<PAGE>

     As filed with the Securities and Exchange Commission on May 15, 2001

                       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, 2001

                                       or

   [  ]  Transition report pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

     For the transition period from _______________ to ___________________

                          Commission File No. 0-25053

                               theglobe.com, inc.

             (Exact Name of Registrant as Specified in Its Charter)

             State of Delaware                           14-1782422
          ----------------------                       --------------
         (State or Other Jurisdiction of               (I.R.S. Employer
        Incorporation or Organization)               Identification No.)

                120 Broadway
                New York, New York                              10271
       ----------------------------------------               ----------
       (Address of Principal Executive Offices)               (Zip Code)

                                 (212) 894-3600

               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.

  Yes X  No

  The number of shares outstanding of the Registrant's Common Stock, $.001 par
value (the "Common Stock"), as of May 8, 2001 was 30,365,901.
<PAGE>

                               theglobe.com, inc.

                                   FORM 10-Q

                                     INDEX

                         PART I   FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                  <C>
  Item 1.  Condensed Consolidated Financial Statements

           Condensed Consolidated Balance Sheets at  March 31, 2001 (unaudited)
             and December 31, 2000                                                        1

           Unaudited Condensed Consolidated Statements of
             Operations for the three months ended March 31, 2001 and 2000                2

           Unaudited Condensed Consolidated Statements of Cash
             Flows for the three months ended March 31, 2001 and 2000                     3

           Notes to Unaudited Condensed Consolidated Financial Statements                 4


  Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                                         10

  Item 3.  Qualitative and Quantitative Disclosures about
             Market Risk                                                                 27

<CAPTION>
                          PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                             II-1
<S>                                                               <C>

  Item 2.  Changes in Securities and Use of Proceeds                                   II-1

  Item 3.  Defaults Upon Senior Securities                                             II-1

  Item 4.  Submission of Matters to a Vote of Security Holders                         II-1

  Item 5.  Other Information                                                           II-1

  Item 6.  Exhibits and Reports on Form 8-K                                            II-1

       A.  Exhibits
       B.  Reports on Form 8-K

  Signatures                                                                           II-3
</TABLE>
<PAGE>

                         PART I  FINANCIAL INFORMATION

  ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               theglobe.com, inc.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                March 31,      December 31,
                                                                  2001            2000
                                                              -------------    -------------
                                                               (unaudited)
<S>                                                           <C>             <C>
    ASSETS
Current assets:
 Cash and cash equivalents..................................  $   5,812,942   $   13,349,554
 Short-term investments.....................................      3,011,730        2,996,250
 Accounts receivable, net...................................      3,416,499        4,316,973
Prepaid and other current assets............................      2,419,859        2,439,382
                                                              -------------   --------------
   Total current assets.....................................     14,661,030       23,102,159
Restricted investments......................................      3,521,289        3,485,007
Property and equipment, net.................................      7,102,922        7,975,967
Goodwill and other intangible assets, net...................     17,071,086       19,967,910
                                                              -------------   --------------
   Total assets.............................................  $  42,356,327   $   54,531,043
                                                              =============   ==============
     LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable...........................................  $   2,971,138   $    2,677,679
 Accrued expenses...........................................      1,961,583        2,540,289
 Accrued compensation.......................................         23,725        1,670,088
Deferred revenue............................................        454,371          729,027
Current portion of long-term debt and current installments
   of capital lease obligations.............................      1,724,742        1,917,077
                                                              -------------   --------------
   Total current liabilities................................      7,135,559        9,534,160
Long-term debt and capital lease obligations, excluding
  current installments......................................        215,848          498,337
Deferred rent...............................................        561,724          552,227

Stockholders' equity:
 Common stock...............................................         31,082           31,080
 Common stock held in treasury, at cost.....................       (371,458)        (371,458)
 Additional paid-in capital.................................    218,255,565      218,254,968
 Accumulated other comprehensive loss.......................       (102,065)         (55,682)
 Accumulated deficit........................................   (183,369,928    ( 173,912,589)
                                                              -------------   --------------
   Total stockholders' equity...............................     34,443,196       43,946,319
Commitments and contingencies...............................
   Total liabilities and stockholders' equity...............  $  42,356,327   $   54,531,043
                                                              =============   ==============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                     - 1 -
<PAGE>

                               theglobe.com, inc.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                Three Months Ended
                                                                   March 31,
                                                          ----------------------------
                                                              2001           2000
                                                          ----------------------------
                                                                  (unaudited)
<S>                                                      <C>            <C>
Revenues:
 Advertising...........................................   $ 2,323,967    $   4,615,042
 Electronic commerce and other.........................     2,423,209        2,364,143
                                                          -----------    -------------
  Total revenues.......................................     4,747,176        6,979,185

Cost of revenues.......................................     3,678,744        4,407,998
                                                          -----------    -------------

Gross profit...........................................     1,068,432        2,571,187

Operating expenses:
 Sales and marketing...................................     3,794,095        5,597,098
 Product development...................................     1,799,924        2,967,747
 General and administrative............................     2,083,424        3,211,043
 Amortization of goodwill and intangible assets........     2,843,097        7,624,170
                                                          -----------    -------------

Total operating expenses...............................    10,520,540       19,400,058
                                                          -----------    -------------

Loss from operations...................................    (9,452,108)     (16,828,871)

Interest and other income, net.........................        96,482          420,046
                                                          -----------    -------------

Loss before provision for income taxes.................    (9,355,626)     (16,408,825)

Provision for income taxes.............................       101,713           70,170
                                                          -----------    -------------

Net loss                                                  $(9,457,339    $(16,478,995)
                                                          ===========    =============

Basic and diluted net loss per share...................   $     (0.31)   $      (0.57)
                                                          ===========    =============

Weighted average basic and diluted shares outstanding..    30,382,036       28,804,530
                                                          ===========    =============

</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.

                                     - 2 -
<PAGE>

                               theglobe.com, inc.
           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>


                                                                  Three Months Ended
                                                                         March 31,
                                                                -------------------------
                                                                2001               2000
                                                                -------------------------
                                                                       (unaudited)
<S>                                                             <C>           <C>
Cash flows from operating activities:
 Net loss.....................................................  $(9,457,339)  $(16,478,995)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
   Depreciation and amortization..............................    4,177,648      8,559,097
   Loss on sale of short-term securities......................            0        134,852
Deferred rent.................................................        9,497         28,491
 Other........................................................      (15,480)        51,695
Changes in operating assets and liabilities,
   net of effect of acquisitions:
   Accounts receivable, net...................................      900,474         35,552
Prepaid and other current assets..............................       19,523       (803,045)
   Other assets...............................................            0         93,750
   Accounts payable...........................................      293,369     (1,490,032)
   Accrued expenses...........................................     (578,706)     1,008,756
   Accrued compensation.......................................   (1,646,363)      (424,487)
   Deferred revenue...........................................     (274,656)       310,666
                                                                -----------   ------------
Net cash used in operating activities.........................   (6,572,033)    (8,973,700)
                                                                -----------   ------------
Cash flows from investing activities:
 Purchases of short-term securities...........................            0     (7,202,800)
 Proceeds from sale and maturities of short-term securities...            0      2,620,202
 Purchases of property and equipment..........................     (407,689)    (1,663,115)
 Cash paid for acquisitions, net of cash acquired.............            0       (374,872)
Payments of security deposits, net............................      (36,282)    (1,499,793)
                                                                -----------   ------------
Net cash used in investing activities.........................     (443,971)    (8,120,378)
                                                                -----------   ------------
Cash flows from financing activities:
 Payments under capital lease obligations.....................     (474,824)      (469,121)
 Payments of long-term debt...................................            0        (56,321)
 Proceeds from exercise of common stock
  options and warrants........................................          599        168,954
 Net proceeds from issuance of common stock...................            0         32,294
                                                                -----------   ------------
Net cash used in financing activities.........................     (474,225)      (324,194)
                                                                -----------   ------------
Net change in cash and cash equivalents.......................   (7,490,229)   (17,418,272)
Effect of exchange rate changes on cash and cash equivalents..      (46,383)        (3,857)
Cash and cash equivalents at beginning of period..............   13,349,554     36,585,998
                                                                -----------   ------------
Cash and cash equivalents at end of period....................  $ 5,812,942   $ 19,163,869
                                                                ===========   ============
Supplemental disclosure of noncash transactions:
   Equipment acquired under capital leases....................  $         0   $     34,277
                                                                ===========   ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                     - 3 -
<PAGE>

                               theglobe.com, inc.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


  (1)  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Description of the theglobe.com

  theglobe.com, inc. (the "Company" or "theglobe") was incorporated on May 1,
1995 (inception) and commenced operations on that date.  theglobe.com is an
online property with registered members and users in the United States and
abroad. theglobe's users are able to personalize their online experience by
publishing their own content and interacting with others having similar
interests.  The Company's revenue sources include the sale of advertising  on
its online properties and the development and sale of sponsorship placements
within its websites.  Additional revenues are generated through the sale of
video games and related products through its online store, the sale of
advertising in its games information magazine, the sale of its games information
magazine through newsstands and subscriptions and electronic commerce revenue
shares (representing the Company's share of the proceeds from its e-commerce
partners' sales).

  The Company's business is characterized by rapid technological change, new
product development and evolving industry standards. Inherent in the Company's
business are various risks and uncertainties, including its limited operating
history, unproven business model and the limited history of commerce and
advertising on the Internet.  The Company's success may depend, in part, upon
the emergence of the Internet as a communications medium, prospective product
development efforts and the acceptance of the Company's community solutions by
the marketplace.

  (b)  Principles of Consolidation

  The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries from their respective dates of
acquisition (see Note 2).  All significant intercompany balances and
transactions have been eliminated in consolidation.

  (c)  Unaudited Interim Condensed Consolidated Financial Information

  The unaudited interim condensed consolidated financial statements of the
Company as of March 31, 2001 and for the three months ended March 31, 2001 and
2000 included herein have been prepared in accordance with the instructions for
Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10
of Regulation S-X under the Securities Act of 1933, as amended. Certain
information and note disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations relating
to interim condensed consolidated financial statements.

  In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company at March 31, 2001 and the results of its operations and its cash
flows for three months ended March 31, 2001 and 2000.

  The results of operations for such periods are not necessarily indicative of
results expected for the full year or for any future period. These financial
statements should be read in conjunction with the audited financial statements
as of December 31, 2000, and for the three years then ended and related notes
included in the Company's 10-K filed with the Securities and Exchange
Commission.

  (d) Use of Estimates

  The preparation of financial statements in conformity with generally accepted
accounting principles 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 realization of goodwill and other intangible assets, accruals
and other factors.  Actual results could differ from those estimates.

   (e) Cash and Cash Equivalents

  The Company considers all highly liquid securities with original maturities of
three months or less to be cash equivalents.  Cash equivalents were $1.0 million
at March 31, 2001 and $11.4 million at December 31, 2000 and consisted of
government securities.

                                     - 4 -
<PAGE>

  (f) Short-term Investments

  The Company accounts for its short-term investments in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115").  SFAS 115 establishes
the accounting and reporting requirements for all debt securities and for
investments in equity securities that have readily determinable fair market
value.  All short-term marketable securities must be classified as one of the
following:  held-to-maturity, available-for-sale or trading securities.  The
Company's short-term investments consist of  held-to-maturity securities. The
Company's held-to-maturity securities are carried at amortized cost in the
statement of financial position.  The amortization of the discount or premium
that arises at acquisition is included in earnings.  The Company's available-
for-sale securities are carried at fair value, with unrealized gains and losses
reported as Accumulated Other Comprehensive Loss in stockholders' equity.
Unrealized gains and losses are computed on the basis of the specific
identification method. Realized gains, realized losses and declines in value
judged to be other-than-temporary, are included in interest income (expense).
The cost of available-for-sale securities sold are based on the specific-
identification method and interest earned is included in earnings.

  The Company's short-term investments were comprised of the following at March
31, 2001 and December 31, 2000:

<TABLE>
<CAPTION>
                                                              March 31,         December 31,
                                                                 2001              2000
                                                              ---------         ----------
<S>                                                         <C>                <C>
   Held-to-maturity securities.....................           $3,011,730         $2,996,250
                                                              ----------         ----------
</TABLE>

  (g)  Restricted Investments

  Restricted investments includes security deposits held in certificates of
deposit and other interest bearing accounts as collateral for certain capital
equipment and office space leases and escrow payments held as collateral in
connection with certain distribution agreements. The Company is contingently
liable under a standby letter of credit of $1.4 million at March 31, 2001. The
letter of credit relates to the Company's office-space lease which is fully
secured by a restricted certificate of deposit held by the Company. Management
does not expect any material losses to result from these off-balance-sheet
instruments.

  (h)  Goodwill and Intangible Assets

  Goodwill and intangible assets primarily relates to the Company's acquisitions
accounted for under the purchase method of accounting, or its purchase of
intangible assets. Under the purchase method of accounting, the excess of the
purchase price over the identifiable net tangible assets of the acquired entity
is recorded as identified intangible assets and goodwill. Goodwill and
intangible assets are stated at cost, net of accumulated amortization, and are
being amortized using the straight-line method over the expected period of
benefit ranging from 2 to 3 years(3 years for goodwill).  As of March 31, 2001
and December 31, 2000 accumulated amortization was $39.4 million and
$36.5 million, respectively.

  (i) Comprehensive Loss

  The Company's comprehensive loss was approximately $9.5 million and $16.5
million for the three months ended March 31, 2001 and 2000, respectively.  The
Company's other comprehensive loss as of March 31, 2001 consisted of
approximately $102,000 of losses related to its foreign currency translation
adjustment.  The other comprehensive loss as of December 31, 2000 consisted of
approximately $56,000 of loss related to the Company's foreign currency
translation adjustment.  The increase in other comprehensive loss as of March
31, 2001 was attributable to the Company's foreign currency translation
adjustment..

   (j) Revenue Recognition

  Advertising

  The Company's revenues are derived principally from the sale of online and
print advertisements under short-term contracts, video games and related
products, and the publishing of a games information magazine. To date, the
duration of the Company's  advertising commitments has generally averaged from
one to three months.  Online advertising revenues are recognized ratably in the
period in which the advertisement is displayed, provided that no significant
Company obligations remain and collection of the resulting receivable is
probable.  Company obligations typically include the guarantee of a minimum
number of "impressions", defined as the number of times that an advertisement
appears in pages viewed by the users of the Company's online properties, for a
fixed fee.  Payments received from advertisers prior to displaying their
advertisements on the Company's sites are recorded as deferred revenues and are
recognized as revenue ratably when the advertisement is displayed.  To the
extent minimum guaranteed impressions levels are not met, the Company defers
recognition of the corresponding revenues until guaranteed levels are achieved.
The Company's online advertising revenue includes the development and sale of
sponsorship placements within its web sites. Development fees related to the
sale of sponsorship placements on the Company's web sites

                                     - 5 -
<PAGE>

are deferred and recognized ratably as revenue over the term of the contract.
The Company also derives revenue through the sale of advertisements in its games
information magazine, which was acquired in February 2000. Advertising revenues
for the games information magazine are recognized at the on-sale date.
Advertising revenue accounted for 49% and 66% of total revenues for three months
ended March 31, 2001 and 2000, respectively.

  The Company trades advertisements on its web properties in exchange for
advertisements on the Internet sites of other companies.  Barter revenues and
expenses are recorded at the fair market value of services provided or received,
whichever is more readily determinable in the circumstances.  Revenue from
barter transactions is recognized as income when advertisements are delivered on
the Company's web properties.  Barter expense is recognized when the Company's
advertisements are run on other companies' web sites, which typically occurs in
the same period in which barter revenue is recognized.  Barter revenues and
expenses represented 0% and 2% of total revenues for the three months ended
March 31, 2001 and 2000, respectively.

  Electronic Commerce and Other

  The Company derives other revenues from the sale of video games and related
products through its online store, the sale of its games information magazine
through newsstands and subscriptions and electronic commerce revenue shares.
Sales from the online store are recognized as revenue when the product is
shipped to the customer. Freight out costs are included in net sales and have
not been significant to date.  The Company provides an allowance for merchandise
sold through its online store.  The allowance provided to date has not been
significant.  Newsstand sales of the games information magazine are recognized
at the on-sale date, net of provisions for estimated returns.  Subscriptions are
recorded as deferred revenue when initially received and recognized as income
pro ratably over the subscription term.  Revenues from the Company's share of
the proceeds from its e-commerce partners' sales are recognized upon
notification from its partners of sales attributable to the Company's sites.
Sales through the online store accounted for 23% and 32% of total revenues for
the three months ended March 31, 2001 and 2000, respectively. Sales of the
Company's games information magazine through newsstands and subscriptions
accounted for 28% and 2% of total revenue for the three months ended March 31,
2001 and March 31, 2000 respectively. The Company acquired its games information
magazine in February 2000.  To date, revenues from the Company's electronic
commerce revenue share agreements have been immaterial.

   (k)  Concentration of Credit Risk

  Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents, short-term
investments,trade accounts receivable and restricted investments.  The Company
invests its cash and cash equivalents and short-term investments among a diverse
group of issuers and instruments.  The Company performs periodic evaluations of
these investments and the relative credit standings of the institutions with
which it invests.  At certain times, the Company's cash balances with any one
financial institution may exceed Federal Deposit Insurance Corporation insurance
limits.

  The Company's customers are primarily concentrated in the United States.  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 is limited due to the Company's large
number of customers, however the Company's online advertising client base has
been concentrated among dedicated internet companies.

  For the three months ended March 31, 2001 and 2000, there were no customers
that accounted for over 10% of revenues generated by the Company.  The Company
had no customers that represented more than 10% of accounts receivable as of
March 31, 2001 and December 31, 2000.

  (l) Net loss per share

  Diluted net loss per share has not been presented separately, as the
outstanding stock options, warrants and contingent stock purchase warrants are
anti-dilutive for each of the periods presented.

  Diluted net loss per share for the three months ended March 31, 2001 and 2000
does not include the effects of (1) options to purchase 5,234,803 and 4,373,477
shares of common stock, respectively, and (2) warrants to purchase 4,011,534 and
4,011,534 shares of common stock, respectively.


   (m) Segment Reporting

  During 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131").  SFAS 131 establishes annual and interim
reporting standards for operating segments of a company.  SFAS 131 requires
disclosures of selected segment-related financial information about products,
major

                                     - 6 -
<PAGE>

customers and geographic areas. The Company is organized in a single operating
segment for purposes of making operating decisions and assessing performance.
The chief operating decision maker evaluates performance, makes operating
decisions and allocates resources based on financial data consistent with the
presentation in the accompanying condensed consolidated financial statements.

  The Company's revenues have been earned primarily from customers in the United
States.  In addition, all significant operations and assets are based in the
United States.

  (n) Recent Accounting Pronouncements

     In June 1998, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") was
issued and, as amended by SFAS 137, was adopted by us on January 1, 2001.  SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities.  The Company's adoption of this statement in the first
quarter of 2001, did not have a significant impact on the Company's historical
financial statements as derivative instruments or hedging activities are not
currently used.

  FASB Interpretation No 44, Accounting for Certain Transactions Involving Stock
Compensation" ("FIN No. 44") provides guidance for applying APB Opinion No 25.
"Accounting for Stock Issued to Employees.  With certain exceptions, FIN No. 44
applies prospectively to new awards, exchanges of awards in a business
combination, modifications to outstanding awards and changes in grantee status
on or after July 1, 2000.  The Company applied FIN No. 44 to account for its
cancellation and reissuance of options and there has been no impact on its
results of operations for the year ended December 31, 2000.  The Company cannot
estimate the impact of FIN No. 44 on its future results of operations as the
charge is dependent on the future market price of the Company's common stock,
which cannot be predicted with any degree of certainty.  Depending upon
movements in the market value of the Company's common stock, this accounting
treatment may result in significant non-cash compensation charges in future
periods.

(2)  STOCK OPTION REPRICING

    On May 31, 2000, the Company offered to substantially all of its employees,
  excluding executive officers and the Board of Directors, the right to cancel
  certain outstanding stock options and receive new options with an exercise
  price equal to the then current fair market value of the stock.  Options to
  purchase a total of approximately 1.1 million shares, approximately 20% of
  outstanding options, were canceled and approximately 856,000 new options were
  granted at an exercise price of $1.594 per share, which was based on the
  closing price of the Company's common stock on May 31, 2000.  The new options
  vest at the same rate that they would have vested under previous option plans.
  As described above in note 1(n), the Company is accounting for these repriced
  stock options using variable accounting in accordance with FIN No. 44.  In
  addition, as a result of options which were granted within six months of the
  cancellations, an additional 244,000 options also require variable accounting
  in accordance with FIN No. 44.  For the year ended December 31, 2000 and the
  three months ended March 31, 2001, there has been no compensation charge
  relating to the repricing.  Depending upon movements in the market value of
  the Company's common stock, this accounting treatment may result in
  significant non cash compensation charges in future periods.

(3)  RESTRUCTURING AND IMPAIRMENT CHARGES

     After giving effect to the fourth quarter of 2000 impairment charges of
  $13.6 million and $6.0 million, the remaining amount of goodwill and other
  intangibles, net, is $4.8 million and $2.0 million for Attitude Networks and
  Webjump, respectively, as of March 31, 2001.

As of March 31, 2001, the amount remaining in the Factorymall.com restructuring
accrual recorded in the second quarter of 2000 is $0.4 million, primarily
related to severance and lease obligations, which will be paid out periodically
through August 2002 and the amount outstanding at December 31, 2000 related to
fourth quarter of 2000 restructuring accrual of $1.0 million for severance
obligations was paid in the first quarter of 2001.  The total restructuring
accrual of $0.4 million is included within accrued expenses.

  (4)  ACQUISITION OF CHIPS & BITS, INC. AND STRATEGY PLUS, INC.

  On February 24, 2000, CB Acquisition Corp. ("CB Merger Sub"), a Vermont
corporation and a wholly-owned subsidiary of theglobe was merged with and into
Chips & Bits, Inc., a Vermont corporation ("Chips & Bits"), with Chips & Bits as
the surviving corporation (the "CB Merger").  Also on February 24, 2000, SP
Acquisition Corp. ("SP Merger Sub"), a Vermont corporation and a wholly-owned
subsidiary of theglobe, was merged with and into Strategy Plus, Inc., a Vermont
corporation ("Strategy Plus"), with Strategy Plus as the surviving corporation
(together with the CB Merger, the "Mergers").  The Mergers were effected
pursuant to an Agreement and Plan of Merger dated as of January 13, 2000 by and
among theglobe, CB Merger Sub, SP Merger Sub, Chips & Bits, Strategy Plus, Yale
Brozen and Christina Brozen (the "Merger Agreement").  As a result of the
Mergers, both Chips & Bits and Strategy Plus became wholly-owned subsidiaries of
theglobe.

                                     - 7 -
<PAGE>

  The consideration paid by the Company consisted of 1,903,977 shares of the
Company's Common Stock, valued at $14.9 million.  The Company also incurred
acquisition costs of approximately $0.6 million.  An additional payment of $1.3
million in newly issued shares of Common Stock is contingent upon the attainment
of certain performance targets by Chips & Bits and Strategy Plus during the 2000
fiscal year.

  This transaction was accounted for under the purchase method of accounting.
The aggregate purchase price of these transactions was $15.5 million.  The
Company has allocated $1.1 million to the net tangible assets of Chips & Bits
and $1.6 million to the net tangible liabilities of Strategy Plus.  The
historical carrying amounts of the net tangible assets acquired and liabilities
assumed by the Company approximated their fair market value on the date of
acquisition.  The purchase price in excess of the fair market value of the net
tangible assets acquired and liabilities assumed by the Company amounted to
$16.0 million and has been preliminarily allocated to goodwill.  The goodwill
amount is being amortized under the straight-line method over an estimated
useful life of 3 years, the expected period of benefit. The remaining amount of
goodwill and other intangibles, net is $10.3 million as of March 31, 2001. Chips
& Bits and Strategy Plus's results of operations are included in the condensed
consolidated statement of operations from February 24, 2000.

  The following unaudited pro forma consolidated financial information gives
effect to the above described acquisition, as if the acquisition had occurred at
January 1, 2000 by consolidating the results of operations of the Company, Chips
& Bits and Strategy Plus for the three months ended March 31, 2000.

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                               March 31,
                                                         --------------------
                                                          2001         2000
                                                         -------     --------
                                                         (actual)  (pro-forma)
<S>                                                      <C>       <C>
(in thousands, except per share data)
Revenues...............................................  $ 4,747     $  8,497
Net loss...............................................   (9,457)     (17,579)
Basic and diluted net loss per share...................  $ (0.31)    $  (0.59)
Weighted average basic and diluted shares outstanding..   30,382       29,955
</TABLE>

(1)  The weighted average common shares used to compute pro forma basic net loss
     per share includes the actual weighted average common shares outstanding
     for the historical three months ended March 31, 2000, plus the common
     shares issued in connection with the acquisition as if it had occurred on
     January 1, 2000.


   (3)  COMMITMENTS AND CONTINGENCIES

(a) Litigation


  On June 20, 2000, Infonent.com, Inc. filed a Complaint and a motion for a
preliminary injunction to enjoin the Company from invoking its contractual right
to terminate the registration statement for Infonent.com, Inc.'s shares in the
Company.  In an order entered July 18, 2000, the U.S. Bankruptcy Court for the
Northern District of California (San Jose Division) granted Infonent.com, Inc.'s
motion to the extent of barring the Company from terminating the registration
statement for a period of 45 days, commencing on July 3, 2000.  On October 26,
2000, the Securities and Exchange Commission declared effective the Company's
amended registration statement which terminated the registration statement
relating to Infonent.com's shares in the Company.

     On February 14, 2001, Mohammed Poonja, Chapter 11 Trustee for the estate of
Infonent.com, Inc. (the "Trustee"), served an Amended Complaint on the Company
and Jump Acquisition, LLC ("Jump").  The Company has not, as of April 2, 2001,
responded to the Amended Complaint.  The Amended Complaint asserts claims for
violation of the automatic stay provision, 11 U.S.C. (S) 362, as a result of the
Company's exercise of its contractual right to terminate the registration
statement for Infonent.com, Inc.'s shares in the Company pursuant to a November
30, 1999 Registration Rights Agreement between the Company and Infonent.com,
Inc.; breach of contract for the Company's and Jump's alleged failure to make
certain earn-out payments to Infonent.com, Inc. in connection with a November
30, 1999 purchase agreement (the "Agreement"); breach of the implied covenant of
good faith and fair dealing in connection with the Agreement; fraud; negligence;
and breach of contract and breach of the implied covenant of good faith and fair
dealing for its alleged delay in registering newly-issued shares of the
Company's common stock in connection with the Registration Rights Agreement.
The Amended Complaint seeks

                                     - 8 -
<PAGE>

$9,524,859 in damages, plus interest, compensatory damages on the automatic stay
cause of action, costs and disbursements of the action, and attorneys' fees. The
Company filed an Answer on May 2, 2001 denying the allegations made in the
Amended Complaint. The Trustee has withdrawn its claim for violation of the
Automatic Stay by the Company. The Company and the Trustee have agreed to
transfer venue to Federal Court in New York, New York. The Company plans on
vigorously defending this action. However, based on future developments and as
additional information becomes known, it is possible that the ultimate
resolution could have a material adverse effect on the Company's results of
operations in a particular future period.

  From time to time the Company has been named in other claims arising in the
ordinary course of business.  In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity

   (b)  Contingent Stock Issuances

     In connection with the acquisition of the web hosting assets of Webjump.com
in December 1999, an additional payment of $12.5 million, payable in newly
issued shares of common stock, was contingent based upon the attainment of
certain performance targets measured as of November 30, 2000.  Management
determined that such targets were not achieved as of the measurement date,
however, on February 14, 2001,  the former shareholder group filed a lawsuit
against the Company claiming that they are entitled to $9.5 million related to
the above mentioned targets. See Note 5 (a) for additional information.

     In connection with the acquisition of Chips & Bits, Inc. and Strategy Plus,
Inc. in February 2000, an additional payment of $1.25 million, payable in newly
issued shares of Common Stock, is contingent on the attainment of certain
performance targets by Chips & Bits, Inc. and Strategy Plus, Inc.  The
contingent consideration, if any, will be recorded by the Company  when the
contingency is resolved and the consideration is or becomes issuable.  Any
additional cost would be allocated to goodwill, and amortized over the remaining
life of the goodwill.  In the event that the Company is required to issue these
additional securities, the percentage ownership of the Company's then current-
stockholders would be reduced.


   (4)  SUBSEQUENT EVENTS

a)  Additional Cost-Reduction Initiatives

  In April 2001, the Company announced additional cost-reduction initiatives.
These initiatives included the elimination of 59 positions, or 31% of the
Company's workforce.  The Company will reflect the restructuring charge,
primarily related to severance benefits, of approximately $450,000  in the
second quarter of 2001.


b)   Delisting of the Company's Common Stock

  On April 23, 2001, following appeal by the Company to the Nasdaq Listing
Qualifications Panel with respect to the delisting of its common stock from the
Nasdaq National Market, the Company was delisted from the Nasdaq national market
due to its non-compliance of the Company's common shares with the required $1
bid price. Accordingly, the Company was required to move the listing of its
common stock from the Nasdaq national market to the Over-the-Counter ("OTC")
market on what is commonly referred to as the OTC bulletin board, where it is
traded under the symbol TGLO.

                                     - 9 -
<PAGE>

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

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.  These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes," "anticipates," "expects," "estimates," "plans,"
"may," "intends," "will," or similar terms.  Investors are cautioned that any
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements as a result of
various factors described under "Risk Factors" and elsewhere in this report.
The following discussion should be read together with the consolidated financial
statements and notes to those statements included elsewhere in this report.

OVERVIEW

     We are a network of nine wholly-owned properties (eight of which are online
properties and one of which is an offline property) focused on delivering
community and/or games information to our registered members in the United
States and abroad.  Each of these nine properties specializes in bringing people
together around shared topics of interest.  We deliver community through: (1)
our leading games information network, games.theglobe.com, which consists of six
online properties: HappyPuppy.com, KidsDomain.com, Computer Games Online
(cdmag.com), Chips & Bits (chipsbits.com), GamesDomain.com, and
ConsoleDomain.com, as well as our offline property Computer Games Magazine; (2)
our flagship website, theglobe.com, which features our community tools
globeclubs and uPublish!, both of which enable users to personalize their online
experience by interacting with other users around similar interests; (3)
distribution of our community tools and services and/or our games information
content to other Web properties; and, (4) providing web hosting services to the
small business sector (businesses and professional webmasters).

     Our revenues consist of the sale of advertisements on our online
properties, which includes the development and sale of sponsorship placements
within our web sites. We earn revenue on sponsorship contracts for fees relating
to the design, coordination, and integration of the customer's content and
links.  Additionally, we derive advertising revenue through the sale of
advertisements in our games information magazine which we acquired in February
2000.  In addition to advertising revenues, we derive other revenues through the
sale of video games and related products through our online store, the sale of
our games information magazine through newsstands and subscriptions and
electronic commerce revenue shares (representing our share of the proceeds from
our e-commerce partners' sales).

      During 1998, revenues and operating expenses increased significantly as we
placed a greater emphasis on building our advertising revenues, sponsorship
revenues and memberships by expanding our sales force and promoting theglobe
brand.

     In November 1998, we completed an initial public offering of approximately
7.0 million shares of our common stock.  The initial offering price was $4.50
per share which resulted in net proceeds of $27.3 million, after underwriting
discounts of $2.0 million and offering costs of  $2.0 million.

     In April 1999, we acquired Attitude Networks, Ltd., a provider of online
games information content whose websites included Happy Puppy, Games Domain and
Kids Domain, three leading websites serving game enthusiasts.  The aggregate
purchase price amounted to $46.8 million and was comprised, in part, of
approximately 1.6 million shares of newly issued common stock.

     In May 1999, we completed a secondary public offering of 3.5 million shares
of common stock at an offering price of $20.00 per share.  Net proceeds amounted
to $65.0 million, after underwriting discounts of $3.5 million and offering
costs of $1.5 million.

     In December 1999, we acquired the web hosting assets of Webjump.com, a web
hosting property that primarily focuses on small businesses.  The total purchase
price for this transaction was $13.0 million and was primarily comprised of 1.1
million shares of newly issued Common Stock.  An additional $12.5 million,
payable in newly issued shares of Common Stock, was contingent based upon the
attainment of certain performance targets measured as of November 30, 2000.
Management determined that such targets were not achieved as of the measurement
date, however, on February 14, 2001 the former shareholder group filed a law
suit against us claiming that they are entitled to $9.5 million related to the
above mentioned targets. See Part I - Item 5 - Legal and Note 5 (a) to our
interim condensed consolidated financial statements for additional information.

     In February 2000, we acquired Chips & Bits, Inc. and Strategy Plus, Inc.,
providers of online and offline entertainment content focused towards game
enthusiasts.  The total purchase price for this transaction was approximately
$15.3 million and was comprised, in part, of 1.9 million newly issued shares of
Common Stock.  An additional $1.25 million, payable in newly issued shares of
Common Stock, is

                                     - 10 -
<PAGE>

contingent on the attainment of certain performance targets by Chips & Bits,
Inc. and Strategy Plus, Inc. The contingent consideration, if any, will be
recorded by us when the contingency is resolved and the consideration is or
becomes issuable. Any additional cost would be allocated to goodwill, and
amortized over the remaining life of the goodwill.

 RESULTS OF OPERATIONS

 Quarter ended March 31, 2001 compared to Quarter ended March 31, 2000

  Revenues.   Our revenue consists of advertisements on our online properties,
which includes the development and sale of sponsorship placements within our web
sites. We earn revenue on sponsorship contracts for fees relating to the design,
coordination, and integration of the customer's content and links.
Additionally, we derive advertising revenue through the sale of advertisements
in our games information magazine which we acquired in February 2000.  We sell a
variety of online advertising packages to clients, including banner
advertisements, event sponsorships, and targeted and direct response
advertisements. Our advertising revenues are derived principally from short-term
advertising arrangements, averaging one to three months. We generally guarantee
a minimum number of impressions, defined as the number of times that an
advertisement appears in pages viewed by the users of our online properties, for
a fixed fee.  In addition to advertising revenues, we derive other revenues
through the sale of video games and related products through our online store,
the sale of our games information magazine through newsstands and subscriptions
and electronic commerce revenue shares.

  Revenues decreased to $4.7 million for the three months ended March 31, 2001
as compared with $7.0 million for the three months ended March 31, 2000.
Advertising revenues for the three months ended March 31, 2001 were $2.3
million, which represented 49% of total revenues. Advertising revenues for the
three months ended March 31, 2000 were $4.6 million, which represented 66% of
total revenues. The decrease in advertising revenues was primarily attributable
to an industry-wide decrease in the on-line advertising market which is expected
to continue through much of 2001. This decrease was partially offset by growth
in advertising revenues, due to our games magazine, which was acquired in
February 2000. Revenues from our games magazine accounted for $1.0 and $0.3
million of total advertising revenues for the three months ended March 31, 2001
and 2000, respectively. Sales of merchandise through our online store accounted
for $1.1 million or 24% and $2.2 million or 32% of total revenues for the three
months ended March 31, 2001 and 2000, respectively. In order to realign our e-
commerce operations to focus on video games and related products, the Company
shut down its electronic commerce operations in Seattle Washington in April,
2000. Sales of our games information magazine through newsstands and
subscriptions accounted for $1.3 million or 28% and $0.1 million or 2% of total
revenues for the three months ended March 31, 2001 and March 31, 2000
respectively. We acquired our games information magazine in February 2000. Price
increases and significant increases in circulation account for the year over
year increase as well as the strategy to diversify revenues with less dependency
on advertising revenues.

  Cost of Revenues.  Cost of revenues consist primarily of Internet connection
charges, staff and related costs of operations personnel, depreciation and
maintenance costs of web site equipment, printing costs of our games magazine
and the costs of merchandise sold and shipping fees in connection with our
online store.  Gross margins were 23% and 37% for the three months ended March
31, 2001 and 2000, respectively.  The period-to-period decrease in the gross
margins was primarily attributable to a higher concentration of electronic
commerce and print advertising sales in our games information magazine, both of
which traditionally result in lower gross margins than online advertising
revenues.  Cost of revenues in absolute dollar terms declined quarter over
quarter due to the restructuring of costs in the 4th quarter and reduction in
bandwidth costs.

  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, promotional
activities and barter expense. Sales and marketing expense was $3.8 million for
the three months ended March 31, 2001 as compared with $5.6 million for the
three months ended March 31,2000.  The period-to-period decrease in sales and
marketing expense was attributable to reduced personnel costs and decreased
advertising costs.  As a percentage of revenues (80%) sales and marketing were
flat quarter over quarter.  The Company is reducing its marketing and
advertising costs in absolute dollars, but sustaining its investment in its
nation-wide sales force.

  Product Development.  Product development expenses include salaries and
related personnel costs, expenses incurred in connection with the development
of, testing of and upgrades to our web sites and community management tools and
editorial and content costs. Product development expenses decreased to $1.8
million for the three months ended March 31, 2001 as compared to $3.0 million
for the three months ended March 31, 2000.  The period-to-period decrease was
related to the our restructuring and cost containment initiatives in the fourth
quarter of 2000.

  General and Administrative Expenses.  General and administrative expenses
consist primarily of salaries and related personnel costs for general corporate
functions including finance, human resources, legal and facilities, outside
legal and professional fees, bad debt expenses and general corporate overhead
costs. General and administrative expenses were $2.1 million for the three
months ended March 31, 2001 as compared with $3.2 million for the three months
ended March 31, 2000.  The period-to-period decrease was primarily attributable
to decreased salaries and personnel costs as a result of our restructuring of
the business in the fourth quarter of 2000.

                                     - 11 -
<PAGE>

  Amortization of Goodwill and Intangible Assets.  Amortization expense was $2.8
million for the three months ended March 31, 2001 as compared with $7.6 million
for the three months ended March 31, 2000.  The period-to-period decrease in
amortization expense was primarily attributable to the write down of goodwill
and intangibles assets  which occurred in the fourth quarter of 2000.    The
gross amount of goodwill and purchased intangibles as of March 31, 2001 is being
amortized over the expected period of benefit ranging from two to three years
(three years for goodwill).

  Interest and other income, net.  Interest and other income, net primarily
includes interest income from our cash and cash equivalents and short-term
investments, interest expense related to our capital lease obligations and
realized gains and losses from the sale of short-term investments. The quarter
to quarter decrease in interest and other income, net was primarily attributable
to decreased interest income earned on decreased cash and cash equivalents and
short-term investments.

  Income Taxes.  Income taxes were $102,000 for three months ended March 31,
2001 as compared with $70,000 for the three months ended March 31, 2000.  Income
taxes were based solely on state and local taxes on business and investment
capital.  The period-to-period increase was primarily the result of a NY State
MTA surcharge for the year 2000.  Our effective tax rate differs from the
statutory federal income tax rate, primarily as a result of the uncertainty
regarding our ability to utilize our net operating loss carryforwards. Due to
the uncertainty surrounding the timing or realization of the benefits of our net
operating loss carryforwards in future tax returns, we have placed a 100%
valuation allowance against our otherwise recognizable deferred tax assets. At
December 31, 2000, the Company had net operating loss carryforwards available
for U.S. and foreign tax purposes of $105.2 million.  These carryforwards expire
through 2020.  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 the change in our ownership
interests in the third quarter of 1997 and May 1999, as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), future utilization of our net
operating loss carryforwards prior to the change of ownership will be subject to
certain limitations or annual restrictions.

  LIQUIDITY AND CAPITAL RESOURCES

  As of March 31, 2001, we had approximately $5.8 million in cash and cash
equivalents and approximately $3.0 million in short-term investments. Net cash
used in operating activities was $6.6 million for the three months ended March
31, 2001 as compared to $9.0 million for the three months ended March 31, 2000.
The decrease in net cash used in operating activities resulted primarily from a
decrease in our net operating losses, exclusive of depreciation expense and
amortization expense related to our acquisitions.  The decrease was also
attributable to decreases in accounts receivable, accounts payable and accrued
compensation.

  Net cash used in investing activities was $0.4 million for the three months
ended March 31, 2001 as compared to $8.1 million for the three months ended
March 31, 2000.  The decrease in net cash used in investing activities is
primarily attributable to a decrease in the purchase of short-term investments
and an increase in the proceeds received from the sale of short-term
investments.

  Net cash used in financing activities was approximately $0.5 million for the
three months ended March 31, 2001 as compared to $0.3 million for the three
months ended March 31, 2000.  The increase in net cash used in financing
activities was primarily attributable to a reduction in the proceeds from
exercise of common stock options.

     As of March 31, 2001, we had obligations amounting to $1.9 million in
connection with equipment purchased under capital leases.  These obligations are
payable at various intervals between 2001 and 2003.  We expect to meet our
current capital lease obligations with our cash, cash equivalents, short-term
investments, and security deposits.

  As of March 31, 2001, the amount remaining in the Factorymall.com
restructuring accrual is $0.4 million, primarily related to severance and lease
obligations, which will be paid out periodically through August 2002.

  In April 2001, the Company announced cost-reduction initiatives that would
result in $8 million of savings on an annualized basis.  Costs attributed to the
elimination of 59 positions or 31% of the Company's workforce, primarily for
severance benefits, are expected to be $450,000. We will record a charge in the
second quarter 2001, all of which is expected to be paid by June, 2001.

  Our capital requirements depend on numerous factors, including market
acceptance of our services, the capital required to maintain our websites, the
resources we devote to marketing and selling our services and our brand
promotions and other factors.  We have experienced a substantial increase in our
capital expenditures and lease arrangements since our inception consistent with
the growth in our operations and staffing. We have received a report from our
independent accountants, relating to our December 31, 2000 audited financial
astatements containing an explanatory paragraph stating that our recurring
losses from operations since inception and requirement for additional financing
raises substantial doubt about our ability to continue as a going concern.
Moreover, management's plans to continue as a going concern rely heavily on
raising additional financing, increasing advertising revenues from our online
and offline properties, as well as, a reduction of our operating in expenses.
Under generally accepted auditing standards, the Company's auditors have
concluded that they are

                                     - 12 -
<PAGE>

unable to rely on these increased revenues in evaluating the achievability of
management's plan to continue as a going concern. In addition to the revenue
plan, management is currently exploring a number of strategic alternatives and
is also continuing to identify and implement internal actions to improve the
Company's liquidity. These alternatives may include selling assets or internet
properties which could result in significant changes in our business plan.

     As of March 31, 2000, our sole source of liquidity consisted of $8.8
million of cash and cash equivalents and short-term investments.  We currently
do not have access to any other sources of funding, including debt and equity
financing facilities. As of March 31, 2001, our principal commitments consisted
of our operating obligations, amounts outstanding under operating and capital
leases as well as long-term debt. We believe that our current cash may not be
sufficient to meet our anticipated operating cash needs through January 1, 2002
on for the next 12 months commencing April 1, 2001. The Company has limited
operating capital and no current access to credit facilities. The Company's
continued operations therefore will depend on its ability to raise additional
funds through bank borrowings or equity or debt financing.

     The capital markets have been unpredictable in the past, especially for
early stage companies such as ours.  In addition, it is difficult to raise
capital in the current market conditions.  The amount of capital that a company
like ours is able to raise often depends on variables that are beyond our
control, such as share price of our stock and its trading volume.  As a result,
there is no guarantee that our efforts to secure financing will be available on
terms attractive to us, when needed or at all.  Due to our operating losses, it
will be difficult to obtain debt financing.  If the Company is able to
consummate a financing arrangement, there is no guarantee that the amount raised
will be sufficient to meet our future needs.  If adequate funds are not
available or are not available on acceptable terms, our business, results of
operations, financial condition and continued viability will be materially
adversely effected.  As a result, we may need to further reduce our staff and
operations.

  If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced.
Stockholders may experience extreme dilution due to our current stock price and
the significant amount of financing we need to raise and these securities may
have rights senior to those of holders of our Common Stock.  We do not have any
contractual restrictions on our ability to incur debt.  Any indebtedness could
contain covenants, which restrict our operations.  See "Risk Factors" - We may
need to raise additional funds, including through the issuance of debt."


  EFFECTS OF INFLATION

  Due to relatively low levels of inflation in 2000, 1999, 1998 and 1997,
inflation has not had a significant effect on our results of operations since
inception.

  IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") was
issued and, as amended by SFAS 137, was adopted by us on January 1, 2001.  SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities.  The Company's adoption of this statement in the first
quarter of 2001, did not have a significant impact on the Company's historical
financial statements as derivative instruments or hedging activities are not
currently used. FASB Interpretation No 44, Accounting for Certain Transactions
Involving Stock Compensation" ("FIN NO. 44") provides guidance for applying APB
Opinion No 25.  "Accounting for Stock Issued to Employees.  With certain
exceptions, FIN No. 44 applies prospectively to new awards, exchanges of awards
in a business combination, modifications to outstanding awards and changes in
grantee status on or after July 1, 2000.  The Company applied FIN No. 44 to
account for its cancellation and reissuance of options and there has been no
impact on its results of operations for the year ended December 31, 2000.  The
Company cannot estimate the impact of FIN No. 44 on its future results of
operations as the charge is dependent on the future market price of the
Company's common stock, which cannot be predicted with any degree of certainty.
However, depending upon movements in the market value, this accounting treatment
may result in significant non-cash compensation charges in the future.



                                  RISK FACTORS

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

  WE WILL NEED TO RAISE ADDITIONAL FUNDS IN ORDER TO CONTINUE OPERATIONS.

                                     - 13 -
<PAGE>

  Since our inception, we have incurred significant operating losses and we
believe we will continue to incur operating losses for the foreseeable future.
We also expect to incur negative cash flows for the foreseeable future as a
result of our operating losses and our need to fund future capital expenditures.
We have received a report from our independent accountants, relating to our
December 31, 2000 audited financial statements containing an explanatory
paragraph stating that we suffered recurring losses from operations since
inception that raises substantial doubt about our ability to continue as a going
concern.  Moreover, management's plans to continue as a going concern rely
heavily on raising additional financing, increasing advertising revenues from
our online and offline properties, as well as further, reducing our operating
expenses. These actions will be difficult to undertake. In addition, management
is currently exploring a number of strategic alternatives and is also continuing
to identify and implement internal actions to improve the Company's liquidity.
These alternatives may include selling assets or internet properties which could
result in significant changes in our business plan.

  The capital markets have been unpredictable in the past, especially for early
stage companies such as ours.  In addition, it is difficult to raise capital in
the current market conditions.  The amount of capital that a company like ours
is able to raise often depends on variables that are beyond our control, such as
share price of our stock and its trading volume.  As a result, there is no
guarantee that our efforts to secure financing will be available on terms
attractive to us, or at all.  Due to our operating losses, it will be difficult
to obtain debt financing.  If the Company is able to consummate a financing
arrangement, there is no guarantee that the amount raised will be sufficient to
meet our future needs.  If adequate funds are not available or are not available
on acceptable terms, our business, results of operation, financial condition and
continued viability will be materially adversely effected.  As a result, we may
need to further reduce our staff and operations.  See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

  If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced.
Stockholders may experience extreme dilution due to our current stock price and
the significant amount of financing we need to raise and these securities may
have rights senior to those of holders of our Common Stock.  We do not have any
contractual restrictions on our ability to incur debt.  Any indebtedness could
contain covenants which restrict our operations.

  DELISTING OF OUR COMMON STOCK.

  The shares of our Common Stock were delisted from the Nasdaq national market
on April 23, 2001 and are now traded in the over-the-counter market on what is
commonly referred to as the electronic bulletin board.  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.  In addition, we are now subject to a Rule
promulgated by the Securities and Exchange Commission that, if we fail to meet
criteria set forth in such Rule, various practice requirements are imposed on
broker-dealers who sell securities governed by the Rule to persons other than
established customers and accredited investors.  For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transactions prior to sale.  Consequently, the Rule may have a materially
adverse effect on the ability of broker-dealers to sell the securities, which
may materially affect the ability of shareholders to sell the securities in the
secondary market.

  The recent delisting could make trading our shares more difficult for
investors, potentially leading to further declines in share price.  It may also
make it more difficult for us to raise additional capital.  We will also incur
additional costs under state blue sky laws if we sell equity or issue equity
upon exception of options in certain jurisdictions due to our delisting.

  REVENUE GROWTH IN PRIOR PERIODS MAY NOT BE INDICATIVE OF FUTURE GROWTH.

  Although we achieved significant total revenue growth during 1999 and 2000,
our online advertising revenue decreased in 2000 due to the softness in the
advertising market, which is expected to continue. Overall our revenues declined
in the first quarter of 2001. Commencing in the third quarter 2000, our online
advertising revenues decreased by $2.5 million compared to second quarter 2000,
and decreased an additional $0.2 million in the fourth quarter of 2000. Our
limited operating history makes prediction of future revenue growth difficult.
Additionally, in April 2000, we elected to shut down our e-commerce operations
in Seattle, Washington in an effort to realign our electronic commerce
operations to focus on video games and related products. This negatively
impacted our projected revenue growth from e-commerce. Accurate predictions of
future revenue growth are also difficult because of the rapid changes in our
markets and the possible need by us to sell assets to fund operations.
Accordingly, investors should not rely on past revenue growth rates as a
prediction of future revenue growth.

  WE EXPECT TO CONTINUE TO INCUR LOSSES.

  We have incurred net losses in each quarter since our inception and we expect
that we will continue to incur net losses for the foreseeable future. We had net
losses of approximately $103.9 million, $49.6 million, $16.0 million, $3.6
million and $0.8 million for the years ended December 31, 2000, 1999, 1998, 1997
and 1996, respectively.  As of March 31, 2001, we had an accumulated deficit of
approximately $183.4 million. The principal causes of our losses are likely to
continue to be:

  .  costs resulting from development and enhancement of our services;
  .  amortization expense related to our acquisitions;
  .  sales and marketing expenses necessary to maintain revenue growth and
     develop brand identity;

                                     - 14 -
<PAGE>

  . growth of our sales force;
  . expansion of our systems infrastructure;
  . failure to generate sufficient revenue; and
  . general and administrative expenses;

  We will need to generate significantly increased revenues to achieve
profitability, particularly if we are unable to adjust our expenses in light of
any earnings shortfall. We cannot assure you that we will ever achieve or
sustain profitability.

  OUR FINANCIAL PERFORMANCE AND SUBSEQUENT REDUCTIONS OF THE WORKFORCE MAY
AFFECT THE MORALE AND PERFORMANCE OF OUR PERSONNEL AND ABILITY TO ENTER INTO NEW
BUSINESS RELATIONSHIPS.

  We have incurred significant net losses since our inception.  In an effort to
reduce our cash expenses, we began to implement certain restructuring
initiatives and cost reductions.  In October 2000, we reduced our workforce by
26 employees.  In April 2001, we further reduced our workforce by 59 employees.
We have also left positions unfilled when certain employees have left the
Company.  In addition, recent trading levels of our common stock have decreased
the value of the stock options granted to employees pursuant to our stock option
plan.  As a result of these factors, our remaining personnel may seek employment
with larger, more stable companies or companies they perceive to have better
prospects.  It may be difficult to increase our revenues due to the decline in
the number of employees. Our failure to retain qualified employees to fulfill
our current and future needs could halt our future growth and have a material
adverse affect on our business.

  In addition, the publicity we receive, in connection with our financial
performance and measures to remedy it, may negatively affect our reputation and
our business partners and other market participants perception of the Company.
If we are unable to maintain the existing and develop new business relationships
our revenues and collections could suffer materially.

  WE RELY SUBSTANTIALLY ON ONLINE ADVERTISING REVENUES.  THE ONLINE ADVERTISING
MARKET HAS SIGNIFICANTLY DECLINED OVER THE PAST SEVERAL QUARTERS.

  We derive a substantial portion of our revenues from the sale of
advertisements on our web sites. We expect to continue to do so for the
foreseeable future.  Our business model and revenues are highly dependent on the
amount of traffic on our sites and our ability to properly monetize this
traffic. The level of traffic on our sites determines the amount of online
advertising inventory we can sell. Our ability to generate significant online
advertising revenues depends, in part, on our ability to create new advertising
programs without diluting the perceived value of our existing programs. Online
advertising has dramatically decreased since the middle of 2000 and has
continued to decline into the first quarter of 2001, which could have a material
effect on the Company. The decline may continue throughout 2001. Many online
advertisers have been experiencing financial difficulties which could materially
impact our revenues and our ability to collect our receivables. Our ability to
generate online advertising revenues will also depend, in part, on the
following:

  .  advertisers' acceptance of the Internet as an attractive and sustainable
     medium;
  .  advertisers' willingness to pay for advertising on the Internet at current
     rates;
  .  the development of a large base of users of our products and services;
  .  our level of traffic;
  .  the effective development of web site content that attracts users having
     demographic characteristics attractive to advertisers; and
  .  price competition among web sites which has resulted in decreasing pricing.

  We cannot assure you that the market for Internet advertising will continue to
emerge or become sustainable. If the Internet advertising market develops slower
than we expect, our business performance would be materially adversely affected.
To date, substantially all our online advertising contracts have been for terms
averaging one to three months in length, with relatively few longer term
advertising contracts. Additionally, our online advertising customers may object
to the placement of their advertisements on some members' personal homepages,
the content of which they deem to be undesirable. Moreover, measurements of site
visitors may not be accurate or trusted by our advertising customers.  There are
no uniformly accepted standards for the measurement of visitors to a web site,
and there exists no one accurate measurement for any given Internet visitor
metric.  Indeed, different website traffic measurement firms will tend to arrive
at different numbers for the same metric.  For any of the foregoing reasons, we
cannot assure you that our current advertisers will continue to purchase
advertisements on our sites. We also compete with traditional advertising media,
including television, radio, cable and print, for a share of advertisers' total
advertising budgets. This results in significant pricing pressures on our
advertising rates, which could have a material adverse effect on us.  In
addition, the online advertising market may not recover from its current
downturn, which could have a material adverse effect on the Company.

                                     - 15 -
<PAGE>

     A significant portion of our revenues is derived from Internet companies
that are early stage entities. These entities may be dependent on additional
financing in order to survive. In addition, such companies may conduct less
online advertising in the future, which could have a material adverse effect on
the Company. These companies have been spending significantly less on online
advertising. For companies such as these, the risk of default on outstanding
indebtedness to us may be higher than we anticipate.

     COMPETITION FOR MEMBERS, USERS AND ADVERTISERS, AS WELL AS COMPETITION IN
THE ELECTRONIC COMMERCE MARKET IS INTENSE AND IS EXPECTED TO INCREASE
SIGNIFICANTLY.

     The market for members, users and Internet advertising among web sites is
new and rapidly evolving. Competition for members, users and advertisers, as
well as competition in the electronic commerce market, is intense and is
expected to increase significantly. Barriers to entry are relatively
insubstantial and we believe we will face competitive pressures from many
additional companies both in the United States and abroad. Accordingly, pricing
pressure on advertising rates will increase in the future which could have a
material adverse effect on us. All types of web sites compete for users.
Competitor web sites include community sites and games information networks, as
well as "gateway" or "portal" sites and various other types of web sites. We
believe that the principal competitive factors in attracting users to a site
are:

 .    functionality of the web site;
 .    brand recognition;
 .    member affinity and loyalty;
 .    broad demographic focus;
 .    open access for visitors;
 .    critical mass of users, particularly for community-type sites;
 .    attractiveness of content and services to users; and
 .    pricing and customer service for electronic commerce sales.

     We compete for users, advertisers and electronic commerce marketers with
     the following types of companies:

     .    other community web sites, such as GeoCities, which was acquired by
          Yahoo!, Tripod and AngelFire, subsidiaries of Lycos, Homestead.com and
          Homepage.com;
     .    search engines and other Internet "portal" companies, such as
          Excite@Home, Lycos, and Yahoo!;
     .    other community club providers, such as eGroups, which was acquired by
          Yahoo!, Topica and TalkCity;
     .    online content web sites, such as CNET, ESPN.com and ZDNet.com;
     .    publishers and distributors of television, radio and print, such as
          CBS, NBC and CNN/Time Warner;
     .    general purpose consumer online services, such as America Online and
          Microsoft Network;
     .    web sites maintained by Internet service providers, such as AT&T
          WorldNet and EarthLink;
     .    electronic commerce web sites, such as Amazon.com, Etoys and CDNow;
          and
     .    other web sites serving game enthusiasts, including Ziff Davis'
          Gamespot and CNET's Gamecenter.

     Many of our competitors, including other community sites, have developed or
may develop Internet navigation services and have or are attempting to become
"gateway" or "portal" sites through which users may enter the web. In the event
these companies are successful in their efforts to become "portal" sites, we
could lose a substantial portion of our user traffic. Furthermore, many non-
community sites have been developing community aspects in their sites.

     Many of our existing and potential competitors, including companies
operating web directories and search engines, and traditional media companies,
have the following advantages:

 .    longer operating histories in the Internet market,
 .    greater name recognition;
 .    larger customer bases; and
 .    significantly greater financial, technical and marketing resources.

     In addition, providers of Internet tools and services, including community-
type sites, may be acquired by, receive investments from, or enter into other
commercial relationships with larger, well-established and well-financed
companies, such as Microsoft and America Online. For example, Excite merged with
@Home, America Online acquired Netscape, Xoom.com and Snap.com completed a
transaction in which

                                      -16-
<PAGE>

NBC merged some of its online assets with these entities to form NBCi, and
Yahoo! acquired GeoCities and eGroups. In addition, there has been other
significant consolidation in the industry. This consolidation may continue in
the future. We could face increased competition in the future from traditional
media companies, including cable, newspaper, magazine, television and radio
companies. A number of these large traditional media companies, CBS and NBC,
have been active in Internet related activities. Those competitors may be able
to undertake more extensive marketing campaigns for their brands and services,
adopt more aggressive advertising pricing policies and make more attractive
offers to potential employees, distribution partners, electronic commerce
companies, advertisers, third-party content providers and acquisition targets.
Furthermore, our existing and potential competitors may develop sites that are
equal or superior in quality to, or that achieve greater market acceptance than,
our sites. We cannot assure you that advertisers may not perceive our
competitors' sites as more desirable than ours.

     To compete with other web sites, we have developed and will continue to
develop and introduce new features and functions, such as increased capabilities
for user personalization and interactivity. We also have developed and will
continue to introduce new products and services, such as "community tools" and
new content targeted for specific user groups with particular demographic and
geographic characteristics. These improvements will require us to spend
significant funds and may require the development or licensing of increasingly
complex technologies. Enhancements of or improvements to our web sites may
contain undetected programming errors that require significant design
modifications, resulting in a loss of customer confidence and user support and a
decrease in the value of our brand name. Our failure to effectively develop and
produce new features, functions, products and services could affect our ability
to compete with other web sites. This could have a material adverse effect on
us.

     Web browsers offered by Netscape and Microsoft also increasingly
incorporate prominent search buttons that direct traffic to services that
compete with ours. These features could make it more difficult for Internet
users to find and use our products and services. In the future, Netscape,
Microsoft and other browser suppliers may also more tightly integrate products
and services similar to ours into their browsers or their browsers' pre-set home
page. Additionally, entities that sponsor or maintain high-traffic web sites or
that provide an initial point of entry for Internet viewers, such as the
Regional Bell Operating Companies, cable companies or Internet service
providers, such as Microsoft and America Online, offer and can be expected to
consider further development, acquisition or licensing of Internet search and
navigation functions that compete with us. These competitors could also take
actions that make it more difficult for viewers to find and use our products and
services.

     Additionally, the electronic commerce market is rapidly evolving, and we
expect competition among electronic commerce merchants to increase
significantly. Because the Internet allows consumers to easily compare prices of
similar products or services on competing web sites and there are low barriers
to entry for potential competitors, gross margins for electronic commerce
transactions may continue to be narrow in the future. Many of the products that
we sell on our web site may be sold by the maker of the product directly or by
other web sites. Competition among Internet retailers, our electronic commerce
partners and product makers may have a material adverse effect on our ability to
generate revenues through electronic commerce transactions or from these
electronic commerce partners.

     OUR QUARTERLY OPERATING RESULTS FLUCTUATE AND VARY BY SEASON.

     Our quarterly revenues, expenses and operating results have varied
significantly in the past and are likely to vary significantly from quarter to
quarter in the future. As a result, quarter to quarter comparisons of our
revenues and operating results may not be meaningful. In addition, due to our
limited operating history and our unproven business model, we cannot accurately
predict our future revenues or results of operations. It is likely that in one
or more future quarters, our operating results will fall below the expectation
of securities analysts and investors. If this occurs, the trading price of our
Common Stock would almost certainly be materially and adversely affected. The
factors which will cause our quarterly operating results to fluctuate include:

 .    the level of traffic on our web sites;
 .    the overall demand for Internet advertising and electronic commerce;
 .    the addition or loss of advertisers and electronic commerce partners on our
     web sites;
 .    overall usage and acceptance of the Internet;
 .    seasonal trends in advertising and electronic commerce sales and member
     usage;
 .    capital expenditures and other costs relating to the expansion of our
     operations;
 .    the incurrence of costs relating to acquisitions;
 .    realignment of certain business operations;
 .    the timing and profitability of acquisitions, joint ventures and strategic
     alliances;
 .    failure to generate significant revenues and profit margins from new
     products and services;
 .    financial performance of other internet companies who advertise on our
     site;
 .    failure to enter into distribution agreements for our products and
     services; and

                                      -17-
<PAGE>

 .    competition from others providing services similar to those of ours.

     We derive a substantial portion of our revenues from the sale of
advertising under short-term contracts. These contracts average one to three
months in length. As a result, our quarterly revenues and operating results are,
to a significant extent, dependent on advertising revenues from contracts
entered into within the quarter, and on our ability to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. A slowdown in
the advertising market can happen quickly. We believe that advertising sales in
traditional media, such as television and radio, generally are lower in the
first and third calendar quarters. If the Internet transitions from an emerging
to a more developed form of media, these same patterns may develop in Internet
advertising sales. Internet advertising expenditures may also develop a
different seasonality pattern. Traffic levels on our sites and the Internet have
typically declined during the summer and year-end vacation and holiday periods.
Revenues from our games magazine are subject to the same seasonality trends as
traditional media.

     In addition to selling advertising, an increasing portion of our revenues
may be generated from electronic commerce through our Chips & Bits, Inc.
subsidiary. We also have existing electronic commerce arrangements with third
parties for the sale of merchandise on our electronic commerce site which are
terminable upon short notice. As a result, our revenues from electronic commerce
may fluctuate significantly from period to period depending on the level of
demand for products featured on our site and overall competition in the
marketplace.

     WE MAY HAVE SIGNIFICANT STOCK BASED COMPENSATION CHARGES RELATED TO
REPRICED OPTIONS.

     In light of the decline in our stock price at the time and in an effort to
retain our employee base, in May 2000, we repriced options held by all
employees, other than directors and executive officers. Options to purchase a
total of approximately 1.1 million shares, representing approximately 20% of
outstanding options, were canceled and approximately 856,000 new options were
granted at an exercise price of $1.594, which was based on the closing price of
the Company's common stock on May 31, 2000. The new options vest at the same
rate that they would have vested under previous option plans. In addition, as a
result of options which were granted within six months of the cancellations, an
additional 244,000 options also require variable accounting in accordance with
FIN No. 44.

     In March 2000, Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" ("Interpretation"). Among
other issues, this Interpretation clarifies (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. As a result under the Interpretation, stock options repriced after
December 15, 1998 are subject to variable plan accounting treatment. The Company
remeasures compensation cost for outstanding repriced options each reporting
period based on changes in the market value of the underlying common stock.
Depending upon movements in the market value of the Company's common stock, this
accounting treatment may result in significant non cash compensation charges in
future periods.

     WE DEPEND ON OUR MEMBERS FOR CONTENT AND PROMOTION.

     We depend substantially upon member involvement for content and
word-of-mouth promotion. Particularly, we depend upon the voluntary efforts of
some highly motivated members who are most active in developing content to
attract other Internet users to our sites. This member involvement reduces the
need for us to spend funds on content development and site promotion. However,
we cannot assure you that these members will continue to effectively generate
significant content or promote our sites. Our business may be materially and
adversely affected if our most highly active members become dissatisfied with
our services or our focus on the commercialization of those services or for any
other reason stop generating content that effectively promotes our sites.

     OUR BUSINESS MODEL IS RELATIVELY NEW AND UNPROVEN.

     Our business model is unproven and relatively new. This model depends upon
our ability to obtain more than one type of revenue source by using our
community platform and games information properties ("Games Network"). To be
successful, we must, among other things, develop and market products and
services that achieve broad market acceptance by our users, advertisers and
electronic commerce vendors. We must continue to develop electronic commerce
revenue streams by marketing products directly to users and having users
purchase products through our electronic commerce site. We cannot assure you
that any Internet community, including our site, will achieve broad market
acceptance and will be able to generate significant electronic commerce
revenues. We also cannot assure you that our business model will be successful,
that it will sustain revenue growth or that it will be profitable.

     Additionally, the market for our products and services is relatively new,
rapidly developing and characterized by an increasing number of market entrants.
As is typical of most new and rapidly evolving markets, demand and market
acceptance for recently introduced products and services are highly uncertain
and risky. Moreover, because this market is new and rapidly evolving, we cannot
predict our future growth rate,

                                      -18-
<PAGE>

if any. If this market fails to develop, develops slower than expected or
becomes saturated with competitors, or if our products and services do not
achieve or sustain market acceptance, our business would be materially and
adversely affected.

     In the fourth quarter we announced the reduction of our workforce by 26
employees. This reduction included certain employees at the management level. As
a result of this reduction, we may experience inefficiencies and a decrease in
productivity throughout our business. This may have a material effect on our
operating results.

     OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT.

     theglobe was founded in May 1995. Accordingly, we have a limited operating
history for you to use in evaluating our prospects and us. Our prospects should
be considered in light of the risks encountered by companies in the early stages
of development, particularly 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:

 .    maintain or increase levels of user and member traffic on our web sites;
 .    maintain or increase the percentage of our advertising inventory sold;
 .    maintain or increase both CPM levels and sponsorship revenues;
 .    adapt to meet changes in our markets and competitive developments;
 .    integrate or successfully develop recent acquisitions;
 .    develop or acquire content for our services;
 .    identify, attract, retain and motivate qualified personnel;
 .    enter into distribution agreements for our products and services; and
 .    raise sufficient capital to sustain future operations.

     OUR ACQUISITIONS, JOINT VENTURES OR STRATEGIC TRANSACTIONS ENTAIL NUMEROUS
RISKS AND UNCERTAINTIES.

     As part of our business strategy, we review acquisition prospects or joint
ventures that we expect to complement our existing business, increase our
traffic, augment the distribution of our community, enhance our technological
capabilities or increase our electronic commerce revenues. On February 1, 1999,
we acquired shop.theglobe.com, formerly known as Azazz, to develop electronic
commerce retailing on our site. In April 2000, we closed these electronic
commerce operations in Seattle, Washington. (See Note 3 in condensed
consolidated financial statements and Management's Discussion and Analysis on
Financial Condition and Results of Operations). On April 9, 1999, we acquired
Attitude Network, Ltd. to add two leading game enthusiast web sites to our
entertainment theme. On November 20, 1999, we acquired the web hosting assets of
Webjump.com to expand our home page hosting services. On February 24, 2000, we
acquired Chips & Bits, Inc., an electronic commerce retailer that focuses
primarily on game enthusiasts' and Strategy Plus, Inc., media property that
publishes a monthly games magazine and a game enthusiast web site. We consider
and evaluate, from time to time, potential business combinations, either
involving potential investments in our Common Stock or other business
combinations, joint ventures alliances or business development arrangements, or
our acquisition of other companies. If consummated, any such transaction could
result in a change of control of our company or could otherwise be material to
our business or to your investment in our Common Stock. These transactions may
or may not be consummated. Our future acquisitions or joint ventures could
result in numerous risks and uncertainties, including:

 .    potentially dilutive issuances of equity securities, which may be issued at
     the time of the transaction or in the future if certain tests 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 Common Stock, which could have a
     material adverse effect on our stock price;
 .    large and immediate write-offs;
 .    significant write-offs if we determine that the business acquisition does
     not fit or perform up to expectations;
 .    the incurrence of debt and contingent liabilities or amortization expenses
     related to goodwill and other intangible assets;
 .    difficulties in the assimilation of operations, personnel, technologies,
     products and information systems of the acquired companies;
 .    the diversion of management's attention from other business concerns;
 .    the risks of entering geographic and business markets in which we have no
     or limited prior experience;
 .    the risk that the acquired business will not perform as expected; and
 .    risks associated with international expansion.

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

                                      -19-
<PAGE>

     We believe that establishing and maintaining awareness of "theglobe.com"
and "games.theglobe.com" brand name, and the brand names of our wholly owned
subsidiaries, is critical to attracting and expanding our member base, the
traffic on our web sites and our advertising and electronic commerce
relationships. If we fail to promote and maintain our brand or our brand value
is diluted, our business, operating results and financial condition could be
materially adversely affected. The importance of brand recognition will increase
because low barriers to entry may result in an increased number of web sites. To
promote our brand, 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 revenues to justify these costs. Additionally, if
members, other Internet users, advertisers and customers do not perceive our
community experience or Games Network to be of high quality, or if we introduce
new services or enter into new business ventures that are not favorably received
by these parties, the value of our brand could be materially diluted.

     WE RELY ON THIRD PARTIES OVER WHOM WE HAVE LIMITED CONTROL TO MANAGE THE
PLACEMENT OF ADVERTISING ON OUR WEBSITES.

     The process of managing advertising within large, high-traffic web sites
such as ours is an increasingly important and complex task. We license our
advertising management system from DoubleClick, Inc. under an agreement expiring
in April 2002. DoubleClick may terminate the agreement upon 30 days' notice if
(1) we breach the agreement or (2) DoubleClick reasonably determines that we
have used their advertising management system in a manner that could damage
their technology or which reflects unfavorably on DoubleClick's reputation. No
assurance can be given that DoubleClick would not terminate the agreement. Any
termination and replacement of DoubleClick's service could disrupt our ability
to manage our advertising operations. Additionally, we have entered into a
contract with Engage Technologies, Inc. for the license of proprietary software
to manage the placement of advertisements on our web sites. This software has
been implemented and our relationship under the contract has not yet been
material. There can be no assurance that this software will effectively manage
and measure the placement of advertisements on our web sites and that errors
will not occur. For example, Doubleclick informed us in June 1999 that its
report of the numbers of unique visitors to the theglobe web site was not
accurate. We cannot assure you that there will be no miscalculations of such or
other measurements in the future. Any miscalculations or other problems with
reporting these measurements could have a material adverse effect on our
business, financial condition or stock price.

     To the extent that we encounter system failures or material difficulties in
the operation of our advertising management systems, we may :

 .    be unable to deliver banner advertisements and sponsorships through our
     sites; and
 .    be required to provide additional impressions to our advertisers after the
     contract term.

     Our obligations to provide additional impressions might displace saleable
advertising inventory. This could reduce revenues and could have a material
adverse effect on us.

     WE DEPEND SUBSTANTIALLY ON OUR KEY PERSONNEL.

     Our performance is substantially dependent on the continued service of our
senior management and key technical personnel. In particular, our success
depends on the continued efforts of our senior management team, especially our
Chief Executive Officer, our President and Chief Operating Officer, our Chief
Financial Officer and our Chief Technology Officer. We do not carry key person
life insurance on any of our personnel. The loss of the services of any of our
executive officers or other key employees without adequate replacement could
have a material adverse effect on our business.

     STAFF ATTRITION AND REDUCTIONS COULD STRAIN OUR MANAGERIAL, OPERATIONAL,
     FINANCIAL AND OTHER RESOURCES.

     We had 221 employees at December 31, 1999 197 employees at December 31,
2000; and 189 employees at March 31, 2001. Any staff attrition we experience,
whether initiated by the departing employee or by us, could place a significant
strain on our managerial, operational, financial and other resources. To the
extent that we do not inititate or seek any staff attrition that occurs, there
can be no assurance that we will be able to identify and hire adequate
replacement staff promptly, if at all, and even that if such staff is replaced,
we will be successful in integrating these employees. In the second quarter of
2001 we commenced a restructuring plan pursuant to which we eliminated 59
positions in response to changes in our business needs, such as redundancies in
our research and development and client support functions. We expect to evaluate
our needs and the performance of our staff on a periodic basis, and may choose
to make further adjustments in the future. If the size of our staff is
significantly reduced, either by our choice or otherwise, we could face
significant management, operational, financial and other constraints. For
example, it may become more difficult for us to manage existing, or establish
new relationships with clients and other counterparties, or to expand and
improve our service offerings. It may also become more difficult for us to
implement changes to our business plan or to respond promptly to opportunities
in the marketplace. Further, it may become more difficult for us to devote
personnel resources necessary to maintain or improve existing systems, including
financial and managerial controls, billing systems, reporting systems and
procedures. Thus, any significant amount of staff attrition could cause our
business and financial results to suffer.

     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 and managerial personnel.
Competition for employees in our industry is intense. 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 we expect to continue to experience in
the future, difficulty in hiring and retaining highly skilled employees with
appropriate qualifications. Furthermore, there is no guarantee that our stock
option plan will be considered attractive by industry standards, particularly in
light of the recent trading levels of our Common Stock. If we are unable to
attract and retain the technical and managerial personnel necessary to support
the growth of our business, our business would likely be materially and
adversely affected.

     WE MAY NOT EFFECTIVELY MANAGE OUR GROWTH; OUR MANAGEMENT TEAM IS
INEXPERIENCED IN THE MANAGEMENT OF A LARGE PUBLIC COMPANY.

                                      -20-
<PAGE>

     Our growth has placed significant strains on our resources. To manage our
future growth, we must continue to implement and improve our operational systems
and expand and train our employee base. We hired a new Chief Executive Officer
in August 2000, who has not had previous experience managing a public company.
Furthermore, the members of our current senior management, other than the
Chairman, have not had any previous experience managing a public company or a
large operating company. Accordingly, we cannot assure you that:

 .    we will be able to effectively manage the expansion of our operations;
 .    our key employees will be able to work together effectively as a team to
     successfully manage our growth;
 .    we will be able to retain key members of our management team;
 .    we will be able to hire, train and manage our growing employee base;
 .    our systems, procedures or controls will be adequate to support our
     operations; and
 .    our management will be able to achieve the rapid execution necessary to
     fully exploit the market opportunity for our products and services.

     Our inability to manage growth effectively could have a material adverse
effect on our business. We also have a substantially smaller work force after
our restructuring to manage our growth.

     OUR CHAIRMAN HAS OTHER INTERESTS AND TIME COMMITMENTS; WE HAVE CONFLICTS OF
INTEREST WITH SOME OF OUR DIRECTORS; CERTAIN OF OUR DIRECTORS WILL NOT BE
STANDING FOR REELECTION.

     Because our Chairman, Mr. Michael Egan, is an officer of other companies,
we have to compete for his time. Mr. Egan serves as the Chairman of our board of
directors and as an executive officer of other entities with primary
responsibility for day-to-day strategic planning and financing arrangements. 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. Mr. Egan is also Chairman of ANC Rental
Corporation, a spin-off of the car rental business of AutoNation, Inc.

     We have revenue agreements with entities controlled by Mr. Egan and by H.
Wayne Huizenga, one of our directors. These agreements were not the result of
arm's-length negotiations, but we believe that the terms of these agreements are
on comparable terms as if they were entered into with unaffiliated third
parties. The revenues recognized from such agreements represented less than 1%,
4% and 3% of total revenues for the years ended December 31, 2000, 1999 and
1998, respectively. Due to their relationships with their related entities,
Messrs. Egan and Huizenga will have an inherent conflict of interest in making
any decision related to transactions between their related entities and us. We
intend to review related party transactions in the future on a case-by-case
basis.

     Due to time constraints on their abilty to serve, some of our Board of
Directors will not be seeking reelection. Accordingly, we will have only one
independent director and only one independent director on the Audit Committee.
The nominees for election of Directors will be included in our Proxy Statement,
which will be filed within 120 days of December 31, 2000.

     WE MAY NOT BE ABLE TO KEEP PACE WITH RAPID TECHNOLOGICAL AND OTHER CHANGES.

     The markets in which we compete are characterized by:

     .    rapidly changing technology;
     .    evolving industry standards;
     .    frequent new service and product announcements, introductions and
          enhancements;
     .    continued emerging competition;
     .    changing consumer demands; and
     .    evolving regulatory oversight.

     We may not be able to keep up with these rapid changes. In addition, these
market characteristics are heightened by the emerging nature of the Internet and
the apparent need of companies from varying industries to offer Internet-based
products and services. As a result, our future success depends on our ability to
adapt to rapidly changing technologies and standards. We will also need to
continually improve the performance, features and reliability of our services in
response to competitive services and product offerings and the evolving demands
of the marketplace. In addition, the widespread adoption of new Internet,
networking or telecommunications technologies or other technological changes
could require us to incur substantial expenditures to modify our services or
infrastructure and could fundamentally affect the nature of our business.

     WE HAVE CAPACITY CONSTRAINT AND SYSTEM DEVELOPMENT RISKS.

                                      -21-
<PAGE>

     A key element of our strategy is to generate a high volume of user traffic.
Our ability to attract advertisers and to achieve market acceptance of our
products and services and our reputation depend significantly upon the
performance of our network infrastructure, including our servers, hardware and
software. Any system failure, including network, software or hardware failure,
that causes an interruption in our service or a decrease in responsiveness of
our web sites could result in reduced traffic and reduced revenue, and could
impair our reputation. Our web sites must accommodate a high volume of traffic
and deliver frequently updated information. Our web sites have in the past and
may in the future experience slower response times for a variety of reasons,
including system failures and an increase in the volume of user traffic on our
web sites. Accordingly, we face risks related to our ability to accommodate our
expected customer levels while maintaining superior performance. In addition,
slower response time may damage our reputation and result in fewer users at our
sites or users spending less time at our sites. This would decrease the amount
of inventory available for sale to advertisers. Accordingly, any failure of our
servers and networking systems to handle current or higher volumes of traffic at
sufficient response times would have a material adverse effect on our business.

     Our principal servers are located at New York Teleport facility in Staten
Island, New York under a lease with Telehouse International Corporation of
America. 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 web sites. Our reputation, theglobe.com brand and the
brands of our subsidiaries could be materially and adversely affected by any
problems to our sites. Our insurance policies may not 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.

     In addition, our users depend on Internet service providers, online service
providers and other web site operators for access to our web sites. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
Moreover, the Internet infrastructure may not be able to support continued
growth in its use. Furthermore, we depend on hardware suppliers for prompt
delivery, installation and service of equipment used to deliver our products and
services. Any of these problems could materially adversely affect our business.

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

     Consumer and supplier confidence in our web sites 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 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 policies carry low coverage limits, which
may not be adequate to reimburse us for losses caused by security breaches. We
also face risks associated with security breaches affecting third parties with
whom we have relationships.

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

     Our market is relatively new and rapidly evolving. Our business is
substantially dependent upon the continued rapid growth in the use of the
Internet and electronic commerce on the Internet becoming more widespread. Web
usage and electronic commerce growth may be inhibited for a number of reasons,
including:

     .    inadequate network infrastructure;
     .    security and authentication concerns with respect to transmission over
          the Internet of confidential information, including credit card
          numbers, or other personal information;
     .    ease of access;
     .    inconsistent quality of service;
     .    availability of cost-effective, high-speed service; and
     .    bandwidth availability.

     If the Internet develops as a commercial medium more slowly than we expect,
it will materially adversely affect our business. Additionally, if web usage
grows, the Internet infrastructure may not be able to support the demands placed
on it by this growth or its

                                      -22-
<PAGE>

performance and reliability may decline. Web sites 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 web sites,
could grow more slowly or decline. Also, the Internet's commercial viability may
be significantly hampered due to:

     .    delays in the development or adoption of new operating and technical
          standards and performance improvements required to handle increased
          levels of activity;
     .    increased government regulation; and
     .    insufficient availability of telecommunications services which could
          result in slower response times and adversely affect usage of the
          Internet.

     WE MAY BE MATERIALLY ADVERSELY AFFECTED IF ELECTRONIC COMMERCE DOES NOT
BECOME A VIABLE SOURCE OF SIGNIFICANT REVENUES OR PROFITS FOR THE COMPANY. IN
ADDITION, OUR ELECTRONIC COMMERCE BUSINESS MAY RESULT IN SIGNIFICANT LIABILITY
CLAIMS AGAINST US.

     In February 2000, we acquired Chips & Bits, Inc., a direct marketer of
video games and related products over the Internet. However, we have limited
experience in the sale of products online as compared to many of our competitors
and the development of relationships with manufacturers and suppliers of these
products. We also face many uncertainties which may affect our ability to
generate electronic commerce revenues and profits, including:

     .    our ability to obtain new customers at a reasonable cost, retain
          existing customers and encourage repeat purchases;
     .    the likelihood that both online and retail purchasing trends may
          rapidly change;
     .    the level of product returns;
     .    merchandise shipping costs and delivery times;
     .    our ability to manage inventory levels;
     .    our ability to secure and maintain relationships with vendors;
     .    the possibility that our vendors may sell their products through other
          sites; and . intense competition for electronic commerce revenues,
          resulting in downward pressure on gross margins.

     In April 2000, we elected to shut down our e-commerce operations in
Seattle, Washington in order to focus our e-commerce operations on video games
and related products (see Note 3 to the condensed consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations). Accordingly, we cannot assure you that electronic
commerce transactions will provide a significant or sustainable source of
revenues or profits. Additionally, due to the ability of consumers to easily
compare prices of similar products or services on competing web sites and
consumers' potential preference for competing web site'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. If use of the Internet for electronic commerce does not
continue to grow, our business and financial condition would be materially and
adversely affected.

     Additionally, consumers may sue us if any of the products that we sell are
defective, fail to perform properly or injure the user. Some of our agreements
with manufacturers contain provisions intended to limit our exposure to
liability claims. However, these limitations may not prevent all potential
claims. 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.

     INTERNET ADVERTISING MAY NOT PROVE AS EFFECTIVE AS TRADITIONAL MEDIA.

     The Internet advertising market is relatively new and rapidly evolving. We
cannot yet gauge its effectiveness as compared to traditional advertising media.
Many of our current or potential advertising partners have limited or no
experience using the Internet for advertising purposes and they have allocated
only a limited portion of their advertising budgets to Internet advertising. The
adoption of Internet advertising, particularly by those entities that have
historically relied upon traditional media, requires the acceptance of a new way
of conducting business, exchanging information and advertising products and
services. Advertisers that have traditionally relied upon other advertising
media may be reluctant to advertise on the Internet or find it less effective.

     No standards have been widely accepted to measure the effectiveness of
Internet advertising or to measure the demographics of our user base.
Additionally, no standards have been widely accepted to measure the number of
members, unique users, page views or impressions related to a particular site.
We cannot assure you that any standards will become available in the future,
that standards will accurately measure our users or the full range of user
activity on our sites or that measurement services will accurately report our
user activity based on their standards. If standards do not develop, advertisers
may not advertise on the Internet. In addition, we depend on third parties to
provide

                                      -23-
<PAGE>

these measurement services. These measurements are often based on sampling
techniques or other imprecise measures and may materially differ from each other
and from our estimates. We cannot assure you that advertisers will accept our or
other parties' measurements. The rejection by advertisers of these measurements
could have a material adverse effect on our business and financial condition.

     The sale of Internet advertising is subject to intense competition that has
resulted in a wide variety of pricing models, rate quotes and advertising
services. For example, advertising rates may be based on the number of user
requests for additional information made by clicking on the advertisement, known
as "click throughs," on the number of times an advertisement is displayed to a
user, known as "impressions," or on the number of times a user completes an
action at an advertiser's web site after clicking through, known as "cost per
action." Our contracts with advertisers typically guarantee the advertiser a
minimum number of impressions. To the extent that minimum impression levels are
not achieved for any reason, including the failure to obtain the expected
traffic, our contracts with advertisers may require us to provide additional
impressions after the contract term, which may adversely affect the availability
of our advertising inventory. In addition, certain long-term contracts with
advertisers may be canceled if response rates or sales generated from our site
are less than advertisers' expectations. This could have a material adverse
effect on us. Online advertisers are increasingly demanding "cost per action"
advertising campaigns, which require many more page views to achieve an equal
revenue, which significantly effects our revenues. If online advertisers
continue to demand those "cost per action" deals, it could negatively impact our
business.

     Our revenues could be materially adversely affected if we are unable to
adapt to other pricing models for Internet advertising if they are adopted. It
is difficult to predict which, if any, pricing models for Internet advertising
will emerge as the industry standard. This makes it difficult to project our
future advertising rates and revenues. Online advertising pricing has been
declining. Additionally, it is possible that Internet access providers may, in
the future, act to block or limit various types of advertising or direct
solicitations, whether at their own behest or at the request of users. Moreover,
"filter" software programs that limit or prevent advertising from being
delivered to an Internet user's computer are available. Widespread adoption of
this software could adversely affect the commercial viability of Internet
advertising. In addition, concerns regarding the privacy of user data on the Web
may reduce the amount of user data collected in the future, thus reducing our
ability to provide targeted advertisements. This may, in turn, put downward
pressure on cost per thousand impressions ("CPM").

     WE DEPEND ON THIRD PARTIES TO INCREASE TRAFFIC ON OUR SITES AND TO PROVIDE
SOFTWARE AND PRODUCTS.

     We utilize arrangements with various web sites that provide direct links to
our sites. These web sites may not attract significant numbers of users and we
may not receive a significant number of additional users from these
relationships. In addition, some companies with which we do business may suffer
financial difficulties that could limit their ability to pay the Company monies
owed. We also enter into agreements with advertisers, electronic commerce
marketers or other third-party web sites that require us to exclusively feature
these parties in particular areas or on particular pages of our sites. These
exclusivity agreements may limit our ability to enter into other relationships.
We may enter into arrangements to increase our traffic which may not be
successful. Our agreements with third party sites do not require future minimum
commitments to use our services or provide access to our sites and may be
terminated at the convenience of the other party. Moreover, we do not have
agreements with a majority of the web sites that provide links to our site.
These sites may terminate their links at any time. Many companies we may pursue
for strategic relationships offer competing services. As a result, these
competitors may be reluctant to enter into strategic relationships with us. Our
business could be materially adversely affected if we do not establish and
maintain strategic relationships on commercially reasonable terms or if any of
our strategic relationships do not result in increased traffic on our web sites.

     Additionally, we cannot assure you that we will be able to maintain
relationships with third parties that supply us with software or products that
are crucial to our success, or that these software or products will be able to
sustain any third-party claims or rights against their use. Furthermore, we
cannot assure you that the software, services or products of those companies
that provide access or links to our services or products will achieve market
acceptance or commercial success. Accordingly, we cannot assure you that our
existing relationships will result in sustained business partnerships,
successful service or product offerings or the generation of significant
revenues for us.

     WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

     We regard substantial elements of our web sites and underlying technology
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 a material 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
internationally. In addition, we have filed a number of patent

                                      -24-
<PAGE>

applications with the United States Patent Office. 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. Furthermore, we cannot assure you that our business activities 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 web sites 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 may assert claims of alleged infringement by us or our members of their
intellectual property rights. Any litigation claims or counterclaims could
impair our business because they could:

     .    be time-consuming;
     .    result in costly litigation;
     .    subject us to significant liability for damages;
     .    result in invalidation of our proprietary rights;
     .    divert management's attention;
     .    cause product release delays; or
     .    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
sites. As we continue to introduce new services that incorporate new
technologies, we may be required to license additional technology from others.
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
services or could adversely affect the performance of our existing services
until equivalent technology can be identified, licensed and integrated.

     We have registered several Internet domain names including "theglobe.com",
"globeclubs.com", "tglo.com," "azazz.com," "happypuppy.com, " "kidsdomain.com,"
"gamesdomain.com," "webjump.com" and "cdmag.com." The regulation of domain names
in the United States and in foreign countries may change. Regulatory bodies
could establish additional top-level domains, 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 web sites 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 FACE INCREASED GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES IN OUR
INDUSTRY.

     There are an increasing number of federal, state, local and foreign laws
and regulations pertaining to the Internet. In addition, a number of federal,
state, local and foreign legislative and regulatory proposals are under
consideration. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy and quality of products and
services. Changes in tax laws relating to electronic commerce could materially
effect our business and financial condition. 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. 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, may impose
additional burdens on electronic commerce or may alter how we do business. This
could decrease the demand for our 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, results of operations and financial
condition.

     There are certain various issues being discussed by the accounting
profession and the Securities and Exchange Commission that would affect Internet
companies accounting policies with regards to revenue recognition, barter
transactions, impression guarantees as they relate to advertising contracts,
coupon and promotional expenses and customer acquisition costs. While these
discussions remain in the preliminary stages as of now, we cannot predict the
impact that certain proposed changes would have on our results of operations,
our financial condition or our stock price.

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

                                      -25-
<PAGE>

INTERNET OR FOR PRODUCTS SOLD OVER THE INTERNET.

     Users may access content on our web sites or the web sites of our
distribution partners or other third parties through web site 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 web sites. Claims have been brought against online services in the past and
we have received inquiries from third parties regarding these matters. The
claims could be material in the future. We could also be exposed to liability
for third party content posted by members on their personal web pages, their
email clubs or by users in our chat rooms or on our bulletin boards.

     Additionally, we offer e-mail service, which a third party provides. The e-
mail service may expose us to potential liabilities or claims resulting from
unsolicited e-mail, lost or misdirected messages, fraudulent use of e-mail or
delays in e-mail service. We also enter into agreements with commerce partners
and sponsors under which we are entitled to receive a share of any 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 MAY HAVE TROUBLE EXPANDING INTERNATIONALLY.

     A part of our strategy has been to expand into foreign markets. In April
1999, we acquired Attitude Network, Ltd., which operates Games Domain.com, Kids
Domain.com and Console Domain.com through a wholly-owned U.K. subsidiary. We had
not previously operated internationally. Additionally, we may not be completely
familiar with U.K. law and its ramifications on our business. There can be no
assurance that the Internet or our community model will become widely accepted
for advertising, electronic commerce or our Games Network in any international
markets. To expand overseas we intend to seek to acquire additional web sites
and enter into relationships with foreign business partners. This strategy
contains risks, including:

     .    we may experience difficulty in managing international operations
          because of distance, as well as language and cultural differences;
     .    we or our future foreign business associates may not be able to
          successfully market and operate our services in foreign markets;
     .    because of substantial anticipated competition, it will be necessary
          to implement our business strategy quickly in international markets to
          obtain a significant share of the market; and
     .    we do not have the content or services necessary to substantially
          expand our operations in many foreign markets.

     We will unlikely be able to significantly penetrate these markets unless we
gain the relevant content, either through partnerships, other business
arrangements or possibly acquisitions with content-providers in these markets.
There are also risks inherent in doing business on an international level,
including:

     .    unexpected changes in regulatory requirements;
     .    trade barriers;
     .    difficulties in staffing and managing foreign operations;
     .    fluctuations in currency exchange rates and the introduction of the
          Euro;
     .    longer payment cycles in general;
     .    problems in collecting accounts receivable;
     .    difficulty in enforcing contracts;
     .    political and economic instability;
     .    seasonal reductions in business activity in certain other parts of the
          world; and
     .    potentially adverse tax consequences.

     VARIOUS STOCKHOLDERS, INDIVIDUALLY OR IN THE AGGREGATE, MAY CONTROL US.

                                      -26-
<PAGE>

     Michael S. Egan, our Chairman, beneficially owns or controls, directly or
indirectly, 9,844,606 shares of our Common Stock which in the aggregate
represents approximately 28% of the outstanding shares of our Common Stock. Todd
V. Krizelman and Stephan J. Paternot, together, beneficially own 12% of the
outstanding shares of Common Stock. Accordingly, Mr. Egan would likely be able
to exercise significant influence in any stockholder vote, particularly if
Messrs. Krizelman and Paternot support his position.

     Messrs. Egan, Krizelman, Paternot and Edward A. Cespedes and Rosalie V.
Arthur, each of whom is a director of our company, `have entered into a
stockholders' agreement with us. As a result of the stockholders' agreement, Mr.
Egan has agreed to vote for up to two nominees of Messrs. Krizelman and Paternot
to the board of directors and Messrs. Krizelman and Paternot have agreed to vote
for the nominees of Mr. Egan to the board, which will be up to five directors.
Consequently, Messrs. Egan, Krizelman and Paternot will likely be able to elect
a majority of our directors. Additionally, each party other than Mr. Egan has
granted an irrevocable proxy with respect to all matters subject to a
stockholder vote to Dancing Bear Investments, Inc., an entity controlled by Mr.
Egan, for any shares held by that party received upon the exercise of
outstanding warrants for 400,000 shares of our Common Stock. The stockholders'
agreement also provides for tag-along and drag-along rights in connection with
any private sale of these securities.

     OUR STOCK PRICE IS VOLATILE.

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

     .    quarterly variations in our operating results;
     .    Decreased trading volume;
     .    competitive announcements;
     .    changes in financial estimates by securities analysts;
     .    failure to meet analysts estimates;
     .    issuance of additional common stock;
     .    the operating and stock price performance of other companies that
          investors may deem comparable to us; and
     .    news relating to trends in our markets.

     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. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against a company. Litigation, if
instituted, whether or not successful, could result in substantial costs and a
diversion of management's attention and resources, which would have a material
adverse effect on our business.

     THE SALE OF SHARES ELIGIBLE FOR FUTURE SALE IN THE OPEN MARKET COULD
DEPRESS OUR STOCK PRICE.

     Sales of significant amounts of Common Stock in the public market in the
future, the perception that sales will occur or the registration of such shares
could materially and adversely affect the market price of the Common Stock or
our future ability to raise capital through an offering of our equity
securities. We currently have approximately 22 million shares of Common Stock
that are freely tradable. Approximately 8,158,450 shares of Common Stock are
held by our "affiliates," within the meaning of the Securities Act of 1933, and
are currently eligible for sale in the public market subject to volume
limitation. Additionally, we may issue additional shares of our common stock,
which could adversely effect our stock price.

     There are outstanding options to purchase 5,234,803 shares of 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 issuance of these
securities are registered under the Securities Act. In addition, there are
outstanding warrants to purchase up to 4,011,534 shares of our Common Stock upon
exercise. Substantially all of our stockholders holding restricted securities,
including shares issuable upon the exercise of warrants to purchase our Common
Stock, are entitled to registration rights under various conditions.

     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:

     .    have the effect of delaying, deferring or preventing a change in
          control of our company;
     .    discourage bids of our Common Stock at a premium over the market
          price; or
     .    adversely affect the market price of, and the voting and other rights
          of the holders of, our Common Stock.

                                      -27-
<PAGE>

     We must follow Delaware laws that 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 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.

     WE DO NOT EXPECT TO PAY CASH DIVIDENDS.

     We do not anticipate paying any cash dividends in the foreseeable future.

                                      -28-
<PAGE>

     ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     Collection Risks. Our accounts receivables are subject, in the normal
course of business, to collection risks. Although we regularly assess these
risks and have policies and business practices to mitigate the adverse effects
of collection risks, significant losses may result due to the non-payment of
receivables by our advertisers.

     Interest Rate Risk. Our return on our investments in cash and cash
equivalents and short-term investments is subject to interest rate risks. We
regularly assesses these risks and have established policies and business
practices to manage the market risk of our short-term securities.

     Foreign Currency Risk. We transact business in the United Kingdom.
Accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. The effect of foreign currency exchange rate
fluctuations for 2000 and the first quarter of 2001 was not material. We do not
use derivative financial instruments to limit our foreign currency risk
exposure.

                                      -29-
<PAGE>

                                    PART II

                               OTHER INFORMATION

  ITEM 1.   LEGAL PROCEEDINGS

  See Note 6 - "Commitments and Contingencies" in Part I, Item 1, "Condensed
Consolidated Financial Statements."

  ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

  (a) Sales of Unregistered Securities

  None.

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

  On November 13, 1998, we completed our initial public offering of
approximately 7.0 million shares of Common Stock at a price of $4.50 per share
(File No. 333-59751).  We received net proceeds of $27.3 million, net of $2.0
million in underwriting discounts and $2.0 million in offering costs.  On May
19, 1999, we completed our secondary public offering of 3.5 million shares of
Common Stock at a price of $20.00 per share (File No. 333-76153).  We received
net proceeds of $65.0 million, net of $3.5 million in underwriting discounts and
$1.5 million in offering costs. None of the expenses incurred in our initial or
secondary public offerings were direct or indirect payments to our directors,
officers, general partners or their associates, to persons owning ten percent or
more of any class of our equity securities or to our affiliates.  As of March
31, 2000, the net proceeds received from our public offerings have been used for
networking infrastructure and  the functionality of our web sites and for
general corporate purposes, which include working capital, advertising costs,
the leasing of new office facilities, the expansion of our sales and marketing
capabilities, our advertising campaign and our brand name promotions.  We have
also used a portion of such net proceeds for the acquisition of complementary
businesses, assets, services and technology. None of the general corporate
expenses incurred were direct or indirect payments to our directors, officers,
general partners or their associates, to persons owning ten percent or more of
any class of our equity securities or to our affiliates.

  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 AND REPORTS ON FORM 8-K.

     None

                                      II-1
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereto duly authorized.



                    theglobe.com, inc.

                    /s/ Stephanie Hauge
                    -------------------

                    Stephanie Hauge
                    Vice President, Chief Financial Officer
                    and Treasurer (Principal Financial and
                    Accounting Officer)

  May 15, 2001

                                      II-2