10-K: Worlds Inc. Reports Net Income for 2023 After Shifting Focus to IP Monetization

Worlds Inc. reports a net income of $82,179 for 2023, a significant turnaround from a net loss of $1,035,427 in 2022, driven by a shift in business strategy towards monetizing its intellectual property.

Summary

• Worlds Inc. has transitioned its business focus to monetizing its intellectual property, including non-fungible tokens and legacy virtual reality worlds, after spinning off its operations to MariMed Inc. in 2011.
• The company reported a net income of $82,179 for the year ended December 31, 2023, a substantial improvement compared to a net loss of $1,035,427 in the previous year.
• This turnaround was primarily due to a decrease in selling, general, and administrative expenses, which fell from $1,297,680 in 2022 to $101,451 in 2023, and a gain on the sale of a URL for $400,000.
• The company's revenue was $0 for both 2023 and 2022, with the exception of the URL sale, as it focuses on developing revenue streams from its IP assets.
• As of December 31, 2023, Worlds Inc. had cash and cash equivalents of $244,856, compared to $7,778 at the end of 2022.
• The company has a significant accumulated deficit of $46,741,914 and a working capital deficiency of $3,142,163, raising concerns about its ability to continue as a going concern.
• Worlds Inc. has 16,600,000 stock options outstanding and exercisable as of December 31, 2023.
• The company has approximately $45,000,000 in federal and state net operating loss carryforwards that expire through 2042.

Sentiment

Score: 6

Explanation: The document shows a positive turnaround in net income and cash position, but significant concerns remain about the company's long-term viability, accumulated deficit, and internal control weaknesses. The shift in strategy is promising but unproven.

Positives

• The company achieved a net income of $82,179 in 2023, a significant turnaround from a net loss in the previous year.
• The company significantly reduced its selling, general, and administrative expenses.
• The sale of a URL generated a substantial gain of $400,000.
• The company's cash position improved significantly, increasing from $7,778 to $244,856.
• The company has a substantial amount of net operating loss carryforwards that can be used to offset future taxable income.

Negatives

• The company's core operations did not generate any revenue in 2023.
• The company has a significant accumulated deficit of $46,741,914.
• The company has a working capital deficiency of $3,142,163.
• There are concerns about the company's ability to continue as a going concern due to its financial situation.
• The company has material weaknesses in its internal controls over financial reporting.

Risks

• The company's ability to continue as a going concern is uncertain due to its working capital deficiency and accumulated losses.
• The company is dependent on the success of monetizing its IP assets, which is a relatively new and unproven business strategy.
• The company may not be able to protect its proprietary technologies, and may face costly litigation over intellectual property rights.
• The company is heavily reliant on its CEO, Thomas Kidrin, and his loss could have a material adverse effect on the business.
• The company's stock is considered a penny stock, which may adversely impact its liquidity and price.
• The company has material weaknesses in its internal controls over financial reporting.

Future Outlook

The company will focus on monetizing its collection of non-fungible tokens and legacy celebrity virtual reality worlds, and is exploring strategic alliances with virtual reality platforms to refocus its positioning in the VR/AR market.

Management Comments

• 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.
• Management has been informed as to the need to be constantly aware of the possibility of cybersecurity breaches and to inform the board of directors immediately upon receipt of any information with respect to an actual or even a potential breach.

Industry Context

The company's shift towards monetizing digital assets like NFTs and virtual worlds aligns with the growing interest in the metaverse and digital ownership, but the company faces competition from other companies exploring similar technologies and standardization efforts.

Comparison to Industry Standards

• Worlds Inc.'s financial performance is difficult to compare directly to industry standards due to its unique business model and focus on legacy IP monetization.
• Unlike many tech companies that are actively developing new products, Worlds Inc. is primarily focused on leveraging existing assets.
• The company's lack of revenue from core operations is a significant deviation from industry norms, where most companies generate revenue from product sales or service offerings.
• The company's reliance on a single employee and consultants is also unusual compared to other tech companies, which typically have larger teams.
• The company's financial position, with a significant accumulated deficit and working capital deficiency, is weaker than many of its peers in the technology sector.

Corporate Governance

Related Party Transactions

• The company entered into an asset purchase agreement with its CEO, Thom Kidrin, for certain IP in exchange for 15 million stock options.
• The CEO loaned the company $47,000 during the year to cover operating expenses, which was subsequently repaid with interest.
• Accrued expenses include amounts owed to related parties, including the CEO and CFO.

Stakeholder Impact

• Shareholders may be concerned about the company's ability to continue as a going concern and the potential for further dilution.
• Employees are limited to one person, the CEO, and the company relies on consultants for additional work.
• Customers are not directly impacted as the company is not currently generating revenue from sales.
• Suppliers and creditors may be concerned about the company's ability to meet its obligations due to its financial situation.

Next Steps

• The company will continue to focus on monetizing its collection of non-fungible tokens and legacy celebrity virtual reality worlds.
• The company will explore strategic alliances with state-of-the-art virtual reality platforms.
• The company will seek additional sources of capital to fund its operations and expansion.

Key Dates

Keywords

intellectual property, non-fungible tokens, virtual reality, IP monetization, 3D technology, software, patents, penny stock, financial results, going concern