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Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Document And Entity Information
Entity Registrant Name WORLDS ONLINE INC.
Entity Central Index Key 0001522767
Document Type 10-K
Document Period End Date Dec 31, 2012
Amendment Flag false
Current Fiscal Year End Date --12-31
Is Entity a Well-known Seasoned Issuer? No
Is Entity a Voluntary Filer? No
Is Entity's Reporting Status Current? Yes
Entity Filer Category Smaller Reporting Company
Entity Public Float $ 23,105,167
Entity Common Stock, Shares Outstanding 25,411,549
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2012
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Balance Sheets (USD $)
Dec. 31, 2012
Dec. 31, 2011
Current Assets
Cash $ 8,585 $ 118,803
Prepaid expenses 94,000   
Trading securities 19,250 71,250
Total Current Assets 121,835 190,053
Total Assets 121,835 190,053
Current Liabilities
Account payable and accrued expense 273,987 77,959
Account payable related party 134,653 43,818
Deferred revenue 226,950 226,950
Total Current Liabilities 635,590 348,728
Stockholders (Deficit)
Common Stock (par value $0.001 authorized 100,000,000 shares, issued and outstanding 24,411,549 and 0 on December 31, 2012 and December 31, 2011 respectively) 25,412   
Common stock subscribed but not yet issued (400,000 and 526,315 shares at December 31, 2011, repectively) 400 526
Common Stock Warrants 1,165,563 1,165,563
Additional Paid in Capital (518,180) (947,354)
Accumulated Deficit (1,186,950) (377,410)
Total stockholders deficit (513,755) (158,675)
Total Liabilities and Stockholders Deficit $ 121,835 $ 190,053
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Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]
Common stock par value $ 0.001 $ 0.001
Common stock shares authorized 100,000,000 100,000,000
Common stock issued 25,411,549 0
Common stock outstanding 25,411,549 0
Common stock subscribed but not yet issued 400,000 526,315
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Statements of Operations (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Revenues
Revenue $ 125,607 $ 785
Total 125,607 785
Cost of Revenue 23,025 19,948
Gross (loss) 102,582 (19,163)
Selling, general & administrative expense:
Options expense 195,615 181,646
Common stock issued for services rendered 0 164,000
Selling, General & Admin - other 188,499 184,430
Payroll and related taxes 92,128 225,548
Total expenses 476,242 755,624
Operating (loss) (373,660) (774,787)
Other Income (Expense)
Realized loss on traiding securities    (2,753)
Unrealized loss on traiding securities (3,750) (32,000)
Net (Loss) $ (377,410) $ (809,540)
Weighted Average Loss per share (basic and fully diluted) $ (1.04) $ (0.04)
Weighted Average Common Shares Outstanding 361,723 19,810,436
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Statements of Cash Flows (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Cash flows from operating activities:
Net (loss) $ (377,410) $ (809,540)
Adjustments to reconcile net (loss) to net cash provided by operating activities
Realized loss on trading securities    2,753
Unrealized loss on trading securities 3,750 32,000
Common stock issued for services rendered including amortization of prepaids 0 164,000
Stock received for consulting services (75,000)   
Fair value of stock options issued to Directors 195,615 181,646
Accounts payable and ccrued expenses 77,959 210,841
Accounts payable related party 43,818 90,835
Deferred revenue (50,000)   
Net cash (used in) operating activities: (181,267) (127,465)
Proceeds from sale of trading securities    17,247
Net cash used provided by investing activities    17,247
Cash flow from financing activities:
Proceeds from issuance of common stock 300,070   
Officer loan      
Net cash provided by financing activities 300,070   
Net increase (decrease) in cash and cash equivalents 118,803 (110,238)
Cash and cash equivalents beginning of period    118,803
Cash and cash equivalents end of period 118,803 8,585
Non-cash financing activities:
Stock options issued as part of stock dividend 1,165,563   
Common stock issued for accrued expenses    14,813
Common stock issued for prepaid compensation 0 228,000
Cash paid during the period for:
Interest      
Income taxes      
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Shareholders Equity (USD $)
Common Stock
Additional Paid-In Capital
Common Shares Subscribed but not Issued
Common Stock Warrants
Accumulated Deficit
Total
Begining Balance, amount at Jan. 24, 2011                  
Begining Balance, shares at Jan. 24, 2011   
Common stock issued to officer for accrued expense, amount   
Transfer of deferred revenue from Worlds Inc.    (276,950)          (276,950)
Issuance of common stock for cash investment, shares 526,315 526,315
Issuance of common stock for cash investment, amount 299,544 526       300,070
Stock options for directors and officer transferred from Worlds Inc.    (1,165,563)    1,165,563      
Issuance of stock options to Directors, amount    195,615          195,615
Common stock subscribed for prepaid compensation, amount 0
Issuance of common stock for services, amount   
Net (Loss)             (377,410) (377,410)
Ending balance, amount at Dec. 31, 2011 (947,354) 526 1,165,563 (377,410) (158,675)
Ending balance, shares at Dec. 31, 2011    526,315
Common stock issued to officer for accrued expense, shares 25,987 25,987
Common stock issued to officer for accrued expense, amount 26 14,787 14,813
Stock Dividend, shares 23,859,248 23,859,248
Stock Dividend, amount 23,859 (23,859)   
Issuance of common stock for cash investment, shares 526,314 (526,315) 0
Issuance of common stock for cash investment, amount 526 (526)   
Issuance of stock options to Directors, amount 181,646 181,646
Common stock subscribed for prepaid compensation, shares 400,000
Common stock subscribed for prepaid compensation, amount 227,600 400 228,000
Amortization of deferred compensation, amount   
Issuance of common stock for services, shares 1,000,000 1,000,000
Issuance of common stock for services, amount 1,000 29,000 30,000
Net (Loss) (809,540) (809,540)
Ending balance, amount at Dec. 31, 2012 $ 25,412 $ (518,180) $ 400 $ 1,165,563 $ (1,186,950) $ (513,755)
Ending balance, shares at Dec. 31, 2012 25,411,549 400,000
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NOTE 1 - DESCRIPTION OF BUSINESS & SUMMARY OF ACCTING POLICIES
12 Months Ended
Dec. 31, 2012
Accounting Policies [Abstract]
NOTE 1 - Description of Business & Summary of Accting Policies

 

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

 

Description of Business

 

Worlds Online 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 licensed technology the Company creates its own Internet sites, as well as sites available through third party on-line service providers.

 

The Company was formed on January 25, 2011 as a wholly-owned subsidiary of Worlds Inc. (formerly known as Worlds.com Inc.). On May 16, 2011, Worlds Inc. transferred to the Company the majority of its operations and related operational assets, except for its patent portfolio. Worlds Inc. has also given to the Company a perpetual world-wide license to its patented technology. Pursuant to the license, the Company has the right to issue unlimited sublicenses to the licensed technology, subject to World Inc.’s reasonable consent.

 

The assets transferred to us include: Worlds Inc.’s technology platform, Worlds Ultimate Chat, Aerosmith World, DMC Worlds, Cinema Virtual, Pearson contracts and related revenue, the following 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. None of the transferred assets have any carrying value on the financial statements of the Company.

 

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 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. These factors raise substantial doubt about the Company's ability to continue as a going concern. For 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.

 

Trading Securities

 

Trading securities is common stock in a publicly traded company that was received as compensation for performing consulting services. The carrying value of the investment is the market price of the shares at December 31, 2012 and December 31, 2011. Any unrealized gain or loss are recorded under other income/(expense) in the accompanying statements of operations.

 

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.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2012 and 2011 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the for the periods ended December 31, 2012 and 2011, respectively. 

Accounts Payable Related Party

 

Accounts payable related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses.

 

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 usually be in the form of a receipt of a customer’s 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.

 

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.  

 

Research and Development Costs

 

Research and development costs are charged to operations as incurred.

  

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 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. 

 

Related Party Transactions

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

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 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, 2012 or 2011.

 

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification 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.

 

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 periods ended December 31, 2012 or 2011.

 

Subsequent Events

The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. 

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.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”).  ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively.  The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance.  This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity.  Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements.  ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted.  The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition.

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its results of operations, cash flows or financial condition.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its financial statements. 

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NOTE 2 - GOING CONCERN
12 Months Ended
Dec. 31, 2012
Liquidity Disclosure [Abstract] (Deprecated 2009-01-31)
NOTE 2 - GOING CONCERN

 

NOTE 2 - GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Worlds Online Inc. has had only minimal revenues from operations, has a negative working capital, has a negative stockholders deficit and negative cash flows from operations. There can be no assurance that the Company will be able to obtain the substantial additional capital resources necessary to fully 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 likely have a material adverse effect on the Company, including possibly requiring the Company to reduce and/or 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.

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NOTE 3 - PRIVATE PLACEMENTS OF EQUITY
12 Months Ended
Dec. 31, 2012
Equity [Abstract]
NOTE 3 - PRIVATE PLACEMENTS OF EQUITY

 

NOTE 3 - PRIVATE PLACEMENTS OF EQUITY

 

During May of 2011, the Company completed a private placement of 526,315 shares of its common stock at a price per share of $0.57 for aggregate proceeds of $300,070 from three “accredited” investors. The shares were physically issued in 2012.

 

During the year ended December 31, 2012 the Company issued an aggregate of 1,000,000 shares of common stock as payment for services rendered with an aggregate value of $30,000, of which $2,500 has been expensed in 2012 and $27,500 was recorded as prepaid expense at December 31, 2012.

 

During the year ended December 31, 2012 the Company issued an aggregate of 25,987 shares of common stock as payment for an accrued expense with an aggregate value of $14,813.

 

During the year ended December 31, 2012, the Company issued 23,859,248 common shares as part of its stock dividend to the shareholders of Worlds, Inc.

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NOTE 4 - DEFERRED REVENUE
12 Months Ended
Dec. 31, 2012
Deferred Revenue [Abstract]
NOTE 4 - DEFERRED REVENUE

 

NOTE 4 - DEFERRED REVENUE

 

 

As part of a debt refinancing in 2000 with Worlds Inc. (formerly Worlds.com), $631,950 of debt was renegotiated to deferred revenue representing future services to be provided by the Company. $355,000 has been amortized into income through December 31, 2010. The balance of $276,950 has been transferred to the Company. During the period presented herein, $50,000 has been amortized into income in 2011 leaving a balance at December 31, 2011 of $226,950. Nothing has been amortized into income in 2012 as no services were performed, leaving the balance unchanged at $226,950 at December 31, 2012.

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NOTE 5 - PROPERTY & EQUIPMENT
12 Months Ended
Dec. 31, 2012
Property, Plant and Equipment [Abstract]
NOTE 5 - PROPERTY & EQUIPMENT

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

There is no property and equipment on the balance sheet at December 31, 2012 or December 31, 2011. The Company does have property and equipment, however, for accounting purposes, the property and equipment that was transferred was fully depreciated by Worlds Inc. prior to the transfer. Therefore it has no carrying value to the Company.

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NOTE 6 - STOCK OPTIONS
12 Months Ended
Dec. 31, 2012
Note 6 - Stock Options
NOTE 6 - STOCK OPTIONS

 

NOTE 6 - STOCK OPTIONS

 

During the year ended December 31, 2012, the Company issued 5,000,000 stock options to directors and officers of the Company. 4,500,000 stock options were issued as part of the employment agreement with its President and CEO, Thom Kidrin. The stock option allows Mr. Kidrin to purchase 4,500,000 shares of the Company’s common stock at $0.01 per share. The options expire on September 30, 2017. The Company issued 300,000 stock options to Chris Ryan, the Company’s CFO. The stock option allows Chris Ryan to purchase 300,000 shares of the Company’s common stock at $0.025 per share per each individual option. The options expire on December 20, 2017. The Company issued 100,000 shares to each of the Company’s directors, Bernard Stolar and Robert Fireman. The stock options allow each director to purchase 100,000 shares of the Company’s common stock at $0.025 per share per each individual option. The options expire on December 20, 2017. The Company did not grant any registration rights with respect to any shares of common stock issuable upon exercise of the options.

 

 

During the period ended December 31, 2012, the Company recorded an expense of $181,646, equal to the estimated fair value of the options at the date of grants. These options were granted for services to be performed.  The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 0.77% risk-free interest, 0% dividend yield, 65% volatility, and expected life of five years.

 

During 2011, the Company issued 675,000 stock options to various Directors.  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 December 31, 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. During the period from inception (January 25, 2011) through December 31, 2011, the Company recorded an expense of $195,615, equal to the estimated fair value of the options at the date of grants. These options were granted to the Directors for services to be performed.  The fair market value was calculated using the Black-Scholes options pricing model, assuming approximately 1.8% risk-free interest, 0% dividend yield, 65% volatility, and expected life of two and three quarter years.

 

During the period from inception (January 25, 2011) through December 31, 2011 we also issued 5,570,829 stock options exercisable at $0.57 per share to various option holders of Worlds Inc. The options were issued on the same basis as the stock dividend i.e. one stock option for every three stock options held in Worlds Inc. However, the exercise price of all such options was increased to $0.57 per share. 5,000,000 stock options were given to Thomas Kidrin, the President and CEO, during the year ended December 31, 2012, the options expired and were replaced with the 4.5 million options mentioned above. 

 

During the year ended December 31, 2012, no stock options or warrants were exercised. There are no outstanding warrants as of December 31, 2012. Approximately five million options expired in 2012.

 

Stock options outstanding and exercisable as of December 31, 2012 are as follows:

 

Exercise Price per Share   Shares Under Option   Remaining Life in Years
Outstanding        
        $ 0.57       845,832     1.00
        $ 0.57       33,333     0.86
        $ 0.57       99,999     0.38
        $ 0.025       500,000     4.97
        $ 0.01       4,500,000     4.67
                  5,979,164      
                         
  Exercisable                      
        $ 0.57       845,832     1.00
        $ 0.57       33,333     0.86
        $ 0.57       99,999     0.38
        $ 0.01       1,500,000     4.67
                         
                  2,479,164      

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NOTE 7 - INCOME TAXES
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
NOTE 7 - INCOME TAXES

 

NOTE 7 - INCOME TAXES

 

At December 31, 2012, the Company had federal and state net operating loss carry forwards of approximately $1,187,000 that expire in 2024.

 

Due to operating losses, there is no provision for current federal or state income taxes for the periods ended December 31, 2012 or 2011.

 

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, 2012 consists of a net operating loss calculated using federal and state effective tax rates equating to approximately $463,000 less a valuation allowance in the amount of approximately $463,000. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The measurement valuation allowance increased by $316,000 and $147,000 during the 2012 and 2011 periods respectively.

 

The Company’s total deferred tax asset as of December 31, 2012 is as follows:

 

         
  Deferred tax asset - gross   $ 463,000  
  Valuation allowance     (463,000 )
         
  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 periods ended December 31, 2012 and 2011 is as follows:

 

      2012       2011  
Income tax computed at the federal statutory rate     34 %     34 %
 Income tax computed at the state statutory rate     5 %     5 %
 Valuation allowance     (39 %)     (39 %)
                 
 Total deferred tax asset     0 %     0 %

 

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NOTE 8 - TRADING SECURITIES
12 Months Ended
Dec. 31, 2012
Trading Securities [Abstract]
NOTE 8 - TRADING SECURITIES

 

NOTE 8 - Trading Securities

 

 

Marketable equity securities     Cost       Market value       Unrealized Loss  
    $ 75,000     $ 19,250     $ 35,750  

 

 

Fair market measurement at December 31, 2012 were computed using quoted prices in an active market for identified assets, (level 1 ). The shares were obtained as compensation for performing consulting services.

 

The unrealized losses of $32,000 and $3,750 is included in the Company Statements of Operations for the periods ended December 31, 2012 and 2011.

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NOTE 9 - RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2012
Related Party Transactions [Abstract]
NOTE 9 - RELATED PARTY TRANSACTIONS

 

NOTE 9 - RELATED PARTY TRANSACTIONS

 

The Company was formed on January 25, 2011 as a wholly-owned subsidiary of Worlds Inc. (formerly known as Worlds.com Inc.). On May 16, 2011 Worlds Inc. transferred to the Company the majority of its operations and related operational assets, except for its patent portfolio. Worlds Inc. has also given to the Company a perpetual world-wide license to its patented technology. Pursuant to the license, the Company has the right to issue unlimited sublicenses to the licensed technology, subject to World Inc.’s reasonable consent.

 

The assets transferred to the Company include: Worlds Inc.’s technology platform, Worlds Ultimate Chat, Aerosmith World, DMC Worlds, Cinema Virtual, Pearson contracts and related revenue, the following 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. None of the transferred assets have any carrying value on the financial statements of the Company. Deferred revenue of $226,950 at December 31, 2012 and 2011 was transferred from Worlds, Inc.

 

Account payable related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses. The balance due at December 31, 2012 is $134,653. Included in the accompanying Balance Sheets at December 31, 2012 and 2011 is $134,653 and $43,818 respectively payable to Worlds Inc. for payments made on shared expenses. 

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NOTE 10 - COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

The Company is committed to an employment agreement with it’s President and CEO, Thom Kidrin. The agreement, dated as of August 30, 2012, is for five years with a one-year renewal option held by Mr. Kidrin.  The agreement provides for a base salary of $175,000, 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 4.5 million shares of Worlds Inc. common stock at an exercise price of  $0.01 per share, of which one-third vested on August 30, 2012, one-third vest on August 30, 2013 and the balance vested on August 30, 2014; 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. The balance due Mr. Kidrin at December 31, 2012 is $87,839 and is included in accrued expenses.      

 

The Company is committed to a consulting agreement with an unrelated business consultant. The contract is dated January 1, 2012, calls for monthly payments in the amounts of $5,000 for the 24 month term of the contract and expires on January 1, 2014

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NOTE 11 - SEGMENTS
12 Months Ended
Dec. 31, 2012
Segment Reporting [Abstract]
NOTE 11 - SEGMENTS

 

NOTE 11 - SEGMENTS

 

The Company determined that it do not operate in any material, separately reportable operating segments as of December 31, 2012 and 2011.

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Note 1 - Description of Business & Summary of Accting Policies (Policies)
12 Months Ended
Dec. 31, 2012
Accounting Policies [Abstract]
Description of Business

 

Description of Business

 

Worlds Online 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 licensed technology the Company creates its own Internet sites, as well as sites available through third party on-line service providers.

 

The Company was formed on January 25, 2011 as a wholly-owned subsidiary of Worlds Inc. (formerly known as Worlds.com Inc.). On May 16, 2011, Worlds Inc. transferred to the Company the majority of its operations and related operational assets, except for its patent portfolio. Worlds Inc. has also given to the Company a perpetual world-wide license to its patented technology. Pursuant to the license, the Company has the right to issue unlimited sublicenses to the licensed technology, subject to World Inc.’s reasonable consent.

 

The assets transferred to us include: Worlds Inc.’s technology platform, Worlds Ultimate Chat, Aerosmith World, DMC Worlds, Cinema Virtual, Pearson contracts and related revenue, the following 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. None of the transferred assets have any carrying value on the financial statements of the Company.

Basis of Presentation

 

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 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. These factors raise substantial doubt about the Company's ability to continue as a going concern. For 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

 

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

 

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.

Trading Securities

 

Trading Securities

 

Trading securities is common stock in a publicly traded company that was received as compensation for performing consulting services. The carrying value of the investment is the market price of the shares at December 31, 2012 and December 31, 2011. Any unrealized gain or loss are recorded under other income/(expense) in the accompanying statements of operations.

Property and Equipment

 

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

 

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.

Fair Value of Financial Instruments

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.

 

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2012 and 2011 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the for the periods ended December 31, 2012 and 2011, respectively. 

Accounts Payable Related Party

 

Accounts Payable Related Party

 

Accounts payable related party is comprised of cash payments made by Worlds Inc. on behalf of Worlds Online Inc. for shared operating expenses.

Revenue Recognition

 

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 usually be in the form of a receipt of a customer’s 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.

Deferred Revenue

 

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.  

Research and Development Costs

 

Research and Development Costs

 

Research and development costs are charged to operations as incurred.

Stock-Based Compensation

 

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

 

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 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.

Related Party Transactions

 

Related Party Transactions

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Comprehensive Income (Loss)

 

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 financial statements.

 

Loss Per Share

 

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, 2012 or 2011.

 

Commitments and Contingencies

 

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification 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.

Risk and Uncertainties

 

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

 

Off Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements.

Uncertain Tax Positions

 

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 periods ended December 31, 2012 or 2011.

Subsequent Events

 

Subsequent Events

The Company evaluated for subsequent events through the issuance date of the Company’s financial statements.

Recent Accounting Pronouncements

 

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.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”).  ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively.  The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance.  This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity.  Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements.  ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted.  The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition.

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its results of operations, cash flows or financial condition.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its financial statements. 

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NOTE 6 - STOCK OPTIONS (Tables)
12 Months Ended
Dec. 31, 2012
Note 6 - Stock Options
Stock Warrants and Options
Exercise Price per Share     Shares Under Option     Remaining Life in Years  
Outstanding              
$ 0.57       675,000       1.42  
$ 0.57       170,832       1.21  
$ 0.57       33,333       1.09  
$ 0.57       99,999       0.57  
$ 0.57       99,999       0.21  
$ 0.01       4,500,000       4.92  
          5,579,163          
                     
Exercisable                  
$ 0.57       675,000       1.42  
$ 0.57       170,832       1.21  
$ 0.57       33,333       1.09  
$ 0.57       99,999       0.57  
$ 0.57       99,999       0.21  
$ 0.01       1,500,000       4.92  
          2,579,163          
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NOTE 7 - INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Company's total deferred tax

 

         
  Deferred tax asset - gross   $ 463,000  
  Valuation allowance     (463,000 )
         
  Net deferred tax asset   $ —     

Reconciliation of income taxes

 

      2012       2011  
Income tax computed at the federal statutory rate     34 %     34 %
Income tax computed at the state statutory rate     5 %     5 %
Valuation allowance     (39 %)     (39 %)
                 
 Total deferred tax asset     0 %     0 %

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NOTE 8 - TRADING SECURITIES (Tables)
12 Months Ended
Dec. 31, 2012
Trading Securities [Abstract]
Marketable equity securities

 

Marketable equity securities     Cost       Market value       Unrealized Loss  
    $ 75,000     $ 19,250     $ 35,750  

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NOTE 6 - STOCK OPTIONS - Stock Warrants and Options (Details) (USD $)
Dec. 31, 2012
Y
Outstanding 1
Option outstanding 845,832
Option exercisable 845,832
Price per share $ 0.57
Remaing life in years 1
Outstanding 2
Option outstanding 33,333
Option exercisable 33,333
Price per share $ 0.57
Remaing life in years 0.86
Outstanding 3
Option outstanding 99,999
Option exercisable 99,999
Price per share $ 0.57
Remaing life in years 0.38
Outstanding 4
Option outstanding 500,000
Option exercisable 0
Price per share $ 0.025
Remaing life in years 4.97
Outstanding 5
Option outstanding 4,500,000
Option exercisable 1,500,000
Price per share $ 0.01
Remaing life in years 4.67
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NOTE 7 - INCOME TAXES - Company's total deferred tax (Details) (USD $)
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Deferred tax assets - gross $ 463,000
Valuation allowance (463,000)
Net deferred tax asset $ 0
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NOTE 7 - INCOME TAXES - Reconciliation of income taxes (Details) (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income tax computed at the federal statutory rate 34.00% 34.00%
Income tax computed at the state statutory rate 5.00% 5.00%
Valuation allowance (0.39) (0.39)
Total deferred tax asset $ 0 $ 0
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NOTE 3 - PRIVATE PLACEMENTS OF EQUITY (Details Narrative) (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Equity [Abstract]
Private placement common stock 526,315 0
Price per share 0.57
Aggregate proceeds $ 300,070   
Shares of common stock issued for services rendered 1,000,000
Value of shares issued for services rendered 30,000
Amount expensed in 2012 2,500
Amount recorded as prepaid expense 27,500
Shares of common stock issued as payment for an accrued expense 25,987
Value of common stock issued as payment for accrued expense    $ 14,813
Common shares issued as part of stock dividend 23,859,248
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NOTE 4- DEFERRED REVENUE (Details Narrative) (USD $)
11 Months Ended 12 Months Ended 120 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2010
Dec. 31, 2000
Notes to Financial Statements
Deferred Revenue $ 226,950 $ 226,950 $ 276,950 $ 631,950
Deferred Revenue Recognized $ 50,000 $ 0 $ 355,000
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NOTE 6 - STOCK OPTIONS (Details Narrative) (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Note 6 - Stock Options
Stock Options Granted - Total 5,570,829 5,000,000
Stock Options Granted to CEO 5,000,000 4,500,000
Common Shares Purchase Upon Exercise 4,500,000
Exercise Price - CEO $ 0.57 $ 0.01
Stock Options Expired - CEO 5,000,000
Stock Options Granted - to CFO 300,000
Common Shares Purchase Upon Exercise 300,000
Exercise Price - CFO $ 0.025
Stock Options Granted to Director 100,000
Common Shares Purchased Upon Exercise 100,000
Exercise Price - Director $ 0.025
Options expense $ 195,615 $ 181,646
Risk-free Interest Rate 0.018 0.0077
Percentage of Dividend Yield      
Volatility 0.65 0.65
Expected Life 2 years 274 days 5 years
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NOTE 7 - INCOME TAXES (Details Narrative) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]
Net operating loss carry fowards $ 1,187,000
Valuation allowance (463,000)
Measurement valuation allowance increased $ 316,000 $ 147,000
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NOTE 8 - TRADING SECURITIES (Details Narrative) (USD $)
11 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Trading Securities [Abstract]
Unrealized loss on investment $ 3,750 $ 32,000
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NOTE 9 - RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)
Dec. 31, 2012
Dec. 31, 2011
Related Party Transactions [Abstract]
Account payable - related party $ 134,653 $ 43,818
Deferred revenue $ 226,950 $ 226,950
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NOTE 10 - COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
Dec. 31, 2012
Aug. 30, 2012
Y
M
Term of employment agreement 5
Officer compensation $ 175,000
Yearly increase 10.00%
Car allowance 500
Annual bonus 2.5
Additional bonus 75,000
Pre-tax income range 150
Pre-tax income range 200
Llife insurance premium 10,000
Option to purchase stock 4,500,000
Exercise price per share $ 0.01
Death benefit 2,000,000
Payment of base amount 2.99
Restrictive convenants time 12
Accrued expenses - Officer 87,839
Monthly payments to consultant 5,000
Term of contract 24 months
Additional bonus 1
Additional bonus 100,000
Pre-tax income range 201
Pre-tax income range 250
Additional bonus 2
Annual bonus 5
Additional bonus $ 200,000
Pre-tax income 251
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