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NOTE 13 – SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2021
Subsequent Events [Abstract]  
NOTE 13 – SUBSEQUENT EVENTS

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

 

 3.1   Certificate of Incorporation (a)
      
 3.2   By-Laws Restated as Amended (b)
      
 31.1   Certification of Chief Executive Officer
      
 31.2   Certification of Chief Financial Officer
      
 32.1   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
      
 32.2   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
      
  101.INS*XBRL   Instance Document
      
 101.SCH*XBRL   Taxonomy Extension Schema
      
 101.CAL*XBRL   Taxonomy Extension Calculation Linkbase
      
 101.DEF*XBRL   Taxonomy Extension Definition Linkbase
      
 101.LAB*XBRL   Taxonomy Extension Label Linkbase
      
 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.

 

 

 

 

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   Certificate of Incorporation (a)
      
 3.2   By - Laws Restated as Amended (b)
      
 31.1   Certification of Chief Executive Officer
      
 31.2   Certification of Chief Financial Officer
      
 32.1   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
      
 32.2   Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
      
  101.INS* XBRL    Instance Document
      
  101.SCH* XBRL    Taxonomy Extension Schema
      
  101.CAL* XBRL    Taxonomy Extension Calculation Linkbase
      
  101.DEF* XBRL    Taxonomy Extension Definition Linkbase
      
  101.LAB* XBRL    Taxonomy Extension Label Linkbase
      
  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.