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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended
September 30, 2021
( ) 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
000-24115
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(g) of the Act:
Title of each
class |
Trading
Symbol(s) |
Name
of each exchange on which registered |
|
|
None |
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.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
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 such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer”,
“accelerated filer”, “smaller reporting company”, and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
(Check One):
Large
Accelerated filer ☐ |
Accelerated
filer ☐ |
Non-accelerated filer ☐
|
Smaller reporting company
☒
|
Emerging growth company
☐ |
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
As of October 30, 2021,
57,112,506 shares of the Issuer's Common Stock were
outstanding.
Worlds Inc.
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Worlds Inc. |
|
|
|
|
Balance
Sheets |
|
|
|
|
September
30, 2021 and December 31, 2020 |
|
|
|
|
|
|
Unaudited |
|
Audited |
|
|
September 30, 2021 |
|
December 31, 2020 |
|
|
|
|
|
ASSETS: |
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
342,238 |
|
|
$ |
474,587 |
|
Total Current Assets |
|
|
342,238 |
|
|
|
474,587 |
|
|
|
|
|
|
|
|
|
|
Convertible Note Receivable - related party |
|
|
200,000 |
|
|
|
200,000 |
|
Accrued interest receivable - related party |
|
|
27,883 |
|
|
|
17,267 |
|
Total assets |
|
$ |
570,121 |
|
|
$ |
691,854 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT: |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,133,949 |
|
|
$ |
981,898 |
|
Accrued expenses |
|
|
1,554,040 |
|
|
|
1,606,565 |
|
Notes payable exceeding statute of limitations |
|
|
773,279 |
|
|
|
773,279 |
|
Total Current Liabilities |
|
|
3,461,268 |
|
|
|
3,361,742 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
3,461,268 |
|
|
|
3,361,742 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit |
|
|
|
|
|
|
|
|
Common stock (Par value $0.001 authorized
250,000,000 shares,
issued and outstanding 57,112,506 at
September 30, 2021 and 56,814,833 at
December 31, 2020, respectively) |
|
|
57,113 |
|
|
|
56,815 |
|
Additional paid in capital |
|
|
41,494,604 |
|
|
|
41,240,880 |
|
Common stock-warrants |
|
|
1,206,913 |
|
|
|
1,206,913 |
|
Accumulated deficit |
|
|
(45,649,777 |
) |
|
|
(45,174,496 |
) |
Total stockholders deficit |
|
|
(2,891,148 |
) |
|
|
(2,669,888 |
) |
Total Liabilities and Stockholders' Deficit |
|
$ |
570,121 |
|
|
$ |
691,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements |
Worlds Inc. |
|
|
|
|
|
|
|
|
Statements of Operations |
|
|
|
|
|
|
|
|
For the Nine and Three Months Ended September 30, 2021 and
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
|
Nine Months Ended
September 30 |
|
Three Months Ended
September 30 |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost and
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenue |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit/(Loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
expense |
|
|
109,874 |
|
|
|
256,574 |
|
|
|
— |
|
|
|
69,028 |
|
Selling, General
& Admin. |
|
|
1,476,855 |
|
|
|
719,841 |
|
|
|
157,284 |
|
|
|
306,179 |
|
Salaries and related |
|
|
155,135 |
|
|
|
166,608 |
|
|
|
51,070 |
|
|
|
58,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(1,741,864 |
) |
|
|
(1,143,024 |
) |
|
|
(208,354 |
) |
|
|
(433,413 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income
(Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of
marketable securities |
|
|
1,006,588 |
|
|
|
— |
|
|
|
141,662 |
|
|
|
— |
|
Settlement of litigation |
|
|
315,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss on Issuance
of shares for service |
|
|
(8,685 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest
income |
|
|
10,617 |
|
|
|
10,656 |
|
|
|
3,578 |
|
|
|
3,578 |
|
Interest
expense |
|
|
(56,937 |
) |
|
|
(60,013 |
) |
|
|
(19,127 |
) |
|
|
(22,176 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
$ |
(475,281 |
) |
|
|
(1,192,380 |
) |
|
$ |
(82,241) |
|
|
|
(452,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Loss per share, basic and diluted |
|
$ |
(0.01 |
) |
|
|
(0.02 |
) |
|
$ |
— |
** |
|
|
(0.01 |
) |
Weighted Average Common Shares Outstanding, basic and diluted |
|
|
57,059,078 |
|
|
|
56,814,833 |
|
|
|
57,112,506 |
|
|
|
56,814,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**=less than
$0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements |
Worlds Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Stockholders' Deficit |
For the Nine Months
Ended September 30, 2020 and 2021 - Unaudited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
Common |
|
|
|
Total |
|
|
Stock |
|
Stock |
|
Paid-in |
|
Stock |
|
Accumulated |
|
Stockholders' |
|
|
Shares |
|
Amount
Common Stock
|
|
capital
Additional Paid-in Capital
|
|
Warrants
Common Stock Warrants
|
|
Deficit
Accumulated Deficit
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2019 |
|
|
56,814,833 |
|
|
$ |
56,815 |
|
|
$ |
40,897,142 |
|
|
|
1,206,913 |
|
|
|
(43,605,857 |
) |
|
|
(1,444,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock options |
|
|
— |
|
|
|
— |
|
|
|
256,574 |
|
|
|
— |
|
|
|
— |
|
|
|
256,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest |
|
|
— |
|
|
|
— |
|
|
|
60,013 |
|
|
|
— |
|
|
|
— |
|
|
|
60,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for settlement of accounts payable - related
party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock issued for settlement, shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
forgiveness of accounts payable - related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,192,380 |
) |
|
|
(1,192,380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances September 30, 2020 |
|
|
56,814,833 |
|
|
|
56,815 |
|
|
|
41,213,729 |
|
|
|
1,206,913 |
|
|
|
(44,798,237 |
) |
|
|
(2,320,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2020 |
|
|
56,814,833 |
|
|
|
56,815 |
|
|
|
41,240,880 |
|
|
|
1,206,913 |
|
|
|
(45,174,496 |
) |
|
|
(2,669,888 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of stock options |
|
|
— |
|
|
|
— |
|
|
|
109,874 |
|
|
|
— |
|
|
|
— |
|
|
|
109,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for settlement of accounts payable - related
party |
|
|
297,673 |
|
|
|
298 |
|
|
|
70,512 |
|
|
|
— |
|
|
|
— |
|
|
|
70,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on forgiveness of accounts payable - related party |
|
|
— |
|
|
|
— |
|
|
|
16,401 |
|
|
|
— |
|
|
|
— |
|
|
|
16,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest |
|
|
— |
|
|
|
— |
|
|
|
56,937 |
|
|
|
— |
|
|
|
— |
|
|
|
56,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(475,281 |
) |
|
|
(475,281 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances September 30, 2021 |
|
|
57,112,506 |
|
|
|
57,113 |
|
|
|
41,494,604 |
|
|
|
1,206,913 |
|
|
|
(45,649,777 |
) |
|
|
(2,891,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements |
Worlds Inc. |
|
|
|
|
Statements
of Cash Flows |
|
|
|
|
Nine Months
Ended September 30, 2021 and 2020 |
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
|
9/30/2021 |
|
9/30/2020 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(475,281 |
) |
|
$ |
(1,192,380 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities |
|
|
|
|
|
|
|
|
Fair value of stock options issued for services |
|
|
109,874 |
|
|
|
256,574 |
|
Loss on shares issued for settlement of accounts payable - related
party |
|
|
8,685 |
|
|
|
— |
|
Realized gain on sale of marketable securities |
|
|
(1,006,588 |
) |
|
|
— |
|
Imputed interest |
|
|
56,937 |
|
|
|
60,013 |
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
178,052 |
|
|
|
106,009 |
|
Net cash (used in) operating activities: |
|
|
(1,128,321 |
) |
|
|
(769,784 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Cash received from sale of marketable securities |
|
|
1,006,588 |
|
|
|
— |
|
Accrued interest receivable - related party |
|
|
(10,616 |
) |
|
|
(10,656 |
) |
Net cash provided by financing activities |
|
|
995,972 |
|
|
|
(10,656 |
) |
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
|
(132,349 |
) |
|
|
(780,440 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, including restricted, beginning of
year |
|
|
474,587 |
|
|
|
1,570,844 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, including restricted, end of period |
|
$ |
342,238 |
|
|
$ |
790,404 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
— |
|
|
$ |
— |
|
Income taxes |
|
$ |
— |
|
|
$ |
— |
|
Non-cash financing activities |
|
|
|
|
|
|
|
|
Shares issued for settlement of accounts payable - related
party |
|
$ |
62,125 |
|
|
$ |
— |
|
Gain on forgiveness of accounts payable - related party |
|
$ |
16,401 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements |
Worlds Inc.
NOTES TO
FINANCIAL STATEMENTS
Nine Months Ended September 30, 2021
(Unaudited)
NOTE 1 – GOING CONCERN
As reflected in the accompanying financial statements, the Company
has a working capital deficiency of $2,891,147 and a
stockholder’s deficiency of $2,891,147 and used $1,128,321 of cash
in operations for the nine months ended September 30, 2021. This
raises substantial doubt about its ability to continue as a going
concern. The ability of the Company to continue as a going concern
is dependent on the Company’s ability to raise additional capital
and implement its business plan. The financial statements do not
include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Management believes that the actions presently being taken to
obtain additional funding and implement its strategic plans provide
the opportunity for the Company to continue as a going
concern.
NOTE 2 – DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING
POLICIES
Description of Business
On May 16, 2011, the Company
transferred, through a spin-off to its then wholly owned
subsidiary, Worlds Online Inc. (currently called
MariMed Inc.), the majority of
its operations and related operational assets. The Company retained
its patent portfolio which it intends to continue to increase and
to more aggressively enforce against alleged infringers.
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"). The Company has incurred
significant losses since its inception and has had minimal revenues
from operations. The Company will require substantial additional
funds for development and enforcement of its patent portfolio.
There can be no assurance that the Company will be able to obtain
the substantial additional capital resources 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 sufficient financing which has had a
material adverse effect on the Company, including requiring the
Company to reduce operations. As the Company has focused its
attention on increasing its patent portfolio and enforcing it, the
Company has been operating at a reduced capacity, with only one
employee 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 include highly liquid money market
instruments, which have original maturities of three months or less
at the time of purchase.
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606. There was
no impact in adopting ASC 606 as the Company has no revenue at this
time. In the second quarter of 2011, the Company spun off its
online businesses to MariMed Inc. The Company’s sources of revenue
after the spinoff was expected to be from sublicenses of the
patented technology by Worlds Online and any revenue that may be
generated from enforcing its patents. The Company recognizes
revenue by applying the following steps: (1) identify the contract
with a customer; (2) identify the performance obligations in the
contract; (3) determine the transaction price; (4) allocate the
transaction price to each performance obligation in the contract;
and (5) recognize revenue when each performance obligation is
satisfied.
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 Financial
Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 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 2020 and 2019.
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 ASC 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 (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 ASC. Deferred income tax assets and liabilities are
determined based upon differences between the financial reporting
and tax basis 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.
ASC 740 prescribes a comprehensive model for how companies should
recognize, measure, present, and disclose in their financial
statements uncertain tax positions taken or expected to be taken on
a tax return. Under ASC 740, tax positions must initially be
recognized in the financial statements when it is more likely than
not the position will be sustained upon examination by the tax
authorities. Such tax positions must initially and subsequently be
measured as the largest amount of tax benefit that has a greater
than 50% likelihood of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and
relevant facts.
Notes Payable
The Company has $773,279 in short term
notes outstanding at September 30, 2021 and December 31, 2020.
These are old notes payable for which the statute of limitations
has passed and therefore the Company does not expect it will ever
have to repay those notes.
Comprehensive Income (Loss)
The Company reports comprehensive income and its components
following guidance set forth by section 220-10 of the FASB ASC
which establishes standards for the reporting and display of
comprehensive income and its components in the financial
statements. There were no items of comprehensive income (loss)
applicable to the Company during the period covered in the
financial statements.
Loss Per Share
Net loss per common share is computed pursuant to section 260-10-45
of the FASB ASC. 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. As of September 30, 2021, there were
11,720,000 options and 4,380,000 warrants outstanding
and as of September 30, 2020, there were 11,140,000 options and 4,380,000 warrants outstanding
whose effect is dilutive but not included in diluted net loss per
share for September 30, 2021 or for September 30, 2020.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB ASC to report
accounting for contingencies. Certain conditions may exist as of
the date the financial statements are issued, which may result in a
loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company assesses
such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the
Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of
relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the
liability can be estimated, then the estimated liability would be
accrued in the Company’s financial statements. If the assessment
indicates that a potentially material loss contingency is not
probable but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and
material, would be disclosed.
Loss contingencies considered remote are generally not disclosed
unless they involve guarantees, in which case the guarantees would
be disclosed. Management does not believe, based upon information
available at this time, that these matters will have a material
adverse effect on the Company’s financial position, results of
operations or cash flows. However, there is no assurance that such
matters will not materially and adversely affect the Company’s
business, financial position, and results of operations or cash
flows.
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 September
30, 2021, and December 31, 2020 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
technology industries, including, but not limited to, litigation,
development of new technological innovations and dependence on key
personnel.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no
adjustments to unrecognized income tax liabilities or benefits
pursuant to the provisions of Section 740-10-25 for the year ended
December 31, 2020.
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on
an expected exit price as defined by the authoritative guidance on
fair value measurements, which represents the amount that would be
received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market
participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The
authoritative guidance on fair value measurements establishes a
consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques,
are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair
value:
• |
Level 1 - Observable
inputs that reflect quoted market prices in active markets for
identical assets or liabilities. |
|
|
• |
Level 2 - Inputs
reflect quoted prices for identical assets or liabilities in
markets that are not active; quoted prices for similar assets or
liabilities in active markets; inputs other than quoted prices that
are observable for the assets or liabilities; or inputs that are
derived principally from or corroborated by observable market data
by correlation or other means. |
|
|
• |
Level 3 - Unobservable
inputs reflecting the Company’s assumptions incorporated in
valuation techniques used to determine fair value. These
assumptions are required to be consistent with market participant
assumptions that are reasonably available. |
The carrying amounts of the Company’s financial assets and
liabilities, such as cash, other receivables, accounts payable
& accrued expenses, due to related party, notes payable and
notes payables, approximate their fair values because of the short
maturity of these instruments. The Company's convertible notes
payable are measured at amortized cost.
Warrant and option expense was measured by using level 3
valuation.
Embedded Conversion Features
The Company evaluates embedded conversion features within
convertible debt under ASC 815 “Derivatives and Hedging” to
determine whether the embedded conversion feature(s) should be
bifurcated from the host instrument and accounted for as a
derivative at fair value with changes in fair value recorded in
earnings. If the conversion feature does not require derivative
treatment under ASC 815, the instrument is evaluated under ASC
470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion feature.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures
to cash flow, market, or foreign currency risks. The Company
evaluates all of its financial instruments, including stock
purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives. For
derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its
fair value and is then re-valued at each reporting date, with
changes in the fair value reported as charges or credits to
income.
For option-based simple derivative financial instruments, the
Company uses the Black-Scholes option-pricing model to value the
derivative instruments at inception and subsequent valuation dates.
The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is
re-assessed at the end of each reporting period.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet
effective, accounting pronouncements, and does 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.
The Company accounts for stock-based compensation for employees and
directors in accordance with Accounting Standards Codification 718,
Compensation (“ASC 718”) as issued by the FASB. ASC 718 requires
all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations
based on their fair values. Under the provisions of ASC 718,
stock-based compensation costs are measured at the grant date,
based on the fair value of the award, and are recognized as an
expense over the employee’s requisite service period (generally the
vesting period of the equity grant). The fair value of the
Company’s common stock options is estimated using the Black Scholes
option-pricing model with the following assumptions: expected
volatility, dividend rate, risk free interest rate and the expected
life. The Company expenses stock-based compensation by using the
straight-line method. In accordance with ASC 718 and, excess tax
benefits realized from the exercise of stock-based awards are
classified as cash flows from operating activities. All excess tax
benefits and tax deficiencies (including tax benefits of dividends
on share-based payment awards) are recognized as income tax expense
or benefit in the condensed consolidated statements of operations.
The Company accounts for stock-based compensation awards issued to
non-employees for services, as prescribed by ASC 718-10, at either
the fair value of the services rendered or the instruments issued
in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in
Accounting Standards Update (“ASU”) 2018-07.
In February 2016, the FASB issued ASU 2016-02, “Leases” Topic
842, which amends the guidance in former ASC Topic
840, Leases. The new standard increases transparency
and comparability most significantly by requiring the recognition
by lessees of right-of-use assets and lease liabilities on the
balance sheet for all leases longer than 12 months. Under the
standard, disclosures are required to meet the objective of
enabling users of financial statements to assess the amount,
timing, and uncertainty of cash flows arising from leases. For
lessees, leases will be classified as finance or operating, with
classification affecting the pattern and classification of expense
recognition in the income statement. The Company adopted the new
lease guidance effective January 1, 2019. The Company is not a
party to any leases and therefore is not showing any asset or
liability related to leases in the current period or prior
periods.
NOTE 3 - NOTES PAYABLE
Notes payable at
September 30, 2021 consist of the following: |
|
|
Unsecured note payable
bearing 8% interest, entire balance of principal and unpaid
interest due on demand |
|
|
$ |
124,230 |
|
|
|
|
|
|
|
Unsecured note payable
bearing 10% interest, entire balance of principal and unpaid
interest due on demand |
|
|
$ |
649,049 |
|
Total
notes |
|
|
$ |
773,279 |
|
2021 |
|
|
$ |
773,279 |
|
2022 |
|
|
$ |
0 |
|
2023 |
|
|
$ |
0 |
|
2024 |
|
|
$ |
0 |
|
2025 |
|
|
$ |
0 |
|
|
|
|
$ |
773,279 |
|
|
|
|
|
|
|
The Company imputed interest of
$56,937 on the notes during the nine months ended September
30, 2021.
NOTE 4 - EQUITY
All common stock numbers and exercise prices in this Note are
reflected on a post reverse split (5 to 1) basis, which reverse
split was effectuated on February 9, 2018.
During the nine months ended September 30, 2021, the Company issued
297,673 shares of
common stock as settlement of accounts payable to a related party.
The value of the shares at the date of issuance was $70,810
resulting in a loss of $8,685.
During the nine months ended September 30, 2021, the Company
recorded an option expense of $109,874 representing the
amortization of the value of the options issued in 2020 that have
not yet vested.
During the year ended December 31, 2020, the Company issued 700,000
options. 300,000 options were issued to Chris Ryan, the Chief
Financial Officer of the Company, and 400,000 options were issued
to Directors of the Company. The Company recorded an
option expense of $267,647 in 2020. $256,574 of this amount relates
to the 2018 grant to Mr. Kidrin, the CEO. $11,073 relates to the
grant in 2020 to Mr. Ryan, the CFO. The directors’ options were
granted on December 31, 2020 and no expense was recorded for these
options. The option expense represents the amortization of the
value of the options issued in 2020 and 2018 that have not yet
vested. The fair market value for Mr. Ryan’s options was calculated
using the Black Scholes method assuming a risk free interest of
.36%, 0% dividend yield, volatility of 204%, and an exercise price
of $0.266 per share with a market price of $0.266 per share at
issuance date and an expected life of 5 years. The options vest one
year from the date of grant.
During the nine months ended September 30, 2020, the Company
recorded an option expense of $187,546 representing the
amortization of the value of the options issued in 2018 that have
not yet vested.
|
|
|
|
|
|
|
Stock Warrants and
Options |
Stock warrants/options
outstanding and exercisable on September 30, 2021 are as
follows: |
|
Exercise Price per
Share
Exercise Price per Share
|
|
|
Shares Under
Option/warrant
Shares Under Option/warrant
|
|
Remaining Life
in Years |
Outstanding |
|
|
|
|
|
|
|
|
|
|
$ |
0.325 |
|
|
|
3,400,000 |
|
|
|
0.33 |
|
$ |
0.15 |
|
|
|
5,220,000 |
|
|
|
1.00 |
|
$ |
0.15 |
|
|
|
580,000 |
|
|
|
1.25 |
|
$ |
0.05 |
|
|
|
200,000 |
|
|
|
1.25 |
|
$ |
0.30 |
|
|
|
200,000 |
|
|
|
1.25 |
|
$ |
0.25 |
|
|
|
5,000,000 |
|
|
|
1.92 |
|
$ |
0.24 |
|
|
|
800,000 |
|
|
|
1.92 |
|
$ |
0.27 |
|
|
|
300,000 |
|
|
|
4.13 |
|
$ |
0.30 |
|
|
|
400,000 |
|
|
|
4.25 |
|
Total |
|
|
|
|
16,100,000 |
|
|
|
|
|
Exercisable |
|
|
|
|
|
|
|
|
|
|
$ |
0.325 |
|
|
|
3,400,000 |
|
|
|
0.33 |
|
$ |
0.15 |
|
|
|
5,220,000 |
|
|
|
1.00 |
|
$ |
0.15 |
|
|
|
580,000 |
|
|
|
1.25 |
|
$ |
0.05 |
|
|
|
200,000 |
|
|
|
1.25 |
|
$ |
0.30 |
|
|
|
200,000 |
|
|
|
1.25 |
|
$ |
0.25 |
|
|
|
5,000,000 |
|
|
|
1.92 |
|
$ |
0.24 |
|
|
|
800,000 |
|
|
|
1.92 |
|
$ |
0.27 |
|
|
|
300,000 |
|
|
|
4.13 |
|
$ |
0.30 |
|
|
|
400,000 |
|
|
|
4.25 |
|
Total |
|
|
|
|
16,100,000 |
|
|
|
|
|
NOTE
5 - COMMITMENTS AND CONTINGENCIES
The Company is committed to an employment agreement with its
President and CEO, Thom Kidrin. The agreement, dated as of August
28, 2018, 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 September 1 of each year; a monthly car allowance of
$500; 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 5
million shares of Worlds Inc. common stock at an exercise price
of $0.25 per share, 2 million of which vested on August 28,
2018, 1.5 million vested on August 28, 2019 and the remaining 1.5
million vested on August 28, 2020 ; a death benefit of at least $2
million dollars; 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.
NOTE
6 - RELATED PARTY TRANSACTIONS
The Company issued 297,673 shares of
common stock to Chris Ryan, our CFO as settlement of amounts
previously recorded. The value of the shares on the date of
issuance was $70,810. The
Company recorded a loss of $8,685 on the
issuance of the shares.
The Company recorded a gain on forgiveness of accounts payable
related party due to the Company’s CFO in the amount of $16,401.
The balance in the accrued expense attributable to related parties
is $29,688 and $82,214 at
September 30, 2021 and December 31, 2020, respectively.
See note 9 for a discussion on the convertible note receivable from
the related party.
NOTE 7 - PATENTS
Worlds Inc. currently has nine patents, 6,219,045 - 7,181,690 -
7,493,558 – 7,945,856, - 8,082,501, – 8,145,998 – 8,161,383, –
8,407,592 and 8,640,028. On March 30, 2012, the Company filed a
patent infringement lawsuit against Activision Bizzard Inc.,
Blizzard Entertainment Inc. and Activision Publishing Inc. in the
United States District Court for the District of Massachusetts. On
September 20, 2019, the Company filed a lawsuit against Linden
Research, Inc. in the US District court for the District of
Delaware. On September 25, 2020, the Company filed a lawsuit
against Microsoft Corporation in the U.S. District Court for the
Western District of Texas. Davidson, Berquist, Jackon & Gowdey
LLP is lead counsel for the Company. See Legal Proceedings section
for more information on the patent infringement lawsuits.
There can be no assurance that the Company will be successful in
its ability to prosecute its IP portfolio or that we will be able
to acquire additional patents.
NOTE 8 – ACCRUED EXPENSES
Accrued expenses is comprised of (i) $28,899 owed to related parties,
(ii) $205,000 related to a judgment against the Company relating to
unpaid consulting services dating back to April of 2001, (iii)
$1,305,009 related to old accruals for which the statute of
limitations has passed and therefore the Company does not expect it
will ever have to repay those amounts, and (iv) $15,132 related to
accruals for recurring operating expenses.
NOTE 9 – CONVERTIBLE NOTE RECEIVABLE – RELATED PARTY
The Company made an investment in the form of a convertible note in
the amount of $200,000 to Canadian American Standard Hemp (“CASH”).
The convertible note has a 7% annual interest rate and matures in 2
years. Interest and principle is payable at maturity. The note can
be converted at any time and either all or part of the amount due
can be converted into the borrower’s equity. During the year ended
December 31, 2020, CASH merged with Real Brands, Inc. (“Real
Brands”). The convertible note and accrued interest of $24,306 can
be converted into 27,559,405 shares of Real Brands common stock at
a conversion price of $0.008139. If converted into common stock,
the Company would own approximately 1% of Real Brands Inc. Messrs.
Kidrin, Toboroff and Christos are Directors of Real Brands and Mr.
Kidrin is the CEO and Mr. Ryan is the CFO of Real
Brands. On October 15, 2021, the convertible note was
extended to October 15, 2023. All other terms remain the same. As
consideration for extending the maturity date 2 years, Real Brands
is issuing the Company one million warrants to purchase Real Brands
stock at a purchase price $0.05 per share.
During the nine months ended September 30, 2021, the Company earned
$10,617 in interest on the note.
During the nine months ended September 30, 2020, the Company earned
$10,656 in interest on the note.
NOTE 10 – SETTLEMENT OF LITIGATION
During the nine months ended September 30, 2021 the Company
generated net cash of $315,000 from a settlement
of litigation. The cash received is recorded as a gain on
settlement in the Statement of Operations.
NOTE 11 – SALE OF MARKETABLE SECURITIES
When Worlds Inc. spun off Worlds Online Inc. in January 2011, the
Company retained 5,936,115 shares of common stock in Worlds Online
Inc. (now named MariMed Inc.). Those shares were retained on the
books of the Company with a book value of $0.
During the nine months ended September 30, 2021 the Company
generated net cash of $1,006,588 from the sale
of 1,245,000 shares of MariMed Inc. common
stock during the nine months ended September 30, 2021 and 100,000
shares of MariMed Inc. common stock at the end of December 2020
which was not transferred to the Company’s bank account until
January of 2021. The average price per share was $0.79 per
share.
As of September 30, 2021, the Company still owns approximately 1.75
million shares of MariMed Inc. common stock.
No shares were sold in the nine months ended September 30,
2020.
NOTE 12 – COMPANY’S LAWSUITS
Regarding the Company's lawsuit against the Activision entities
filed in 2012, on April 30, 2021, Judge Casper granted Activision’s
summary judgment motion, entered an Order finding that all asserted
patents were invalid as directed to patent-ineligible subject
matter, and terminated the Company’s lawsuit against the Activision
Entities. The Company appealed this Order on May 28, 2021 to
the U.S. Court of Appeals for the Federal Circuit, sitting in
Washington, D.C. The Company’s opening brief on this appeal
was submitted on August 2, 2021 and Activision’s response brief was
filed on October 13, 2021. The Company’s reply brief is due
on November 17, 2021, and oral argument is expected to follow in
the first half of 2022.
Regarding the Company’s lawsuit against Linden Research, Inc.,
d/b/a Linden Lab (“Linden”) filed on September 20, 2019. On
April 8, 2021, the Company and Linden jointly filed a stipulation
to stay the Court’s deadlines for 30 days pending completion of a
settlement agreement between the parties, and the Court entered an
order dismissing this lawsuit on May 17, 2021.
Regarding the Company’s
lawsuit against Microsoft Corporation (“Microsoft”), in view
of the Order issued by Judge Casper in the Company’s litigation
against Activision on April 30, 2021, including the Company’s
intent to appeal that Order, the Company and Microsoft jointly
asked that Judge Albright stay the lawsuit against Microsoft
pending the Company’s appeal of Judge Casper’s Order.
The parties’ motion to stay pending appeal was filed on May 7,
2021, and the Court granted the motion on May 11,
2021. On June 16,
2021, the PTAB instituted Microsoft’s IPR over the Company’s
objections. On September 16, 2021, the Company and Microsoft
jointly stipulated to dismiss the lawsuit, and on September 20,
2021, the Company and Microsoft jointly moved to terminate
Microsoft’s IPR against U.S. Patent No. 8,082,501. The PTAB
granted the motion to terminate on September 23, 2021 and
terminated the IPR.
NOTE 13 – SUBSEQUENT EVENTS
The Company reviewed for subsequent events and there are none to
report.
Item 2. Management's Discussions and Analysis of Financial
Condition and Results of Operations
Forward Looking Statements
When used in this Form 10-Q and in other filings by the Company
with the Commission, the words or phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intend," “hope”, "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 resulting from changes in political, social and economic
conditions (whether or not related to terrorism, war, pandemic,
weather, environmental or other factors) in the jurisdictions in
which we operate and changes to regulations that pertain to our
operations.
The following discussion should be read in conjunction with the
unaudited financial statements and related notes which are included
under Item 1.
We do not undertake to update our forward-looking statements or
risk factors to reflect future events or circumstances.
Overview
General
On May 16, 2011, we transferred, through a spin-off to our then
wholly owned subsidiary, Worlds Online Inc. (currently named
MariMed Inc.), the majority of our operations and related
operational assets. We retained our patent portfolio which we
intend to continue to increase and to more aggressively enforce
against alleged infringers. We also entered into a License
Agreement with MariMed Inc. to sublicense patented technologies,
which agreement has since expired.
At present, the Company’s business is the enforcement and expansion
of its patent portfolio and its anticipated sources of revenue will
be from any revenue that may be generated from enforcing its
patents.
Revenues
We generated no revenue during the quarter because we did not
receive any court awards or settlements during the quarter.
Expenses
We classify our expenses into two broad groups:
• |
Cost of
revenues; and |
• |
selling,
general and administration. |
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, prior to the spinoff, was used to
enable us to begin upgrading our technology, develop new products
and actively solicit additional business, and more recently to
protect, increase and enforce our patent
portfolio. Although we have been able to generate funds
through our sale of shares of MariMed Inc., 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, raise more funds
through the sale of shares of MariMed Inc., or start to generate
sufficient revenues, we may be unable to purchase additional
patents or otherwise expand operations through acquisition or
otherwise.
RESULTS OF OPERATIONS
Our net revenues for each of the three months ended September 30,
2021 and 2020 were $0. All the operations were
transferred over to Worlds Online Inc. in the spin off. The
Company’s sources of revenue are anticipated to be from enforcing
our patents in litigation or otherwise. We still need to
raise a sufficient amount of capital to provide the resources
required that would enable us to expand our business.
Three months ended September 30, 2021 compared to three months
ended September 30, 2020
Revenue is $0 for the three months ended September 30, 2021 and
2020. All the operations were transferred over to Worlds Online
Inc. in the spin off. The business up to the spin off continued to
run in a severely diminished mode due to the lack of liquidity.
Post spin off we still need to raise a sufficient amount of capital
to provide the resources required that would enable us to expand
our business.
Cost of revenues is $0 in the three months ended September 30, 2021
and 2020.
Selling general and administrative (SG&A) expenses decreased by
$148,895 from $306,179 to $157,284 for the three months ended
September 30, 2020 and 2021, respectively. The decrease is due to a
decrease in legal costs related to the patent infringement
litigation cases.
Salaries and related decreased by $7,136 to $51,070 from $58,206
for the three months ended September 30, 2021 and 2020,
respectively.
For the three months ended months ended September 30, 2021, the
Company did not record an option expense as all options are
currently vested. For the three months ended September 30, 2020,
the Company recorded $69,028 of option expense equal to the
increase in estimated fair value of the unvested options at
September 30, 2020.
For the three months ended September 30, 2021 the Company had an
interest expense of $19,127 and for the three months ended
September 30, 2020 the Company had an interest expense of
$22,176.
For the three months ended September 30, 2021 and 2020, the Company
had interest income of $3,578.
For the three months ended ended September 30, 2021, the Company
had a gain on sale of marketable securities of $141,662. The
Company did not sell any marketable securities for the three months
ended September 30, 2020.
As a result of the foregoing, we realized a net loss of $82,241 for
the three months ended September 30, 2021 compared to a net loss of
$452,011 for the three months ended September 30, 2020.
Nine months ended September 30, 2021 compared to nine months
ended September 30, 2020
Revenue is $0 for the nine months ended September 30, 2021 and
2020. All the operations were transferred over to Worlds Online
Inc. in the spin off. The business up to the spin off continued to
run in a severely diminished mode due to the lack of
liquidity. Post spin off we still need to raise a sufficient amount
of capital to provide the resources required that would enable us
to continue running the business.
Cost of revenues is $0 in the nine months ended September 30, 2021
and 2020.
Selling general and administrative (SG&A) expenses increased by
$757,014 from $719,841 to $1,476,855 for the nine months ended
September 30, 2020 and 2021, respectively. The increase is due to
an increase in legal costs related to the patent infringement
litigation cases earlier in the year.
Salaries and related decreased by $11,473 to $155,135 from $166,608
for the nine months ended September 30, 2021 and 2020.
For the nine months ended September 30, 2021, the Company recorded
an option expense of $109,874, equal to the increase in estimated
fair value of the unvested options. All options are currently
vested. For the nine months ended September 30, 2020, the Company
recorded $256,574 of option expense.
For the nine months ended September 30, 2021, the Company had
interest expense of $56,937. For the nine months ended September
30, 2020, the Company had interest expense of $60,013.
For the nine months ended September 30, 2021 the Company had
interest income of $10,617. For the nine months ended September 30,
2020 the Company had interest income of $10,656.
For the nine months ended September 30, 2021, the Company recorded
a loss on issuance of shares for services of $8,685.
For the nine months ended September 30, 2021, the Company had a
gain on sale of marketable securities of $1,006,588. The Company
did not sell any marketable securities for the nine months ended
September 30, 2020.
For the nine months ended September 30, 2021, the Company had
income from the settlement of litigation in the amount of
$315,000.
As a result of the foregoing, we realized a net loss of $475,281
for the nine months ended September 30, 2021 compared to a net loss
of $1,192,380 in the nine months ended September 30, 2020.
Liquidity and Capital Resources
At September 30, 2021, our cash and cash equivalents were $342,238.
The Company raised funds by selling shares of stock that the
Company retained in the spin off company MariMed Inc. during the
nine months ended September 30, 2021. The Company raised $1,006,588
from selling shares of MariMed Inc. common stock. The Company used
$1,128,320 in cash to pay for operating expenses during the nine
months ended September 30, 2021.
At September 30, 2020, our cash and cash equivalents were $790,404.
The Company did not raise any funds or sell any shares of stock
that the Company retained in the spin off company MariMed Inc.
during the nine months ended September 30, 2020. The Company used
$769,784 in cash to pay for operating expenses during the nine
months ended September 30, 2020.
Our primary cash requirements have been used to fund the cost of
operations and lawsuits, and patent enforcement, with additional
funds having been used in connection with the exploration of new
business lines.
We hope to raise additional funds to be used for further developing
our portfolio of patents and to document our technology in order to
enforce our patents where there is infringement. No
assurances can be given that we will be able to raise any
additional funds.
Item 4. Controls And Procedures
As of September 30, 2021, we carried out an evaluation, under the
supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as
amended). Based upon that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls
and procedures were not effective as of September 30, 2021.
Changes in Internal
Control Over Financial Reporting
During the quarter covered by this report there were no changes in
our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934, as amended) that have materially affected, or
are reasonably likely to materially affect, our internal control
over financial reporting.
PART II OTHER INFORMATION
Legal
Proceedings
The Company has sought damages for patent infringement of the
Company’s patents in three proceedings. The first proceeding
was filed by the Company against Activision Blizzard, Inc.,
Blizzard Entertainment, Inc., and Activision Publishing, Inc. in
the U.S. District Court for the District of
Massachusetts in 2012. The Company also filed a
complaint for patent infringement against Linden Research, Inc.,
d/b/a Linden Lab in the U.S. District Court for the District of
Delaware in 2019, and filed a complaint for patent infringement
against Microsoft Corporation in the U.S. District Court for the
Western District of Texas in September, 2020.
1. |
|
Company’s Lawsuit
Against Activision Entities |
The Company's lawsuit against the Activision entities was filed in
2012, with U.S. District Judge Casper presiding over these
proceedings. This lawsuit was stayed in 2015 pending the
outcome of six Inter Partes Review (“IPR”) petitions filed by
Bungie, Inc. to the U.S. Patent & Trademark Office's Patent
Trial and Appeal Board (“PTAB”). Those IPR proceedings were
finally concluded in Company's favor on January 14, 2020, with the
majority of the challenged claims surviving Bungie's
challenges. Returning to its District Court litigation, the
Company asked that Judge Casper lift the stay and allow the Company
to proceed in its lawsuit for patent infringement of the Company’s
patents against the Activision entities.
On April 17, 2020, Judge Casper issued an Order lifting the stay,
and setting a pre-trial schedule with a final pretrial conference
and trial to occur at a date to be determined after September 24,
2021. On May 5, 2020, Activision submitted a renewed motion
for summary judgment of patent invalidity under 35 U.S.C. 101
motion, and claimed that the asserted patents are directed to
patent-ineligible subject matter. Worlds opposed this motion
on September 9, 2020, and a hearing was held on July 22, 2020 at
3:00 p.m. The parties proceeded with fact and expert
discovery up to and including April 30, 2021. On April
30, 2021, Judge Casper granted Activision’s summary judgment
motion, entered an Order finding that all asserted patents were
invalid as directed to patent-ineligible subject matter, and
terminated the Company’s lawsuit against the Activision
Entities. The Company appealed this Order on May 28, 2021 to
the U.S. Court of Appeals for the Federal Circuit, sitting in
Washington, D.C. The Company’s opening brief on this appeal
was submitted on August 2, 2021. and Activision’s
response brief was filed on October 13, 2021. The Company’s
reply brief is due on November 17, 2021, and oral argument is
expected to follow in the first half of 2022.
2. |
|
Company’s Lawsuit
Against Linden Research, Inc. d/b/a Linden Lab |
On September 20, 2019, the Company filed a lawsuit against Linden
Research, Inc., d/b/a Linden Lab (“Linden”) in the U.S. District
Court for the District of Delaware for patent infringement of the
Company’s U.S. Patent No. 7,181,690. This case was assigned
to U.S. District Judge Maryellen Noreika. On December 2,
2019, Linden answered the Complaint, denying that it has committed
patent infringement. On January 8, 2020, the Court entered a
Scheduling Order, setting deadlines for Fact Discovery and
Contentions, Claim Construction, Expert Discovery, Summary
Judgment, and Trial Phase. A claim construction hearing
(“Markman” hearing) occurred on November 13, 2020. The
scheduled trial date was set for January 31, 2022. On April
8, 2021, the Company and Linden jointly filed a stipulation to stay
the Court’s deadlines for 30 days pending completion of a
settlement agreement between the parties, and the Court entered an
order dismissing this lawsuit on May 17, 2021.
3. |
|
Company’s Lawsuit
Against Microsoft Corporation |
On September 25, 2020, the Company filed a lawsuit against
Microsoft Corporation (“Microsoft”) in the U.S. District Court for
the Western District of Texas for patent infringement of the
Company’s U.S. Patent No. 8,082,501. This case was assigned
to U.S. District Judge Alan D. Albright. On December 4, 2020,
Microsoft filed Motion to Dismiss and Motion to Stay pending
completion of an IPR filed by Microsoft against U.S. Patent No.
8,082,501 with the PTAB on December 3, 2020. On January
15, 2021, the Court entered a Scheduling Order, setting the Jury
Selection and Jury Trial for March 14, 2022. The Company
filed its Opening claim construction brief on April 9, 2021.
Microsoft filed its Responsive claim construction brief on April
30, 2021. In view of the Order issued by Judge Casper in the
Company’s litigation against Activision on April 30, 2021,
including the Company’s intent to appeal that Order, the Company
and Microsoft jointly asked that Judge Albright stay the lawsuit
against Microsoft pending the Company’s appeal of Judge Casper’s
Order. The parties’ motion to stay pending appeal was filed
on May 7, 2021, and the Court granted the motion on May 11,
2021. On June 16, 2021, the PTAB instituted Microsoft’s
IPR over the Company’s objections. On September 16, 2021, the
Company and Microsoft jointly stipulated to dismiss the
lawsuit, and on September 20, 2021, the Company and Microsoft
jointly moved to terminate Microsoft’s IPR against U.S. Patent No.
8,082,501. The PTAB granted the motion to terminate on
September 23, 2021 and terminated the IPR.
Item 1A. Risk Factors
We are not obligated to disclose our risk factors in this report,
however, limited information regarding our risk factors appears in
Part I, Item 2. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under the caption
“Forward-Looking Statements” contained in this Quarterly Report on
Form 10-Q and in “Item 1A. RISK FACTORS” of our 2020 Annual Report
on Form 10-K. There have been no material changes from the risk
factors previously disclosed in our 2020 Annual Report on Form
10-K.
The above notwithstanding, we are mindful of the COVID-19 pandemic
currently sweeping the world in general and in particular the
United States. Inasmuch as our business model does not rely on
sales of a product or services or consumer access thereto, we do
not believe that we will be negatively impacted by the pandemic and
the economic havoc it is currently wreaking on the economies of the
United States and the world. Having said that, it is possible that
if the pandemic continues for an extended period of time and/or
recurs again in the future, it may cause delays in the prosecution
of the Company’s lawsuit.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
During the nine months ended September 30, 2021 and 2020 we did not
raise any funds through the sale of equity securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
(a) |
Filed previously with
the Proxy Statement Form DEF 14A on May, 19, 2010, as amended as
described in Proxy Statements on Form DEF 14A filed on September 7,
2013 and May 17, 2016, and incorporated herein by
reference. |
(b) |
Filed previously with
the Proxy Statement Form DEF 14A on May, 19, 2010, and incorporated
herein by reference. |
SIGNATURES
In
accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: November 8, 2021
WORLDS INC.
By: /s/Thomas
Kidrin
Thomas
Kidrin
President and CEO
By: /s/Christopher
Ryan
Christopher Ryan
Chief
Financial Officer
INDEX TO EXHIBITS
Exhibit No. |
|
Description |
|
3.1 |
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Certificate of Incorporation (a) |
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3.2 |
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By -
Laws Restated as Amended (b) |
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31.1 |
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Certification of Chief Executive Officer |
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31.2 |
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Certification of Chief Financial Officer |
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32.1 |
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Statement required by 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
|
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Statement required by 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002. |
|
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101.INS*
XBRL |
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Instance Document |
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101.SCH*
XBRL |
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Taxonomy Extension Schema |
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101.CAL*
XBRL |
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|
Taxonomy Extension Calculation Linkbase |
|
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|
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101.DEF*
XBRL |
|
|
Taxonomy Extension Definition Linkbase |
|
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101.LAB*
XBRL |
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Taxonomy Extension Label Linkbase |
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101.PRE*
XBRL |
|
|
Taxonomy Extension Presentation Linkbase |
(a) |
Filed previously with
the Proxy Statement Form DEF 14A on May, 19, 2010, as amended as
described in Proxy Statements on Form DEF 14A filed on September 7,
2013 and May 17, 2016, and incorporated herein by
reference. |
(b) |
Filed previously with
the Proxy Statement Form DEF 14A on May, 19, 2010, and incorporated
herein by reference. |
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