The club were thrown out of the Premiership after going into administration and had a February 14th deadline to meet various RFU criteria to play in the second-tier Championship.
The Atlas group were made the preferred bidders by the administrators but Jim O'Toole of Atlas told the BBC that some of the RFU demands for a Championship return were "too onerous" and unacceptable to the investors.
"It would have given the RFU control over decisions that we as a business will have to take," Atlas said.
"This decision will clearly upset and annoy a number of people. The sad fact of life is that the Worcester Warriors brand and the Worcester Warriors business is gone. We didn't want to go down to the 10th tier as Worcester Warriors, so the name sadly will disappear. We are rebranding as Sixways Rugby (the name of the club's current ground). We're starting afresh. We believe it is time for a new start."
The merger with semi-professional club Stourbridge is subject to a vote from the lower league club's members and would require RFU approval, but if it goes ahead, it would appear to mean that Worcester's new owners would avoid having to pay millions of pounds owed to creditors, including former players and employees.
The RFU said that their priority had always been to enable Worcester Warriors to play in the Championship and Worcester Warriors Women in the Premier 15s "in a sustainable way."
"The information required has been asked for repeatedly and deadlines were extended to provide the best possible chance for this to happen," the governing body said in a statement.
"The RFU will now consult with the local rugby community over the proposed relocation of Stourbridge and the change of name.
"The RFU maintains its commitment to running the Midlands academy which it took over in November and the continuation of Worcester Warriors Women."
To add to the chaotic situation Wasps, who also went into administration and were thrown out of the Premiership early in the season, are investigating the possibility of playing their Championship home games next season at Sixways, according to the Daily Telegraph.
Wasps, who played in Coventry until administration, with its community club still at its traditional base in West London, would not form any sort of merger with Worcester.
