THEGLOBE COM INC - Quarter Report: 2005 September (Form 10-Q)

Unassociated Document

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______ TO _________

COMMISSION FILE NO. 0-25053

THEGLOBE.COM, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

STATE OF DELAWARE		14-1782422
(STATE OR OTHER JURISDICTION OF		(I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)		IDENTIFICATION NO.)

110 EAST BROWARD BOULEVARD, SUITE 1400

FORT LAUDERDALE, FL. 33301

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(954) 769 - 5900

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the Registrant's Common Stock, $.001 par value (the "Common Stock") as of November 11, 2005 was 173,252,690.

THEGLOBE.COM, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2005 (unaudited)and December 31, 2004	3
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004	4
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004	5
Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3. Quantitative and Qualitative Disclosures about Market Risk	50

Item 4. Controls and Procedures	51

PART II: OTHER INFORMATION

Item 1. Legal Proceedings	52

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3. Defaults Upon Senior Securities	52

Item 4. Submission of Matters to a Vote of Security Holders	52

Item 5. Other Information	52

Item 6. Exhibits	52

SIGNATURES	53

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PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	SEPTEMBER 30,			DECEMBER 31,
	2005			2004
	(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,047,615		$	6,828,200
Marketable securities		–			42,736
Accounts receivable, less allowance for doubtful accounts of approximately $269,000 and $274,000, respectively		534,377			1,120,310
Inventory, less reserves of approximately $361,000 and $1,333,000, respectively		187,385			589,579
Prepaid expenses		845,495			941,316
Assets of discontinued operations		23,241,377			21,665,429
Other current assets		274,380			359,619
Total current assets		27,130,629			31,547,189

Property and equipment, net		1,817,899			2,442,613
Intangible assets		517,011			–
Other assets		40,000			27,363
Total assets	$	29,505,539		$	34,017,165
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	2,799,881		$	1,064,048
Accrued expenses and other current liabilities		2,344,183			1,720,001
Deferred revenue		113,002			163,715
Notes payable and current portion of long-term debt		4,509,040			1,277,405
Liabilities of discontinued operations		8,457,598			8,042,995
Total current liabilities		18,223,704			12,268,164

Long-term debt		–			26,997
Other long-term liabilities		–			204,616
Total liabilities		18,223,704			12,499,777

Stockholders' Equity:
Common stock, $0.001 par value; 500,000,000 shares authorized; 200,138,436 and 174,315,678 shares issued at September 30, 2005 and December 31, 2004, respectively		200,139			174,316
Additional paid-in capital		287,818,627			282,289,404
Treasury stock, 699,281 common shares, at cost		(371,458	)		(371,458	)
Accumulated deficit		(276,365,473	)		(260,574,874	)
Total stockholders' equity		11,281,835			21,517,388
Total liabilities and stockholders' equity	$	29,505,539		$	34,017,165

See notes to unaudited condensed consolidated financial statements.

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THEGLOBE.COM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
	(UNAUDITED)						(UNAUDITED)

Net Revenue	$	409,258		$	877,727		$	1,689,418		$	2,559,954

Operating Expenses:
Cost of revenue		2,213,574			2,573,956			6,379,145			6,067,382
Sales and marketing		481,573			2,053,439			1,722,058			4,775,670
Product development		356,409			360,478			1,010,666			726,662
General and administrative		2,321,295			1,765,743			5,734,072			5,412,143
Depreciation		299,225			381,593			882,396			873,943
Intangible asset amortization		28,200			25,901			47,000			68,244
		5,700,276			7,161,110			15,775,337			17,924,044

Operating Loss from Continuing Operations		(5,291,018	)		(6,283,383	)		(14,085,919	)		(15,364,090	)

Other Income (Expense), net:
Interest expense, net		(1,102,234	)		(9,463	)		(4,156,840	)		(811,586	)
Other income (expense), net		(3,157	)		260,904			(281,994	)		126,075
		(1,105,391	)		251,441			(4,438,834	)		(685,511	)

Loss from Continuing Operations Before Income Tax		(6,396,409	)		(6,031,942	)		(18,524,753	)		(16,049,601	)
Income Tax Benefit		(388,547	)		(61,860	)		(1,038,497	)		(61,860	)
Loss from Continuing Operations		(6,007,862	)		(5,970,082	)		(17,486,256	)		(15,987,741	)
Discontinued Operations:
Income from operations		1,009,026			162,286			2,734,154			162,286
Tax provision		372,971			61,860			1,038,497			61,860
Income from Discontinued Operations		636,055			100,426			1,695,657			100,426
Net Loss	$	(5,371,807	)	$	(5,869,656	)	$	(15,790,599	)	$	(15,887,315	)

Earnings (Loss) Per Share - Basic and Diluted:
Continuing Operations	$	(0.03	)	$	(0.04	)	$	(0.10	)	$	(0.14	)
Discontinued Operations	$	–		$	–		$	0.01		$	–
Net Loss	$	(0.03	)	$	(0.04	)	$	(0.09	)	$	(0.14	)

Weighted Average Common Shares Outstanding		192,210,000			143,514,000			182,577,000			116,546,000

See notes to unaudited condensed consolidated financial statements.

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THEGLOBE.COM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
	2005			2004
	(UNAUDITED)
Cash Flows from Operating Activities:
Net loss	$	(15,790,599	)	$	(15,887,315	)
(Income)from discontinued operations		(1,695,657	)		(100,426	)
Net loss from continuing operations		(17,486,256	)		(15,987,741	)

Adjustments to reconcile net loss from continuing operations to net cash and cash equivalents used in operating activities:
Depreciation and amortization		929,396			942,187
Provision for uncollectible accounts receivable		100,000			160,509
Provision for excess and obsolete inventory		95,054			629,515
Non-cash interest expense		4,000,000			735,416
Reserve against amounts loaned to Tralliance prior to acquisition		280,000			365,250
Contingent commissions expenses		(130,366	)		103,667
Employee stock compensation		48,987			177,638
Compensation related to non-employee stock options		143,351			398,687
Non-cash settlements of liabilities		–			(352,455	)
Other, net		2,246			14,274

Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net		485,933			(147,873	)
Inventory, net		307,140			(1,114,954	)
Prepaid and other current assets		213,859			(282,796	)
Accounts payable		1,659,943			(444,274	)
Accrued expenses and other current liabilities		395,062			746,553
Deferred revenue		(50,713	)		1,580
Net cash and cash equivalents used in operating activities of continuing operations		(9,006,364	)		(14,054,817	)
Net cash and cash equivalents provided by / (used in) operating activities of discontinued operations		1,152,597			(905,974	)
Net cash and cash equivalents used in operating activities		(7,853,767	)		(14,960,791	)

Cash Flows from Investing Activities:
Proceeds from sales and maturities of marketable securities		42,736			225,070
Purchases of property and equipment		(257,682	)		(2,236,694	)
Net cash acquired in acquisition of Tralliance		14,450			–
Amounts loaned to Tralliance prior to acquisition		(280,000	)		(325,250	)
Other, net		(40,000	)		(84,483	)

Net cash and cash equivalents used in investing activities of continuing operations		(520,496	)		(2,421,357	)
Acquisition of discontinued operation, net of cash acquired		–			(2,389,520	)
Purchases of property and equipment by discontinued operation		(171,431	)		(18,993	)
Net cash and cash equivalents used in investing activities		(691,927	)		(4,829,870	)

Cash Flows from Financing Activities:
Borrowings on notes payable and long-term debt		4,000,000			2,000,000
Payments on notes payable and long-term debt		(277,608	)		(121,599	)
Proceeds from issuance of common stock, net		–			26,972,745
Proceeds from exercise of common stock options		31,881			184,546
Proceeds from exercise of warrants		10,836			10,918
Payments of other long-term liabilities, net		–			(119,711	)
Net cash and cash equivalents provided by financing activities		3,765,109			28,926,899
Net Increase (Decrease) in Cash and Cash Equivalents		(4,780,585	)		9,136,238

Cash and Cash Equivalents, at beginning of period		6,828,200			1,061,702
Cash and Cash Equivalents, at end of period	$	2,047,615		$	10,197,940

See notes to unaudited condensed consolidated financial statements.

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THEGLOBE.COM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) DESCRIPTION OF THEGLOBE.COM

theglobe.com, inc. (the "Company" or "theglobe") was incorporated on May 1, 1995 (inception) and commenced operations on that date. Originally, theglobe.com was an online community with registered members and users in the United States and abroad. That product gave users the freedom to personalize their online experience by publishing their own content and by interacting with others having similar interests. However, due to the deterioration of the online advertising market, the Company was forced to restructure and ceased the operations of its online community on August 15, 2001. The Company then sold most of its remaining online and offline properties. The Company continues to operate its Computer Games print magazine and the associated website Computer Games Online (www.cgonline.com), as well as the computer games distribution business of Chips & Bits, Inc. (www.chipsbits.com). On June 1, 2002, Chairman Michael S. Egan and Director Edward A. Cespedes became Chief Executive Officer and President of the Company, respectively.

On November 14, 2002, the Company acquired certain Voice over Internet Protocol ("VoIP") assets and is now pursuing opportunities related to this acquisition. In exchange for the assets, the Company issued warrants to acquire 1,750,000 shares of its Common Stock and an additional 425,000 warrants as part of an earn-out structure upon the attainment of certain performance targets. The earn-out performance targets were not achieved and the 425,000 earn-out warrants expired on December 31, 2003.

On May 28, 2003, the Company acquired Direct Partner Telecom, Inc. ("DPT"), a company engaged in VoIP telephony services in exchange for 1,375,000 shares of the Company's Common Stock and the issuance of warrants to acquire 500,000 shares of the Company's Common Stock. The transaction included an earn-out arrangement whereby the former shareholders of DPT may earn additional warrants to acquire up to 2,750,000 shares of the Company's Common Stock at an exercise price of $0.72 per share upon the attainment of certain performance targets by DPT, or upon a change in control as defined, over approximately a three year period following the date of acquisition. Effective March 31, 2004, 500,000 of the earn-out warrants were forfeited as performance targets had not been achieved for the first of the three year periods. An additional 750,000 of the warrants were forfeited effective March 31, 2005, as performance targets for the second of the three year periods were not achieved.

The Company acquired all of the physical assets and intellectual property of DPT and originally planned to continue to operate the company as a subsidiary and engage in the provision of VoIP services to other telephony businesses on a wholesale transactional basis. In the first quarter of 2004, the Company decided to suspend DPT's wholesale business and dedicate the DPT physical and intellectual assets to its retail VoIP business. As a result, the Company wrote-off the goodwill associated with the purchase of DPT as of December 31, 2003, and has since employed DPT's physical assets in the build out of the retail VoIP network.

On September 1, 2004, the Company acquired SendTec, Inc. ("SendTec"), a direct response marketing services and technology company, for a total purchase price of approximately $18.0 million. As more fully discussed in Note 3, "Discontinued Operations - SendTec, Inc.," on October 31, 2005, the Company completed the sale of all of the business and substantially all of the net assets of SendTec for approximately $39.9 million.

As more fully discussed in Note 4, "Acquisition of Tralliance Corporation," on May 9, 2005, the Company exercised its option to acquire Tralliance Corporation ("Tralliance"), a company which had recently entered into an agreement to become the registry for the ".travel" top-level Internet domain. The Company issued 2,000,000 shares of its Common Stock, warrants to acquire 475,000 shares of its Common Stock and paid $40,000 in cash to acquire Tralliance.

As of September 30, 2005, sources of the Company's revenue from continuing operations were derived principally from the operations of our games related businesses. The Company's retail VoIP products and services have yet to produce any significant revenue. Tralliance did not begin collecting fees from ".travel" registrars for its services until October 2005.

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(b) PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries from their respective dates of acquisition. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited interim condensed consolidated financial statements of the Company as of September 30, 2005 and for the three and nine months ended September 30, 2005 and 2004 included herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations relating to interim condensed consolidated financial statements.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at September 30, 2005 and the results of its operations and its cash flows for the three and nine months ended September 30, 2005 and 2004. The results of operations and cash flows for such periods are not necessarily indicative of results expected for the full year or for any future period.

(d) USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates and assumptions relate to estimates of collectibility of accounts receivable, the valuation of inventory, accruals, the valuations of fair values of options and warrants, the impairment of long-lived assets and other factors. Actual results could differ from those estimates.

(e) CASH AND CASH EQUIVALENTS

Cash equivalents consist of money market funds and highly liquid short-term investments with qualified financial institutions. The Company considers all highly liquid securities with original maturities of three months or less to be cash equivalents. Included in cash and cash equivalents in the accompanying condensed consolidated balance sheet at September 30, 2005, was approximately $32,000 of cash held in escrow for purposes of sweepstakes promotions conducted by the VoIP telephony division.

(f) COMPREHENSIVE INCOME (LOSS)

The Company reports comprehensive income (loss) in accordance with SFAS No. 130, "Reporting Comprehensive Income." Comprehensive income (loss) generally represents all changes in stockholders' equity during the year except those resulting from investments by, or distributions to, stockholders. The Company's comprehensive loss was approximately $15.8 million and $15.9 million for the nine months ended September 30, 2005 and 2004, respectively, which approximated the Company's reported net loss.

(g) INVENTORY

Inventories are recorded on a first in, first out basis and valued at the lower of cost or market value. The Company's reserve for excess and obsolete inventory as of September 30, 2005 and December 31, 2004, was approximately $361,000 and $1,333,000, respectively.

The Company manages its inventory levels based on internal forecasts of customer demand for its products, which is difficult to predict and can fluctuate substantially. In addition, the Company's inventories include high technology items that are specialized in nature or subject to rapid obsolescence. If the Company's demand forecast is greater than the actual customer demand for its products, the Company may be required to record additional charges related to increases in its inventory valuation reserves in future periods. The value of inventories is also dependent on the Company's estimate of future average selling prices, and, if projected average selling prices are over estimated, the Company may be required to further adjust its inventory value to reflect the lower of cost or market.

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(h) CONCENTRATION OF CREDIT RISK

Financial instruments which subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and trade accounts receivable. The Company maintains its cash and cash equivalents with various financial institutions and invests its funds among a diverse group of issuers and instruments. The Company performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. Concentration of credit risk in the Company's computer games and VoIP telephony services divisions is generally limited due to the large number of customers in these businesses.

(i) REVENUE RECOGNITION

Continuing Operations

COMPUTER GAMES BUSINESSES

Advertising revenue from the sale of print advertisements under short-term contracts in the Company's magazine publications are recognized at the on-sale date of the magazines.

Newsstand sales of the Company's magazine publications are recognized at the on-sale date of the magazines, net of provisions for estimated returns. Subscription revenue, which is net of agency fees, is deferred when initially received and recognized as income ratably over the subscription term.

Sales of video games and related products from the Company's online store are recognized as revenue when the product is shipped to the customer. Amounts billed to customers for shipping and handling charges are included in net revenue. The Company provides an allowance for returns of merchandise sold through its online store. The allowance for returns provided to date has not been significant.

VOIP TELEPHONY SERVICES

VoIP telephony services revenue represents fees charged to customers for voice services and is recognized based on minutes of customer usage or as services are provided. The Company records payments received in advance for prepaid services as deferred revenue until the related services are provided. Sales of peripheral VoIP telephony equipment are recognized as revenue when the product is shipped to the customer. Amounts billed to customers for shipping and handling charges are included in net revenue.

Discontinued Operations

MARKETING SERVICES

Revenue from the distribution of Internet advertising is recognized when Internet users visit and complete actions at an advertiser's website. Revenue consists of the gross value of billings to clients, including the recovery of costs incurred to acquire online media required to execute client campaigns. Recorded revenue is based upon reports generated by the Company's tracking software.

Revenue derived from the purchase and tracking of direct response media, such as television and radio commercials, is recognized on a net basis when the associated media is aired. In many cases, the amount the Company bills to clients significantly exceeds the amount of revenue that is earned due to the existence of various "pass-through" charges such as the cost of the television and radio media. Amounts received in advance of media airings are deferred.

Revenue generated from the production of direct response advertising programs, such as infomercials, is recognized on the completed contract method when such programs are complete and available for airing. Production activities generally take eight to twelve weeks and the Company usually collects amounts in advance and at various points throughout the production process. Amounts received from customers prior to completion of commercials are included in deferred revenue and direct costs associated with the production of commercials in process are deferred.

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(j) NET LOSS PER SHARE

The Company reports net loss per common share in accordance with SFAS No. 128, "Computation of Earnings Per Share." In accordance with SFAS No. 128 and the SEC Staff Accounting Bulletin No. 98, basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon the conversion of convertible preferred stock and convertible notes (using the if-converted method), if any, and the shares issuable upon the exercise of stock options and warrants (using the treasury stock method). Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.

Due to the Company's net losses, the effect of potentially dilutive securities or common stock equivalents that could be issued was excluded from the diluted net loss per common share calculation due to the anti-dilutive effect. Such potentially dilutive securities and common stock equivalents consisted of the following for the periods ended September 30:


	2005		2004
Options to purchase common stock		19,570,000		15,224,000
Common shares issuable upon exercise of warrants		11,492,000		20,713,000
Common shares issuable upon conversion of Convertible Notes		68,000,000		–
Common shares issuable upon conversion of Series H Preferred Stock		–		17,500,000
Total		99,062,000		53,437,000

(k) RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued SFAS No. 154, "Accounting for Changes and Error Corrections, a Replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS 154 applies to all voluntary changes in accounting principles and requires retrospective application to prior periods' financial statements of changes in accounting principles. This statement also requires that a change in depreciation, amortization or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. SFAS 154 carries forward without change the guidance contained in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not expect the adoption of this standard to have a material impact on its financial condition, results of operations or liquidity.

In March 2005, the FASB issued Interpretation ("FIN") No. 47, "Accounting for Conditional Asset Retirement Obligations," an interpretation of FASB Statement No. 143, "Accounting for Asset Retirement Obligations." The interpretation clarifies that the term conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. An entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The effective date of this interpretation is no later than the end of fiscal years ending after December 15, 2005. The Company is currently investigating the effect, if any, that FIN 47 would have on the Company's financial position, cash flows and results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29." SFAS No. 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. This statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of this standard to have a material impact on its financial condition, results of operations, or liquidity.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This standard replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The standard requires companies to expense the fair value of stock options on the grant date and is effective for annual periods beginning after June 15, 2005. In accordance with the revised statement, the expense attributable to stock options granted or vested subsequent to January 1, 2006 will be required to be recognized by the Company. The precise impact of the adoption of SFAS No. 123R cannot be predicted at this time because it will depend on the levels of share-based payments that are granted in the future. However, the Company believes that the adoption of this standard may have a significant effect on the Company's results of operations or financial position.

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In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4." SFAS No. 151 requires all companies to recognize a current-period charge for abnormal amounts of idle facility expense, freight, handling costs and wasted materials. This statement also requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of this statement to have a material effect on its consolidated financial statements.

In December 2003, the FASB issued FIN No. 46-R, "Consolidation of Variable Interest Entities." FIN 46-R, which modifies certain provisions and effective dates of FIN 46, sets forth the criteria to be used in determining whether an investment in a variable interest entity should be consolidated. These provisions are based on the general premise that if a company controls another entity through interests other than voting interests, that company should consolidate the controlled entity. The Company believes that currently, it does not have any material arrangements that meet the definition of a variable interest entity which would require consolidation.

(l) RECLASSIFICATIONS

Certain 2004 amounts have been reclassified to conform to the 2005 presentation. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the operations of SendTec have been accounted for in accordance with the provisions of SFAS No. 144 and the results of SendTec’s operations have been included in income from discontinued operations. Prior periods have been reclassified for comparability, as required.

(2) GOING CONCERN CONSIDERATIONS

The Company received a report from its independent accountants, relating to its December 31, 2004 audited financial statements containing an explanatory paragraph stating that its recurring losses from operations and its accumulated deficit raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Based upon the net cash proceeds received from the completion of the sale of the SendTec business on October 31, 2005, management believes the Company has sufficient liquidity to operate as a going concern through at least the end of 2006.

(3) DISCONTINUED OPERATIONS - SENDTEC, INC.

On August 10, 2005, the Company entered into an Asset Purchase Agreement with RelationServe Media, Inc. ("RelationServe") whereby the Company agreed to sell all of the business and substantially all of the net assets of its SendTec marketing services subsidiary to RelationServe for $37,500,000 in cash, subject to certain net working capital adjustments. On August 23, 2005, the Company entered into Amendment No. 1 to the Asset Purchase Agreement with RelationServe (the “1^st Amendment” and together with the original Asset Purchase Agreement, the “Purchase Agreement”). On October 31, 2005, the Company completed the asset sale. Including adjustments to the purchase price, related to excess working capital of SendTec as of the date of sale, the Company received an aggregate of approximately $39,900,000 in cash pursuant to the Purchase Agreement. In accordance with the terms of an escrow agreement established as a source to secure the Company’s indemnification obligations under the Purchase Agreement, $1,000,000 of the purchase price and an aggregate of 2,272,727 shares of theglobe’s unregistered Common Stock (valued at $750,000 pursuant to the terms of the Purchase Agreement based upon the average closing price of the stock in the 10 day period preceding the closing of the sale) were placed into escrow. Any of the shares of Common Stock released from escrow to RelationServe will be entitled to customary “piggy-back” registration rights.

Additionally, as contemplated by the Purchase Agreement, immediately following the asset sale, the Company completed the redemption of 28,879,097 shares of its Common Stock owned by six members of management of SendTec for approximately $11,604,000 in cash pursuant to a Redemption Agreement dated August 23, 2005. Pursuant to a separate Termination Agreement, the Company also terminated and canceled 1,275,783 stock options and the contingent interest in 2,062,785 earn-out warrants held by the six members of management in exchange for approximately $400,000 in cash. The Company also terminated 829,678 stock options of certain other non-management employees of SendTec and entered into bonus arrangements with a number of other non-management SendTec employees for amounts totaling approximately $600,000.

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Results of operations for SendTec have been reported separately as “Discontinued Operations” in the accompanying condensed consolidated statement of operations for all periods presented. The assets and liabilities of the SendTec marketing services business which was sold have been included in the captions, “Assets of Discontinued Operations” and “Liabilities of Discontinued Operations” in the accompanying condensed consolidated balance sheets.

The following is a summary of the assets and liabilities of the discontinued operations of SendTec as included in the accompanying condensed consolidated balance sheets:


	September 30,		December 31,
	2005		2004
Assets:
Accounts receivable	$	8,674,235	$	6,620,382
Prepaid and other current assets		544,451		683,380
Property and equipment, net		874,135		963,757
Goodwill		11,709,952		11,702,317
Non-compete intangible assets		1,410,000		1,680,000
Other assets		28,604		15,593
Assets of discontinued operations	$	23,241,377	$	21,665,429

Liabilities:
Accounts payable	$	7,940,291	$	6,383,502
Accrued expenses		352,945		1,083,543
Deferred revenue		164,362		575,950
Liabilities of discontinued operations	$	8,457,598	$	8,042,995

Summarized financial information for the Discontinued Operations of SendTec was as follows:

	Three Months Ended September 30,
	2005		2004

Net revenue, net of intercompany eliminations	$	10,752,616	$	2,820,381

Income from discontinued operations	$	1,009,026	$	162,286
Provision for income taxes		372,971		61,860
Income from discontinued operations, net of tax	$	636,055	$	100,426

	Nine Months Ended September 30,
	2005		2004

Net revenue, net of intercompany eliminations	$	28,897,502	$	2,820,381

Income from discontinued operations	$	2,734,154	$	162,286
Provision for income taxes		1,038,497		61,860
Income from discontinued operations, net of tax	$	1,695,657	$	100,426

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The Company originally acquired SendTec on September 1, 2004. In exchange for all of the issued and outstanding shares of capital stock of SendTec the Company paid consideration consisting of: (i) $6,000,000 in cash, excluding transaction costs, (ii) the issuance of an aggregate of 17,500,024 shares of the Company's Common Stock, (iii) the issuance of an aggregate of 175,000 shares of Series H Automatically Converting Preferred Stock (which was converted into approximately 17,500,500 shares of the Company's Common Stock effective December 1, 2004), and (iv) the issuance of a subordinated promissory note in the amount of $1,000,009. The Company also issued an aggregate of 3,974,165 replacement options to acquire the Company's Common Stock for each of the issued and outstanding options to acquire SendTec shares held by the former employees of SendTec.

The SendTec purchase price allocation was as follows:


Cash	$	3,610,000
Accounts receivable		5,534,000
Other current assets		194,000
Fixed assets		1,031,000
Non-compete agreements		1,800,000
Goodwill		11,710,000
Other assets		124,000
Assumed liabilities		(5,605,000	)
	$	18,398,000

In addition, warrants to acquire shares of theglobe.com Common Stock would be issued to the former shareholders of SendTec when and if SendTec exceeded forecasted operating income, as defined, of $10.125 million, for the year ending December 31, 2005. The number of earn-out warrants issuable ranged from an aggregate of approximately 250,000 to 2,500,000 (if actual operating income exceeds the forecast by at least 10%). Pursuant to the Termination Agreement mentioned above, the contingent interest in approximately 2,063,000 of the earn-out warrants was canceled effective October 31, 2005.

As part of the SendTec acquisition transaction, certain executives of SendTec entered into new employment agreements with SendTec. The employment agreements each had a term of five years and contained certain non-compete provisions for periods as specified by the agreements. The $1,800,000 value assigned to the non-compete agreements was being amortized on a straight-line basis over five years. Pursuant to the Termination Agreement mentioned above, the employment agreements were terminated effective October 31, 2005.

(4) ACQUISITION OF TRALLIANCE CORPORATION

On February 25, 2003, theglobe.com entered into a Loan and Purchase Option Agreement, as amended, with Tralliance, an Internet related business venture, pursuant to which it agreed to fund, in the form of a loan, at the discretion of the Company, Tralliance's operating expenses and obtained the option to acquire all of the outstanding capital stock of Tralliance in exchange for, when and if exercised, $40,000 in cash and the issuance of an aggregate of 2,000,000 unregistered restricted shares of theglobe.com's Common Stock (the "Option"). The Loan was secured by a lien on the assets of the venture. On May 5, 2005, Tralliance and the Internet Corporation for Assigned Names and Numbers ("ICANN") entered into an agreement designating Tralliance as the registry for the ".travel" top-level domain. On May 9, 2005, the Company exercised its option to acquire all of the outstanding capital stock of Tralliance. The purchase price consisted of the issuance of 2,000,000 shares of theglobe.com Common Stock, warrants to acquire 475,000 shares of theglobe.com Common Stock and $40,000 in cash. The warrants are exercisable for a period of five years at an exercise price of $0.11 per share. As part of the transaction, 10,000 shares of theglobe.com Common Stock were also issued to a third party in payment of a finder's fee resulting from the acquisition. The Common Stock issued as a result of the acquisition of Tralliance is entitled to certain "piggy-back" registration rights. In addition, as part of the transaction, the Company agreed to pay approximately $154,000 in outstanding liabilities of Tralliance immediately after the closing of the acquisition.

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The preliminary Tralliance purchase price allocation was as follows:


Cash	$	54,000
Other current assets		6,000
Intangible assets		564,000
Assumed liabilities		(370,000	)
	$	254,000

Upon acquisition, the existing CEO and CFO of Tralliance entered into employment agreements, which include certain non-compete provisions, whereby each would agree to remain in the employ of Tralliance for a period of two years in exchange for annual base compensation totaling $200,000 to each officer, plus participation in a bonus pool based upon the pre-tax income of the venture.

The value assigned to the intangible assets acquired is being amortized on a straight-line basis over the expected useful life. Annual amortization expense of the intangible assets is estimated to be approximately $75,200 in 2005, $112,800 for 2006 through 2009 and $37,600 in 2010. The related accumulated amortization as of September 30, 2005 was $47,000 and amortization expense totaled $28,200 and $47,000 for the three and nine months ended September 30, 2005, respectively.

Advances to Tralliance totaled $1,281,500 prior to its acquisition by the Company. Due to the uncertainty of the ultimate collectibility of the Loan, the Company had historically provided a reserve equal to the full amount of the funds advanced to Tralliance. For the nine months ended September 30, 2005 and 2004, additions to the reserve of $280,000 and $365,250, respectively, were included in other expense in the accompanying condensed consolidated statements of operations.

The following pro forma condensed consolidated results of operations for the three and nine months ended September 30, 2004 and the nine months ended September 30, 2005 assumes the acquisition of Tralliance occurred as of January 1, 2004. The pro forma information is not necessarily indicative of what the actual results of operations of the combined company would have been had the acquisition occurred on January 1, 2004, nor is it necessarily indicative of future results.

PRO FORMA RESULTS:	2004
Three months ended September 30,
Net revenue	$	878,000
Net loss		(5,900,000	)

Basic and diluted net loss per common share	$	(0.04	)

	2005			2004
Nine months ended September 30,
Net revenue	$	1,689,000		$	2,560,000
Net loss		(15,821,000	)		(16,039,000	)

Basic and diluted net loss per common share	$	(0.09	)	$	(0.14	)

(5) DEBT

On April 22, 2005, E&C Capital Partners, LLLP and E&C Capital Partners II, Ltd. (the "Noteholders"), entities controlled by the Company's Chairman and Chief Executive Officer, entered into a Note Purchase Agreement (the "Agreement") with theglobe pursuant to which they acquired secured demand convertible promissory notes (the "Convertible Notes") in the aggregate principal amount of $1,500,000. Under the terms of the Agreement, the Noteholders were also granted the optional right, for a period of 90 days from the date of the Agreement, to purchase additional Convertible Notes such that the aggregate principal amount of Convertible Notes issued under the Agreement could total $4,000,000 (the "Option"). On June 1, 2005, the Noteholders exercised a portion of the Option and acquired an additional $1,500,000 of Convertible Notes. On July 18, 2005, the Noteholders exercised the remainder of the Option and acquired an additional $1,000,000 of Convertible Notes.

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The Convertible Notes are convertible at the option of the Noteholders into shares of the Company's Common Stock at an initial price of $0.05 per share. Through November 10, 2005, an aggregate of $600,000 of Convertible Notes were converted by the Noteholders into an aggregate of 12,000,000 shares of the Company’s Common Stock. Assuming full conversion of all Convertible Notes which remain outstanding as of November 10, 2005, an additional 68,000,000 shares of the Company's Common Stock would be issued to the Noteholders. The Convertible Notes provide for interest at the rate of ten percent per annum and are secured by a pledge of substantially all of the assets of the Company. The Convertible Notes are due and payable five days after demand for payment by the Noteholders.

As the Notes were immediately convertible into common shares of the Company at issuance, an aggregate of $3,000,000 of non-cash interest expense was recorded during the 2005 second quarter and $1,000,000 of non-cash interest expense was recorded during the 2005 third quarter as a result of the beneficial conversion features of the Convertible Notes. The value attributed to the beneficial conversion features was calculated by comparing the fair value of the underlying common shares of the Convertible Notes on the date of issuance based on the closing price of theglobe's Common Stock as reflected on the OTCBB to the conversion price and was limited to the aggregate proceeds received from the issuance of the Convertible Notes.

Effective October 12, 2005, the maturity date of the Company’s mortgage payable totaling approximately $70,000 was extended to September 30, 2006.

As discussed in Note 3, “Discontinued Operations - SendTec, Inc.,” on September 1, 2004 the Company issued a subordinated promissory note in the amount of $1,000,009 in connection with the acquisition of SendTec. The subordinated promissory note provided for interest at the rate of four percent per annum and was due on September 1, 2005. The Company paid the principal and interest due under the terms of the subordinated promissory note on October 31, 2005, including default interest at a rate of 15% per annum for the period the debt was outstanding subsequent to the original due date.

(6) STOCK OPTION PLANS

A total of 5,819,750 stock options were granted during the nine months ended September 30, 2005, including grants of 775,000 stock options to non-employees. A total of 677,169 stock options were exercised and a total of 1,557,074 stock options were cancelled during the nine months ended September 30, 2005.

As discussed in Note 3, “Discontinued Operations - SendTec, Inc.,” in connection with the acquisition of SendTec on September 1, 2004, the Company issued an aggregate of 3,974,165 replacement options to acquire shares of theglobe’s Common Stock for each of the then issued and outstanding options to acquire shares of SendTec common stock held by employees of SendTec. Of these replacement options, 3,273,663 had exercise prices of $0.06 and 700,497 had exercise prices of $0.27 per share. The Company also agreed to grant an aggregate of 225,000 options to employees of SendTec and 25,000 options to a consultant of SendTec at an exercise price of $0.34 per share under similar terms as other stock option grants of theglobe. The Company also granted 1,000,000 stock options at an exercise price of $0.27 per share in connection with the establishment of a bonus option pool pursuant to which various employees of SendTec could vest in such options if SendTec exceeded forecasted operating income, as defined, of $10.125 million, for the year ending December 31, 2005.

As mentioned in Note 3, “Discontinued Operations - SendTec, Inc.”, pursuant to a Termination Agreement entered into as a result of the sale of the assets and business of SendTec, the Company terminated and canceled an aggregate of 2,105,461 stock options held by employees of SendTec effective October 31, 2005.

Excluding the aforementioned stock options issued in connection with the acquisition of SendTec, a total of 1,745,000 stock options were granted during the nine months ended September 30, 2004, including grants of 365,000 stock options to non-employees. A total of 639,000 stock options were exercised and a total of 1,049,220 stock options were cancelled during the nine months ended September 30, 2004.

Compensation expense of $143,351 was charged to continuing operations during the nine months ended September 30, 2005, as a result of the vesting of non-employee stock options granted in prior years, as well as expense resulting from stock options granted to non-employees during the first nine months of 2005. In addition, $48,987 of compensation expense was charged to continuing operations during the first nine months of 2005 primarily as a result of the accelerated vesting of stock options issued to a terminated employee. During the nine months ended September 30, 2004, stock compensation expense charged to continuing operations included $398,687 related to non-employee stock options, $160,450 related to employee option grants with below-market exercise prices and $17,188 related to the accelerated vesting of stock options issued to a terminated employee.

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In 2000, the Company re-priced a group of stock options issued to its employees. The Company is accounting for these re-priced options using variable accounting in accordance with FIN No. 44. No compensation expense was recorded in connection with the re-priced stock options during the nine months ended September 30, 2005 and 2004. At September 30, 2005, a total of 29,060 options remained outstanding which were being accounted for in accordance with FIN No. 44.

Stock compensation expense totaling $446,854 and $59,507 for the nine months ended September 30, 2005 and 2004, respectively, was charged to income from the discontinued operations of the Company’s SendTec subsidiary. The expense resulted primarily from the deferred compensation attributable to the issuance of stock options in the Company’s acquisition of SendTec as mentioned above.

The Company estimates the fair value of each stock option at the grant date by using the Black Scholes option-pricing model with the following weighted-average assumptions used for grants in 2005: no dividend yield; an expected life of three to five years; 160% expected volatility and a risk free interest rate of 3.00% to 4.00%.

In accordance with SFAS No. 123, the Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," to account for stock-based awards granted to employees. The following table presents the Company's pro forma net loss for the three and nine months ended September 30, 2005 and 2004, had the Company determined compensation cost based on the fair value at the grant date for all of its employee stock options issued under SFAS No. 123:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004

Net loss - as reported	$	(5,371,807	)	$	(5,869,656	)	$	(15,790,599	)	$	(15,887,315	)

Add: Stock-based employee compensation expense included in net loss as reported		126,331			68,659			494,201			236,963
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards		(352,524	)		(317,003	)		(1,187,602	)		(1,299,648	)
Net loss - pro forma	$	(5,598,000	)	$	(6,118,000	)	$	(16,484,000	)	$	(16,950,000	)
Basic net loss per share - as reported	$	(0.03	)	$	(0.04	)	$	(0.09	)	$	(0.14	)
Basic net loss per share - pro forma	$	(0.03	)	$	(0.04	)	$	(0.09	)	$	(0.15	)

(7) LITIGATION

On and after August 3, 2001 and as of the date of this filing, the Company is aware that six putative shareholder class action lawsuits were filed against the Company, certain of its current and former officers and directors (the “Individual Defendants”), and several investment banks that were the underwriters of the Company's initial public offering. The lawsuits were filed in the United States District Court for the Southern District of New York.

The lawsuits purport to be class actions filed on behalf of purchasers of the stock of the Company during the period from November 12, 1998 through December 6, 2000. Plaintiffs allege that the underwriter defendants agreed to allocate stock in the Company's initial public offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases of stock in the aftermarket at pre-determined prices. Plaintiffs allege that the Prospectus for the Company's initial public offering was false and misleading and in violation of the securities laws because it did not disclose these arrangements. On December 5, 2001, an amended complaint was filed in one of the actions, alleging the same conduct described above in connection with the Company's November 23, 1998 initial public offering and its May 19, 1999 secondary offering. A Consolidated Amended Complaint, which is now the operative complaint, was filed in the Southern District of New York on April 19, 2002. The action seeks damages in an unspecified amount. On February 19, 2003, a motion to dismiss all claims against the Company was denied by the Court. On October 13, 2004, the Court certified a class in six of the approximately 300 other nearly identical actions and noted that the decision is intended to provide strong guidance to all parties regarding class certification in the remaining cases. Plaintiffs have not yet moved to certify a class in theglobe.com case.

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The Company has approved a settlement agreement and related agreements which set forth the terms of a settlement between the Company, the Individual Defendants, the plaintiff class and the vast majority of the other approximately 300 issuer defendants. Among other provisions, the settlement provides for a release of the Company and the Individual Defendants for the conduct alleged in the action to be wrongful. The Company would agree to undertake certain responsibilities, including agreeing to assign away, not assert, or release certain potential claims the Company may have against its underwriters. The settlement agreement also provides a guaranteed recovery of $1 billion to plaintiffs for the cases relating to all of the approximately 300 issuers. To the extent that the underwriter defendants settle all of the cases for at least $1 billion, no payment will be required under the issuers’ settlement agreement. To the extent that the underwriter defendants settle for less than $1 billion, the issuers are required to make up the difference. It is anticipated that any potential financial obligation of the Company to plaintiffs pursuant to the terms of the settlement agreement and related agreements will be covered by existing insurance. The Company currently is not aware of any material limitations on the expected recovery of any potential financial obligation to plaintiffs from its insurance carriers. Its carriers are solvent, and the company is not aware of any uncertainties as to the legal sufficiency of an insurance claim with respect to any recovery by plaintiffs. Therefore, we do not expect that the settlement will involve any payment by the Company. If material limitations on the expected recovery of any potential financial obligation to the plaintiffs from the Company's insurance carriers should arise, the Company's maximum financial obligation to plaintiffs pursuant to the settlement agreement would be less than $3.4 million. On February 15, 2005, the Court granted preliminary approval of the settlement agreement, subject to certain modifications consistent with its opinion. Those modifications have been made. There is no assurance that the court will grant final approval to the settlement. If the settlement agreement is not approved and the Company is found liable, we are unable to estimate or predict the potential damages that might be awarded, whether such damages would be greater than the Company’s insurance coverage, and whether such damages would have a material impact on our results of operations or financial condition in any future period.

On December 16, 2004, the Company, together with its wholly-owned subsidiary, voiceglo Holdings, Inc., were named as defendants in NeoPets, Inc. v. voiceglo Holdings, Inc. and theglobe.com, inc., a lawsuit filed in Los Angeles Superior Court. The Company and its subsidiary, were parties to an agreement dated May 6, 2004, with NeoPets, Inc. ("NeoPets"), whereby NeoPets agreed to host a voiceglo advertising feature on its website for the purpose of generating registered activations of the voiceglo product featured. Consideration to NeoPets was to include specified commissions, including cash payments based on registered activations, as defined, as well as the issuance of Common Stock of theglobe.com and additional cash payments, upon the attainment of certain performance criteria. NeoPets' complaint asserts claims for breach of contract and specific performance and seeks payment of approximately $2.5 million in cash, plus interest, as well as the issuance of 1,000,000 shares of theglobe.com Common Stock. On February 22, 2005, the Company and voiceglo answered the complaint and asserted cross-claims against NeoPets for fraud and deceit, rescission, breach of contract, breach of the implied covenant of good faith and fair dealing and set-off. NeoPets answered the cross-claims on March 24, 2005.

During 2004, the Company recorded amounts due for commissions pursuant to the terms of the agreement totaling approximately $246,000. On August 5, 2005, the Company, together with voiceglo Holdings, Inc., its wholly-owned subsidiary, and NeoPets (collectively "the Parties") agreed to amicably resolve their dispute and entered into a settlement agreement (the "Settlement Agreement"). Under the terms of the Settlement Agreement, the Parties agreed to dismiss the lawsuit, release each other from all claims and to terminate their May 6, 2004 website advertising agreement in consideration for voiceglo Holdings, Inc. making cash payments totaling $200,000 to NeoPets within thirty days of the date of the Settlement Agreement.

On October 4, 2005, Sprint Communications Company, L.P. (“Sprint”) filed a Complaint in the United States District Court for the District of Kansas against theglobe, theglobe’s subsidiary, voiceglo Holdings, inc. (“Voiceglo”), and Vonage Holdings Corp. (“Vonage”). On October 12, 2005, Sprint filed a First Amended Complaint naming Vonage America, Inc. (“Vonage America”) as an additional defendant. Neither theglobe nor Voiceglo has any affiliation with Vonage or Vonage America. Sprint alleges that Voiceglo has made unauthorized use of “inventions” described and claimed in seven patents held by Sprint. Sprint seeks monetary and injunctive relief for this alleged infringement. The complaint does not specify which claimed “inventions” allegedly have been used by Voiceglo or what specific activity of Voiceglo is alleged to infringe the asserted patents. On November 7, 2005, theglobe and Voiceglo filed an Answer to Sprint’s First Amended Complaint, denying infringement and interposing affirmative defenses, including that each of the asserted patents is invalid. It is not possible to predict the outcome of this litigation with any certainty or whether a decision adverse to theglobe or Voiceglo would have a material adverse affect on our developing VoIP business and the financial condition, results of operations, and prospects of theglobe generally.

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The Company is currently a party to certain other legal proceedings, claims and disputes arising in the ordinary course of business, including those noted above. The Company currently believes that the ultimate outcome of these other matters, individually and in the aggregate, will not have a material adverse affect on the Company's financial position, results of operations or cash flows. However, because of the nature and inherent uncertainties of legal proceedings, should the outcome of these matters be unfavorable, the Company's business, financial condition, results of operations and cash flows could be materially and adversely affected.

(8) SEGMENTS AND GEOGRAPHIC INFORMATION

The Company applies the provisions of SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for operating segments of a company. SFAS No. 131 requires disclosures of selected segment-related financial information about products, major customers and geographic areas. Effective with the May 9, 2005 acquisition of Tralliance, the Company was organized in four operating segments for purposes of making operating decisions and assessing performance: the computer games division, the Internet services division, the marketing services division and the VoIP telephony services division. The computer games division consists of the operations of the Company's magazine publications and the associated websites and the operations of Chips & Bits, Inc., its games distribution business. The Internet services division consists of the newly acquired operations of Tralliance. The VoIP telephony services division is principally involved in the sale of telecommunications services over the Internet to consumers. The marketing services division consists of the operations of the Company's subsidiary, SendTec which was sold effective October 31, 2005 and has been reflected as “discontinued operations” where applicable within the segment data presented below.

The chief operating decision maker evaluates performance, makes operating decisions and allocates resources based on financial data of each segment. Where appropriate, the Company charges specific costs to each segment where they can be identified. Certain items are maintained at the Company's corporate headquarters ("Corporate") and are not presently allocated to the segments. Corporate expenses primarily include personnel costs related to executives and certain support staff and professional fees. Corporate assets principally consist of cash and cash equivalents. Subsequent to its acquisition on September 1, 2004, SendTec provided various intersegment marketing services to the Company's VoIP telephony services division. Prior to the acquisition of SendTec, there were no intersegment transactions. The accounting policies of the segments are the same as those for the Company as a whole.

The following table presents financial information regarding the Company's different segments:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
NET REVENUE FROM CONTINUING OPERATIONS:
Computer games	$	360,917		$	779,073		$	1,477,692		$	2,253,947
VoIP telephony services		48,341			98,654			211,726			306,007
	$	409,258		$	877,727		$	1,689,418		$	2,559,954

OPERATING LOSS FROM CONTINUING OPERATIONS:
Computer games	$	(716,105	)	$	(64,714	)	$	(1,694,843	)	$	(376,725	)
VoIP telephony services		(3,064,272	)		(5,501,761	)		(9,191,989	)		(12,268,015	)
Internet services		(431,990	)		–			(645,564	)		–
Corporate expenses		(1,078,651	)		(716,908	)		(2,553,523	)		(2,719,350	)
Operating loss from continuing operations		(5,291,018	)		(6,283,383	)		(14,085,919	)		(15,364,090	)
Other income (expense), net		(1,105,391	)		251,441			(4,438,834	)		(685,511	)
Loss from continuing operations before income tax	$	(6,396,409	)	$	(6,031,942	)	$	(18,524,753	)	$	(16,049,601	)

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
DEPRECIATION AND AMORTIZATION OF CONTINUING OPERATIONS:
Computer games	$	7,723	$	1,358	$	23,161	$	6,146
VoIP telephony services		280,584		397,062		829,160		913,461
Internet services		30,668		–		49,468		–
Corporate expenses		8,450		9,074		27,607		22,580
	$	327,425	$	407,494	$	929,396	$	942,187

	September 30,		December 31,
	2005		2004
IDENTIFIABLE ASSETS:
Computer games	$	830,031	$	1,585,944
VoIP telephony services		2,324,572		3,562,384
Internet services		715,039		–
Corporate assets *		2,394,520		7,203,408
Continuing operations		6,264,162		12,351,736
Discontinued operations		23,241,377		21,665,429
	$	29,505,539	$	34,017,165

*	Corporate assets includes cash held at subsidiaries for purposes of the presentation above.

(9) SUBSEQUENT EVENTS

Reference should be made to Note 3, “Discontinued Operations - SendTec, Inc.”, for a discussion of the sale of substantially all of the assets and the business of SendTec, the Company’s wholly-owned marketing services subsidiary, effective October 31, 2005. Information regarding the repayment of the $1,000,009 subordinated promissory note issued in the original acquisition of SendTec is presented in Note 5, “Debt”, and additional information regarding stock options held by SendTec employees which were terminated and canceled as a result of the SendTec asset sale is included in Note 6, “Stock Options Plans”.

Effective November 4, 2005, the Company paid a total of approximately $3,953,000 in bonuses to certain of its officers, employees and consultants.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology, such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "intend," "potential" or "continue" or the negative of such terms or other comparable terminology, although not all forward-looking statements contain such terms. In addition, these forward-looking statements include, but are not limited to, statements regarding:

o	implementing our business plans;

o	marketing and commercialization of our existing products and those products under development;

o	plans for future products and services and for enhancements of existing products and services;

o	our ability to implement cost-reduction programs;

o	potential governmental regulation and taxation;

o	the outcome of any pending litigation;

o	our intellectual property;

o	our estimates of future revenue and profitability;

o	our estimates or expectations of continued losses;

o	our expectations regarding future expenses, including cost of revenue, product development, sales and marketing, and general and administrative expenses;

o	difficulty or inability to raise additional financing, if needed, on terms acceptable to us;

o	our estimates regarding our capital requirements and our needs for additional financing;

o	attracting and retaining customers and employees;

o	rapid technological changes in our industry and relevant markets;

o	sources of revenue and anticipated revenue;

o	plans for future acquisitions and entering new lines of business;

o	plans for divestitures of certain businesses or assets;

o	competition in our market; and

o	our ability to continue to operate as a going concern.

These statements are only predictions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are not required to and do not intend to update any of the forward-looking statements after the date of this Form 10-Q or to conform these statements to actual results. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur. Actual results, levels of activity, performance, achievements and events may vary significantly from those implied by the forward-looking statements. A description of risks that could cause our results to vary appears under "Risk Factors" and elsewhere in this Form 10-Q. The following discussion should be read together in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes thereto and the audited consolidated financial statements and notes to those statements contained in the Annual Report on Form 10-KSB for the year ended December 31, 2004.

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OVERVIEW

As of September 30, 2005, theglobe.com, inc. (the "Company" or "theglobe") managed four primary lines of business. One line of business, Voice over Internet Protocol ("VoIP") telephony services, includes voiceglo Holdings, Inc., a wholly-owned subsidiary of theglobe that offers VoIP-based phone services. The term VoIP refers to a category of hardware and software that enables people to use the Internet to make phone calls. The second line of business consists of our historical network of three wholly-owned businesses, each of which specializes in the games business by delivering games information and selling games in the United States and abroad. These businesses are: our print publication business, which consists of Computer Games and Now Playing magazines; our online website business, which consists of our Computer Games Online website (www.cgonline.com) and our Now Playing Online website (www.nowplayingmag.com), which are the online counterparts to our magazine publications; and our Chips & Bits, Inc. (www.chipsbits.com) games distribution company ("Chips & Bits"). We entered a third line of business, marketing services, on September 1, 2004, with our acquisition of SendTec, Inc. ("SendTec"), a direct response marketing services and technology company, which business we disposed of on October 31, 2005. On May 9, 2005, we entered a fourth line of business, which we call our Internet Services business, when we exercised our option to acquire Tralliance Corporation ("Tralliance"), a company which had recently entered into an agreement to become the registry for the ".travel" top-level Internet domain.

As of September 30, 2005, sources of our revenue from continuing operations were derived principally from the operations of our computer games related businesses. Our VoIP products and services have yet to produce any significant revenue. Tralliance did not begin collecting fees from “.travel” registrars for its services until October 2005.

During the first quarter of 2005, management began actively reevaluating the Company's primary business lines, particularly in view of the Company's critical need for cash and the overall net losses of the Company. As a result, management began to explore a number of strategic alternatives for the Company and/or its businesses, including continuing to operate the businesses, selling certain businesses or assets, or entering into new lines of businesses.

On August 10, 2005, we entered into an Asset Purchase Agreement with RelationServe Media, Inc. ("RelationServe") whereby we agreed to sell all of the business and substantially all of the net assets of our SendTec marketing services subsidiary to RelationServe for $37.5 million in cash, subject to certain net working capital adjustments. On August 23, 2005, we entered into Amendment No. 1 to the Asset Purchase Agreement with RelationServe (the “1^st Amendment” and together with the original Asset Purchase Agreement, the “Purchase Agreement”). On October 31, 2005, we completed the asset sale. Including adjustments to the purchase price, related to excess working capital of SendTec as of the date of sale, the Company received an aggregate of approximately $39.9 million in cash pursuant to the Purchase Agreement. In accordance with the terms of an escrow agreement established as a source to secure our indemnification obligations under the Purchase Agreement, $1.0 million of the purchase price and an aggregate of 2,272,727 shares of theglobe’s unregistered Common Stock (valued at $750,000 pursuant to the terms of the Purchase Agreement based upon the average closing price of the stock in the 10 day period preceding the closing of the sale) were placed into escrow. Any of the shares of Common Stock released from escrow to RelationServe will be entitled to customary “piggy-back” registration rights.

Additionally, as contemplated by the Purchase Agreement, immediately following the asset sale, we completed the redemption of 28,879,097 shares of our Common Stock owned by six members of management of SendTec for approximately $11.6 million in cash pursuant to a Redemption Agreement dated August 23, 2005. Pursuant to a separate Termination Agreement, we also terminated and canceled 1,275,783 stock options and the contingent interest in 2,062,785 earn-out warrants held by the six members of management in exchange for approximately $0.4 million in cash. We also terminated 829,678 stock options of certain other non-management employees of SendTec and entered into bonus arrangements with a number of other non-management SendTec employees for amounts totaling approximately $0.6 million.

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BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS; GOING CONCERN

We received a report from our independent accountants, relating to our December 31, 2004 audited financial statements containing an explanatory paragraph stating that our recurring losses from operations and our accumulated deficit raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, our condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should we be unable to continue as a going concern. Based upon the net cash proceeds received from the sale of our SendTec business on October 31, 2005, management believes the Company has sufficient liquidity to operate as a going concern through at least the end of 2006. See the “Liquidity and Capital Resources” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations for a more complete discussion.

DESCRIPTION OF BUSINESS---CONTINUING OPERATIONS

OUR VOIP TELEPHONY BUSINESS

During the third quarter of 2003, the Company launched its first suite of consumer and business level VoIP services. The Company launched its browser-based VoIP product during the first quarter of 2004. These services allow consumers and enterprises to communicate using VoIP technology for dramatically reduced pricing compared to traditional telephony networks. The services also offer traditional telephony features such as voicemail, caller ID, call forwarding, and call waiting for no additional cost to the consumer, as well as incremental services that are not currently supported by the public switched telephone network ("PSTN") like the ability to use numbers remotely and voicemail to email services. In the fourth quarter of 2004, the Company announced an "instant messenger" or "IM" related application which enables users to chat via voice or text across multiple platforms using their preferred instant messenger service. Additionally, during the second quarter of 2005, the Company released a number of new VoIP products and features which allow users to communicate via mobile phones, traditional land line phones and/or computers.

The Company now provides the following VoIP services, on a retail basis, to individual consumers and businesses:

o Browser-Based - full functioning voice and messaging capabilities that reside on the computer desktop and also include web-based solutions. The only system requirements are a browser and an Internet connection. The Company is seeking various patents to protect its position. The browser-based products work on broadband, dial-up and wi-fi Internet connections and can optionally be used with a USB phone or other peripheral devices.

o Hardware-Based - a long distance or phone line replacement service. Requires an Internet connection and can optionally be used with an adapter or regular, cellular, wi-fi or USB phone directly over a user's computer if desired. The service works on broadband, dial-up and wi-fi Internet connections.

The Company's retail VoIP products are provided under various tradenames including "voiceglo", "GloPhone" and "tglo". Customers choose their levels of service from a number of available packages and complete online registrations and credit card payment transactions via websites maintained by the Company. The Company's browser-based plans require the customers to download a simple "plug-in" to their browsers to enable voice and messaging communications. Certain of the Company's hardware-based plans require the customer to either register the phones (and phone numbers) that the customer will be using and/or to purchase and install certain peripheral equipment such as adapters or bridge devices prior to activating service.

OUR COMPUTER GAMES BUSINESS

Computer Games Magazine is a consumer print magazine for gamers. As a leading consumer print publication for games, Computer Games magazine boasts: a reputation for being a reliable, trusted, and engaging games magazine; more editorial content, tips and hints than most other similar magazines; a knowledgeable editorial staff providing increased editorial integrity and content; and, broad-based editorial coverage, appealing to a wide audience of gamers. In Spring 2004, a new magazine, Now Playing began to be delivered within Computer Games magazine and in March 2005, Now Playing began to be distributed as a separate publication. Now Playing covers movies, DVDs, television, music, games, comics and anime, and is designed to fulfill the wider pop culture interests of our current readers and to attract a more diverse group of advertisers; autos, television, telecommunications and film to name a few.

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Computer Games Online (www.cgonline.com) is the online counterpart to Computer Games magazine. Computer Games Online is a source of free computer games news and information for the sophisticated gamer, featuring news, reviews and previews. Features of Computer Games Online include: game industry news; truthful, concise reviews; first looks, tips and hints; multiple content links; thousands of archived files; and easy access to game buying.

Now Playing Online (www.nowplayingmag.com) is the online counterpart for Now Playing magazine. Now Playing Online provides free, up-to-date entertainment news and information for the pop culture consumer. Features of Now Playing Online include: industry news in music, movies and games; reviews of concerts, movies and DVDs; and exclusive video interviews by Now Playing writers done with well-known Hollywood stars.

Chips & Bits (www.chipsbits.com) is a games distribution business that attracts customers in the United States and abroad. Chips & Bits covers all the major game platforms available, including Macintosh, Window-based PCs, Sony PlayStation, Sony PlayStation2, Microsoft's Xbox, Nintendo 64, Nintendo's GameCube, Nintendo's Game Boy, and Sega Dreamcast, among others.

OUR INTERNET SERVICES BUSINESS

Tralliance, headquartered in New York City, was incorporated in 2002 to develop products and services to enhance online commerce between consumers and the travel and tourism industries, including administration of the ".travel" top-level domain. In February 2003, theglobe.com entered into a Loan and Purchase Option Agreement, as amended, with Tralliance in which theglobe.com agreed to fund, in the form of a loan, at the discretion of theglobe.com, Tralliance's operating expenses and obtained the option to acquire all of the outstanding capital stock of Tralliance. On May 5, 2005, the Internet Corporation for Assigned Names and Numbers (ICANN) and Tralliance entered into a contract whereby Tralliance was designated as the registry for the ".travel" top-level domain for a period of ten years. Effective May 9, 2005, theglobe.com exercised its option to purchase Tralliance.

As the registry for the ".travel" top-level domain, Tralliance will be responsible for the administration and maintenance of the master directory and database of all second-level ".travel" domain names. In addition, Tralliance will be offering, free of charge, to all ".travel" top-level domain registrants the ".travel" directory, a global online source of travel data organized according to a unique vocabulary for the travel industry. Tralliance has outsourced or is planning to outsource to third parties many of the processes required to operate as the ".travel" registry. Tralliance launched its “.travel” registry services in the 2005 fourth quarter and began collecting fees from “.travel” registrars for its services in October 2005.

DESCRIPTION OF BUSINESS---DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS OF OUR MARKETING SERVICES BUSINESS

As previously discussed, based upon the Company’s decision to sell substantially all of the assets and the business of its SendTec subsidiary, the results of operations and assets and liabilities of SendTec have been reported separately as “Discontinued Operations” for all periods presented in this report.

On September 1, 2004, the Company acquired SendTec, a direct response marketing services and technology company. SendTec provides clients a complete offering of direct marketing products and services to help their clients market their products both on the Internet ("online") and through traditional media channels such as television, radio and print advertising ("offline"). SendTec is organized into two primary product line divisions: the DirectNet Advertising Division, which provides digital marketing services; and the Creative South Division, which provides creative production and media buying services. Additionally, its proprietary iFactz technology provides software tracking solutions that benefit both the DirectNet Advertising and Creative South businesses.

DirectNet Advertising ("DNA") - DNA delivers results based interactive marketing programs for advertisers through a network of online distribution partners including websites, search engines and email publishers. SendTec's proprietary software technology is used to track, optimize and report results of marketing campaigns to advertising clients and distribution partners. Pricing options for DNA's services include cost-per-action ("CPA"), cost-per-click ("CPC") and cost-per-thousand impressions ("CPM"), with most payments resulting from CPA agreements.

Creative South - Creative South provides online and offline agency marketing services including creative development, campaign management, creative production, post production, media planning and media buying services. Most services provided by Creative South are priced on a fee-per-project basis, where the client pays an agreed upon fixed fee for a designated scope of work. Creative South also receives monthly retainer fees from clients for service to such clients as their Agency of Record.

iFactz - iFactz is SendTec's Application Service Provider ("ASP") technology that tracks and reports on a real time basis the online responses generated from offline direct response advertising, such as television, radio, print advertising and direct mail. iFactz' Intelligent Sourcing (TM) is a patent-pending media technology that informs the user where online customers come from, and what corresponding activity they produced on the user's website. The iFactz patent application was filed in November 2001 and the Company expects the application to be reviewed during 2005. iFactz is licensed to clients based on a monthly fixed license fee, with license terms ranging from three months to one year.

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RESULTS OF OPERATIONS

The nature of our business has significantly changed from 2004 to 2005. On September 1, 2004, we entered into a new line of business, marketing services, as a result of our acquisition of SendTec, Inc. ("SendTec"). On October 31, 2005, we completed the sale of substantially all of the net assets and the business of SendTec. As a result, we now account for and report SendTec as a “discontinued operation”. Also, on May 9, 2005, the Company entered into another line of business, Internet services, when it exercised its option to acquire Tralliance Corporation ("Tralliance"), a company which had recently been designated as the registry for the ".travel" top-level Internet domain. The results of both SendTec and Tralliance are included in the Company's consolidated operating results from their respective dates of acquisition. Primarily, as a result of the acquisition of SendTec, our results of operations for the three and nine months ended September 30, 2005, are not necessarily comparable to our results of operations for the three and nine months ended September 30, 2004.

THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2004

CONTINUING OPERATIONS

NET REVENUE. Net revenue totaled $0.4 million for the three months ended September 30, 2005 as compared to $0.9 million for the three months ended September 30, 2004. The $0.5 million decrease in consolidated net revenue was principally the result of the $0.4 million decline in net revenue of our computer games business segment.

NET REVENUE BY BUSINESS SEGMENT:


	2005		2004
Computer games	$	360,917	$	779,073
VoIP telephony services		48,341		98,654
	$	409,258	$	877,727

Advertising revenue from the sale of print advertisements in the magazines published by our computer games business declined $0.3 million in the 2005 third quarter as compared to the third quarter of 2004. Sales of electronic games and related products through Chips & Bits, Inc., our Internet-based retail distribution subsidiary, decreased $0.1 million in the 2005 third quarter as compared to the same quarter of 2004. The $0.4 million decline in net revenue of our computer games segment in 2005 compared to 2004 negatively impacted the profitability of this segment, with the operating loss for computer games increasing to $0.7 million in the third quarter of 2005 compared to $0.1 million in the same period of the prior year.

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OPERATING EXPENSES BY BUSINESS SEGMENT:


									Depreciation
	Cost of		Sales and		Product		General and		and
Three months ended:	Revenue		Marketing		Development		Administrative		Amortization		Total

2005
Computer games	$	502,345	$	97,140	$	178,366	$	291,448	$	7,723	$	1,077,022
Internet services		–		87,143		–		314,179		30,668		431,990
VoIP telephony services		1,711,229		297,290		178,043		645,467		280,584		3,112,613
Corporate expenses		–		–		–		1,070,201		8,450		1,078,651
	$	2,213,574	$	481,573	$	356,409	$	2,321,295	$	327,425	$	5,700,276

									Depreciation
	Cost of		Sales and		Product		General and		and
	Revenue		Marketing		Development		Administrative		Amortization		Total
2004
Computer games	$	492,934	$	81,059	$	107,736	$	160,700	$	1,358	$	843,787
VoIP telephony services		2,081,022		1,972,380		252,742		897,209		397,062		5,600,415
Corporate expenses		–		–		–		707,834		9,074		716,908
	$	2,573,956	$	2,053,439	$	360,478	$	1,765,743	$	407,494	$	7,161,110

COST OF REVENUE. Cost of revenue totaled $2.2 million for the three months ended September 30, 2005, a decline of $0.4 million from the $2.6 million reported for the three months ended September 30, 2004. The decrease in cost of revenue as compared to the 2004 third quarter was principally attributable to the $0.4 million decrease in cost of revenue of our VoIP telephony services business. Cost of revenue of our VoIP telephony services business segment is principally comprised of carrier transport and circuit interconnection costs related to our retail products, as well as personnel and consulting costs incurred in support of our Internet telecommunications network. During the 2004 third quarter, cost of revenue included charges of $0.6 million related to writedowns of telephony equipment inventory. The impact of the prior year’s inventory writedown coupled with $0.2 million lower network operations personnel costs in the third quarter of 2005 as compared to the same period of 2004, were partially offset by $0.4 million higher software costs in support of our VoIP telecommunications network. The Company is no longer capitalizing software development costs of its VoIP telephony business and is charging such costs to operations as a result of the review of long-lived assets for impairment performed in connection with the preparation of its 2004 year-end consolidated financial statements. Gross margin losses related to our new Now Playing magazine, which we began distributing in March 2005, coupled with advertising revenue decreases related to our Computer Games magazine in 2005 versus 2004, negatively impacted profit margins of our computer games segment during 2005.

SALES AND MARKETING. Sales and marketing expenses consist primarily of salaries and related expenses of sales and marketing personnel, commissions, advertising and marketing costs, public relations expenses and promotional activities. Sales and marketing expenses totaled $0.5 million for the three months ended September 30, 2005 versus $2.1 million for the same period in 2004. A decrease of $1.7 million in sales and marketing expenses of the VoIP telephony services business segment was the principal factor contributing to the decrease in sales and marketing expenses as compared to the third quarter of 2004. During the third quarter of 2004, the VoIP telephony services business incurred significant costs in marketing and advertising its then existing retail products, and also recorded significant commissions expenses related to its "free" GloPhone customer registrations. During the first quarter of 2005, the Company reevaluated its existing VoIP telephony services business plan and began the process of terminating and/or modifying certain of its existing product offerings and marketing programs. The Company also began to develop and test certain new VoIP products and features. As a result, the VoIP telephony services business segment has significantly slowed its sales and marketing efforts and lowered the related personnel costs as compared to the same period in 2004.

PRODUCT DEVELOPMENT. Product development expenses include salaries and related personnel costs; expenses incurred in connection with website development, testing and upgrades; editorial and content costs; and costs incurred in the development of our VoIP telephony products. Product development expenses totaled $0.4 million in both the third quarter of 2005 and 2004.

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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist primarily of salaries and other personnel costs related to management, finance and accounting functions, facilities, outside legal and professional fees, information-technology consulting, directors and officers insurance, bad debt expenses and general corporate overhead costs. General and administrative expenses totaled $2.3 million in the third quarter of 2005 versus $1.8 million reported for the third quarter of 2004. The $0.5 million increase in consolidated general and administrative expenses as compared to the 2004 third quarter was primarily attributable to the $0.3 million of general and administrative expenses incurred by the Company's new Internet services segment, as well as increases of $0.4 million and $0.1 million in general and administrative costs of the corporate and computer games segments, respectively. These increases were partially offset by a $0.3 decrease in general and administrative expenses of our VoIP telephony services business. Higher professional fees, principally legal and accounting fees, were primarily responsible for the $0.4 million increase in corporate general and administrative expenses as compared to the 2004 third quarter. The decrease of $0.3 million in general and administrative expenses incurred by the VoIP telephony services division was primarily due to reductions in consulting costs.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense totaled $0.3 million for the three months ended September 30, 2005 as compared to $0.4 million for the three months ended September 30, 2004. The $0.1 million decline in this expense category as compared to the same period of the prior year resulted principally from decreases in depreciation and intangible asset amortization expenses incurred by the Company's VoIP telephony services business.

OTHER INCOME (EXPENSE), NET. Approximately $1.0 million of non-cash interest expense was recorded during the third quarter of 2005 related to the beneficial conversion features of the $1,000,000 in secured demand convertible promissory notes acquired by entities controlled by our Chairman and Chief Executive Officer. See "Capital Transactions" below and Note 5, "Debt," of the Notes to Unaudited Condensed Consolidated Financial Statements for further discussion. During the 2004 third quarter a favorable settlement of a previously disputed vendor claim of approximately $0.4 million was partially offset by $0.1 million in reserves against amounts loaned by the Company to Tralliance prior to its acquisition.

INCOME TAXES. For continuing operations, an income tax benefit of approximately $0.4 million was recorded for the three months ended September 30, 2005 versus an income tax benefit of approximately $0.1 million for the same period of the prior year. Other than the income tax liability resulting from the sale of our SendTec business, which is not expected to exceed $1.0 million, the Company does not expect to incur an income tax liability on a consolidated basis for either 2005 or 2004. Accordingly, income tax benefits of continuing operations serve to offset the income tax provisions recorded for discontinued operations. No consolidated federal income tax or benefit was recorded for the third quarters of 2005 and 2004 as we recorded a 100% valuation allowance against our otherwise recognizable deferred tax assets due to the uncertainty surrounding the timing or ultimate realization of the benefits of our net operating loss carry forwards in future periods. As of December 31, 2004, the Company had net operating loss carryforwards available for U.S. and foreign tax purposes of approximately $162 million. These carryforwards expire through 2024. The Tax Reform Act of 1986 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change" of a corporation. Due to various significant changes in our ownership interests, as defined in the Internal Revenue Code of 1986, as amended, commencing in August 1997 through our most recent issuance of convertible notes in July 2005, and assuming conversion of such notes, we may have substantially limited or eliminated the availability of our net operating loss carryforwards. There can be no assurance that we will be able to utilize any net operating loss carryforwards in the future.

DISCONTINUED OPERATIONS

Income from discontinued operations, net of income taxes totaled $0.6 million in the third quarter of 2005 as compared to $0.1 million in the third quarter of 2004. As a result of the Company’s decision to sell its SendTec marketing services business, which sale was completed in October 2005, the results of SendTec’s operations have been reported as discontinued operations in the accompanying condensed consolidated statements of operations. The third quarter of 2004 includes the results of only one month of SendTec’s operations as SendTec was originally acquired by the Company on September 1, 2004.

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NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2004

CONTINUING OPERATIONS

NET REVENUE. Net revenue totaled $1.7 million for the nine months ended September 30, 2005 as compared to $2.6 million for the nine months ended September 30, 2004. The $0.9 million decrease in consolidated net revenue was principally the result of a decline of $0.8 million in net revenue of our computer games business segment.

NET REVENUE BY BUSINESS SEGMENT:


	2005		2004
Computer games	$	1,477,692	$	2,253,947
VoIP telephony services		211,726		306,007
	$	1,689,418	$	2,559,954

The decline in net revenue of the Company’s computer games business segment as compared to the prior year resulted from decreases of $0.4 million in net revenue from our Chips & Bits, Inc., retail games distribution subsidiary, due primarily to a decrease in the volume of games products sold, $0.3 million in print advertising revenue generated by our magazine publications and $0.1 million in net revenue from magazine sales. The $0.8 million decline in net revenue of our computer games segment in 2005 compared to 2004 negatively impacted the profitability of this segment, with the operating loss for computer games increasing to $1.7 million for the nine months ended September 30, 2005 compared to $0.4 million for the same period of the prior year.

OPERATING EXPENSES BY BUSINESS SEGMENT:


									Depreciation
	Cost of		Sales and		Product		General and		and
Nine months ended:	Revenue		Marketing		Development		Administrative		Amortization		Total
2005
Computer games	$	1,717,730	$	318,342	$	497,493	$	615,809	$	23,161	$	3,172,535
Internet services		–		96,381		–		499,715		49,468		645,564
VoIP telephony services		4,661,415		1,307,335		513,173		2,092,632		829,160		9,403,715
Corporate expenses		–		–		–		2,525,916		27,607		2,553,523
	$	6,379,145	$	1,722,058	$	1,010,666	$	5,734,072	$	929,396	$	15,775,337

									Depreciation
	Cost of		Sales and		Product		General and		and
	Revenue		Marketing		Development		Administrative		Amortization		Total
2004
Computer games	$	1,598,833	$	252,214	$	341,645	$	431,834	$	6,146	$	2,630,672
VoIP telephony services		4,468,549		4,523,456		385,017		2,283,539		913,461		12,574,022
Corporate expenses		–		–		–		2,696,770		22,580		2,719,350
	$	6,067,382	$	4,775,670	$	726,662	$	5,412,143	$	942,187	$	17,924,044

COST OF REVENUE. Cost of revenue totaled $6.4 million for the nine months ended September 30, 2005 versus $6.1 million reported for the nine months ended September 30, 2004. Cost of revenue of our computer games segment totaled $1.7 million for the nine months ended September 30, 2005, an increase of $0.1 million from the same period in 2004, due primarily to the costs of $0.3 million associated with our new magazine publication, Now Playing, which we began distributing in March 2005. Gross margin losses related to our new Now Playing magazine and advertising revenue decreases related to our Computer Games magazine in 2005 compared to 2004 negatively impacted profit margins of our computer games segment during 2005.

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As mentioned in the comparison of the three months ended September 30, 2005 to the three months ended September 30, 2004, cost of revenue in the prior year included charges of $0.6 million related to writedowns of telephony equipment inventory. Excluding the impact of the 2004 inventory charge, VoIP telephony services cost of revenue increased $0.8 million compared to the first nine months of 2004. Throughout 2004, the Company increased its VoIP network capacity by entering into agreements with numerous carriers for leased equipment and services and with third parties for a number of leased data center facilities. The Company also expanded its internal network support function by hiring additional technical personnel. As a result, the Company incurred higher network operating and support costs during the nine months ended September 30, 2005 compared to the first nine months of the prior year. In addition, the Company is no longer capitalizing software development costs in its VoIP telephony business and is charging such costs to operations as a result of the review of long-lived assets for impairment performed in connection with the preparation of its 2004 year-end consolidated financial statements. The first nine months of 2005 include $0.4 million in expenses related to such software costs.

SALES AND MARKETING. Sales and marketing expenses totaled $1.7 million for the nine months ended September 30, 2005, a decrease of $3.1 million from the $4.8 million reported for the same period in 2004. The decline in consolidated sales and marketing expenses was primarily due to the $3.2 million decrease in sales and marketing expenses of the VoIP telephony services business. As discussed in the comparison of the three months ended September 30, 2005 compared to the three months ended September 30, 2004, the VoIP telephony services business incurred significant costs during the nine months of 2004 for advertising campaigns and marketing services, as well as commissions expenses related to its VoIP products. During the first quarter of 2005, the Company reevaluated its existing VoIP telephony services business plan and began the process of terminating and/or modifying certain of its existing product offerings and marketing programs. The Company also began to develop and test certain new VoIP products and features. As a result, the VoIP telephony services business segment has significantly slowed its sales and marketing efforts, as compared to the same period in 2004.

PRODUCT DEVELOPMENT. Product development expenses totaled $1.0 million for the nine months ended September 30, 2005 as compared to $0.7 million for the nine months ended September 30, 2004. The increase in product development expenses as compared to the first nine months of 2004 was primarily due to increases in personnel costs related to the continued development of our retail VoIP telephony products and services and increases in website development costs incurred by our computer games business.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses of $5.7 million for the nine months ended September 30, 2005 increased $0.3 million from the $5.4 million reported for the same period of 2004. The increase in general and administrative expenses as compared to 2004 was primarily attributable to the inclusion of $0.5 million of general and administrative expenses incurred by the Company's Internet services business. Tralliance, which comprises our Internet services segment, was acquired in May 2005 and its results of operations have been included in our results only since its date of acquisition. Corporate general and administrative expense declined $0.2 million as compared to the first six months of 2004 primarily due to lower personnel related expenses. Declines of $0.2 million in general and administrative expenses in each of the VoIP telephony services and corporate divisions as compared to the first nine months of 2004, were partially offset by an increase of $0.2 million in general and administrative expenses of the computer games business.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense totaled $0.9 million for the first nine months of both 2005 and 2004.

INTEREST EXPENSE, NET. Interest expense, net of interest income, totaled $4.2 million for the first nine months of 2005 as compared to $0.8 million in the same period of the prior year. Non-cash interest expense of $4.0 million was recorded during 2005 related to the beneficial conversion feature of the $4,000,000 secured demand convertible promissory notes issued by the Company. During the first nine months of 2004, $0.7 million of non-cash interest expense was recorded related to the beneficial conversion feature of the $2,000,000 demand convertible promissory note acquired by our Chairman and Chief Executive Officer and his spouse in February 2004.

OTHER INCOME (EXPENSE), NET. Other expense, net of approximately $0.3 million was recorded during the nine months ended September 30, 2005 as compared to other income, net of approximately $0.1 million during the nine months ended September 30, 2004. Reserves against the amounts advanced by the Company to Tralliance Corporation prior to its acquisition of $0.3 million and $0.4 million were charged to other expense during the first nine months of 2005 and 2004, respectively. The 2004 period also included recognition of approximately $0.4 million of other income related to a favorable settlement of a previously disputed vendor claim of the computer games business segment.

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INCOME TAXES. For continuing operations, an income tax benefit of approximately $1.0 million was recorded for the nine months ended September 30, 2005 versus an income tax benefit of approximately $0.1 million for the same period of the prior year. Other than the income tax liability resulting from the sale of our SendTec business, which is not expected to exceed $1.0 million, the Company does not expect to incur an income tax liability on a consolidated basis for either 2005 or 2004. Accordingly, income tax benefits of continuing operations serve to offset the income tax provisions recorded for discontinued operations. As was the case in the third quarter of 2005, no federal income tax benefit was recorded on a consolidated basis for the first nine months of 2005 as we recorded a 100% valuation allowance against our otherwise recognizable deferred tax assets due to the uncertainty surrounding the timing or ultimate realization of the benefits of our net operating loss carryforwards in future periods.

DISCONTINUED OPERATIONS

Income from discontinued operations, net of income taxes totaled $1.7 million in the first nine months of 2005 as compared to $0.1 million in the same period of the prior year. As a result of the sale of the Company’s SendTec marketing services business which was completed in October 2005, the results of SendTec’s operations have been reported as discontinued operations in the accompanying condensed consolidated statements of operations. The nine months ended September 30, 2004 includes the results of only one month of SendTec’s operations as SendTec was originally acquired by the Company on September 1, 2004.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ITEMS

As of September 30, 2005, we had approximately $2.0 million in cash and cash equivalents as compared to $6.8 million as of December 31, 2004. Net cash used in operating activities of continuing operations was $9.0 million and $14.1 million, for the nine months ended September 30, 2005 and 2004, respectively. Notwithstanding an increase of approximately $1.5 million in the net loss from continuing operations in 2005 compared to 2004, net cash used in operating activities of continuing operations increased by approximately $5.1 million in 2005 compared to 2004 due primarily to the favorable impact of working capital changes and higher non-cash interest expense.

Net cash and cash equivalents of $1.2 million were provided by our discontinued SendTec operations during the nine months ended September 31, 2005 as compared to a use of $0.9 million in cash and cash equivalents by discontinued operations during the same period of the prior year. The increase in the net income contribution by SendTec was the principal factor resulting in the period-to-period increase in cash and cash equivalents provided by discontinued operations. SendTec was acquired on September 1, 2004 and its results of operations were included in the Company’s consolidated results only since acquisition date.

Net cash and cash equivalents of $0.7 million were used in investing activities during the nine months ended September 30, 2005 as compared to $4.8 million in the same period of the prior year. The Company incurred costs totaling $0.3 million and $2.2 million for capital expenditures of its continuing operations during the nine months ended September 30, 2005 and 2004, respectively. Capital expenditures during both periods related primarily to the development of its VoIP telephony network, and during the prior year period included costs incurred in the development of its VoIP customer billing system. We also loaned approximately $0.3 million to Tralliance prior to its acquisition by the Company during each of the nine month periods ended September 30, 2005 and 2004.

Net cash and cash equivalents used in investing activities related to the Company’s discontinued operations totaled approximately $0.2 million and $2.4 million during the nine months ended September 30, 2005 and 2004, respectively. As more fully described in Note 3, “Discontinued Operations - SendTec, Inc.” in the accompanying condensed consolidated financial statements, in connection with its acquisition of SendTec on September 1, 2004, the Company paid cash consideration of approximately $6.0 million, excluding transaction costs. As of the date of acquisition, SendTec held approximately $3.6 million of cash. Thus, the Company used a net amount of approximately $2.4 million of cash to acquire SendTec.

Net cash and cash equivalents provided by financing activities was $3.8 million and $28.9 million for the nine months ended September 30, 2005 and 2004, respectively. As discussed previously, we issued $4.0 million in Convertible Notes during the first nine months of 2005. During March 2004, the Company completed a private offering of its Common Stock and warrants to acquire its Common Stock, for net proceeds totaling approximately $27.0 million. In addition, on February 2, 2004, the Company issued a $2,000,000 Bridge Note which was subsequently converted into our Common Stock in connection with the March 2004 private offering.

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CAPITAL TRANSACTIONS

On May 9, 2005, we exercised our option to acquire all of the outstanding capital stock of Tralliance. The purchase price consisted of the issuance of 2.0 million shares of theglobe.com Common Stock, warrants to acquire 475,000 shares of theglobe.com Common Stock and $40,000 in cash. The warrants are exercisable for a period of five years at an exercise price of $0.11 per share. As part of the transaction, 10,000 shares of our Common Stock were also issued to a third party in payment of a finder's fee resulting from the acquisition. The Common Stock issued as a result of the acquisition of Tralliance is entitled to certain "piggy-back" registration rights.

On April 22, 2005, E&C Capital Partners, LLLP and E&C Capital Partners II, Ltd. (the "Noteholders"), entities controlled by the Company's Chairman and Chief Executive Officer, entered into a Note Purchase Agreement (the "Agreement") with theglobe pursuant to which they acquired secured demand convertible promissory notes (the "Convertible Notes") in the aggregate principal amount of $1.5 million. Under the terms of the Agreement, the Noteholders were also granted the optional right, for a period of 90 days from the date of the Agreement, to purchase additional Convertible Notes such that the aggregate principal amount of Convertible Notes issued under the Agreement could total $4.0 million (the "Option"). On June 1, 2005, the Noteholders exercised a portion of the Option and acquired an additional $1.5 million of Convertible Notes. On July 18, 2005, the Noteholders exercised the remainder of the Option and acquired an additional $1.0 million of Convertible Notes.

The Convertible Notes are convertible at the option of the Noteholders into shares of the Company's Common Stock at an initial price of $0.05 per share. Through November 10, 2005, an aggregate of $0.6 million of Convertible Notes were converted by the Noteholders into an aggregate of 12 million shares of the Company’s Common Stock. Assuming full conversion of all Convertible Notes which remain outstanding as of November 10, 2005, an additional 68 million shares of the Company's Common Stock would be issued to the Noteholders. The Convertible Notes provide for interest at the rate of ten percent per annum and are secured by a pledge of substantially all of the assets of the Company. The Convertible Notes are due and payable five days after demand for payment by the Noteholders.

FUTURE CAPITAL NEEDS

As a result of the completion of the sale of our SendTec business on October 31, 2005, the Company received net cash proceeds of approximately $25.0 million (after giving effect to the repurchase of shares and cancellation of options and warrants from SendTec management and certain employees and payment of all other direct transaction costs). The Company anticipates using its prior and current year net operating losses to offset the recognized gain on the sale and estimates that the total of federal and state income taxes to be paid in connection with the gain on the sale of its SendTec business will not exceed $1.0 million. We believe that these net cash proceeds provide sufficient liquidity to enable the Company to operate its remaining businesses on a going concern basis while it completes the development of and begins the implementation of a new strategic business plan. Our new business plan may involve making certain changes to improve the profitability of existing businesses or may instead result in decisions to sell or dispose of certain unprofitable businesses or components. Additionally, we may use a portion of the net cash proceeds from the sale of the SendTec business to enter into one or more new businesses, through either acquisitions or internal development.

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The Company continues to incur substantial consolidated net losses and management believes the Company will continue to be unprofitable and use cash in its operations for the foreseeable future. The Company's consolidated net losses and cash usage during its recent past and projected future periods relate primarily to the operation of its VoIP telephony services business and to a lesser extent to corporate overhead expenses and the operations of its computer games business.

In order to offer our VoIP services, we have invested substantial capital and made substantial commitments related to the development of the VoIP network. The VoIP network is comprised of switching hardware and software, servers, billing and inventory systems, and telecommunications carrier services. We own and operate VoIP equipment located in leased data center facilities in Miami, New York, Atlanta and Boston, and interconnect this equipment utilizing a leased transport network through numerous carrier agreements with third party providers. Through these carrier relationships we are able to carry the traffic of our customers over the Internet and interact with the public switched telephone network. Based upon our existing contractual commitments at September 30, 2005, minimum amounts payable during the next twelve months for network data center and carrier circuit interconnection service expenses, exclusive of regulatory taxes, fees and charges, are approximately $1.0 million. The Company believes that the capacity of its VoIP network, including its lease obligations relating to such network, will continue to be greatly in excess of customer demand and usage levels for the foreseeable future. Therefore, the Company is currently attempting to reduce its total commitment for future network data center and carrier circuit interconnection services, including further reducing the $1.0 minimum amounts payable during the next twelve months.

The Company has expended, particularly during 2004, significant costs to implement a number of marketing programs geared toward increasing the number of its VoIP retail customers and telephony revenue. None of these programs have proven to be successful to any significant degree. Our inability to generate telephony revenue sufficient to cover the fixed costs of operating our VoIP network, including carrier, data center, personnel and administrative costs, as well as our marketing and other variable costs, has resulted in the Company incurring substantial net losses during 2004 and during the first nine months of 2005.

During the first quarter of 2005, the Company reevaluated its existing VoIP telephony services business plan and subsequently terminated or is in the process of terminating and/or modifying certain of its existing product offerings and marketing programs. Additionally, the Company began to develop and test certain new VoIP products and features, some of which were completed and released during the nine month period ended September 30, 2005. Additionally, in order to reduce its near term consolidated net losses and cash usage, the Company implemented a number of cost-reduction actions at its VoIP telephony services business, including decreases in personnel and salary levels, carrier and data center costs (including the minimum commitment costs discussed above), and marketing/advertising expenses during the first quarter of 2005.

Management believes that it will be difficult to implement its new VoIP product and marketing plans, once fully developed and tested, without significant additional cash being invested in its VoIP business. Accordingly, in November 2005 we engaged a financial advisor to assist the Company in seeking out prospective parties who would be interested in either acquiring all or part of our VoIP business or alternatively partnering with the Company by making strategic investments in our Common Stock. While the Company pursues a prospective purchaser for its VoIP business or a strategic investor, it plans to continue to improve the quality of the products, services and operations of its VoIP business, while at the same time seeking to limit the losses and cash usage attributable to its VoIP business operations. Other than existing network technology commitments totaling approximately $0.4 million no other significant capital expenditures are planned for the VoIP telephony services segment or any of the Company’s other business segments at the present time.

The Company has recently made a number of operational changes in its computer games business, including the implementation of an online games auction website. Pending the completion of its 2006 computer games business plan, additional operations changes geared mainly toward achieving profitability and positioning the computer games business for future growth, are expected to be implemented by the first quarter of 2006.

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Tralliance, the Company’s Internet services business, began collecting fees related to its “.travel” registry business in October 2005. Having recently emerged from its development stage, Tralliance is now in the beginning stages of a phased launch of its “.travel” registry business, including implementation of initial advertising programs. Tralliance is also in the process of developing its marketing plan for fiscal 2006, the implementation of which may require substantial cash expenditures.

Subsequent to the receipt of approximately $25.0 million in net cash proceeds from the sale of our SendTec business on October 31, 2005, the Company repaid the $1.0 million subordinated promissory note issued in connection with the SendTec acquisition along with accrued interest of approximately $66,000. The Company also made vendor payments totaling approximately $1.0 million related to delinquent accounts payable invoices and paid bonuses to certain Company officers, employees and consultants totaling approximately $4.0 million during the early part of November 2005. The bonus payments, the majority of which related to the successful sale of the Company’s SendTec business, will increase the net loss expected to be reported for the fourth quarter of fiscal 2005. As of November 10, 2005, the Company’s total cash and cash equivalents balance was approximately $20.0 million, inclusive of $1.0 million held in escrow to secure the Company’s indemnification obligations related to the sale of the SendTec business. Management believes that its current cash resources balance provides sufficient liquidity to enable the Company to operate as a going concern through at least the end of 2006. The Company currently has no access to credit facilities with traditional third party lenders and its longer term viability will be determined mainly by its ability to successfully execute its existing and future business plans.

The shares of our Common Stock were delisted from the NASDAQ national market in April 2001 and are now traded in the over-the-counter market on what is commonly referred to as the electronic bulletin board or OTCBB. Since the trading price of our Common Stock is less than $5.00 per share, trading in our Common Stock is also subject to the requirements of Rule 15g-9 of the Exchange Act. Our Common Stock is also considered a penny stock under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990, which defines a penny stock, generally, as any equity security not traded on an exchange or quoted on the Nasdaq SmallCap Market that has a market price of less than $5.00 per share. Under Rule 15g-9, brokers who recommend our Common Stock to persons who are not established customers and accredited investors, as defined in the Exchange Act, must satisfy special sales practice requirements, including requirements that they make an individualized written suitability determination for the purchaser; and receive the purchaser's written consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosures in connection with any trades involving a penny stock, including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated with that market. Such requirements may severely limit the market liquidity of our Common Stock and the ability of purchasers of our equity securities to sell their securities in the secondary market. Consequently, it has also made it more difficult for us to raise additional capital, although the Company has had some success in offering its securities as consideration for the acquisition of various business opportunities or assets. We may also incur additional costs under state blue sky laws if we sell equity due to our delisting.

EFFECTS OF INFLATION

Due to relatively low levels of inflation in 2005 and 2004, inflation has not had a significant effect on our results of operations since inception.

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

Certain of our accounting policies require higher degrees of judgment than others in their application. These include revenue recognition, valuation of customer receivables, valuation of inventories, valuation of goodwill, intangible assets and other long-lived assets and capitalization of computer software costs. Our accounting policies and procedures related to these areas are summarized below.

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REVENUE RECOGNITION

The Company's revenue from continuing operations was derived principally from the sale of print advertisements under short-term contracts in our games information magazine Computer Games; through the sale of our games information magazine through newsstands and subscriptions; from the sale of video games and related products through our online store Chips & Bits; and from the sale of VoIP telephony services. There is no certainty that events beyond anyone's control such as economic downturns or significant decreases in the demand for our services and products will not occur and accordingly, cause significant decreases in revenue.

COMPUTER GAMES BUSINESSES

Advertising revenues for the Company's magazine publications are recognized at the on-sale date of the magazine.

Newsstand sales of the Company's magazine publications are recognized at the on-sale date of the magazine, net of provisions for estimated returns. Subscription revenue, which is net of agency fees, is deferred when initially received and recognized as income ratably over the subscription term.

Sales of video games and related products from the online store are recognized as revenue when the product is shipped to the customer. Amounts billed to customers for shipping and handling charges are included in net revenue. The Company provides an allowance for returns of merchandise sold through its online store. The allowance provided to date has not been significant.

VOIP TELEPHONY SERVICES

DISCONTINUED OPERATIONS---MARKETING SERVICES

VALUATION OF CUSTOMER RECEIVABLES

Provisions for the allowance for doubtful accounts are made based on historical loss experience adjusted for specific credit risks. Measurement of such losses requires consideration of the Company's historical loss experience, judgments about customer credit risk, and the need to adjust for current economic conditions.

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VALUATION OF INVENTORIES

Inventories are recorded on a first-in, first-out basis and valued at the lower of cost or market value. We generally manage our inventory levels based on internal forecasts of customer demand for our products, which is difficult to predict and can fluctuate substantially. Our inventories include high technology items that are specialized in nature or subject to rapid obsolescence. If our demand forecast is greater than the actual customer demand for our products, we may be required to record charges related to increases in our inventory valuation reserves. The value of our inventory is also dependent on our estimate of future average selling prices, and, if our projected average selling prices are over estimated, we may be required to adjust our inventory value to reflect the lower of cost or market.

GOODWILL AND INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that certain acquired intangible assets in a business combination be recognized as assets separate from goodwill. SFAS No. 142 requires that goodwill and other intangibles with indefinite lives should no longer be amortized, but rather tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value.

Our policy calls for the assessment of the potential impairment of goodwill and other identifiable intangibles with indefinite lives whenever events or changes in circumstances indicate that the carrying value may not be recoverable or at least on an annual basis. Some factors we consider important which could trigger an impairment review include the following:

o	significant under-performance relative to historical, expected or projected future operating results;

o	significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and

o	significant negative industry or economic trends.

When we determine that the carrying value of goodwill or other identified intangibles with indefinite lives may not be recoverable, we measure any impairment based on a projected discounted cash flow method.

LONG-LIVED ASSETS

Historically, the Company's long-lived assets, other than goodwill, have primarily consisted of property and equipment, capitalized costs of internal-use software, values attributable to covenants not to compete, acquired technology and patent costs.

Long-lived assets held and used by the Company and intangible assets with determinable lives are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We evaluate recoverability of assets to be held and used by comparing the carrying amount of the assets, or the appropriate grouping of assets, to an estimate of undiscounted future cash flows to be generated by the assets, or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair values are based on quoted market values, if available. If quoted market prices are not available, the estimate of fair value may be based on the discounted value of the estimated future cash flows attributable to the assets, or other valuation techniques deemed reasonable in the circumstances.

CAPITALIZATION OF COMPUTER SOFTWARE COSTS

The Company capitalizes the cost of internal-use software which has a useful life in excess of one year in accordance with Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Subsequent additions, modifications, or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized computer software costs are amortized using the straight-line method over the expected useful life, or three years.

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IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This standard replaces SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The standard requires companies to expense the fair value of stock options on the grant date and is effective for annual periods beginning after June 15, 2005. In accordance with the revised statement, the expense attributable to stock options granted or vested subsequent to January 1, 2006 will be required to be recognized by the Company. The precise impact of the adoption of SFAS No. 123R cannot be predicted at this time because it will depend on the levels of share-based payments that are granted in the future. However, the Company believes that the adoption of this standard may have a significant effect on the Company's results of operations or financial position.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - An Amendment of ARB No. 43, Chapter 4." SFAS No. 151 requires all companies to recognize a current-period charge for abnormal amounts of idle facility expense, freight, handling costs and wasted materials. This statement also requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of this statement to have a material effect on its consolidated financial statements.

In December 2003, the FASB issued FIN No. 46-R "Consolidation of Variable Interest Entities." FIN 46-R, which modifies certain provisions and effective dates of FIN 46, sets forth the criteria to be used in determining whether an investment in a variable interest entity should be consolidated. These provisions are based on the general premise that if a company controls another entity through interests other than voting interests, that company should consolidate the controlled entity. The Company believes that currently, it does not have any material arrangements that meet the definition of a variable interest entity which would require consolidation.

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RISK FACTORS

In addition to the other information in this report, the following factors should be carefully considered in evaluating our business and prospects.

RISKS RELATING TO OUR BUSINESS GENERALLY

WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO CONTINUE TO INCUR LOSSES.

Since our inception, we have incurred net losses in each quarter, except the fourth quarter of 2002 where we had net income of approximately $17,000. We expect that we will continue to incur net losses for the foreseeable future. We had net losses of approximately $24.3 million and $11.0 million for the years ended December 31, 2004 and 2003, respectively, and approximately $15.8 million for the first nine months of 2005. The principal causes of our losses are likely to continue to be:

o	costs resulting from the operation of our businesses;

o	costs relating to entering new business lines;

o	failure to generate sufficient revenue; and

o	selling, general and administrative expenses.

Although we have restructured our businesses, we still expect to continue to incur losses as we continue to develop our VoIP telephony services business and while we explore a number of strategic alternatives for our businesses, including continuing to operate the businesses, selling certain businesses or assets, or acquiring or developing additional businesses or complementary products.

WE MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.

We received a report from our independent accountants, relating to our December 31, 2004 audited financial statements, containing an explanatory paragraph stating that our recurring losses from operations and our accumulated deficit raise substantial doubt about our ability to continue as a going concern. Based upon the net proceeds received from the sale of our SendTec business on October 31, 2005, management believes that the Company has sufficient liquidity to operate as a going concern through at least the end of 2006. In order to assure its longer term financial viability, the Company must complete the development of and successfully implement its new strategic business plan. The Company’s new business plan may include making certain changes which transform its unprofitable businesses into profitable ones, selling or otherwise disposing of businesses or components, acquiring or internally developing new profitable businesses, including Tralliance, and/or raising additional equity capital. There can be no assurance that the Company will be successful in taking any of the above actions which would enable it to continue as a going concern on a long-term future basis (see the “Liquidity and Capital Resources” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for further details).

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OUR ENTRY INTO NEW LINES OF BUSINESS, AS WELL AS POTENTIAL FUTURE ACQUISITIONS, JOINT VENTURES OR STRATEGIC TRANSACTIONS ENTAILS NUMEROUS RISKS AND UNCERTAINTIES.

We have entered into new business lines: VoIP telephony services and Internet services. In November 2002, we acquired certain VoIP assets from an entrepreneur in exchange for 1,750,000 warrants to purchase our Common Stock. On May 28, 2003, we acquired Direct Partner Telecom, Inc. ("DPT"), an international licensed telecommunications carrier then engaged in the purchase and resale of telecommunication services over the Internet. On May 9, 2005, we acquired Tralliance Corporation ("Tralliance"), an Internet related business venture. Tralliance was recently awarded the contract to operate as the registry for the ".travel" top-level domain by the Internet Corporation for Assigned Names and Numbers. We may also enter into new or different lines of business, as determined by management and our Board of Directors. Our acquisitions, as well as any future acquisitions or joint ventures could result, and in some instances have resulted in numerous risks and uncertainties, including:

potentially dilutive issuances of equity securities, which may be issued at the time of the transaction or in the future if certain performance or other criteria are met or not met, as the case may be. These securities may be freely tradable in the public market or subject to registration rights which could require us to publicly register a large amount of our Common Stock, which could have a material adverse effect on our stock price;

o	diversion of management's attention and resources from our existing businesses;

o	significant write-offs if we determine that the business acquisition does not fit or perform up to expectations;

o	the incurrence of debt and contingent liabilities or impairment charges related to goodwill and other long-lived assets;

o	difficulties in the assimilation of operations, personnel, technologies, products and information systems of the acquired companies;

o	regulatory and tax risks relating to the new or acquired business;

o	the risks of entering geographic and business markets in which we have no or limited prior experience;

o	the risk that the acquired business will not perform as expected; and

o	material decreases in short-term or long-term liquidity.

THE ANTICIPATED BENEFITS OF THE SENDTEC ASSET SALE MAY NOT BE REALIZED.

The cash proceeds received from the SendTec Asset Sale are expected to provide sufficient liquidity to enable the Company to operate on a going concern basis and to complete the development of and begin the implementation of a strategic business plan. SendTec represented the Company’s only profitable business, with its VoIP telephony services and computer games businesses continuing to incur operating losses at the present time. It’s newly acquired Internet services business, Tralliance Corporation (“Tralliance”), is in the process of evolving from the start-up phase of its operations and began collecting fees for its services in October 2005. In order to capitalize on and realize the benefits of the SendTec Asset Sale, the Company must either sell or otherwise dispose of unprofitable businesses, make changes which transform unprofitable businesses into profitable ones, and/or acquire or internally develop new profitable businesses, including Tralliance. There can be no assurance that the Company will be successful in taking any of the above actions which would enable it to achieve satisfactory investment returns in future periods and realize the benefits of selling its SendTec business.

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE AS A RESULT OF THE SENDTEC ASSET SALE.

The market price of our Common Stock may decline as a result of the SendTec Asset Sale if:

o	the sale of the SendTec business, theglobe’s only profitable business, is perceived negatively by investors; or

o	investors become skeptical that theglobe can invest the cash proceeds received for the SendTec Asset Sale in businesses that have acceptable returns on investment in future periods.

The market price of theglobe.com’s Common Stock could also decline as a result of unforeseen factors related to the SendTec Asset Sale.

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OUR NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED.

As of December 31, 2004, we had net operating loss carryforwards potentially available for U.S. and foreign tax purposes of approximately $162 million. These carryforwards expire through 2024. The Tax Reform Act of 1986 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change" of a corporation. Due to various significant changes in our ownership interests, as defined in the Internal Revenue Code of 1986, as amended, commencing in August 1997 through our most recent issuance of convertible notes in July 2005, and assuming conversion of such notes, we may have substantially limited or eliminated the availability of our net operating loss carryforwards. There can be no assurance that we will be able to utilize any net operating loss carryforwards in the future.

WE DEPEND ON THE CONTINUED GROWTH IN THE USE AND COMMERCIAL VIABILITY OF THE INTERNET.

Our VoIP telephony services business, Internet services business and computer games businesses are substantially dependent upon the continued growth in the general use of the Internet. Internet and electronic commerce growth may be inhibited for a number of reasons, including:

o	inadequate network infrastructure;

o	security and authentication concerns;

o	inadequate quality and availability of cost-effective, high-speed service;

o	general economic and business downturns; and

o	catastrophic events, including war and terrorism.

As web usage grows, the Internet infrastructure may not be able to support the demands placed on it by this growth or its performance and reliability may decline. Websites have experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure. If these outages or delays frequently occur in the future, web usage, as well as usage of our services, could grow more slowly or decline. Also, the Internet's commercial viability may be significantly hampered due to:

o	delays in the development or adoption of new operating and technical standards and performance improvements required to handle increased levels of activity;

o	increased government regulation;

o	potential governmental taxation of such services; and

o	insufficient availability of telecommunications services which could result in slower response times and adversely affect usage of the Internet.

WE MAY FACE INCREASED GOVERNMENT REGULATION, TAXATION AND LEGAL UNCERTAINTIES IN OUR INDUSTRY, WHICH COULD HARM OUR BUSINESS.

There are an increasing number of federal, state, local and foreign laws and regulations pertaining to the Internet and telecommunications. In addition, a number of federal, state, local and foreign legislative and regulatory proposals are under consideration. Laws or regulations have been and may continue to be adopted with respect to the Internet relating to, among other things, fees and taxation of VoIP telephony services, liability for information retrieved from or transmitted over the Internet, online content regulation, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, public safety issues like enhanced 911 emergency service ("E911"), the Communications Assistance for Law Enforcement Act ("CALEA"), the provision of online payment services, broadband residential Internet access, and the characteristics and quality of products and services.

Changes in tax laws relating to electronic commerce could materially affect our business, prospects and financial condition. One or more states or foreign countries may seek to impose sales or other tax collection obligations on out-of-jurisdiction companies that engage in electronic commerce. A successful assertion by one or more states or foreign countries that we should collect sales or other taxes on services could result in substantial tax liabilities for past sales, decrease our ability to compete with traditional telephony, and otherwise harm our business.

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Currently, decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and local sales and use taxes with respect to electronic commerce. However, a number of states, as well as the U.S. Congress, have been considering various initiatives that could limit or supersede the Supreme Court's position regarding sales and use taxes on electronic commerce. If any of these initiatives addressed the Supreme Court's constitutional concerns and resulted in a reversal of its current position, we could be required to collect sales and use taxes. The imposition by state and local governments of various taxes upon electronic commerce could create administrative burdens for us and could adversely affect our VoIP business operations, and ultimately our financial condition, operating results and future prospects.

Regardless of the type of state tax imposed, the threshold issue involving state taxation of any transaction is always whether sufficient nexus, or contact, exists between the taxing entity and the taxpayer or the transaction to which the tax is being applied. The concept of nexus is constantly changing and no bright line exists that would sufficiently alert a business as to whether it is subject to tax in a specific jurisdiction. All states which have attempted to tax Internet access or online services have done so by asserting that the sale of such telecommunications services, information services, data processing services or other type of transaction is subject to tax in that particular state.

A handful of states impose taxes on computer services, data processing services, information services and other similar types of services. Some of these states have asserted that Internet access and/or online information services are subject to these taxes.

Most states have telecommunications sales or gross receipts taxes imposed on interstate calls or transmissions of data. A sizable minority tax only intrastate calls. Although these taxes were enacted long before the birth of electronic commerce and VoIP, several states have asserted that Internet access and/or online information services are subject to these taxes.

For example, in the 2005 Florida legislative session, Florida incorporated into the tax imposed by Chapter 202, Florida Statutes, (the Communications Services Tax) language which establishes tax nexus in Florida for VoIP. The Florida legislature inserted this language to protect the scope of the tax base for the Communications Services Tax. The language could have the effect of imposing the Communications Services Tax on VoIP services not based in the state of Florida.

The Florida legislature borrowed the language that it used to amend the Florida Statute from the national Streamlined Sales Tax Project. This project is being touted by many states as a proposed tax simplification plan. If adopted by other states, the language included in the Florida law could have a far reaching effect in many states in the United States.

Moreover, the applicability to the Internet of existing laws governing issues such as intellectual property ownership and infringement, copyright, trademark, trade secret, obscenity, libel, employment and personal privacy is uncertain and developing. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel, and personal privacy apply to the Internet and electronic commerce. Any new legislation or regulation, or the application or interpretation of existing laws or regulations, may decrease the growth in the use of the Internet or VoIP telephony services, may impose additional burdens on electronic commerce or may alter how we do business. This could decrease the demand for our existing or proposed services, increase our cost of doing business, increase the costs of products sold through the Internet or otherwise have a material adverse effect on our business, plans, prospects, results of operations and financial condition.

Our ability to offer VoIP services outside the U.S. is also subject to the local regulatory environment, which may be complicated and often uncertain. Regulatory treatment of Internet telephony outside the United States varies from country to country.

WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

We regard substantial elements of our websites and underlying technology, as well as certain assets relating to our VoIP business and other opportunities we are investigating, as proprietary and attempt to protect them by relying on intellectual property laws and restrictions on disclosure. We also generally enter into confidentiality agreements with our employees and consultants. In connection with our license agreements with third parties, we generally seek to control access to and distribution of our technology and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise obtain and use our proprietary information without authorization or to develop similar technology independently. Thus, we cannot assure you that the steps taken by us will prevent misappropriation or infringement of our proprietary information, which could have an adverse effect on our business. In addition, our competitors may independently develop similar technology, duplicate our products, or design around our intellectual property rights.

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We pursue the registration of our trademarks in the United States and, in some cases, internationally. We are also seeking patent protection for certain VoIP assets which we acquired or which we have developed. However, effective intellectual property protection may not be available in every country in which our services are distributed or made available through the Internet. Policing unauthorized use of our proprietary information is difficult. Legal standards relating to the validity, enforceability and scope of protection of proprietary rights in Internet related businesses are also uncertain and still evolving. We cannot assure you about the future viability or value of any of our proprietary rights.

Litigation may be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. However, we may not have sufficient funds or personnel to adequately litigate or otherwise protect our rights. Furthermore, we cannot assure you that our business activities and product offerings will not infringe upon the proprietary rights of others, or that other parties will not assert infringement claims against us, including claims related to providing hyperlinks to websites operated by third parties or providing advertising on a keyword basis that links a specific search term entered by a user to the appearance of a particular advertisement. Moreover, from time to time, third parties have asserted and may in the future assert claims of alleged infringement by us of their intellectual property rights. Sprint recently filed one such lawsuit against us and our voiceglo subsidiary alleging infringement by us. Any litigation claims or counterclaims could impair our business because they could:

o	be time-consuming;

o	result in significant costs;

o	subject us to significant liability for damages;

o	result in invalidation of our proprietary rights;

o	divert management's attention;

o	cause product release delays; or

o	require us to redesign our products or require us to enter into royalty or licensing agreements that may not be available on terms acceptable to us, or at all.

We license from third parties various technologies incorporated into our products, networks and sites. We cannot assure you that these third-party technology licenses will continue to be available to us on commercially reasonable terms. Additionally, we cannot assure you that the third parties from which we license our technology will be able to defend our proprietary rights successfully against claims of infringement. As a result, our inability to obtain any of these technology licenses could result in delays or reductions in the introduction of new products and services or could adversely affect the performance of our existing products and services until equivalent technology can be identified, licensed and integrated.

The regulation of domain names in the United States and in foreign countries may change. Regulatory bodies could establish and have established additional top-level domains, could appoint additional domain name registrars or could modify the requirements for holding domain names, any or all of which may dilute the strength of our names or our “.travel” domain registry business. We may not acquire or maintain our domain names in all of the countries in which our websites may be accessed, or for any or all of the top-level domain names that may be introduced. The relationship between regulations governing domain names and laws protecting proprietary rights is unclear. Therefore, we may not be able to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights.

WE MAY BE UNSUCCESSFUL IN ESTABLISHING AND MAINTAINING BRAND AWARENESS; BRAND IDENTITY IS CRITICAL TO OUR COMPANY.

Our success in the markets in which we operate will depend on our ability to create and maintain brand awareness for our product offerings. This has in some cases required, and may continue to require, a significant amount of capital to allow us to market our products and establish brand recognition and customer loyalty. Many of our competitors are larger than us and have substantially greater financial resources. Additionally, many of the companies offering VoIP services have already established their brand identity within the marketplace. We can offer no assurances that we will be successful in establishing awareness of our brand allowing us to compete in the VoIP market.

If we fail to promote and maintain our various brands or our businesses' brand values are diluted, our businesses, operating results, financial condition, and our ability to attract buyers for any of our businesses could be materially adversely affected. The importance of brand recognition will continue to increase because low barriers of entry to the industries in which we operate may result in an increased number of direct competitors. To promote our brands, we may be required to continue to increase our financial commitment to creating and maintaining brand awareness. We may not generate a corresponding increase in revenue to justify these costs.

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OUR QUARTERLY OPERATING RESULTS FLUCTUATE.

Due to our significant change in operations, including the entry into new lines of business and disposition of other lines of business, our historical quarterly operating results are not necessarily reflective of future results. The factors that will cause our quarterly operating results to fluctuate in the future include:

o	acquisitions of new businesses or sales of our businesses or assets;

o	changes in the number of sales or technical employees;

o	the level of traffic on our websites;

o	the overall demand for Internet telephony services, print, television, radio and Internet advertising and electronic commerce;

o	the addition or loss of VoIP customers, advertisers of our computer games businesses, subscribers to our magazine, and electronic commerce partners on our websites;

o	overall usage and acceptance of the Internet;

o	seasonal trends in advertising and electronic commerce sales and member usage in our businesses;

o	costs relating to the implementation or cessation of marketing plans for our various lines of business;

o	other costs relating to the maintenance of our operations;

o	the restructuring of our business;

o	failure to generate significant revenues and profit margins from new products and services; and

o	competition from others providing services similar to ours.

OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT. OUR INEXPERIENCE IN THE VOIP TELEPHONY BUSINESS AND INTERNET SERVICES BUSINESS WILL MAKE FINANCIAL FORECASTING EVEN MORE DIFFICULT.

We have a limited operating history for you to use in evaluating our prospects and us. Our prospects should be considered in light of the risks encountered by companies operating in new and rapidly evolving markets like ours. We may not successfully address these risks. For example, we may not be able to:

o	maintain or increase levels of user traffic on our e-commerce websites;

o	attract customers to our VoIP telephony service;

o	adequately forecast anticipated customer purchase and usage of our retail VoIP products;

o	maintain or increase advertising revenue for our magazines;

o	adapt to meet changes in our markets and competitive developments; and

o	identify, attract, retain and motivate qualified personnel.

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OUR MANAGEMENT TEAM IS INEXPERIENCED IN THE MANAGEMENT OF A LARGE OPERATING COMPANY.

Only our Chairman has had experience managing a large operating company. Accordingly, we cannot assure you that:

o	our key employees will be able to work together effectively as a team;

o	we will be able to retain the remaining members of our management team;

o	we will be able to hire, train and manage our employee base;

o	our systems, procedures or controls will be adequate to support our operations; and

o	our management will be able to achieve the rapid execution necessary to fully exploit the market opportunity for our products and services.

WE DEPEND ON HIGHLY QUALIFIED TECHNICAL AND MANAGERIAL PERSONNEL.

Our future success also depends on our continuing ability to attract, retain and motivate highly qualified technical expertise and managerial personnel necessary to operate our businesses. We may need to give retention bonuses and stock incentives to certain employees to keep them, which can be costly to us. The loss of the services of members of our management team or other key personnel could harm our business. Our future success depends to a significant extent on the continued service of key management, client service, product development, sales and technical personnel. We do not maintain key person life insurance on any of our executive officers and do not intend to purchase any in the future. Although we generally enter into non-competition agreements with our key employees, our business could be harmed if one or more of our officers or key employees decided to join a competitor or otherwise compete with us.

We may be unable to attract, assimilate or retain highly qualified technical and managerial personnel in the future. Wages for managerial and technical employees are increasing and are expected to continue to increase in the future. We have from time to time in the past experienced, and could continue to experience in the future if we need to hire any additional personnel, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Also, we may have difficulty attracting qualified employees to work in the geographically remote location in Vermont of Chips & Bits, Inc. and Strategy Plus, Inc. If we were unable to attract and retain the technical and managerial personnel necessary to support and grow our businesses, our businesses would likely be materially and adversely affected.

OUR OFFICERS, INCLUDING OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER AND PRESIDENT HAVE OTHER INTERESTS AND TIME COMMITMENTS; WE HAVE CONFLICTS OF INTEREST WITH SOME OF OUR DIRECTORS; ALL OF OUR DIRECTORS ARE EMPLOYEES OR STOCKHOLDERS OF THE COMPANY OR AFFILIATES OF OUR LARGEST STOCKHOLDER.

Because our Chairman and Chief Executive Officer, Mr. Michael Egan, is an officer or director of other companies, we have to compete for his time. Mr. Egan became our Chief Executive Officer effective June 1, 2002. Mr. Egan is also the controlling investor of Dancing Bear Investments, Inc., an entity controlled by Mr. Egan, which is our largest stockholder. Mr. Egan has not committed to devote any specific percentage of his business time with us. Accordingly, we compete with Dancing Bear Investments, Inc. and Mr. Egan's other related entities for his time.

Our President, Treasurer and Chief Financial Officer and Director, Mr. Edward A. Cespedes, is also an officer or director of other companies. Accordingly, we must compete for his time. Mr. Cespedes is an officer or director of various privately held entities and is also affiliated with Dancing Bear Investments, Inc.

Our Vice President of Finance and Director, Ms. Robin Lebowitz is also affiliated with Dancing Bear Investments, Inc. She is also an officer or director of other companies or entities controlled by Mr. Egan and Mr. Cespedes.

Due to the relationships with his related entities, Mr. Egan will have an inherent conflict of interest in making any decision related to transactions between the related entities and us, including investment in our securities. Furthermore, the Company's Board of Directors presently is comprised entirely of individuals which are employees of theglobe, and therefore are not "independent." We intend to review related party transactions in the future on a case-by-case basis.

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WE RELY ON THIRD PARTY OUTSOURCED HOSTING FACILITIES OVER WHICH WE HAVE LIMITED CONTROL.

Our principal servers are located in Florida and New York primarily at third party outsourced hosting facilities. Our operations depend on the ability to protect our systems against damage from unexpected events, including fire, power loss, water damage, telecommunications failures and vandalism. Any disruption in our Internet access could have a material adverse effect on us. In addition, computer viruses, electronic break-ins or other similar disruptive problems could also materially adversely affect our businesses. Our reputation, theglobe.com brand and the brands of our individual businesses could be materially and adversely affected by any problems experienced by our sites or our supporting VoIP network. We may not have insurance to adequately compensate us for any losses that may occur due to any failures or interruptions in our systems. We do not presently have any secondary off-site systems or a formal disaster recovery plan.

HACKERS MAY ATTEMPT TO PENETRATE OUR SECURITY SYSTEM; ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS.

Consumer and supplier confidence in our businesses depends on maintaining relevant security features. Substantial or ongoing security breaches on our systems or other Internet-based systems could significantly harm our business. We incur substantial expenses protecting against and remedying security breaches. Security breaches also could damage our reputation and expose us to a risk of loss or litigation. Experienced programmers or "hackers" have successfully penetrated our systems and we expect that these attempts will continue to occur from time to time. Because a hacker who is able to penetrate our network security could misappropriate proprietary or confidential information (including customer billing information) or cause interruptions in our products and services, we may have to expend significant capital and resources to protect against or to alleviate problems caused by these hackers. Additionally, we may not have a timely remedy against a hacker who is able to penetrate our network security. Such security breaches could materially adversely affect our company. In addition, the transmission of computer viruses resulting from hackers or otherwise could expose us to significant liability. Our insurance may not be adequate to reimburse us for losses caused by security breaches. We also face risks associated with security breaches affecting third parties with whom we have relationships.

WE MAY BE EXPOSED TO LIABILITY FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE INTERNET.

Users may access content on our websites or the websites of our distribution partners or other third parties through website links or other means, and they may download content and subsequently transmit this content to others over the Internet. This could result in claims against us based on a variety of theories, including defamation, obscenity, negligence, copyright infringement, trademark infringement or the wrongful actions of third parties. Other theories may be brought based on the nature, publication and distribution of our content or based on errors or false or misleading information provided on our websites. Claims have been brought against online services in the past and we have received inquiries from third parties regarding these matters. Such claims could be material in the future.

WE MAY BE EXPOSED TO LIABILITY FOR PRODUCTS OR SERVICES SOLD OVER THE INTERNET, INCLUDING PRODUCTS AND SERVICES SOLD BY OTHERS.

We enter into agreements with commerce partners and sponsors under which, in some cases, we are entitled to receive a share of revenue from the purchase of goods and services through direct links from our sites. We sell products directly to consumers which may expose us to additional legal risks, regulations by local, state, federal and foreign authorities and potential liabilities to consumers of these products and services, even if we do not ourselves provide these products or services. We cannot assure you that any indemnification that may be provided to us in some of these agreements with these parties will be adequate. Even if these claims do not result in our liability, we could incur significant costs in investigating and defending against these claims. The imposition of potential liability for information carried on or disseminated through our systems could require us to implement measures to reduce our exposure to liability. Those measures may require the expenditure of substantial resources and limit the attractiveness of our services. Additionally, our insurance policies may not cover all potential liabilities to which we are exposed.

WE ARE A PARTY TO LITIGATION MATTERS THAT MAY SUBJECT US TO SIGNIFICANT LIABILITY AND BE TIME CONSUMING AND EXPENSIVE.

We are currently a party to litigation. At this time we cannot reasonably estimate the range of any loss or damages resulting from any of the pending lawsuits due to uncertainty regarding the ultimate outcome. The defense of this litigation may be expensive and divert management's attention from day-to-day operations. An adverse outcome in this litigation could materially and adversely affect our results of operations and financial position and may utilize a significant portion of our cash resources.

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WE MAY NOT BE ABLE TO IMPLEMENT SECTION 404 OF THE SARBANES-OXLEY ACT ON A TIMELY BASIS.

The SEC, as directed by Section 404 of The Sarbanes-Oxley Act, adopted rules generally requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual report on Form 10-K that contains an assessment by management of the effectiveness of the company's internal controls over financial reporting. In addition, the company's independent registered public accounting firm must attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting. This requirement will first apply to our annual report on Form 10-K for the fiscal year ending December 31, 2007.

We are currently at the beginning stages of developing our Section 404 implementation plan. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. How companies should be implementing these new requirements including internal control reforms to comply with Section 404's requirements, and how independent auditors will apply these requirements and test companies' internal controls, is still reasonably uncertain.

We expect that we will need to hire and/or engage additional personnel and incur incremental costs in order to complete the work required by Section 404. There can be no assurance that we will be able to complete our Section 404 plan on a timely basis. The Company's liquidity position in 2005, 2006 and 2007 may also impact our ability to adequately fund our Section 404 efforts.

Even if we timely complete our Section 404 plan, we may not be able to conclude that our internal controls over financial reporting are effective, or in the event that we conclude that our internal controls are effective, our independent accountants may disagree with our assessment and may issue a report that is qualified. This could subject the Company to regulatory scrutiny and a loss of public confidence in our internal controls. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company's operating results or cause the Company to fail to meet its reporting obligations.

RISKS RELATING TO OUR VOIP TELEPHONY BUSINESS

WE ARE UNABLE TO PREDICT THE VOLUME OF USAGE AND OUR CAPACITY NEEDS FOR OUR VOIP BUSINESS; DISADVANTAGEOUS CONTRACTS HAVE REDUCED OUR OPERATING MARGINS AND MAY ADVERSELY AFFECT OUR LIQUIDITY AND FINANCIAL CONDITION.

We have entered into a number of agreements (generally for terms of one year, with the terms of several agreements extending to three to five years) for leased communications transmission capacity and data center facilities with various carriers and other third parties. The minimum amounts payable under these agreements and the underlying current capacity of our VoIP network greatly exceeds our current estimates of customer demand and usage for the foreseeable future. The Company is currently attempting to reduce the amounts payable under these network-related agreements. Although at the beginning of 2005 the Company was successful in terminating substantially all of the minimum usage requirement commitments for which it was previously obligated under certain of its carrier agreements, there can be no assurance that it will be able to further reduce its network-related contractual commitments. If the Company is not successful in significantly reducing such commitments, its liquidity and financial condition could be materially and adversely impacted.

THE VOIP MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND WE WILL NEED TO DEPEND ON NEW PRODUCT INTRODUCTIONS AND INNOVATIONS IN ORDER TO ESTABLISH, MAINTAIN AND GROW OUR BUSINESS.

VoIP is an emerging market that is characterized by rapid changes in customer requirements, frequent introductions of new and enhanced products, and continuing and rapid technological advances. To enter and compete successfully in this emerging market, we must continually design, develop and sell new and enhanced VoIP products and services that provide increasingly higher levels of performance and reliability at lower costs. These new and enhanced products must take advantage of technological advancements and changes, and respond to new customer requirements. Our success in designing, developing and selling such products and services will depend on a variety of factors, including:

o	access to sufficient capital to complete our development efforts;

o	the identification of market demand for new products;

o	the determination of appropriate product inventory levels;

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o	product and feature selection;

o	timely implementation of product design and development;

o	product performance;

o	cost-effectiveness of products under development;

o	securing effective sources of equipment supply; and

o	success of promotional efforts.

Additionally, we may also be required to collaborate with third parties to develop our products and may not be able to do so on a timely and cost-effective basis, if at all. If we are unable, due to resource constraints or technological or other reasons, to develop and introduce new or enhanced products in a timely manner or if such new or enhanced products do not achieve sufficient market acceptance, our operating results will suffer and our business will not grow.

OUR ABILITY AND PLANS TO PROVIDE TELECOMMUNICATION SERVICES AT ATTRACTIVE RATES ARISE IN LARGE PART FROM THE FACT VOIP SERVICES ARE NOT CURRENTLY SUBJECT TO THE SAME REGULATION AS TRADITIONAL TELEPHONY.

Because their services are not currently regulated to the same extent as traditional telephony, some VoIP providers can currently avoid paying certain charges that traditional telephone companies must pay. Many traditional telephone operators are lobbying the Federal Communications Commission (FCC) and the states to regulate VoIP on the same or similar basis as traditional telephone services. The FCC and several states are examining this issue.

If the FCC or any state determines to regulate VoIP, they may impose surcharges, taxes or additional regulations upon providers of VoIP. These surcharges could include access charges payable to local exchange carriers to carry and terminate traffic, contributions to the Universal Service Fund or other charges. Regulations requiring compliance with the CALEA could also place a significant financial burden on us. The imposition of any such additional fees, charges, taxes, licenses and regulations on VoIP services could materially increase our costs and may reduce or eliminate the competitive pricing advantage we seek to enjoy.

WE WILL INCUR INCREASED COSTS AND RISKS ASSOCIATED WITH THE PROVISION OF 911 EMERGENCY DIALING WITH VOIP SERVICES.

In May 2005, the FCC adopted an Order and Notice of Proposed Rulemaking that requires VoIP providers to supply enhanced emergency 911 ("E911") service. On June 3, 2005, the FCC released the text of the First Report and Order and Notice of Proposed Rulemaking in the E911 proceeding (the "E911 Order"). Previously, Texas and Connecticut Attorneys General filed lawsuits against Vonage, accusing Vonage of not warning customers about limits to its 911 service. As a result of the E911 Order, VoIP service providers that interconnect to the public switched telephone network ("Interconnected VoIP Providers") will be required to mimic the 911 emergency calling capabilities offered by traditional landline phone companies. All Interconnected VoIP Providers must deliver 911 calls to the appropriate local public safety answering point ("PSAP"), along with call back number and location, where the PSAP is able to receive that information. E911 must be included in the basic service offering; it cannot be an optional or extra feature. The PSAP delivery obligation, along with call back number and location information must be provided regardless of whether the service is "fixed" or "nomadic." User registration of location is permissible initially, although the FCC is committed to an advanced form of E911 that will determine user location without user intervention, one of the topics of the further Notice of Proposed Rulemaking to be released.

Additionally, all interconnected VoIP providers must obtain affirmative acknowledgement from all subscribers that they have been advised of the circumstances under which E911 service may not be available. Further, an interconnected VoIP provider must make it possible for customers to update their address (i.e., change their registered location) via at least one option that requires no equipment other than that needed to access the VoIP service. All interconnected VoIP providers must comply with the requirements of the E911 Order within 120 days of the publication of the E911 Order in the Federal Register, with the exception that the customer notification obligations must be complied with within 30 days of the publication.

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The E911 Order applies to certain of our products. Even with E911 provisioned, the IP dialtone service provided by us is only as reliable as a customer's underlying broadband data service and Internet service provider (neither service is provided by us), and may not be suitable for use in all emergency situations.

The E911 Order will increase our cost of doing business and may adversely affect our ability to deliver the VoIP telephony services to new and existing customers in all geographic regions. We cannot guarantee that E911 service will be available to all of our subscribers. There is also risk that specific E911 requirements may impede our ability to offer service in a manner that conforms to these requirements. The E911 Order and subsequent orders or clarifications could have a material adverse effect on our business, financial condition and operating results.

THE INTERNET TELEPHONY BUSINESS IS HIGHLY COMPETITIVE AND ALSO COMPETES WITH TRADITIONAL AND CELLULAR TELEPHONY PROVIDERS.

The long distance telephony market and the Internet telephony market are highly competitive. There are several large and numerous small competitors and we expect to face continuing competition based on price and service offerings from existing competitors and new market entrants in the future. The principal competitive factors in our market include price, quality of service, breadth of geographic presence, customer service, reliability, network size and capacity, and the availability of enhanced communications services. Our competitors include major and emerging telecommunications carriers in the U.S. and abroad. Financial difficulties in the past several years of many telecommunications providers are rapidly altering the number, identity and competitiveness of the marketplace. Many of the competitors for our current and planned VoIP service offerings have substantially greater financial, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we have. As a result, certain of these competitors may be able to adopt more aggressive pricing policies which could hinder our ability to market our voice services.

During the past several years, a number of companies have introduced services that make Internet telephony or voice services over the Internet available to businesses and consumers. All major telecommunications companies, including entities like AT&T, Verizon, Sprint and MCI, either presently or potentially compete or can compete directly with us. Other Internet telephony service providers, such as Net2Phone, Vonage and deltathree, also focus on a retail customer base and compete with us. These companies may offer the kinds of voice services we currently offer or intend to offer in the future. In addition, companies currently in related markets have begun to provide voice over the Internet services or adapt their products to enable voice over the Internet services. These related companies may potentially migrate into the Internet telephony market as direct competitors. A number of cable operators have also begun to offer VoIP telephony services via cable modems which provide access to the Internet. These companies, which tend to be large entities with substantial resources, generally have large budgets available for research and development, and therefore may further enhance the quality and acceptance of the transmission of voice over the Internet. We also compete with cellular telephony providers.

PRICING PRESSURES AND INCREASING USE OF VOIP TECHNOLOGY MAY LESSEN OUR COMPETITIVE PRICING ADVANTAGE.

One of the main competitive advantages of our current and planned VoIP service offerings is the ability to provide discounted local and long distance telephony services by taking advantage of cost savings achieved by carrying voice traffic employing VoIP technology, as compared to carrying calls over traditional networks. In recent years, the price of telephone service has fallen. The price of telephone service may continue to fall for various reasons, including the adoption of VoIP technology by other communications carriers. Many carriers have adopted pricing plans such that the rates that they charge are not always substantially higher than the rates that VoIP providers charge for similar service. In addition, other providers of long distance services are offering unlimited or nearly unlimited use of some of their services for increasingly lower monthly rates.

IF WE DO NOT DEVELOP AND MAINTAIN SUCCESSFUL PARTNERSHIPS FOR VOIP PRODUCTS, WE MAY NOT BE ABLE TO SUCCESSFULLY MARKET ANY OF OUR VOIP PRODUCTS.

Our success in the VoIP market is partly dependent on our ability to forge marketing, engineering and carrier partnerships. VoIP communication systems are extremely complex and no single company possesses all the technology components needed to build a complete end to end solution. We will likely need to enter into partnerships to augment our development programs and to assist us in marketing complete solutions to our targeted customers. We may not be able to develop such partnerships in the course of our operations and product development. Even if we do establish the necessary partnerships, we may not be able to adequately capitalize on these partnerships to aid in the success of our business.

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THE FAILURE OF VOIP NETWORKS TO MEET THE RELIABILITY AND QUALITY STANDARDS REQUIRED FOR VOICE COMMUNICATIONS COULD RENDER OUR PRODUCTS OBSOLETE.

Circuit-switched telephony networks feature very high reliability, with a guaranteed quality of service. In addition, such networks have imperceptible delay and consistently satisfactory audio quality. VoIP networks will not be a viable alternative to traditional circuit switched telephony unless they can provide reliability and quality consistent with these standards.

ONLINE CREDIT CARD FRAUD CAN HARM OUR BUSINESS.

The sale of our products and services over the Internet exposes us to credit card fraud risks. Many of our products and services, including our VoIP services, can be ordered or established (in the case of new accounts) over the Internet using a major credit card for payment. As is prevalent in retail telecommunications and Internet services industries, we are exposed to the risk that some of these credit card accounts are stolen or otherwise fraudulently obtained. In general, we are not able to recover fraudulent credit card charges from such accounts. In addition to the loss of revenue from such fraudulent credit card use, we also remain liable to third parties whose products or services are engaged by us (such as termination fees due telecommunications providers) in connection with the services which we provide. In addition, depending upon the level of credit card fraud we experience, we may become ineligible to accept the credit cards of certain issuers. We are currently authorized to accept Discover, together with Visa and MasterCard (which are both covered by a single merchant agreement with us). Visa/MasterCard constitutes the primary credit card used by our VoIP customers. The loss of eligibility for acceptance of Visa/MasterCard could significantly and adversely affect our business. During 2004, we updated our fraud controls and will attempt to manage fraud risks through our internal controls and our monitoring and blocking systems. If those efforts are not successful, fraud could cause our revenue to decline significantly and our business, financial condition and results of operations to be materially and adversely affected.

RISKS RELATING TO OUR COMPUTER GAMES BUSINESS

THE MARKET SITUATION CONTINUES TO BE A CHALLENGE FOR CHIPS & BITS DUE TO ADVANCES IN CONSOLE AND ONLINE GAMES, WHICH HAVE LOWER MARGINS AND TRADITIONALLY LESS SALES LOYALTY TO CHIPS & BITS.

Our subsidiary, Chips & Bits depends on major releases in the Personal Computer (PC) market for the majority of sales and profits. Advances in technology and the game industry's increased focus on console and online game platforms, such as Xbox, PlayStation and GameCube, has dramatically reduced the number of major PC releases, which resulted in significant declines in revenues and gross margins for Chips & Bits. Because of the large installed base of personal computers, revenue and gross margin percentages may fluctuate with changes in the PC game market. However, we are unable to predict when, if ever, there will be a turnaround in the PC game market, or if we will be successful in adequately increasing our future sales of non-PC games.

WE HAVE HISTORICALLY RELIED SUBSTANTIALLY ON ADVERTISING REVENUES, WHICH COULD DECLINE IN THE FUTURE.

We historically derived a substantial portion of our revenues from the sale of advertisements, primarily in our Computer Games Magazine. Our games business model and our ability to generate sufficient future levels of print and online advertising revenues are highly dependent on the print circulation of our magazines, as well as the amount of traffic on our websites and our ability to properly monetize website traffic. Print and online advertising market volumes have declined in the past and may decline in the future, which could have a material adverse effect on us. Many advertisers have been experiencing financial difficulties which could further negatively impact our revenues and our ability to collect our receivables. For these reasons, we cannot assure you that our current advertisers will continue to purchase advertisements from our computer games businesses.

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WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE IN THE ELECTRONIC COMMERCE MARKETPLACE.

The games marketplace has become increasingly competitive due to acquisitions, strategic partnerships and the continued consolidation of a previously fragmented industry. In addition, an increasing number of major retailers have increased the selection of video games offered by both their traditional "bricks and mortar" locations and their online commerce sites, resulting in increased competition. Our Chips & Bits subsidiary may not be able to compete successfully in this highly competitive marketplace.

We also face many uncertainties, which may affect our ability to generate electronic commerce revenues and profits, including:

o	our ability to obtain new customers at a reasonable cost, retain existing customers and encourage repeat purchases;

o	the likelihood that both online and retail purchasing trends may rapidly change;

o	the level of product returns;

o	merchandise shipping costs and delivery times;

o	our ability to manage inventory levels;

o	our ability to secure and maintain relationships with vendors; and

o	the possibility that our vendors may sell their products through other sites.

Additionally, if use of the Internet for electronic commerce does not continue to grow, our business and financial condition would be materially and adversely affected.

INTENSE COMPETITION FOR ELECTRONIC COMMERCE REVENUES HAS RESULTED IN DOWNWARD PRESSURE ON GROSS MARGINS.

Due to the ability of consumers to easily compare prices of similar products or services on competing websites and consumers' potential preference for competing website's user interface, gross margins for electronic commerce transactions, which are narrower than for advertising businesses, may further narrow in the future and, accordingly, our revenues and profits from electronic commerce arrangements may be materially and adversely affected.

OUR ELECTRONIC COMMERCE BUSINESS MAY RESULT IN SIGNIFICANT LIABILITY CLAIMS AGAINST US.

Consumers may sue us if any of the products that we sell are defective, fail to perform properly or injure the user. Consumers are also increasingly seeking to impose liability on game manufacturers and distributors based upon the content of the games and the alleged affect of such content on behavior. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. As a result, any claims, whether or not successful, could seriously damage our reputation and our business.

RISKS RELATING TO OUR INTERNET SERVICES BUSINESS

OUR CONTRACT TO SERVE AS THE REGISTRY FOR THE ".TRAVEL" TOP-LEVEL DOMAIN MAY BE TERMINATED EARLY, WHICH WOULD LIKELY DO IRREPARABLE HARM TO OUR NEWLY DEVELOPING INTERNET SERVICES BUSINESS.

Our contract with the Internet Corporation for Assigned Names and Numbers ("ICANN") to serve as the registry for the ".travel" top-level Internet domain is for an initial term of ten years. Additionally, we have agreed to engage in good faith negotiations at regular intervals throughout the term of our contract (at least once every three years) regarding possible changes to the provisions of the contract, including changes in the fees and payments that we are required to make to ICANN. In the event that we materially and fundamentally breach the contract and fail to cure such breach within thirty days of notice, ICANN has the right to immediately terminate our contract.

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Should our ".travel" registry contract be terminated early by ICANN, we could suffer a loss of prestige that could force us to permanently shutdown our Internet services business. Further, we could be held liable to pay additional fees or financial damages to ICANN or certain of our related subcontractors and, in certain limited circumstances, to pay punitive, exemplary or other damages to ICANN. Any such developments could have a material adverse effect on our financial condition and results of operations.

OUR BUSINESS COULD BE MATERIALLY HARMED IF IN THE FUTURE THE ADMINISTRATION AND OPERATION OF THE INTERNET NO LONGER RELIES UPON THE EXISTING DOMAIN NAME SYSTEM.

The domain name registration industry continues to develop and adapt to changing technology. This development may include changes in the administration or operation of the Internet, including the creation and institution of alternate systems for directing Internet traffic without the use of the existing domain name system. The widespread acceptance of any alternative systems could eliminate the need to register a domain name to establish an online presence and could materially adversely affect our business, financial condition and results of operations.

WE OUTSOURCE CERTAIN OPERATIONS WHICH EXPOSES US TO RISKS RELATED TO OUR THIRD PARTY VENDORS.

We do not develop and maintain all of the products and services that we offer. We offer most of our services to our customers through various third party service providers engaged to perform these services on our behalf and also outsource most of our operations to third parties. Accordingly, we are dependent, in part, on the services of third party service providers, which may raise concerns by our customers regarding our ability to control the services we offer them if certain elements are managed by another company. In the event that these service providers fail to maintain adequate levels of support, do not provide high quality service, discontinue their lines of business, cease or reduce operations or terminate their contracts with us, our business, operations and customer relations may be impacted negatively and we may be required to pursue replacement third party relationships, which we may not be able to obtain on as favorable terms or at all. If a problem should arise with a provider, transitioning services and data from one provider to another can often be a complicated and time consuming process and we cannot assure that if we need to switch from a provider we would be able to do so without significant disruptions, or at all. If we were unable to complete a transition to a new provider on a timely basis, or at all, we could be forced to either temporarily or permanently discontinue certain services which may disrupt services to our customers. Any failure to provide services would have a negative impact on our revenue, profitability and financial condition and could materially harm our Internet services business.

REGULATORY AND STATUTORY CHANGES COULD HARM OUR INTERNET SERVICES BUSINESS.

We cannot predict with any certainty the effect that new governmental or regulatory policies, including changes in consumer privacy policies or industry reaction to those policies, will have on our domain name registry business. Additionally, ICANN's limited resources may seriously affect its ability to carry out its mandate or could force ICANN to impose additional fees on registries. Changes in governmental or regulatory statutes or policies could cause decreases in future revenue and increases in future costs which could have a material adverse effect on the development of our domain name registry business.

RISKS RELATING TO OUR COMMON STOCK

THE VOLUME OF SHARES AVAILABLE FOR FUTURE SALE IN THE OPEN MARKET COULD DRIVE DOWN THE PRICE OF OUR STOCK OR KEEP OUR STOCK PRICE FROM IMPROVING, EVEN IF OUR FINANCIAL PERFORMANCE IMPROVES.

As of November 11, 2005, we had issued and outstanding approximately 173.3 million shares, of which approximately 56.1 million shares were freely tradable over the public markets. There is limited trading volume in our shares and we are now traded only in the over-the-counter market. On April 16, 2004, we filed a registration statement relating to the potential resale of up to approximately 131 million of our shares (including approximately 27 million shares underlying then outstanding warrants to acquire our Common Stock). The registration statement became effective on May 11, 2004.

Sales of significant amounts of Common Stock in the public market in the future, the perception that sales will occur or the registration of additional shares pursuant to existing contractual obligations could materially and adversely drive down the price of our stock. In addition, such factors could adversely affect the ability of the market price of the Common Stock to increase even if our business prospects were to improve. Substantially all of our stockholders holding restricted securities, including shares issuable upon the exercise of warrants or the conversion of the Convertible Notes to acquire our Common Stock (which are convertible into 68 million shares), have registration rights under various conditions and will become available for resale in the future.

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In addition, as of September 30, 2005, there were outstanding options to purchase approximately 19.6 million shares of our Common Stock, which become eligible for sale in the public market from time to time depending on vesting and the expiration of lock-up agreements. The shares issuable upon exercise of these options are registered under the Securities Act and consequently, subject to certain volume restrictions as to shares issuable to executive officers, will be freely tradable.

Also as of November 11, 2005, we had issued and outstanding warrants to acquire approximately 7.5 million shares of our Common Stock. In addition, the Company holds in escrow warrants to acquire up to 1.5 shares of Common Stock, subject to release over approximately the next year (some of which may accelerate under certain events) upon the attainment of certain performance objectives. Many of the outstanding instruments representing the warrants contain anti-dilution provisions pursuant to which the exercise prices and number of shares issuable upon exercise may be adjusted.

OUR CHAIRMAN MAY CONTROL US.

Michael S. Egan, our Chairman and Chief Executive Officer, beneficially owns or controls, directly or indirectly, approximately 140.7 million shares of our Common Stock as of November 11, 2005, which in the aggregate represents approximately 57% of the outstanding shares of our Common Stock (treating as outstanding for this purpose the shares of Common Stock issuable upon exercise and/or conversion of the options, Convertible Notes and warrants owned by Mr. Egan or his affiliates). Accordingly, Mr. Egan will be able to exercise significant influence over, if not control, any stockholder vote.

DELISTING OF OUR COMMON STOCK MAKES IT MORE DIFFICULT FOR INVESTORS TO SELL SHARES. THIS MAY POTENTIALLY LEAD TO FUTURE MARKET DECLINES.

The shares of our Common Stock were delisted from the NASDAQ national market in April 2001 and are now traded in the over-the-counter market on what is commonly referred to as the electronic bulletin board or "OTCBB." As a result, an investor may find it more difficult to dispose of or obtain accurate quotations as to the market value of the securities. The delisting has made trading our shares more difficult for investors, potentially leading to further declines in share price and making it less likely our stock price will increase. It has also made it more difficult for us to raise additional capital. We may also incur additional costs under state blue-sky laws if we sell equity due to our delisting.

OUR COMMON STOCK IS PRESENTLY SUBJECT TO THE "PENNY STOCK" RULES WHICH MAY MAKE IT A LESS ATTRACTIVE INVESTMENT.

Since the trading price of our Common Stock is less than $5.00 per share, trading in our Common Stock is also subject to the requirements of Rule 15g-9 of the Exchange Act. Our Common Stock is also considered a penny stock under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990, which defines a penny stock, generally, as any equity security not traded on an exchange or quoted on the Nasdaq SmallCap Market that has a market price of less than $5.00 per share. Under Rule 15g-9, brokers who recommend our Common Stock to persons who are not established customers and accredited investors, as defined in the Exchange Act, must satisfy special sales practice requirements, including requirements that they make an individualized written suitability determination for the purchaser; and receive the purchaser's written consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosures in connection with any trades involving a penny stock, including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated with that market. Such requirements may severely limit the market liquidity of our Common Stock and the ability of purchasers of our equity securities to sell their securities in the secondary market. For all of these reasons, an investment in our equity securities may not be attractive to our potential investors.

ANTI-TAKEOVER PROVISIONS AFFECTING US COULD PREVENT OR DELAY A CHANGE OF CONTROL.

Provisions of our charter, by-laws and stockholder rights plan and provisions of applicable Delaware law may:

o	have the effect of delaying, deferring or preventing a change in control of our company;

o	discourage bids of our Common Stock at a premium over the market price; or

o	adversely affect the market price of, and the voting and other rights of the holders of, our Common Stock.

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Certain Delaware laws could have the effect of delaying, deterring or preventing a change in control of our company. One of these laws prohibits us from engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder, unless various conditions are met. In addition, provisions of our charter and by-laws, and the significant amount of Common Stock held by our current executive officers, directors and affiliates, could together have the effect of discouraging potential takeover attempts or making it more difficult for stockholders to change management. In addition, the employment contracts of our Chairman and CEO, President and Vice President of Finance provide for substantial lump sum payments ranging from 2 (for the Vice President) to 10 times (for each of the Chairman and President) of their respective average combined salaries and bonuses (together with the continuation of various benefits for extended periods) in the event of their termination without cause or a termination by the executive for "good reason," which is conclusively presumed in the event of a "change-in-control" (as such terms are defined in such agreements).

OUR STOCK PRICE IS VOLATILE AND MAY DECLINE.

The trading price of our Common Stock has been volatile and may continue to be volatile in response to various factors, including:

o	the performance and public acceptance of our new product lines;

o	quarterly variations in our operating results;

o	competitive announcements;

o	sales of any of our businesses, including the recent sale of our SendTec business;

o	the operating and stock price performance of other companies that investors may deem comparable to us;

o	news relating to trends in our markets; and

o	disposition or entry into new lines of business and acquisitions of businesses, including our Tralliance acquisition.

The market price of our Common Stock could also decline as a result of unforeseen factors related to the acquisitions. The stock market has experienced significant price and volume fluctuations, and the market prices of technology companies, particularly Internet related companies, have been highly volatile. Our stock is also more volatile due to the limited trading volume and the high number of shares eligible for trading in the market.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that we classify as cash and cash equivalents have original maturities of three months or less and therefore, are not affected in any material respect by changes in market interest rates. At September 30, 2005, debt outstanding includes approximately $4.5 million of fixed rate instruments with an aggregate average interest rate of 11.10% and approximately $39,000 of variable rate instruments with an aggregate average interest rate of 6.76%. All debt outstanding as of the end of the third quarter of 2005 is either due on demand (including $1.0 million of fixed rate debt which is past due and in default) or matures within the next twelve months.

Foreign Currency Risk. We transact business in U.S. dollars. Our exposure to changes in foreign currency rates has been limited to a related party obligation payable in Canadian dollars, which totals approximately $39,000 (U.S.) at September 30, 2005. Foreign currency exchange rate fluctuations do not have a material effect on our results of operations.

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ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure (1) that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms, and (2) that this information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2005. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective in alerting them in a timely manner to material information regarding us (including our consolidated subsidiaries) that is required to be included in our periodic reports to the SEC.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated any change in our internal control over financial reporting that occurred during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, and have determined there to be no reportable changes.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 7, "Litigation," of the Financial Statements included in this Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Unregistered Sales of Equity Securities.

On October 31, 2005, theglobe completed the sale of substantially all of the assets and business of its subsidiary, SendTec, Inc., to RelationServe Media, Inc. pursuant to an Asset Purchase Agreement dated August 10, 2005, and as amended on August 23, 2005. In accordance with the terms of an escrow agreement established as a source to secure theglobe’s indemnification obligations under the Asset Purchase Agreement, $1.0 million in cash and 2,272,727 shares of theglobe’s unregistered Common Stock (valued at $750,000 pursuant to the terms of the Asset Purchase Agreement based upon the average closing price of the stock in the 10 day period preceding the closing) were placed into escrow. To the extent any of these shares are released to RelationServe Media, Inc., they will be issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933. Any shares released from escrow to RelationServe Media, Inc. will be entitled to customary “piggy-back” registration rights.

(b) Use of Proceeds From Sales of Registered Securities.

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


4.1		Form of Secured Demand Convertible Promissory Note (1).

4.2		Security Agreement dated April 22, 2005 by theglobe.com, inc. and certain other parties named therein (1).

4.3		Unconditional Guaranty Agreement dated April 22, 2005 (1).

10.1		Note Purchase Agreement dated April 22, 2005 between theglobe.com, inc. and certain named investors (1).

10.2		Asset Purchase Agreement dated as of August 10, 2005 by and among theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc. (2).

10.3		1^st Amendment to the Asset Purchase Agreement dated as of August 23, 2005, by and among theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc. (3).

10.4		Redemption Agreement dated August 23, 2005 between theglobe.com, inc. and certain members of management of SendTec, Inc. (4).

10.5		Escrow Agreement dated as of October 31, 2005, by and among theglobe.com, inc., SendTec, Inc., RelationServe Media, Inc. and Olshan Grundman Frome Rosenzweig & Wolosky LLP. (5).

10.6		Termination Agreement dated as of October 1, 2005, by and among theglobe.com, inc., SendTec, Inc., Paul Soltoff, Eric Obeck, Donald Gould, Harry Greene, Irvine and Nadine Brechner, as tenants by the entirety, Allen Vance, G. Thomas Alison and Steven Morvay. (5).

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a).

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a).

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference from our Form 8-K filed on April 26, 2005.

(2)	Incorporated by reference from our Form 8-K filed on August 16, 2005.

(3)	Incorporated by reference to Annex A of our preliminary information statement filed on August 23, 2005.

(4)	Incorporated by reference to Annex B of our preliminary information statement filed on August 23, 2005.

(5)	Incorporated by reference from our Form 8-K filed on November 4, 2005.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	THEGLOBE.COM, INC.

Dated: November 21, 2005	By:	/s/ Michael S. Egan

		Michael S. Egan Chief Executive Officer (Principal Executive Officer)



	By:	/s/ Edward A. Cespedes

		Edward A. Cespedes President and Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX


4.1	Form of Secured Demand Convertible Promissory Note (1).

4.2	Security Agreement dated April 22, 2005 by theglobe.com, inc. and certain other parties named therein (1).

4.3	Unconditional Guaranty Agreement dated April 22, 2005 (1).

10.1	Note Purchase Agreement dated April 22, 2005 between theglobe.com, inc. and certain named investors (1).

10.2	Asset Purchase Agreement dated as of August 10, 2005 by and among theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc. (2).

10.3	1^st Amendment to the Asset Purchase Agreement dated as of August 23, 2005, by and among theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc. (3).

10.4	Redemption Agreement dated August 23, 2005 between theglobe.com, inc. and certain members of management of SendTec, Inc. (4).

10.5	Escrow Agreement dated as of October 31, 2005, by and among theglobe.com, inc., SendTec, Inc., RelationServe Media, Inc. and Olshan Grundman Frome Rosenzweig & Wolosky LLP. (5).

10.6	Termination Agreement dated as of October 1, 2005, by and among theglobe.com, inc., SendTec, Inc., Paul Soltoff, Eric Obeck, Donald Gould, Harry Greene, Irvine and Nadine Brechner, as tenants by the entirety, Allen Vance, G. Thomas Alison and Steven Morvay. (5).

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a).

31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a).

32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

(1)	Incorporated by reference from our Form 8-K filed on April 26, 2005.

(2)	Incorporated by reference from our Form 8-K filed on August 16, 2005.

(3)	Incorporated by reference to Annex A of our preliminary information statement filed on August 23, 2005.

(4)	Incorporated by reference to Annex B of our preliminary information statement filed on August 23, 2005.

(5)	Incorporated by reference from our Form 8-K filed on November 4, 2005.

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