was the closing price of our common stock on the date of grant, as compensation for
his efforts in assisting the Company in negotiating and settling the various patent matters with respect to our patent advisors.



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, 2010 and 2009. Bongiovanni was retained as our auditor in 2007.
Audit fees and other fees of auditors are listed as follows:



|Year Ended December 31             |  | 2010        |        |  |  | 2009        |  |   |       
|---------------------------------- |  | ----------- | ------ |  |  | ----------- |  | - | ------
|                                   |  | Bongiovanni |        |  |  | Bongiovanni |  |   |       
|                                   |  |             |        |  |  |             |  |   |       
|Audit Fees(1)                      |  | $           | 26,500 |  |  | (2)         |  | $ | 23,000
|Audit-Related Fees(3)              |  |             | 15,000 |  |  |             |  |   | 13,000
|Tax Fees(4)                        |  | $           | 0      |  |  |             |  |   | 0     
|All Other Fees(5)                  |  |             |        |  |  |             |  |   | --    
|Total Accounting Fees and Services |  | $           | 41,500 |  |  |             |  | $ | 36,000



| | (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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The amounts shown for Bongiovanni in 2010 and 2009 relate to (i) the audit of our annual financial statements for the years ended December 31, 2010 and 2009, and (ii) the review of the financial statements included in our filings on Form 10-Q for the first, second and third quarters of 2010 and 2009.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | 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.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.
| | --- | ----------------------------------------------------------------------------------------------------------------



| | (5) | 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.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



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)

3.2       By-Laws
- Restated as Amended(a)

4.1       2007
Stock Option Plan(c)

10.1     Consulting
Agreement between the Registrant and SGC Advisory, Inc.(b)

10.2	 Employment Agreement	between
the Registrant Thom Kidrin(d)

14.1.    Code
of Ethics(d)

31.1.    Rule 13a-14(a)/15d-14(a)
Certifications of Chief Executive Officer **

31.2.    Rule 13a-14(a)/15d-14(a)
Certifications of Chief Financial  Officer **

32.1.    Section 1350
Certifications of Chief Executive Officer **

32.2.    Section 1350
Certifications of Chief Financial Officer **



|(a) | Filed previously with the Proxy Statement Form DEF 14A on May, 19, 2010, 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 Current Report on Form 8-K filed on September 7, 2007, and incorporated herein by reference.



|(d) | 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



(19)


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.







Dated: March 2, 2011                                                                                                WORLDS
INC.



(Registrant)



|By:   /s/ Thomas Kidrin
        Name: Thomas Kidrin
        Title:   President 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                        March
        2, 2011
        Thomas Kidrin                                and
        Director
        
        /s/ Christopher J. Ryan                  Vice
        President - Finance and                                 March
        2, 2011
        Christopher J. Ryan                        Principal
        Accounting and
        Financial
        Officer
        
        /s/ Bernard Stolar                             Director                                                                   March
        2, 2011
        Bernard Stolar
        
        /s/ Jay Coleman                                 Director                                                                   March
        2, 2011
        Jay Coleman
        
        /s/ Robert Fireman                            Director                                                                  March
        2, 2011
        Robert Fireman
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



(20)


Table of Contents






EXHIBIT INDEX



3.1       Certificate
of Incorporation(a)

3.2       By-Laws
- Restated as Amended(a)

4.1       2007
Stock Option Plan(b)

10.1     Consulting
Agreement between the Registrant and SGC Advisory, Inc.(c)

10.2	 Employment Agreement
between the Registrant and Thom Kidrin(d)

14.1.    Code
of Ethics(d)

31.1.    Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer **

31.2.    Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial  Officer **

32.1.    Section 1350 Certifications of Chief Executive Officer **

32.2.    Section 1350 Certifications of Chief Financial Officer **



|(a) | Filed previously with the Proxy Statement Form DEF 14A on May, 19, 2010, and incorporated herein by reference.                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Filed previously as an exhibit to Registrant's Current Report on Form 8-K
    filed on September 7, 2007, and incorporated herein by reference.
|(c) | Filed previously as an exhibit to Registrant's Annual Report on Form 10-KSB filed on March 30, 2000, and incorporated herein by reference.     
|(d) | 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