**UNITED
      STATES**


**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 March 31, 2006





OR





**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.
                EMPLOYERINCORPORATION
                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 a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
      one):





Large accelerated filer o
            
            Accelerated
                filer o
            
            Non-accelerated
                filer 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 May 2, 2006 was 174,722,565.













**THEGLOBE.COM,
      INC.**


**FORM
      10-Q**


TABLE
          OF
          CONTENTS
 PART
                      I:
                  FINANCIAL
                      INFORMATIONItem
                      1.
                  Condensed
                      Consolidated Financial StatementsCondensed
                      Consolidated Balance Sheets at March 31, 2006 (unaudited)and
                      December 31,
                      2005
                  
                  3Unaudited
                      Condensed Consolidated Statements of Operations for the three
                      months ended
                      March 31, 2006 and 2005
                  
                  4Unaudited
                      Condensed Consolidated Statements of Cash Flows for the three
                      months ended
                      March 31, 2006 and 2005
                  
                  5Notes
                      to Unaudited Condensed Consolidated Financial Statements
                  
                  6Item
                      2.
                  Management's
                      Discussion and Analysis of Financial Condition and Results
                      of Operations
                  
                  17Item
                      3.
                  Quantitative
                      and Qualitative Disclosures About Market Risk
                  
                  29Item
                      4.
                  Controls
                      and Procedures
                  
                  29PART
                      II:
                  OTHER
                      INFORMATIONItem
                      1.
                  Legal
                      Proceedings
                  
                  30Item
                      1A.
                  Risk
                      Factors
                  
                  30Item
                      2.
                  Unregistered
                      Sales of Equity Securities and Use of Proceeds
                  
                  48Item
                      3.
                  Defaults
                      Upon Senior Securities
                  
                  49Item
                      4.
                  Submission
                      of Matters to a Vote of Security Holders
                  
                  49Item
                      5.
                  Other
                      Information
                  
                  49Item
                      6.
                  Exhibits
                  
                  49SIGNATURES
                  
                  
                  50


2


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**THEGLOBE.COM,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





MARCH
                      31,
                
                DECEMBER
                    31,2006
                
                2005ASSETS
                
                (UNAUDITED)Current
                    Assets:Cash
                    and cash equivalents
                
                $
                12,379,881
                
                $
                16,480,660Restricted
                    cash
                
                
                251,043
                
                
                1,031,764Accounts
                    receivable, less allowance for doubtfulaccounts
                    of approximately $38,000 and$128,000,
                    respectively
                
                
                295,975
                
                
                452,398Inventory,
                    less reserves of approximately
                  $414,000
                    and $434,000, respectively
                
                
                59,442
                
                
                66,271Prepaid
                    expenses
                
                
                742,070
                
                
                1,022,771Other
                    current assets
                
                
                153,217
                
                
                146,889Total
                    current assets
                
                
                13,881,628
                
                
                19,200,753Property
                    and equipment, net
                
                
                1,145,528
                
                
                1,455,653Intangible
                    assets
                
                
                645,360
                
                
                715,035Other
                    assets
                
                
                40,000
                
                
                40,000Total
                    assets
                
                $
                15,712,516
                
                $
                21,411,441LIABILITIES
                    AND STOCKHOLDERS' EQUITYCurrent
                    Liabilities:Accounts
                    payable
                
                $
                2,460,970
                
                $
                2,564,988Accrued
                    expenses and other current liabilities
                
                
                1,655,605
                
                
                2,177,815Income
                    taxes payable
                
                
                —
                
                
                806,406Deferred
                    revenue
                
                
                956,531
                
                
                985,981Notes
                    payable and current portion of long-term debt
                
                
                3,417,446
                
                
                3,428,447Total
                    current liabilities
                
                
                8,490,552
                
                
                9,963,637Long-term
                    liabilities
                
                
                297,354
                
                
                173,003Total
                    liabilities
                
                
                8,787,906
                
                
                10,136,640Stockholders'
                    Equity:Common
                    stock, $0.001 par value; 500,000,000 sharesauthorized;
                    174,722,565 and 174,373,091 sharesissued
                    at March 31, 2006 and December 31, 2005,respectively
                
                
                174,723
                
                
                174,373Additional
                    paid-in capital
                
                
                288,934,961
                
                
                288,740,889Escrow
                    shares
                
                
                (750,000
                )
                
                (750,000
                )Accumulated
                    deficit
                
                
                (281,435,074
                )
                
                (276,890,461
                )Total
                    stockholders' equity
                
                
                6,924,610
                
                
                11,274,801Total
                    liabilities and stockholders' equity
                
                $
                15,712,516
                
                $
                21,411,441




See
      notes
      to unaudited condensed consolidated financial statements.


3
  **THEGLOBE.COM,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**





Three
                    Months EndedMarch
                    31,2006
              
              
              2005(UNAUDITED)Net
                  Revenue
              
              $
              701,157
              
              $
              648,484Operating
                  Expenses:Cost
                  of revenue
              
              
              1,664,480
              
              
              1,983,382Sales
                  and marketing
              
              
              935,028
              
              
              781,275Product
                  development
              
              
              373,741
              
              
              325,841General
                  and administrative
              
              
              2,088,777
              
              
              1,633,247Depreciation
              
              
              305,125
              
              
              285,931Intangible
                  asset amortization
              
              
              69,675
              
              
              —5,436,826
              
              
              5,009,676Operating
                    Loss from ContinuingOperations
              
              
              (4,735,669
              )
              
              (4,361,192
              )Other
                  Income (Expense), net:Interest
                  income (expense), net
              
              
              61,653
              
              
              (4,517
              )Other
                  income (expense), net
              
              
              129,403
              
              
              (229,288
              )191,056
              
              
              (233,805
              )Loss
                  from Continuing OperationsBefore
                  Income Tax
              
              
              (4,544,613
              )
              
              (4,594,997
              )Income
                  Tax Benefit
              
              
              —
              
              
              (240,124
              )Loss
                  from Continuing Operations
              
              
              (4,544,613
              )
              
              (4,354,873
              )Discontinued
                  Operations:Income
                  from operations
              
              
              —
              
              
              645,774Tax
                  provision
              
              
              —
              
              
              256,474Income
                  from DiscontinuedOperations
              
              
              —
              
              
              389,300Net
                  Loss
              
              $
              (4,544,613
              )
              $
              (3,965,573
              )Earnings
                  (Loss) Per Share -Basic
                  and Diluted:Continuing
                  Operations
              
              $
              (0.03
              )
              $
              (0.02
              )Discontinued
                  Operations
              
              $
              —
              
              $
              —Net
                  Loss
              
              $
              (0.03
              )
              $
              (0.02
              )Weighted
                  Average Common SharesOutstanding
              
              
              174,593,000
              
              
              174,821,000





See
      notes
      to unaudited condensed consolidated financial statements.


4


**THEGLOBE.COM,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


Three
                  Months EndedMarch
                  31,2006
              
              2005(UNAUDITED)Cash
                  Flows from Operating Activities:Net
                  loss
              
              $
              (4,544,613
              )
              $
              (3,965,573
              )(Income)
                  from discontinued operations
              
              
              —
              
              
              (389,300
              )Net
                  loss from continuing operations
              
              
              (4,544,613
              )
              
              (4,354,873
              )Adjustments
                  to reconcile net loss from continuingoperations
                  to net cash flows from operating activities:Depreciation
                  and amortization
              
              
              374,800
              
              
              285,931Provision
                  for uncollectible accounts receivable
              
              
              17,050
              
              
              —Reserve
                  against amounts loaned to Tralliance prior to
                  acquisition
              
              
              —
              
              
              230,000Employee
                  stock compensation
              
              
              81,769
              
              
              37,334Compensation
                  related to non-employee stock options
              
              
              94,233
              
              
              41,577Other,
                  net
              
              
              315
              
              
              (173
              )Changes
                  in operating assets and liabilities, net:Accounts
                  receivable, net
              
              
              139,373
              
              
              328,272Inventory,
                  net
              
              
              7,111
              
              
              359,685Prepaid
                  and other current assets
              
              
              274,373
              
              
              95,287Accounts
                  payable
              
              
              (104,018
              )
              
              528,422Accrued
                  expenses and other current liabilities
              
              
              (522,210
              )
              
              (622,090
              )Income
                  taxes payable
              
              
              (806,406
              )
              
              —Deferred
                  revenue
              
              
              94,901
              
              
              (5,165
              )Net
                    cash flows from operating activities of continuingoperations
              
              
              (4,893,322
              )
              
              (3,075,793
              )Net
                  cash flows from operating activities of discontinued operations
              
              
              —
              
              
              6,983Net
                  cash flows from operating activities
              
              
              (4,893,322
              )
              
              (3,068,810
              )Cash
                  Flows from Investing Activities:Purchases
                  of property and equipment
              
              
              —
              
              
              (159,621
              )Net
                  cash released from escrow
              
              
              780,721
              
              
              31,111Amounts
                  loaned to Tralliance prior to acquisition
              
              
              —
              
              
              (230,000
              )Other,
                  net
              
              
              5,000
              
              
              (39,400
              )Net
                    cash flows from investing activities of continuingoperations
              
              
              785,721
              
              
              (397,910
              )Purchases
                  of property and equipment by discontinued operation
              
              
              —
              
              
              (23,433
              )Net
                  cash flows from investing activities
              
              
              785,721
              
              
              (421,343
              )Cash
                  Flows from Financing Activities:Payments
                  on notes payable and long-term debt
              
              
              (11,598
              )
              
              (30,912
              )Proceeds
                  from exercise of common stock options and warrants
              
              
              18,420
              
              
              4,165Net
                  cash flows from financing activities
              
              
              6,822
              
              
              (26,747
              )Net
                  Decrease in Cash and Cash Equivalents
              
              
              (4,100,779
              )
              
              (3,516,900
              )Cash
                  and Cash Equivalents, at beginning of period
              
              
              16,480,660
              
              
              6,734,793Cash
                  and Cash Equivalents, at end of period
              
              $
              12,379,881
              
              $
              3,217,893




See
      notes
      to unaudited condensed consolidated financial statements.




5


**THEGLOBE.COM,
      INC. AND SUBSIDIARIES**


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





(1)
      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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 CGOnline website (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 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. The Company
      has since employed DPT's physical assets in the build out of its 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 $18.4 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 in cash, subject to the finalization of certain
      net
      working capital adjustments. Effective March 31, 2006, $318,750 in cash was
      released to the purchaser from funds held in escrow in settlement of such net
      working capital adjustments.





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
      March 31, 2006, sources of the Company's revenue from continuing operations
      were
      derived principally from the operations of its games related businesses and
      its
      Internet services business. The Company's retail VoIP products and services
      have
      yet to produce any significant revenue.





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.





UNAUDITED
      INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION





The
      unaudited interim condensed consolidated financial statements of the Company
      as
      of March 31, 2006 and for the three months ended March 31, 2006 and 2005
      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.





6


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 March 31, 2006 and the results of its operations and its cash flows
      for the three months ended March 31, 2006 and 2005. 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.





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.





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.





RESTRICTED
      CASH





Included
      in restricted cash in the accompanying condensed consolidated balance sheet
      at
      March 31, 2006, was $250,000 of cash held in escrow in connection with the
      October 31, 2005 sale of the SendTec business (see Note 3, “Discontinued
      Operations - SendTec, Inc.” for further discussion). In addition, at March 31,
      2006, restricted cash included $1,043 of cash held in escrow for purposes of
      sweepstakes promotions conducted by the VoIP telephony division.





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 $4.5 million and $4.0 million for the
      three
      months ended March 31, 2006 and 2005, respectively, which approximated the
      Company's reported net loss.





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
      March 31, 2006 and December 31, 2005, was approximately $414,000 and $434,000,
      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.




7




CONCENTRATION
      OF CREDIT RISK





Financial
      instruments which subject the Company to concentrations of credit risk consist
      primarily of cash and cash equivalents, restricted cash, 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 Internet services and VoIP telephony services
      divisions is generally limited due to the large number of customers in these
      businesses. Two customers of the computer games division represented an
      aggregate of approximately $74,000, or 25%, of net consolidated accounts
      receivable as of March 31, 2006.





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
      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.





**INTERNET
      SERVICES**





Internet
      services revenue consists of registration fees for Internet domain
      registrations, which generally have terms of one year, but may be up to ten
      years. Such registration fees are reported net of transaction fees paid to
      an
      unrelated third party which serves as the registry operator for the Company.
      Payments of registration fees are deferred when initially received and
      recognized as revenue on a straight-line basis over the registration
      terms.





**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.





***Discontinued
      Operations***





**MARKETING
      SERVICES**





Revenue
      from the distribution of Internet advertising was recognized when Internet
      users
      visited and completed actions at an advertiser's website. Revenue consisted
      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
      was 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, was recognized on a net basis when the
      associated media was aired. In many cases, the amount the Company billed to
      clients significantly exceeded the amount of revenue that was 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 were deferred.





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





8


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 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 or if a
      loss
      from continuing operations is reported.





Due
      to
      the Company's net losses from continuing operations, 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 March 31:


2006
              
              
              2005Options
                  to purchase common stock
              
              
              15,699,000
              
              
              15,605,000Common
                  shares issuable upon exercise of warrants
              
              
              7,276,000
              
              
              20,782,000Common
                  shares issuable upon conversion of Convertible Notes
              
              
              68,000,000
              
              
              --Total
              
              
              90,975,000
              
              
              36,387,000




RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      November 2005, the FASB issued final FASB Staff Position (“FSP”) FAS No. 123R-3,
“Transition Election Related to Accounting for the Tax Effects of Share-Based
      Payment Awards.” The FSP provides an alternative method of calculating excess
      tax benefits from the method defined in SFAS No. 123R for share-based payments.
      A one-time election to adopt the transition method in this FSP is available
      to
      those entities adopting SFAS No. 123R using either the modified retrospective
      or
      modified prospective method. Up to one year from the initial adoption of SFAS
      No. 123R or effective date of the FSP is provided to make this one-time
      election. However, until an entity makes its election, it must follow the
      guidance in SFAS No. 123R. The FSP is effective upon initial adoption of SFAS
      No. 123R and became effective for the Company in the first quarter of 2006.
      We
      are currently evaluating the allowable methods for calculating excess tax
      benefits and have not yet determined whether we will make a one-time election
      to
      adopt the transition method described in this FSP, nor the expected impact
      on
      our financial position or results of operations.





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
      No. 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 No. 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 adoption
      of
      this standard did not have a material impact on the Company’s financial
      condition, results of operations or liquidity.





In
      March
      2005, the FASB issued Interpretation 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
      believes that currently it does not have any legal obligations to record an
      asset retirement liability.





9


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
      adoption of this standard did not have a material impact on the Company’s
      financial condition, results of operations or liquidity.





In
      December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This
      statement is a revision of SFAS No. 123, "Accounting for Stock-Based
      Compensation", supersedes Accounting Principles Board ("APB") Opinion No. 25,
      "Accounting for Stock Issued to Employees" and amends SFAS No. 95, “Statement of
      Cash Flows.” The statement eliminates the alternative to use the intrinsic value
      method of accounting that was provided in SFAS No. 123, which generally resulted
      in no compensation expense recorded in the financial statements related to
      the
      issuance of equity awards to employees. The statement also requires that the
      cost resulting from all share-based payment transactions be recognized in the
      financial statements. It establishes fair value as the measurement objective
      in
      accounting for share-based payment arrangements and generally requires all
      companies to apply a fair-value-based measurement method in accounting for
      share-based payment transactions with employees. In March 2005, the Securities
      and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin 107 which
      describes the SEC staff’s expectations in determining the assumptions that
      underlie the fair value estimates and discusses the interaction of SFAS No.
      123R
      with existing guidance. The Company has adopted SFAS No. 123R effective January
      1, 2006, using the modified prospective application method in accordance with
      the statement. This application requires the Company to record compensation
      expense for all awards granted after the adoption date and for the unvested
      portion of awards that are outstanding at the date of adoption. The Company
      expects that the adoption of SFAS No. 123R will result in charges to operating
      expense of continuing operations of approximately $194,000, $77,000 and $19,000,
      in the years ended December 31, 2006, 2007 and 2008, related to the unvested
      portion of outstanding employee stock options at December 31, 2005.





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 is effective
      for
      fiscal years beginning after June 15, 2005. The adoption of this statement
      did
      not have a material effect on the Company’s consolidated financial statements.





RECLASSIFICATIONS





Certain
      2005 amounts have been reclassified to conform to the 2006 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 2005 results of SendTec’s
      operations have been included in income from discontinued
      operations.





(2)
      BASIS
      OF PRESENTATION





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. However, the Company has incurred net losses in the quarter
      ended March 31, 2006 and in each fiscal year since its inception and has an
      accumulated deficit of $281,435,074 as of March 31, 2006.





Based
      upon the Company’s present cash resources and cash flow projections, management
      believes 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 a 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 businesses, including Tralliance, and/or
      raising additional equity capital. Because of uncertainties regarding the future
      direction and financial performance of the Company, there can be no assurance
      that the Company will be able to continue as a going concern beyond the end
      of
      2006.





10


(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 **** preliminary
      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
      as
      of the date of sale. On March 31, 2006, a partial release of $750,000 of the
      escrowed cash was made to the Company pursuant to the terms of the escrow
      agreement, less $318,750 of cash due to RelationServe in final settlement of
      the
      purchase price net working capital adjustments.





Results
      of operations for SendTec have been reported separately as “Discontinued
      Operations” in the accompanying condensed consolidated statement of operations
      for the three months ended March 31, 2005. Summarized financial information
      for
      the Discontinued Operations of SendTec was as follows:




Three
                  Months EndedMarch
                  31, 2005Net
                    revenue, net of intercompanyeliminations
              
              $
              8,790,244Income
                  from operations
              
              $
              645,774Provision
                  for income taxes
              
              
              256,474Income
                  from discontinued operations,net of tax
              
              $
              389,300




(4)
      ACQUISITION OF TRALLIANCE CORPORATION





On
      February 25, 2003, the Company 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 the Company'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 the Company’s Common Stock,
      warrants to acquire 475,000 shares of the Company’s 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 the
      Company’s 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.





11


The
      preliminary Tralliance purchase price allocation was as follows:


Cash
              
              $
              54,000Other
                  current assets
              
              
              6,000Intangible
                  assets
              
              
              790,000Assumed
                  liabilities
              
              
              (370,000
              )Deferred
                  tax liability
              
              
              (226,000
              )$
              254,000


Upon
      acquisition, the existing CEO and CFO of Tralliance (the “Executives”) 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. In addition, the Executives participate in an annual bonus pool based
      upon the pre-tax income of the venture for a period of five years beginning
      May
      1, 2005.





The
      value
      assigned to the intangible assets acquired is being amortized on a straight-line
      basis over a five year estimated useful life. Annual amortization expense of
      the
      intangible assets is estimated to be: $188,211 in 2006; $158,047 for each of
      2007 through 2009 and $52,683 in 2010. The related accumulated amortization
      as
      of March 31, 2006 and December 31, 2005 was $144,877 and $75,201, respectively.
      Amortization expense totaled $69,675 for the three months ended March 31, 2006,
      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 three months ended March 31, 2005, additions to the
      reserve of $230,000 were included in other expense in the accompanying condensed
      consolidated statement of operations.





The
      following pro forma condensed consolidated results of operations for the three
      months ended March 31, 2005 assumes the acquisition of Tralliance occurred
      as of
      January 1, 2005. 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, 2005, nor is it necessarily indicative of
      future results.


PRO
                  FORMA RESULTS:
              
              
              2005Three
                  months ended March 31,Net
                  revenue
              
              $
              648,000Net
                  loss
              
              
              (3,975,000
              )Basic
                  and diluted net loss per common share
              
              $
              (0.02
              )




(5)
      STOCK
      OPTION PLANS





We
      have
      several stock option plans under which nonqualified stock options may be granted
      to officers, directors, other employees, consultants and advisors of the
      Company. In general, options granted under the Company’s stock option plans
      expire after a ten-year period and generally vest no later than three years
      from
      the date of grant. Incentive options granted to stockholders who own greater
      than 10% of the total combined voting power of all classes of stock of the
      Company must be issued at 110% of the fair market value of the stock on the
      date
      the options are granted. As of March 31, 2006, there were approximately
      7,320,000 shares available for grant under the Company’s stock option
      plans.





A
      total
      of 1,110,000 stock options were granted during the three months ended March
      31,
      2006, with a weighted-average fair value of $0.27. During the three months
      ended
      March 31, 2005, a total of 111,000 stock options were issued with a
      weighted-average fair value of $0.19.





Stock
      option exercises during the three months ended March 31, 2006 and 2005, resulted
      in cash inflows to the Company of $18,420 and $3,094, respectively. The
      corresponding intrinsic value as of exercise date of the 349,474 and 218,226
      stock options exercised during the three months ended March 31, 2006 and 2005,
      was $119,628 and $46,369, respectively.





12


Stock
      option activity during the three months ended March 31, 2006 was as
      follows:


Total
              
              
              Weighted
                  AverageOptions
              
              
              Exercise
                  PriceOutstanding
                  at January 1, 2006
              
              
              15,373,103
              
              $
              0.46Granted
              
              
              1,110,000
              
              
              0.34Exercised
              
              
              (349,474
              )
              
              0.05Canceled
              
              
              (434,603
              )
              
              0.20Outstanding
                  at March 31, 2006
              
              
              15,699,026
              
              $
              0.46Options
                  exercisable at March 31, 2006
              
              
              13,571,874
              
              $
              0.49





The
      weighted-average remaining contractual terms of stock options outstanding and
      stock options exercisable at March 31, 2006 was 7.7 years and 7.4 years,
      respectively. The aggregate intrinsic value of options outstanding and stock
      options exercisable at March 31, 2006 was approximately $2,491,000 and
      $2,353,000, respectively.





In
      December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This
      statement is a revision of SFAS No. 123, "Accounting for Stock-Based
      Compensation", supersedes Accounting Principles Board ("APB") Opinion No. 25,
      "Accounting for Stock Issued to Employees" and amends SFAS No. 95, “Statement of
      Cash Flows.” The statement eliminates the alternative to use the intrinsic value
      method of accounting that was provided in SFAS No. 123, which generally resulted
      in no compensation expense recorded in the financial statements related to
      the
      issuance of equity awards to employees. The statement also requires that the
      cost resulting from all share-based payment transactions be recognized in the
      financial statements. It establishes fair value as the measurement objective
      in
      accounting for share-based payment arrangements and generally requires all
      companies to apply a fair-value-based measurement method in accounting for
      share-based payment transactions with employees. The Company adopted SFAS No.
      123R effective January 1, 2006, using the modified prospective
      application method in accordance with the statement. This application requires
      the Company to record compensation expense for all awards granted to employees
      and directors after the adoption date and for the unvested portion of awards
      that are outstanding at the date of adoption. The Company’s condensed
      consolidated financial statements as of and for the three months ended March
      31,
      2006, reflect the impact of SFAS No. 123R. In accordance with the modified
      prospective application method, the Company’s condensed consolidated financial
      statements for prior periods have not been restated to reflect and do not
      include the impact of SFAS No. 123R.





Prior
      to
      January 1, 2006, the Company had historically followed SFAS No. 123, "Accounting
      for Stock-Based Compensation," which permitted entities to continue to apply
      the
      provisions of Accounting Principles Board Opinion No. 25 ("APB 25") and provide
      pro forma net earnings (loss) disclosures for employee stock option grants
      as if
      the fair-value-based method defined in SFAS No. 123 had been applied. Under
      this
      method, compensation expense was recorded on the date of grant only if the
      then
      current market price of the underlying stock exceeded the exercise price. The
      following table presents the Company's pro forma net loss for the three months
      ended March 31, 2005, 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 March 31, 2005Net
                  loss - as reported
              
              $
              (3,965,573
              )Add:
                  Stock-based employee compensationincluded
                  in net loss as reported
              
              
              208,281Deduct:
                  Total stock-based employeecompensation
                  expense determined underfair
                  value method for all awards
              
              
              (296,708
              )Net
                  loss - pro forma
              
              $
              (4,054,000
              )Basic
                  net loss per share - as reported
              
              $
              (0.02
              )Basic
                  net loss per share - pro forma
              
              $
              (0.02
              )






13




Stock
      compensation cost is recognized on a straight-line basis over the vesting
      period. Stock compensation expense totaling $176,002 was charged to continuing
      operations during the three months ended March 31, 2006, including $94,233
      of
      expense resulting from the vesting of non-employee stock options granted in
      prior years and approximately $5,619 from the accelerated vesting of stock
      options issued to terminated employees. A total of $76,150 of the total stock
      compensation expense charged to continuing operations for the first quarter
      of
      2006 resulted from the adoption of SFAS No. 123R. During the three months ended
      March 31, 2005, stock compensation expense of $78,911 charged to continuing
      operations included $41,577 of expense related to non-employee stock options
      and
      $28,000 of expense related to the accelerated vesting of stock options issued
      to
      a terminated employee.





Stock
      compensation expense totaling $171,494 for the three months ended March 31,
      2005, 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.





At
      March
      31, 2006, there was approximately $525,000 of unrecognized compensation expense
      related to unvested stock options, which is expected to be recognized over
      a
      weighted-average period of 1.3 years.





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 2006: no dividend yield; an expected life of
      three years; 150% expected volatility and a risk free interest rate of 4.00%.
      The risk free interest rate is based on the U.S. Treasury yield in effect at
      the
      time of grant; the expected life is based on historical and expected exercise
      behavior; and expected volatility is based on the historical volatility of
      the
      Company’s stock price, over a time period that is consistent with the expected
      life of the option.





(6)
      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.





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.





14


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, tglo.com (formerly known as voiceglo Holdings,
      Inc. or “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 theglobe and
      voiceglo have made unauthorized use of “inventions” described and claimed in
      seven patents held by Sprint. Sprint seeks monetary and injunctive relief for
      this alleged infringement. On November 21, 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.
      voiceglo has counterclaimed against Sprint for a declaratory judgment of
      non-infringement and invalidity. On January 18, 2006, the court issued a
      Scheduling Order calling for, among other things, discovery to be completed
      by
      December 29, 2006, and for trial to commence August 7, 2007. 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.





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.





(7)
      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 VoIP telephony services division
      and the marketing services division. The computer games division currently
      consists of the operations of the Company's Computer Games magazine publication
      and the associated website 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 development of telecommunications services over
      the
      Internet for use by consumers. The marketing services division consisted of
      the
      discontinued operations of the Company's subsidiary, SendTec which was sold
      effective October 31, 2005 and has been excluded from 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.





15





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


Three
                  Months EndedMarch
                  31,2006
              
              2005NET
                  REVENUE FROM CONTINUING OPERATIONS:Computer
                  games
              
              $
              366,920
              
              $
              561,392Internet
                  services
              
              
              313,613
              
              
              --VoIP
                  telephony services
              
              
              20,624
              
              
              87,092$
              701,157
              
              $
              648,484OPERATING
                  LOSS FROM CONTINUING OPERATIONS:Computer
                  games
              
              $
              (304,213
              )
              $
              (315,154
              )Internet
                  services
              
              
              (981,122
              )
              
              --VoIP
                  telephony services
              
              
              (2,673,107
              )
              
              (3,322,862
              )Corporate
                  expenses
              
              
              (777,227
              )
              
              (723,176
              )Operating
                    loss from continuingoperations
              
              
              (4,735,669
              )
              
              (4,361,192
              )Other
                  income (expense), net
              
              
              191,056
              
              
              (233,805
              )Loss
                  from continuing operations before income tax
              
              $
              (4,544,613
              )
              $
              (4,594,997
              )DEPRECIATION
                  AND AMORTIZATION OF CONTINUING
                  OPERATIONS:Computer
                  games
              
              $
              6,988
              
              $
              7,719Internet
                  services
              
              
              78,726
              
              
              --VoIP
                  telephony services
              
              
              280,528
              
              
              268,633Corporate
                  expenses
              
              
              8,558
              
              
              9,579$
              374,800
              
              $
              285,931March
                  31,
              
              
              December
                  31,2006
              
              
              2005IDENTIFIABLE
                  ASSETS:Computer
                  games
              
              $
              434,264
              
              $
              637,417Internet
                  services
              
              
              788,194
              
              
              1,161,344VoIP
                  telephony services
              
              
              1,317,403
              
              
              1,817,809Corporate
                  assets*
              
              
              13,172,655
              
              
              17,794,871$
              15,712,516
              
              $
              21,411,441


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




16


**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 or spin-offs 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-K for the year ended December 31, 2005.




17


**OVERVIEW**





As
      of
      March 31, 2006, theglobe.com, inc. (the "Company" or "theglobe") managed three
      primary lines of business. One line of business consists of our historical
      network of three wholly-owned operations, each of which specializes in the
      games
      business by delivering games information and selling games in the United States
      and abroad. These operations are: our print publication business, which consists
      of Computer Games magazine; our online website business, which consists of
      our
      Computer Games Online website (www.cgonline.com), which is the online
      counterpart to our magazine publication; and our Chips & Bits, Inc.
      (www.chipsbits.com) games distribution company ("Chips & Bits"). The second
      line of business consists of our Internet Services business, Tralliance
      Corporation (“Tralliance”), a company which is the registry for the “.travel”
top-level Internet domain. We acquired Tralliance on May 9, 2005. Our third
      line
      of business, Voice over Internet Protocol ("VoIP") telephony services, includes
      tglo.com, inc. (formerly known as 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.




We
      sold
      the business and substantially all of the net assets of our marketing services
      technology business, SendTec, Inc. (“SendTec”) on October 31, 2005. The results
      of operations of SendTec have been reflected as “discontinued operations” within
      our condensed consolidated financial statements for the 2005
      period.





As
      of
      March 31, 2006, sources of our revenue from continuing operations were derived
      principally from the operations of our computer games related businesses and
      our
      Internet services business. Our VoIP products and services have yet to produce
      any significant revenue.





**BASIS
      OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**





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.




**DESCRIPTION
      OF BUSINESS---CONTINUING OPERATIONS**





**OUR
      COMPUTER GAMES BUSINESS**





In
      February 2000, the Company entered the computer games business by acquiring
      Computer Games Magazine, its associated website, CGOnline, and Chips & Bits,
      a games distribution business.





Computer
      Games Magazine is a consumer print magazine for personal computer (“PC”) gamers.
      As a leading consumer print publication for PC games, Computer Games Magazine
      boasts: a reputation for being a reliable, trusted, and engaging games magazine;
      more editorial, tips and hints than most other similar magazines; a
      knowledgeable editorial staff providing increased editorial integrity and
      content; and broad-based editorial coverage.





CGOnline
      ( www.cgonline.com )
      is the
      online counterpart to Computer Games magazine. CGOnline is a source of free
      computer games news and information for the sophisticated gamer, featuring
      news,
      reviews and previews. Features of CGOnline 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.





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 entered into a Loan and Purchase Option Agreement,
      as
      amended, with Tralliance in which theglobe agreed to fund, in the form of a
      loan, at the discretion of theglobe, 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 exclusive registry for the “.travel” top-level domain for an
      initial period of ten years. Renewal of the ICANN contract beyond the initial
      ten year term is conditioned upon the negotiation of renewal terms reasonably
      acceptable to ICANN. 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. Effective May 9, 2005, theglobe
      exercised its option to purchase Tralliance.





18


The
      establishment of the “.travel” top-level domain enables businesses,
      organizations, governmental agencies and other enterprises that operate within
      the travel and tourism industry to establish a unique Internet domain name
      from
      which to communicate and conduct commerce. An Internet domain name is made
      up of
      a top-level domain and a second-level domain. For example, in the domain name
      “companyX.travel”, “companyX” is the second-level domain and “.travel” is the
      top-level domain. As the registry for the “.travel” top-level domain, Tralliance
      is responsible for maintaining the master database of all second-level “.travel”
domain names and their corresponding Internet Protocol (“IP”)
      addresses.





To
      facilitate the “.travel” domain name registration process, Tralliance has
      entered into contracts with a number of registrars. These registrars act as
      intermediaries between Tralliance and customers (referred to as registrants)
      seeking to register “.travel” domain names. The registrars handle the billing
      and collection of registration fees, customer service and technical management
      of the registration database. Registrants can register “.travel” domain names
      for terms of one year (minimum) up to 10 years (maximum). The registrars retain
      a portion of the registration fee collected by them as their compensation and
      remit the remainder, presently $80 per domain name per year, of the registration
      fee to Tralliance.





In
      order
      to register a “.travel” domain name, a registrant must first be verified as
      being eligible (“authenticated”) by virtue of being a valid participant in the
      travel industry. Additionally, eligibility data is required to be updated and
      reviewed annually, subsequent to initial registration. Once authenticated,
      a
      registrant is only permitted to register “.travel” domain names that are
      publicly used or associated with the registrant’s business or organization.
      Tralliance has entered into contracts with a number of travel associations
      or
      other independent organizations (“authentication providers”) whereby, in
      consideration for the payment of fixed and/or variable fees, all required
      authentication procedures are performed by such authentication providers.
      Tralliance has also outsourced various other registry operations, database
      maintenance and policy formulation functions to certain other independent
      businesses or organizations in consideration for the payment of certain fixed
      and/or variable fees.





In
      launching the “.travel” top-level domain registry, Tralliance adopted a phased
      approach consisting of three distinct stages. During the third quarter of 2005,
      Tralliance implemented phase one, which consisted of a pre-authentication of
      a
      limited group of potential registrants. During the fourth quarter of 2005,
      Tralliance implemented phase two, which involved the registration of the limited
      group of registrants who had been pre-authenticated. It was during this limited
      registration phase that Tralliance initially began collecting registration
      fees
      from its “.travel” registrars. In January 2006, Tralliance commenced the final
      phase of its launch, which culminated in live “.travel” registry
      operations.





During
      the first quarter of 2006, Tralliance also began to offer consumers access
      to
      the “.travel” directory (the “Directory”). The Directory is a global online
      resource of travel data designed to precisely match the travel products and
      services of authenticated “.travel” registrants with consumers on a worldwide
      basis. Users can access the Directory via the Tralliance website, or by typing www.directory.travel into
      their web browser. All authenticated “.travel” registrants are offered the
      opportunity to include their specific travel profiles and products in the
      Directory, free of charge. It is anticipated that the Directory will become
      more
      useful to consumers over time, as additional travel businesses and organizations
      become “.travel” registrants and load their travel profiles into the Directory.





**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.
      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. During the fourth quarter of
      2005, the Company launched its new tglo.com website ( www.tglo.com )
      along
      with a new linked online community website called tglo Friends ( www.tglofriends.com ).
      The
      Company continues to develop and test certain new VoIP products and features
      and
      to terminate and/or modify certain existing product offerings.





19


The
      Company’s retail VoIP service plans include both “peer-to-peer” plans, for which
      subscribers can make calls free of charge over the Internet to other
      subscribers, and “paid” plans which involve interconnection with the PSTN and
      for which subscribers are charged certain fixed and/or variable service
      charges.





During
      2003 through 2005, the Company attempted to market and distribute its VoIP
      retail products through various direct and indirect sales channels including
      Internet advertising, structured customer referral programs, network marketing,
      television infomercials and partnerships with third party national retailers.
      None of the marketing and sales programs implemented during these years were
      successful in generating a significant number of “paid” plan customers or
      revenue. The Company’s marketing efforts during this period of time achieved
      limited successes in developing a “peer-to-peer” subscriber base of free service
      plan users. We currently derive no revenue from our “peer-to-peer” customer
      base.





At
      the
      present time, the Company intends to devote substantially all of its near-term
      marketing efforts in 2006 to continuing to expand its “peer-to-peer”, or free
      service plan, customer base and to develop ways to monetize such customer base
      once it reaches sufficient critical mass. To that end, the Company currently
      plans to add new “peer-to-peer” subscribers mainly through further developing
      and improving its own online community website ( www.tglofriends.com )
      and
      also by entering into marketing arrangements with other third party online
      community website enterprises.





**DESCRIPTION
      OF BUSINESS---DISCONTINUED OPERATIONS**





**DISCONTINUED
      OPERATIONS OF OUR MARKETING SERVICES BUSINESS**





As
      a
      result of our sale of the business and substantially all of the net assets
      of
      SendTec, our former marketing services technology business, on October 31,
      2005,
      the results of operations of SendTec have been reported separately as
“Discontinued Operations” for the three months ended March 31,
      2005.





On
      September 1, 2004, the Company acquired SendTec, a direct response marketing
      services and technology company. SendTec provided 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 was
      organized into two primary product line divisions: the DirectNet Advertising
      Division, which provided digital marketing services; and the Creative South
      Division, which provided creative production and media buying services.
      Additionally, its proprietary iFactz technology provided software tracking
      solutions that benefited both the DirectNet Advertising and Creative South
      businesses.





**RESULTS
      OF OPERATIONS**





The
      nature of our business has significantly changed from 2005 to 2006. On October
      31, 2005, we completed the sale of substantially all of the net assets and
      the
      business of SendTec, Inc. (“SendTec”), our former marketing services technology
      business. 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 Tralliance
      have been included in the Company's consolidated operating results from its
      date
      of acquisition. Primarily, as a result of the acquisition of Tralliance and
      the
      sale of SendTec, our results of operations for the three months ended March
      31,
      2006, are not necessarily comparable to our results of operations for the three
      months ended March 31, 2005.








20




**THREE
      MONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
      2005**





**CONTINUING
      OPERATIONS**





NET
      REVENUE. Net revenue totaled $701 thousand for the three months ended March
      31,
      2006 as compared to $648 thousand for the three months ended March 31, 2005,
      an
      increase of approximately 8% from the prior year period.





**NET
      REVENUE BY BUSINESS SEGMENT:**


Three
                  months ended March 31,
              
              2006
              
              2005Computer
                  games
              
              $
              366,920
              
              $
              561,392Internet
                  services
              
              
              313,613
              
              
              --VoIP
                  telephony services
              
              
              20,624
              
              
              87,092$
              701,157
              
              $
              648,484


Advertising
      revenue from the sale of print advertisements in the magazines published by
      our
      computer games business declined $126 thousand, or 32%, in the 2006 first
      quarter as compared to the same quarter of the prior year. Sales of electronic
      games and related products through Chips & Bits, Inc., our Internet-based
      retail distribution subsidiary, decreased $58 thousand, or 67%, in the 2006
      first quarter as compared to the first quarter of 2005.





Our
      Internet services business, Tralliance, contributed $314 thousand in net revenue
      during the first quarter of 2006. Tralliance, which was acquired in May 2005,
      began collecting fees for Internet domain name registrations in October 2005.
      Net revenue attributable to domain name registrations is recognized as revenue
      on a straight-line basis over the term of the registrations.





**OPERATING
      EXPENSES BY BUSINESS SEGMENT:**




Three
                months ended:
              
              
              Cost
                    of
                Revenue
              
              
              Sales
                    and
                Marketing
              
              
              ProductDevelopment
              
              
              General
                    and
                Administrative
              
              
              Depreciation
                  and
                Amortization
              
              
              TotalMarch
                31,
                2006Computer
                  games
              
              $
              251,583
              
              $
              146,990
              
              $
              129,851
              
              $
              135,721
              
              $
              6,988
              
              $
              671,133Internet
                  services
              
              
              130,159
              
              
              579,231
              
              
              —
              
              
              506,619
              
              
              78,726
              
              
              1,294,735VoIP
                  telephony services
              
              
              1,282,738
              
              
              208,807
              
              
              243,890
              
              
              677,768
              
              
              280,528
              
              
              2,693,731Corporate
                  expenses
              
              
              —
              
              
              —
              
              
              —
              
              
              768,669
              
              
              8,558
              
              
              777,227$
              1,664,480
              
              $
              935,028
              
              $
              373,741
              
              $
              2,088,777
              
              $
              374,800
              
              $
              5,436,826Cost
                    of
                Revenue
              
              
              Sales
                    and
                Marketing
              
              
              ProductDevelopment
              
              
              General
                    and
                Administrative
              
              
              Depreciation
                  and
                Amortization
              
              
              TotalMarch
                  31, 2005Computer
                  games
              
              $
              491,567
              
              $
              85,683
              
              $
              155,139
              
              $
              136,438
              
              $
              7,719
              
              $
              876,546VoIP
                  telephony services
              
              
              1,491,815
              
              
              695,592
              
              
              170,702
              
              
              783,212
              
              
              268,633
              
              
              3,409,954Corporate
                  expenses
              
              
              —
              
              
              —
              
              
              —
              
              
              713,597
              
              
              9,579
              
              
              723,176$
              1,983,382
              
              $
              781,275
              
              $
              325,841
              
              $
              1,633,247
              
              $
              285,931
              
              $
              5,009,676




COST
      OF
      REVENUE. Cost of revenue totaled $1.7 million for the three months ended March
      31, 2006, a decline of $319 thousand from the $2.0 million reported for the
      three months ended March 31, 2005.





Cost
      of
      revenue related to our computer games business segment consists primarily of
      printing costs of our games magazine, Internet connection charges, personnel
      costs, maintenance cost of website equipment and the costs of merchandise sold
      and shipping fees in connection with our online store. Approximately $159
      thousand, of the total $240 thousand decrease in cost of revenue of our computer
      games segment as compared to the first quarter of 2005 resulted from lower
      printing, paper and freight costs associated with the production of our magazine
      publications. We have reduced the total number of copies printed for each issue
      in the first quarter of 2006 as compared to the first quarter of 2005. The
      overall decline in net revenue of our computer games business segment as
      discussed above also contributed to the decrease in cost of revenue of that
      business segment as compared to the first quarter of 2005.





21


Cost
      of
      revenue of our VoIP telephony services business segment is principally comprised
      of carrier transport and circuit interconnection costs, as well as personnel
      and
      consulting costs incurred in support of our Internet telecommunications network.
      The $209 thousand decline in cost of revenue of our VoIP telephony services
      division as compared to the 2005 first quarter was due principally to a decrease
      in headcount of personnel supporting our Internet telecommunications network.





Cost
      of
      revenue of our Internet services division consists primarily of fees paid to
      third party service providers which provide outsourced services, including
      verification of registration eligibility, maintenance of the “.travel” directory
      of consumer-oriented registrant travel data, as well as other services. Fees
      for
      some of these services vary based on transaction levels. Fees incurred for
      outsourced services are generally deferred and amortized to cost of revenue
      over
      the term of the related domain name registration.





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 $935 thousand for the three months ended March 31,
      2006 versus $781 thousand for the same period in 2005. Tralliance, our new
      Internet services business, incurred $579 thousand of sales and marketing
      expenses during the 2006 first quarter, consisting primarily of advertising,
      public relations, promotional and trade show costs incurred in launching the
      “.travel” top-level domain registry. Sales and marketing expenses of the VoIP
      telephony services business segment decreased $487 thousand, or 70%, from the
      first quarter of 2005. 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 reduced its sales and marketing spending and presently intends
      to continue to limit its sales and marketing spending during the remainder
      of
      2006.





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 $374 thousand
      in the first quarter of 2006 as compared to $326 thousand in the first quarter
      of 2005.




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 $2.1 million in the first quarter of 2006 as compared to $1.6
      million for the same quarter of the prior year. The $456 thousand increase
      in
      consolidated general and administrative expenses as compared to the 2005 first
      quarter was primarily attributable to the $507 thousand of general and
      administrative expenses incurred by Tralliance, our new Internet services
      business. Travel-related costs involved in increasing awareness of the “.travel”
top-level domain incurred by Tralliance and personnel costs represented
      approximately 38% and 31% of the total general and administrative costs of
      the
      Internet services segment, respectively. As discussed in Note 5, “Stock Option
      Plans,” of the Notes to Condensed Consolidated Financial Statements, we adopted
      Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”) effective
      January 1, 2006 using the modified prospective application method. SFAS No.
      123R
      generally requires all companies to apply a fair-value-based measurement method
      in accounting for share-based payment transactions with employees and to
      recognize the related cost in its financial statements. As a result, general
      and
      administrative expenses of the corporate division for the first quarter of
      2006
      included approximately $76 thousand of stock compensation expense recognized
      in
      accordance with the requirements of SFAS No. 123R. Prior to January 1, 2006,
      we
      accounted for employee stock options pursuant to Accounting Principles Board
      Opinion No. 25 and financial results in the accompanying condensed consolidated
      financial statements for prior periods have not been restated to give effect
      to
      the provisions of SFAS No. 123R. At March 31, 2006, there was approximately
      $525,000 of unrecognized compensation expense related to unvested stock options,
      which is expected to be recognized over a weighted-average period of 1.3
      years.





22


DEPRECIATION
      AND AMORTIZATION. Depreciation and amortization expense totaled $375 thousand
      for the three months ended March 31, 2006 as compared to $286 thousand for
      the
      three months ended March 31, 2005. The increase in this expense category as
      compared to the same quarter of 2005 resulted principally from the $79 thousand
      of depreciation and intangible asset amortization expenses incurred by our
      Internet services business.





OTHER
      INCOME (EXPENSE), NET. Other income, net, totaled $191 thousand for the first
      quarter of 2006. In January 2006, we sold our Now Playing magazine
      publication and the related website resulting in a net gain of approximately
      $130 thousand. In addition, net interest income increased by approximately
      $66
      thousand in comparison to the first quarter of 2005. The cash proceeds received
      from the sale of our marketing services business, SendTec, Inc., in the fourth
      quarter of 2005 resulted in higher levels of funds available for investment
      in
      short-term securities during the first quarter of 2006 as compared to the same
      period of the prior year. Total other expense, net, of $234 thousand was
      reported for the first quarter of 2005, which consisted principally of reserves
      against amounts loaned by the Company to Tralliance prior to its
      acquisition.




INCOME
      TAXES. No tax benefit was recorded for the first quarter of 2006 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. As
      of
      December 31, 2005, the Company had net operating loss carryforwards available
      for U.S. tax purposes of approximately $147 million. These carryforwards expire
      through 2025. 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. During the first quarter
      of
      2005, an income tax benefit of approximately $240 thousand was recognized for
      continuing operations which served to offset the income tax provision of $256
      thousand recorded for discontinued operations.





**DISCONTINUED
      OPERATIONS**





Income
      from discontinued operations, net of income taxes totaled $389 thousand in
      the
      first quarter of 2005. As a result of the Company’s October 2005 sale of its
      SendTec marketing services business, the results of SendTec’s operations have
      been reported as discontinued operations in the accompanying condensed
      consolidated statement of operations for the three months ended March 31,
      2005.





**LIQUIDITY
      AND CAPITAL RESOURCES**





**CASH
      FLOW ITEMS**





As
      of
      March 31, 2006, we had approximately $12.4 million in cash and cash equivalents
      as compared to $16.5 million as of December 31, 2005. Net cash used in operating
      activities of continuing operations was $4.9 million and $3.1 million, for
      the
      three months ended March 31, 2006 and 2005, respectively. **** The
      increase in net cash used in operating activities of continuing operations
      of
      approximately $1.8 million as compared to the same quarter in 2005 resulted
      principally from the Company’s payment of its 2005 income tax liabilities, as
      well as an unfavorable accounts payable change compared to the prior year during
      the first quarter of 2006.





Net
      cash
      and cash equivalents of $786 thousand were provided by investing activities
      of
      continuing operations during the first quarter of 2006. As a result of the
      October 2005 sale of the SendTec business, we were required to place $1.0
      million of cash in an escrow account to secure our indemnification obligations.
      On March 31, 2006, pursuant to the related escrow agreement, $750 thousand
      of
      the escrow funds were released to the Company. The remaining $31 thousand in
      escrow funds released during the first quarter of 2006 represented funds which
      had been held in escrow in connection with sweepstakes promotions conducted
      by
      the VoIP telephony services division. During the first quarter of 2005, we
      used
      a total of $398 thousand in investing activities of continuing operations,
      including $160 thousand of capital expenditures and $230 thousand of loans
      to
      Tralliance prior to its acquisition by the Company.





Financing
      activities provided net cash and cash equivalents of $7 thousand during the
      2006
      first quarter as compared to a use of $27 thousand during the same quarter
      of
      the prior year. Payments on debt outstanding totaled $12 thousand and $31
      thousand during the first quarters of 2006 and 2005, respectively. Proceeds
      from
      the exercise of stock options and warrants totaled $18 thousand during the
      first
      quarter of 2006 and $4 thousand during the first quarter of 2005.




23


**FUTURE
      CAPITAL NEEDS**





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 operations of its Internet services and
      computer games businesses.





In
      order
      to offer our VoIP services, we have invested substantial time, capital and
      other
      resources on the development of our VoIP network. Our inability to generate
      any
      significant telephony revenue, and the fixed costs of operating our VoIP
      network, as well as marketing and other variable costs, has resulted in the
      Company incurring substantial losses during 2003, 2004, 2005 and the first
      quarter of 2006. In an effort to reduce the excess capacity of our VoIP network
      and to decrease the Company’s net losses, we recently developed a plan to
      reconfigure, phase-out and eliminate certain components of our VoIP network.
      The
      implementation of this plan, which was completed in April 2006, is expected
      to
      reduce the ongoing costs and expenses of operating our VoIP network by
      approximately $300 thousand per month. The implementation of this plan, which
      involved the renegotiation and/or termination of certain network agreements,
      also reduced minimum amounts payable for network data center and carrier circuit
      interconnection service expenses to be incurred during the next twelve months,
      exclusive of regulatory taxes, fees and charges, to approximately $800 thousand
      as of March 31, 2006, (down from $1.1 million as of December 31, 2005).





Management
      believes that it will be difficult to develop, grow and transform its VoIP
      business into profitability without the investment of significant additional
      capital and/or the development of mutually beneficial third-party strategic
      relationships. Accordingly, we have engaged financial advisors to assist the
      Company and are presently 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 and/or business partner, 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. The Company does not presently intend to expend funds
      in excess of $200 thousand in 2006 for VoIP capital expenditures or
      advertising programs.





During
      2005, the Company’s computer games business recognized certain incremental
      losses in connection with attempts to broaden and expand its business beyond
      games and into other areas of the entertainment industry. In developing its
      2006
      business plan, the Company decided to abort its diversification efforts and
      to
      refocus its strategy back to operating and improving its traditional games-based
      businesses. In this regard, the computer games division has recently completed
      the implementation of a number of revenue enhancement and cost-reduction
      programs geared mainly toward achieving profitability and positioning its
      computer games businesses for future growth.





Tralliance,
      the Company’s Internet services business, began collecting fees related to its
“.travel” registry business in October 2005. Having emerged from its development
      stage, Tralliance has recently completed 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.





As
      of May
      2, 2006, the Company’s total cash and cash equivalents balance was approximately
      $11.5 million, inclusive of $250 thousand held in escrow to secure the Company’s
      indemnification obligations related to the sale of the SendTec business. We
      believe that the Company’s current net cash and cash equivalents balance will
      provide sufficient liquidity to enable the Company to operate its remaining
      businesses on a going concern basis through at least the end of 2006. However,
      in order to ensure its longer term financial viability, the Company must
      complete the development of and successfully implement a new strategic business
      plan. Our new business plan may involve making certain changes to achieve
      profitability of existing businesses or may instead result in decisions to
      sell
      or dispose of certain businesses or components. Additionally, we may use a
      portion of our net cash balance to enter into one or more new businesses,
      through either acquisitions or internal development. 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. Because of uncertainties
      regarding the future direction and financial performance of the Company, there
      can be no assurance that the Company will be able to continue as a going concern
      beyond the end of 2006.





24


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
      may also become subject to the requirements of Rule 15g-9 of the Exchange Act
      if
      our net tangible assets should fall below $2.0 million. Under Rule 15g-9,
      brokers who recommend penny stocks 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. 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 2006 and 2005, 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.





**REVENUE
      RECOGNITION**





The
      Company's revenue from continuing operations was derived principally from the
      sale of print advertisements under short-term contracts in our magazine
      publication; through the sale of our magazine publication through newsstands
      and
      subscriptions; from the sale of video games and related products through our
      online store Chips & Bits; from the sale of Internet domain registrations
      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
      revenue for the Company's magazine publication is recognized at the on-sale
      date
      of the magazine.





Newsstand
      sales of the Company's magazine publication 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.





**INTERNET
      SERVICES**





Internet
      services net revenue consists of registration fees for Internet domain
      registrations, which generally have terms of one year, but may be up to ten
      years. Such registration fees are reported net of transaction fees paid to
      an
      unrelated third party which serves as the registry operator for the Company.
      Net
      registration fee revenue is recognized on a straight line basis over the term
      of
      the registration.





25


**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.





**DISCONTINUED
      OPERATIONS---MARKETING SERVICES**





Revenue
      from the distribution of Internet advertising was recognized when Internet
      users
      visited and completed actions at an advertiser's website. Revenue consisted
      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
      was 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, was recognized on a net basis when the
      associated media was aired. In many cases, the amount the Company billed to
      clients significantly exceeded the amount of revenue that was 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 were deferred.





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





**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.





**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:





26




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.





**IMPACT
      OF RECENTLY ISSUED ACCOUNTING STANDARDS**





In
      November 2005, the FASB issued final FASB Staff Position (“FSP”) FAS No. 123R-3,
“Transition Election Related to Accounting for the Tax Effects of Share-Based
      Payment Awards.” The FSP provides an alternative method of calculating excess
      tax benefits from the method defined in SFAS No. 123R for share-based payments.
      A one-time election to adopt the transition method in this FSP is available
      to
      those entities adopting SFAS No. 123R using either the modified retrospective
      or
      modified prospective method. Up to one year from the initial adoption of SFAS
      No. 123R or effective date of the FSP is provided to make this one-time
      election. However, until an entity makes its election, it must follow the
      guidance in SFAS No. 123R. The FSP is effective upon initial adoption of SFAS
      No. 123R and became effective for the Company in the first quarter of 2006.
      We
      are currently evaluating the allowable methods for calculating excess tax
      benefits and have not yet determined whether we will make a one-time election
      to
      adopt the transition method described in this FSP, nor the expected impact
      on
      our financial position or results of operations.





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
      No. 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 No. 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 adoption
      of
      this standard did not have a material impact on the Company’s financial
      condition, results of operations or liquidity.





27


In
      March
      2005, the FASB issued Interpretation 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
      believes that currently it does not have any legal obligations to record an
      asset retirement liability.





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
      adoption of this standard did not have a material impact on the Company’s
      financial condition, results of operations or liquidity.





In
      December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." This
      statement is a revision of SFAS No. 123, "Accounting for Stock-Based
      Compensation", supersedes Accounting Principles Board ("APB") Opinion No. 25,
      "Accounting for Stock Issued to Employees" and amends SFAS No. 95, “Statement of
      Cash Flows.” The statement eliminates the alternative to use the intrinsic value
      method of accounting that was provided in SFAS No. 123, which generally resulted
      in no compensation expense recorded in the financial statements related to
      the
      issuance of equity awards to employees. The statement also requires that the
      cost resulting from all share-based payment transactions be recognized in the
      financial statements. It establishes fair value as the measurement objective
      in
      accounting for share-based payment arrangements and generally requires all
      companies to apply a fair-value-based measurement method in accounting for
      share-based payment transactions with employees. In March 2005, the Securities
      and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin 107 which
      describes the SEC staff’s expectations in determining the assumptions that
      underlie the fair value estimates and discusses the interaction of SFAS No.
      123R
      with existing guidance. The Company has adopted SFAS No. 123R effective January
      1, 2006, using the modified prospective application method in accordance with
      the statement. This application requires the Company to record compensation
      expense for all awards granted after the adoption date and for the unvested
      portion of awards that are outstanding at the date of adoption. The Company
      expects that the adoption of SFAS No. 123R will result in charges to operating
      expense of continuing operations of approximately $194,000, $77,000 and $19,000,
      in the years ended December 31, 2006, 2007 and 2008, related to the unvested
      portion of outstanding employee stock options at December 31, 2005.





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 is effective
      for
      fiscal years beginning after June 15, 2005. The adoption of this statement
      did
      not have a material effect on the Company’s 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.




28




**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 March 31, 2006 **,** debt
      outstanding includes $3.4 million of fixed rate instruments with an aggregate
      average interest rate of 10.00% and $17,446 of variable rate instruments with
      an
      aggregate average interest rate of 7.91%. All debt outstanding as of the end
      of
      the first quarter of 2006 is either due on demand 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 $17,446 (U.S.) at March 31, 2006. Foreign
      currency exchange rate fluctuations do not have a material effect on our results
      of operations.





**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 March 31, 2006. 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 March 31, 2006 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.




29





**PART
      II - OTHER INFORMATION**








**ITEM
      1. LEGAL PROCEEDINGS**





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








**ITEM
      1A. 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 each year and we expect that we will
      continue to incur net losses for the foreseeable future. We had losses from
      continuing operations, net of applicable income tax benefits, of approximately
      $13.3 million, $24.9 million and $11.0 million for the years ended December
      31,
      2005, 2004 and 2003, respectively. We incurred a net loss from continuing
      operations of approximately $4.5 million for the three months ended March 31,
      2006. 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, including most recently as a result of
      the
      sale of our SendTec marketing services business, we still expect to continue
      to
      incur losses as we continue to develop our VoIP telephony services business
      and
      our Internet 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. At the present time, none of our business
      lines operate at a profit.





**WE
      MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN ON A LONG-TERM BASIS.**





We
      received a report from our independent accountants, relating to our December
      31,
      2005 audited financial statements, containing a paragraph stating that our
      recurring losses from operations and our accumulated deficit subject the Company
      to certain liquidity and profitability considerations. 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. Based upon the Company’s present cash resources and cash
      flow projections, 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 a 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 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 beyond the end of 2006
      (see
      the “Liquidity and Capital Resources” section of Management’s Discussion and
      Analysis of Financial Condition and Results of Operations for further
      details).





30





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





During
      our recent past, we have entered into a number of new business lines through
      acquisitions: VoIP telephony services, marketing services and Internet services.
      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:





o
            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.





**OUR
      NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED.**





As
      of
      December 31, 2005, we had net operating loss carryforwards potentially available
      for U.S. tax purposes of approximately $147 million. These carryforwards expire
      through 2025. 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.





31


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, BOTH DOMESTICALLY AND INTERNATIONALLY, WHICH COULD NEGATIVELY
      IMPACT OUR FINANCIAL CONDITION AND/OR OUR RESULTS OF OPERATIONS.**





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 and regulations have been and will likely 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 of 1994, 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.





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.




32


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.





**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.





We
      pursue
      the registration of our trademarks in the United States and, in some cases,
      internationally. We have been awarded and are also seeking additional 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 which remains pending
      against us and our tglo.com, inc. subsidiary (formerly known as voiceglo
      Holdings, Inc.) 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;




33




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.





**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 and Internet
                advertising and electronic commerce;





o
            the
                addition or loss of advertising clients of our computer games businesses,
                subscribers to our magazine, “.travel” domain name registrants, VoIP
                customers and electronic commerce partners on our websites;




34




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,
      particularly as it pertains to our VoIP and Internet services businesses. 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
            generate
                and maintain adequate levels of “.travel” domain name registrations;





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





o
            maintain
                or increase advertising revenue for our magazine;





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





o
            identify,
                attract, retain and motivate qualified personnel.





**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.





35


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. 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.





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





Our
      principal servers are located in areas throughout the eastern region of the
      United States 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 websites, databases or our supporting information technology
      networks. 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.





36


**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 any litigation may
      be
      expensive and divert management's attention from day-to-day operations. An
      adverse outcome in any litigation could materially and adversely affect our
      results of operations and financial position and may utilize a significant
      portion of our cash resources.





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





The
      Securities and Exchange Commission (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
      have
      not yet developed a 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.





37


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 a Section 404 plan on
      a
      timely basis. The Company's liquidity position in 2006 and 2007 may also impact
      our ability to adequately fund our Section 404 efforts.





Even
      if
      we timely complete a 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
      CONTINUE TO ADVERSELY AFFECT OUR LIQUIDITY AND FINANCIAL CONDITION.**





We
      entered into a number of agreements (generally for initial terms of one year,
      with the terms of several agreements extending beyond one year) for leased
      communications transmission capacity and data center facilities with various
      carriers and other third parties. In April 2006, we completed the implementation
      of a plan to reconfigure, phase-out and eliminate certain components of our
      VoIP
      network. Although the implementation of this plan, which involved the
      renegotiation and/or termination of certain network agreements, is expected
      to
      reduce the ongoing costs of operating our VoIP network by approximately $300
      thousand per month, the minimum amounts payable under these agreements and
      the
      underlying current capacity of our VoIP network still greatly exceeds our
      current estimates of customer demand and usage for the foreseeable future.
      If we
      are not able to generate sufficient levels of VoIP telephony revenue, or
      alternatively further reduce our network operating costs in future periods,
      our
      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;





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 and our efforts to create brand recognition.





38


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 TELECOMMUNICATIONS SERVICES AT ATTRACTIVE RATES
      ARISE IN LARGE PART FROM THE FACT THAT VOIP SERVICES ARE NOT CURRENTLY SUBJECT
      TO THE SAME REGULATION OR TAXATION AS TRADITIONAL TELEPHONY.**





In
      the
      United States, the Federal Communications Commission (the "FCC") has so far
      declined to make a general conclusion that all forms of VoIP services constitute
      telecommunications services (rather than information services). Because their
      services are not currently regulated to the same extent as telecommunications
      services, some VoIP providers, such as the Company, can currently avoid paying
      certain charges and incurring certain costs and expenses that traditional
      telephone companies must pay and incur. Many traditional telephone operators
      are
      lobbying the 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.





On
      March
      10, 2004, the FCC released its IP-Enabled Services Notice of Proposed Rulemaking
      which included guidelines and questions upon which it is seeking public comment
      to determine what regulation, if any, will govern companies that provide VoIP
      services. Specifically, the FCC has expressed an intention to further examine
      the question of whether certain forms of phone-to-phone VoIP services are
      information services or telecommunications services. The two classifications
      are
      treated differently in several respects, with certain information services
      being
      regulated to a lesser degree than telecommunications services. The FCC has
      noted
      that certain forms of phone-to-phone VoIP services bear many of the same
      characteristics as more traditional voice telecommunications services and lack
      the characteristics that would render them information services.





In
      addition to regulation by the FCC, we currently face potential regulation by
      state governments and their respective agencies. Although VoIP services are
      presently largely unregulated by the state governments, such state governments
      and their regulatory authorities may assert jurisdiction over the provision
      of
      intrastate IP communications services where they believe that their
      telecommunications regulations are broad enough to cover regulation of IP
      services. A number of state regulators have recently taken the position that
      VoIP providers are telecommunications providers and must register as such within
      their states. VoIP operators have resisted such registration on the position
      that VoIP is not, and should not be, subject to such regulations because VoIP
      is
      an information service, not a telecommunications service and because VoIP is
      interstate in nature, not intrastate. Various state regulatory authorities
      have
      initiated proceedings to examine the regulatory status of Internet telephony
      services and, in several cases, rulings have been obtained to the effect that
      the use of the Internet to provide certain interstate services does not exempt
      an entity from paying intrastate access charges in the jurisdictions in
      question. The FCC has stated in at least one case that multiple state regulatory
      regimes could violate the Commerce Clause because of the unavoidable effect
      that
      regulation on an intrastate component would have on interstate use of the
      service. However, we cannot predict the ultimate impact of this ruling or
      whether the facts of that case are so unique as to be inapplicable to our VoIP
      operations. As state governments, courts, and regulatory authorities continue
      to
      examine the regulatory status of Internet telephony services, they could render
      decisions or adopt regulations affecting providers of VoIP or requiring such
      providers to pay intrastate access charges or to make contributions to universal
      service funding. Should the FCC determine to regulate IP services, states may
      decide to follow the FCC's lead and impose additional obligations as
      well.





If
      providers of VoIP services, such as the Company, become subject to additional
      regulation by the FCC or any state regulatory agencies, the cost of complying
      with such additional regulation would likely increase the costs of providing
      such services. In addition, the FCC or any such state agencies may impose new
      surcharges, taxes, fees and/or other charges upon providers or users of VoIP
      services. Such charges could include, among others, access charges payable
      to
      local exchange carriers to carry and terminate traffic, contributions to the
      Universal Service Fund or other charges. Such new charges would likely increase
      our cost of VoIP operations and, to the extent that any or all of them are
      passed along to our VoIP customers, they could adversely affect our revenues
      from our VoIP services. Accordingly, more aggressive state and/or federal
      regulation of Internet telephony providers and VoIP services may adversely
      affect our VoIP business operations, and ultimately our financial condition,
      operating results and future prospects.





39




**RECENT
      REGULATORY ENACTMENTS BY THE FCC REQUIRE US TO PROVIDE ENHANCED EMERGENCY 911
      DIALING CAPABILITIES TO SUBSCRIBERS OF OUR INTERCONNECTED VOIP SERVICES AND
      TO
      COMPLY WITH THE REQUIREMENTS OF THE COMMUNICATIONS ASSISTANCE FOR LAW
      ENFORCEMENT ACT OF 1994. THESE REQUIREMENTS WILL RESULT IN INCREASED COSTS
      AND
      RISKS ASSOCIATED WITH OUR DELIVERY OF INTERCONNECTED VOIP SERVICES, INCLUDING
      DISCONTINUATION OF SUCH SERVICES WITH RESPECT TO A POTENTIALLY MATERIAL PORTION
      OF OUR INTERCONNECTED VOIP SUBSCRIBERS.**





On
      June
      3, 2005, the FCC released the "IP-Enabled Services and E911 Requirements for
      IP-Enabled Service Providers, First Report and Order and Notice of Proposed
      Rulemaking" (the "E911 Order"). The E911 Order requires, among other things,
      that providers of "Interconnected VoIP Service" ("Interconnected VoIP
      Providers") supply enhanced emergency 911 dialing capabilities ("E911") to
      their
      subscribers no later than 120 days from the effective date of the E911 Order.
      The effective date of the E911 Order is July 29, 2005. Additionally, the E911
      Order ** requires
      each Interconnected VoIP Provider to file with the FCC a compliance letter
      on or
      before November 28, 2005 detailing its compliance with the above E911
      requirements. For purposes of the E911 Order, "Interconnected VoIP Service"
      is
      defined as a VoIP service that: (1) enables real-time, two-way voice
      communications; (2) requires a broadband connection from the user’s location;
      (3) requires Internet protocol-compatible customer premises equipment; and
      (4)
      permits users generally to receive calls that originate on the public switched
      telephone network and to terminate calls to the public switched telephone
      network.





As
      part
      of the E911 capabilities required to be provided pursuant to the E911 Order,
      Interconnected VoIP Providers are required to mimic the E911 emergency calling
      capabilities offered by traditional landline phone companies. Specifically,
      all
      Interconnected VoIP Providers must deliver 911 calls to the appropriate local
      public safety answering point ("PSAP"), along with call back number and location
      information with respect to the user making the 911 call. Such E911 capabilities
      must be included in the basic service offering of the Interconnected VoIP
      Providers; it cannot be an optional or extra feature. The PSAP delivery
      obligation, including call back number and location information, must be
      provided regardless of whether the service is "fixed," such as where the service
      is being provided to a fixed location via wireline technology, or "nomadic,"
      such as where the service is being provided to a mobile location via wireless
      technology. In some cases, the requirement to provide location information
      to
      the appropriate PSAP relies on the user to self-report his or her location.
      The
      E911 Order, however, provides that the FCC intends, through a future order,
      to
      adopt an advanced E911 solution for interconnected VoIP services that must
      include a method for determining a user’s location without assistance from the
      user as well as firm implementation deadlines for that solution.





Additionally,
      the E911 Order required that, by July 29, 2005 (the effective date of the E911
      Order), each Interconnected VoIP Provider must have: (1) specifically advised
      every new and existing subscriber, prominently and in plain language, of the
      circumstances under which the E911 capabilities service may not be available
      through its VoIP services or may in some way be limited by comparison to
      traditional landline E911 services; (2) obtained and kept a record of
      affirmative acknowledgement from all subscribers, both new and existing, of
      having received and understood the advisory described in the preceding item
      (1);
      and (3) distributed to its existing subscribers warning stickers or other
      appropriate labels warning subscribers if E911 service may be limited or not
      available and instructing the subscriber to place them on or near the equipment
      used in conjunction with the provider's VoIP services. We complied with the
      requirements set forth in the preceding items (1) and (3). However, despite
      engaging in significant efforts, as of August 10, 2005, we had received the
      affirmative acknowledgements required by the preceding item (2) from less than
      15% of our Interconnected VoIP Service subscribers.





On
      July
      26, 2005, noting the efforts made by Interconnected VoIP Providers to comply
      with the E911 Order's affirmative acknowledgement requirement, the Enforcement
      Bureau of the FCC (the "EB") released a Public Notice communicating that, until
      August 30, 2005, it would not initiate enforcement action against any
      Interconnected VoIP Provider with respect to such affirmative acknowledgement
      requirement on the condition that the provider file a detailed report with
      the
      FCC by August 10, 2005. The Public Notice provided that the report must set
      forth certain specific information relating to the provider's efforts to comply
      with the requirements of the E911 Order. Furthermore, the EB stated its
      expectation that that if an Interconnected VoIP Provider had not received such
      affirmative acknowledgements from 100% of its existing subscribers by August
      29,
      2005, then the Interconnected VoIP Provider would disconnect, no later than
      August 30, 2005, all subscribers from whom it has not received such
      acknowledgements.





On
      August
      26, 2005, the EB released another Public Notice communicating that it would
      not,
      until September 28, 2005, initiate enforcement action regarding the affirmative
      acknowledgement requirement against any provider that: (1) previously filed
      the
      compliance report required by the July 26 Public Notice on or before August
      10,
      2005; and (2) filed two separate updated reports with the FCC by September
      1,
      2005 and September 22, 2005 containing certain additional required information
      relating to such provider's compliance efforts with respect to the E911 Order's
      requirements. The EB further stated in the second Public Notice its expectation
      that, during the additional period of time afforded by the extension, all
      Interconnected VoIP Providers that qualified for such extension would continue
      to use all means available to them to obtain affirmative acknowledgements from
      all of their subscribers.





40


On
      September 27, 2005, the EB released a third Public Notice communicating that
      it
      would not seek enforcement action regarding the affirmative acknowledgement
      requirement against any provider that had received acknowledgements from at
      least 90% of their applicable VoIP subscribers. Furthermore, the EB communicated
      in the third Public Notice that, with respect to any providers that had not
      received acknowledgements from at least 90% of their applicable VoIP
      subscribers, the EB would not initiate enforcement action regarding the
      affirmative acknowledgement requirement until October 31, 2005, provided that
      such providers filed a status report regarding their respective compliance
      efforts by October 25, 2005.





Although
      we have engaged in efforts to comply with all of the requirements of the E911
      Order, as of November 28, 2005 and as of December 31, 2005, we were not able
      to
      provide the E911 capabilities required by the E911 Order to our Interconnected
      VoIP Service subscribers. Moreover, we did not file the compliance letter with
      respect to our compliance efforts on November 28, 2005 as required by the E911
      Order. The Company did comply with the reporting requirements of the EB's Public
      Notices issued on July 26, 2005, August 26, 2005 and September 27, 2005.
      Accordingly, the Company qualified for the September 28, 2005 and October 31,
      2005 extensions with respect to the E911 Order's requirement to obtain the
      required acknowledgements from our Interconnected VoIP Service subscribers.





As
      of May
      2, 2006, we have notified all of the Company’s existing customers of products
      that are subject to the E911 Order that these products are being discontinued.
      The Company believes that its remaining products are not subject to the E911
      Order. If, in the future, the Company decides to deliver products that are
      subject to the E911 Order, it will use its best efforts to implement appropriate
      solutions at that time. For the twelve months ended December 31, 2005 and the
      three months ended March 31, 2006, our aggregate net revenues for VoIP services,
      including, without limitation, revenue for Interconnected VoIP Services, totaled
      approximately $249,000, or 10%, and approximately $21,000, or 3%, of the
      Company's aggregate net revenue from continuing operations, respectively. Even
      assuming our full compliance with the E911 Order, such compliance and our
      efforts to achieve such compliance, would increase our cost of doing business
      in
      the VoIP arena.





In
      addition to the E911 Order, on September 23, 2005, the FCC released a First
      Report and Order and Notice of Proposed Rulemaking (the "CALEA Order") in which
      it concluded that providers of "Interconnected VoIP Service" constitute
      telecommunications carriers for purposes of the Communications Assistance for
      Law Enforcement Act of 1994 ("CALEA") even when those providers are not
      telecommunications carriers under the Communications Act of 1934. CALEA requires
      telecommunications carriers to assist law enforcement officials in executing
      electronic surveillance pursuant to court order or other lawful authorization
      and requires carriers to design or modify their systems to ensure that
      lawfully-authorized electronic surveillance can be performed. For purposes
      of
      the CALEA Order, the term "Interconnected VoIP Service" is defined in the same
      way as it is defined in the E911 Order. Accordingly, Interconnected VoIP
      Providers are now required to comply with all of the requirements of CALEA
      no
      later than 18 months from the effective date of the CALEA Order. The FCC notes
      in the CALEA Order that it will release another order that will address separate
      questions regarding the assistance capabilities required of the Interconnected
      VoIP Providers. The CALEA Order provides that such subsequent order will
      address, among other matters, issues such as compliance extensions and
      exemptions, cost recovery, identification of future services and entities
      subject to CALEA, and enforcement. The Company is currently evaluating how
      and
      to what extent it will need to modify its technology infrastructure and systems
      in order to timely comply with the requirements of the CALEA Order. However,
      any
      such compliance efforts are likely to increase our costs of providing our
      Interconnected VoIP Services and adversely affect our results of operations
      from
      such services.





We
      cannot
      predict whether in the future the FCC or any state or other regulatory agencies
      will expand their regulations, or implement new ones, so as to include VoIP
      services other than Interconnected VoIP Services within the scope of such
      regulations. ****





41




**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.**





Although
      the use of private IP networks to provide voice services over the Internet
      is
      currently permitted by United States federal law and largely unregulated within
      the United States, several foreign governments have adopted laws and/or
      regulations that could restrict or prohibit the provision of voice
      communications services over the Internet or private IP networks. The regulatory
      treatment of IP communications outside the United States varies significantly
      from country to country. Some countries currently impose little or no regulation
      on Internet telephony services, as in the United States. Other countries,
      including those in which the governments prohibit or limit competition for
      traditional voice telephony services, generally do not permit Internet telephony
      services or strictly limit the terms under which those services may be provided.
      Still other countries regulate Internet telephony services like traditional
      voice telephony services, requiring Internet telephony companies to make various
      telecommunications service contributions and pay other taxes.





Internationally,
      the European Union has also enacted several directives relating to the Internet.
      The European Union has, for example, adopted a directive that imposes
      restrictions on the collection and use of personal data. Under the directive,
      citizens of the European Union are guaranteed rights to access their data,
      rights to know where the data originated, rights to have inaccurate data
      rectified, rights to recourse in the event of unlawful processing and rights
      to
      withhold permission to use their data for direct marketing. The directive could,
      among other things, affect U.S. companies that collect or transmit information
      over the Internet from individuals in European Union member states, and will
      impose restrictions that are more stringent than current Internet privacy
      standards in the U.S. In particular, companies with offices located in European
      Union countries will not be allowed to send personal information to countries
      that do not maintain adequate standards of privacy. Compliance with these laws
      is both necessary and difficult. Failure to comply could subject us to lawsuits,
      fines, criminal penalties, statutory damages, adverse publicity, and other
      losses that could harm our business. Changes to existing laws or the passage
      of
      new laws intended to address these privacy and data protection and retention
      issues could directly affect the way we do business or could create uncertainty
      on the Internet. This could reduce demand for our services, increase the cost
      of
      doing business as a result of litigation costs or increased service or delivery
      costs, or otherwise harm our business.





Other
      laws that reference the Internet, such as the European Union's Directive on
      Distance Selling and Electronic Commerce has begun to be interpreted by the
      courts and implemented by the European Union member states, but their
      applicability and scope remain somewhat uncertain. Regulatory agencies or courts
      may claim or hold that we or our users are either subject to licensure or
      prohibited from conducting our business in their jurisdiction, either with
      respect to our services in general, or with respect to certain categories or
      items of our services. In addition, because our services are accessible
      worldwide, and we facilitate VoIP telephony services to users worldwide, foreign
      jurisdictions may claim that we are required to comply with their laws. For
      example, the Australian high court has ruled that a U.S. website in certain
      circumstances must comply with Australian laws regarding libel. As we expand
      our
      international activities, we become obligated to comply with the laws of the
      countries in which we operate. Laws regulating Internet companies outside of
      the
      U.S. may be less favorable than those in the U.S., giving greater rights to
      consumers, content owners, and users. Compliance may be more costly or may
      require us to change our business practices or restrict our service offerings
      relative to those in the U.S. Our failure to comply with foreign laws could
      subject us to penalties ranging from criminal prosecution to bans on our
      services.





**NEW
      LAWS AND REGULATIONS AFFECTING THE INTERNET GENERALLY MAY INCREASE OUR COSTS
      OF
      COMPLIANCE AND DOING BUSINESS, DECREASE THE GROWTH IN INTERNET USE, DECREASE
      THE
      DEMAND FOR OUR SERVICES OR OTHERWISE HAVE A MATERIAL ADVERSE EFFECT ON OUR
      BUSINESS.**





Today,
      there are still relatively few laws specifically directed towards online
      services. However, due to the increasing popularity and use of the Internet
      and
      online services, many laws and regulations relating to the Internet are being
      debated at all levels of governments around the world and it is possible that
      such laws and regulations will be adopted. It is not clear how existing laws
      governing issues such as property ownership, copyrights and other intellectual
      property issues, taxation, libel and defamation, obscenity, and personal privacy
      apply to online businesses. The vast majority of these laws were adopted prior
      to the advent of the Internet and related technologies and, as a result, do
      not
      contemplate or address the unique issues of the Internet and related
      technologies. In the United States, Congress has recently adopted legislation
      that regulates certain aspects of the Internet, including online content, user
      privacy and taxation. In addition, Congress and other federal entities are
      considering other legislative and regulatory proposals that would further
      regulate the Internet. Congress has, for example, considered legislation on
      a
      wide range of issues including Internet spamming, database privacy, gambling,
      pornography and child protection, Internet fraud, privacy and digital
      signatures. For example, Congress recently passed and the President signed
      into
      law several proposals that have been made at the U.S. state and local level
      that
      would impose additional taxes on the sale of goods and services through the
      Internet. These proposals, if adopted, could substantially impair the growth
      of
      e-commerce, and could diminish our opportunity to derive financial benefit
      from
      our activities. For example, in December 2004, the U.S. federal government
      enacted the Internet Tax Nondiscrimination Act (the "ITNA"). While the ITNA
      generally extends through November 2007 the moratorium on taxes on Internet
      access and multiple and discriminatory taxes on electronic commerce, it does
      not
      affect the imposition of tax on a charge for voice or similar service utilizing
      Internet Protocol or any successor protocol. In addition, the ITNA does not
      prohibit federal, state, or local authorities from collecting taxes on our
      income or from collecting taxes that are due under existing tax rules.





42


Various
      states have adopted and are considering Internet-related legislation. Increased
      U.S. regulation of the Internet, including Internet tracking technologies,
      may
      slow its growth, particularly if other governments follow suit, which may
      negatively impact the cost of doing business over the Internet and materially
      adversely affect our business, financial condition, results of operations and
      future prospects. Legislation has also been proposed that would clarify the
      regulatory status of VoIP service. The Company has no way of knowing whether
      legislation will pass or what form it might take. Domain names have been the
      subject of significant trademark litigation in the United States and
      internationally. The current system for registering, allocating and managing
      domain names has been the subject of litigation and may be altered in the
      future. The regulation of domain names in the United States and in foreign
      countries may change. Regulatory bodies are anticipated to establish additional
      top-level domains and may appoint additional domain name registrars or modify
      the requirements for holding domain names, any or all of which may dilute the
      strength of our names. 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
      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/or 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 and Sprint, either presently or potentially compete or can
      compete directly with us. Other Internet telephony service providers, such
      as
      Skype, Net2Phone, Vonage, Go2Call 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. AOL, Google and Yahoo! also now offer new services
      that have features similar to some of our products and services. 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.





43


**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.





**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**





**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
      magazine, 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 us or that
      we
      will be successful in selling advertising to new advertisers.





44


**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
      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.





45





**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.





Should
      our “.travel” registry contract be terminated early by ICANN, we would likely
      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.





46








**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 May
      2, 2006, we had issued and outstanding approximately 174.7 million shares,
      of
      which approximately 70.1 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. Most of our outstanding restricted shares
      of Common Stock were issued more than one year ago and are therefore eligible
      to
      be resold over the public markets pursuant to Rule 144 promulgated under the
      Securities Act of 1933, as amended.





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.





In
      addition, as of March 31, 2006, there were outstanding options to purchase
      approximately 15.7 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 May 2, 2006, we had issued and outstanding warrants to acquire approximately
      7.3 million shares of our Common Stock. 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 May 2, 2006, 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 MAY BECOME SUBJECT TO CERTAIN "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 would be subject to the requirements of Rule 15g-9 of the Exchange
      Act if our net tangible assets were to fall below $2.0 million. Under Rule
      15g-9, brokers who recommend penny stocks 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.





47


**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.





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





(a)
      Unregistered Sales of Equity Securities.





None.





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





Not
      applicable.





48


**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**





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.








49





**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.


*Dated:
              May 10,
              2006*
            *theglobe.com,
              inc.**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)*


50





**EXHIBIT
      INDEX**




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.





51