**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-Q**





**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(D)****OF
                THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      quarterly period ended March 31, 2007





OR





**o**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE****SECURITIES
                EXCHANGE ACT OF 1934**





**FOR
      THE TRANSITION PERIOD FROM _______ TO _________**





*COMMISSION
      FILE NO. 0-25053*





**THEGLOBE.COM,
      INC.**


(EXACT
      NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)




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




110
      EAST
      BROWARD BOULEVARD, SUITE 1400


FORT
      LAUDERDALE, FL. 33301


(ADDRESS
      OF PRINCIPAL EXECUTIVE OFFICES)





(954)
      769 - 5900


(Registrant's
      telephone number, including area code)




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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
      one):





Large
                accelerated filero
            
            Accelerated
                filero
            
            Non-accelerated
                filerx




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x





The
      number of shares outstanding of the Registrant's Common Stock, $.001 par value
      (the "Common Stock") as of May 7, 2007 was 172,484,838.









**THEGLOBE.COM,
      INC.**


**FORM
      10-Q**





TABLE
      OF
      CONTENTS





PART
                I:
            
            FINANCIAL
                INFORMATIONItem
                1.
            
            Financial
                StatementsCondensed
                Consolidated Balance Sheets at March 31, 2007 (unaudited) and December
                31,
                2006
            
            2Unaudited
                Condensed Consolidated Statements of Operations for the three months
                ended
                March 31, 2007 and 2006
            
            3Unaudited
                Condensed Consolidated Statements of Cash Flows for the three months
                ended
                March 31, 2007 and 2006
            
            4Notes
                to Unaudited Condensed Consolidated Financial Statements
            
            5Item
                2.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            16Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            28Item
                4.
            
            Controls
                and Procedures
            
            28PART
                II:
            
            OTHER
                INFORMATIONItem
                1.
            
            Legal
                Proceedings
            
            28Item
                1A.
            
            Risk
                Factors
            
            28Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            42Item
                3.
            
            Defaults
                Upon Senior Securities
            
            42Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            42Item
                5.
            
            Other
                Information
            
            42Item
                6.
            
            Exhibits
            
            42SIGNATURES
            
            43











**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





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


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




MARCH
                31,
            
            DECEMBER
                31,2007
            
            2006(UNAUDITED)ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            3,507,052
            
            $
            5,316,218Accounts
                receivable
            
            
            53,472
            
            
            45,870Prepaid
                expenses
            
            
            351,476
            
            
            358,701Net
                assets of discontinued operations
            
            
            549,050
            
            
            960,280Other
                current assets
            
            
            12,142
            
            
            13,001Total
                current assets
            
            
            4,473,192
            
            
            6,694,070Intangible
                assets
            
            
            487,313
            
            
            526,824Property
                and equipment, net
            
            
            160,581
            
            
            144,216Other
                assets
            
            
            40,000
            
            
            40,000Total
                assets
            
            $
            5,161,086
            
            $
            7,405,110LIABILITIES
                AND STOCKHOLDERS' DEFICITCurrent
                Liabilities:Accounts
                payable
            
            $
            657,381
            
            $
            507,578Accrued
                expenses and other current liabilities
            
            
            1,322,492
            
            
            1,484,669Deferred
                revenue
            
            
            1,444,898
            
            
            1,222,705Notes
                payable due affiliates
            
            
            3,400,000
            
            
            3,400,000Net
                liabilities of discontinued operations
            
            
            5,447,898
            
            
            5,160,872Total
                current liabilities
            
            
            12,272,669
            
            
            11,775,824Deferred
                revenue
            
            
            175,524
            
            
            232,433Total
                liabilities
            
            
            12,448,193
            
            
            12,008,257Stockholders'
                Deficit:Common
                stock, $0.001 par value; 500,000,000 shares authorized;172,484,838
                and 172,484,838 shares issued at March 31, 2007and
                December 31, 2006, respectively
            
            
            172,485
            
            
            172,485Additional
                paid-in capital
            
            
            289,193,213
            
            
            289,088,557Accumulated
                deficit
            
            
            (296,652,805
            )
            
            (293,864,189
            )Total
                stockholders' deficit
            
            
            (7,287,107
            )
            
            (4,603,147
            )Total
                liabilities and stockholders' deficit
            
            $
            5,161,086
            
            $
            7,405,110





See
      notes
      to unaudited condensed consolidated financial statements.





2





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


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**





Three
                Months Ended March 31,2007
            
            2006(UNAUDITED)Net
                Revenue
            
            $
            431,742
            
            $
            313,613Operating
                Expenses:Cost
                of revenue
            
            
            102,185
            
            
            130,159Sales
                and marketing
            
            
            639,781
            
            
            579,231General
                and administrative
            
            
            1,224,766
            
            
            1,275,288Depreciation
            
            
            19,520
            
            
            17,609Intangible
                asset amortization
            
            
            39,511
            
            
            69,6752,025,763
            
            
            2,071,962Operating
                Loss from Continuing Operations
            
            
            (1,594,021
            )
            
            (1,758,349
            )Interest
                Income (Expense), net
            
            
            (33,559
            )
            
            62,138Loss
                from Continuing OperationsBefore
                Income Tax
            
            
            (1,627,580
            )
            
            (1,696,211
            )Income
                Tax Provision
            
            
            —
            
            
            —Loss
                from Continuing Operations
            
            
            (1,627,580
            )
            
            (1,696,211
            )Discontinued
                Operations, net of tax
            
            
            (1,161,036
            )
            
            (2,848,402
            )Net
                Loss
            
            $
            (2,788,616
            )
            $
            (4,544,613
            )Loss
                Per Share -Basic
                and Diluted:Continuing
                Operations
            
            $
            (0.01
            )
            $
            (0.01
            )Discontinued
                Operations
            
            $
            (0.01
            )
            $
            (0.02
            )Net
                Loss
            
            $
            (0.02
            )
            $
            (0.03
            )Weighted
                Average Common Shares Outstanding
            
            
            172,485,000
            
            
            174,593,000








See
      notes
      to unaudited condensed consolidated financial statements.





3




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


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**





Three
                Months
              Ended
                March 31,2007
            
            2006(UNAUDITED)Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (2,788,616
            )
            $
            (4,544,613
            )Add
                back: loss from discontinued operations
            
            
            1,161,036
            
            
            2,848,402Net
                loss from continuing operations
            
            
            (1,627,580
            )
            
            (1,696,211
            )Adjustments
                to reconcile net loss from continuing operations to net cash flows
                from
                operating activities:Depreciation
                and amortization
            
            
            59,031
            
            
            87,284Employee
                stock compensation
            
            
            101,520
            
            
            81,769Compensation
                related to non-employee stock options
            
            
            3,136
            
            
            94,233Changes
                in operating assets and liabilitiesAccounts
                receivable, net
            
            
            (7,602
            )
            
            —Prepaid
                and other current assets
            
            
            8,084
            
            
            21,581Accounts
                payable
            
            
            149,803
            
            
            (194,497
            )Accrued
                expenses and other current liabilities
            
            
            (162,177
            )
            
            (351,391
            )Income
                taxes payable
            
            
            —
            
            
            (806,406
            )Deferred
                revenue
            
            
            165,284
            
            
            103,124Net
                cash flows from operating activities of continuing operations
            
            
            (1,310,501
            )
            
            (2,660,514
            )Net
                cash flows from operating activities of discontinued operations
            
            
            (496,872
            )
            
            (2,232,809
            )Net
                cash flows from operating activities
            
            
            (1,807,373
            )
            
            (4,893,323
            )Cash
                Flows from Investing Activities:Net
                cash released from escrow
            
            
            —
            
            
            780,721Purchases
                of property and equipment
            
            
            (30,593
            )
            
            —Other,
                net
            
            
            —
            
            
            5,001Net
                cash flows from investing activities of continuing
                operations
            
            
            (30,593
            )
            
            785,722Proceeds
                from the sale of property and equipment of discontinued
                operations
            
            
            28,800
            
            
            —Net
                cash flows from investing activities
            
            
            (1,793
            )
            
            785,722Cash
                Flows from Financing Activities:Proceeds
                from exercise of stock options and warrants
            
            
            —
            
            
            18,420Net
                cash flows from financing activities of continuing
                operations
            
            
            —
            
            
            18,420Payments
                on debt of discontinued operations
            
            
            —
            
            
            (11,598
            )—
            
            
            6,822Net
                Decrease in Cash and Cash Equivalents
            
            
            (1,809,166
            )
            
            (4,100,779
            )Cash
                and Cash Equivalents, at beginning of period
            
            
            5,316,218
            
            
            16,480,660Cash
                and Cash Equivalents, at end of period
            
            $
            3,507,052
            
            $
            12,379,881





See
      notes
      to unaudited condensed consolidated financial statements.





4


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


**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**





(1)
      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





DESCRIPTION
      OF THEGLOBE.COM





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





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





On
      May
      28, 2003, the Company acquired Direct Partner Telecom, Inc. ("DPT"), a company
      engaged in VoIP telephony services in exchange for 1,375,000 shares of the
      Company's Common Stock and the issuance of warrants to acquire 500,000 shares
      of
      the Company's Common Stock. The Company acquired all of the physical assets
      and
      intellectual property of DPT and originally planned to continue to operate
      the
      company as a subsidiary and engage in the provision of VoIP services to other
      telephony businesses on a wholesale transactional basis. In the first quarter
      of
      2004, the Company decided to suspend DPT's wholesale business and dedicate
      the
      DPT physical and intellectual assets to its retail VoIP business.





On
      May 9,
      2005, the Company exercised an option to acquire all of the outstanding capital
      stock of Tralliance Corporation (“Tralliance”), an entity which had been
      designated as the registry for the “.travel” top-level domain through an
      agreement with the Internet Corporation for Assigned Names and Numbers
      (“ICANN”). The purchase price consisted of the issuance of 2,000,000 shares of
      theglobe’s Common Stock, warrants to acquire 475,000 shares of theglobe’s Common
      Stock and $40,000 in cash.





As
      more
      fully discussed in Note 3, “Discontinued Operations,” in March 2007, management
      and the Board of Directors of the Company made the decision to cease all
      activities related to its computer games businesses, including discontinuing
      the
      operations of its magazine publications, games distribution business and related
      websites.  In
      addition, in March 2007, management and the Board of Directors of the Company
      decided to discontinue the operating, research and development activities of
      its
      VoIP telephony services business and terminate all of the remaining employees
      of
      that business.





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.





5








UNAUDITED
      INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION





The
      unaudited interim condensed consolidated financial statements of the Company
      as
      of March 31, 2007 and for the three months ended March 31, 2007 and 2006
      included herein have been prepared in accordance with the instructions for
      Form
      10-Q under the Securities Exchange Act of 1934, as amended, and Article 10
      of
      Regulation S-X under the Securities Act of 1933, as amended. Certain information
      and note disclosures normally included in consolidated financial statements
      prepared in accordance with generally accepted accounting principles have been
      condensed or omitted pursuant to such rules and regulations relating to interim
      condensed consolidated financial statements.




In
      the
      opinion of management, the accompanying unaudited interim condensed consolidated
      financial statements reflect all adjustments, consisting only of normal
      recurring adjustments, necessary to present fairly the financial position of
      the
      Company at March 31, 2007 and the results of its operations and its cash flows
      for the three months ended March 31, 2007 and 2006. The results of operations
      and cash flows for such periods are not necessarily indicative of results
      expected for the full year or for any future period.





USE
      OF
      ESTIMATES





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





CASH
      AND
      CASH EQUIVALENTS





Cash
      equivalents consist of money market funds and highly liquid short-term
      investments with qualified financial institutions. The Company considers all
      highly liquid securities with original maturities of three months or less to
      be
      cash equivalents.





COMPREHENSIVE
      INCOME (LOSS)





The
      Company reports comprehensive income (loss) in accordance with Statement of
      Financial Accounting Standards (“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 $2.8 million and $4.5 million for the three months ended March
      31,
      2007 and 2006, respectively, which approximated the Company's reported net
      loss.





CONCENTRATION
      OF CREDIT RISK





Financial
      instruments which subject the Company to concentrations of credit risk consist
      primarily of cash and cash equivalents 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.




6





REVENUE
      RECOGNITION





***Continuing
      Operations***





**INTERNET
      SERVICES**





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





***Discontinued
      Operations***





**COMPUTER
      GAMES BUSINESSES**





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





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





Sales
      of
      games and related products from the Company's online store were recognized
      as
      revenue when the product was shipped to the customer. Amounts billed to
      customers for shipping and handling charges were included in net revenue. The
      Company provided an allowance for returns of merchandise sold through its online
      store.





**VOIP
      TELEPHONY SERVICES**





VoIP
      telephony services revenue represented fees charged to customers for voice
      services and was recognized based on minutes of customer usage or as services
      were provided. The Company recorded payments received in advance for prepaid
      services as deferred revenue until the related services were
      provided.





SEGMENT
      REPORTING





Effective
      with the March 2007 decision by management and the Board of Directors of the
      Company to cease all activities related to its computer games and VoIP telephony
      services businesses, the Company is now involved in one operating segment,
      the
      Internet services business.





NET
      LOSS
      PER SHARE





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




7





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





2007
            
            2006Options
                to purchase common stock
            
            
            18,923,000
            
            
            15,699,000Common
                shares issuable upon exercise of warrants
            
            
            16,911,000
            
            
            7,276,000Common
                shares issuable upon conversion of Convertible Notes
            
            
            68,000,000
            
            
            68,000,000Total
            
            
            103,834,000
            
            
            90,975,000





RECENT
      ACCOUNTING PRONOUNCEMENTS





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities.”
SFAS No. 159 expands the scope of what entities may carry at fair value by
      offering an irrevocable option to record many types of financial assets and
      liabilities at fair value. Changes in fair value would be recorded in an
      entity’s income statement. This accounting standard also establishes
      presentation and disclosure requirements that are intended to facilitate
      comparisons between entities that choose different measurement attributes for
      similar types of assets and liabilities. SFAS No. 159 is effective for the
      Company on January 1, 2008. Earlier application is permitted under certain
      circumstances. We are currently evaluating the requirements of SFAS No. 159
      and
      have not yet determined the impact on our consolidated financial
      statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles and expands disclosure about fair
      value
      measurements. SFAS No. 157 applies to other accounting standards that require
      or
      permit fair value measurements. Accordingly, this statement does not require
      any
      new fair value measurement. This statement is effective for fiscal years
      beginning after November 15, 2007 and interim periods within those fiscal years.
      We are currently evaluating the requirements of SFAS No. 157 and have not
      determined the impact on our consolidated financial statements.





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
      the effects of prior year uncorrected misstatements should be considered when
      quantifying misstatements in current year financial statements. SAB No. 108
      requires companies to quantify misstatements using a balance sheet and income
      statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 permits existing public companies to initially
      apply its provisions either by (i) restating prior financial statements as
      if
      the “dual approach” had always been used or (ii) recording the cumulative effect
      of initially applying the “dual approach” as adjustments to the carrying value
      of assets and liabilities as of January 1, 2006 with an offsetting adjustment
      recorded to the opening balance of retained earnings. Use of the “cumulative
      effect” transition method requires detailed disclosure of the nature and amount
      of each individual error being corrected through the cumulative adjustment
      and
      how and when it arose. The adoption of this standard did not have a material
      impact on the Company’s financial condition, results of operations or
      liquidity.





In
      June
      2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty
      in Income Taxes,” an interpretation of FASB Statement No. 109, “Accounting for
      Income Taxes,” which clarifies accounting for and disclosure of uncertainty in
      tax positions. FIN No. 48 prescribes a recognition threshold and measurement
      attribute for the financial recognition and measurement of a tax position taken
      or expected to be taken in a tax return. The interpretation is effective for
      fiscal years beginning after December 15, 2006. We have evaluated the impact
      of
      adopting FIN No. 48 on our consolidated financial statements, and the adoption
      of FIN No. 48 did not have a material effect on our consolidated financial
      position, cash flows and results of operations.




8





RECLASSIFICATIONS





Certain
      2006 amounts have been reclassified to conform to the 2007 presentation. In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets”, the operations of the Company’s games and VoIP telephony
      services divisions have been accounted for in accordance with the provisions
      of
      SFAS No. 144 and the 2006 results of their operations have been included in
      income from discontinued operations. Prior periods have been reclassified for
      comparability, as required.





(2)
      GOING
      CONCERN CONSIDERATIONS AND MANAGEMENT’S PLAN





The
      Company received a report from its independent accountants, relating to its
      December 31, 2006 audited financial statements containing an explanatory
      paragraph stating that its recurring losses from operations and its accumulated
      deficit raise substantial doubt about the Company’s ability to continue as a
      going concern. The accompanying consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America on a going concern basis, which contemplates the
      realization of assets and the satisfaction of liabilities in the normal course
      of business. Accordingly, the consolidated financial statements do not include
      any adjustments relating to the recoverability of assets and classification
      of
      liabilities that might be necessary should the Company be unable to continue
      as
      a going concern. However, for the reasons described below, Company management
      does not believe that cash on hand and cash flow generated internally by the
      Company will be adequate to fund the operation of its businesses beyond a short
      period of time. These reasons raise significant doubt about the Company’s
      ability to continue as a going concern.





As
      of
      March 31, 2007, the Company had a net working capital deficit of approximately
      $7,800,000, inclusive of a cash and cash equivalents balance of approximately
      $3,500,000. Such working capital deficit included a settlement liability of
      $2,550,000 owed to MySpace, Inc. (“MySpace”) in connection with a lawsuit filed
      by MySpace against the Company on June 1, 2006 (as more fully discussed in
      Note
      5, “Litigation”) and an aggregate of $3,400,000 in secured convertible demand
      notes (the “Convertible Notes”) and accrued interest of approximately $640,000
      due to entities controlled by Michael Egan, the Company’s Chairman and Chief
      Executive Officer. On April 18, 2007, the Company paid MySpace $2,550,000 in
      cash in full settlement of the aforementioned lawsuit. As of May 4, 2007, the
      Company had a cash and cash equivalents balance of approximately $480,000.
      Notwithstanding previous cost reduction actions taken by the Company and its
      recent decision to shutdown its unprofitable computer games and VoIP telephony
      services businesses in March 2007 (see Note 3, “Discontinued Operations”), the
      Company continues to incur substantial consolidated operating losses, although
      reduced in comparison with prior periods, and management believes that the
      Company will continue to be unprofitable in the foreseeable future. Based upon
      the Company’s current financial condition, as discussed above, and without the
      infusion of additional capital, management does not believe that the Company
      will be able to fund its operations beyond May 2007.





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to continue operating as a going concern for any length of
      time beyond May 2007, we believe that we must quickly raise capital. Although
      there is no commitment to do so, any such funds would most likely come from
      Michael Egan, the Company’s Chairman and Chief Executive Officer, or affiliates
      of Mr. Egan or the Company, as the Company currently has no access to credit
      facilities with traditional third parties and has historically relied on
      borrowings from related parties to meet short-term liquidity needs. Any such
      capital raised would not be registered under the Securities Act of 1933 and
      would not be offered or sold in the United States absent registration or an
      applicable exemption from registration requirements. Although the Company is
      currently in negotiations with Mr. Egan to provide additional financing, there
      can be no assurance that the Company will be successful in raising such capital
      or borrowing such funds, and any capital raised will likely result in very
      substantial dilution of the number of shares outstanding or which could be
      outstanding upon the exercise or conversion of any derivative securities issued
      by the Company as part of such capital raise.





In
      addition to raising a sufficient amount of capital, we believe that our
      long-term financial viability will be determined mainly by our ability to
      successfully execute our current and future business plans, including (i)
      achieving net growth in the number of “.travel” domain name registrations; (ii)
      monetizing our www.search.travel website; (iii) further reducing our operating
      expenses; (iv) eliminating future losses incurred by our discontinued
      operations; and (v) successfully settling disputed and other outstanding
      liabilities related to our discontinued operations. The amount of capital
      required to be raised by the Company will be dependent upon the Company’s
      performance in executing its current and future business plans, as measured
      principally by the time period needed to begin generating positive internal
      cash
      flow. There can be no assurance that the Company will be successful in raising
      a
      sufficient amount of capital or in executing its business plans. Further, even
      if we raise capital and are successful in achieving each of the aforementioned
      objectives, if demand for repayment of any or all of the $3,400,000 in
      outstanding secured debt or related accrued interest is made, there is no
      assurance that we will not be required to file for bankruptcy protection at
      that
      time.




9





(3)
      DISCONTINUED OPERATIONS





In
      March
      2007, management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its computer games businesses, including
      discontinuing the operations of its magazine publications, games distribution
      business and related websites. The Company’s decision to shutdown its computer
      games businesses was based primarily on the historical losses sustained by
      these
      businesses during the recent past and management’s expectations of continued
      future losses. The Company is currently in the process of implementing a
      business shutdown plan, which includes the termination of employee and vendor
      relationships and the collection and payment of outstanding accounts receivables
      and payables. We are also attempting to sell certain of the businesses’
component assets; however, we do not expect the proceeds from such sales to
      be
      significant.





In
      addition, in March 2007, management and the Board of Directors of the Company
      decided to discontinue the operating, research and development activities of
      its
      VoIP telephony services business and terminate all of the remaining employees
      of
      the business. **** The
      Company’s decision to discontinue the operations of its VoIP telephony services
      business was based primarily on the historical losses sustained by the business
      during the past several years, management’s expectations of continued losses for
      the foreseeable future and estimates of the amount of capital required to
      attempt to successfully monetize its business. The Company is currently in
      the
      process of implementing a business shutdown plan, which includes the termination
      of its carrier and vendor relationships, as well as the payment and/or
      settlement of outstanding payables. We are also attempting to sell certain
      of
      the businesses’ component assets; however, we do not expect the proceeds from
      such sales to be significant. On April 2, 2007, theglobe agreed to transfer
      to
      Michael Egan all of its VoIP intellectual property in consideration for his
      agreement to provide the Security in connection with the MySpace litigation
      Settlement Agreement (See Note 5, “Litigation,” for further discussion). The
      Company had previously written off the value of the VoIP intellectual property
      as a result of its evaluation of the VoIP telephony services business’
long-lived assets in connection with the preparation of the Company’s 2004
      year-end consolidated financial statements.





Results
      of operations for the computer games and VoIP telephony services businesses
      have
      been reported separately as “Discontinued Operations” in the accompanying
      condensed consolidated statements of operations for all periods presented.
      The
      assets and liabilities of the computer games and VoIP telephony services
      businesses have been included in the captions, “Assets of Discontinued
      Operations” and “Liabilities of Discontinued Operations” in the accompanying
      condensed consolidated balance sheets.




10




The
      following is a summary of the assets and liabilities of the discontinued
      operations of the computer games and VoIP telephony services businesses as
      included in the accompanying condensed consolidated balance sheets:





March
                31,
            
            December
                31,2007
            
            2006Assets:Computer
                GamesAccounts
                receivable, net
            
            $
            381,776
            
            $
            518,279Inventory,
                net
            
            
            8,739
            
            
            37,736Prepaid
                and other current assets
            
            
            10,000
            
            
            44,111Property
                and equipment, net
            
            
            30,749
            
            
            38,747431,264
            
            
            638,873VoIP
                Telephony ServicesAccounts
                receivable, net
            
            
            25,031
            
            
            25,031Prepaid
                and other current assets
            
            
            24,751
            
            
            113,815Property
                and equipment, net
            
            
            68,004
            
            
            182,561117,786
            
            
            321,407Net
                assets of discontinued operations
            
            $
            549,050
            
            $
            960,280




March
                31,
            
            December
                31,2007
            
            2006Liabilities:Computer
                GamesAccounts
                payable
            
            $
            345,588
            
            $
            226,497Accrued
                expenses
            
            
            142,546
            
            
            22,863Subscriber
                liability, net
            
            
            78,697
            
            
            71,827566,831
            
            
            321,187VoIP
                Telephony ServicesAccounts
                payable
            
            
            1,975,116
            
            
            2,062,562Accrued
                legal settlement
            
            
            2,550,000
            
            
            2,550,000Other
                accrued expenses
            
            
            355,951
            
            
            227,1234,881,067
            
            
            4,839,685Net
                liabilities of discontinued operations
            
            $
            5,447,898
            
            $
            5,160,872





Summarized
      financial information for the discontinued operations was as
      follows:





Periods
                Ended March 31,
            
            2007
            
            2006Computer
                Games:Net
                revenue
            
            $
            588,499
            
            $
            366,920Loss
                from operations, net of tax
            
            $
            (364,474
            )
            $
            (174,213
            )VoIP
                Telephony Services:Net
                revenue
            
            $
            374
            
            $
            20,624Loss
                from operations, net of tax
            
            $
            (796,562
            )
            $
            (2,674,189
            )




11




The
      Company is in the process of evaluating the recoverability of its existing
      computer games and VoIP telephony services businesses’ assets, and at this time,
      does not anticipate significant future impairment or other charges in this
      regard. Any such charges, if and when determined to be required, will be
      recorded by the Company when identified. ****





The
      Company has estimated the costs expected to be incurred in shutting down its
      computer games and VoIP telephony services businesses and has accrued charges
      as
      of March 31, 2007, as follows:




Computer
                Games
            
            VoIP
                Telephony ServicesTotal
                Estimated Shut-Down Costs:Contract
                termination costs
            
            $
            115,000
            
            $
            405,000Settlement
                of purchase commitment
            
            
            106,000
            
            
            —Other
                costs
            
            
            20,000
            
            
            —$
            241,000
            
            $
            405,000Charged
                to discontinued operations through March 31, 2007:Contract
                termination costs
            
            $
            115,000
            
            
            405,000Settlement
                of purchase commitment
            
            
            106,000
            
            
            —Other
                costs
            
            
            4,748
            
            
            —$
            225,748
            
            $
            405,000





Net
      current liabilities of discontinued operations at March 31, 2007 include
      accounts payable and accruals totaling approximately $626,000 related to the
      estimated shut-down costs summarized above. The Company currently expects the
      shutdown of its computer games and VoIP telephony services businesses to be
      substantially completed by the end of the second quarter of 2007.




(4)
      STOCK
      OPTION PLANS





We
      have
      several stock option plans under which nonqualified stock options may be granted
      to officers, directors, other employees, consultants and advisors of the
      Company. In general, options granted under the Company’s stock option plans
      expire after a ten-year period and generally vest no later than three years
      from
      the date of grant. Incentive options granted to stockholders who own greater
      than 10% of the total combined voting power of all classes of stock of the
      Company must be issued at 110% of the fair market value of the stock on the
      date
      the options are granted. As of March 31, 2007, there were approximately
      4,061,000 shares available for grant under the Company’s stock option
      plans.





A
      total
      of 100,000 stock options were granted during the three months ended March 31,
      2007, with a weighted-average fair value of $0.07. During the three months
      ended
      March 31, 2006, a total of 1,110,000 stock options were issued with a
      weighted-average fair value of $0.27.





There
      were no stock option exercises during the three months ended March 31, 2007.
      Stock option exercises during the three months ended March 31, 2006, resulted
      in
      cash inflows to the Company of $18,420. The corresponding intrinsic value as
      of
      exercise date of the 349,474 stock options exercised during the three months
      ended March 31, 2006, was $119,628.




12




Stock
      option activity during the three months ended March 31, 2007 was as
      follows:




Total
                Options
            
            Weighted
              Average
                Exercise PriceOutstanding
                at December 31, 2006
            
            
            20,142,620
            
            $
            0.36Granted
            
            
            100,000
            
            
            0.08Exercised
            
            
            —
            
            
            —Canceled
            
            
            (1,319,580
            )
            
            0.12Outstanding
                at March 31, 2007
            
            
            18,923,040
            
            $
            0.38Options
                exercisable at March 31, 2007
            
            
            16,882,547
            
            $
            0.41





The
      weighted-average remaining contractual terms of stock options outstanding and
      stock options exercisable at March 31, 2007 were 7.2 years and 7.0
      years, respectively. The aggregate intrinsic value of both options outstanding
      and stock options exercisable at March 31, 2007 was approximately
      $147,000.





Stock
      compensation cost is recognized on a straight-line basis over the vesting
      period. Stock compensation expense totaling $104,656 was charged to continuing
      operations during the three months ended March 31, 2007, including $3,136 of
      expense resulting from the vesting of non-employee stock options and
      approximately $34,423 from the accelerated vesting of stock options issued
      to
      terminated employees. During the three months ended March 31, 2006, stock
      compensation expense of $176,002 charged to continuing operations included
      $94,233 of expense related to the vesting of non-employee stock options granted
      in prior years and $5,619 from the accelerated vesting of stock options issued
      to terminated employees.





At
      March
      31, 2007, there was approximately $147,000 of unrecognized compensation expense
      related to unvested stock options which is expected to be recognized over a
      weighted-average period of 1.2 years.





The
      Company estimates the fair value of each stock option at the grant date by
      using
      the Black Scholes option-pricing model with the following weighted-average
      assumptions used for grants in 2007: no dividend yield; an expected life of
      approximately six years; **** 115%
      expected volatility and a risk free interest rate of 4.85%. **** The risk
      free interest rate is based on the U.S. Treasury yield in effect at the time
      of
      grant; the expected life is based on historical and expected exercise behavior;
      and expected volatility is based on the historical volatility of the Company’s
      stock price, over a time period that is consistent with the expected life of
      the
      option.





(5)
      LITIGATION





On
      June
      1, 2006, MySpace, Inc. (“MySpace”), a Delaware corporation, filed a lawsuit in
      the United States District Court for the Central District of California against
      theglobe.com, inc. (the “Company”). We were served with the lawsuit on June 6,
      2006. MySpace alleged that the Company sent at least 100,000 unsolicited and
      unauthorized commercial email messages to MySpace members using MySpace user
      accounts improperly established by the Company, that the user accounts were
      used
      in a false and misleading fashion and that the Company's alleged activities
      constituted violations of the CAN-SPAM Act, the Lanham Act and California
      Business & Professions Code § 17529.5 (the “California Act”), as well as
      trademark infringement, false advertising, breach of contract, breach of the
      covenant of good faith and fair dealing, and unfair competition. MySpace seeks
      monetary penalties, damages and injunctive relief for these alleged violations.
      It asserts entitlement to recover "a minimum of" $62.3 million of damages,
      in
      addition to three times the amount of MySpace's actual damages and/or
      disgorgement of the Company's purported profits from alleged violations of
      the
      Lanham Act, punitive damages and attorneys’ fees. Subsequent discovery in the
      case disclosed that the total number of unsolicited messages was approximately
      400,000.




13





On
      February 28, 2007, the Court entered an order (the “Order”) granting in part
      MySpace’s motion for summary judgment, finding that the Company was liable for
      violation of the CAN-SPAM Act and the California Business & Professions
      Code, and for breach of contract (as embodied in MySpace’s “Terms of Service”
contract). The Order also upheld as valid that portion of MySpace’s Terms of
      Service contract which provides for liquidated damages of $50 per email message
      sent after March 17, 2006 in violation of such Terms. The Company estimates
      that
      approximately 110,000 of the emails in question were sent after such date,
      which
      could result in damages of approximately $5.5 million. In addition, the CAN-SPAM
      Act provides for statutory damages of between $100 and $300 per email sent
      in
      violation of the statute. Total damages under CAN-SPAM could therefore range
      between about $40 million to about $120 million. In addition, under the
      California Act, statutory damages of $1,000,000 “per incident” could be
      assessed.





On
      March
      15, 2007, the Company entered into a Settlement Agreement with MySpace whereby
      it agreed to pay MySpace $2,550,000 on or before April 5, 2007 in exchange
      for a
      mutual release of all claims against one another, including any claims against
      the Company’s directors and officers. As part of the settlement, Michael Egan,
      the Company’s CEO, who is also an affiliate of the Company, agreed to enter into
      an agreement with MySpace on or before April 5th pursuant to which he would,
      among other things, provide a letter of credit, cash or other equivalent
      security (collectively, “Security”) in form and substance satisfactory to
      MySpace. Such Security is to expire and be released on the 100th day following
      the Company’s payment of the foregoing $2,550,000 so long as no bankruptcy
      petition, assignment for the benefit of creditors or like liquidation,
      reorganization or insolvency proceeding is instituted or filed related to the
      Company during such 100-day period. In accordance with SFAS No. 5, “Accounting
      for Contingencies,” the payment required by the Settlement Agreement has been
      included in accrued liabilities in the accompanying condensed consolidated
      balance sheets.





On
      April
      2, 2007, theglobe agreed to transfer to Michael Egan all of its VoIP
      intellectual property in consideration for his agreement to provide the Security
      in connection with the Settlement Agreement. On April 13, 2007, Michael Egan
      and
      an entity wholly-owned by Michael Egan, and MySpace entered into a Security
      Agreement, an Indemnity Agreement and an Escrow Agreement (the “Security
      Agreements”) providing for the Security. On April 18, 2007, theglobe paid
      MySpace $2,550,000 in cash as settlement of the claims. MySpace and theglobe
      filed a consent judgment and stipulated permanent injunction with the Court
      on
      April 19, 2007, which among other things, dismissed all claims alleged in the
      lawsuit with prejudice.





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 (the “focus cases”) and noted
      that the decision is intended to provide strong guidance to all parties
      regarding class certification in the remaining cases. The Underwriter Defendants
      appealed the decision and the Second Circuit vacated the District Court’s
      decision granting class certification in those six cases on December 5, 2006.
      Plaintiffs filed a motion for rehearing. On April 6, 2007, the Second Circuit
      denied the petition, but noted that Plaintiffs could ask the District Court
      to
      certify a more narrow class than the one that was rejected. Plaintiffs have
      not
      yet moved to certify a class in theglobe.com case.




14




Prior
      to
      the Second Circuit’s December 5, 2006 ruling the Company 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. These agreements
      were
      submitted to the Court for approval. The settlement would have provided, among
      other things, a release of the Company and of the Individual Defendants for
      the
      conduct alleged to be wrongful in the complaint in exchange for a guarantee
      from
      the Company’s insurers regarding recovery from the underwriter defendants and
      other consideration from the Company regarding its underwriters. In light of
      the
      Second Circuit opinion, liaison counsel for the issuers informed the District
      Court that the settlement cannot be approved because the defined settlement
      class, like the litigation class, cannot be certified. We cannot predict whether
      we will be able to renegotiate a settlement that complies with the Second
      Circuit’s mandate.




Due
      to
      the inherent uncertainties of litigation, we cannot accurately predict the
      ultimate outcome of the matter. If the Company is found liable, we are unable
      to
      estimate or predict the potential damages that might be awarded, whether such
      damages would be greater than the Company’s insurance coverage, and whether such
      damages would have a material impact on our results of operations or financial
      condition in any future period.





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





(6)
      SUBSEQUENT EVENTS





On
      April
      18, 2007, the Company paid $2,550,000 to MySpace pursuant to a Settlement
      Agreement dated March 15, 2007. See Note 5, “Litigation,” for further
      discussion.





15




**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:




·
            implementing
                our business plans;·
            marketing
                and commercialization of our products and services;·
            plans
                for future products and services and for enhancements of existing
                products
                and services;·
            our
                ability to implement cost-reduction programs;·
            potential
                governmental regulation and taxation;·
            the
                outcome of pending litigation;·
            our
                intellectual property;·
            our
                estimates of future revenue and profitability;·
            our
                estimates or expectations of continued losses;·
            our
                expectations regarding future expenses, including cost of revenue,
                product
                development, sales and marketing, and general and administrative
                expenses;·
            difficulty
                or inability to raise additional financing, if needed, on terms acceptable
                to us;·
            our
                estimates regarding our capital requirements and our needs for additional
                financing;·
            attracting
                and retaining customers and employees;·
            rapid
                technological changes in our industry and relevant
                markets;·
            sources
                of revenue and anticipated revenue;·
            implementation
                of our shutdown of certain businesses and our estimate of the associated
                costs;·
            our
                ability to sell and/or recover certain business assets;·
            competition
                in our market; and·
            our
                ability to continue to operate as a going
                concern.




16


These
      statements are only predictions. Although we believe that the expectations
      reflected in these forward-looking statements are reasonable, we cannot
      guarantee future results, levels of activity, performance or achievements.
      We
      are not required to and do not intend to update any of the forward-looking
      statements after the date of this Form 10-Q or to conform these statements
      to
      actual results. In light of these risks, uncertainties and assumptions, the
      forward-looking events discussed in this Form 10-Q might not occur. Actual
      results, levels of activity, performance, achievements and events may vary
      significantly from those implied by the forward-looking statements. A
      description of risks that could cause our results to vary appears under "Risk
      Factors" and elsewhere in this Form 10-Q. The following discussion should be
      read together in conjunction with the accompanying unaudited condensed
      consolidated financial statements and related notes thereto and the audited
      consolidated financial statements and notes to those statements contained in
      the
      Annual Report on Form 10-K for the year ended December 31, 2006.




**OVERVIEW**





As
      of
      March 31, 2007, theglobe.com, inc. (the "Company" or "theglobe") managed a
      single line of business, Internet services, consisting of Tralliance Corporation
      (“Tralliance”) which is the registry for the “.travel” top-level Internet
      domain. We acquired Tralliance on May 9, 2005. Prior to the end of the 2007
      first quarter, management and the Board of Directors of the Company made the
      decision to cease all activities related to its computer games and VoIP
      telephony services businesses. Results of operations for the computer games
      and
      VoIP telephony services businesses have been reported separately as
“Discontinued Operations” in the accompanying condensed consolidated statements
      of operations for all periods presented. The assets and liabilities of the
      computer games and VoIP telephony services businesses have been included in
      the
      captions, “Assets of Discontinued Operations” and “Liabilities of Discontinued
      Operations” in the accompanying condensed consolidated balance
      sheets.





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





We
      received a report from our independent accountants, relating to our December
      31,
      2006 audited financial statements, containing a paragraph stating that our
      recurring losses from operations and our accumulated deficit raise substantial
      doubt about our ability to continue as a going concern. The Company continues
      to
      incur substantial consolidated net losses and management believes the Company
      will continue to be unprofitable and use cash in its operations for the
      foreseeable future. Based upon our current cash resources of approximately
      $480
      thousand at May 4, 2007, management does not believe the Company can operate
      as
      a going concern beyond May 2007. See “Future and Critical Need for Capital”
section of this Management’s Discussion and Analysis of Financial Condition and
      Results of Operations for further details.





Our
      condensed consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      on
      a going concern basis, which contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business. Accordingly,
      our
      condensed consolidated financial statements do not include any adjustments
      relating to the recoverability of assets and classification of liabilities
      that
      might be necessary should we be unable to continue as a going
      concern.




**DESCRIPTION
      OF BUSINESS—CONTINUING OPERATIONS**





**OUR
      INTERNET SERVICES BUSINESS**





Tralliance
      was incorporated in 2002 to develop products and services to enhance online
      commerce between consumers and the travel and tourism industries, including
      administration of the “.travel” top-level domain. In February 2003, theglobe
      entered into a Loan and Purchase Option Agreement, as amended, with Tralliance
      in which theglobe agreed to fund, in the form of a loan, at the discretion
      of
      theglobe, Tralliance’s operating expenses and obtained the option to acquire all
      of the outstanding capital stock of Tralliance. On May 5, 2005, the Internet
      Corporation for Assigned Names and Numbers (“ICANN”) and Tralliance entered into
      a contract whereby Tralliance was designated as the exclusive registry for
      the
“.travel” top-level domain for an initial period of ten years. Renewal of the
      ICANN contract beyond the initial ten year term is conditioned upon the
      negotiation of renewal terms reasonably acceptable to ICANN. Additionally,
      we
      have agreed to engage in good faith negotiations at regular intervals throughout
      the term of our contract (at least once every three years) regarding possible
      changes to the provisions of the contract, including changes in the fees and
      payments that we are required to make to ICANN. In the event that we materially
      and fundamentally breach the contract and fail to cure such breach within thirty
      days of notice, ICANN has the right to immediately terminate our contract.
      Effective May 9, 2005, theglobe exercised its option to purchase Tralliance.




17





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





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





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





In
      launching the “.travel” top-level domain registry, Tralliance adopted a phased
      approach consisting of three distinct stages. During the third quarter of 2005,
      Tralliance implemented phase one, which consisted of a pre-authentication of
      a
      limited group of potential registrants. During the fourth quarter of 2005,
      Tralliance implemented phase two, which involved the registration of the limited
      group of registrants who had been pre-authenticated. It was during this limited
      registration phase that Tralliance initially began collecting registration
      fees
      from its “.travel” registrars. Finally, in January 2006, Tralliance commenced
      the final phase of its launch, which culminated in live “.travel” registry
      operations. As of March 31, 2007 the total number of “.travel” domain names
      registered approximated 25,200.





On
      August
      15, 2006, the Company introduced its online search engine dedicated to the
      travel industry, www.search.travel. The search engine was developed by
      Tralliance to benefit both consumers at large and “.travel” domain name
      registrants, as the search engine delivers qualified search results from the
      entire World Wide Web, giving priority to destinations and businesses that
      are
      authenticated “.travel” registrants. During August 2006, the Company launched a
      national television campaign to promote the new search engine and website.
      The
      Company has begun marketing the www.search.travel website to potential
      advertisers interested in targeting the travel consumer and plans to seek
      additional net revenue through the sale of advertising sponsorships. As of
      March
      31, 2007, advertising net revenue attributable to the www.search.travel
      website has not been significant.





18




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





**COMPUTER
      GAMES BUSINESS**





In
      February 2000, the Company entered the computer games business by acquiring
      Computer Games Magazine, a print publication for personal computer (“PC”)
      gamers; CGOnline, the online counterpart to Computer Games magazine; and Chips
      & Bits, an e-commerce games distribution business. Historically, content of
      Computer Games Magazine and CGOnline focused primarily on the PC games market
      niche.





During
      2004, the Company developed and began to implement plans to expand its business
      beyond games and into other areas of the entertainment industry. 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 covered movies, DVD’s, television, music, games, comics
      and anime, and was designed to fulfill the wider pop culture interests of
      readers and to attract a more diverse group of advertisers: autos, television,
      telecommunications and film to name a few. During 2005, the Now Playing online
      website ( www.nowplaying.com ),
      the
      online counterpart for Now Playing magazine, was implemented and costs were
      also
      incurred to develop a new corporate website ( www.theglobe.com ),
      also
      targeted at the broader entertainment marketplace.





In
      August
      2005, based upon a re-evaluation of the capital requirements and risks/rewards
      related to completing the transition to a broader-based entertainment business,
      the Company decided to abort its diversification efforts and refocus its
      strategy back to operating and improving its traditional games-based businesses.
      During the remainder of 2005, the Company implemented a number of revenue
      enhancement programs, including establishing a used game auction website
      ( www.gameswapzone.com ),
      introducing a digital version of its Computer Games Magazine, and entering
      into
      several marketing partnership affiliate programs. Additionally, during the
      latter part of 2005, the Company completed the implementation of a number of
      cost-reduction programs related to facility consolidations, headcount
      reductions, and decreases in magazine publishing and sales costs **.** In
      January 2006, the Company completed the sale of all assets related to Now
      Playing Magazine and the Now Playing Online website for approximately $130,000.





The
      premiere issue of a new quarterly print publication, Massive Magazine (renamed
      MMOGames Magazine in 2007), was released in September 2006. The new magazine
      was
      dedicated solely to “massively multiplayer online” games (“MMO” games) and
      included features on the culture of MMO games, focusing on players, guilds
      and
      communities. The editorial staff of Computer Games Magazine produced the content
      for the new magazine. The new magazine was also accompanied by a complementary
      website ( www.mmogamesmag.com).





In
      March
      2007, management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its Computer Games businesses, including
      discontinuing the operations of its magazine publications, games distribution
      business and related websites. The Company’s decision to shutdown its Computer
      Games businesses was based primarily on the historical losses sustained by
      these
      businesses during the recent past and management’s expectations of continued
      future losses. The Company is currently in the process of implementing a
      business shutdown plan, which includes the termination of employee and vendor
      relationships and the collection and payment of outstanding accounts receivables
      and payables. We are also attempting to sell certain of the businesses’
component assets; however, we do not expect the proceeds from such sales to
      be
      significant.





**VOIP
      TELEPHONY BUSINESS**





During
      the third quarter of 2003, the Company launched its first suite of consumer
      and
      business level VoIP services. The Company launched its browser-based VoIP
      product during the first quarter of 2004. These services allowed customers
      to
      communicate using VoIP technology for dramatically reduced pricing compared
      to
      traditional telephony networks. The services also offered traditional telephony
      features such as voicemail, caller ID, call forwarding, and call waiting for
      no
      additional cost to the customer, as well as incremental services that were
      not
      then supported by the public switched telephone network ("PSTN") like the
      ability to use numbers remotely and voicemail to email services. In the fourth
      quarter of 2004, the Company announced an "instant messenger" or "IM" related
      application which enabled users to chat via voice or text across multiple
      platforms using their preferred instant messenger service. During the second
      quarter of 2005, the Company released a number of new VoIP products and features
      which allowed users to communicate via mobile phones, traditional land line
      phones and/or computers. From the initial launch of its VoIP services in 2003
      through 2005, the Company continued to expand its VoIP network, which was
      comprised of switching hardware and software, servers, billing and inventory
      systems, and telecommunication carrier contractual relationships. Throughout
      this period, the capacity of our VoIP network greatly exceeded usage.





19


The
      Company’s retail VoIP service plans had included both “peer-to-peer” plans, for
      which subscribers were able to place calls free of charge over the Internet
      to
      other subscribers’ Internet connections, and “paid” plans which involved
      interconnection with the PSTN and for which subscribers were charged certain
      fixed and/or variable service charges.





During
      2003 through 2005, the Company attempted to market and distribute its VoIP
      retail products through various direct and indirect sales channels including
      Internet advertising, structured customer referral programs, network marketing,
      television infomercials and partnerships with third party national retailers.
      None of the marketing and sales programs implemented during these years were
      successful in generating a significant number of “paid” plan customers or
      revenue. The Company’s marketing efforts during this period of time achieved
      only limited success in developing a “peer-to-peer” subscriber base of free
      service plan users.





During
      2006, the Company re-focused its efforts on VoIP product development. During the
      first quarter of 2006, the Company developed a plan to reconfigure, phase out
      and eliminate certain components of its existing VoIP network. During the second
      quarter of 2006, the Company discontinued offering service to its small existing
      “paid” plan customer base and completed the implementation of its plan to
      significantly reduce the excess capacity and operating costs of its VoIP
      network. During November 2006, the Company entered into a license agreement
      with
      Speecho, LLC, which granted a license to use the Company’s chat, VoIP and video
      communications technology for a monthly license fee of $10,000 per month with
      an
      initial term of ten years. The Company’s Chairman, the Company’s President and
      the Company’s Vice President of Finance, as well as certain other current and
      former employees of the Company, are members of a company that owns 50% of
      the
      membership interests in Speecho, LLC.





In
      March
      2007, management and the Board of Directors of the Company decided to
      discontinue the operating, research and development activities of its VoIP
      telephony services business and terminate all of the remaining employees of
      the
      business. On April 2, 2007, theglobe agreed to transfer to Michael Egan all
      of
      its VoIP intellectual property in consideration for his agreement to provide
      the
      Security in connection with the MySpace litigation Settlement Agreement (See
      Note 5, “Litigation,” in the accompanying Notes to Unaudited Condensed
      Consolidated Financial Statements for further discussion). **** The
      Company had previously written off the value of the VoIP intellectual property
      as a result of its evaluation of the VoIP telephony services business’
long-lived assets in connection with the preparation of the Company’s 2004
      year-end consolidated financial statements. The Company’s decision to
      discontinue the operations of its VoIP telephony services business was based
      primarily on the historical losses sustained by the business during the past
      several years, management’s expectations of continued losses for the foreseeable
      future and estimates of the amount of capital required to attempt to
      successfully monetize its business.





**RESULTS
      OF OPERATIONS**





**THREE
      MONTHS ENDED MARCH 31, 2007 COMPARED TO**


**THE
      THREE MONTHS ENDED MARCH 31, 2006**





**CONTINUING
      OPERATIONS**





NET
      REVENUE. Net revenue totaled $432 thousand for the three months ended March
      31,
      2007 as compared to $314 thousand for the three months ended March 31, 2006,
      an
      increase of approximately $118 thousand, or 38%, from the prior year
      period.  Net
      revenue attributable to domain name registrations is recognized as revenue
      on a
      straight-line basis over the term of the registrations. Total domain names
      registered as of the end of the first quarter of 2007 and 2006 approximated
      25.2
      thousand and 17.6 thousand, respectively.





20


COST
      OF
      REVENUE. Cost of revenue totaled $102 thousand for the three months ended March
      31, 2007, a decline of $28 thousand, or 21%, from the $130 thousand reported
      for
      the three months ended March 31, 2006.  Cost
      of
      revenue consists primarily of fees paid to third party service providers which
      furnish outsourced services, including verification of registration eligibility,
      maintenance of the “.travel” directory of consumer-oriented registrant travel
      data, as well as other services. Fees for some of these services vary based
      on
      transaction levels or transaction types. Fees for outsourced services are
      generally deferred and amortized to cost of revenue over the term of the related
      domain name registration. Cost of revenue as a percent of net revenue was
      approximately 24% for the first quarter of 2007 as compared to 42% for the
      same
      period of 2006. The decline in cost of revenue as compared to the 2006 first
      quarter was due primarily to Tralliance performing more verifications of
      registration eligibility in-house during the first quarter of 2007.





SALES
      AND
      MARKETING. Sales and marketing expenses consist primarily of salaries and
      related expenses of sales and marketing personnel, commissions, consulting,
      advertising and marketing costs, public relations expenses and promotional
      activities. Sales and marketing expenses totaled $640 thousand for the three
      months ended March 31, 2007 versus $579 thousand for the same period in 2006.
      Beginning in the third quarter of 2006, Tralliance has engaged several outside
      parties to promote our registry operations and the www.search.travel website
      internationally, which resulted in an increase in sales and marketing costs
      of
      approximately $237 thousand as compared to the first quarter of 2006. Partially
      offsetting this increase in comparison to the 2006 first quarter was a decrease
      of approximately $176 thousand in costs associated with attendance at trade
      shows and conventions and the acquisition of promotional items.





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, and general
      corporate overhead costs. General and administrative expenses totaled
      approximately $1.2 million in the first quarter of 2007 as compared to $1.3
      million for the same quarter of the prior year, a decline of $51 thousand,
      or
      approximately 4%. A $291 thousand increase in personnel costs was more than
      offset by declines in the majority of other general and administrative expense
      categories in comparison to the first quarter of 2006. Throughout 2006 and
      the
      first quarter of 2007, we hired additional staff to accommodate the increase
      in
      authentication and registration activity experienced by Tralliance.
      Additionally, during 2006, certain employees of the VoIP telephony services
      division were reassigned to Tralliance.




DEPRECIATION
      AND AMORTIZATION. Depreciation and amortization expense totaled $59 thousand
      for
      the three months ended March 31, 2007 as compared to $87 thousand for the three
      months ended March 31, 2006, or a decline of $28 thousand.





INTEREST
      INCOME (EXPENSE), NET. Net interest expense of $34 thousand was reported for
      the
      first quarter of 2007 compared to net interest income of $62 thousand reported
      for the first quarter of the prior year. As a result of the Company’s net loss
      incurred during 2006, the Company had a lower level of funds available for
      investment during the first quarter of 2007 as compared to the same quarter
      of
      the prior year.




INCOME
      TAXES. No tax benefit was recorded for the losses incurred during the first
      quarter of 2007 or the first quarter of 2006 as we recorded a 100% valuation
      allowance against our otherwise recognizable deferred tax assets due to the
      uncertainty surrounding the timing or ultimate realization of the benefits
      of
      our net operating loss carryforwards in future periods. As of December 31,
      2006,
      we had net operating loss carryforwards which may be potentially available
      for
      U.S. tax purposes of approximately $162 million. These carryforwards expire
      through 2026. The Tax Reform Act of 1986 imposes substantial restrictions on
      the
      utilization of net operating losses and tax credits in the event of an
      "ownership change" of a corporation. Due to various significant changes in
      our
      ownership interests, as defined in the Internal Revenue Code of 1986, as
      amended, we have substantially limited 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.





21


**DISCONTINUED
      OPERATIONS**





The
      loss
      from discontinued operations, net of income taxes totaled approximately $1.2
      million in the first quarter of 2007 as compared to a net loss of $2.8 million
      during the first quarter of 2006 and is summarized as follows:




Computer
                Games
            
            VoIP
                Telephony Services
            
            TotalThree
                months ended March 31, 2007:Net
                revenue
            
            $
            588,499
            
            $
            374
            
            $
            588,873Operating
                expenses
            
            
            (952,973
            )
            
            (830,529
            )
            
            (1,783,502
            )Other
                income, net
            
            
            —
            
            
            33,593
            
            
            33,593$
            (364,474
            )
            $
            (796,562
            )
            $
            (1,161,036
            )




Computer
                Games
            
            VoIP
                Telephony Services
            
            TotalThree
                months ended March 31, 2006:Net
                revenue
            
            $
            366,920
            
            $
            20,624
            
            $
            387,544Operating
                expenses
            
            
            (671,133
            )
            
            (2,693,731
            )
            
            (3,364,864
            )Other
                income (expense), net
            
            
            130,000
            
            
            (1,082
            )
            
            128,918$
            (174,213
            )
            $
            (2,674,189
            )
            $
            (2,848,402
            )




Net
      revenue of the computer games division increased $222 thousand compared to
      the
      first quarter of 2006 primarily due to increased advertising revenue in our
      magazine focused on PC gaming. Operating expenses of the computer games division
      increased $282 thousand in comparison to the first quarter of 2006, principally
      due to charges related to the shutdown of the business, including estimated
      contract termination charges. Other income, net recorded during the first
      quarter of 2006 represented the $130 thousand gain on the sale of Now Playing
      magazine.





Operating
      expenses of the VoIP telephony services division declined approximately $1.9
      million in comparison to the first quarter of 2006. Throughout 2006, the Company
      placed significant emphasis on the reduction of costs of the VoIP telephony
      services division. Efforts included the renegotiation, non-renewal and/or
      termination of certain network agreements, as well as reduction of network
      personnel costs. The Company also significantly reduced its sales and marketing
      spending throughout 2006. In connection with the cut backs in spending within
      the VoIP telephony services business implemented during 2006, the Company also
      reassigned certain personnel to fill open positions within the Tralliance
      registry business. These factors were the principal contributors to the decline
      in operating expenses incurred by the VoIP telephony services division as
      compared to the first quarter of 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





**CASH
      FLOW ITEMS**





As
      of
      March 31, 2007, we had approximately $3.5 million in cash and cash equivalents
      as compared to $5.3 million as of December 31, 2006. Net cash flows used in
      operating activities of continuing operations totaled $1.3 million and $2.7
      million, for the three months ended March 31, 2007 and 2006, respectively,
      or a
      decrease of approximately $1.4 million. The impact of the payment of $806
      thousand in income tax liabilities during the first quarter of 2006, coupled
      with a reduction in the payment of accounts payables, accrued liabilities and
      other current liabilities during the first quarter of 2007 as compared to the
      same quarter of the prior year, were the primary factors contributing to the
      lower level of cash used in operating activities of continuing operations.





22


A
      total
      of $497 thousand in net cash flows were used in the operating activities of
      discontinued operations during the first quarter of 2007 as compared to a use
      of
      approximately $2.2 million of cash in operating activities of discontinued
      operations during the same period of the prior year. The lower level of cash
      used by operating activities of our discontinued businesses was primarily the
      result of the decrease of approximately $1.7 million in net losses of the
      businesses as compared to the first quarter of 2006.





Net
      cash
      flows of $786 thousand were provided by investing activities of continuing
      operations during the first three months of 2006. As a result of the October
      2005 sale of our SendTec, Inc. marketing services business, we were required
      to
      place $1.0 million of cash in an escrow account to secure our indemnification
      obligations. On March 31, 2006, pursuant to the related escrow agreement, $750
      thousand of the escrow funds were released to the Company.





**FUTURE
      AND CRITICAL NEED FOR CAPITAL**





For
      the
      reasons described below, Company management does not believe that cash on hand
      and cash flow generated internally by the Company will be adequate to fund
      the
      operation of its businesses beyond a short period of time. Additionally, we
      have
      received a report from our independent accountants, relating to our December
      31,
      2006 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.





As
      of
      March 31, 2007, the Company had a net working capital deficit of approximately
      $7.8 million, inclusive of a cash and cash equivalents balance of approximately
      $3.5 million. Such working capital deficit included a settlement liability
      of
      approximately $2.6 million owed to MySpace, Inc. (“MySpace”) in connection with
      a lawsuit filed by MySpace against the Company on June 1, 2006 (as more fully
      discussed in Note 5, “Litigation”) and an aggregate of $3.4 million in secured
      convertible demand notes (the “Convertible Notes”) and accrued interest of
      approximately $640 thousand due to entities controlled by Michael Egan, the
      Company’s Chairman and Chief Executive Officer. On April 18, 2007, the Company
      paid MySpace approximately $2.6 million in cash in full settlement of the
      aforementioned lawsuit. As of May 4, 2007, the Company had a cash and cash
      equivalents balance of approximately $480 thousand. Notwithstanding previous
      cost reduction actions taken by the Company and its recent decision to shutdown
      its unprofitable computer games and VoIP telephony services businesses in March
      2007 (see Note 3, “Discontinued Operations”), the Company continues to incur
      substantial consolidated operating losses, although reduced in comparison with
      prior periods, and management believes that the Company will continue to be
      unprofitable in the foreseeable future. Based upon the Company’s current
      financial condition, as discussed above, and without the infusion of additional
      capital, management does not believe that the Company will be able to fund
      its
      operations beyond May 2007.





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to continue operating as a going concern for any length of
      time beyond May 2007, we believe that we must quickly raise capital. Although
      there is no commitment to do so, any such funds would most likely come from
      Michael Egan, the Company’s Chairman and Chief Executive Officer, or affiliates
      of Mr. Egan or the Company, as the Company currently has no access to credit
      facilities with traditional third parties and has historically relied on
      borrowings from related parties to meet short-term liquidity needs. Any such
      capital raised would not be registered under the Securities Act of 1933 and
      would not be offered or sold in the United States absent registration or an
      applicable exemption from registration requirements. Although the Company is
      currently in negotiations with Mr. Egan to provide additional financing, there
      can be no assurance that the Company will be successful in raising such capital
      or borrowing such funds, and any capital raised will likely result in very
      substantial dilution of the number of shares outstanding or which could be
      outstanding upon the exercise or conversion of any derivative securities issued
      by the Company as part of such capital raise.





23


In
      addition to raising a sufficient amount of capital, we believe that our
      long-term financial viability will be determined mainly by our ability to
      successfully execute our current and future business plans, including (i)
      achieving net growth in the number of “.travel” domain name registrations; (ii)
      monetizing our www.search.travel website; (iii) further reducing our operating
      expenses; (iv) eliminating future losses incurred by our discontinued
      operations; and (v) successfully settling disputed and other outstanding
      liabilities related to our discontinued operations. The amount of capital
      required to be raised by the Company will be dependent upon the Company’s
      performance in executing its current and future business plans, as measured
      principally by the time period needed to begin generating positive internal
      cash
      flow. There can be no assurance that the Company will be successful in raising
      a
      sufficient amount of capital or in executing its business plans. Further, even
      if we raise capital and are successful in achieving each of the aforementioned
      objectives, if demand for repayment of any or all of the $3.4 million in
      outstanding secured debt or related accrued interest is made, there is no
      assurance that we will not be required to file for bankruptcy protection at
      that
      time.





Tralliance,
      the Company’s Internet services business, began collecting fees related to its
“.travel” registry business in October 2005. In August 2006, we introduced our
      online search engine dedicated to the travel industry, www.search.travel ,
      and
      launched a national television campaign to promote the new search engine and
      website. During the third quarter of 2006, we also expanded Tralliance’s
      domestic and international sales and marketing infrastructure, principally
      by
      entering into a number of arrangements with third party consultants and
      travel-related organizations. At this time, our primary objective is to quickly
      and substantially increase Tralliance’s revenue levels. In this regard, we are
      focused on accelerating the rate of new “.travel” domain name registrations,
      both in the U.S. and in international markets, in order to generate current
      revenue and to also provide a base for future registration renewal revenue.
      Additionally, we are focused on generating sponsorship and search advertising
      revenue streams from our newly established www.search.travel search
      engine and website. In addition to the factors set forth in the preceding
      paragraph, management presently believes that its success in quickly and
      substantially increasing Tralliance’s revenue levels will be a critical factor
      in the Company’s ability to continue as a going concern.





In
      March
      2007 management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its Computer Games businesses, including
      discontinuing the operations of its magazine publications, e-commerce games
      distribution business and related websites. The Company’s decision to shutdown
      its Computer Games businesses was based primarily on the historical losses
      sustained by these businesses during the recent past and management’s
      expectations of continued future losses. The Company is currently in the process
      of implementing a business shutdown plan, which includes the termination of
      employee and vendor relationships and the collection and payment of outstanding
      accounts receivables and payables. We are also attempting to sell certain of
      the
      businesses’ component assets; however, we do not expect the proceeds from such
      sales to be significant.




In
      addition, in March 2007, management and the Board of Directors of the Company
      decided to discontinue the operating, research and development activities of
      its
      VoIP telephony services business and terminate all of the remaining employees
      of
      the business. The Company’s decision to discontinue the operations of its VoIP
      telephony services business was based primarily on the historical losses
      sustained by the business during the past several years, management’s
      expectations of continued losses for the foreseeable future and estimates of
      the
      amount of capital required to attempt to successfully monetize its business.
      The
      Company is currently in the process of implementing a business shutdown plan,
      which includes the termination of its existing carrier and vendor relationships,
      as well as the payment and/or settlement of outstanding payables. We are also
      attempting to sell certain of the businesses’ component assets; however, we do
      not expect the proceeds from such sales to be significant.





We
      are in
      the process of evaluating the recoverability of our existing computer games
      and
      VoIP telephony services businesses’ assets, and at this time, we do not
      anticipate significant future impairment or other charges in this regard. Any
      such charges, if and when determined to be required, will be recorded when
      identified. We are also in the process of evaluating the amount of costs
      expected to be incurred in shutting down our computer games and VoIP telephony
      services businesses. The amount of these shutdown costs, including costs related
      to employee termination benefits and vendor contract termination costs are
      not
      yet certain, however, at the present time, we believe that total cash
      expenditures for shutdown costs will range between $20 thousand and $241
      thousand for our computer games business and between zero and $405 thousand
      for
      our VoIP telephony services business. We currently expect the shutdown of our
      computer games and VoIP telephony services businesses to be substantially
      completed by the end of the second quarter of 2007.




24




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





**EFFECTS
      OF INFLATION**





Due
      to
      relatively low levels of inflation in 2007 and 2006, inflation has not had
      a
      significant effect on our results of operations since inception.





**MANAGEMENT'S
      DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES**





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





Certain
      of our accounting policies require higher degrees of judgment than others in
      their application. These include revenue recognition, valuation of receivables,
      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**




**Continuing
      Operations -**





**INTERNET
      SERVICES**





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





**Discontinued
      Operations -**





**COMPUTER
      GAMES BUSINESSES**





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





25


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





Sales
      of
      games and related products from the online store were recognized as revenue
      when
      the product was shipped to the customer. Amounts billed to customers for
      shipping and handling charges were included in net revenue. The Company provided
      an allowance for returns of merchandise sold through its online store.





**VOIP
      TELEPHONY SERVICES**





VoIP
      telephony services revenue represented fees charged to customers for voice
      services and was recognized based on minutes of customer usage or as services
      were provided. The Company recorded payments received in advance for prepaid
      services as deferred revenue until the related services were
      provided.





**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.





**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:





·
            significant
                under-performance relative to historical, expected or projected future
                operating results;·
            significant
                changes in the manner of our use of the acquired assets or the strategy
                for our overall business; and·
            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**





The
      Company's long-lived assets primarily consist of property and equipment,
      capitalized costs of internal-use software, and values attributable to covenants
      not to compete.





26


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
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities.”
SFAS No. 159 expands the scope of what entities may carry at fair value by
      offering an irrevocable option to record many types of financial assets and
      liabilities at fair value. Changes in fair value would be recorded in an
      entity’s income statement. This accounting standard also establishes
      presentation and disclosure requirements that are intended to facilitate
      comparisons between entities that choose different measurement attributes for
      similar types of assets and liabilities. SFAS No. 159 is effective for the
      Company on January 1, 2008. Earlier application is permitted under certain
      circumstances. We are currently evaluating the requirements of SFAS No. 159
      and
      have not yet determined the impact on our consolidated financial
      statements.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles and expands disclosure about fair
      value
      measurements. SFAS No. 157 applies to other accounting standards that require
      or
      permit fair value measurements. Accordingly, this statement does not require
      any
      new fair value measurement. This statement is effective for fiscal years
      beginning after November 15, 2007 and interim periods within those fiscal years.
      We are currently evaluating the requirements of SFAS No. 157 and have not
      determined the impact on our consolidated financial statements.





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
      the effects of prior year uncorrected misstatements should be considered when
      quantifying misstatements in current year financial statements. SAB No. 108
      requires companies to quantify misstatements using a balance sheet and income
      statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 permits existing public companies to initially
      apply its provisions either by (i) restating prior financial statements as
      if
      the “dual approach” had always been used or (ii) recording the cumulative effect
      of initially applying the “dual approach” as adjustments to the carrying value
      of assets and liabilities as of January 1, 2006 with an offsetting adjustment
      recorded to the opening balance of retained earnings. Use of the “cumulative
      effect” transition method requires detailed disclosure of the nature and amount
      of each individual error being corrected through the cumulative adjustment
      and
      how and when it arose **.** The
      adoption of this standard did not have a material impact on the Company’s
      financial condition, results of operations or liquidity.





27


In
      June
      2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty
      in Income Taxes,” an interpretation of FASB Statement No. 109, “Accounting for
      Income Taxes,” which clarifies accounting for and disclosure of uncertainty in
      tax positions. FIN No. 48 prescribes a recognition threshold and measurement
      attribute for the financial recognition and measurement of a tax position taken
      or expected to be taken in a tax return. The interpretation is effective for
      fiscal years beginning after December 15, 2006. We have evaluated the impact
      of
      adopting FIN No. 48 on our consolidated financial statements, and the adoption
      of FIN No. 48 did not have a material effect on our consolidated financial
      position, cash flows and results of operations.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Interest
      Rate Risk. Interest rate risk refers to fluctuations in the value of a security
      resulting from changes in the general level of interest rates. Investments
      that
      we classify as cash and cash equivalents have original maturities of three
      months or less and therefore, are not affected in any material respect by
      changes in market interest rates. At March 31, 2007 **,** debt
      outstanding was composed of $3.4 million of fixed rate instruments due on demand
      with an aggregate average interest rate of 10.00%.





Foreign
      Currency Risk. We transact business in U.S. dollars. 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, 2007. 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, 2007 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.




**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





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





**ITEM
      1A. RISK FACTORS**





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





28


**RISKS
      RELATING TO OUR BUSINESS GENERALLY**





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





We
      have
      received a report from our independent accountants, relating to our December
      31,
      2006 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. For the
      reasons described below, Company management does not believe that cash on hand
      and cash flow generated internally by the Company will be adequate to fund
      the
      operation of its businesses beyond a short period of time. These reasons raise
      significant doubt about the Company’s ability to continue as a going
      concern.





As
      of
      March 31, 2007, the Company had a net working capital deficit of approximately
      $7.8 million, inclusive of a cash and cash equivalents balance of approximately
      $3.5 million. Such working capital deficit included a settlement liability
      of
      approximately $2.6 million owed to MySpace, Inc. (“MySpace”) in connection with
      a lawsuit filed by MySpace against the Company on June 1, 2006 (as more fully
      discussed in Note 5, “Litigation”) and an aggregate of $3.4 million in secured
      convertible demand notes (the “Convertible Notes”) and accrued interest of
      approximately $640 thousand due to entities controlled by Michael Egan, the
      Company’s Chairman and Chief Executive Officer. On April 18, 2007, the Company
      paid MySpace approximately $2.6 million in cash in full settlement of the
      aforementioned lawsuit. As of May 4, 2007, the Company had a cash and cash
      equivalents balance of approximately $480 thousand. Notwithstanding previous
      cost reduction actions taken by the Company and its recent decision to shutdown
      its unprofitable computer games and VoIP telephony services businesses in March
      2007 (see Note 3, “Discontinued Operations”), the Company continues to incur
      substantial consolidated operating losses, although reduced in comparison with
      prior periods, and management believes that the Company will continue to be
      unprofitable in the foreseeable future. Based upon the Company’s current
      financial condition, as discussed above, and without the infusion of additional
      capital, management does not believe that the Company will be able to fund
      its
      operations beyond May 2007.





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to continue operating as a going concern for any length of
      time beyond May 2007, we believe that we must quickly raise capital. Although
      there is no commitment to do so, any such funds would most likely come from
      Michael Egan, the Company’s Chairman and Chief Executive Officer, or affiliates
      of Mr. Egan or the Company, as the Company currently has no access to credit
      facilities with traditional third parties and has historically relied on
      borrowings from related parties to meet short-term liquidity needs. Any such
      capital raised would not be registered under the Securities Act of 1933 and
      would not be offered or sold in the United States absent registration or an
      applicable exemption from registration requirements. Although the Company is
      currently in negotiations with Mr. Egan to provide additional financing, there
      can be no assurance that the Company will be successful in raising such capital
      or borrowing such funds, and any capital raised will likely result in very
      substantial dilution of the number of shares outstanding or which could be
      outstanding upon the exercise or conversion of any derivative securities issued
      by the Company as part of such capital raise.





In
      addition to raising a sufficient amount of capital, we believe that our
      long-term financial viability will be determined mainly by our ability to
      successfully execute our current and future business plans, including (i)
      achieving net growth in the number of “.travel” domain name registrations; (ii)
      monetizing our www.search.travel website; (iii) further reducing our operating
      expenses; (iv) eliminating future losses incurred by our discontinued
      operations; and (v) successfully settling disputed and other outstanding
      liabilities related to our discontinued operations. The amount of capital
      required to be raised by the Company will be dependent upon the Company’s
      performance in executing its current and future business plans, as measured
      principally by the time period needed to begin generating positive internal
      cash
      flow. There can be no assurance that the Company will be successful in raising
      a
      sufficient amount of capital or in executing its business plans. Further, even
      if we raise capital and are successful in achieving each of the aforementioned
      objectives, if demand for repayment of any or all of the $3.4 million in
      outstanding secured debt or related accrued interest is made, there is no
      assurance that we will not be required to file for bankruptcy protection at
      that
      time.




29


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





Since
      our
      inception, we have incurred net losses each year and we expect that we will
      continue to incur net losses for the foreseeable future. We had losses from
      continuing operations, net of applicable income tax benefits, of approximately
      $1.6 million for the first three months of 2007 and $17.0 million, $13.3 million
      and $24.9 million for the years ended December 31, 2006, 2005 and 2004,
      respectively. The principal causes of our losses are likely to continue to
      be:





·
            costs
                resulting from the operation of our
                business;





·
            failure
                to generate sufficient revenue; and




·
            selling,
                general and administrative
                expenses.





Although
      we have restructured our businesses, we still expect to continue to incur losses
      as we attempt to improve the performance and operating results of our Internet
      services business and while we attempt to sell components of our recently
      discontinued computer games and VoIP telephony services businesses.





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





We
      are
      currently a party to litigation and other claims and/or disputes arising in
      the
      ordinary course of business. At this time, we cannot reasonably estimate the
      range of any loss or damages resulting from any of the pending lawsuits or
      claims due to uncertainty regarding the ultimate outcome. The defense of any
      litigation or the process required to resolve outstanding claims and/or disputes
      may be expensive and divert management's attention from day-to-day operations.
      An adverse outcome in any of these matters could materially and adversely affect
      our results of operations and financial position and may utilize a significant
      portion of our cash resources. See Note 5, “Litigation,” in the Notes to
      Unaudited Condensed Consolidated Financial Statements for further details
      regarding outstanding legal matters.





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





As
      of
      December 31, 2006, we had net operating loss carryforwards which may be
      potentially available for U.S. tax purposes of approximately $162 million.
      These
      carryforwards expire through 2026. The Tax Reform Act of 1986 imposes
      substantial restrictions on the utilization of net operating losses and tax
      credits in the event of an "ownership change" of a corporation. Due to various
      significant changes in our ownership interests, as defined in the Internal
      Revenue Code of 1986, as amended, we have substantially limited the availability
      of our net operating loss carryforwards. There can be no assurance that we
      will
      be able to utilize any net operating loss carryforwards in the
      future.





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





Our
      business is 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:





·
            inadequate
                network infrastructure;





·
            security
                and authentication concerns;





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




30




·
            general
                economic and business downturns;
                and





·
            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:





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




·
            increased
                government regulation;





·
            potential
                governmental taxation of such services;
                and





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





**WE
      MAY FACE INCREASED GOVERNMENT REGULATION, TAXATION AND LEGAL UNCERTAINTIES
      IN
      OUR INDUSTRY, BOTH DOMESTICALLY AND INTERNATIONALLY, WHICH COULD NEGATIVELY
      IMPACT OUR FINANCIAL CONDITION AND/OR OUR RESULTS OF
      OPERATIONS.**





There
      are
      an increasing number of federal, state, local and foreign laws and regulations
      pertaining to the Internet. In addition, a number of federal, state, local
      and
      foreign legislative and regulatory proposals are under consideration. Laws
      and
      regulations have been and will likely continue to be adopted with respect to
      the
      Internet relating to, among other things, 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 other entities involved in
      the
      industries in which we participate, and otherwise harm our
      business.





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, 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.




31





**WE
      RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.**





We
      regard
      substantial elements of our websites and underlying technology as proprietary
      and attempt to protect them by relying on intellectual property laws and
      restrictions on disclosure. We also generally enter into confidentiality
      agreements with our employees and consultants. In connection with our license
      agreements with third parties, we generally seek to control access to and
      distribution of our technology and other proprietary information. Despite these
      precautions, it may be possible for a third party to copy or otherwise obtain
      and use our proprietary information without authorization or to develop similar
      technology independently. Thus, we cannot assure you that the steps taken by
      us
      will prevent misappropriation or infringement of our proprietary information,
      which could have 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. 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, sending unsolicited email messages 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. In the fourth quarter
      of 2005, we were sued by Sprint Communications Company, L.P. (“Sprint”) for
      alleged unauthorized use of “inventions” described and claimed in seven patents
      held by Sprint. In August 2006, we entered into a settlement agreement with
      Sprint which resolved the pending patent infringement lawsuit. As part of the
      settlement, we agreed to enter into a non-exclusive license under certain of
      Sprint’s patents. Additionally, on February 28, 2007, the United States District
      Court for the Central District of California entered an order, related to the
      lawsuit filed against theglobe by MySpace, Inc. (“MySpace”), granting in part
      MySpace’s motion for summary judgment, finding that we were liable for violation
      of the CAN-SPAM Act and the California Business & Professions Code, and for
      breach of contract. On March 15, 2007, the Company entered into a Settlement
      Agreement with MySpace whereby, among other things, the Company agreed to pay
      MySpace approximately $2.6 million on or before April 5, 2007 in exchange for
      a
      mutual release of all claims against one another, including any claims against
      the Company’s directors and officers.   See Note 5, “Litigation,” in the
      Notes to Unaudited Condensed Consolidated Financial Statements for further
      details regarding the MySpace settlement.   Any litigation claims or
      counterclaims could impair our business because they could:





·
            be
                time-consuming;





·
            result
                in significant costs;





·
            subject
                us to significant liability for
                damages;




·
            result
                in invalidation of our proprietary
                rights;





·
            divert
                management's attention;





·
            cause
                product release delays; or




32




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




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





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





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





Our
      success in the markets in which we operate will depend on our ability to create
      and maintain brand awareness for our product offerings. This has in some cases
      required, and may continue to require, a significant amount of capital to allow
      us to market our products and establish brand recognition and customer loyalty.
      Many of our competitors are larger than us and have substantially greater
      financial resources.





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





**OUR
      QUARTERLY OPERATING RESULTS FLUCTUATE.**





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





·
            the
                outcome and costs related to defending and settling litigation, claims
                and
                disputes;





·
            sales
                of our recently discontinued businesses or
                assets;





·
            changes
                in the number of sales or technical
                employees;





·
            the
                level of traffic on our websites;





·
            the
                overall demand for Internet travel services and Internet
                advertising;




33




·
            the
                addition or loss of “.travel” domain name registrants, advertising clients
                of ourwww.search.travelwebsite and electronic commerce partners on our
                website;




·
            overall
                usage and acceptance of the
                Internet;




·
            seasonal
                trends in advertising and electronic commerce sales in our
                business;





·
            costs
                relating to the implementation or cessation of marketing plans for
                our
                business;





·
            other
                costs relating to the maintenance of our
                operations;





·
            the
                restructuring of our business;




·
            failure
                to generate significant revenues and profit margins from new and/or
                existing products and services; and





·
            competition
                from others providing services similar to
                ours.





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





We
      have a
      limited operating history for you to use in evaluating our prospects and us,
      particularly as it pertains to our Internet services business. 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:





·
            maintain
                or increase levels of user traffic on ourwww.search.travelwebsite;





·
            generate
                and maintain adequate levels of “.travel” domain name
                registrations;





·
            generate
                and maintain adequatewww.search.traveladvertising revenue;





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





·
            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:





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





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





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




34




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





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





**WE
      DEPEND ON HIGHLY QUALIFIED TECHNICAL AND MANAGERIAL
      PERSONNEL**





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




We
      may be
      unable to attract, assimilate or retain highly qualified technical and
      managerial personnel in the future. Our deteriorating financial performance
      creates uncertainty that may result in departures of key employees and our
      inability to attract suitable replacements and/or additional managerial
      personnel in the future. Wages for managerial and technical employees are
      increasing and are expected to continue to increase in the future. We have
      from
      time to time in the past experienced, and could continue to experience in the
      future if we need to hire any additional personnel, difficulty in hiring and
      retaining highly skilled employees with appropriate qualifications. If we were
      unable to attract and retain the technical and managerial personnel necessary
      to
      support and grow our businesses, our businesses would likely be materially
      and
      adversely affected.





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





Because
      our Chairman and Chief Executive Officer, Mr. Michael Egan, is an officer or
      director of other companies, we have to compete for his time. Mr. Egan became
      our Chief Executive Officer effective June 1, 2002. Mr. Egan is also the
      controlling investor of Dancing Bear Investments, Inc. and E&C Capital
      Partners LLLP, which are our largest stockholders. Mr. Egan has not committed
      to
      devote any specific percentage of his business time with us. Accordingly, we
      compete with Dancing Bear Investments, Inc., E&C Capital Partners LLLP, Blue
      Wall, LLC, Speecho, LLC and Mr. Egan's other related entities for his
      time.





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





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





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





35


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





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




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





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





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





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





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





We
      enter
      into agreements with commerce partners and sponsors under which, in some cases,
      we are entitled to receive a share of revenue from the purchase of goods and
      services through direct links from our sites. We 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.




36


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





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





We
      have
      not yet developed a Section 404 implementation plan. We have in the past
      discovered, and may in the future discover, areas of our internal controls
      that
      need improvement.




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





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




**RISKS
      RELATING TO OUR INTERNET SERVICES BUSINESS**





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





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





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





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





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




37


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





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





**REGULATORY
      AND STATUTORY CHANGES COULD HARM OUR INTERNET SERVICES
      BUSINESS.**





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





**OUR
      INTERNET SERVICES BUSINESS IS DEPENDENT ON THE TRAVEL INDUSTRY. OUR BUSINESS
      MAY
      AFFECTED BY EVENTS WHICH AFFECT THE TRAVEL INDUSTRY IN
      GENERAL.**





Revenue
      and cash flows of our Internet services business principally result from the
      registrations of domain names in the “.travel” top level domain. The ability to
      register such domain names are only available to businesses which are involved
      in the travel industry. Events such as terrorist attacks, military actions
      and
      natural disasters have had a significant adverse affect on the travel industry
      in the past. In addition, recessions or other economic pressures, such as the
      level of employment in the U.S or abroad have also had negative impacts on
      the
      travel industry. The overall demand for advertising, as well as the level of
      consumer travel may also be linked to such events or economic conditions. If
      such events result in a negative impact on the travel industry, such impact
      could have a material adverse effect on our business, results of operations
      and
      financial condition.




**WE
      MAY NOT BE ABLE TO ATTRACT ADVERTISERS OR INTERNET USERS TO OUR SEARCH.TRAVEL
      WEBSITE.**





Our www.search.travel search
      engine competes for advertising dollars with large Internet portal and search
      engine sites, such as Google, America Online, MSN and Yahoo!, that offer
      listings or other advertising opportunities for travel companies. These
      companies have significantly greater financial, technical, marketing and other
      resources and larger client bases. In addition, we also compete with traditional
      media companies, such as newspaper and magazine publishers, that provide online
      advertising opportunities on their websites. We expect to face additional
      competition as other companies enter the online advertising market. If we do
      not
      attract a sufficient number of Internet users and advertisers to our search
      engine website, our present business model may not be successful and our
      business could be adversely affected.





38


**RISKS
      RELATING TO OUR RECENTLY DISCONTINUED OPERATIONS**





**WE
      MAY NOT BE ABLE TO RECOVER THE FULL CARRYING VALUE OF THE ASSETS OF OUR RECENTLY
      DISCONTINUED BUSINESSES.**





In
      connection with our recent decision to discontinue the operations of our
      computer games and VoIP telephony services businesses, we are currently in
      the
      process of evaluating the recoverability of the carrying value of the remaining
      assets of these businesses. At the present time, management is not aware of
      any
      issues that would negatively impact the recoverability of these assets. However,
      there can be no assurance that future events will not occur, particularly with
      respect to the collection of approximately $400 thousand in accounts receivable
      of our computer games businesses, which will adversely impact the recoverability
      of these discontinued business assets. Any such adverse future events could
      negatively impact the Company’s already weakened liquidity and financial
      condition.





**WE
      MAY INCUR EXCESSIVE SHUTDOWN COSTS.**





In
      connection with our recent decision to discontinue the operations of our
      computer games and VoIP telephony services businesses, we are in the process
      of
      evaluating the amount of costs expected to be incurred in shutting down these
      businesses. The amount of these shutdown costs, including employee termination
      benefits and vendor contract termination costs, are not yet certain, however,
      at
      the present time, we believe that total shutdown costs for both businesses
      combined will range from between $20 thousand to $646 thousand. Although we
      will
      attempt to negotiate vendor settlements near the lower end of this range, there
      can be no assurance that we will be successful. Additionally, liabilities
      presently unknown to us could be identified in the future. Either or both of
      these adverse outcomes could negatively impact the Company’s already weakened
      liquidity and financial condition.





**RISKS
      RELATING TO OUR COMMON STOCK**





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





As
      of May
      7, 2007, we had issued and outstanding approximately 172.5 million shares,
      of
      which approximately 86.7 million shares were freely tradable over the public
      markets. There is limited trading volume in our shares and we are now traded
      only in the over-the-counter market. Most of our outstanding restricted shares
      of Common Stock were issued more than one year ago and are therefore eligible
      to
      be resold over the public markets pursuant to Rule 144 promulgated under the
      Securities Act of 1933, as amended.





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





In
      addition, as of March 31, 2007, there were outstanding options to purchase
      approximately 18.9 million shares of our Common Stock, which become eligible
      for
      sale in the public market from time to time depending on vesting and the
      expiration of lock-up agreements. The shares issuable upon exercise of these
      options are registered under the Securities Act and consequently, subject to
      certain volume restrictions as to shares issuable to executive officers, will
      be
      freely tradable.




39


Also
      as
      of May 7, 2007, we had issued and outstanding warrants to acquire approximately
      16.9 million shares of our Common Stock. **** Many of
      the outstanding instruments representing the warrants contain anti-dilution
      provisions pursuant to which the exercise prices and number of shares issuable
      upon exercise may be adjusted.





**OUR
      CHAIRMAN MAY CONTROL US.**





Michael
      S. Egan, our Chairman and Chief Executive Officer, beneficially owns or
      controls, directly or indirectly, approximately 150 million shares of our Common
      Stock as of May 7, 2007, which in the aggregate represents approximately 58%
      of
      the outstanding shares of our Common Stock (treating as outstanding for this
      purpose the shares of Common Stock issuable upon exercise and/or conversion
      of
      the options, convertible 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 SUBJECT TO CERTAIN "PENNY STOCK" RULES WHICH MAY MAKE IT A
      LESS
      ATTRACTIVE INVESTMENT.**





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




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





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





·
            have
                the effect of delaying, deferring or preventing a change in control
                of our
                Company;





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





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





40


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




**OUR
      STOCK PRICE IS VOLATILE AND MAY DECLINE.**





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





·
            the
                performance and public acceptance of our product
                lines;





·
            quarterly
                variations in our operating
                results;





·
            competitive
                announcements;





·
            sales
                of any of our recently discontinued businesses and/or components
                of their
                assets;





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




·
            news
                relating to trends in our markets.





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





41




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





(a)
      Unregistered Sales of Equity Securities.





None.





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





Not
      applicable.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None.





**ITEM
      6. EXHIBITS**





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





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





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





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




42




**SIGNATURES**





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


*theglobe.com,
                inc.**Dated*:*May
                11, 2007*
            By:
            /s/*Michael
                S. Egan**Michael
                S. Egan*
              *Chief
                Executive Officer*
              *(Principal
                Executive Officer)*




By:
            /s/*Edward
                A. Cespedes**Edward
                A. Cespedes*
              *President
                and Chief Financial Officer*
              *(Principal
                Financial Officer)*




43




**EXHIBIT
      INDEX**




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





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





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





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




44