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 quarter period ended March 31, 2005

                                       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.)


                     110 EAST BROWARD BOULEVARD, SUITE 1400
                           FORT LAUDERDALE, FL. 33301
                  --------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                (954) 769 - 5900
              (Registrant's telephone number, including area code)


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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 the Securities Exchange Act of 1934). Yes |_| No |X|

The number of shares  outstanding of the  Registrant's  Common Stock,  $.001 par
value (the "Common Stock") as of May 4, 2005 was 175,816,973
<PAGE>

                               THEGLOBE.COM, INC.
                                    FORM 10-Q
                                TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

        Condensed  Consolidated  Balance  Sheets  at  March  31,  2005
        (unaudited) and December 31, 2004                                     3

        Unaudited Condensed Consolidated  Statements of Operations for
        the three months ended March 31, 2005 and 2004                        4

        Unaudited Condensed Consolidated  Statements of Cash Flows for
        the three months ended March 31, 2005 and 2004                        5

        Notes to Unaudited Condensed Consolidated Financial Statements        6

Item 2. Management's  Discussion and Analysis of Financial  Condition
        and Results of Operations                                            16

Item 3. Quantitative and Qualitative Disclosures about Market Risk           43

Item 4. Controls and Procedures                                              43

PART II: OTHER INFORMATION

Item 1. Legal Proceedings                                                    44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds          44

Item 3. Defaults Upon Senior Securities                                      44

Item 4. Submission of Matters to a Vote of Security Holders                  44

Item 5. Other Information                                                    44

Item 6. Exhibits                                                             44

SIGNATURES                                                                   46


                                  2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       THEGLOBE.COM, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           MARCH 31,       DECEMBER 31,
                                                              2005            2004
                                                          ------------    -------------
                             ASSETS                       (UNAUDITED)
                             ------
<S>                                                          <C>          <C>
Current Assets:
  Cash and cash equivalents                               $  3,280,189    $   6,828,200
  Marketable securities                                         42,736           42,736
  Accounts receivable, less allowance for doubtful
   accounts of approximately $268,000 and
   $274,000, respectively                                    7,541,329        7,740,692
  Inventory, less reserves of approximately
   $271,000 and $1,333,000, respectively                       229,894          589,579
  Prepaid expenses                                             998,654        1,590,139
  Deposits on inventory purchases                               77,250           77,250
  Other current assets                                         292,881          316,926
                                                          ------------    -------------
       Total current assets                                 12,462,933       17,185,522

Goodwill                                                    11,709,952       11,702,317
Intangible assets                                            1,590,000        1,680,000
Property and equipment, net                                  3,220,881        3,406,370
Other assets                                                    79,356           42,956
                                                          ------------    -------------
       Total assets                                       $ 29,063,122    $  34,017,165
                                                          ============    =============

               LIABILITIES AND STOCKHOLDERS' EQUITY
               ------------------------------------

Current Liabilities:
  Accounts payable                                        $  6,187,071    $   7,447,550
  Accrued expenses and other current liabilities             3,020,065        2,803,544
  Deferred revenue                                             571,668          739,665
  Notes payable and current portion of long-term debt        1,257,345        1,277,405
                                                          ------------    -------------
       Total current liabilities                            11,036,149       12,268,164

Long-term debt                                                  15,972           26,997
Other long-term liabilities                                    130,366          204,616
                                                          ------------    -------------
       Total liabilities                                    11,182,487       12,499,777
                                                          ------------    -------------
Stockholders' Equity:
  Common stock, $0.001 par value; 500,000,000 shares
    authorized; 175,904,504 and 174,315,678 shares
    issued at March 31, 2005 and December 31, 2004,
    respectively                                               175,905          174,316
  Additional paid-in capital                               282,616,635      282,289,404
  Treasury stock, 699,281 common shares, at cost              (371,458)        (371,458)
  Accumulated deficit                                     (264,540,447)    (260,574,874)
                                                          ------------    -------------
       Total stockholders' equity                           17,880,635       21,517,388
                                                          ------------    -------------
       Total liabilities and stockholders' equity         $ 29,063,122    $  34,017,165
                                                          ============    =============
</TABLE>

See notes to unaudited condensed consolidated financial statements.


                                       3
<PAGE>

                       THEGLOBE.COM, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                Three Months Ended March 31,
                                               ----------------------------
                                                    2005           2004
                                               -------------   ------------
                                                        (UNAUDITED)

Net Revenue                                    $   9,438,728   $    855,997
                                               -------------   ------------
Operating Expenses:
  Cost of revenue                                  8,273,362      1,323,127
  Sales and marketing                              1,173,396        827,296
  Product development                                325,841        175,516
  General and administrative                       2,939,646      2,072,017
  Depreciation                                       368,543        216,000
  Amortization of intangible assets                   90,000         20,111
                                               -------------   ------------
                                                  13,170,788      4,634,067
                                               -------------   ------------

Loss from Operations                              (3,732,060)    (3,778,070)
                                               -------------   ------------

Other Income (Expense):
  Interest income (expense), net                      12,125       (793,829)
  Other expense, net                                (229,288)       (89,799)
                                               -------------   ------------
                                                    (217,163)      (883,628)
                                               -------------   ------------

Loss Before Provision for Income Taxes            (3,949,223)    (4,661,698)

Provision for Income Taxes                            16,350             --
                                               -------------   ------------
Net Loss                                       $  (3,965,573)  $ (4,661,698)
                                               =============   ============

Basic and Diluted Net Loss Per Common Share    $       (0.02)  $      (0.07)
                                               =============   ============

Weighted Average Common Shares Outstanding       174,821,229     70,986,256
                                               =============   ============



See notes to unaudited condensed consolidated financial statements.


                                       4
<PAGE>

                       THEGLOBE.COM, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31,
                                                                  ---------------------------
                                                                     2005            2004
                                                                  -----------    ------------
                                                                         (UNAUDITED)
<S>                                                               <C>            <C>
Cash Flows from Operating Activities:
  Net loss                                                        $(3,965,573)   $ (4,661,698)
  Adjustments to reconcile net loss to net cash
    and cash equivalents used in operating activities:
      Depreciation and amortization                                   458,543         236,111
      Provision for excess and obsolete inventory                          --          (4,485)
      Provision for uncollectible accounts receivable                      --          20,000
      Non-cash interest expense                                            --         785,886
      Reserve against amounts loaned to Internet venture              230,000         110,000
      Employee stock compensation                                     208,281         150,533
      Compensation related to non-employee stock options               42,124         294,796
      Other, net                                                         (173)          5,262

      Changes in operating assets and liabilities, net:
        Accounts receivable, net                                      199,363         177,531
        Inventory, net                                                359,685        (580,085)
        Prepaid and other current assets                              615,530         115,537
        Accounts payable                                           (1,260,479)       (690,480)
        Accrued expenses and other current liabilities                208,886         375,335
        Deferred revenue                                             (167,997)         52,668
                                                                  -----------    ------------
            Net cash and cash equivalents used in operating
                activities                                         (3,071,810)     (3,613,089)
                                                                  -----------    ------------
Cash Flows from Investing Activities:
  Proceeds from sales and maturities of marketable securities              --         225,070
  Purchases of property and equipment                                (183,054)       (288,601)
  Amounts loaned to Internet venture                                 (230,000)       (110,000)
  Patent costs incurred                                                    --         (25,252)
  Other, net                                                          (36,400)         (3,500)
                                                                  -----------    ------------
            Net cash and cash equivalents used in
                investing activities                                 (449,454)       (202,283)
                                                                  -----------    ------------
Cash Flows from Financing Activities:
  Borrowings on notes payable and long-term debt                           --       2,000,000
  Payments on notes payable and long-term debt                        (30,912)        (24,655)
  Proceeds from issuance of common stock, net                              --      27,055,281
  Proceeds from exercise of common stock options                        3,094         139,545
  Proceeds from exercise of warrants                                    1,071              --
                                                                  -----------    ------------
            Net cash and cash equivalents provided by (used in)
                financing activities                                  (26,747)     29,170,171
                                                                  -----------    ------------
Net Increase (Decrease) in Cash and Cash Equivalents               (3,548,011)     25,354,799

Cash and Cash Equivalents, at beginning of period                   6,828,200       1,061,702
                                                                  -----------    ------------
Cash and Cash Equivalents, at end of period                       $ 3,280,189    $ 26,416,501
                                                                  ===========    ============
</TABLE>

See notes to unaudited condensed consolidated financial statements.


                                       5
<PAGE>

                       THEGLOBE.COM, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   DESCRIPTION OF THEGLOBE.COM

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

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

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

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

On September 1, 2004, the Company acquired SendTec, Inc.  ("SendTec"),  a direct
response marketing services and technology  company.  As more fully discussed in
Note 3,  "Acquisition of SendTec,  Inc.," the Company paid $6.0 million in cash,
excluding  transaction  costs, and issued debt and equity securities valued at a
total of approximately $12 million to purchase SendTec.

As of March 31, 2005,  the Company's  revenue  sources were derived  principally
from the acquired  operations of SendTec which comprises our marketing  services
division,  as well as from the operations of our games related  businesses.  The
Company's  retail VoIP products and services have yet to produce any significant
revenue.

(b)   PRINCIPLES OF CONSOLIDATION

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

(c)   UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The unaudited interim condensed consolidated financial statements of the Company
as of March 31,  2005 and for the three  months  ended  March 31,  2005 and 2004
included herein have been prepared in accordance with the  instructions for Form
10-Q under the  Securities  Exchange Act of 1934, as amended,  and Article 10 of
Regulation S-X under the Securities Act of 1933, as amended. Certain information
and note  disclosures  normally  included in consolidated  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted pursuant to such rules and regulations  relating to interim
condensed consolidated financial statements.


                                       6
<PAGE>

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, 2005 and the results of its  operations and its cash
flows for the three months ended March 31, 2005 and 2004.

(d)   USE OF ESTIMATES

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

(e)   CASH AND CASH EQUIVALENTS

Cash  equivalents  consist of money  market funds and highly  liquid  short-term
investments with qualified  financial  institutions.  The Company  considers all
highly liquid securities with original  maturities of three months or less to be
cash  equivalents.  Included in cash and cash  equivalents  in the  accompanying
condensed  consolidated  balance  sheet at March  31,  2005,  was  approximately
$62,000 of cash held in escrow for  purposes  of  sweepstakes  promotions  being
conducted by the VoIP telephony division.

(f)   MARKETABLE SECURITIES

The  Company  accounts  for its  investment  in debt and  equity  securities  in
accordance with Statement of Financial  Accounting  Standards  ("SFAS") No. 115,
"Accounting  for Certain  Investments in Debt and Equity  Securities."  All such
investments  are  classified  as  available-for-sale  as of March  31,  2005 and
December 31, 2004.  Available-for-sale  securities  are stated at market  value,
which  approximates  fair value,  and  unrealized  holding  gains and losses are
excluded from earnings and included as a component of stockholders' equity until
realized.

Available-for-sale securities at March 31, 2005 and December 31, 2004, consisted
of U.S.  Treasury Bills with a cost basis and fair value of $42,736.  During the
three months ended March 31, 2005 and 2004, the Company had no significant gross
realized gains or losses on sales of available-for-sale securities.

(g)   COMPREHENSIVE INCOME (LOSS)

The Company reports comprehensive income (loss) in accordance with SFAS No. 130,
"Reporting   Comprehensive   Income."   Comprehensive  income  (loss)  generally
represents  all changes in  stockholders'  equity  during the year except  those
resulting from investments by, or distributions to, stockholders.  The Company's
comprehensive loss was approximately $4.0 million and $4.7 million for the three
months  ended  March 31, 2005 and 2004,  respectively,  which  approximated  the
Company's reported net loss.

(h)   INVENTORY

Inventories  are recorded on a first in, first out basis and valued at the lower
of cost or market value. The Company's reserve for excess and obsolete inventory
as of March 31, 2005 and  December  31,  2004,  was  approximately  $271,000 and
$1,333,000, respectively.

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

(i)   CONCENTRATION OF CREDIT RISK

Financial instruments which subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents,  marketable securities and trade
accounts  receivable.  The Company  maintains its cash and cash equivalents with
various  financial  institutions  and invests its funds among a diverse group of
issuers and instruments.  The Company performs ongoing credit evaluations of its
customers'  financial  condition  and  establishes  an  allowance  for  doubtful
accounts based upon factors surrounding the credit risk of customers, historical
trends  and  other  information.  Amounts  receivable  from  four  of  SendTec's
customers  represented  approximately  $4,009,000,  or 59%, of  SendTec's  total
accounts  receivable as of March 31, 2005.  Concentration  of credit risk in the
Company's  computer  games and VoIP  telephony  services  divisions is generally
limited due to the large number of customers in these businesses.


                                       7
<PAGE>

(j)   REVENUE RECOGNITION

Computer Games Businesses

Advertising  revenue  from  the sale of print  advertisements  under  short-term
contracts in the games information  magazine,  Computer Games, are recognized at
the on-sale date of the magazine.

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

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

Marketing Services

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

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

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

VoIP Telephony Services

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

(k)   NET LOSS PER SHARE

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

Due to the Company's net losses, the effect of potentially  dilutive  securities
or common stock  equivalents  that could be issued was excluded from the diluted
net loss per common share  calculation  due to the  anti-dilutive  effect.  Such
potentially  dilutive  securities and common stock equivalents  consisted of the
following for the periods ended March 31:


                                       8
<PAGE>

                                          2005         2004
                                       ----------   ----------
Options to purchase common stock       15,605,000    9,924,000
Common shares issuable upon exercise
    of warrants                        20,782,000   26,504,000
                                       ----------   ----------
Total                                  36,387,000   36,428,000
                                       ==========   ==========

(l)   RECENT ACCOUNTING PRONOUNCEMENTS

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

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

In December  2004,  the FASB issued SFAS No. 123R,  "Share-Based  Payment." This
standard  replaces SFAS No. 123,  "Accounting for Stock-Based  Compensation" and
supersedes  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees." The standard requires  companies to expense the fair
value of stock  options on the grant date and is  effective  for annual  periods
beginning  after June 15, 2005. In accordance  with the revised  statement,  the
expense attributable to stock options granted or vested subsequent to January 1,
2006 will be required to be recognized  by the Company.  The Company has not yet
evaluated the impact of this pronouncement on the Company.

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

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

(m)   RECLASSIFICATIONS

Certain 2004 amounts have been reclassified to conform to the 2005 presentation.

(2)   GOING CONCERN CONSIDERATIONS

The Company's March 31, 2005 condensed  consolidated  financial  statements have
been prepared assuming the Company will continue as a going concern. The Company
has  suffered   recurring  losses  from  operations  since  inception,   has  an
accumulated  deficit as of March 31,  2005,  of  $264,540,447  and has  recorded
impairment  charges  related to its VoIP telephony  services  division  totaling
$2,570,359  during  2004  and  2003.  Net  cash  and  cash  equivalents  used in
operations totaled $3,071,810 for the first quarter of 2005 due primarily to net
losses incurred by its VoIP telephony services division.

During 2004,  the Company  expended  significant  costs to implement a number of
marketing  programs  geared  toward  increasing  the  number of its VoIP  retail
customers  and  telephony  revenue.  None of these  programs  have  proven to be
successful to any  significant  degree.  At March 31, 2005,  the Company's  sole
source of liquidity  consisted of $3,280,189 of cash and cash  equivalents.  The
Company  continues to incur  substantial  consolidated net losses and management
believes  the Company  will  continue  to be  unprofitable  for the  foreseeable
future.  These conditions raise significant doubt about the Company's ability to
continue as a going concern.


                                       9
<PAGE>

Management's Plans

During  October  2004,  the  Company  engaged  financial  advisors to assist the
Company in raising capital through a private placement of its equity securities,
or  in  entering  into  other  business  relationships  with  certain  strategic
investors. In February 2005, the Company engaged an additional financial advisor
to assist the  Company in  connection  with  raising  capital  through a private
placement of equity securities in either the Company or its SendTec wholly-owned
subsidiary  or  alternatively  in selling  either  part or all of the  Company's
businesses or assets,  including its SendTec business. The Company currently has
no access to credit  facilities with  traditional  third party lenders and there
can be no  assurance  that it would be able to raise  capital or sell any of its
businesses or assets.  In addition,  any financing  that could be obtained would
likely  significantly  dilute existing  shareholders.  Management is exploring a
number  of  strategic  alternatives  regarding  the  Company's  future  business
operations.  Management has also  implemented a number of internal actions in an
effort to improve the Company's  liquidity and business  performance,  including
those  described  below.  The  Company's  future  strategic  direction is highly
dependent  upon the outcome of its efforts to raise capital  and/or sell certain
businesses or assets.

During the first  quarter of 2005,  the Company  reevaluated  its existing  VoIP
telephony  services business plan and is currently in the process of terminating
and/or  modifying  certain  of its  existing  product  offerings  and  marketing
programs,  as well as  developing  and  testing  certain new VoIP  products  and
features.  The Company also, during the first quarter of 2005, made the decision
to discontinue using its SendTec business to perform marketing  services for its
VoIP business,  and to instead dedicate 100% of SendTec's  marketing services to
support and grow its own third party  customer base.  Additionally,  in order to
reduce  its near term  consolidated  net  losses  and cash  usage,  the  Company
implemented a number of  cost-reduction  actions at its VoIP telephony  services
business,  including decreases in personnel and salary levels,  carrier and data
center costs,  and  marketing/advertising  expenses  during the first quarter of
2005.

Management  believes that it will be difficult to implement its new VoIP product
and marketing plans,  once fully developed and tested,  without  additional cash
being provided from a prospective  financing or sale transaction(s).  Should the
Company's new product  offerings  achieve market  acceptance  and  significantly
increase the  Company's  current  customer  and revenue  base,  additional  cash
resources to fund capital expenditures related to the Company's VoIP network and
customer  billing  systems  and to fund  future  marketing  and  other  business
development costs would be required.

There can be no assurance that the Company's new VoIP product  offerings will be
successful  in  attracting  a  sufficient  number of new  customers  to its VoIP
network and increasing  telephony revenue to desired levels. Even if the Company
is able to raise  additional  capital,  management  may at any  time,  decide to
terminate the  operations of its VoIP  telephony  services  business,  either by
asset  sale  or  abandonment,   if  future  investment  returns  are  considered
inadequate  and/or  preferable  investment  alternatives  exist. The Company may
alternatively  decide to enter into new lines of  business.  (See Note 4, "Other
Assets" for further  details  regarding the Company's  acquisition of Tralliance
Corporation in May 2005).

On April 22, 2005,  entities  controlled  by our  Chairman  and Chief  Executive
Officer and our President entered into an agreement with the Company pursuant to
which the entities acquired secured demand  convertible  promissory notes in the
aggregate  amount of  $1,500,000  together with options to acquire an additional
$2,500,000  in the  aggregate of such notes on or before July 22, 2005 (see Note
9, "Subsequent Events," for further details).  The proceeds from the sale of the
notes are intended to provide the Company with temporary short-term liquidity to
operate its businesses  while it seeks to raise  additional  capital,  which may
involve  the  potential  sale  of one or  more  of the  Company's  subsidiaries,
including  SendTec.  The Company's cash and cash  equivalents  balance at May 6,
2005,  inclusive of the  $1,500,000  in proceeds  received  from the sale of the
notes, was approximately $4,000,000.

Summary

If the Company is not successful in entering into a financing, sale, or business
transaction that infuses sufficient  additional cash resources into the Company,
by sometime during the third quarter of 2005,  management  expects to pursue the
remaining $2.5 million of optional  convertible  promissory note  financing.  If
such  funding is  received,  management  believes  the funding  will provide the
Company with  additional  short-term  liquidity into the fourth quarter of 2005.
There can be no assurance  that this  financing  will be  available  when and if
required,  nor that demand for repayment will not be made prior to such date. In
the event that the Company is not  successful in obtaining  the  remaining  $2.5
million  funding,  or in the event that such  remaining  funds are  received and
depleted  prior to our  raising of  sufficient  additional  capital,  management
believes that the Company will no longer be able to continue the  implementation
of its current VoIP business  plan.  As a result,  it is likely that the Company
would be required to either  temporarily  suspend or  permanently  shutdown  the
operation of its VoIP telephony services business.  Additionally, in such event,
management  believes that it may also be required to revise the business plan of
some or all of its other business segments and/or further implement company-wide
cost-reduction  programs.  There can be no assurance  that the Company  would be
successful  in  implementing   such  revised   business  plans  and  effectively
restructuring  its  businesses  so that the  Company  would have the  ability to
continue to operate as a going concern in the future.


                                       10
<PAGE>

The condensed  consolidated  financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

(3)   ACQUISITION OF SENDTEC, INC.

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

The preliminary SendTec purchase price allocation was as follows:

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

In addition,  warrants to acquire  shares of  theglobe.com  Common Stock will be
issued to SendTec  shareholders when and if SendTec exceeds forecasted operating
income, as defined,  of $10.125 million,  for the year ending December 31, 2005.
The  number of  earn-out  warrants  may range  from an  aggregate  of 250,000 to
2,500,000  (if actual  operating  income  exceeds the forecast by at least 10%).
Because the number of warrants that will be earned is not yet  determinable,  no
consideration  related to this contingency was included in the  determination of
the SendTec purchase price.

As part of the Merger,  100,000  shares of Series H Preferred  Stock  (which was
subsequently  converted  into 10 million  shares of Common  Stock) (the  "Escrow
Shares") are being held in escrow for  potential  recovery by the Company in the
event of a breach of the Merger Agreement by SendTec or its former shareholders.
In general, the Escrow Shares, together with the sums due under the subordinated
promissory  note, are the sole source of recourse  against the  shareholders  of
SendTec in the event of breach of the Merger  Agreement  and theglobe  would not
have  recourse  against  the  cash  portion  or other  shares  of  Common  Stock
distributed  to the SendTec  shareholders  as part of the Merger  Consideration.
Assuming no claims are then pending,  the Escrow Shares will be  distributed  to
SendTec shareholders after expiration of one year from the date of closing.

As part of the SendTec  acquisition  transaction,  certain executives of SendTec
entered into new employment  agreements with SendTec. The employment  agreements
each have a term of five years and automatically renew for an additional year at
expiration unless either party provides the requisite notice of non-renewal. The
agreements also contain certain non-compete  provisions for periods as specified
by the agreements.  The $1,800,000 value assigned to the non-compete  agreements
is being amortized on a straight-line  basis over 5 years.  Annual  amortization
expense of the  non-compete  agreements  is  estimated  to be  $360,000  in 2005
through 2008 and $240,000 in 2009. The related  accumulated  amortization  as of
March 31, 2005 and December 31, 2004,  was $210,000 and $120,000,  respectively,
and amortization expense was $90,000 for the three months ended March 31, 2005.

The following pro forma  condensed  consolidated  results of operations  for the
three months ended March 31, 2004 assumes the acquisition of SendTec occurred as
of January 1, 2004.  The pro forma results  reflected  below  include  SendTec's
revenue utilizing the revenue  recognition methods employed by the Company since
SendTec's date of  acquisition.  The pro forma  information  is not  necessarily
indicative  of what the actual  results of  operations  of the combined  company
would have been had the  acquisition  occurred  on  January  1, 2004,  nor is it
necessarily indicative of future results.


                                       11
<PAGE>

      PRO FORMA RESULTS                                  2004
                                                    -------------
      Three months ended March 31,
      Revenue                                       $   8,103,000

      Net loss                                         (3,766,000)

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

      Weighted average common shares                  105,986,780

(4)   OTHER ASSETS

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

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

Advances to  Tralliance  totaled  $1,231,500  as of March 31,  2005.  Due to the
uncertainty  of  the  ultimate  collectibility  of the  Loan,  the  Company  has
historically  provided a reserve equal to the full amount of the funds  advanced
to  Tralliance.  Additions to the reserve of $230,000 and $110,000 were included
in other  expense  in the  accompanying  condensed  consolidated  statements  of
operations for the three months ended March 31, 2005 and 2004, respectively.

(5)   STOCK OPTION PLANS

A total of 111,000  stock  options were  granted to  employees  during the three
months ended March 31,  2005.  No stock  options  were granted to  non-employees
during the first  quarter of 2005. A total of 892,500 stock options were granted
during the three months ended March 31, 2004,  including grants of 215,000 stock
options to non-employees.  Compensation  expense of $180,281 was recorded during
the three months ended March 31, 2005, related to vesting of prior year employee
option  grants  with  below-market  exercise  prices.  In  addition,  $28,000 of
compensation  expense was recorded  during the first quarter of 2005 as a result
of the accelerated vesting of stock options issued to a terminated employee. The
remaining $42,124 of stock  compensation  expense recorded during the 2005 first
quarter resulted from the vesting of non-employee stock options granted in prior
years. During the three months ended March 31, 2004, stock compensation  expense
included $150,533 related to employee option grants with  below-market  exercise
prices and $294,796  recognized  with respect to non-employee  stock options.  A
total of 218,226  stock  options  were  exercised  and a total of 272,247  stock
options were cancelled during the three months ended March 31, 2005.  During the
first quarter of 2004,  286,500  stock options were  exercised and 625,110 stock
options were cancelled.

In 2000, the Company  repriced a group of stock options issued to its employees.
The Company is accounting for these re-priced options using variable  accounting
in  accordance  with  FIN No.  44.  No  compensation  expense  was  recorded  in
connection  with the re-priced stock options during the three months ended March
31,  2005 and  2004.  At March 31,  2005,  a total of  29,060  options  remained
outstanding which were being accounted for in accordance with FIN No. 44.

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

In accordance with SFAS No. 123, the Company applies Accounting Principles Board
Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees,"  to account for
stock-based  awards  granted to  employees.  The  following  table  presents the
Company's pro forma net loss for the three months ended March 31, 2005 and 2004,
had the  Company  determined  compensation  cost  based on the fair value at the
grant date for all of its employee stock options issued under SFAS No. 123:


                                       12
<PAGE>

                                                    Three Months Ended March 31,
                                                    --------------------------
                                                       2005           2004
                                                    -----------    -----------
Net loss - as reported                              $(3,965,573)   $(4,661,698)

    Add: Stock-based employee compensation
       expense included in net loss as
       reported                                         208,281        150,533

    Deduct: Total stock-based employee
       compensation expense determined
       under fair value method for all awards          (296,708)      (842,835)
                                                    -----------    -----------
Net loss - pro forma                                $(4,054,000)   $(5,354,000)
                                                    ===========    ===========
Basic net loss per share -
   as reported                                      $     (0.02)   $     (0.07)
                                                    ===========    ===========
Basic net loss per share -
   pro forma                                        $     (0.02)   $     (0.08)
                                                    ===========    ===========

(6)   LITIGATION

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

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

The Company has approved a settlement agreement and related agreements which set
forth the terms of a settlement between the Company, the Individual  Defendants,
the plaintiff class and the vast majority of the other  approximately 300 issuer
defendants. Among other provisions, the settlement provides for a release of the
Company and the Individual  Defendants for the conduct  alleged in the action to
be  wrongful.  The Company  would agree to undertake  certain  responsibilities,
including  agreeing to assign away,  not assert,  or release  certain  potential
claims the Company may have against its underwriters.  The settlement  agreement
also provides a guaranteed  recovery of $1 billion to  plaintiffs  for the cases
relating  to all of the  approximately  300  issuers.  To the  extent  that  the
underwriter  defendants  settle  all of the  cases for at least $1  billion,  no
payment will be required under the issuers' settlement agreement.  To the extent
that the underwriter defendants settle for less than $1 billion, the issuers are
required  to  make up the  difference.  It is  anticipated  that  any  potential
financial  obligation of the Company to plaintiffs  pursuant to the terms of the
settlement  agreement  and  related  agreements  will  be  covered  by  existing
insurance. The Company currently is not aware of any material limitations on the
expected recovery of any potential  financial  obligation to plaintiffs from its
insurance  carriers.  Its carriers are solvent,  and the Company is not aware of
any uncertainties as to the legal sufficiency of an insurance claim with respect
to any recovery by plaintiffs.  Therefore,  we do not expect that the settlement
will involve any payment by the Company. If material limitations on the expected
recovery  of any  potential  financial  obligation  to the  plaintiffs  from the
Company's  insurance  carriers  should arise,  the Company's  maximum  financial
obligation to plaintiffs pursuant to the settlement agreement would be less than
$3.4 million.  On February 15, 2005, the Court granted  preliminary  approval of
the settlement agreement,  subject to certain modifications  consistent with its
opinion.  The Court ruled that the issuer  defendants  and the  plaintiffs  must
submit a revised  settlement  agreement  which  provides for a mutual bar of all
contribution  claims by the settling and  non-settling  parties and does not bar
the  parties  from  pursuing  other  claims.  The issuers  and  plaintiffs  have
negotiated a revised  settlement  agreement  consistent with the Court's opinion
and are in the process of obtaining  approval from those issuer  defendants that
are not in bankruptcy. The parties have submitted a revised settlement agreement
to the Court. The underwriter defendants will have until May 16, 2005, to object
to the revised settlement  agreement.  There is no assurance that the Court will
grant final  approval to the  settlement.  If the  settlement  agreement  is not
approved and the Company is found  liable,  we are unable to estimate or predict
the  potential  damages that might be awarded,  whether  such  damages  would be
greater than the  Company's  insurance  coverage,  or whether such damages would
have a material  impact on our results of operations  or financial  condition in
any future period.


                                       13
<PAGE>

On December 16, 2004, the Company,  together with its  wholly-owned  subsidiary,
voiceglo Holdings,  Inc., were named as defendants in NeoPets,  Inc. v. voiceglo
Holdings,  Inc. and theglobe.com,  inc., a lawsuit filed in Los Angeles Superior
Court. The Company and its subsidiary, were parties to an agreement dated May 6,
2004, with NeoPets, Inc. ("NeoPets"),  whereby NeoPets agreed to host a voiceglo
advertising  feature on its  website for the  purpose of  generating  registered
activations of the voiceglo  product  featured.  Consideration to NeoPets was to
include  specified  commissions,  including  cash  payments  based on registered
activations, as defined, as well as the issuance of Common Stock of theglobe.com
and  additional  cash  payments,  upon the  attainment  of  certain  performance
criteria.  NeoPets' complaint asserts claims for breach of contract and specific
performance  and seeks  payment of  approximately  $2.5  million  in cash,  plus
interest,  as well as the issuance of 1,000,000  shares of  theglobe.com  Common
Stock. On February 22, 2005, the Company and voiceglo answered the complaint and
asserted cross-claims against NeoPets for fraud and deceit,  rescission,  breach
of contract,  breach of the implied  covenant of good faith and fair dealing and
set-off. NeoPets has not yet answered the cross-claims and discovery has not yet
begun.

Through  March 31, 2005,  the Company has recorded  amounts due for  commissions
pursuant to the terms of the  agreement  totaling  approximately  $246,000.  The
Company believes that this is the amount NeoPets has earned relating to services
performed and intends to vigorously defend its position.  It is too early in the
process to determine  the  likelihood of an  unfavorable  outcome,  however,  an
unfavorable outcome could result in a liability in excess of the amount recorded
and could have a material adverse effect on the Company.

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

(7)   SEGMENTS AND GEOGRAPHIC INFORMATION

The Company applies the provisions of SFAS No. 131,  "Disclosures About Segments
of an Enterprise and Related  Information," which establishes annual and interim
reporting  standards for operating segments of a company.  SFAS No. 131 requires
disclosures of selected  segment-related  financial  information about products,
major  customers  and  geographic  areas.  Effective  with the September 1, 2004
acquisition of SendTec, the Company is now organized in three operating segments
for  purposes of making  operating  decisions  and  assessing  performance:  the
computer games division,  the marketing services division and the VoIP telephony
services division. The computer games division consists of the operations of the
Company's  Computer  Games print magazine and the  associated  website  Computer
Games Online (www.cgonline.com) and the operations of Chips & Bits, Inc. ("Chips
& Bits"),  its games  distribution  business.  The marketing  services  division
consists of the operations of the Company's acquired  subsidiary,  SendTec.  The
VoIP  telephony  services  division  is  principally  involved  in the  sale  of
telecommunications services over the Internet to consumers.

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

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

                                                      Three Months Ended
                                                            March 31,
                                                  ----------------------------
                                                      2005            2004
                                                  ------------    ------------
                                                           (UNAUDITED)
NET REVENUE:
Computer games                                    $    561,392    $    756,449
Marketing services                                   9,105,820              --
VoIP telephony services                                 87,092          99,548
Intersegment eliminations                             (315,576)             --
                                                  ------------    ------------
                                                  $  9,438,728    $    855,997
                                                  ============    ============


                                       14
<PAGE>

                                                      Three Months Ended
                                                            March 31,
                                                  ----------------------------
                                                      2005            2004
                                                  ------------    ------------
                                                           (UNAUDITED)
INCOME (LOSS) FROM OPERATIONS:
Computer games                                    $   (315,154)   $   (109,888)
Marketing services                                     800,626              --
VoIP telephony services                             (3,322,862)     (2,128,367)
Corporate expenses                                    (894,670)     (1,539,815)
                                                  ------------    ------------
    Loss from operations                            (3,732,060)     (3,778,070)
    Other expense, net                                (217,163)       (883,628)
                                                  ------------    ------------
    Consolidated loss before income tax           $ (3,949,223)   $ (4,661,698)
                                                  ============    ============

DEPRECIATION AND AMORTIZATION:
Computer games                                    $      7,719    $      3,429
Marketing services                                     172,612              --
VoIP telephony services                                268,633         226,770
Corporate expenses                                       9,579           5,912
                                                  ------------    ------------
                                                  $    458,543    $    236,111
                                                  ============    ============

                                                    March 31,     December 31,
                                                      2005            2004
                                                  ------------    ------------
                                                   (UNAUDITED)
IDENTIFIABLE ASSETS:
Computer games                                    $  2,129,164    $  2,000,230
Marketing services                                  22,903,952      24,764,361
VoIP telephony services                              2,842,182       3,497,698
Corporate assets                                     1,187,824       3,754,876
                                                  ------------    ------------
                                                  $ 29,063,122    $ 34,017,165
                                                  ============    ============

(8)   COMMITMENTS

As of March 31,  2005,  the Company  had  approximately  $20,000 in  outstanding
standby  letters  of  credit  used to  support  the  agreement  with  one of our
telecommunications carriers.

Revenue generated by three customers of SendTec represented approximately 59% of
consolidated net revenue reported for the three months ended March 31, 2005.

(9)   SUBSEQUENT EVENTS

On April 22, 2005, E&C Capital  Partners,  LLLP and another entity controlled by
the Company's Chairman and Chief Executive Officer and the Company's  President,
entered into a Note Purchase  Agreement (the "Agreement") with theglobe pursuant
to which they acquired secured demand convertible promissory notes (the "Notes")
in the  aggregate  principal  amount  of  $1,500,000.  Under  the  terms  of the
Agreement, E&C Capital Partners, LLLP and the other entity were also granted the
optional  right,  for a period  of 90 days  from the date of the  Agreement,  to
purchase  additional secured demand  convertible  promissory notes such that the
aggregate  principal  amount  of Notes  issued  under  the  Agreement  may total
$4,000,000.  The Notes are  convertible  at the option of the  noteholders  into
shares of the Company's Common Stock at an initial price of $0.05 per share. The
Notes  provide for interest at the rate of ten percent per annum and are secured
by a pledge of substantially all of the assets of the Company.

Reference  should be made to Note 4, "Other Assets",  for details  regarding the
Company's acquisition of Tralliance Corporation in May 2005.


                                       15
<PAGE>

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

                           FORWARD LOOKING STATEMENTS

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

      o     implementing our business plans;

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

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

      o     our ability to implement cost-reduction programs;

      o     potential governmental regulation and taxation;

      o     the outcome of any litigation;

      o     our intellectual property;

      o     our estimates of future revenue and profitability;

      o     our estimates or expectations of continued losses;

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

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

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

      o     attracting and retaining customers and employees;

      o     rapid technological changes in our industry and relevant markets;

      o     sources of revenue and anticipated revenue;

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

      o     plans for divestitures of certain businesses or assets;

      o     competition in our market; and

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

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


                                       16
<PAGE>

OVERVIEW

As of March 31, 2005,  theglobe.com,  inc. (the "Company" or "theglobe") managed
three primary lines of business.  One line of business,  Voice over the Internet
Protocol  ("VoIP")  telephony  services,  includes  voiceglo  Holdings,  Inc., a
wholly-owned  subsidiary of theglobe that offers  VoIP-based  phone services and
features.  The term VoIP  refers to a category  of hardware  and  software  that
enables  people to use the  Internet  to make phone  calls.  The second  line of
business consists of our historical  network of three  wholly-owned  businesses,
each of which  specializes in the games business by delivering games information
and selling games in the United  States and abroad.  These  businesses  are: our
print  publication  Computer Games  Magazine;  our Computer Games Online website
(www.cgonline.com),  which is the online counterpart to Computer Games Magazine;
and  our  Chips  &  Bits,  Inc.  ("Chips  &  Bits")   (www.chipsbits.com)  games
distribution  company. We entered a third line of business,  marketing services,
on September 1, 2004,  with our  acquisition  of SendTec,  Inc.  ("SendTec"),  a
direct response marketing services and technology company.

At the current  time,  the  Company's  revenue is derived  principally  from the
acquired  operations of SendTec,  as well as from the operations of our computer
games related businesses. Our VoIP products and services have yet to produce any
significant revenue.

During the first quarter of 2005,  management began actively  re-evaluating  the
Company's primary business lines, particularly in view of the Company's critical
need for cash and the overall net losses of the Company. As a result, management
is currently exploring a number of strategic alternatives for the Company and/or
its businesses,  including continuing to operate the businesses, selling certain
businesses  or  assets,  or  entering  into  new  lines of  businesses.  See the
"Liquidity  and  Capital  Resources"  section  of  Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations  for a more complete
discussion.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS; GOING CONCERN

Certain matters  discussed below under  "Liquidity and Capital  Resources" raise
substantial doubt about our ability to continue as a going concern. In addition,
we received a report from our independent accountants,  relating to our December
31, 2004  audited  financial  statements  containing  an  explanatory  paragraph
stating that our recurring  losses from operations and our  accumulated  deficit
raise  substantial  doubt about our ability to continue as a going concern.  Our
condensed  consolidated  financial  statements  have been prepared in accordance
with accounting principles generally accepted in the United States of America on
a going concern  basis,  which  contemplates  the  realization of assets and the
satisfaction of liabilities in the normal course of business.  Accordingly,  our
condensed  consolidated  financial  statements  do not include  any  adjustments
relating to the  recoverability of assets and classification of liabilities that
might be necessary should we be unable to continue as a going concern.

                           OUR VOIP TELEPHONY BUSINESS

During the third  quarter  of 2003,  the  Company  launched  its first  suite of
consumer  and  business   level  VoIP   services.   The  Company   launched  its
browser-based  GloPhone product during the first quarter of 2004. These services
allow  consumers  and  enterprises  to  communicate  using VoIP  technology  for
dramatically  reduced pricing compared to traditional  telephony  networks.  The
services also offer traditional telephony features such as voicemail, caller ID,
call  forwarding,  and call waiting for no additional  cost to the consumer,  as
well as  incremental  services  that are not  currently  supported by the public
switched telephone network ("PSTN") like the ability to use numbers remotely and
voicemail to email services.

Additionally,  in  November  2004,  the Company  announced a beta  version of an
"instant  messenger" or "IM" related application which it is marketing under the
name  "GloConnect."  The  new  GloConnect  application  utilizes  the  Company's
proprietary  web and PC-based  GloPhone  platform and enables  users to chat via
voice or text across multiple  platforms using their preferred instant messenger
service, such as AOL's AIM, MSN's Messenger, Yahoo! Messenger and ICQ.

The Company now offers VoIP services, on a retail basis, to individual consumers
and currently provides two primary types of services:

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

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


                                       17
<PAGE>

During the latter part of 2004, the Company discontinued offering its "voiceglo"
hardware-based home and business replacement  products to new customers,  and is
now only providing service to and supporting existing "voiceglo" customers.  The
Company is currently  developing  and testing a number of new VoIP  products and
features,  which allow users to communicate via mobile phones,  traditional land
line phones and/or computers. It plans to release a number of these new products
and features beginning in the second quarter of 2005.

                           OUR COMPUTER GAMES BUSINESS

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

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

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

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

                         OUR MARKETING SERVICES BUSINESS

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

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

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

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


                                       18
<PAGE>

                              RESULTS OF OPERATIONS

Effective  September 1, 2004, we entered into a new line of business,  marketing
services,  as a result of our  acquisition  of  SendTec.  SendTec's  results are
included  in the  Company's  consolidated  operating  results  from  its date of
acquisition.  As a result of the SendTec acquisition,  the results of operations
for the three months ended March 31, 2005, are not necessarily comparable to the
three months ended March 31, 2004.

THREE MONTHS  ENDED MARCH 31, 2005  COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2004

NET REVENUE.  Net revenue  totaled $9.4 million for the three months ended March
31, 2005 as compared to $0.9  million for the three months ended March 31, 2004.
The $8.5 million increase in consolidated net revenue was principally the result
of the $8.8 million in additional net revenue, net of intersegment eliminations,
resulting  from the  operations  of SendTec,  which was acquired on September 1,
2004. Partially offsetting this additional revenue was a decline of $0.2 million
in net  revenue of our  computer  games  business  segment  due  primarily  to a
decrease  in the volume of games  products  sold by Chips & Bits,  our  computer
games  distribution  business.  Net revenue generated by our telephony  services
division  totaled  approximately  $0.1 million in each of the first  quarters of
2005 and 2004.

NET REVENUE BY BUSINESS SEGMENT:

                                             2005          2004
                                          -----------    --------
              Computer games ..........   $   561,392    $756,449
              Marketing services ......     9,105,820          --
              VoIP telephony services .        87,092      99,548
              Intersegment eliminations      (315,576)         --
                                          -----------    --------
                                          $ 9,438,728    $855,997
                                          ===========    ========

SendTec's  DirectNet  Advertising  division,  which provides online  interactive
marketing  services  for its  clients,  generated  approximately  91% of the net
revenue  reported for the marketing  services segment for the three months ended
March 31, 2005.  SendTec also provided  marketing services to our VoIP telephony
services business segment which resulted in the recording of approximately  $0.3
million of intersegment  marketing  services revenue during the first quarter of
2005.

OPERATING EXPENSES BY BUSINESS SEGMENT:

<TABLE>
<CAPTION>
                                                                                       Depreciation
                                  Cost of     Sales and     Product     General and        and
Three months ended:               Revenue     Marketing   Development  Administrative  Amortization     Total
                                -----------  -----------  -----------  --------------  ------------  -----------
2005
----
<S>                             <C>          <C>          <C>          <C>             <C>           <C>
Computer games ................ $   491,567  $    85,683  $   155,139  $      136,438  $      7,719  $   876,546
Marketing services.............   6,479,044      518,633           --       1,134,905       172,612    8,305,194
VoIP telephony services .......   1,491,815      695,592      170,702         783,212       268,633    3,409,954
Corporate expenses.............          --           --           --         885,091         9,579      894,670
Intersegment eliminations......    (189,064)    (126,512)          --              --            --     (315,576)
                                -----------  -----------  -----------  --------------  ------------  -----------
                                $ 8,273,362  $ 1,173,396  $   325,841  $    2,939,646  $    458,543  $13,170,788
                                ===========  ===========  ===========  ==============  ============  ===========

<CAPTION>
                                                                                       Depreciation
                                  Cost of     Sales and     Product     General and        and
                                  Revenue     Marketing   Development  Administrative  Amortization     Total
                                -----------  -----------  -----------  --------------  ------------  -----------
2004
----
Computer games ................ $   585,925  $    87,728  $   119,666  $       69,589  $      3,429   $  866,337
VoIP telephony services .......     737,202      739,568       55,850         468,525       226,770    2,227,915
Corporate expenses.............          --           --           --       1,533,903         5,912    1,539,815
                                -----------  -----------  -----------  --------------  ------------   ----------
                                $ 1,323,127  $   827,296  $   175,516  $    2,072,017  $    236,111   $4,634,067
                                ===========  ===========  ===========  ==============  ============   ==========
</TABLE>


                                       19
<PAGE>

COST OF REVENUE. Cost of revenue totaled $8.3 million for the three months ended
March 31, 2005,  an increase of $7.0 million from the $1.3 million  reported for
the three  months  ended March 31,  2004.  An increase of $0.8  million in costs
incurred  by our  VoIP  telephony  services  business  segment,  as  well as the
inclusion of marketing  services  cost of revenue  related to the  operations of
SendTec totaling  approximately $6.3 million, net of intersegment  eliminations,
were slightly  offset by a decrease of $0.1 million in cost of revenue  reported
by our computer games segment as compared to 2004.

Cost  of  revenue  related  to our  computer  games  business  segment  consists
primarily of printing costs of our games magazine,  Internet connection charges,
personnel  costs,  maintenance  costs  of  website  equipment  and the  costs of
merchandise sold and shipping fees in connection with our online store.  Cost of
revenue of our computer games segment totaled approximately $0.5 million for the
three months ended March 31, 2005, a decrease of approximately $0.1 million from
the same period in 2004, due primarily to the revenue decreases discussed above.

Cost of revenue related to our marketing  services  business segment consists of
fees paid to third party vendors for project  related  research,  production and
post-production  services and products.  Additionally,  cost of revenue includes
third party vendor fees incurred to acquire online advertising media,  including
the  actual  cost of the media.  Intersegment  eliminations  in 2005,  represent
approximately  $0.2  million of costs  incurred by SendTec  related to marketing
services provided to our VoIP telephony services segment.

Cost of revenue of our VoIP telephony  services  business segment is principally
comprised of carrier transport and circuit  interconnection costs related to our
retail  products,  as well as personnel and consulting costs incurred in support
of our Internet telecommunications network. Although VoIP telephony services net
revenue was essentially unchanged compared to the first quarter of 2004, cost of
revenue attributable to this segment increased $0.8 million in comparison to the
same period in 2004.  Throughout  2004,  the Company  increased its VoIP network
capacity by entering into agreements with numerous carriers for leased equipment
and  services  and  with  third  parties  for a number  of  leased  data  center
facilities.  The Company also expanded its internal  network support function by
hiring additional technical  personnel.  As a result, our VoIP network capacity,
as well as our network's  operating and support  costs,  have  increased in 2005
compared to 2004.

SALES AND MARKETING.  Sales and marketing expenses consist primarily of salaries
and related expenses of sales and marketing personnel, commissions,  advertising
and marketing costs, public relations expenses and promotional activities. Sales
and marketing expenses totaled $1.2 million for the three months ended March 31,
2005 versus $0.8 million for the same period in 2004.  The rise in  consolidated
sales and marketing  expenses as compared to 2004 was  principally the result of
the  $0.4  million  in  sales  and  marketing  expenses,   net  of  intersegment
eliminations, incurred by the Company's marketing services business segment.

PRODUCT  DEVELOPMENT.  Product development expenses include salaries and related
personnel  costs;  expenses  incurred in  connection  with website  development,
testing and upgrades;  editorial and content  costs;  and costs  incurred in the
development of our VoIP telephony products. Product development expenses totaled
$0.3  million  for the three  months  ended  March 31,  2005 as compared to $0.2
million  for the three  months  ended  March 31,  2004.  The period  over period
increase  in  product  development  expenses  was  principally  attributable  to
increases in personnel and  consulting  costs related to the  development of our
retail VoIP telephony products and services.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of salaries and other personnel  costs related to management,  finance
and  accounting  functions,  facilities,  outside legal and  professional  fees,
information-technology  consulting,  directors and officers insurance,  bad debt
expenses  and general  corporate  overhead  costs.  General  and  administrative
expenses of $2.9  million in the first  quarter of 2005  increased  $0.8 million
from the $2.1  million  reported  for the same period of 2004.  The  increase in
consolidated  general and administrative  expenses as compared to the 2004 first
quarter  was  primarily   attributable  to  the  $1.1  million  of  general  and
administrative expenses incurred by the Company's marketing services segment. At
year-end  2004,  the Company  wrote-off the carrying value of its VoIP telephony
billing  system as a result of its review and  evaluation of the VoIP  telephony
services segment's  long-lived assets for impairment.  Costs incurred during the
2005 first  quarter in the further  development  of the VoIP  telephony  billing
system have been included  within  general and  administrative  expenses.  These
costs, as well as higher salaries and facilities  costs  contributed to the $0.3
million  increase in general and  administrative  expenses of the VoIP telephony
services segment as compared to the first quarter of 2004. Corporate general and
administrative  expense  declined  $0.6  million as  compared  to the 2004 first
quarter primarily due to decreases in stock compensation  expenses recorded as a
result of stock option grants, personnel related expenses and legal expenses.

DEPRECIATION AND  AMORTIZATION.  Depreciation  and amortization  expense totaled
$0.5  million  for the three  months  ended  March 31,  2005.  The $0.3  million
increase  from the same period of the prior year resulted  principally  from the
depreciation  and  intangible  asset  amortization   expenses  incurred  by  the
Company's marketing services business.

INTEREST INCOME (EXPENSE),  NET. Approximately $0.7 million of non-cash interest
expense was recorded  during the first quarter of 2004 related to the beneficial
conversion feature of the $2,000,000 demand convertible promissory note acquired
by our Chairman and Chief Executive Officer and his spouse in February 2004.


                                       20
<PAGE>

OTHER EXPENSE,  NET. Other expense,  net,  includes reserves against the amounts
advanced by the Company to Tralliance Corporation,  a development stage internet
related  business  venture,  totaling $0.2 million and $0.1 million in the three
month  periods ended March 31, 2005 and 2004,  respectively.  See Note 4, "Other
Assets", in the accompanying Notes to Unaudited Condensed Consolidated Financial
Statements for information  regarding the Company's acquisition of Tralliance in
May 2005.

INCOME TAXES.  The income tax provision of $16,350 recorded for the three months
ended  March 31,  2005  consisted  solely of state and local  income  taxes.  No
federal tax benefit was recorded  for the first  quarters of 2005 and 2004 as we
recorded a 100% valuation allowance against our otherwise  recognizable deferred
tax assets due to the uncertainty surrounding the timing or ultimate realization
of the benefits of our net operating loss carry forwards in future periods.  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.  As of December  31,  2004,  the Company had net
operating  loss  carryforwards  available  for U.S.  and foreign tax purposes of
approximately  $162 million.  These  carryforwards  expire through 2024. The Tax
Reform Act of 1986 imposes  substantial  restrictions  on the utilization of net
operating  losses  and tax  credits in the event of an  "ownership  change" of a
corporation. As defined in the Internal Revenue Code of 1986, as amended, due to
the  change  in our  ownership  interests  in  August  1997 and May 1999 and the
Company's  private  offering  of  securities  in March 2004  (together  with the
exercise and  conversion of various  securities in connection  with such private
offering  of  securities)  and the  issuance  of shares in  connection  with our
acquisition of SendTec on September 1, 2004, the Company may have  substantially
limited or eliminated the availability of its net operating loss  carryforwards.
There can be no  assurance  that the Company will be able to avail itself of any
net operating loss carryforwards.

                         LIQUIDITY AND CAPITAL RESOURCES

FUTURE AND CRITICAL NEED FOR CAPITAL

At March 31, 2005,  the  Company's  sole source of  liquidity  consisted of $3.3
million of cash and cash equivalents.  On April 22, 2005, we entered into a Note
Purchase  Agreement (the "Agreement")  with E&C Capital Partners,  LLLP, and E&C
Capital Partners II, Ltd. ("the E&C  Partnerships"),  entities controlled by our
Chairman and Chief  Executive  Officer and our President,  pursuant to which the
E&C  Partnerships  acquired  secured demand  convertible  promissory  notes (the
"Notes") in the aggregate  principal amount of $1.5 million.  Under the terms of
the Agreement,  the E&C Partnerships were also granted the optional right, for a
period of 90 days from the date of the Agreement, to purchase additional secured
demand convertible  promissory notes such that the aggregate principal amount of
Notes  issued  under  the  Agreement  may  total  $4.0  million.  The  Notes are
convertible, at the option of the noteholders into shares of our Common Stock at
an initial price of $0.05 per share.  The Notes provide for interest at the rate
of ten percent per annum and are secured by a pledge of substantially all of the
assets of the Company.  The Notes are due and payable five days after demand for
payment by the E&C Partnerships.  Based on its current financial  position,  the
Company would not have the resources to pay the Notes following any such demand.
The Company's cash and cash equivalents balance at May 6, 2005, inclusive of the
$1.5 million in proceeds  received from the sale of the Notes, was approximately
$4.0 million.

The  Company  continues  to  incur  substantial   consolidated  net  losses  and
management  believes  the  Company  will  continue  to be  unprofitable  for the
foreseeable future. The Company's  consolidated net losses and cash usage during
its recent past and projected  future periods relate  primarily to the operation
of its VoIP  telephony  services  business  and to a lesser  extent to corporate
overhead expenses.  SendTec,  the Company's  marketing  services  business,  has
contributed  net income and cash flow since being acquired on September 1, 2004,
and  management  expects that SendTec will continue to be profitable and provide
positive  cash flow in  future  periods.  Management  does not  expect  that its
computer  games  business  segment  will  incur  significant  net  losses or use
significant amounts of cash in the foreseeable future.

In order to offer our VoIP services,  we have invested  substantial  capital and
made substantial commitments related to the development of the VoIP network. The
VoIP network is comprised of switching hardware and software,  servers,  billing
and inventory  systems,  and  telecommunications  carrier  services.  We own and
operate VoIP equipment  located in leased data center  facilities in Miami,  New
York,  Atlanta and Boston,  and interconnect  this equipment  utilizing a leased
transport   network  through  numerous  carrier   agreements  with  third  party
providers.  Through these carrier relationships we are able to carry the traffic
of our  customers  over the  Internet  and  interact  with the  public  switched
telephone  network.  We generally enter into one year agreements with these data
centers and carriers,  with the term of several agreements extending to three or
five years.  Based upon our  existing  contractual  commitments  at December 31,
2004,  minimum amounts payable during calendar year 2005 for network data center
and carrier circuit  interconnection  service expenses,  exclusive of regulatory
taxes, fees and charges, are approximately $2.1 million.

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


                                       21
<PAGE>

The Company believes that the capacity of its VoIP network,  including its lease
obligations  relating to such network,  will continue to be greatly in excess of
customer  demand and usage levels for the  foreseeable  future.  The Company was
successful in recently terminating certain minimum usage requirement commitments
for  which  it was  previously  obligated  to  make  carrier  payments  totaling
approximately  $1.9 million,  exclusive of regulatory  taxes,  fees and charges,
during 2005.  Additionally,  the Company is currently  negotiating to reduce the
approximate $2.1 million remaining minimum amounts payable during 2005 for other
network data center and carrier circuit interconnection services.

During  October  2004,  the  Company  engaged  financial  advisors to assist the
Company in raising capital through a private placement of its equity securities,
or  in  entering  into  other  business  relationships  with  certain  strategic
investors. In February 2005, the Company engaged an additional financial advisor
to assist the  Company in  connection  with  raising  capital  through a private
placement of equity securities in either the Company or its SendTec wholly-owned
subsidiary  or  alternatively  in selling  either  part or all of the  Company's
businesses  or assets,  including  its SendTec  business.  We currently  have no
access to credit  facilities with traditional  third party lenders and there can
be no  assurance  that we  would  be able to  raise  capital  or sell any of our
businesses or assets.  In addition,  any financing  that could be obtained would
likely  significantly  dilute  existing  shareholders.  As more fully  described
below,  management is exploring a number of strategic alternatives regarding the
Company's  future  business  operations  and is in the process of developing and
implementing  internal  actions to improve the Company's  liquidity and business
performance.  The Company's future strategic  direction is highly dependent upon
the outcome of its efforts to raise  capital  and/or sell certain  businesses or
assets.

During the first  quarter of 2005,  the Company  reevaluated  its existing  VoIP
telephony  services business plan and is currently in the process of terminating
and/or  modifying  certain  of its  existing  product  offerings  and  marketing
programs,  as well as  developing  and  testing  certain new VoIP  products  and
features.  The Company also, during the first quarter of 2005, made the decision
to discontinue using its SendTec business to perform marketing  services for its
VoIP business,  and to instead dedicate 100% of SendTec's  marketing services to
support and grow its own third party  customer base.  Additionally,  in order to
reduce  its near term  consolidated  net  losses  and cash  usage,  the  Company
implemented a number of  cost-reduction  actions at its VoIP telephony  services
business,  including decreases in personnel and salary levels,  carrier and data
center costs  (including the minimum  commitment  costs  discussed  above),  and
marketing/advertising expenses during the first quarter of 2005.

Management  believes that it will be difficult to implement its new VoIP product
and marketing plans,  once fully developed and tested,  without  additional cash
being provided from a prospective  financing or sale transaction(s).  Should the
Company's new VoIP product offerings achieve market acceptance and significantly
increase the  Company's  current  customer  and revenue  base,  additional  cash
resources to fund capital expenditures related to the Company's VoIP network and
customer  billing  systems  and to fund  future  marketing  and  other  business
development  costs would be required.  No significant  capital  expenditures are
expected to be required to  accommodate  the  operation  or growth of either the
Company's SendTec marketing  services business or its computer games business in
the near term future.

There can be no assurance that the Company's new VoIP product  offerings will be
successful  in  attracting  a  sufficient  number of new  customers  to its VoIP
network and increasing  telephony revenue to desired levels. Even if the Company
is able to raise  additional  capital,  management  may at any  time,  decide to
terminate the  operations of its VoIP  telephony  services  business,  either by
asset  sale  or  abandonment,   if  future  investment  returns  are  considered
inadequate and/or preferable investment alternatives exist.

On May 9, 2005,  the  Company  exercised  its  purchase  option and we  acquired
Tralliance  Corporation  ("Tralliance"),  a development  stage  Internet-related
business venture.  Tralliance was created to develop, operate and administer the
".travel"  top-level domain, a new segment of the Internet devoted to the travel
industry.  Tralliance  recently  entered  into an  agreement  with the  Internet
Corporation for Assigned Names and Numbers  ("ICANN") to become the registry for
the ".travel"  top-level domain. The Tralliance  purchase price consisted of the
issuance of 2,000,000 shares of theglobe.com  Common Stock,  warrants to acquire
475,000  shares of  theglobe.com  Common Stock and $40,000 in cash. The warrants
are  exercisable  for a period of five years at an  exercise  price of $0.11 per
share.  The Common Stock issued as a result of the  acquisition of Tralliance is
entitled to certain "piggy-back"  registration  rights. In addition,  as part of
the  transaction,  the  Company  agreed to pay  approximately  $0.2  million  in
outstanding  liabilities  of  Tralliance  immediately  after the  closing of the
acquisition.  Additionally,  the  Company  expects  to fund  approximately  $0.7
million of Tralliance's  start-up costs prior to the end of the third quarter of
2005.

Based upon the foregoing,  Company  management  does not presently  believe that
cash on hand and cash flow generated  internally by the company will be adequate
to fund the operation of its  businesses and the  implementation  of its current
VoIP  business plan beyond a short period of time. We received a report from our
independent  accountants,  relating to our December  31, 2004 audited  financial
statements containing an explanatory paragraph stating that our recurring losses
from operations and our accumulated  deficit raise substantial  doubts about our
ability to continue as a going concern. We believe that the funding received and
potentially  receivable in connection with the E&C  Partnerships'  Note Purchase
Agreement  (maximum of $4.0  million as  discussed  above and  assuming  that no
demand  for  payment  is made by the  Noteholders)  provides  the  Company  with
temporary short-term liquidity to operate its businesses while it seeks to raise
sufficient  additional  capital,  which may involve the potential sale of one or
more of the Company's subsidiaries, including SendTec.


                                       22
<PAGE>

If we are not  successful  in  entering  into a  financing,  sale,  or  business
transaction that infuses sufficient  additional cash resources into the Company,
by sometime  during the third quarter of 2005, we expect to pursue the remaining
$2.5 million of optional convertible promissory note financing.  If such funding
is  received we believe the funding  will  provide the Company  with  additional
short-term  liquidity into the fourth quarter of 2005. There can be no assurance
that this financing will be available when and if required,  nor that demand for
repayment  will not be made  prior to such  date.  In the event  that we are not
successful  in  obtaining  the  remaining  $2.5  million  in  funding  from  E&C
Partnerships or in the event that such remaining funds are received and depleted
prior to our  raising of  sufficient  additional  capital,  we believe  that the
Company  will no longer be able to continue  the  implementation  of its current
VoIP  business  plan.  As a result,  it is likely  that we would be  required to
either  temporarily  suspend or  permanently  shutdown the operation of our VoIP
telephony services business.  Additionally,  in such event,  management believes
that it may also be required to revise the  business  plan of some or all of its
other business  segments and/or further  implement  company-wide  cost-reduction
programs.  There can be no assurance  that the Company  would be  successful  in
implementing  such revised  business  plans and  effectively  restructuring  its
businesses  so that the Company would have the ability to continue to operate as
a going concern in the future.

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

CASH FLOW ITEMS

As of  March  31,  2005,  we had  approximately  $3.3  million  in cash and cash
equivalents  as compared to $6.8 million as of December 31, 2004.  Net cash used
in operating  activities was $3.1 million and $3.6 million, for the three months
ended March 31, 2005 and 2004,  respectively.  The period-to-period  decrease in
net cash used in operating  activities  resulted  primarily from the decrease in
our net  operating  losses  and  favorable  working  capital  changes  offset by
decreases in non-cash charges.

Net cash of $0.4  million  was used in  investing  activities  during  the three
months ended March 31, 2005.  The Company  incurred  costs totaling $0.2 million
and $0.3 million for capital  expenditures  related primarily to the development
of its VoIP telephony  network and to a lesser extent to the  development of its
VoIP telephony  customer  billing system during the three months ended March 31,
2005 and 2004, respectively.  We also loaned approximately $0.2 million and $0.1
million to Tralliance Corporation, a development stage Internet related business
venture, during the three months ended 2005 and 2004, respectively.

Net cash used in  financing  activities  was  $27,000  and net cash  provided by
financing activities was $29.2 million for the three months ended 2005 and 2004,
respectively. As discussed in the Company's Annual Report on Form 10-KSB for the
year ended  December 31, 2004, the Company  completed a private  offering of its
Common Stock and warrants to acquire its Common Stock in March 2004 resulting in
the  issuance of  33,381,647  shares of Common  Stock,  and  warrants to acquire
16,690,824 shares of its Common Stock, for gross proceeds of approximately $28.4
million.  Offering costs included $1.2 million in cash  commissions  paid to the
placement agent and approximately  $0.2 million in legal and accounting fees. In
addition, on February 2, 2004, the Company issued a $2,000,000 Bridge Note which
was  subsequently  converted into our Common Stock in connection  with the March
2004 private offering. Proceeds of approximately $0.1 million were received from
the exercise of stock options and warrants during 2004.

                              EFFECTS OF INFLATION

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

      MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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


                                       23
<PAGE>

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

REVENUE RECOGNITION

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

Computer Games Businesses

Advertising  revenues for the games  information  magazine are recognized at the
on-sale date of the magazine.

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

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

Marketing Services

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

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

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

VoIP Telephony Services

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

VALUATION OF CUSTOMER RECEIVABLES

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


                                       24
<PAGE>

VALUATION OF INVENTORIES

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

GOODWILL AND INTANGIBLE ASSETS

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

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

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

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

o     significant negative industry or economic trends.

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

LONG-LIVED ASSETS

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

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

CAPITALIZATION OF COMPUTER SOFTWARE COSTS

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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


                                       25
<PAGE>

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

In December  2004,  the FASB issued SFAS No. 123R,  "Share-Based  Payment." This
standard  replaces SFAS No. 123,  "Accounting for Stock-Based  Compensation" and
supersedes  Accounting  Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees." The standard requires  companies to expense the fair
value of stock  options on the grant date and is  effective  for annual  periods
beginning  after June 15, 2005. In accordance  with the revised  statement,  the
expense attributable to stock options granted or vested subsequent to January 1,
2006 will be required to be recognized  by the Company.  The Company has not yet
evaluated the impact of this pronouncement on the Company.

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

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


                                  RISK FACTORS

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

                    RISKS RELATING TO OUR BUSINESS GENERALLY

We May Not Be Able To Continue As A Going Concern.

We have recently  engaged  certain  financial  advisors to assist the Company in
raising capital through private  placement of equity securities or alternatively
in  selling  either  part  or all of the  Company's  businesses  or  assets.  We
currently  have no access to credit  facilities  with  traditional  third  party
lenders  and there can be no  assurance  that we would be able to raise any such
capital or sell any of our businesses or assets. In addition, any financing that
could be obtained would likely significantly dilute existing stockholders.

We do not presently believe that cash on hand and cash flow generated internally
by the Company will be adequate to fund the operation of our  businesses and the
implementation  of our current VoIP business plan beyond a short period of time.
We received a report from our independent accountants,  relating to our December
31, 2004  audited  financial  statements  containing  an  explanatory  paragraph
stating that our recurring  losses from operations and our  accumulated  deficit
raise  substantial  doubts about our ability to continue as a going concern.  We
believe that the funding received and potentially  receivable in connection with
the E & C  Partnerships'  Note Purchase  Agreement  (maximum of $4.0 million and
assuming  that no demand for payment is made by the  Noteholders)  provides  the
Company with temporary  short-term  liquidity to operate its businesses while it
seeks to raise sufficient  additional  capital,  which may involve the potential
sale of one or more of the Company's subsidiaries, including SendTec.


                                       26
<PAGE>

If we are not  successful  in  entering  into a  financing,  sale,  or  business
transaction that infuses sufficient  additional cash resources into the Company,
by sometime  during the third quarter of 2005, we expect to pursue the remaining
$2.5 million, of optional convertible promissory note financing. If such funding
is received,  we believe the funding  will  provide the Company with  additional
short-term  liquidity into the fourth quarter of 2005. There can be no assurance
that this financing will be available when and if required,  nor that demand for
repayment  will not be made  prior to such  date.  In the event  that we are not
successful  in  obtaining  the  remaining  $2.5  million  in  funding  from  E&C
Partnerships or in the event that such remaining funds are received and depleted
prior to our  raising of  sufficient  additional  capital,  we believe  that the
Company  will no longer be able to continue  the  implementation  of its current
VoIP  business  plan.  As a result,  it is likely  that we would be  required to
either  temporarily  suspend or  permanently  shutdown the operation of our VoIP
telephony services business.  Additionally,  in such event,  management believes
that it may also be required to revise the  business  plan of some or all of its
other business  segments and/or further  implement  company-wide  cost-reduction
programs.  There can be no assurance  that the Company  would be  successful  in
implementing  such revised  business  plans and  effectively  restructuring  its
businesses  so that the Company would have the ability to continue to operate as
a going concern in the future.

Although the secured demand convertible notes (the "Notes") are owned by certain
entities which are  controlled by our Chairman,  if any of such entities were to
make demand for payment of the Notes, we do not have the financial  resources to
honor such payment. Absent additional financing, in the event demand is made for
repayment  of the Notes,  the Company  will not have the  resources to repay the
Notes.  Inasmuch  as  substantially  all of the  assets of the  Company  and its
subsidiaries  secure the Notes, in connection  with any resulting  proceeding to
collect the indebtedness  relating to the Notes, the Noteholders could seize and
sell the assets of the Company and its  subsidiaries,  any or all of which would
have a material adverse effect on the Company and its operations.

We Have A History Of Operating Losses And Expect To Continue To Incur Losses.

Since our  inception,  we have incurred net losses in each  quarter,  except the
fourth  quarter  of 2002 where we had net income of  approximately  $17,000.  We
expect that we will continue to incur net losses for the foreseeable  future. We
had net losses of  approximately  $24.3  million and $11.0 million for the years
ended December 31, 2004 and 2003,  respectively,  and approximately $4.0 million
for the first  three  months of 2005.  The  principal  causes of our  losses are
likely to continue to be:

o     costs resulting from the operation of our businesses;

o     costs relating to entering new business lines;

o     failure to generate sufficient revenue; and

o     selling, general and administrative expenses.

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

Our Entry Into New Lines Of Business,  As Well As Potential Future Acquisitions,
Joint   Ventures  Or  Strategic   Transactions   Entails   Numerous   Risks  And
Uncertainties.

We have entered into new business lines,  VoIP telephony  services and marketing
services. In November 2002, we acquired certain VoIP assets from an entrepreneur
in exchange  for  1,750,000  warrants to purchase our Common  Stock.  On May 28,
2003,  we acquired  Direct  Partner  Telecom,  Inc.  ("DPT"),  an  international
licensed  telecommunications  carrier then engaged in the purchase and resale of
telecommunication  services over the Internet. On September 1, 2004, we acquired
SendTec, Inc.  ("SendTec"),  a direct response marketing services and technology
company. On May 9, 2005, we acquired Tralliance  Corporation  ("Tralliance"),  a
development stage  Internet-related  business  venture.  Tralliance was recently
awarded the  contract to operate as the  registry  for the  ".travel"  top-level
domain by the  Internet  Corporation  for Assigned  Names and Numbers.  Although
highly dependent upon our obtaining  additional  capital, we may also enter into
new or different lines of business, as determined by management and our Board of
Directors.  Our  acquisitions,  as  well as any  future  acquisitions  or  joint
ventures could result, and in some instances have resulted in numerous risks and
uncertainties, including:

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

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

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

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

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


                                       27
<PAGE>

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

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

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

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

Our Net Operating Loss Carry Forwards May Be Limited.

As of December 31, 2004, we had net  operating  loss  carryforwards  potentially
available for U.S. and foreign tax purposes of approximately $162 million. These
carryforwards   expire  through  2024.  The  Tax  Reform  Act  of  1986  imposes
substantial  restrictions  on the  utilization  of net operating  losses and tax
credits  in the event of an  "ownership  change"  of a  corporation.  Due to the
change in our  ownership  interests in August 1997 and May 1999,  the  Company's
private  offering in March 2004  (together  with the exercise and  conversion of
various securities in connection with such private offering) and the issuance of
Common Stock in connection with the acquisition of SendTec on September 1, 2004,
as  defined  in the  Internal  Revenue  Code of 1986,  as  amended,  we may have
substantially  limited or eliminated the  availability of our net operating loss
carryforwards. There can be no assurance that we will be able to utilize any net
operating loss carryforwards in the future.

We Could Be Adversely  Affected By An Impairment Of Goodwill  And/Or  Intangible
Assets On Our Balance Sheet.

Our acquisition of SendTec has resulted in the recording of a significant amount
of  goodwill  and  intangible  assets on our balance  sheet.  The  goodwill  was
recorded  because  the fair value of the net assets  acquired  was less than the
purchase  price.  We may not  realize  the  full  value of the  goodwill  and/or
intangible  assets.  As such, we evaluate on a regular basis whether  events and
circumstances indicate that some or all of the carrying value of goodwill and/or
intangible  assets are no longer  recoverable,  in which case we would write off
the unrecoverable portion as a charge to our earnings.

We Depend On The  Continued  Growth In The Use And  Commercial  Viability Of The
Internet.

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

o     inadequate network infrastructure;

o     security and authentication concerns;

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

o     general economic and business downturns; and

o     catastrophic events, including war and terrorism.

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

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

o     increased government regulation;

o     potential governmental taxation of such services; and

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


                                       28
<PAGE>

We May Face Increased Government Regulation, Taxation And Legal Uncertainties In
Our Industry, Which Could Harm Our Business.

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

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

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

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

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

We Rely On Intellectual Property And Proprietary Rights.

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

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

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


                                       29
<PAGE>

o     be time-consuming;

o     result in significant costs;

o     subject us to significant liability for damages;

o     result in invalidation of our proprietary rights;

o     divert management's attention;

o     cause product release delays; or

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

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

The regulation of domain names in the United States and in foreign countries may
change.  Regulatory bodies could establish 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
websites may be accessed,  or for any or all of the top-level  domain names that
may be introduced.  The relationship between regulations  governing domain names
and laws protecting proprietary rights is unclear. Therefore, we may not be able
to prevent third parties from acquiring  domain names that infringe or otherwise
decrease the value of our trademarks and other proprietary rights.

We May Be Unsuccessful In Establishing And Maintaining  Brand  Awareness;  Brand
Identity Is Critical To Our Company.

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

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

Our Quarterly Operating Results Fluctuate.

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

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

o     changes in the number of sales or technical employees;

o     the level of traffic on our websites;

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


                                       30
<PAGE>

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

o     overall usage and acceptance of the Internet;

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

o     other costs relating to the maintenance of our operations;

o     the restructuring of our business;

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

o     competition from others providing services similar to ours.

Our  Limited  Operating  History  Makes  Financial  Forecasting  Difficult.  Our
Inexperience In The Internet Telephony Business Will Make Financial  Forecasting
Even More Difficult.

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

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

o     attract customers to our VoIP telephony service;

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

o     maintain or increase advertising revenue for our computer games magazine;

o     maintain or increase direct response marketing services revenue;

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

o     identify, attract, retain and motivate qualified personnel.

Our Management  Team Is  Inexperienced  In The  Management Of A Large  Operating
Company.

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

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

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

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

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

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

We Depend On Highly Qualified Technical And Managerial Personnel.

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


                                       31
<PAGE>

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

Our Officers,  Including Our Chairman And Chief Executive  Officer And President
Have Other  Interests And Time  Commitments;  We Have Conflicts Of Interest With
Some Of Our Directors; All Of Our Directors Are Employees Or Stockholders Of The
Company Or Affiliates Of Our Largest Stockholder.

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

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

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

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

We Rely On Third Party Outsourced  Hosting Facilities Over Which We Have Limited
Control.

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

Hackers May Attempt To Penetrate Our Security System;  Online Security  Breaches
Could Harm Our Business.

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


                                       32
<PAGE>

We May Be Exposed To Liability For  Information  Retrieved  From Or  Transmitted
Over The Internet.

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

We May Be Exposed To Liability  For Products Or Services Sold Over The Internet,
Including Products And Services Sold By Others.

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

We Are A  Party  To  Litigation  Matters  That  May  Subject  Us To  Significant
Liability And Be Time Consuming And Expensive.

We are currently a defendant in a lawsuit asserting claims of breach of contract
and specific  performance and which seeks payment of approximately  $2.5 million
in cash,  plus  interest,  as well as the issuance of 1.0 million  shares of our
Common Stock. In addition, we are a party to securities class action litigation.

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

We May Not Be Able  To  Implement  Section  404 Of The  Sarbanes-Oxley  Act On A
Timely Basis.

The SEC, as directed by Section 404 of The  Sarbanes-Oxley  Act,  adopted  rules
generally requiring each public company to include a report of management on the
company's  internal  controls over  financial  reporting in its annual report on
Form 10-K that contains an assessment by management of the  effectiveness of the
company's internal controls over financial reporting. In addition, the company's
independent  registered  public  accounting  firm must  attest to and  report on
management's  assessment of the effectiveness of the company's internal controls
over financial reporting. This requirement will first apply to our annual report
on Form 10-K for the fiscal year ending December 31, 2006.

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

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

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

                  RISKS RELATING TO OUR VOIP TELEPHONY BUSINESS

We Are Unable To Predict The Volume Of Usage And Our Capacity Needs For Our VoIP
Business;  Disadvantageous  Contracts Have Reduced Our Operating Margins And May
Adversely Affect Our Liquidity And Financial Condition.


                                       33
<PAGE>

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

The VoIP  Market Is  Subject To Rapid  Technological  Change And We Will Need To
Depend On New  Product  Introductions  And  Innovations  In Order To  Establish,
Maintain And Grow Our Business.

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

o     access to sufficient capital to complete our development efforts;

o     the identification of market demand for new products;

o     the determination of appropriate product inventory levels;

o     product and feature selection;

o     timely implementation of product design and development;

o     product performance;

o     cost-effectiveness of products under development;

o     securing effective sources of equipment supply; and

o     success of promotional efforts.

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

Our Ability And Plans To Provide Telecommunication  Services At Attractive Rates
Arise In Large Part From The Fact VoIP Services Are Not Currently Subject To The
Same Regulation As Traditional Telephony.

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

If the FCC or any state determines to regulate VoIP, they may impose surcharges,
taxes or additional  regulations  upon providers of VoIP. These surcharges could
include access charges payable to local exchange carriers to carry and terminate
traffic,   contributions  to  the  Universal  Service  Fund  or  other  charges.
Regulations  requiring  compliance  with the  Communications  Assistance for Law
Enforcement  Act, or  provision  of  enhanced  911  services  could also place a
significant  financial burden on us. The imposition of any such additional fees,
charges,  taxes,  licenses and  regulations  on VoIP services  could  materially
increase our costs and may reduce or eliminate the competitive pricing advantage
we seek to enjoy.


                                       34
<PAGE>

The Internet  Telephony  Business Is Highly  Competitive  And Also Competes With
Traditional And Cellular Telephony Providers.

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

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

Pricing  Pressures  And  Increasing  Use  Of  VoIP  Technology  May  Lessen  Our
Competitive Pricing Advantage.

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

If We Do Not Develop And Maintain Successful  Partnerships For VoIP Products, We
May Not Be Able To Successfully Market Any Of Our VoIP Products.

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

The Failure Of VoIP  Networks  To Meet The  Reliability  And  Quality  Standards
Required For Voice Communications Could Render Our Products Obsolete.

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

Online Credit Card Fraud Can Harm Our Business.

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


                                       35
<PAGE>

                RISKS RELATED TO OUR MARKETING SERVICES BUSINESS

Any Decrease In Demand For Our Online  Marketing  Services  Could  Substantially
Reduce Our Revenues.

A substantial  portion of our revenue is derived from Internet  advertising.  We
expect  that online  advertising  will  continue  to account  for a  substantial
portion  of our  revenue in the  future.  However,  our  revenue  from  Internet
advertising  may decrease in the future for a number of reasons,  including  the
following:

o     the rate at which Internet users click on advertisements or take action in
      response to an advertisement  has always been low and could decline as the
      volume of Internet advertising increases;

o     Internet  users can install  software  programs that allow them to prevent
      advertisements  from  appearing  on their  screens or block the receipt of
      emails;

o     advertisers may prefer an alternative Internet advertising format, product
      or service which we might not offer at that time; and

o     we may be  unable  to make  the  transition  to new  Internet  advertising
      formats preferred by advertisers.

If Our Pricing Models Are Not Accepted By Our Advertiser  Clients, We Could Lose
Clients And Our Revenue Could Decline.

Most of our  services are offered to  advertisers  based on  cost-per-action  or
cost-per-click pricing models, under which advertisers only pay us if we provide
the results they specify.  These  results-based  pricing  models differ from the
fixed-rate  pricing model used by many  Internet  advertising  companies,  under
which the fee is based on the number of times the advertisement is shown without
regard to  effectiveness.  Our  ability to  generate  significant  revenue  from
advertisers   will  depend,   in  part,  on  our  ability  to  demonstrate   the
effectiveness  of our primary  pricing  models to  advertisers,  who may be more
accustomed to a fixed-rate pricing model.

Furthermore,  intense competition among websites and other Internet  advertising
providers has led to the  development of a number of alternative  pricing models
for Internet advertising. The proliferation of multiple pricing alternatives may
confuse  advertisers and make it more difficult for them to differentiate  among
these alternatives.  In addition,  it is possible that new pricing models may be
developed  and  gain  widespread  acceptance  that are not  compatible  with our
business model or our technology.  These  alternatives,  and the likelihood that
additional  pricing  models  will be  introduced,  make it  difficult  for us to
project  the  levels  of  advertising  revenue  or the  margins  that we, or the
Internet  advertising  industry  in  general,  will  realize in the  future.  If
advertisers  do not  understand  the  benefits of our pricing  models,  then the
market for our services may decline or develop more slowly than we expect, which
may limit our ability to grow our revenue or cause our revenue to decline.

Online  Transactions From Which We Derive Our Revenue Are Subject To Validation.
Our Revenue And Margins Could Be Reduced As A Result Of Invalid Transactions.

SendTec  derives  revenue from its online cost per action  advertising  business
based on the number of actions it  generates  for clients  each  month.  SendTec
determines the number of actions generated for clients based on digital tracking
technology and reports from its clients detailing the number of actions received
by them. SendTec relies upon its digital tracking methods and final reports from
its clients to determine  the number of actions for which it pays its  publisher
network.  On average SendTec pays its network of publishers  between 30 days and
60 days  from  the end of the  month.  In  certain  situations,  SendTec  may be
required to  reimburse  its clients for  actions  which  SendTec has  previously
verified  as valid  actions  but the client has  subsequently  determined  to be
invalid due to fraud or other factors. In these instances, SendTec generally may
not have recourse  against the publishers in its network that have generated the
actions  and  therefore  SendTec  may not be able to recover  any portion of the
reimbursements it makes to its clients from its publishers.

We Depend On A Limited  Number Of Clients For A  Significant  Percentage  Of Our
Revenue And The Loss Of One Or More Of These Advertisers Could Cause Our Revenue
To Decline.

The results of  SendTec's  operations  have been  included  in our  consolidated
results since date of acquisition,  September 1, 2004.  During the first quarter
2005, three customers of SendTec  accounted for  approximately  62% of SendTec's
total net revenue. For the four months ended December 31, 2004, two customers of
SendTec  accounted  for  approximately  52% of SendTec's  total net revenue.  We
believe  that a limited  number of clients  will  continue to be the source of a
substantial  portion of our revenue for the foreseeable  future.  Key factors in
maintaining  our  relationships  with these clients  include our  performance on
individual  campaigns,  the  strength  of our  professional  reputation  and the
relationships  of our key executives with client  personnel.  To the extent that
our  performance  does  not  meet  client  expectations,  or our  reputation  or
relationships  with one or more major clients are impaired,  our revenues  could
decline and our operating results could be adversely affected. During the second
quarter of 2004,  one of  SendTec's  major  customers  acquired a business  that
competes with SendTec. This acquisition,  other similar acquisitions, or general
business  consolidation  within the marketing services industry could also cause
our revenue and  operating  results to decline and  adversely  affect  SendTec's
business.


                                       36
<PAGE>

Any  Limitation  On Our  Use Of  Data  Derived  From  Our  Clients'  Advertising
Campaigns Could Significantly Diminish The Value Of Our Services And Cause Us To
Lose Clients And Revenue.

When an individual visits our clients' websites, we use technologies,  including
cookies and web beacons,  to collect  information such as the user's IP address,
advertisements  delivered by us that have been viewed by the user and  responses
by the user to such advertisements. We aggregate and analyze this information to
determine  the  placement  of  advertisements  across our  affiliate  network of
advertising  space.  Although  the data we collect  from  campaigns of different
clients, once aggregated, are not identifiable,  our clients might decide not to
allow us to  collect  some or all of this  data or might  limit  our use of this
data.  Any  limitation  on our  ability  to use  such  data  could  make it more
difficult for us to deliver online marketing programs that meet client demands.

In addition,  although our contracts  generally permit us to aggregate data from
advertising campaigns, our clients might nonetheless request that we discontinue
using data obtained from their  campaigns that have already been aggregated with
other  clients'  campaign  data. It would be difficult,  if not  impossible,  to
comply  with these  requests,  and such  requests  could  result in  significant
expenditures  of  resources.  Interruptions,  failures  or  defects  in our data
collection,  mining and storage systems,  as well as privacy concerns  regarding
the  collection  of user data,  could also limit our  ability to  aggregate  and
analyze data from our clients'  advertising  campaigns.  If that happens, we may
lose clients and our revenue may decline.

If The Market For Internet Advertising Fails To Continue To Develop, Our Revenue
And Our Operating Results Could Be Harmed.

Our future  success is highly  dependent on the  continued use and growth of the
Internet as an advertising medium. The Internet advertising market is relatively
new and rapidly  evolving,  and it uses different  measurements than traditional
media to gauge its effectiveness.  As a result, demand for and market acceptance
of Internet advertising services is uncertain.  Many of our current or potential
advertiser  clients  have  little  or  no  experience  using  the  Internet  for
advertising   purposes  and  have  allocated  only  limited  portions  of  their
advertising  budgets to the  Internet.  The  adoption of  Internet  advertising,
particularly by those entities that have  historically  relied upon  traditional
media  for  advertising,  requires  the  acceptance  of a new way of  conducting
business,   exchanging   information,   measuring  success  and  evaluating  new
advertising products and services. Such clients may find Internet advertising to
be less  effective for promoting  their  products and services than  traditional
advertising media. We cannot assure you that the market for Internet advertising
will  continue  to  grow or  become  sustainable.  If the  market  for  Internet
advertising fails to continue to develop or develops more slowly than we expect,
our revenue and business could be harmed.

We Depend On Online  Publishers  For  Advertising  Space To Deliver Our Clients'
Advertising  Campaigns  And Any  Decline  In The  Supply  Of  Advertising  Space
Available Through Our Network Could Cause Our Revenue To Decline.

The websites,  search  engines and email  publishers  that sell or venture their
advertising space to or with us are not bound by long-term contracts that ensure
us a consistent supply of advertising space, which we refer to as our inventory.
We generate a significant portion of our revenue from the advertising  inventory
provided by a limited number of publishers.  In most  instances,  publishers can
change the amount of inventory they make available to us at any time, as well as
the price at which they make it  available.  In addition,  publishers  may place
significant  restrictions  on  our  use  of  our  advertising  inventory.  These
restrictions may prohibit  advertisements from specific  advertisers or specific
industries,  or restrict  the use of certain  creative  content or format.  If a
publisher decides not to make inventory  available to us, or decides to increase
the price, or places significant  restrictions on the use of such inventory,  we
may not be able to  replace  this with  inventory  from  other  publishers  that
satisfy our requirements in a timely and cost-effective manner. If this happens,
our revenue could decline or our cost of acquiring inventory may increase.

Our Growth May Be  Limited  If We Are  Unable To Obtain  Sufficient  Advertising
Inventory That Meets Our Pricing And Quality Requirements.

Our growth depends on our ability to effectively manage and expand the volume of
our inventory of advertising space. To attract new advertisers, we must increase
our supply of inventory that meets our performance and pricing requirements. Our
ability to purchase or venture  sufficient  quantities  of suitable  advertising
inventory will depend on various factors,  some of which are beyond our control.
These factors include:

o     our ability to offer publishers a competitive price for our inventory;

o     our ability to estimate the quality of the available inventory; and

o     our ability to efficiently manage our existing advertising inventory.


                                       37
<PAGE>

In addition, the number of competing Internet advertising networks that purchase
advertising  inventory  from  websites,   search  engine  and  email  publishers
continues to increase.  We cannot assure you that we will be able to purchase or
venture  advertising  inventory  that meets our  performance,  price and quality
requirements,  and if we cannot do so, our ability to generate  revenue could be
limited.

Any Limitation On Our Ability To Post  Advertisements  Throughout Our Network Of
Advertising Space Could Harm Our Business.

We execute advertising programs for clients primarily by posting advertisements,
which we refer to as ad delivery, on our affiliate network of advertising space.
Our  business  could suffer from a variety of factors that could limit or reduce
our ability to post advertisements across our affiliate network, including:

o     technological  changes  that  render the  delivery  of our  advertisements
      obsolete or incompatible  with the operating  systems of consumers  and/or
      the systems of online publishers;

o     lawsuits or injunctions based on claims that our ad delivery methodologies
      violate the proprietary rights of other parties; and

o     interruptions,  failures  or  defects  in our  ad  delivery  and  tracking
      systems.

Consolidation Of Online  Publishers May Impair Our Ability To Provide  Marketing
Services,  Acquire Advertising Inventory At Favorable Rates And Collect Campaign
Data.

The consolidation of Internet advertising networks, web portals,  search engines
and  other  online  publishers  could  eventually  lead  to a  concentration  of
desirable  advertising  inventory  on a very small  number of networks and large
websites. Such concentration could:

o     increase our costs if these publishers use their greater  bargaining power
      to increase rates for advertising inventory; and

o     impair our  ability  to provide  marketing  services  if these  publishers
      prevent us from distributing our clients'  advertising  campaigns on their
      websites or if they adopt ad delivery systems that are not compatible with
      our ad delivery methodologies.

Our Business Could Be Harmed If The Use Of Tracking  Technology Is Restricted Or
Becomes Subject To New Regulation.

In conjunction  with the delivery of  advertisements  to websites,  we typically
place  small files of  information,  commonly  known as cookies,  on an Internet
user's hard drive,  generally  without the user's  knowledge or consent.  Cookie
information is passed to us through an Internet user's browser software.  We use
cookies  to  collect  information  regarding  the  advertisements  we deliver to
Internet  users and their  interaction  with these  advertisements.  We use this
information to identify  Internet users who have received our  advertisements in
the  past  and to  monitor  and  prevent  potentially  fraudulent  activity.  In
addition,  our technology  uses this  information to monitor the  performance of
ongoing advertising campaigns and plan future campaigns.

Some Internet  commentators  and privacy  advocates  have  proposed  limiting or
eliminating  the use of cookies and other Internet  tracking  technologies,  and
legislation  has been  introduced  in some  jurisdictions  to regulate  Internet
tracking  technologies.  The  European  Union has  already  adopted a  directive
requiring  that when cookies are used,  the user must be informed and offered an
opportunity  to opt-out of the cookies' use. If there is a further  reduction or
limitation in the use of Internet tracking technologies such as cookies:

o     we may have to replace or re-engineer our tracking technology, which could
      require  significant  amounts  of  our  time  and  resources,  may  not be
      completed in time to avoid losing  clients or advertising  inventory,  and
      may not be commercially or technically feasible;

o     we may have to develop or acquire other technology to prevent fraud; and

o     we  may  become  subject  to  costly  and  time-consuming   litigation  or
      investigations  due to our use of cookie technology or other  technologies
      designed to collect Internet usage information.

Any one or more of these occurrences could result in increased costs, require us
to change our business practices or divert management's attention.

If We Or Our  Advertiser  Or Publisher  Clients Fail To Comply With  Regulations
Governing  Consumer  Privacy,  We Could Face Substantial  Costs And Our Business
Could Be Harmed.

Our collection,  maintenance and sharing of information regarding Internet users
could  result in lawsuits or  government  inquiries.  These  actions may include
those related to U.S. federal and state legislation or European Union directives
limiting  the  ability  of  companies  like  ours to  collect,  receive  and use
information  regarding Internet users.  Litigation and regulatory  inquiries are
often  expensive  and  time-consuming  and  their  outcome  is  uncertain.   Any
involvement by us in any of these matters could require us to:


                                       38
<PAGE>

o     spend significant amounts on legal defense;

o     divert  the  attention  of senior  management  from  other  aspects of our
      business;

o     defer or  cancel  new  product  launches  as a result  of these  claims or
      proceedings; and

o     make changes to our present and planned products or services.

Further,  we cannot assure you that our  advertiser  and  publisher  clients are
currently in compliance,  or will remain in  compliance,  with their own privacy
policies,  regulations  governing  consumer  privacy or other  applicable  legal
requirements.  We may be held liable if our clients  use our  technology  or the
data we  collect  on their  behalf in a manner  that is not in  compliance  with
applicable laws or regulations or their own stated privacy standards.

We May Be Liable For Content In The Advertisements We Deliver For Our Clients.

We may be liable to third parties for content in the  advertisements  we deliver
if the artwork,  text or other content involved violates copyrights,  trademarks
or other  intellectual  property  rights of third  parties or if the  content is
defamatory.  Although we generally receive  warranties from our advertisers that
they  have the right to use any  copyrights,  trademarks  or other  intellectual
property  included  in an  advertisement  and are  normally  indemnified  by the
advertisers,  a third  party may still  file a claim  against  us. Any claims by
third  parties  against  us could be  time-consuming,  could  result  in  costly
litigation and adverse judgments and could require us to change our business.

Misappropriation  Of Confidential  Information Held By Us Could Cause Us To Lose
Clients Or Incur Liability.

We retain  highly  confidential  information  on behalf  of our  clients  in our
systems and databases.  Although we maintain  security  features in our systems,
our operations may be  susceptible to hacker  interception,  break-ins and other
disruptions. These disruptions may jeopardize the security of information stored
in  and  transmitted  through  our  systems.  If  confidential   information  is
compromised, we could be subject to lawsuits by the affected clients or Internet
users,  which  could  damage our  reputation  among our  current  and  potential
clients,  require  significant  expenditures  of capital and other resources and
cause us to lose business and revenues.

We Face Intense And Growing Competition, Which Could Result In Price Reductions,
Reduced Operating Margins And Loss Of Market Share.

The direct  response  advertising  market is highly  competitive.  If we fail to
compete effectively  against other advertising service companies,  we could lose
clients or  advertising  inventory  and our revenues  could  decline.  We expect
competition to continue to increase because there are no significant barriers to
entry.

Many current and potential  competitors  have advantages over us, such as longer
operating  histories,  greater name  recognition,  larger client bases,  greater
access to advertising space on high-traffic  websites and significantly  greater
financial,  technical and marketing resources.  In addition,  existing or future
competitors may develop or offer services that provide significant  performance,
price, creative or other advantages over those offered by us.

Current and potential competitors may establish cooperative  relationships among
themselves or with third  parties to increase the ability of their  products and
services  to address  the needs of our clients  and  prospective  clients.  As a
result,  it is possible  that new  competitors  may emerge and  rapidly  acquire
significant market share.

If we fail to compete  successfully,  we could have difficulties  attracting and
retaining advertising clients or advertising  inventory,  which may decrease our
revenues and adversely affect our operating results.  Increased  competition may
also result in price reductions and reduced operating income.

We Generally Do Not Have Long-Term Contracts With Our Clients.

Our  clients  typically  hire us on a  project-by-project  basis or on an annual
contractual  relationship.  Moreover,  our clients  generally  have the right to
terminate their  relationships with us without penalty and with relatively short
or no notice.  Once a project is  completed  we cannot be assured  that a client
will  engage  us for  further  services.  From time to time,  highly  successful
engagements  have  ended  because  our client  was  acquired  and the new owners
decided not to retain us. A client that generates  substantial revenue for us in
one period may not be a substantial source of revenue in a subsequent period. We
expect a relatively  high level of client  concentration  to  continue,  but not
necessarily  involve the same clients from period to period.  The termination of
our business  relationships with any of our significant  clients,  or a material
reduction in the use of our services by any of our  significant  clients,  could
adversely affect our future financial performance.


                                       39
<PAGE>

If We Fail To Manage Our Growth Effectively, Our Expenses Could Increase And Our
Management's Time And Attention Could Be Diverted.

As we  continue  to  increase  the  scope  of our  operations,  we will  need an
effective  planning  and  management  process to  implement  our  business  plan
successfully in the rapidly evolving Internet  advertising market. Our business,
results of operations and financial condition will be substantially harmed if we
are unable to manage our expanding operations  effectively.  We plan to continue
to expand the sales and marketing, customer support and research and development
organizations.  Growth may place a significant  strain on our management systems
and  resources.  We will likely need to  continue to improve our  financial  and
managerial  controls and our reporting systems and procedures.  In addition,  we
will need to expand,  train and manage our work force. Our failure to manage our
growth effectively could increase our expenses and divert  management's time and
attention.

If We Fail To  Establish,  Maintain  And  Expand  Our  Technology  Business  And
Marketing Alliances And Partnerships, Our Ability To Grow Our Marketing Services
Business Could Be Limited.

In  order  to grow  our  technology  business,  we  must  generate,  retain  and
strengthen   successful   business  and  marketing  alliances  with  advertising
agencies.  We depend,  and expect to continue  to depend,  on our  business  and
marketing  alliances,  which are  companies  with which we have  written or oral
agreements  to work  together  to provide  services  to our clients and to refer
business from their clients and customers to us. If companies with which we have
business and marketing  alliances do not refer their clients and customers to us
to perform their online campaign and message management, our revenue and results
of operations may be severely harmed.

                  RISKS RELATING TO OUR COMPUTER GAMES BUSINESS

The  Market  Situation  Continues  To Be A  Challenge  For  Chips & Bits  Due To
Advances In Console And Online Games, Which Have Lower Margins And Traditionally
Less Sales Loyalty To Chips & Bits.

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

We Have Historically Relied Substantially On Advertising  Revenues,  Which Could
Decline In The Future.

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

We  May  Not  Be  Able  To  Successfully  Compete  In  The  Electronic  Commerce
Marketplace.

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

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

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

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

o     the level of product returns;

o     merchandise shipping costs and delivery times;


                                       40
<PAGE>

o     our ability to manage inventory levels;

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

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

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

Intense  Competition For Electronic  Commerce  Revenues Has Resulted In Downward
Pressure On Gross Margins.

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

Our  Electronic  Commerce  Business May Result In Significant  Liability  Claims
Against Us.

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

                       RISKS RELATING TO OUR COMMON STOCK

The Volume Of Shares  Available  For Future Sale In The Open Market  Could Drive
Down The Price Of Our Stock Or Keep Our Stock Price From Improving,  Even If Our
Financial Performance Improves.

As of March 31, 2005, we had issued and outstanding  approximately 175.2 million
shares, of which approximately 48.4 million shares were freely tradable over the
public  markets.  There is limited  trading  volume in our shares and we are now
traded  only in the  over-the-counter  market.  On April  16,  2004,  we filed a
registration  statement  relating to the potential resale of up to approximately
131 million of our shares (including  approximately 27 million shares underlying
outstanding  warrants to acquire our Common Stock).  The registration  statement
became  effective on May 11, 2004.  As part of the  acquisition  of SendTec,  we
issued an  aggregate of  approximately  35 million  shares of our Common  Stock.
Pursuant to our contractual  obligations,  we will file a registration statement
relating to the potential resale of these shares. We are obligated to cause such
registration  statement to become  effective on or before  September 1, 2005. In
the event we fail to timely register such shares,  we may be held liable for any
damages  suffered by holders of such stock.  Upon  registration,  and subject to
waiver or expiration of a lock-up agreement which expires September 1, 2005, all
such  shares  will be  eligible  for  resale  over  the  open  market.  Sales of
significant  amounts of Common  Stock in the public  market in the  future,  the
perception  that sales  will  occur or the  registration  of  additional  shares
pursuant to existing  contractual  obligations  could  materially  and adversely
drive down the price of our stock.  In addition,  such factors  could  adversely
affect the ability of the market price of the Common  Stock to increase  even if
our business  prospects were to improve.  Substantially  all of our stockholders
holding  restricted  securities,  including shares issuable upon the exercise of
warrants to purchase our Common Stock,  have  registration  rights under various
conditions.  Also, we may issue  additional  shares of our Common Stock or other
equity  instruments  which may be  convertible  into Common Stock at some future
date, which could further adversely affect our stock price.

In addition,  as of March 31, 2005, there were  outstanding  options to purchase
approximately  15,605,000 shares of our Common Stock,  which become eligible for
sale in the  public  market  from  time to time  depending  on  vesting  and the
expiration of lock-up agreements.  The issuance of shares upon exercise of these
options is registered  under the  Securities  Act and  consequently,  subject to
certain volume restrictions as to shares issuable to executive officers, will be
freely tradable.

Also as of March 31,  2005,  we had issued and  outstanding  warrants to acquire
approximately  16,782,000  shares of our Common Stock. In addition,  the Company
holds in escrow  warrants  to acquire up to  1,500,000  shares of Common  Stock,
subject  to  release  over  approximately  the next  year  (some  of  which  may
accelerate  under certain  events) upon the  attainment  of certain  performance
objectives  and may issue  warrants  to  acquire up to an  additional  2,500,000
shares of Common Stock upon attainment of certain  performance  criteria related
to the SendTec acquisition. Many of the outstanding instruments representing the
warrants contain anti-dilution  provisions pursuant to which the exercise prices
and number of shares issuable upon exercise may be adjusted.


                                       41
<PAGE>

Our Chairman May Control Us.

After giving effect to the proxies to vote the shares of Common Stock granted by
five of the former  shareholders  of SendTec,  Michael S. Egan, our Chairman and
Chief Executive Officer,  beneficially owns or controls, directly or indirectly,
approximately  169.4 million shares of our Common Stock as of May 4, 2005, which
in the aggregate represents approximately 64.8% of the outstanding shares of our
Common  Stock  (assuming  the full $4.0  million  funding of the secured  demand
convertible  promissory  notes and treating as outstanding  for this purpose the
shares of Common Stock issuable upon exercise and/or  conversion of the options,
secured demand  convertible  promissory  notes and warrants owned by Mr. Egan or
his  affiliates).  Accordingly,  Mr. Egan will be able to  exercise  significant
influence over, if not control, any stockholder vote.

Delisting  Of Our Common  Stock Makes It More  Difficult  For  Investors To Sell
Shares. This May Potentially Lead To Future Market Declines.

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

Our Common Stock Is Presently  Subject To The "Penny Stock" Rules Which May Make
It A Less Attractive Investment.

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

Anti-Takeover  Provisions  Affecting  Us Could  Prevent  Or  Delay A  Change  Of
Control.

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

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

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

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

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

Our Stock Price Is Volatile And May Decline.

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

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

o     quarterly variations in our operating results;


                                       42
<PAGE>

o     competitive announcements;

o     sales of any of our businesses;

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

o     news relating to trends in our markets; and

o     entrance  into new  lines of  business  and  acquisitions  of  businesses,
      including our SendTec acquisition.

In addition,  with regard to our acquisition of SendTec the trading price of our
Common Stock may decline if:

o     integration of theglobe.com and SendTec is unsuccessful or is delayed;

o     the  combined  company  does not  achieve  the  perceived  benefits of the
      acquisition as rapidly or to the extent anticipated by investors;

o     the effect of the acquisition on the combined company's  financial results
      or  condition  is  not  consistent  with  the  expectations  of  financial
      investors; or

o     the dilution in shareholder ownership related to the issuance of shares of
      theglobe.com's   Common  Stock  in  connection  with  the  acquisition  is
      perceived negatively by investors.

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.  Interest rate risk refers to fluctuations in the value of a
security  resulting  from  changes  in the  general  level  of  interest  rates.
Investments  that we  classify  as  cash  and  cash  equivalents  have  original
maturities  of three  months  or less and  therefore,  are not  affected  in any
material respect by changes in market interest rates.  Marketable  securities at
March 31, 2005, of $42,736 are  classified as  available-for-sale  and stated at
fair value.  At March 31, 2005, debt  outstanding  includes  approximately  $1.1
million of fixed rate  instruments  with an aggregate  average  interest rate of
4.52% and  approximately  $0.2  million of  variable  rate  instruments  with an
aggregate  average  interest  rate of 6.92%.  All but  approximately  $16,000 of
principal of the variable rate debt  outstanding as of the end of the 2005 first
quarter matures within the next twelve months.

Foreign  Currency Risk. We transact  business in U.S.  dollars.  Our exposure to
changes in foreign currency rates has been limited to a related party obligation
payable in Canadian dollars,  which totals approximately $58,000 (U.S.) at March
31, 2005.  Foreign  currency  exchange rate  fluctuations do not have a material
effect on our results of operations.

ITEM 4. CONTROLS AND PROCEDURES

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

Our Chief  Executive  Officer and Chief  Financial  Officer have  evaluated  the
effectiveness  of our  disclosure  controls and procedures as of March 31, 2005.
Based on that  evaluation,  our Chief Executive  Officer and our Chief Financial
Officer have concluded that our disclosure controls and procedures are effective
in  alerting  them in a timely  manner  to  material  information  regarding  us
(including our consolidated subsidiaries) that is required to be included in our
periodic reports to the SEC.

Our management,  with the  participation of our Chief Executive  Officer and our
Chief Financial Officer,  have evaluated any change in our internal control over
financial  reporting that occurred  during the quarter ended March 31, 2005 that
has  materially  affected,  or is reasonably  likely to materially  affect,  our
internal  control over financial  reporting,  and have determined there to be no
reportable changes.


                                       43
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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


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

(a)   Unregistered Sales of Equity Securities.

None.  Subsequent to the quarter ended March 31, 2005, the  registrant  reported
the sale of unregistered  secured demand convertible  promissory notes on a Form
8-K dated April 26, 2005.

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

Not applicable.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


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

None.


ITEM 5. OTHER INFORMATION

On January 31, 2005,  theglobe.com,  inc., and Promotion Display Technology Ltd.
("PDT"),  entered into a termination of agreement  related to an agreement dated
August  7,  2003  for the  purchase  of USB  handsets.  The  provisions  of this
termination  of agreement  are  discussed  in Item 6 under the caption  "Loss on
Settlement  of  Contractual  Obligation"  in the  discussion  of our  results of
operations  for the year ended  December  31,  2004  compared  to the year ended
December  31,  2003,  as  included  in our Annual  Report on Form 10-KSB for the
fiscal year ended December 31, 2004.

Although we treated the original August 7, 2003 agreement with PDT as a material
contract,  we did  not  file a Form  8-K  relating  to the  termination  of this
contract. Due to previous disclosures in theglobe.com's Quarterly Report on Form
10-QSB for the quarterly period ended September 30, 2004, of amounts written-off
related to USB handset inventory  purchases pursuant to this contract and that a
material part of our business was no longer  dependent upon this  supplier,  the
actual termination of the contract may not have been a termination of a material
agreement requiring it to be reported on Form 8-K.


ITEM 6. EXHIBITS

4.1   Form of Secured Demand Convertible Promissory Note (2).

4.2   Security Agreement dated April 22, 2005 by theglobe.com,  inc. and certain
      other parties named therein (2).

4.3   Unconditional Guaranty Agreement dated April 22, 2005 (2).

10.1  Termination   of   Agreement   dated  as  of  January  31,  2005   between
      theglobe.com, inc. and Promotion and Display Technology Ltd. (1).

10.2  Consulting  Agreement  effective as of February 2, 2005 (fully executed as
      of March 28, 2005) between theglobe.com, inc. and Albert J. Detz (1).

10.3  Carrier  Services  Agreement  between XO  Communications,  Inc. and Direct
      Partner  Telecom,  Inc.,  as  amended  and  made  effective  by the  First
      Amendment to the Carrier Services Agreement dated March 25, 2005 (1).


                                       44
<PAGE>

10.4  Note Purchase  Agreement dated April 22, 2005 between  theglobe.com,  inc.
      and certain named investors (2).

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

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

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

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

----------

(1)   Incorporated by reference from our Form 10-KSB for the year ended December
      31, 2004, filed on March 30, 2005.

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


                                       45
<PAGE>

SIGNATURES

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

Dated:  May 13, 2005                          theglobe.com, inc.


                                         By:  /s/ Michael S. Egan
                                              ----------------------------------
                                              Michael S. Egan
                                              Chief Executive Officer
                                              (Principal Executive Officer)


                                         By:  /s/ Edward A. Cespedes
                                              ----------------------------------
                                              Edward A. Cespedes
                                              President, Chief Financial Officer
                                              (Principal Financial Officer)


                                       46
<PAGE>

EXHIBIT INDEX

4.1   Form of Secured Demand Convertible Promissory Note (2).

4.2   Security Agreement dated April 22, 2005 by theglobe.com,  inc. and certain
      other parties named therein (2).

4.3   Unconditional Guaranty Agreement dated April 22, 2005 (2).

10.1  Termination   of   Agreement   dated  as  of  January  31,  2005   between
      theglobe.com, inc. and Promotion and Display Technology Ltd. (1).

10.2  Consulting  Agreement  effective as of February 2, 2005 (fully executed as
      of March 28, 2005) between theglobe.com, inc. and Albert J. Detz (1).

10.3  Carrier  Services  Agreement  between XO  Communications,  Inc. and Direct
      Partner  Telecom,  Inc.,  as  amended  and  made  effective  by the  First
      Amendment to the Carrier Services Agreement dated March 25, 2005 (1).

10.4  Note Purchase  Agreement dated April 22, 2005 between  theglobe.com,  inc.
      and certain named investors (2).

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

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

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

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

---------------

(1)   Incorporated by reference from our Form 10-KSB for the year ended December
      31, 2004, filed on March 30, 2005.

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


                                       47