SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                           COMMISSION FILE NO. 0-25053

                               THEGLOBE.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

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

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

        Securities registered pursuant to Section 12(b) of the Act: None

             Securities registered pursuant to Section 12(g) of the
                                      Act:

                     Common Stock, par value $.001 per share
                         Preferred Stock Purchase Rights

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-B  (Sec.229.405  of this chapter) is not contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB [X].

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

Registrant's  revenues  for  the  fiscal  year  ended  December  31,  2004  were
$16,041,032.

The number of shares  outstanding of the  Registrant's  Common Stock,  $.001 par
value (the "Common Stock") as of March 10, 2005 was 175,186,997.

Aggregate market value of the voting Common Stock held by  non-affiliates of the
registrant as of the close of business on March 10, 2005: $18,314,614.*

*Includes  voting  stock  held by  third  parties,  which  may be  deemed  to be
beneficially owned by affiliates,  but for which such affiliates have disclaimed
beneficial ownership.


<PAGE>


                               THEGLOBE.COM, INC.
                                   FORM 10-KSB


                                TABLE OF CONTENTS

PART I

Item  1.    Business                                                          5
Item  2.    Properties                                                       15
Item  3.    Legal Proceedings                                                15
Item  4.    Submission of Matters to a Vote of Security Holders              17

PART II

Item  5.    Market for Common Equity, Related Stockholder Matters
                and Small Business Issuer Purchases of Equity Securities     18
Item  6.    Management's Discussion and Analysis or Plan of Operation        20
Item  7.    Consolidated Financial Statements and Supplementary Data         51
Item  8.    Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure                                     85
Item  8A.   Controls and Procedures                                          85
Item  8B.   Other Information                                                85

PART III

Item  9.    Directors and Executive Officers of the Registrant               86
Item  10.   Executive Compensation                                           89
Item  11.   Security Ownership of Certain Beneficial Owners and Management
                 and Related Stockholder Matters                             93
Item  12.   Certain Relationships and Related Transactions                   94
Item  13.   Exhibits                                                         96
Item  14.   Principal Accountant Fees and Services                           99

SIGNATURES                                                                  100

<PAGE>

FORWARD LOOKING STATEMENTS

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

      o     implementing our business plans;

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

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

      o     our ability to implement cost reduction programs;

      o     potential governmental regulation and taxation;

      o     the outcome of any litigation;

      o     our intellectual property;

      o     our estimates of future revenue and profitability;

      o     our estimates or expectations of continued losses;

      o     our expectations  regarding future expenses,  including research and
            development,  sales and  marketing,  and general and  administrative
            expenses;

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

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

      o     attracting and retaining customers and employees;

      o     rapid technological changes in our industry and relevant markets;

      o     sources of revenue and anticipated revenue;

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

      o     plans for divestitures of certain businesses or assets;

      o     competition in our market; and

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

These statements are only predictions. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. We
are not required to and do not intend to update any of the forward-looking
statements after the date of this Form 10-KSB 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-KSB 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-KSB.

In this Form 10-KSB, we refer to information regarding our potential markets and
other industry data. We believe that we have obtained this information from
reliable sources that customarily are relied upon by companies in our industry,
but we have not independently verified any of this information.

                                       4
<PAGE>

PART I

ITEM 1. BUSINESS

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

As of December 31, 2004, the Company's revenue was derived  principally from the
newly  acquired  operations  of SendTec,  as well as from the  operations of our
computer  games related  businesses.  Our VoIP products and services have yet to
produce any significant revenue.

Subsequent to December 31, 2004, management has been actively  re-evaluating the
Company's primary business lines, particularly in view of the Company's critical
need for cash and the overall net losses of the Company. As a result, management
is currently exploring a number of strategic alternatives for the Company and/or
its businesses,  including continuing to operate the businesses, selling certain
businesses  or  assets,  or  entering  into  new  lines of  businesses.  See the
"Liquidity  and  Capital  Resources"  section  of  Management's  Discussion  and
Analysis or Plan of Operation for a more complete discussion.

HISTORICAL OVERVIEW

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  experiences by publishing their own content
and by interacting  with others having similar  interests.  However,  due to the
deterioration  of the  online  advertising  market,  the  Company  was forced to
restructure  and ceased the  operations  of its online  community  on August 15,
2001. The Company then sold most of its remaining online and offline properties.
The Company  continues  to operate its  Computer  Games print  magazine  and the
associated  website  Computer  Games Online  (www.cgonline.com),  as well as the
games distribution business of Chips & Bits, Inc.  (www.chipsbits.com).  On June
1, 2002,  Chairman  Michael S. Egan and Director Edward A. Cespedes became Chief
Executive Officer and President of the Company, respectively.

On November 14, 2002, the Company acquired certain Voice over Internet  Protocol
("VoIP") assets and is now aggressively  pursuing  opportunities related to this
acquisition  under  the brand  names,  voiceglo,  GloPhone  and  GloConnect.  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.

In February 2003, the Company committed to fund operating expenses of Tralliance
Corporation  ("Tralliance"),  a  development  stage  Internet  related  business
venture, at the Company's  discretion in the form of a loan.  Approximately $1.0
million had been  advanced to the venture as of December 31,  2004.  We have the
option to acquire  Tralliance  in exchange  for the  issuance of an aggregate of
1,500,000  shares of our Common Stock.  In November 2004, the Company  announced
that Tralliance had entered into exclusive technical and commercial negotiations
with the Internet Corporation for Assigned Names and Numbers ("ICANN") to become
the  registry  for  the  ".travel"  top-level  domain.  As of  March  25,  2005,
Tralliance  continues to  negotiate  with ICANN and has not yet been awarded the
right to become the registry operator for the ".travel" top-level domain.

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

DPT  was a  specialized  international  communications  carrier  providing  VoIP
communications  services to  emerging  countries.  The DPT network had  provided
"next  generation"  packet-based  telephony  and value  added data  services  to
carriers and  businesses in the United States and  internationally.  The Company
acquired all of the physical assets and intellectual property of DPT and


                                       5
<PAGE>


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

On September 1, 2004,  the Company  closed upon an Agreement  and Plan of Merger
dated August 31, 2004,  pursuant to which the Company acquired all of the issued
and outstanding  shares of capital stock of SendTec, a direct response marketing
services  and  technology  company.  Pursuant  to the  terms of the  Merger,  in
consideration  for the  acquisition  of  SendTec,  theglobe  paid  consideration
consisting of: (i) $6,000,000 in cash,  excluding  transaction  costs,  (ii) the
issuance of an aggregate of 17,500,024 shares of theglobe's Common Stock,  (iii)
the  issuance  of an  aggregate  of  175,000  shares of  Series H  Automatically
Converting   Preferred  Stock  (which  as  more  fully  described   below,   was
subsequently converted into approximately 17,500,500 shares of theglobe's Common
Stock), and (iv) the issuance of a subordinated promissory note in the amount of
$1 million.  In addition,  warrants to acquire  shares of the  Company's  Common
Stock  would be issued  to  SendTec  shareholders  when and if  SendTec  exceeds
forecasted operating income, as defined, of $10.125 million, for the year ending
December 31, 2005. The number of earn-out warrants would range from an aggregate
of 250,000 to 2,500,000 (if actual  operating  income exceeds the forecast by at
least 10%). If and to the extent the warrants are earned,  the exercise price of
the  performance  warrants would be $0.27 per share and they will be exercisable
for  a  period  of  five  years.   The  Company  also  issued  an  aggregate  of
approximately  4,000,000  replacement options to acquire theglobe's Common Stock
for each of the issued and outstanding options to acquire SendTec shares held by
the former employees of SendTec. The subordinated promissory note bears interest
at the  rate of 4% per  annum  and  matures  in one lump  sum of  principal  and
interest on September 1, 2005.

Each share of the Series H Preferred Stock was automatically  converted into 100
shares of theglobe's Common Stock on December 1, 2004, the effective date of the
amendment  to  the  Company's   certificate  of  incorporation   increasing  its
authorized shares of Common Stock from 200,000,000 shares to 500,000,000 shares.

OUR LINES OF BUSINESS

                           OUR VOIP TELEPHONY BUSINESS

The use of the  Internet to provide  voice  communications  services is becoming
more prevalent as new providers enter the market and the technology becomes more
accepted.  According to Insight  Research,  VoIP-based  services  will grow from
$13.0  billion  in 2002 to  nearly  $197.0  billion  in  2007.  VoIP  technology
translates voice into data packets, transmits the packets over data networks and
reconverts them into voice at their destination.  Unlike  traditional  telephone
networks,  VoIP does not require dedicated circuits to complete telephone calls.
Instead, VoIP networks can be shared by multiple users for voice, data and video
simultaneously.  These types of data networks are more  efficient than dedicated
circuit  networks  because  they  are not  restricted  by  "one-call,  one-line"
limitations of traditional telephone networks. Accordingly,  improved efficiency
creates  cost savings that can be passed on to the consumer in the form of lower
rates.

Development  of our VoIP  Business.  On November 14,  2002,  we entered the VoIP
business by acquiring  certain  software  assets from Brian Fowler.  Today those
assets  serve as the  foundation  of the  products we offer and market under the
brand names, "voiceglo," "GloPhone" and "GloConnect."

On May 28, 2003, the Company  acquired DPT, a company  engaged in VoIP wholesale
telephony  services.  At  the  time  we  acquired  DPT,  it  was  a  specialized
international  communications  carrier providing  wholesale VoIP  communications
services  to emerging  countries.  In the first  quarter of 2004,  we decided to
suspend DPT's wholesale  business and dedicate the DPT physical and intellectual
assets to our retail VoIP business.

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

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


                                       6
<PAGE>

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

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

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

The  browser-based   products  are  marketed  under  the  names  "GloPhone"  and
"GloConnect":

      o     Users  acquire the  products by  downloading  a simple  "plug-in" to
            their  browsers.  The  download  is a simple  process  and once it's
            completed,  the user's  browser is enabled  for voice and  messaging
            communications;

      o     Users  choose  their  levels of  service  from a number of  packages
            offered  as part of the  download  process  and are  enabled  with a
            working United States telephone number;

      o     GloPhone  and  GloConnect  users  speak  and  message  free to other
            GloPhone and GloConnect users;

      o     Both products are used by either utilizing the computer's microphone
            and  speakers  or using an external  device,  such as a USB phone or
            headset; and

      o     Users can utilize their services when traveling through the "Glo2Go"
            web-based applications.

The  hardware-based  home and  business  replacement  products  are  provided as
different "packages" under the "voiceglo" brand:

      o     The home and  business  replacement  products are meant to "replace"
            existing traditional phone service with voiceglo's service;

      o     The voiceglo  adapter allows use of traditional  telephone  handsets
            with the voiceglo service;

      o     All  voiceglo  packages  include  features  such as caller ID,  call
            waiting, etc.; and

      o     voiceglo users speak free to other voiceglo users.


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

Sales and Marketing. The Company is continuing to develop its 2005 product sales
and  distribution  strategy,  which is presently  focused on  promoting  its new
products  and  features to be released  in 2005 in  connection  with its current
"GloPhone" and "GloConnect" products. The Company intends to market its services
through  both direct and  indirect  retail  sales  channels,  primarily  through
Internet advertising and structured customer referral programs.

Development of our Network and Carrier  Relationships;  Equipment Suppliers.  In
order to offer our services we have invested substantial time, capital and other
resources on the development of our VoIP network.  Our VoIP network is comprised
of switching hardware and software,  servers, billing and inventory systems, and
telecommunication carrier services. We own and operate VoIP equipment located in
leased data  center  facilities  in Miami,  New York,  Atlanta  and Boston,  and
interconnect  these  switches  utilizing  a  leased  transport  network  through
numerous carrier  agreements with third party  providers.  Through these carrier
relationships  we are  able to  carry  the  traffic  of our  customers  over the
Internet and interact with the PSTN.  These carrier  relationships  also provide
the Company with a leased network for telephone numbers, or "footprint," in more
than 100 area codes in  approximately  34 states.  The network also provides for
both domestic and international  call  termination.  We generally enter into one
year agreements with these data centers and carriers,  with the terms of several
agreements  extending to three to five years.  The capacity of our VoIP network,
presently  greatly exceeds the current level of customer  demand and usage.  The
Company has been  successful in recently  terminating  substantially  all of the
minimum usage  requirement  commitments  for which it was  previously  obligated
under certain of its carrier agreements.  Additionally, the Company is currently
negotiating  to reduce the amounts  payable  during 2005 for other  network data
center and carrier circuit interconnection services.


                                       7
<PAGE>


Research and Development. Internet telephony is a technical service offering. As
a technology,  basic VoIP service,  although complex, is well-understood and has
been adapted by many  companies that are selling basic services to consumers and
businesses  worldwide.  The  Company,  however,  believes  that in  order  to be
competitive  and  differentiate  itself  among its peers,  it must  continuously
upgrade its service  offering.  To that end, the Company is engaged in a program
of continuous development of its products.  Since the initial launch of its VoIP
service,  the  Company  has  introduced  a number  of new  features  which  have
increased  the  functionality  of  its  products  and  has  plans  to  introduce
additional new products and features in the future.

                           OUR COMPUTER GAMES BUSINESS

Computer Games Magazine and Now Playing Magazine

Computer Games Magazine is a consumer print magazine for gamers.

-     As a leading consumer print publication for games, Computer Games magazine
      boasts:  a reputation  for being a reliable,  trusted,  and engaging games
      magazine;  more  editorial,   tips  and  hints  than  most  other  similar
      magazines;  a knowledgeable  editorial staff providing increased editorial
      integrity and content; and, broad-based editorial coverage, appealing to a
      wide audience of gamers.

-     In Spring 2004, a new magazine,  Now Playing began to be delivered  within
      Computer  Games  magazine  and in  March  2005,  Now  Playing  began to be
      distributed as a separate  publication.  Now Playing covers movies, DVD's,
      television, music, games, comics and anime, and is designed to fulfill the
      wider pop culture  interests of our current  readers and to attract a more
      diverse group of advertisers;  autos,  television,  telecommunications and
      film to name a few.

Computer Games Online

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

-     Features of Computer Games Online include:  game industry news;  truthful,
      concise  reviews;  first looks,  tips and hints;  multiple  content links;
      thousands of archived files; and easy access to game buying.

Now Playing Online

Now Playing Online  (www.nowplayingmag.com)  is the online  counterpart  for Now
Playing  magazine.  Now Playing Online provides free,  up-to-date  entertainment
news and information for the pop culture consumer.

-     Features of Now Playing Online include: industry news in music, movies and
      games;  reviews  of  concerts,   movies  and  DVDs;  and  exclusive  video
      interviews by Now Playing writers done with well-known Hollywood stars.

Chips & Bits

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

Advertising.  We continue to attract  major  advertisers  to our Computer  Games
print magazine,  which is a widely respected consumer print magazine for gamers.
During  the  years  ended  December  31,  2004 and 2003,  no  single  advertiser
accounted  for more than 10% of total net revenue.  For the twelve  months ended
December  31,  2004,  42 clients  advertised  in our  Computer  Games  magazine.
Following a series of cost reduction  measures and  restructuring,  we currently
have an  internal  advertising  sales  staff of two  account  executives  and an
advertising director,  all of whom are dedicated to selling advertising space in
our Computer Games print magazine and online. Although these professionals focus
on  developing  long-term  strategic  relationships  with  clients  as they sell
advertisements  in our  Computer  Games  print  magazine,  most  of  our  actual
advertising contracts are for periods of one to three months.


                                       8
<PAGE>


                         OUR MARKETING SERVICES BUSINESS

On September 1, 2004, the Company acquired SendTec,  a direct response marketing
services and technology company. SendTec provides clients a complete offering of
direct  marketing  products  and  services to help their  clients  market  their
products both on the Internet  ("online") and through traditional media channels
such as  television,  radio  and print  advertising  ("offline").  By  utilizing
SendTec's  marketing  products and services,  SendTec's clients seek to increase
the effectiveness  and the return on investment of their advertising  campaigns.
SendTec's  online and offline  direct  marketing  products and services  include
strategic campaign development,  creative  development,  creative production and
post-production,  media  buying  and  tracking,  campaign  management,  campaign
analysis and optimization, technology systems implementation and integration for
campaign tracking and many other agency type services. In addition,  SendTec has
a suite of technology solutions, Results,  Optimization,  Yield ("ROY"), SendTec
Optimization  and  Reporting  ("SOAR")  and iFactz,  which enable it to deliver,
track,  and optimize direct  marketing  campaigns  across multiple  distribution
channels, including television,  radio, direct mail, print and the Internet. The
combination  of  SendTec's   direct  marketing   capabilities,   technology  and
experience in both online and offline marketing,  enable its clients to optimize
their  advertising  campaigns  across a broad spectrum of  advertising  mediums.
SendTec is organized  into two primary  product line  divisions,  the Direct Net
Advertising  Division  and  the  Creative  South  Division.   Additionally,  its
proprietary iFactz technology  provides software tracking solutions that benefit
both the Direct Net Advertising and Creative South businesses.

DirectNet Advertising (DNA)

DNA is the digital marketing services division of SendTec.  DNA offers a variety
of products  and services  that enable  online  advertisers  and  publishers  to
generate  performance  based results through online marketing  channels such as,
web advertising,  e-commerce up-sells, affiliate marketing, search marketing and
email  marketing.  DNA's broad range of products and services  include  creative
strategy and execution, strategic offer development,  production planning, media
planning,  media  buying and search  optimization.  Through  these  products and
services DNA's clients can address all aspects of the marketing continuum,  from
strategic planning through execution,  including results management and campaign
refinements.  DNA's proprietary technologies,  including its ROY online tracking
software,  allow advertisers and publishers to track, report and optimize online
campaign  activity  all  the  way to  the  "conversion  level"  (which  means  a
consumer's actual response to the offer, as for example,  by making a purchase).
DNA's knowledge of digital  advertising  strategies,  targeting  methods,  media
placements and creative  executions  combined with its innovative and dependable
technology  help DNA's  clients to improve  their  advertising  performance  and
return on investment.

Creative South

Creative South is the creative strategy, production and media buying division of
SendTec. Creative South services both online and offline clients of SendTec, and
its  production  capabilities  cover a range  of  distribution  media  including
television, radio, direct mail, print and digital. Creative South has developed,
produced and  distributed  numerous  direct  response  television  campaigns for
clients and has received  national awards for its creative and production  work.
Creative South maintains in-house two state-of-the-art  non-linear digital video
editing suites.  Creative South's  production  department  includes  experienced
directors,  producers  and  editors  on staff.  Creative  South's  media  buying
department provides a full range of services including strategic media planning,
media trafficking, media buying, media tracking and post-buy media and financial
analysis.  Creative  South's media buying  department  has executed media buying
assignments for all types of television  (broadcast and cable),  radio and print
formats and Creative  South's long time  relationships  with its media  partners
have enabled SendTec to provide its clients competitive media prices.

iFactz

iFactz is SendTec's Application Service Provider or "ASP" technology that tracks
and reports the online responses that are generated from offline direct response
advertising.  Historically,  advertisers  have lacked the ability to  accurately
track which offline  advertising yields results online and thus advertisers have
been unable to properly optimize their media buys. iFactz  intelligently  tracks
and  reports  web  activity  from all offline  advertising  - TV (even  national
cable),  radio,  print and  direct  mail - in real  time.  iFactz's  Intelligent
Sourcing(TM) is a  patent-pending  media  technology that informs the user where
online customers come from, and what corresponding activity they produced on the
user's  website.  The iFactz  patent was filed in  November  of 2001 and SendTec
expects the patent  application for iFactz to be reviewed during 2005.  iFactz's
ASP design  enables  advertisers  to implement  and access the  technology  in a
timely and cost efficient manner, as there are no cumbersome, time-consuming and
costly  implementation  expenses  and lead times.  iFactz is licensed to clients
both as a stand alone  technology  solution  and as part of an overall  campaign
offering.

COMPETITION

VOIP TELEPHONY BUSINESS. The telecommunications industry has experienced a great
deal of instability during the past several years.  During the 1990s,  forecasts
of very high  levels  of  future  demand  brought  a  significant  number of new
entrants and new capital investments into the industry. New global carriers were
joined by many of the largest  traditional  carriers  and built large  global or
regional networks to compete with the global  wholesalers.  However, in the last
several  years many of the new global  carriers and many  industry  participants
have either gone through  bankruptcy or no longer exist. The networks were built
primarily to meet the expected  explosion  in bandwidth  demand from data,  with
specific  emphasis  upon  Internet   applications.   Those  forecasts  have  not


                                       9
<PAGE>


materialized, telecommunications capacity now far exceeds actual demand, and the
resulting   marketplace  is  characterized   by  fierce  price   competition  as
traditional  and next  generation  carriers  compete  to  secure  market  share.
Resulting  lower  prices have eroded  margins and have kept many  carriers  from
attaining positive cash flow from operations.

During the past several years, a number of companies  have  introduced  services
that make Internet  telephony or voice  services over the Internet  available to
businesses  and consumers.  All major  telecommunications  companies,  including
entities like AT&T,  Verizon,  Sprint and MCI, as well as iBasis,  Net2Phone and
deltathree, compete or can compete directly with us. A number of cable operators
have also begun to offer VoIP telephony  services via cable modems which provide
access to the Internet.

Our  competitors  can be divided into  domestic  competitors  and  international
competitors.  The  international  market is highly  localized.  In markets where
telecommunications  have been fully  deregulated,  the competition  continues to
increase.  In newly deregulated  markets even new entrants to the VoIP space can
rapidly capture  significant market share.  Competitors in these markets include
both  government-owned  and  incumbent  phone  companies,  as well  as  emerging
competitive  carriers.  The principle  competitive  factors in this  marketplace
include: price, quality of service, distribution, customer service, reliability,
network capacity, and brand recognition.  The long distance market in the United
States is highly  competitive.  There are numerous  competitors in the pure play
VoIP space and we expect to face continuing  competition from these existing, as
well as new,  competitors.  The principal competitive factors in the marketplace
include those identified above, as well as enhanced communications services. Our
competitors  include VoIP services companies such as Net2Phone,  Skype,  Vonage,
Go2Call and deltathree.

Many of our competitors  have  substantially  greater  financial,  technical and
marketing resources, larger customer bases, longer operating histories,  greater
brand  recognition and more  established  relationships  in the industry than we
have.  As a  result,  certain  of these  competitors  may be able to adopt  more
aggressive  pricing  policies  which may hinder our  ability to market our voice
services.

COMPUTER GAMES  BUSINESS.  Competition  among games print  magazines is high. We
compete for advertising and circulation  revenues principally with publishers of
other  technology  and games  magazines  with similar  editorial  content as our
magazine. The technology magazine industry has traditionally been dominated by a
small  number  of large  publishers.  We  believe  that we  compete  with  other
technology  and  games  publications  based on the  nature  and  quality  of our
magazines' editorial content and the attractive demographics of our readers.

The  computer  games  marketplace  has become  increasingly  competitive  due to
acquisitions,  strategic  partnerships  and  the  continued  consolidation  of a
previously  fragmented  industry.  In addition,  an  increasing  number of major
retailers  have  increased  the  selection  of  video  games  offered  by  their
traditional  "bricks and mortar"  locations  and their  online  commerce  sites,
resulting in increased competition.

MARKETING  SERVICES BUSINESS.  The direct response  advertising market is highly
competitive.  We compete with a variety of large and small advertising  agencies
but  our  primary  competitors  are  interactive  marketing  companies  such  as
ValueClick,  aQuantive,  Advertising.com and Performics.  Currently,  the online
performance based  advertising  market in which we compete is still evolving and
it is expected that certain government  regulations may be implemented to better
define acceptable practices and methodologies.

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

Current and potential competitors may establish cooperative  relationships among
themselves or with third  parties to increase the ability of their  products and
services  to address  the needs of our clients  and  prospective  clients.  As a
result it is  possible  that new  competitors  may  emerge and  rapidly  acquire
significant  market  share.  If we fail to  compete  effectively  against  other
advertising  service companies,  we could lose clients or advertising  inventory
and our revenue could  decline.  We expect  competition  to continue to increase
because there are no significant barriers to entry.

Our Results,  Optimization,  Yield ("ROY") online tracking software provides the
Company with a unique competitive advantage by enabling us to optimize campaigns
and  by  enabling  advertising  clients  and  distribution  partners  to  access
real-time conversion information.  Additionally, our iFactz software provides an
excellent complementary platform for our ROY tracking software and enables us to
offer a complete  technology  tracking  solution  for online and offline  direct
response marketing. We believe that iFactz currently provides the Company with a
significant  competitive advantage in its marketing services business and we are
not aware of any similar technologies available in the market today.

Historically, a high percentage of SendTec's marketing services revenue has been
generated  from a few major  customers.  We  believe  that a  limited  number of
clients will continue to be the source of a substantial portion of our marketing
services  revenue for the  foreseeable  future.  Key factors in maintaining  our
relationships   with  these  clients   include  our  performance  on  individual
campaigns,  the strength of our professional reputation and the relationships of
our key executives  with client  personnel.  To the extent that our  performance


                                       10
<PAGE>


does not meet client  expectations,  or our reputation or relationships with one
or more major clients are impaired, our marketing services revenue could decline
and its operating results could be adversely affected.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

We regard  substantial  elements of our websites and  underlying  technology  as
proprietary.  In addition,  we have  developed  in our VoIP  business and direct
response   marketing   business  certain   technologies  which  we  believe  are
proprietary.  Further,  we are investigating other opportunities and are seeking
to develop additional proprietary technology. We attempt to protect these assets
by  relying  on  intellectual  property  laws.  We  also  generally  enter  into
confidentiality  agreements with our employees and consultants and in connection
with our license  agreements with third parties.  We also seek to control access
to and  distribution  of our  technology,  documentation  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.  We pursue the
registration of our trademarks in the United States and internationally.  We are
also currently  pursuing patent protection for certain of our VoIP technologies,
including certain  technology related to our linkage of a telephone number to an
IP address and our browser to telephone  interface,  and for our direct response
marketing business' iFactz Intelligent Sourcing(TM) media technology.

Effective trademark, service mark, copyright, patent and trade secret protection
may not be available in every  country in which our services are made  available
through the Internet.  Policing unauthorized use of our proprietary  information
is  difficult.  Existing or future  trademarks  or service  marks applied for or
registered  by other  parties  and which are similar to ours may prevent us from
expanding  the  use of our  trademarks  and  service  marks  into  other  areas.
Enforcing  our  patent  rights  could  result in costly  litigation.  Our patent
applications  could be rejected or any patents  granted could be  invalidated in
litigation. Should this happen, we may lose a significant competitive advantage.
Additionally, our competitors or others could be awarded patents on technologies
and  business  processes  that  could  require  us to  significantly  alter  our
technology, change our business processes or pay substantial license and royalty
fees.  (See "Risk  Factors-We  rely on  intellectual  property  and  proprietary
rights.")

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

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

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

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


Moreover,  the  applicability  to the Internet of existing laws governing issues
such as intellectual property ownership and infringement,  copyright, trademark,
trade secret, obscenity, libel, employment and personal privacy is uncertain and
developing.  It is not clear how existing laws governing issues such as property
ownership,  sales and other  taxes,  libel,  and personal  privacy  apply to the
Internet and electronic  commerce.  Any new  legislation  or regulation,  or the
application or interpretation of existing laws or regulations,  may decrease the
growth  in the  use of the  Internet  or VoIP  telephony  services,  may  impose
additional burdens on electronic commerce or may alter how we do business.

New laws  and  regulations  may  increase  our  costs of  compliance  and  doing
business,  decrease  the growth in  Internet  use,  decrease  the demand for our
services or otherwise have a material adverse effect on our business.


                                       11
<PAGE>


VOIP  REGULATION.  The use of the  Internet  and  private IP networks to provide
voice  services  over the Internet is a relatively  recent  market  development.
Although the provision of such services is currently  permitted by United States
federal law and largely  unregulated  within the United States,  several foreign
governments have adopted laws and/or regulations that could restrict or prohibit
the provision of voice  communications  services over the Internet or private IP
networks.

FEDERAL COMMUNICATIONS  COMMISSION REGULATION. In the United States, the Federal
Communications  Commission  (the  "FCC") has so far  declined  to make a general
conclusion  that  all  forms  of  VoIP  services  constitute  telecommunications
services (rather than information  services).  The FCC's Internet Policy Working
Group  was  established  to  assist  the  FCC in  identifying,  evaluating,  and
addressing  policy  issues  that will  arise as  traditional  telecommunications
services migrate to Internet based  platforms.  The FCC has held a forum on VoIP
to study and discuss issues including regulatory classification and has held two
solutions  summits  regarding VoIP: the first  solutions  summit focused on VoIP
solutions  for E911  issues  and the  second  solutions  summit  focused on VoIP
solutions for disability access issues.

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

On March  10,  2004,  (on the same day  that  the FCC  released  its  IP-Enabled
Services  Notice  of  Proposed  Rulemaking),  in a  response  to a  petition  by
Pulver.com  which  sought a  declaration  that  Pulver.com's  Free World  Dialup
("FWD") is neither telecommunications nor a telecommunications  service, the FCC
ruled that  Pulver.com's  FWD  offering is an  unregulated  information  service
subject to the FCC's  jurisdiction.  The ruling  specifically  does not  address
whether  traditional phone regulations might apply to VoIP services in which end
users interconnect with the traditional telephone system.

In April 2004, in response to a petition by AT&T which sought a  declaration  to
preclude  local exchange  carriers from imposing  access charges on certain AT&T
"phone-to-phone"  IP telephony services the FCC ruled that the service that AT&T
described is a  telecommunications  service upon which interstate access charges
may be assessed. However, the FCC emphasized that its decision is limited to the
type of service  described by AT&T in that  proceeding,  i.e., an  interexchange
service  that:  (1) uses  ordinary  customer  premises  equipment  (CPE) with no
enhanced  functionality;  (2) originates  and terminates on the public  switched
telephone  network  (PSTN);  and (3)  undergoes no net protocol  conversion  and
provides no enhanced  functionality to end users due to the provider's use of IP
technology.

In November 2004,  the FCC issued a Memorandum  Opinion and Order ("MO&O") which
preempted an order of the Minnesota  Public  Utilities  Commission  applying its
traditional  telephone  company  regulations to Vonage's  DigitalVoice  service,
which  provides  VoIP  service and other  communications  capabilities.  The FCC
issued this MO&O in response to a petition  that Vonage  filed with the FCC. The
FCC concluded that the DigitalVoice  service cannot be separated into interstate
and intrastate  communications  for  compliance  with  Minnesota's  requirements
without  negating  valid  federal  policies  and  rules.  In so  doing,  the FCC
clarified  that  it,  not the  state  commissions,  has the  responsibility  and
obligation to decide whether certain regulations apply to DigitalVoice and other
IP-enabled  services having the same capabilities.  The FCC stated that for such
services,  comparable  regulations  of  other  states  must  likewise  yield  to
important federal objectives.  However, in this MO&O, the FCC did not express an
opinion on the  applicability  to Vonage of  Minnesota's  general laws governing
entities conducting business within Minnesota, such as laws concerning taxation;
fraud;  general  commercial  dealings;  and  marketing,  advertising,  and other
business  practices.  The FCC stated that it expects that as it moves forward in
establishing  policies and rules for DigitalVoice and other IP-enabled services,
states  will  continue  to play their vital role in  protecting  consumers  from
fraud,  enforcing  fair business  practices,  for example,  in  advertising  and
billing, and generally responding to consumer inquiries and complaints.

At the same time as Vonage filed its  petition  with the FCC, it filed a lawsuit
in the  district  court in  Minnesota  against the  Minnesota  Public  Utilities
Commission  ("Minnesota  Commission")  to challenge the  Minnesota  Commission's
order  asserting  regulatory  jurisdiction  over Vonage and  ordering  Vonage to
comply with all state  statutes  and  regulations  relating  to the  offering of
telephone  service in Minnesota.  In October 2003,  the district court entered a
permanent  injunction in favor of Vonage.  In January  2004,  the court denied a
motion by the Minnesota  Commission  for  reconsideration,  and an appeal to the
U.S. Court of Appeals for the Eighth Circuit is pending.  However,  other states
are not bound by this decision and may reject the VoIP  operator's  position and
may seek to subject us to regulation.


                                       12
<PAGE>


If the FCC or any state determines to regulate VoIP, they may impose surcharges,
taxes,  licensing  or  additional  regulations  upon  providers  of VoIP.  These
surcharges  could include access charges  payable to local exchange  carriers to
carry and terminate  traffic,  contributions  to the  Universal  Service Fund or
other charges. In August 2004, the FCC issued a Notice of Proposed Rulemaking in
which  it  tentatively  concluded  that  providers  of VoIP  services  that  the
Department of Justice,  Federal Bureau of  Investigation,  and Drug  Enforcement
Agency (collectively, "Law Enforcement") characterize as "managed" or "mediated"
are subject to the  Communications  Assistance for Law Enforcement Act ("CALEA")
as telecommunications  carriers under the "Substantial  Replacement  Provision."
The  Substantial  Replacement  Provision  describes  the  unique  definition  of
"telecommunications  carrier"  in CALEA to  include  entities  that  provide  "a
replacement for a substantial  portion of the local telephone exchange service."
Law  Enforcement  describes  managed or mediated VoIP services as those services
that offer voice  communications  calling  capability  whereby the VoIP provider
acts as a mediator  to manage the  communication  between  its end points and to
provide call set up, connection, termination, and party identification features,
often  generating  or modifying  dialing,  signaling,  switching,  addressing or
routing   functions  for  the  user.  Law  Enforcement   distinguishes   managed
communications  from  "non-managed"  or  "peer-to-peer"  communications,   which
involve  disintermediated  communications that are set up and managed by the end
user  via its  customer  premises  equipment  or  personal  computer.  In  these
non-managed, or disintermediated,  communications, the VoIP provider has minimal
or no  involvement  in the flow of  packets  during the  communication,  serving
instead  primarily as a directory that provides users' Internet web addresses to
facilitate  peer-to-peer  communications.   In  this  proceeding,  the  FCC  has
requested comment on the appropriateness of this distinction between managed and
non-managed VoIP communications for purposes of CALEA.

Regulations  requiring  compliance  with CALEA,  or  provision  of enhanced  911
services could also place a significant  financial  burden on us. The imposition
of any such additional fees,  charges,  taxes,  licenses and regulations on VoIP
services  could  materially  increase our costs and may reduce or eliminate  the
competitive pricing advantage we seek to enjoy.

STATE REGULATION.  Although VoIP services are presently  largely  unregulated by
the state governments,  such state governments and their regulatory  authorities
may assert  jurisdiction  over the  provision of  intrastate  IP  communications
services where they believe that their telecommunications  regulations are broad
enough to cover  regulation of IP services.  A number of state  regulators  have
recently taken the position that VoIP providers are telecommunications providers
and must register as such within their states. VoIP operators have resisted such
registration  on the position  that VoIP is not,  and should not be,  subject to
such regulations because VoIP is an information service, not a telecommunication
service and because VoIP is interstate in nature, not intrastate.  Various state
regulatory  authorities  have  initiated  proceedings  to examine the regulatory
status of Internet  telephony  services,  and in several cases rulings have been
obtained  to the  effect  that  the  use  of the  Internet  to  provide  certain
intrastate  services  does not exempt an entity  from paying  intrastate  access
charges in the jurisdictions in question.  However,  in the Vonage MO&O, the FCC
found that the  characteristics  of Vonage's  DigitalVoice  service preclude any
practical  identification  of, and  separation  into,  interstate and intrastate
communications  for purposes of  effectuating  a dual  federal/state  regulatory
scheme.  Therefore,  because it is a jurisdictionally mixed service, the FCC has
exclusive  jurisdiction  under the Act to determine  the policies and rules,  if
any, that govern the interstate aspect of DigitalVoice service. In fact, the FCC
stated that multiple state regulatory  regimes would likely violate the Commerce
Clause  because of the  unavoidable  effect  that  regulation  on an  intrastate
component  would have on interstate  use of the service.  As state  governments,
courts, and regulatory  authorities continue to examine the regulatory status of
Internet  telephony  services,  they could render decisions or adopt regulations
affecting providers of VoIP or requiring such providers to pay intrastate access
charges  or to make  contributions  to  universal  service  funding.  Should the
Commission  determine to regulate IP  services,  states may decide to follow the
FCC's lead and impose additional obligations as well.

OTHER  REGULATION.  The regulatory  treatment of IP  communications  outside the
United  States  varies  significantly  from country to country.  Some  countries
currently impose little or no regulation on Internet telephony  services,  as in
the United States.  Other  countries,  including  those in which the governments
prohibit  or  limit  competition  for  traditional  voice  telephony   services,
generally do not permit Internet  telephony services or strictly limit the terms
under which those  services  may be  provided.  Still other  countries  regulate
Internet telephony services like traditional voice telephony services, requiring
Internet  telephony  companies  to  make  various   telecommunications   service
contributions  and pay other taxes.  We may incur  substantial  liabilities  for
expenses  necessary to comply with these laws and  regulations  or penalties for
any failure to comply. Compliance with these laws and regulations may also cause
us to have to change or limit our business  practices in a manner adverse to our
business.

More aggressive regulation of Internet telephony providers and VoIP services may
adversely  affect our VoIP business  operations,  and  ultimately  our financial
condition, operating results and future prospects.


CERTAIN  OTHER  REGULATION  AFFECTING  THE  INTERNET.  Today,  there  are  still
relatively few laws specifically directed towards online services.  However, due
to the increasing  popularity and use of the Internet and online services,  many
laws and regulations relating to the Internet are being debated at all levels of
governments  around the world and it is possible that such laws and  regulations
will be adopted.  It is not clear how  existing  laws  governing  issues such as
property ownership, copyrights and other intellectual property issues, taxation,
libel  and  defamation,   obscenity,   and  personal  privacy  apply  to  online
businesses.  The vast majority of these laws were adopted prior to the advent of
the Internet and related  technologies  and, as a result,  do not contemplate or
address  the unique  issues of the  Internet  and related  technologies.  In the
United States,  Congress has recently adopted legislation that regulates certain
aspects of the Internet, including online content, user privacy and taxation. In
addition,  Congress and other federal entities are considering other legislative
and regulatory proposals that would further regulate the Internet. Congress has,
for example, considered legislation on a wide range of issues including Internet
spamming, database privacy, gambling, pornography and child protection, Internet
fraud, privacy and digital signatures. For example, Congress recently passed and


                                       13
<PAGE>


the President signed into law several  proposals that have been made at the U.S.
state and local level that would  impose  additional  taxes on the sale of goods
and  services  through  the  Internet.   These  proposals,   if  adopted,  could
substantially   impair  the  growth  of  e-commerce,   and  could  diminish  our
opportunity to derive  financial  benefit from our activities.  For example,  in
December  2004,   the  U.S.   federal   government   enacted  the  Internet  Tax
Nondiscrimination  Act (the "ITNA").  While the ITNA generally  extends  through
November  2007 the  moratorium  on taxes on  Internet  access and  multiple  and
discriminatory taxes on electronic  commerce,  it does not affect the imposition
of tax on a charge for voice or similar service  utilizing  Internet Protocol or
any successor protocol. In addition, the ITNA does not prohibit federal,  state,
or local  authorities  from  collecting  taxes on our income or from  collecting
taxes that are due under existing tax rules. Various states have adopted and are
considering  Internet-related  legislation.  Increased  U.S.  regulation  of the
Internet,  including  Internet  tracking  technologies,  may  slow  its  growth,
particularly if other  governments  follow suit, which may negatively impact the
cost of doing  business over the Internet and  materially  adversely  affect our
business,  financial  condition,  results of  operations  and future  prospects.
Legislation  has also been proposed that would clarify the regulatory  status of
VoIP service. The Company has no way of knowing whether legislation will pass or
what form it might  take.  Domain  names have been the  subject  of  significant
trademark  litigation  in the United  States and  internationally.  The  current
system  for  registering,  allocating  and  managing  domain  names has been the
subject of litigation and may be altered in the future. The regulation of domain
names in the United  States  and in foreign  countries  may  change.  Regulatory
bodies are anticipated to establish additional top-level domains and may appoint
additional  domain name registrars or modify the requirements for holding domain
names,  any or all of which may dilute  the  strength  of our names.  We may not
acquire  or  maintain  our  domain  names in all of the  countries  in which our
websites may be accessed,  or for any or all of the top-level  domain names that
may be introduced.

Internationally, the European Union has also enacted several directives relating
to the Internet.  The European Union has, for example,  adopted a directive that
imposes  restrictions  on the  collection  and use of personal  data.  Under the
directive,  citizens of the European Union are guaranteed rights to access their
data,  rights to know where the data originated,  rights to have inaccurate data
rectified,  rights to recourse in the event of unlawful processing and rights to
withhold permission to use their data for direct marketing. The directive could,
among other things,  affect U.S. companies that collect or transmit  information
over the Internet from  individuals in European  Union member  states,  and will
impose  restrictions  that are more  stringent  than  current  Internet  privacy
standards in the U.S. In particular,  companies with offices located in European
Union  countries  will not be allowed to send personal  information to countries
that do not maintain adequate  standards of privacy.  Compliance with these laws
is both necessary and difficult. Failure to comply could subject us to lawsuits,
fines,  criminal  penalties,  statutory damages,  adverse  publicity,  and other
losses that could harm our business.  Changes to existing laws or the passage of
new laws  intended to address these  privacy and data  protection  and retention
issues could directly affect the way we do business or could create  uncertainty
on the Internet. This could reduce demand for our services, increase the cost of
doing business as a result of litigation costs or increased  service or delivery
costs,  or otherwise harm our business.  Other laws that reference the Internet,
such as the  European  Union's  Directive  on Distance  Selling  and  Electronic
Commerce  has begun to be  interpreted  by the  courts  and  implemented  by the
European Union member states, but their  applicability and scope remain somewhat
uncertain.  Regulatory agencies or courts may claim or hold that we or our users
are either  subject to licensure or prohibited  from  conducting our business in
their  jurisdiction,  either with  respect to our  services in general,  or with
respect to certain categories or items of our services. In addition, because our
services are accessible worldwide,  and we facilitate VoIP telephony services to
users worldwide,  foreign jurisdictions may claim that we are required to comply
with their laws. For example,  the  Australian  high court has ruled that a U.S.
website in certain  circumstances  must comply with  Australian  laws  regarding
libel. As we expand our international  activities, we become obligated to comply
with the laws of the  countries in which we operate.  Laws  regulating  Internet
companies  outside  of the U.S.  may be less  favorable  than those in the U.S.,
giving greater rights to consumers, content owners, and users. Compliance may be
more costly or may require us to change our  business  practices or restrict our
service  offerings  relative  to those in the U.S.  Our  failure to comply  with
foreign laws could subject us to penalties ranging from criminal  prosecution to
bans on our services.


EMPLOYEES

As of March 15, 2005, we had approximately 118 active full-time  employees.  Our
future success depends,  in part, on our ability to continue to attract,  retain
and motivate highly qualified  technical and management  personnel.  Competition
for these  persons is intense.  From time to time,  we also  employ  independent
contractors  to  support  our  network  operations,  research  and  development,
marketing, sales and support and administrative organizations. Our employees are
not represented by any collective  bargaining unit and we have never experienced
a work stoppage. We believe that our relations with our employees are good.

WHERE YOU CAN FIND MORE INFORMATION

We file  annual,  quarterly  and current  reports,  proxy  statements  and other
information with the Securities and Exchange Commission ("SEC").  You may read a
copy of any document we file  without  charge at the public  reference  facility
maintained by the SEC in Room 1024,  450 Fifth Street,  N.W.,  Washington,  D.C.
20549. You may obtain  information on the operation of the public reference room
by  calling  the  SEC  at  1-800-SEC-0330.   The  SEC  maintains  a  Website  at
http://www.sec.gov that contains reports, proxy and information statements,  and
other information  regarding  registrants that file electronically with the SEC.


                                       14
<PAGE>


ITEM 2. PROPERTIES

Our corporate  headquarters  is located in Fort  Lauderdale,  Florida,  where we
lease  approximately  26,000 square feet of office space.  15,000 square feet of
this space is sublet from a company  which is controlled by our Chairman and the
remaining 11,000 square feet is sublet from an unaffiliated company. We maintain
approximately  9,500 square feet of office  space in two  separate  locations in
Vermont in connection  with the  operations of our Computer  Games  magazine and
Chips & Bits, Inc. We own one property and the other is a lease which expires in
September  2005. In June of 2004,  we signed a two year lease for  approximately
5,000 square feet of warehouse space in Pompano Beach, Florida. Additionally, we
have obtained colocation space in secure telecommunications data centers located
in Florida,  Georgia,  Massachusetts and New York which is used to house certain
Internet routing and computer equipment.  Our subsidiary,  SendTec, Inc., leases
approximately 14,500 square feet of office space in St. Petersburg,  Florida and
approximately  300  square  feet of  office  space  in New  York  City.  The St.
Petersburg  lease  commenced in April of 2004 and expires in March of 2010.  The
New York lease commenced in July of 2004 and expired in February of 2005. We are
currently  occupying  temporary space in New York on a month-to-month  basis and
are planning to lease new space in New York.


ITEM 3. LEGAL PROCEEDINGS

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

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

The Company has approved a settlement agreement and related agreements which set
forth the terms of a settlement between the Company, the Individual  Defendants,
the plaintiff class and the vast majority of the other  approximately 300 issuer
defendants. Among other provisions, the settlement provides for a release of the
Company and the Individual  Defendants for the conduct  alleged in the action to
be  wrongful.  The Company  would agree to undertake  certain  responsibilities,
including  agreeing to assign away,  not assert,  or release  certain  potential
claims the Company may have against its underwriters.  The settlement  agreement
also provides a guaranteed  recovery of $1 billion to  plaintiffs  for the cases
relating  to all of the  approximately  300  issuers.  To the  extent  that  the
underwriter  defendants  settle  all of the  cases for at least $1  billion,  no
payment will be required under the issuers' settlement agreement.  To the extent
that the underwriter defendants settle for less than $1 billion, the issuers are
required  to  make up the  difference.  It is  anticipated  that  any  potential
financial  obligation of the Company to plaintiffs  pursuant to the terms of the
settlement  agreement  and  related  agreements  will  be  covered  by  existing
insurance. The Company currently is not aware of any material limitations on the
expected recovery of any potential  financial  obligation to plaintiffs from its
insurance  carriers.  Its carriers are solvent,  and the Company is not aware of
any uncertainties as to the legal sufficiency of an insurance claim with respect
to any recovery by plaintiffs.  Therefore,  we do not expect that the settlement
will involve any payment by the Company. If material limitations on the expected
recovery  of any  potential  financial  obligation  to the  plaintiffs  from the
Company's  insurance  carriers  should arise,  the Company's  maximum  financial
obligation to plaintiffs pursuant to the settlement agreement would be less than
$3.4 million.  On February 15, 2005, the court granted  preliminary  approval of
the settlement agreement,  subject to certain modifications  consistent with its
opinion.  Judge Scheindlin  ruled that the issuer  defendants and the plaintiffs
must submit a revised  settlement  agreement  which provides for a mutual bar of
all contribution  claims by the settling and  non-settling  parties and does not
bar the parties from  pursuing  other  claims.  There will be a conference  with
Judge  Scheindlin  on  April  4,  2005 to  discuss  the  status  of the  revised
settlement  agreement.  The  underwriter  defendants will have an opportunity to
object to the  revised  settlement  agreement.  There is no  assurance  that the
parties  to the  settlement  will be  able  to  agree  to a  revised  settlement
agreement  consistent  with the  court's  opinion,  or that the court will grant
final approval to the settlement to the extent the parties reach  agreement.  If
the settlement agreement is not approved and the Company is found liable, we are
unable to  estimate  or predict  the  potential  damages  that might be awarded,
whether such damages would be greater than the Company's insurance coverage, and
whether such damages  would have a material  impact on our results of operations
or financial condition in any future period.


                                       15
<PAGE>


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

Through  December 31, 2004, the Company has recorded amounts due for commissions
pursuant to the terms of the  agreement  totaling  approximately  $246,000.  The
Company believes that this is the amount NeoPets has earned relating to services
performed and intends to vigorously defend its position.  It is too early in the
process to determine  the  likelihood of an  unfavorable  outcome,  however,  an
unfavorable  outcome  could  result  in a  liability  in  excess  of the  amount
recorded.

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


                                       16
<PAGE>


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

The Company held its 2004 Annual Meeting of  Shareholders  on November 30, 2004.
At  the  Annual   Meeting,   Edward  A.   Cespedes,   Michael  S.  Egan,   Robin
Segaul-Lebowitz and Paul Soltoff were elected as Directors.  All directors serve
for a term of one year or until their successors are duly elected and qualified.
In addition,  shareholders  voted to approve an amendment to the  certificate of
incorporation of the Company to increase the total  authorized  shares of Common
Stock from 200,000,000 shares to 500,000,000 shares.  Shareholders also voted to
approve the  Company's  2000 Stock  Option  Plan as amended  and  restated as of
December 1, 2004.

The tabulation of the vote for the foregoing matters is set forth below:

<TABLE>
<CAPTION>
A. Election of Directors                          For          Against          Withheld*
                                              -----------     ---------        ----------

         <S>                                  <C>                  <C>          <C>
         1.  Edward A. Cespedes               121,467,511          --            455,025

         2.  Michael S. Egan                  121,455,002          --            467,534

         3.  Robin Segaul-Lebowitz            121,467,032          --            455,504

         4.  Paul Soltoff                     121,467,932          --            454,604

B.  Proposal to Increase Authorized Shares

                                                 For           Against         Withheld*
                                              -----------     ---------        ----------
                                              104,183,467     1,028,541        2,360,628

C. Proposal to Amend and Restate Stock Option Plan

                                                 For           Against         Withheld*
                                              -----------     ---------        ----------
                                               91,523,708       765,517          397,787
</TABLE>
-------------------
*Includes broker non-votes and abstentions


                                       17
<PAGE>


PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

The shares of our Common Stock trade in the  over-the-counter  market on what is
commonly  referred  to as  the  electronic  bulletin  board,  under  the  symbol
"TGLO.OB" The following table sets forth the range of high and low bid prices of
our Common Stock for the periods  indicated as reported by the  over-the-counter
market  (the  electronic   bulletin   board).   The  quotations   below  reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions:


                      2004              2003
                 -------------    ---------------
                 High     Low     High       Low
                 -----   -----    -----     -----
Fourth Quarter   $0.56   $0.36    $2.12     $1.30
Third Quarter    $0.65   $0.24    $1.97     $1.12
Second Quarter   $0.96   $0.28    $2.56     $0.13
First Quarter    $1.42   $0.83    $0.20     $0.06


The market  price of our  Common  Stock is highly  volatile  and  fluctuates  in
response to a wide  variety of factors.  (See "Risk  Factors-Our  Stock Price is
Volatile and May Decline.")

HOLDERS OF COMMON STOCK

We had  approximately  717 holders of record of Common  Stock as March 10, 2005.
This does not reflect  persons or entities  that hold Common Stock in nominee or
"street" name through various brokerage firms.

DIVIDENDS

We have not paid any cash  dividends on our Common Stock since our inception and
do not intend to pay dividends in the foreseeable future. Our board of directors
will determine if we pay any future dividends.


<TABLE>
<CAPTION>
                 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF DECEMBER 31, 2004

                             Number of securities to be    Weighted-average exercise          Number of securities
                              issued upon exercise of        price of outstanding           remaining available for
         Plan                  outstanding options,          options, warrants and       future issuance under equity
       Category                warrants and rights                  rights                     compensation plans
-----------------------    ----------------------------    --------------------------    -----------------------------
<S>                               <C>                             <C>                            <C>
Equity Compensation                4,729,020                      $ 1.40                         8,063,897
plans approved by
security holders

Equity Compensation               11,255,165                      $ 0.14                         2,139,835
plans not approved by
security holders

Total                             15,984,185                      $ 0.51                        10,203,732
</TABLE>


Equity  compensation  plans not  approved  by  security  holders  consist of the
following:

      o     200,000  shares of Common  Stock of  theglobe.com,  inc.,  issued to
            Charles Peck pursuant to the  Non-Qualified  Stock Option  Agreement
            dated June 1, 2002 at an exercise  price of $0.035 per share.  These
            stock options vested  immediately  and have a life of ten years from
            date of grant.


                                       18
<PAGE>


      o     1,750,000  shares of Common Stock of theglobe.com,  inc.,  issued to
            Edward  A.  Cespedes  pursuant  to the  Non-Qualified  Stock  Option
            Agreement  dated  August 12, 2002 at an exercise  price of $0.02 per
            share. These stock options vested immediately and have a life of ten
            years from date of grant.

      o     2,500,000  shares of Common Stock of theglobe.com,  inc.,  issued to
            Michael S. Egan pursuant to the Non-Qualified Stock Option Agreement
            dated August 12, 2002 at an exercise price of $0.02 per share. These
            stock options vested  immediately  and have a life of ten years from
            date of grant.

      o     500,000  shares of Common  Stock of  theglobe.com,  inc.,  issued to
            Robin  S.  Lebowitz  pursuant  to  the  Non-Qualified  Stock  Option
            Agreement  dated  August 12, 2002 at an exercise  price of $0.02 per
            share. These stock options vested immediately and have a life of ten
            years from date of grant.

      o     The Company's 2003 Amended and Restated  Non-Qualified  Stock Option
            Plan  (the  "2003  Plan").  The  purpose  of  the  2003  Plan  is to
            strengthen  theglobe.com,  inc. by providing an incentive to certain
            employees and consultants (or in certain circumstances,  individuals
            who are the principals of certain consultants) of the Company or any
            subsidiary of the Company,  with a view toward  encouraging  them to
            devote their  abilities and industry to the success of the Company's
            business  enterprise.  The 2003 Plan is  administered by a Committee
            appointed by the Board to administer  the Plan,  which has the power
            to determine  those  eligible  individuals  to whom options shall be
            granted  under the 2003 Plan and the  number of such  options  to be
            granted and to prescribe the terms and conditions (which need not be
            identical)  of each such option,  including  the exercise  price per
            share subject to each option and vesting schedule of options granted
            thereunder,  and make any amendment or modification to any agreement
            consistent  with the terms of the 2003 Plan.  The maximum  number of
            shares  that may be made the  subject of options  granted  under the
            2003 Plan is 1,000,000 and no option may have a term in excess of 10
            years.  Options to acquire an aggregate  of 41,000  shares of Common
            Stock have been  issued to  various  independent  sales  agents at a
            weighted average exercise price of $1.54. These stock options vested
            immediately and have a life of ten years from date of grant. Options
            to acquire an aggregate of 400,000  shares of Common Stock have been
            issued  to  various  employees  and  independent  contractors  at  a
            weighted average exercise price of $1.00. These stock options vested
            immediately and have a life of ten years from date of grant. Options
            to acquire an aggregate of 110,000  shares of Common Stock have been
            issued to two independent contractors at a weighted average exercise
            price of $1.22.  These stock options vested  immediately  and have a
            life of five  years from date of grant.  Options to acquire  200,000
            shares of Common  Stock were  issued to an  employee  at an exercise
            price of $0.01 per share.  These stock  options,  with a life of ten
            years,  were  to  vest  upon  attainment  of  specific   performance
            criteria.  However,  in January of 2005, the employee was terminated
            and his options were  completely  vested as part of his  termination
            agreement.

      o     The  Company's  2004 Stock  Incentive  Plan (the "2004  Plan").  The
            purpose of the 2004 Plan is to enhance the  profitability  and value
            of the Company for the benefit of its  stockholders  by enabling the
            Company to offer eligible  employees,  consultants and  non-employee
            directors stock-based and other incentives, thereby creating a means
            to raise the level of equity  ownership by such individuals in order
            to attract,  retain and reward such  individuals  and strengthen the
            mutuality of interests  between such  individuals  and the Company's
            stockholders. The 2004 Plan is administered by a Committee appointed
            by the  Board  to  administer  the  Plan,  which  has the  power  to
            determine  those eligible  individuals to whom stock options,  stock
            appreciation rights, restricted stock awards, performance awards, or
            other  stock-based  awards shall be granted  under the 2004 Plan and
            the number of such  options,  rights or awards to be granted  and to
            prescribe the terms and conditions  (which need not be identical) of
            each such option,  right or award,  including the exercise price per
            share subject to each option and vesting schedule of options granted
            thereunder,  and make any amendment or modification to any agreement
            consistent  with the terms of the 2004 Plan.  The maximum  number of
            shares  that may be made the  subject of  options,  rights or awards
            granted  under the 2004 Plan is  7,500,000  and no option may have a
            term in excess of 10 years.  Options  to  acquire  an  aggregate  of
            250,000 shares of Common Stock have been issued to several employees
            and  consultants of SendTec,  Inc. at an exercise price of $0.34 per
            share.  Twenty-five  percent of these options vested immediately and
            the balance  will vest in three  equal  annual  installments.  These
            options have a life of five years from date of grant. As part of the
            merger with SendTec,  Inc.,  replacement  options of 3,974,165  were
            issued  to  the  former  SendTec  employees.  Of  these  replacement
            options,  3,273,668  have been issued at an exercise  price of $0.06
            per share and 700,497 have been issued at an exercise price of $0.27
            per share. The terms of these replacement options were as negotiated
            between  representatives  of theglobe and the Stock Option Committee
            for the SendTec  2000 Amended and  Restated  Stock  Option Plan.  In
            addition,  theglobe  also  granted  1,000,000  stock  options  at an
            exercise   price  of  $0.27  per  share  in   connection   with  the
            establishment  of a bonus  option  pool  pursuant  to which  various
            employees of SendTec  could vest in such options if SendTec  exceeds
            certain performance  targets. In October of 2004, options to acquire
            an  aggregate  of 330,000  shares of Common Stock were issued to two
            employees.  250,000  were issued at an exercise  price of $0.52,  of
            which  62,500 of these  stock  options  vested  immediately  and the
            balance  will vest  ratably on a quarterly  basis over three  years.
            80,000 were issued at an exercise  price of $0.37 of which 32,000 of
            these stock  options  vested  immediately  and the balance will vest
            ratably on a quarterly basis over three years,  although vesting may
            be  accelerated  subject  to  certain  performance  criteria.  These
            options have a life of ten years from date of grant.


                                       19
<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

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

As of December 31, 2004,  our revenues were derived  principally  from the newly
acquired  operations  of SendTec,  as well as from the  operations  of our games
related  businesses.  Our VoIP  products  and  services  have yet to produce any
significant revenue.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS; GOING CONCERN

Certain matters  discussed below under  "Liquidity and Capital  Resources" raise
substantial doubt about our ability to continue as a going concern. In addition,
we have  received a report  from our  independent  accountants,  relating to our
December  31,  2004  audited  financial  statements  containing  an  explanatory
paragraph  stating that our recurring losses from operations and our accumulated
deficit  raise  substantial  doubt  about our  ability  to  continue  as a going
concern. Our 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
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.

RESULTS OF OPERATIONS

The nature of our business has significantly  changed from 2002 to 2003 to 2004.
As a result  of our  decision  to  enter  the VoIP  business,  we have  incurred
substantial  expenditures  without  corresponding  revenue as we  developed  our
retail VoIP  product  line and as we put into place the  infrastructure  for our
VoIP products.  Consequently,  and primarily as a result of these  factors,  the
results of operations for the year ended  December 31, 2003 are not  necessarily
comparable to the year ended December 31, 2002. In addition, we recently entered
into a new business line, marketing services,  as a result of our acquisition of
SendTec.  SendTec's results are included in the Company's consolidated operating
results from its date of acquisition, September 1, 2004. Because of our entrance
into the VoIP business and our acquisition of SendTec, our results of operations
for the year ended December 31, 2004 are not necessarily  comparable to the year
ended December 31, 2003.

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

NET REVENUE.  Net revenue  totaled $16.0 million for the year ended December 31,
2004 as compared to $5.3 million for the year ended December 31, 2003. The $10.7
million  increase in consolidated  net revenue was principally the result of the
$12.5  million in  additional  net revenue,  net of  intersegment  eliminations,
resulting  from the  operations  of SendTec,  which was acquired on September 1,
2004. Partially offsetting this additional revenue were declines of $1.6 million
and $0.2  million  in net  revenue  of our  computer  games  and VoIP  telephony
services business segments, respectively.


NET REVENUE BY BUSINESS SEGMENT:
                                                    2004                2003
                                               ------------         ------------
Computer games ........................        $  3,107,637         $  4,736,032
Marketing services ....................          13,408,183                   --
VoIP telephony services ...............             391,154              548,081
Intersegment eliminations .............            (865,942)                  --
                                               ------------         ------------
                                               $ 16,041,032         $  5,284,113
                                               ============         ============


                                       20
<PAGE>


Decreases  of $0.8 million in sales of games  products by Chips and Bits,  Inc.,
$0.5 million in print  advertisements  in our games magazine and $0.3 million in
sales of the games  magazine,  respectively,  accounted  for the  decline in net
revenue  experienced by our computer games segment. As discussed in Note 1(j) of
the Notes to Consolidated Financial Statements,  we use outside agents to obtain
new  subscribers  for our Computer Games  magazine,  whereby the agents retain a
percentage of the subscription  proceeds as their  commission.  Previously these
commissions  had been  classified  as sales and  marketing  expense  within  the
consolidated  statements  of  operations.  Effective  June 2004,  we changed our
method of accounting  for these  commissions,  reporting  them as a reduction of
magazine sales  subscription  revenue.  We believe this  alternative  accounting
method is a more  commonly used  industry  practice and is preferable  under the
circumstances. This reclassification had no impact on our net loss as previously
reported. Net revenue as presented in the accompanying  consolidated  statements
of operations has been shown net of approximately  $1.1 million and $1.3 million
of agency fees for the years ended December 31, 2004 and 2003, respectively.

SendTec's  DirectNet  Advertising  division,  which provides online  interactive
marketing  services  for its  clients,  generated  approximately  86% of the net
revenue reported for the marketing  services segment for the year ended December
31,  2004.  SendTec  also  provided  marketing  services  to our VoIP  telephony
services business segment which resulted in the recording of approximately  $0.9
million  of  intersegment   marketing   services   revenue  since  its  date  of
acquisition.

Net revenue  generated by our telephony  services  division totaled $0.4 million
for the year  ended 2004 as  compared  to $0.5  million in 2003.  As part of the
Company's  strategy  to enter the VoIP  business,  the Company  acquired  Direct
Partner Telecom,  Inc.  ("DPT"),  an international  licensed  telecommunications
carrier engaged in the purchase and resale of  telecommunications  services over
the  Internet,  in May 2003.  Telephony  services  net revenue  generated by DPT
during  2003  represented  approximately  89% of total  telephony  services  net
revenue  and  was  derived   principally  from  the  charges  to  customers  for
international  call completion based on the volume of minutes  utilized.  During
the first quarter of 2004,  management decided to suspend the wholesale business
of DPT and dedicate  DPT's  physical and  intellectual  assets to the  Company's
retail VoIP  business.  Telephony  services  net revenue for the year ended 2004
consisted  solely of revenue  attributable  to sale of our voiceglo and GloPhone
branded retail products.

OPERATING EXPENSES BY BUSINESS SEGMENT:

<TABLE>
<CAPTION>
                                                                                     Depreciation
                                  Cost of     Sales and     Product     General and       and
Years ended:                      Revenue     Marketing   Development Administrative Amortization     Total
                                -----------  -----------  -----------  -------------  -----------  ----------
<S>                             <C>          <C>          <C>          <C>            <C>         <C>
2004
Computer games ................ $ 2,114,716  $   377,531  $   475,785  $     571,285  $    10,606 $ 3,549,923
Marketing services.............   9,670,229      691,654           --      1,621,146      227,270  12,210,299
VoIP telephony services .......   6,940,023    6,720,531      578,101      3,266,366    1,355,532  18,860,553
Corporate expenses.............          --           --           --      3,643,354       32,138   3,675,492
Intersegment eliminations......    (462,863)    (403,079)          --             --           --    (865,942)
                                -----------  -----------  -----------  -------------  ----------- -----------
                                $18,262,105  $ 7,386,637  $ 1,053,886  $   9,102,151  $ 1,625,546  37,430,325
                                ===========  ===========  ===========  =============  ===========
VoIP telephony services
   Impairment charge............                                                                    1,661,975
   Loss on settlement of
      Contractual obligation....                                                                      406,750
                                                                                                  -----------
                                                                                                  $39,499,050
                                                                                                  ===========

<CAPTION>
                                                                                     Depreciation
                                  Cost of     Sales and     Product    General and       and
                                  Revenue     Marketing   Development Administrative Amortization     Total
                                -----------  -----------  -----------  -------------  -----------  -----------
<S>                             <C>          <C>          <C>          <C>            <C>          <C>
2003
Computer games ................ $ 3,121,734  $   586,420  $   543,139  $     301,624  $    62,208  $4,615,125
VoIP telephony services .......   1,579,604    1,400,606      341,651      1,175,939      258,334   4,756,134
Corporate expenses.............          --           --           --      3,808,349        9,200   3,817,549
                                -----------  -----------  -----------  -------------  -----------  ----------
                                $ 4,701,338  $ 1,987,026  $   884,790  $   5,285,912  $   329,742  13,188,808
                                ===========  ===========  ===========  =============  ===========
VoIP telephony services
   Impairment charge...........                                                                       908,384
                                                                                                  -----------
                                                                                                  $14,097,192
                                                                                                  ===========
</TABLE>

COST OF  REVENUE.  Cost of  revenue  totaled  $18.3  million  for the year ended
December 31, 2004, an increase of $13.6  million from the $4.7 million  reported
for the year ended  December  31,  2003.  An increase  of $5.4  million in costs
incurred  by our  VoIP  telephony  services  business  segment,  as  well as the
inclusion of marketing  services  cost of revenue  related to the  operations of
SendTec from date of acquisition (September 1, 2004) totaling approximately $9.2
million, net of intersegment eliminations, were slightly offset by a decrease of
$1.0  million in cost of  revenue  reported  by our  computer  games  segment as
compared to 2003.


                                       21
<PAGE>


Cost  of  revenue  related  to our  computer  games  business  segment  consists
primarily of printing costs of our games magazine,  Internet connection charges,
personnel  costs,  maintenance  costs  of  website  equipment  and the  costs of
merchandise sold and shipping fees in connection with our online store.  Cost of
revenue of our computer  games  segment  totaled  approximately  $2.1 million in
2004, a decrease of  approximately  $1.0 million from 2003, due primarily to the
revenue decreases discussed above.

Cost of revenue related to our marketing  services  business segment consists of
fees paid to third party vendors for project  related  research,  production and
post-production  services and products.  Additionally,  cost of revenue includes
third party vendor fees incurred to acquire online advertising media,  including
the  actual  cost of the media.  Intersegment  eliminations  in 2004,  represent
approximately  $0.5  million of costs  incurred by SendTec  related to marketing
services provided to our VoIP telephony services segment.

Cost of revenue of our VoIP  telephony  services  business  segment for the year
ended December 31, 2004 totaled $6.9 million and  principally  includes  carrier
transport  and  circuit  interconnection  costs  related to our retail  products
marketed under the voiceglo and GloPhone  brand names,  as well as personnel and
consulting costs incurred in support of our Internet telecommunications network.
Additionally,  during the year ended December 31, 2004, cost of revenue included
charges of $1.5 million related to write-downs of telephony  equipment inventory
(See Note 1(f) of the  Consolidated  Financial  Statements).  Cost of revenue of
$1.6 million reported for the VoIP telephony  services  business during the year
ended December 31, 2003, consisted principally of costs related to the wholesale
telephony  services  business  marketed by DPT, as well as start up costs of our
retail VoIP operation.

SALES AND MARKETING.  Sales and marketing expenses consist primarily of salaries
and related expenses of sales and marketing personnel, commissions,  advertising
and marketing costs, public relations expenses and promotional activities. Sales
and marketing expenses totaled $7.4 million in 2004 versus $2.0 million in 2003.
The rise in consolidated sales and marketing expenses was principally the result
of the  $5.3  million  increase  in sales  and  marketing  expenses  of the VoIP
telephony services division as compared to 2003. During 2004, the VoIP telephony
services  division  increased  Internet and television  advertising and incurred
increased  commissions expenses related to "free" GloPhone sign-ups,  as well as
higher  personnel  costs.  The $0.7  million  of sales  and  marketing  expenses
incurred by SendTec subsequent to its acquisition by the Company on September 1,
2004,  was partially  offset by the $0.2 million  decline in sales and marketing
expenses of the computer  games  business  segment as compared to the year ended
2003. As mentioned in the discussion of net revenue above,  commissions  paid to
agents to obtain  subscribers to our Computer Games magazine had previously been
reported as sales and marketing  expenses.  Effective  June 2004, we changed our
method of  accounting  for these agency fees,  reporting  them as a reduction of
magazine  sales  subscription   revenue,   which  we  believe  is  a  preferable
alternative  accounting  method  and a more  commonly  used  industry  practice.
Approximately  $0.4 million of  intersegment  sales and marketing  expenses were
recognized by the VoIP  telephony  services  segment during the year ended 2004.
These expenses  relate to services which were provided by SendTec  subsequent to
its acquisition by the Company and have been eliminated in consolidation.

PRODUCT  DEVELOPMENT.  Product development expenses include salaries and related
personnel  costs;  expenses  incurred in  connection  with website  development,
testing and upgrades;  editorial and content  costs;  and costs  incurred in the
development of our voiceglo and GloPhone branded products.  Product  development
expenses  totaled $1.1 million for the year ended  December 31, 2004 as compared
to $0.9  million  for the year  ended  December  31,  2003.  The year  over year
increase  in  product  development  expenses  was  principally  attributable  to
increases in personnel and  consulting  costs related to the  development of our
retail VoIP telephony products and services.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of salaries and other personnel  costs related to management,  finance
and  accounting  functions,  facilities,  outside legal and  professional  fees,
information-technology  consulting,  directors and officers insurance,  bad debt
expenses  and general  corporate  overhead  costs.  General  and  administrative
expenses of $9.1  million in 2004  increased  $3.8 million from the $5.3 million
reported  for  2003.   Increases  in  personnel  costs  and  other  general  and
administrative  expenses  directly  attributable to our VoIP telephony  services
division,  as well as general and  administrative  expenses  incurred by SendTec
since date of acquisition by the Company,  were principally  responsible for the
increase in this expense category as compared to 2003. Other expense  categories
which  increased  as  compared  to 2003  largely  as a result  of the  Company's
entrance  into the VoIP  business  included  legal fees,  information-technology
consulting, other professional fees and facilities costs.

DEPRECIATION AND  AMORTIZATION.  Depreciation  and amortization  expense totaled
$1.6 million for the year ended  December 31,  2004.  The $1.3 million  increase
from the  prior  year  resulted  principally  from  investments  related  to the
development  of our VoIP network and to a lesser extent to costs incurred in the
development  of our VoIP  telephony  customer  billing  system.  As discussed in
"Impairment  Charge"  below,  certain  long-lived  assets of the VoIP  telephony
services division were written-off  effective  December 31, 2004, as a result of
the Company's review of its long-lived assets for impairment. Approximately $0.5
million  of  depreciation  and  amortization   expense  related  to  the  assets
written-off was recorded during 2004.


                                       22
<PAGE>


IMPAIRMENT  CHARGE.  Due to the  significant  operating  and  cash  flow  losses
incurred by the Company's VoIP telephony services division during 2004 and 2003,
coupled with  management's  projection  of continued  losses in the  foreseeable
future,  the  Company  performed  an  evaluation  of the  recoverability  of the
division's long-lived assets during the first quarter of 2005 in connection with
the  preparation  of our  2004  annual  financial  statements.  This  evaluation
indicated that the carrying value of certain of our VoIP  division's  long-lived
assets  exceeded  the fair value of such  assets,  as measured by quoted  market
prices or our  estimate of fair value.  As a result,  we recorded an  impairment
charge of approximately $1.7 million in the accompanying  consolidated statement
of operations for the year ended December 31, 2004. The impairment loss included
the write-off of the full value of amounts  previously  capitalized  by the VoIP
telephony services division as internal-use software, website development costs,
acquired  technology  and patent costs,  as well as certain  other  assets.  The
long-lived assets affected by this charge may continue to be used in operations.
As a result  of this  impairment  charge,  we expect to  realize  reductions  in
depreciation and amortization expense in future periods.

LOSS ON SETTLEMENT OF CONTRACTUAL  OBLIGATION.  Subsequent to year-end 2004, the
Company  formally  terminated  its  contract  with a supplier of VoIP  telephony
handsets and agreed to settle the unconditional  purchase  obligation under such
contract,  which totaled approximately $3.0 million. The settlement provided for
(i) a cash payment of $0.2 million, (ii) the return of 35,000 VoIP handset units
from the  Company's  inventory,  and (iii) the  issuance  of  300,000  shares of
theglobe.com Common Stock. The value attributed to the loss on the settlement of
the contractual  obligation,  which  approximated  $0.4 million,  was accrued at
December 31, 2004,  and included as a component of operating  expenses  reported
for 2004.

INTEREST  INCOME  (EXPENSE),  NET. On February 2, 2004,  our  Chairman and Chief
Executive  Officer and his spouse,  entered into a Note Purchase  Agreement with
the Company pursuant to which they acquired a demand convertible promissory note
(the "Bridge Note") in the aggregate  principal  amount of $2,000,000.  Non-cash
interest  expense  of $0.7  million  was  recorded  during  2004  related to the
beneficial  conversion  feature  of the  Bridge  Note  as the  Bridge  Note  was
convertible  into our Common  Stock at a price below the fair market  value (for
accounting  purposes)  of our Common  Stock,  based on the closing  price of our
Common  Stock as  reflected  on the  OTCBB  on the  issuance  date of the  Note.
Non-cash interest expense of approximately $1.6 million was recorded during 2003
related  to  the  beneficial  conversion  features  of  the  $1,750,000  Secured
Convertible Notes and warrant issued on May 22, 2003.

OTHER EXPENSE,  NET. Other expense,  net,  includes reserves against the amounts
loaned by the Company to Tralliance  Corporation,  a development  stage internet
related  business  venture,  totaling  $0.5  million in each of the years  ended
December  31,  2004 and  2003.  Partially  offsetting  the 2004  expense,  was a
favorable settlement of a previously disputed vendor claim by the computer games
business segment of approximately $0.4 million.

INCOME TAXES.  No tax benefit was recorded for the years ended December 31, 2004
and  2003 as we  recorded  a 100%  valuation  allowance  against  our  otherwise
recognizable  deferred tax assets due to the uncertainty  surrounding the timing
or ultimate realization of the benefits of our net operating loss carry forwards
in future  periods.  Our effective  tax rate differs from the statutory  Federal
income tax rate, primarily as a result of the uncertainty  regarding our ability
to utilize our net operating  loss  carryforwards.  As of December 31, 2004, the
Company had net operating loss carryforwards  available for U.S. and foreign tax
purposes of approximately $162 million. These carryforwards expire through 2024.
The Tax Reform Act of 1986 imposes  substantial  restrictions on the utilization
of net operating losses and tax credits in the event of an "ownership change" of
a corporation.  As defined in the Internal Revenue Code of 1986, as amended, due
to the change in our  ownership  interests  in August  1997 and May 1999 and the
Company's  private  offering  of  securities  in March 2004  (together  with the
exercise and  conversion of various  securities in connection  with such private
offering  of  securities)  and the  issuance  of shares in  connection  with our
acquisition of SendTec on September 1, 2004, the Company may have  substantially
limited or eliminated the availability of its net operating loss  carryforwards.
There can be no  assurance  that the Company will be able to avail itself of any
net operating loss carryforwards.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

NET  REVENUE.  Our  revenue  sources  were  principally  from  the sale of print
advertisements  under  short-term  contracts in our games  information  magazine
Computer Games;  the sale of video games and related  products through our games
distribution  business  Chips & Bits,  Inc.;  the sale of our games  information
magazine through newsstands and  subscriptions;  and to a lesser extent from the
sale of VoIP telephony services.

NET REVENUE BY BUSINESS SEGMENT:
                                               2003               2002
                                            -----------       -----------
     Computer games ....................    $ 4,736,032       $ 7,245,276
     VoIP telephony services ...........        548,081                --
                                            -----------       -----------
                                            $ 5,284,113       $ 7,245,276
                                            ===========       ===========


                                       23
<PAGE>


Net  revenue  totaled  $5.3  million  for the year ended  December  31,  2003 as
compared to $7.2 million for the year ended  December 31, 2002. The $1.9 million
decline in total net revenue was  primarily  attributable  to  decreases  in net
revenue from electronic  commerce,  advertising  and magazine  sales,  partially
offset by net revenue generated by our VoIP telephony services division.

Advertising revenue from the sale of print  advertisements in our games magazine
was $2.6 million,  or 48%, of total net revenue for the year ended  December 31,
2003,  versus  $3.1  million,  or 43%,  of total net revenue for the prior year.
Barter advertising revenue represented approximately 2% of total net revenue for
each of the years ended December 31, 2003 and 2002, respectively.

Net revenue  attributable to the sale of our games information magazine was $0.7
million,  or 14%,  of total net  revenue  for the 2003 year as  compared to $1.0
million, or 14%, of total net revenue in 2002. As discussed in the comparison of
the year ended December 31, 2004 to the year ended December 31, 2003, we changed
the  classification  of agency  fees paid to third  parties as  commissions  for
obtaining new  subscribers  to our Computer  Games  magazine.  Previously  these
commissions  had been  classified  as sales and  marketing  expense  within  the
consolidated statement of operations. Effective June 2004, we changed our method
of accounting  for these agency fees,  reporting them as a reduction of magazine
sales subscription  revenue. We believe this alternative  accounting method is a
more commonly used industry practice and is preferable under the  circumstances.
This reclassification had no impact on our net loss as previously reported.  Net
revenue as presented in the accompanying  consolidated  statements of operations
is shown net of  approximately  $1.3 million and $2.4 million of agency fees for
the years ended  December  31, 2003 and 2002,  respectively.  The decline in net
revenue from the sale of our games magazine as compared to the previous year was
primarily  the  result  of a  decrease  in the  circulation  base  of our  games
magazine.  As rates for print  advertising  charged  to  advertisers  are driven
largely by the  circulation of the  publication,  the decline in the circulation
base  of  our  games  magazine  has  also  contributed  to the  decrease  in our
advertising revenue.

Sales of products through our online store,  Chips & Bits,  Inc.,  accounted for
$1.5 million,  or 28%, of total net revenue for the year ended December 31, 2003
as compared  to $3.1  million,  or 42%, of total net revenue for 2002.  The $1.6
million  decrease was  primarily  the result of advances in  technology  and the
number of releases of console and online games,  which  traditionally  have less
sales  loyalty to our online store,  coupled with the  continued  decline in the
number of major PC game  releases,  on which our  online  store  relies  for the
majority of sales.  In addition,  an increasing  number of major  retailers have
increased the selection of video games offered by both their traditional "bricks
and mortar"  locations and their online  commerce  sites  resulting in increased
competition.

Net revenue from VoIP telephony services totaled $0.5 million for the year ended
December 31, 2003. As discussed in the comparison of the year ended December 31,
2004 to the year ended December 31, 2003,  approximately  89% of total telephony
services  net  revenue  in 2003  was  attributable  to the  operation  of  DPT's
wholesale  business.  Net revenue  attributable  to the launch of the  Company's
retail VoIP products  during the second half of 2003  represented  the remaining
11% of total 2003 telephony services net revenue.

OPERATING EXPENSES BY BUSINESS SEGMENT:

<TABLE>
<CAPTION>
                                                                                      Depreciation
                                  Cost of     Sales and     Product     General and       and
Years ended:                      Revenue     Marketing   Development  Administrative Amortization    Total
                                -----------  -----------  -----------  -------------  -----------  -----------
<S>                             <C>          <C>          <C>          <C>            <C>          <C>
2003
Computer games ................ $ 3,121,734  $   586,420  $   543,139  $     301,624  $    62,208  $ 4,615,125
VoIP telephony services .......   1,579,604    1,400,606      341,651      1,175,939      258,334    4,756,134
Corporate expenses.............          --           --           --      3,808,349        9,200    3,817,549
                                -----------  -----------  -----------  -------------  -----------  -----------
                                $ 4,701,338  $ 1,987,026  $   884,790  $   5,285,912  $   329,742   13,188,808
                                ===========  ===========  ===========  =============  ===========
VoIP telephony services
   Impairment charge...........                                                                        908,384
                                                                                                   -----------
                                                                                                   $14,097,192
                                                                                                   ===========

<CAPTION>
                                                                                      Depreciation
                                  Cost of     Sales and     Product     General and       and
                                  Revenue     Marketing   Development Administrative Amortization     Total
                                -----------  -----------  -----------  -------------  -----------  -----------
2002
<S>                             <C>          <C>          <C>          <C>            <C>          <C>
Computer games ................ $ 5,453,136  $ 1,101,417  $   652,997  $     364,025  $    85,327  $ 7,656,902
VoIP telephony services .......          --           --           --          1,196           --        1,196
Corporate expenses.............          --           --           --      2,524,713        3,253    2,527,966
                                -----------  -----------  -----------  -------------  -----------  -----------
                                $ 5,453,136  $ 1,101,417  $   652,997  $   2,889,934  $    88,580  $10,186,064
                                ===========  ===========  ===========  =============  ===========  ===========
</TABLE>

                                       24

<PAGE>

COST OF REVENUE.  Cost of revenue related to our computer games division totaled
approximately  $3.1  million and $5.5  million for the years ended  December 31,
2003 and 2002,  respectively.  The gross margin of the Company's  games division
approximated 34% in 2003 as compared to 25% in 2002. The overall  improvement in
the gross  margin of the games  division as compared to the prior year  resulted
from the increase in  advertising  revenue as a percentage of total net revenue,
coupled with an improvement in the gross profit margin of Chips & Bits.

VoIP  telephony  services  cost of  revenue  totaled  $1.6  million  in 2003 and
includes  carrier  transport  and circuit  interconnection  costs related to the
Company's  wholesale  telephony  services  business  marketed  by  DPT  and  the
Company's retail  telephony  services  business  marketed under the voiceglo and
GloPhone brand names.  Personnel and consulting costs incurred in support of the
Company's  Internet  telecommunications  network,  as well as customer equipment
costs  related to the sale of the Company's  voiceglo  service  launched  during
mid-August 2003 are also included in this expense category.

SALES AND MARKETING. Sales and marketing expenses were $2.0 million for the year
ended  December 31, 2003 as compared to $1.1 million for the year ended December
31, 2002. Sales and marketing  expenses of the VoIP telephony  services division
totaling  $1.4  million  were  partially  offset by a decline of $0.5 million in
sales and  marketing  expenses of the  Company's  games  division as compared to
2002. As mentioned in the discussion of Net Revenue above,  commissions  paid to
agents to obtain  subscribers to our Computer Games magazine had previously been
reported as sales and marketing  expenses.  Effective  June 2004, we changed our
method of  accounting  for these agency fees,  reporting  them as a reduction of
magazine  sales  subscription   revenue,   which  we  believe  is  a  preferable
alternative accounting method and a more commonly used industry practice.  Sales
and marketing expenses of the games division  represented  approximately 12% and
15% of total net revenue attributable to the games division's operations for the
years ended December 31, 2003 and 2002, respectively.  Costs related to employee
salaries,  the  identification  and  continuing  development  of an  independent
outside sales network and  advertising  the VoIP product line were the principal
components  of sales  and  marketing  expenses  of the VoIP  telephony  services
division during the year ended December 31, 2003.

PRODUCT DEVELOPMENT.  Product development expenses increased to $0.9 million for
the year ended December 31, 2003, as compared to $0.7 million for the year ended
December 31, 2002. The increase was principally  attributable to personnel costs
and consulting expenses relating to the development of our retail VoIP telephony
products and services, which totaled approximately $0.3 million during 2003.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses were
$5.3 million for the year ended  December 31, 2003,  as compared to $2.9 million
for the year ended  December 31, 2002.  Increases in headcount and the resulting
personnel  expenses,  as well  as  other  general  and  administrative  expenses
directly  attributable  to the  Company's new line of business,  VoIP  telephony
services,  were major factors contributing to the $2.4 million increase in total
general and administrative expenses. Other expense categories which increased as
compared to 2002  largely as a result of the  Company's  entrance  into the VoIP
business, included legal fees, other professional fees and facilities costs.

DEPRECIATION AND  AMORTIZATION.  Depreciation  and amortization  expense of $0.3
million in 2003 included approximately $0.1 million representing amortization of
the  non-compete  agreement  recorded in connection  with the acquisition of DPT
prior to its write-off at year-end 2003, as well as  amortization of capitalized
patent costs related to our retail VoIP products.

IMPAIRMENT  CHARGE.  During the first  quarter of 2004,  the Company  decided to
suspend  DPT's  wholesale  business and decided to dedicate the DPT physical and
intellectual  assets to its retail VoIP business,  which is conducted  under the
brand names of voiceglo  and  GloPhone.  As a result,  management  reviewed  the
long-lived  assets  associated  with the wholesale VoIP business for impairment.
Goodwill  of  approximately  $0.6  million  and the  unamortized  balance of the
non-compete   intangible  asset  of  approximately   $0.3  million  recorded  in
connection with the May 2003 acquisition of DPT were written off and recorded as
an impairment loss in 2003. No impairment charges were recorded during 2002.

INTEREST INCOME  (EXPENSE),  NET.  Non-cash interest expense of $1.5 million was
recorded  in the second  quarter of 2003  related to the  beneficial  conversion
feature of the $1,750,000 in Secured  Convertible  Notes issued on May 22, 2003.
The expense resulted as the Secured  Convertible Notes were convertible into our
Common  Stock at a price  below the fair market  value of our Common  Stock (for
accounting  purposes),  based  on the  closing  price  of our  Common  Stock  as
reflected  on the OTCBB on the  issuance  date of the notes.  In  addition,  the
warrant to acquire  3,888,889  shares of our Common  Stock  issued to one of the
note  holders was  exercisable  at a price  below the fair  market  value of our
Common Stock (for accounting purposes), based on the closing price of our Common
Stock as reflected on the OTCBB on the date of issuance.  The value  assigned to
the  warrant  was  recorded  as a  discount  to the face  value  of the  Secured
Convertible  Notes to be  amortized  to  interest  expense  over the term of the
Secured Convertible Notes.  Discount  amortization of approximately $0.2 million
was included in interest expense, net, during the year ended December 31, 2003.

OTHER EXPENSE,  NET.  Other  expense,  net, of $0.5 million was reported for the
year ended  December  31, 2003 and  consisted  of  reserves  against the amounts
loaned by the Company to Tralliance  Corporation,  a development  stage Internet
related  business venture totaling $0.5 million (as more fully described in Note
4,  "Acquisitions  and  Disposition,"  of the  Notes to  Consolidated  Financial
Statements).


                                       25
<PAGE>


INCOME  TAXES.  As was the case in the year  ended  December  31,  2004,  no tax
benefit was recorded for the year ended  December 31, 2003 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.  The income
tax provision  recorded for the year ended December 31, 2002 was based solely on
state and local taxes on business and investment capital.

LIQUIDITY AND CAPITAL RESOURCES

FUTURE AND CRITICAL NEED FOR CAPITAL

For the reasons described below,  Company  management does not presently believe
that cash on hand and cash flow  generated  internally  by the  Company  will be
adequate to fund the operation of its businesses and the  implementation  of its
current VoIP  business  plan beyond a short period of time.  We have  received a
report  from our  independent  accountants,  relating to our  December  31, 2004
audited financial  statements  containing an explanatory  paragraph stating that
our  recurring  losses  from  operations  and  our  accumulated   deficit  raise
substantial  doubts about our ability to continue as a going concern.  If we are
not successful in entering into a financing,  sale, or business transaction that
infuses  sufficient  cash resources into the Company  sometime during the second
quarter of 2005,  management believes that it will no longer be able to continue
the  implementation  of its current VoIP  business  plan.  In such event,  it is
likely that we would be required to either  temporarily  suspend or  permanently
shutdown the operation of our VoIP telephony services business. Additionally, in
such  event,  management  believes  that it may also be  required  to revise the
business  plan of some or all of its  other  business  segments  and/or  further
implement  company-wide cost reduction programs.  There can be no assurance that
the Company would be successful in implementing  such revised business plans and
effectively  restructuring  its  businesses  so that the Company  would have the
ability to continue to operate as a going concern in the future.

At December 31, 2004, the Company's  sole source of liquidity  consisted of $6.8
million of cash and cash equivalents. The Company continues to incur substantial
consolidated net losses and management  believes the Company will continue to be
unprofitable for the foreseeable future. Consequently, as of March 25, 2005, the
Company's cash and cash  equivalent  resources had  diminished to  approximately
$3.9 million.

The  Company's  consolidated  net losses and cash usage during 2004 and 2003 and
projected future periods relate primarily to the operation of its VoIP telephony
services  business  and to a  lesser  extent  to  corporate  overhead  expenses.
SendTec,  the Company's marketing services business,  has contributed net income
and cash flow since being acquired on September 1, 2004, and management  expects
that SendTec will  continue to be profitable  and provide  positive cash flow in
future  periods.  Management  does not expect that its computer  games  business
segment will incur significant net losses or use significant  amounts of cash in
the foreseeable future.

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

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

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

During  October  2004,  the  Company  engaged  financial  advisors to assist the
Company in raising capital through a private placement of its equity securities,
or  in  entering  into  other  business  relationships  with  certain  strategic
investors. In February 2005, the Company engaged an additional financial advisor
to assist the  Company in  connection  with  raising  capital  through a private
placement of equity securities in either the Company or its SendTec wholly-owned
subsidiary  or  alternatively  in selling  either  part or all of the  Company's


                                       26
<PAGE>


businesses  or assets,  including  its SendTec  business.  We currently  have no
access to credit  facilities with traditional  third party lenders and there can
be no  assurance  that we  would  be able to  raise  capital  or sell any of our
businesses or assets.  In addition,  any financing  that could be obtained would
likely  significantly  dilute  existing  shareholders.  As more fully  described
below,  management is exploring a number of strategic alternatives regarding the
Company's  future  business  operations  and is in the process of developing and
implementing  internal  actions to improve the Company's  liquidity and business
performance.  The Company's future strategic  direction is highly dependent upon
the outcome of its efforts to raise  capital  and/or sell certain  businesses or
assets.

Subsequent  to December  31, 2004,  the Company  reevaluated  its existing  VoIP
telephony  services business plan and is currently in the process of terminating
and/or  modifying  certain  of its  existing  product  offerings  and  marketing
programs,  as well as  developing  and  testing  certain new VoIP  products  and
features.  The Company has also recently made the decision to discontinue  using
its SendTec business to perform marketing services for its VoIP business, and to
instead  dedicate 100% of SendTec's  marketing  services to support and grow its
own third party  customer base.  Additionally,  in order to reduce its near term
consolidated  net losses and cash usage, the Company is currently in the process
of  implementing  a number  of  cost-reduction  actions  at its  VoIP  telephony
services business,  including decreases in personnel and salary levels,  carrier
and data center costs (including the minimum  commitment costs discussed above),
and marketing/advertising expenses.

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

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

Although  substantially  dependent upon our ability to consummate a financing or
sale transaction that provides  additional cash resources to the Company, we may
enter into new lines of  business  in the future.  In this  regard,  in November
2004, we announced  our  preliminary  intent to exercise our purchase  option to
acquire   Tralliance   Corporation    ("Tralliance"),    a   development   stage
Internet-related  business  venture  that had recently  entered  into  exclusive
technical and commercial negotiations with the Internet Corporation for Assigned
Names and Numbers  ("ICANN") to become the registry for the ".travel"  top-level
domain.  Tralliance was created to develop, operate and administer the ".travel"
top level domain,  a new segment of the Internet devoted to the travel industry.
The exercise of our purchase option to acquire  Tralliance is conditioned upon a
number of factors,  including  ICANN  final  approval  of  Tralliance  to be the
registry of the ".travel"  top-level  domain.  If and when the Company exercises
its purchase  option,  we would issue 1.5 million  shares of our Common Stock in
exchange for all of the  outstanding  capital stock of  Tralliance  and also may
need to fund  start-up  and initial  operating  expenses  of a yet  undetermined
amount. As of March 25, 2005,  Tralliance  continues to negotiate with ICANN and
has not yet been  awarded  the right to become  the  registry  operator  for the
".travel" top-level domain.

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


                                       27
<PAGE>

CASH FLOW ITEMS

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

As of December  31,  2004,  we had  approximately  $6.8 million in cash and cash
equivalents  as compared to $1.1 million as of December 31, 2003.  Net cash used
in operating  activities was $17.7 million and $7.1 million, for the years ended
December 31, 2004 and 2003, respectively.  The period-to-period  increase in net
cash used in operating  activities  resulted  primarily from the increase in our
net operating losses, partially offset by the effect of non-cash charges.

Net cash of $5.4 million was used in investing  activities  during 2004. As more
fully  described  in  the  following  "Capital  Transactions"  section  of  this
Management's   Discussion  and  Analysis  or  Plan  of  Operation  and  Note  4,
"Acquisitions  and  Disposition,"  in the  accompanying  Consolidated  Financial
Statements,  in connection with its acquisition of SendTec on September 1, 2004,
the Company paid cash  consideration  of approximately  $6.0 million,  excluding
transaction  costs.  As of the date of acquisition,  SendTec held  approximately
$3.6 million of cash. Thus, the Company used a net amount of approximately  $2.4
million of cash to acquire  SendTec.  Additionally,  the Company  incurred costs
totaling  $2.7  million  and  $2.4  million  for  capital  expenditures  related
primarily  to the  development  of its VoIP  telephony  network  and to a lesser
extent to the development of its VoIP telephony  customer  billing system during
the years  ended  December  31,  2004 and  2003,  respectively.  We also  loaned
approximately  $0.5  million to  Tralliance  Corporation,  a  development  stage
Internet  related business  venture,  during each of the years of 2004 and 2003,
respectively.

Net cash  provided  by  financing  activities  was $28.9  million  for 2004.  As
discussed below and in the Notes to the Consolidated  Financial Statements,  the
Company completed a private offering of its Common Stock and warrants to acquire
its Common Stock in March 2004 resulting in the issuance of 33,381,647 shares of
Common Stock, and warrants to acquire 16,690,824 shares of its Common Stock, for
gross  proceeds of  approximately  $28.4  million.  Offering costs included $1.2
million in cash commissions paid to the placement agent and  approximately  $0.2
million in legal and  accounting  fees.  In addition,  on February 2, 2004,  the
Company issued a $2,000,000  Bridge Note which was  subsequently  converted into
our Common Stock in connection with the March 2004 private offering. Proceeds of
approximately  $0.2 million were received from the exercise of stock options and
warrants  during 2004.  Cash  provided by financing  activities  during the year
ended  December 31, 2003,  included  proceeds of $8.6  million,  net of offering
costs, from the issuance of Series G Preferred Stock and the associated warrants
in July 2003, proceeds of $0.5 million from the issuance of Series F Convertible
Preferred  Stock and $1.75  million in proceeds from Secured  Convertible  Notes
issued during the first half of 2003.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

As of December  31,  2003,  we had  approximately  $1.1 million in cash and cash
equivalents  as compared to $0.7 million as of December 31, 2002.  Net cash used
in  operating  activities  was $7.1 million and $2.0 million for the years ended
December 31, 2003 and 2002,  respectively.  The  year-over-year  increase in net
cash used in operating activities resulted primarily from an increase in our net
operating losses, partially offset by the impact of non-cash charges recorded in
2003  and  favorable   working  capital  changes  recorded  in  2002.  The  most
significant of these non-cash charges during 2003 included the non-cash interest
expense  recorded  as a  result  of the  beneficial  conversion  feature  of the
$1,750,000 in Secured Convertible Notes and associated warrants,  as well as the
non-cash   impairment  charge  related  to  the  write-off  of  goodwill  and  a
non-compete  intangible  originally  recorded as a result of the  acquisition of
DPT.

Net cash of $3.2 million was used in investing  activities during the year ended
December 31, 2003.  The Company  incurred  $2.4 million in capital  expenditures
during  2003,  primarily  within the VoIP  telephony  services  division.  These
expenditures  included costs  incurred in the  development of our VoIP telephony
network used to support the retail VoIP product  line,  as well as the Company's
wholesale VoIP business.  Additionally,  in February 2003, the Company committed
to fund  operating  expenses of  Tralliance  Corporation,  a  development  stage
Internet related business venture, at the Company's discretion, in the form of a
loan. As of December 31, 2003,  approximately  $0.5 million had been advanced to
the venture.  During 2003, the Company invested  approximately  $10.3 million in
marketable  securities,  the funds of which were  principally  from the proceeds
received in  connection  with the issuance of the  Company's  Series G Preferred
Stock.  Approximately  $10.1 million of  investments  were sold  throughout  the
second  half  of  2003 as  working  capital  was  required  to fund  operations.
Partially  offsetting  these  uses of funds in 2003 was the $0.1  million in net
cash acquired upon the May 2003  acquisition  of DPT. The purchase  price of DPT
consisted of the issuance of 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.  Warrants to acquire an additional  2,750,000  shares of our Common Stock
could be  issued  if  certain  performance  or  other  criteria  are  satisfied.
Effective  March 31, 2004,  500,000 of the earn-out  warrants were  forfeited as
performance targets had not been achieved for the first of the earn-out periods.
An  additional  750,000 of the warrants  will be forfeited  effective  March 31,
2005, as  performance  targets for the second of the three year periods will not
be achieved.  Net cash provided by investing activities in 2002 was $0.1 million
principally resulting from the sale of the assets of the Happy Puppy website.


                                       28
<PAGE>


Net cash  provided by financing  activities in 2003 totaled  $10.6  million.  As
discussed below and in the Notes to the Consolidated  Financial Statements,  the
Company  issued $0.5 million in Series F  Convertible  Preferred  Stock in March
2003, $1.75 million of Secured  Convertible Notes in May 2003, and approximately
$8.6  million,  net of  offering  costs,  of Series G  Automatically  Converting
Preferred Stock and associated warrants in July 2003.  Immediately after the May
2003  closing of the DPT  acquisition,  the Company paid $0.5 million in cash to
the former  stockholders  of DPT in  repayment  of certain  loans which they had
extended to DPT prior to its acquisition by theglobe.com.

CAPITAL TRANSACTIONS

On September 1, 2004,  the Company  closed upon an agreement  and plan of merger
dated August 31, 2004  pursuant to which the Company  acquired all of the issued
and outstanding shares of capital stock of SendTec. Pursuant to the terms of the
Merger,  in  consideration  for  the  acquisition  of  SendTec,   theglobe  paid
consideration  consisting  of: (i)  $6,000,000  in cash,  excluding  transaction
costs,  (ii) the  issuance of an aggregate of  17,500,024  shares of  theglobe's
Common Stock,  (iii) the issuance of an aggregate of 175,000  shares of Series H
Automatically  Converting  Preferred Stock (which as more fully described below,
was subsequently  converted into  approximately  17,500,500 shares of theglobe's
Common Stock),  and (iv) the issuance of a subordinated  promissory  note in the
amount of $1 million.  In addition,  warrants to acquire shares of the Company's
Common Stock would be issued to SendTec shareholders when and if SendTec exceeds
forecasted operating income, as defined, of $10.125 million, for the year ending
December  31,  2005 (the  "Earn-out  Consideration").  The  number  of  earn-out
warrants  would  range from an  aggregate  of 250,000  to  2,500,000  (if actual
operating income exceeds the forecast by at least 10%). If and to the extent the
warrants are earned,  the exercise  price of the  performance  warrants would be
$0.27 per share and they will be exercisable  for a period of 5 years.  The Note
bears  interest  at the  rate of 4% per  annum  and  matures  in one lump sum of
principal and interest on September 1, 2005.

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

Each share of the Series H Preferred Stock was automatically  converted into 100
shares of theglobe's Common Stock on December 1, 2004, the effective date of the
amendment  to  the  Company's   certificate  of  incorporation   increasing  its
authorized shares of Common Stock from 200,000,000 shares to 500,000,000 shares.

The Company  agreed to file a registration  statement  relating to the resale of
the shares of Common  Stock  issued in the Merger and the shares of Common Stock
underlying the Series H Preferred Stock and to cause the  effectiveness  of such
registration on or before September 1, 2005. The Company also agreed to keep the
registration  statement  effective  until at least the third  anniversary of the
Closing.  Pursuant to the terms of the Merger, in general, the equity securities
issued in the Merger may not be sold or  otherwise  transferred  for a period of
one (1) year without the prior written consent of the Company.

theglobe  also issued an  aggregate  of  approximately  4.0 million  replacement
options to acquire shares of theglobe's  Common Stock for each of the issued and
outstanding options to acquire shares of SendTec held by the former employees of
SendTec. Of these replacement options,  approximately 3.27 million have exercise
prices of $0.06 per share and approximately 700 thousand have exercise prices of
$0.27 per  share.  The terms of these  replacement  options  were as  negotiated
between  representatives  of theglobe  and the Stock  Option  Committee  for the
SendTec  2000 Amended and Restated  Stock Option Plan.  theglobe  also agreed to
grant an aggregate of 250,000  options to other  employees  and a consultant  of
SendTec at an exercise  price of $0.34 per share.  Twenty-five  percent of these
options  vested  immediately  and the balance  will vest in three  equal  annual
installments  assuming  the  continued  employment  of the  option  holders.  In
addition,  theglobe also granted 1,000,000 stock options at an exercise price of
$0.27 per share in  connection  with the  establishment  of a bonus  option pool
pursuant to which  various  employees  of SendTec  could vest in such options on
terms  substantially   similar  to  the  circumstances  in  which  the  Earn-out
Consideration may be earned.

In  connection  with the  Merger,  the  SendTec  executives  (whom  collectively
received  approximately  82% of the shares of Common Stock and  Preferred  Stock
issued in the Merger),  theglobe and Messrs.  Michael Egan and Edward  Cespedes,
our  Chairman  and  Chief   Executive   Officer  and   President,   respectively
(individually  and on behalf of  certain  affiliated  entities)  entered  into a
Stockholders'  Agreement.  Pursuant to the terms of the Stockholders' Agreement,
the SendTec  executives granted an irrevocable proxy to vote their shares to E&C
Capital  Partners  LLLP, an affiliate of Mr. Egan on all matters  (including the
election of directors) other than with respect to certain  potential  affiliated
transactions involving Messr. Egan or Cespedes. After giving effect to the grant
of the proxy (and excluding  outstanding options and warrants held by Mr. Egan),
Mr. Egan has voting power over  approximately  83.6  million  shares of theglobe
representing approximately 48.3% of the issued and outstanding voting securities
of the Company.  The SendTec  executives were also granted  certain  pre-emptive
rights  involving  potential new  issuances of securities by theglobe,  together
with a co-sale  right to  participate  in certain  qualifying  sales of stock by
Messrs.  Egan, Cespedes and their affiliates.  Messrs.  Egan, Cespedes and their
affiliates were granted a right of first refusal on certain sales (generally, in
excess of 10 million shares) by the SendTec executives,  together with the right
to  "drag-along"  the SendTec  executives  with regard to certain major sales of
their stock or a sale or merger of theglobe.


                                       29
<PAGE>


In March 2004,  the Company  completed a private  offering of 333,816 units (the
"Units") for a purchase price of $85 per Unit (the "PIPE  Offering").  Each Unit
consisted of 100 shares of the  Company's  Common  Stock,  $0.001 par value (the
"Common Stock"), and warrants to acquire 50 shares of the Company's Common Stock
(the  "Warrants").  The  Warrants  are  exercisable  for a period of five  years
commencing  60 days after the initial  closing at an initial  exercise  price of
$0.001 per share.  The aggregate  number of shares of Common Stock issued in the
PIPE  Offering  was  33,381,647   shares  for  an  aggregate   consideration  of
$28,374,400,  or  approximately  $0.57 per share  assuming  the  exercise of the
16,690,824 Warrants.  As of December 31, 2004,  approximately  11,102,000 of the
Warrants remain outstanding.

The  securities  offered  in the PIPE  Offering  were not  registered  under the
Securities  Act of 1933 and may not be offered  or resold in the  United  States
absent   registration  or  an  applicable   exemption  from  such   registration
requirements.  Pursuant to the terms of the PIPE  Offering,  the Company filed a
registration  statement  relating to the resale of the  Securities  on April 16,
2004 which became  effective on May 11, 2004.  Most of our investors  from prior
capital raises also elected to register their shares for resale pursuant to that
registration statement.

Halpern Capital,  Inc., acted as placement agent for the PIPE Offering,  and was
paid a  commission  of $1.2  million  and issued a warrant to acquire  1,000,000
shares  of  Common  Stock  at  $0.001  per  share.  As  of  December  31,  2004,
approximately 459,000 of these warrants remain outstanding.

The purpose of the PIPE  Offering  was to raise funds for use  primarily  in the
Company's  developing  VoIP  business,  including  the  deployment  of networks,
website  development,  marketing,  and capital  infrastructure  expenditures and
working capital.  Other intended uses of proceeds included funding  requirements
in connection with the Company's  other existing or future business  operations,
including acquisitions.

In connection  with the PIPE Offering,  Mr. Egan, our Chairman,  Chief Executive
Officer and  principal  stockholder,  together  with certain of his  affiliates,
including E&C Capital Partners,  converted a $2,000,000 convertible Bridge Note,
$1,750,000 of Secured  Convertible  Notes and all of the  Company's  outstanding
shares of Series F Preferred Stock, and exercised (on a "cashless" basis) all of
the  warrants  issued  in  connection  with  the  foregoing  $1,750,000  Secured
Convertible  Notes and Series F Preferred Stock,  together with certain warrants
issued to Dancing Bear  Investments,  an  affiliate of Mr. Egan.  As a result of
such  conversions  and exercises,  the Company issued an aggregate of 48,775,909
additional shares of Common Stock.

On February 2, 2004,  Michael S. Egan and his wife, S. Jacqueline Egan,  entered
into a Note Purchase  Agreement with the Company pursuant to which they acquired
a convertible promissory note due on demand (the "Bridge Note") in the aggregate
principal  amount of $2,000,000.  The Bridge Note was convertible into shares of
the Company's Common Stock. The Bridge Note provided for interest at the rate of
ten percent per annum and was  secured by a pledge of  substantially  all of the
assets of the Company. Such security interest was shared with the holders of the
Company's  $1,750,000  Secured  Convertible  Notes issued on May 22, 2003 to E&C
Capital  Partners and certain  affiliates of Michael S. Egan.  In addition,  the
Egans  were  issued a warrant to acquire  204,082  shares of Common  Stock at an
exercise price of $1.22 per share. This warrant is exercisable at any time on or
before  February 2, 2009. The exercise  price of the warrant,  together with the
number of shares for which such warrant is exercisable, is subject to adjustment
upon the occurrence of certain events.

On July 2, 2003,  theglobe.com,  inc.  completed a private  offering of Series G
Automatically  Converting  Preferred  Stock for an aggregate  purchase  price of
approximately  $8.7  million.  In  accordance  with the terms of such  Preferred
stock,  the Series G Preferred  shares  converted into Common Stock at $0.50 per
share (or an aggregate of approximately  17.4 million shares) upon the filing of
an amendment  to the  Company's  certificate  of  incorporation  to increase its
authorized shares of Common Stock from 100,000,000 shares to 200,000,000 shares.
Such an amendment was filed on July 29, 2003.  Investors also received  warrants
to acquire  approximately  3.5 million shares of Common Stock.  The warrants are
exercisable  for a period of five years at an exercise price of $1.39 per common
share. The exercise price of the warrants,  together with the number of warrants
issuable upon exercise, are subject to adjustment upon the occurrence of certain
events.  The purpose of the Series G Preferred Stock offering was to raise funds
for use primarily in the Company's VoIP telephony services  business,  including
the deployment of networks, website development,  marketing, and limited capital
infrastructure expenditures and working capital.

On May 22,  2003,  E&C Capital  Partners  together  with certain  affiliates  of
Michael  S.  Egan,  entered  into a Note  Purchase  Agreement  with the  Company
pursuant to which they acquired  $1,750,000 of Secured  Convertible  Notes.  The
Secured  Convertible  Notes were  convertible  into a maximum  of  approximately
19,444,000  shares of the Company's  Common Stock at a blended rate of $0.09 per
share.  The Secured  Convertible  Notes provided for interest at the rate of ten
percent per annum payable semi-annually, a one year maturity and were secured by
a pledge of  substantially  all of the assets of the Company.  In addition,  E&C
Capital  Partners  was  issued a  Warrant  to  acquire  3,888,889  shares of the
Company's  Common Stock at an exercise price of $0.15 per share. The Warrant was
exercisable at any time on or before May 22, 2013.


                                       30
<PAGE>


On March 28,  2003,  E&C  Capital  Partners  signed a Preferred  Stock  Purchase
Agreement and other related  documentation  pertaining to a $500,000  investment
via the purchase of shares of a new Series F Preferred Stock of theglobe.com and
closed on the investment.  Pursuant to the Preferred  Stock Purchase  Agreement,
E&C  Capital  Partners  received  333,333  shares  of Series F  Preferred  Stock
convertible  into shares of the  Company's  Common Stock at a price of $0.03 per
share.  The Series F Preferred  Stock had a liquidation  preference of $1.50 per
share,  provided  for  payment  of a  dividend  at the rate of 8% per  annum and
entitled  the  holder to vote on an  "as-converted"  basis  with the  holders of
Common  Stock.  In  addition,  as part of the $500,000  investment,  E&C Capital
Partners received warrants to purchase  3,333,333 shares of theglobe.com  Common
Stock at an exercise price of $0.125 per share. The warrants were exercisable at
any time on or before March 28, 2013 and both the warrants'  exercise  price and
number were subject to adjustment.

As a result of the  preferential  conversion  features of the Series G Preferred
Stock and the  Series F  Preferred  Stock,  a total of  $8,120,000  in  non-cash
dividends  to  preferred  stockholders  were  recognized  during  the year ended
December 31, 2003.

EFFECTS OF INFLATION

Due to relatively low levels of inflation in 2004, 2003 and 2002,  inflation has
not had a significant effect on our results of operations since inception.

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

REVENUE RECOGNITION

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

COMPUTER GAMES BUSINESSES

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

The Company uses outside agents to obtain new subscribers for its Computer Games
magazine, whereby the agents retain a percentage of the subscription proceeds as
their commission.  Previously these commissions had been classified as sales and
marketing  expense within the consolidated  statements of operations.  Effective
June 2004,  the Company  changed its method of accounting for these agency fees,
reporting them as a reduction of magazine sales subscription revenue. We believe
this alternative accounting method is a more commonly used industry practice and
is preferable under the circumstances.

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

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


                                       31
<PAGE>


MARKETING SERVICES

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

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

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

VOIP TELEPHONY SERVICES

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

VALUATION OF CUSTOMER RECEIVABLES

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

VALUATION OF INVENTORIES

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

GOODWILL AND INTANGIBLE ASSETS

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

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

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

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

      o     Significant negative industry or economic trends.

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


                                       32
<PAGE>


LONG-LIVED ASSETS

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

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

CAPITALIZATION OF COMPUTER SOFTWARE COSTS

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

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

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

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
affects  the  issuer's  accounting  for three  types of  freestanding  financial
instruments.  One type is  mandatorily  redeemable  shares,  which  the  issuing
company is obligated to buy back in exchange for cash or other assets.  A second
type,  which  includes  put  options and forward  purchase  contracts,  involves
instruments  that do or may require the issuer to buy back some of its shares in
exchange  for cash or other  assets.  The third type of  instrument  consists of
obligations  that can be settled  with shares,  the  monetary  value of which is
fixed,  tied solely or  predominantly  to a variable such as a market index,  or
varies  inversely with the value of the issuers'  shares.  SFAS No. 150 does not
apply to features embedded in a financial instrument that is not a derivative in
its entirety.  SFAS No. 150 also requires  disclosures about alternative ways of
settling the instruments and the capital structure of entities, whose shares are
mandatorily  redeemable.  Most of the guidance in SFAS No. 150 is effective  for


                                       33
<PAGE>


all  financial  instruments  entered into or modified  after May 31,  2003,  and
otherwise  is effective  from the start of the first  interim  period  beginning
after June 15,  2003.  The  adoption  of this  standard  did not have a material
impact on the Company's results of operations or financial position.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments Hedging Activities." This statement amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS
No. 149  became  effective  during the third  quarter of 2003 and did not have a
material impact on the Company's results of operations or financial position.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2004 and 2003, we did not have any material off-balance sheet
arrangements that have or are reasonably likely to have a material effect on our
current  or  future  financial  condition,  revenues  or  expenses,  results  of
operations, liquidity, or capital resources.

RISK FACTORS

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

                    RISKS RELATING TO OUR BUSINESS GENERALLY

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

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

We do not presently believe that cash on hand and cash flow generated internally
by the Company will be adequate to fund the operation of our  businesses and the
implementation  of our current VoIP business plan beyond a short period of time.
We have  received a report  from our  independent  accountants,  relating to our
December  31,  2004  audited  financial  statements  containing  an  explanatory
paragraph  stating that our recurring losses from operations and our accumulated
deficit  raise  substantial  doubts  about our  ability to  continue  as a going
concern.  If we are not  successful  in  entering  into a  financing,  sale,  or
business  transaction  that infuses  sufficient  cash resources into the Company
sometime during the second quarter of 2005,  management believes that it will no
longer be able to continue the implementation of its current VoIP business plan.
In such event,  it is likely  that we would be  required  to either  temporarily
suspend or  permanently  shutdown the operation of our VoIP  telephony  services
business.  Additionally,  in such event, management believes that it may also be
required  to  revise  the  business  plan of some or all of its  other  business
segments and/or further implement  company-wide cost reduction  programs.  There
can be no assurance  that the Company would be successful in  implementing  such
revised business plans and effectively  restructuring its businesses so that the
Company  would have the ability to continue to operate as a going concern in the
future.

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

Since our  inception,  we have incurred net losses in each  quarter,  except the
fourth  quarter  of 2002 where we had net income of  approximately  $17,000.  We
expect that we will continue to incur net losses for the foreseeable  future. We
had net losses of  approximately  $24.3 million,  $11.0 million and $2.6 million
for the  years  ended  December  31,  2004,  2003 and  2002,  respectively.  The
principal causes of our losses are likely to continue to be:

      o     costs resulting from the operation of our businesses;

      o     costs relating to entering new business lines;

      o     failure to generate sufficient revenue; and

      o     selling, general and administrative expenses.

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


                                       34
<PAGE>


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

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

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

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

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

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

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

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

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

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

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

OUR NET OPERATING LOSS CARRY FORWARDS MAY BE LIMITED.

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

WE COULD BE ADVERSELY  AFFECTED BY AN IMPAIRMENT OF GOODWILL  AND/OR  INTANGIBLE
ASSETS ON OUR BALANCE SHEET.

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

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

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

      o     inadequate network infrastructure;

      o     security and authentication concerns;


                                       35
<PAGE>


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

      o     general economic and business downturns; and

      o     catastrophic events, including war and terrorism.

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

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

      o     increased government regulation;

      o     potential governmental taxation of such services; and

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

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

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

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

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

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

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


                                       36
<PAGE>


WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

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

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

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

      o     be time-consuming;

      o     result in significant costs;

      o     subject us to significant liability for damages;

      o     result in invalidation of our proprietary rights;

      o     divert management's attention;

      o     cause product release delays; or

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

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

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


                                       37
<PAGE>


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 may require
a significant amount of capital to allow us to market our products and establish
brand recognition and customer loyalty.  Many of our competitors are larger than
us and have substantially greater financial resources. Additionally, many of the
companies  offering VoIP services have already  established their brand identity
within the marketplace. We can offer no assurances that we will be successful in
establishing awareness of our brand allowing us to compete in the VoIP market.

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

OUR QUARTERLY OPERATING RESULTS FLUCTUATE.

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

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

      o     changes in the number of sales or technical employees;

      o     the level of traffic on our websites;

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

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

      o     overall usage and acceptance of the Internet;

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

      o     other costs relating to the maintenance of our operations;

      o     the restructuring of our business;

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

      o     competition from others providing services similar to ours.

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

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

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

      o     attract customers to our VoIP telephony service;

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

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

      o     maintain or increase direct response marketing services revenue;

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


                                       38
<PAGE>


      o     identify, attract, retain and motivate qualified personnel.

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

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

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

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

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

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

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

WE DEPEND ON HIGHLY QUALIFIED TECHNICAL AND MANAGERIAL PERSONNEL.

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

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

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

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

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

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

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


                                       39
<PAGE>


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

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

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

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

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

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

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

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

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

As  described  in Note 11,  "Commitments  and  Contingencies,"  in the  Notes to
Consolidated  Financial  Statements,  we are  currently a defendant in a lawsuit
asserting claims of breach of contract and specific  performance and which seeks
payment of  approximately  $2.5 million in cash,  plus interest,  as well as the
issuance of 1.0 million shares of our Common Stock. In addition,  we are a party
to securities class action litigation.

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


                                       40
<PAGE>


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

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

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

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

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

                  RISKS RELATING TO OUR VOIP TELEPHONY BUSINESS

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

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

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

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

      o     access to sufficient capital to complete our development efforts;

      o     the identification of market demand for new products;

      o     the determination of appropriate product inventory levels;

      o     product and feature selection;

      o     timely implementation of product design and development;

      o     product performance;


                                       41
<PAGE>


      o     cost-effectiveness of products under development;

      o     securing effective sources of equipment supply; and

      o     success of promotional efforts.

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

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

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

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

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

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

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

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

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


                                       42
<PAGE>


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

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

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

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

ONLINE CREDIT CARD FRAUD CAN HARM OUR BUSINESS.

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

                RISKS RELATED TO OUR MARKETING SERVICES BUSINESS

ANY DECREASE IN DEMAND FOR OUR ONLINE  MARKETING  SERVICES  COULD  SUBSTANTIALLY
REDUCE OUR REVENUES.

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

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

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

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

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

IF OUR PRICING MODELS ARE NOT ACCEPTED BY OUR ADVERTISER  CLIENTS, WE COULD LOSE
CLIENTS AND OUR REVENUE COULD DECLINE.

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


                                       43
<PAGE>


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

ONLINE  TRANSACTIONS FROM WHICH WE DERIVE OUR REVENUE ARE SUBJECT TO VALIDATION.
OUR REVENUE AND MARGINS COULD BE REDUCED AS A RESULT OF INVALID TRANSACTIONS.

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

WE DEPEND ON A LIMITED  NUMBER OF CLIENTS FOR A  SIGNIFICANT  PERCENTAGE  OF OUR
REVENUE,  AND THE  LOSS OF ONE OR MORE OF  THESE  ADVERTISERS  COULD  CAUSE  OUR
REVENUE TO DECLINE.

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

ANY  LIMITATION  ON OUR  USE OF  DATA  DERIVED  FROM  OUR  CLIENTS'  ADVERTISING
CAMPAIGNS COULD SIGNIFICANTLY DIMINISH THE VALUE OF OUR SERVICES AND CAUSE US TO
LOSE CLIENTS AND REVENUE.

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

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

IF THE MARKET FOR INTERNET ADVERTISING FAILS TO CONTINUE TO DEVELOP, OUR REVENUE
AND OUR OPERATING RESULTS COULD BE HARMED.

Our future  success is highly  dependent on the  continued use and growth of the
Internet as an advertising medium. The Internet advertising market is relatively
new and rapidly  evolving,  and it uses different  measurements than traditional
media to gauge its effectiveness.  As a result, demand for and market acceptance
of Internet advertising services is uncertain.  Many of our current or potential
advertiser  clients  have  little  or  no  experience  using  the  Internet  for
advertising   purposes  and  have  allocated  only  limited  portions  of  their
advertising  budgets to the  Internet.  The  adoption of  Internet  advertising,
particularly by those entities that have  historically  relied upon  traditional


                                       44
<PAGE>


media  for  advertising,  requires  the  acceptance  of a new way of  conducting
business,   exchanging   information,   measuring  success  and  evaluating  new
advertising products and services. Such clients may find Internet advertising to
be less  effective for promoting  their  products and services than  traditional
advertising media. We cannot assure you that the market for Internet advertising
will  continue  to  grow or  become  sustainable.  If the  market  for  Internet
advertising fails to continue to develop or develops more slowly than we expect,
our revenue and business could be harmed.

WE DEPEND ON ONLINE  PUBLISHERS  FOR  ADVERTISING  SPACE TO DELIVER OUR CLIENTS'
ADVERTISING  CAMPAIGNS,  AND ANY  DECLINE  IN THE  SUPPLY OF  ADVERTISING  SPACE
AVAILABLE THROUGH OUR NETWORK COULD CAUSE OUR REVENUE TO DECLINE.

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

OUR GROWTH MAY BE  LIMITED  IF WE ARE  UNABLE TO OBTAIN  SUFFICIENT  ADVERTISING
INVENTORY THAT MEETS OUR PRICING AND QUALITY REQUIREMENTS.

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

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

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

      o     our  ability  to   efficiently   manage  our  existing   advertising
            inventory.

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

ANY LIMITATION ON OUR ABILITY TO POST  ADVERTISEMENTS  THROUGHOUT OUR NETWORK OF
ADVERTISING SPACE COULD HARM OUR BUSINESS.

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

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

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

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

CONSOLIDATION OF ONLINE  PUBLISHERS MAY IMPAIR OUR ABILITY TO PROVIDE  MARKETING
SERVICES,  ACQUIRE ADVERTISING INVENTORY AT FAVORABLE RATES AND COLLECT CAMPAIGN
DATA.

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

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

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


                                       45
<PAGE>


OUR BUSINESS COULD BE HARMED IF THE USE OF TRACKING  TECHNOLOGY IS RESTRICTED OR
BECOMES SUBJECT TO NEW REGULATION.

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

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

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

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

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

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

IF WE OR OUR  ADVERTISER  OR PUBLISHER  CLIENTS FAIL TO COMPLY WITH  REGULATIONS
GOVERNING  CONSUMER  PRIVACY,  WE COULD FACE SUBSTANTIAL  COSTS AND OUR BUSINESS
COULD BE HARMED.

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

      o     spend significant amounts on legal defense;

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

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

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

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

WE MAY BE LIABLE FOR CONTENT IN THE ADVERTISEMENTS WE DELIVER FOR OUR CLIENTS.

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


                                       46
<PAGE>


MISAPPROPRIATION  OF CONFIDENTIAL  INFORMATION HELD BY US COULD CAUSE US TO LOSE
CLIENTS OR INCUR LIABILITY.

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

WE FACE INTENSE AND GROWING COMPETITION, WHICH COULD RESULT IN PRICE REDUCTIONS,
REDUCED OPERATING MARGINS AND LOSS OF MARKET SHARE.

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

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

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

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

WE GENERALLY DO NOT HAVE LONG-TERM CONTRACTS WITH OUR CLIENTS.

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

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR EXPENSES COULD INCREASE AND OUR
MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

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

IF WE FAIL TO  ESTABLISH,  MAINTAIN  AND  EXPAND  OUR  TECHNOLOGY  BUSINESS  AND
MARKETING ALLIANCES AND PARTNERSHIPS, OUR ABILITY TO GROW OUR MARKETING SERVICES
BUSINESS COULD BE LIMITED.

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


                                       47
<PAGE>


                  RISKS RELATING TO OUR COMPUTER GAMES BUSINESS

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

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

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

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

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

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

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

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

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

      o     the level of product returns;

      o     merchandise shipping costs and delivery times;

      o     our ability to manage inventory levels;

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

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

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

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

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

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

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


                                       48
<PAGE>


                       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 December  31,  2004,  we had issued and  outstanding  approximately  173.6
million shares, of which  approximately 37.3 million shares were freely tradable
over the public  markets.  There is limited  trading volume in our shares and we
are now traded only in the over-the-counter  market. On April 16, 2004, we filed
a registration statement relating to the potential resale of up to approximately
131 million of our shares (including  approximately 27 million shares underlying
outstanding  warrants to acquire our Common Stock).  The registration  statement
became effective on May 11, 2004.  Sales of significant  amounts of Common Stock
in the public market in the future,  the perception that sales will occur or the
registration of additional shares pursuant to existing  contractual  obligations
could  materially and adversely  drive down the price of our stock. In addition,
such  factors  could  adversely  affect the  ability of the market  price of the
Common  Stock  to  increase  even if our  business  prospects  were to  improve.
Substantially all of our stockholders holding restricted  securities,  including
shares issuable upon the exercise of warrants to purchase our Common Stock, have
registration  rights under various  conditions.  Also,  we may issue  additional
shares of our Common Stock or other equity  instruments which may be convertible
into Common Stock at some future date, which could further  adversely affect our
stock price.

In addition, as of December 31, 2004, there were outstanding options to purchase
approximately  15,984,000 shares of our Common Stock,  which become eligible for
sale in the  public  market  from  time to time  depending  on  vesting  and the
expiration of lock-up agreements.  The issuance of shares upon exercise of these
options is registered  under the  Securities  Act and  consequently,  subject to
certain volume restrictions as to shares issuable to executive officers, will be
freely tradable.

Also as of December 31, 2004, we had issued and outstanding  warrants to acquire
approximately  18,125,000  shares of our Common Stock. In addition,  the Company
holds in escrow  warrants  to acquire up to  2,250,000  shares of Common  Stock,
subject  to  release  over  approximately  the next  year  (some  of  which  may
accelerate  under certain  events) upon the  attainment  of certain  performance
objectives  and may issue  warrants  to  acquire up to an  additional  2,500,000
shares of Common Stock upon attainment of certain  performance  criteria related
to the SendTec acquisition. Many of the outstanding instruments representing the
warrants contain anti-dilution  provisions pursuant to which the exercise prices
and number of shares issuable upon exercise may be adjusted.

As part of the acquisition of SendTec,  we issued an aggregate of  approximately
35 million shares of our Common Stock. Pursuant to our contractual  obligations,
we will file a registration  statement relating to the potential resale of these
shares.  We are  obligated  to  cause  such  registration  statement  to  become
effective on or before  September  1, 2005.  Upon  registration,  and subject to
waiver or expiration of a lock-up agreement which expires September 1, 2005, all
such shares will be eligible for resale over the open market.

OUR CHAIRMAN MAY CONTROL US.

After giving effect to the proxies to vote the shares of Common Stock granted by
five of the former  shareholders  of SendTec,  Michael S. Egan, our Chairman and
Chief Executive Officer,  beneficially owns or controls, directly or indirectly,
approximately  87.7  million  shares of our Common  Stock as of March 10,  2005,
which in the aggregate represents  approximately 48.9% of the outstanding shares
of our Common  Stock  (treating  as  outstanding  for this purpose the shares of
Common Stock  issuable  upon  exercise of the options and warrants  owned by Mr.
Egan or his  affiliates).  Accordingly,  Mr.  Egan  will  be  able  to  exercise
significant influence over, if not control, any stockholder vote.

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

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

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

Since  the  trading  price of our  Common  Stock is less than  $5.00 per  share,
trading in our Common Stock is also subject to the requirements of Rule 15g-9 of
the Exchange  Act.  Our Common Stock is also  considered a penny stock under the
Securities  Enforcement  Remedies  and Penny  Stock  Reform  Act of 1990,  which
defines a penny  stock,  generally,  as any  equity  security  not  traded on an
exchange or quoted on the Nasdaq SmallCap Market that has a market price of less
than $5.00 per share.  Under Rule 15g-9,  brokers who recommend our Common Stock
to persons  who are not  established  customers  and  accredited  investors,  as
defined in the Exchange Act, must satisfy  special sales practice  requirements,
including  requirements  that they make an  individualized  written  suitability


                                       49
<PAGE>


determination  for the purchaser;  and receive the  purchaser's  written consent
prior to the transaction.  The Securities  Enforcement  Remedies and Penny Stock
Reform Act of 1990 also requires  additional  disclosures in connection with any
trades involving a penny stock, including the delivery, prior to any penny stock
transaction,  of a disclosure schedule explaining the penny stock market and the
risks  associated  with that market.  Such  requirements  may severely limit the
market liquidity of our Common Stock and the ability of purchasers of our equity
securities to sell their  securities in the secondary  market.  For all of these
reasons,  an  investment in our equity  securities  may not be attractive to our
potential investors.

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

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

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

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

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

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

OUR STOCK PRICE IS VOLATILE AND MAY DECLINE.

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

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

      o     quarterly variations in our operating results;

      o     competitive announcements;

      o     sales of any of our businesses;

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

      o     news relating to trends in our markets; and

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

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

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

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

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

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

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


                                       50
<PAGE>


ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                       THEGLOBE.COM, INC. AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS


                                                                            PAGE
                                                                            ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                      F-1


CONSOLIDATED FINANCIAL STATEMENTS

   BALANCE SHEETS                                                            F-2

   STATEMENTS OF OPERATIONS                                                  F-3

   STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)        F-4

   STATEMENTS OF CASH FLOWS                                                  F-5

   NOTES TO FINANCIAL STATEMENTS                                             F-7



                                       51
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
theglobe.com, inc. and Subsidiaries

We have audited the  accompanying  consolidated  balance sheets of theglobe.com,
inc.  and  Subsidiaries  as of  December  31,  2004 and  2003,  and the  related
consolidated  statements of operations,  stockholders'  equity and comprehensive
income  (loss),  and cash flows for each of the years ended  December  31, 2004,
2003 and 2002. These consolidated financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
theglobe.com,  inc. and  Subsidiaries  as of December 31, 2004 and 2003, and the
consolidated  results of their  operations  and their cash flows for each of the
years ended  December 31, 2004,  2003 and 2002,  in conformity  with  accounting
principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and has an accumulated deficit that raise substantial doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also described in Note 2. The consolidated  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

RACHLIN COHEN & HOLTZ LLP

Fort Lauderdale, Florida
March 23, 2005, except for Note 2, as to which the date is March 25, 2005


                                       F-1

<PAGE>


                       THEGLOBE.COM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                              ------------------------------

                                                                   2004            2003
                                                              -------------    -------------
                             ASSETS
                             ------
<S>                                                           <C>              <C>
Current Assets:
  Cash and cash equivalents                                   $   6,828,200    $   1,061,702
  Marketable securities                                              42,736          267,970
  Accounts receivable, less allowance for doubtful
    accounts of approximately $274,000 and
    $113,000, respectively                                        7,740,692          958,487
  Inventory, less reserves of approximately
    $1,333,000 and $109,000, respectively                           589,579          770,314
  Prepaid expenses                                                1,590,139          550,930
  Deposits on inventory purchases                                    77,250          820,675
  Other current assets                                              316,926           26,357
                                                              -------------    -------------
       Total current assets                                      17,185,522        4,456,435

Goodwill                                                         11,702,317               --
Intangible assets                                                 1,680,000          199,020
Property and equipment, net                                       3,406,370        2,416,383
Other assets                                                         42,956          100,240
                                                              -------------    -------------

       Total assets                                           $  34,017,165    $   7,172,078
                                                              =============    =============




               LIABILITIES AND STOCKHOLDERS' EQUITY
               ------------------------------------
Current Liabilities:
  Accounts payable                                            $   7,447,550    $   1,935,142
  Accrued expenses and other current liabilities                  2,803,544          840,376
  Deferred revenue                                                  739,665          176,591
  Notes payable and current portion of long-term debt             1,277,405          121,919
                                                              -------------    -------------
       Total current liabilities                                 12,268,164        3,074,028

Long-term debt                                                       26,997        1,792,568
Other long-term liabilities                                         204,616          124,943
                                                              -------------    -------------
       Total liabilities                                         12,499,777        4,991,539
                                                              -------------    -------------

Stockholders' Equity:
  Preferred stock, $0.001 par value; 3,000,000 shares
    authorized; 333,333 shares
    issued and outstanding at December 31, 2003
    at liquidation value                                                 --          500,000
  Common stock, $0.001 par value; 500,000,000 shares
    authorized; 174,315,678 and 50,245,574 shares
    issued at December 31, 2004 and December 31, 2003,
    respectively                                                    174,316           50,246
  Additional paid-in capital                                    282,289,404      238,301,862
  Treasury stock, 699,281 common shares, at cost                   (371,458)        (371,458)
  Accumulated other comprehensive income                                 --            1,562
  Accumulated deficit                                          (260,574,874)    (236,301,673)
                                                              -------------    -------------
       Total stockholders' equity                                21,517,388        2,180,539
                                                              -------------    -------------
       Total liabilities and stockholders' equity             $  34,017,165    $   7,172,078
                                                              =============    =============

See notes to consolidated financial statements.
</TABLE>


                                       F-2


<PAGE>


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


<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                         ----------------------------------------------
                                                              2004            2003             2002
                                                         -------------    -------------   -------------


<S>                                                       <C>             <C>             <C>
Net Revenue                                               $ 16,041,032    $  5,284,113    $   7,245,276
                                                          ------------    ------------    -------------
Operating Expenses:
  Cost of revenue                                           18,262,105       4,701,338        5,453,136
  Sales and marketing                                        7,386,637       1,987,026        1,101,417
  Product development                                        1,053,886         884,790          652,997
  General and administrative                                 9,102,151       5,285,912        2,889,934
  Depreciation                                               1,402,712         257,560           88,580
  Amortization of intangible assets                            222,834          72,182               --
  Impairment charge                                          1,661,975         908,384               --
  Loss on settlement of contractual obligation                 406,750              --               --
                                                          ------------    ------------    -------------
                                                            39,499,050      14,097,192       10,186,064
                                                          ------------    ------------    -------------

Loss from Operations                                       (23,458,018)     (8,813,079)      (2,940,788)
                                                          ------------    ------------    -------------

Other Income (Expense):
  Interest income (expense), net                              (656,633)     (1,759,246)         349,895
  Other expense, net                                          (158,550)       (462,072)         (11,768)
                                                          ------------    ------------    -------------
                                                              (815,183)     (2,221,318)         338,127
                                                          ------------    ------------    -------------

Loss Before Provision for Income Taxes                     (24,273,201)    (11,034,397)      (2,602,661)

Provision for Income Taxes                                          --              --           12,000
                                                          ------------    ------------    -------------
Net Loss                                                  $(24,273,201)   $(11,034,397)   $  (2,614,661)
                                                          ============    ============    =============

Basic and Diluted Net Loss Per Common Share               $      (0.19)   $      (0.49)   $       (0.09)
                                                          ============    ============    =============

Weighted Average Common Shares Outstanding                 127,842,923      38,710,917       30,382,293
                                                          ============    ============    =============
</TABLE>


See notes to consolidated financial statements.


                                       F-3

<PAGE>


                       THEGLOBE.COM, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
                                  INCOME (LOSS)


<TABLE>
<CAPTION>
                                                                              Common Stock           Additional
                                                     Preferred        ---------------------------     Paid-in           Treasury
                                                       Stock            Shares          Amount        Capital            Stock
                                                   -------------      -----------   -------------   -------------    -------------
<S>                                                <C>                 <C>          <C>             <C>              <C>
Balance, December 31, 2001                         $          --       31,081,574   $      31,082   $ 218,255,565    $    (371,458)

Year Ended December 31, 2002:
  Net loss                                                    --               --              --              --               --

  Disposal of Attitude Network-
    translation loss                                          --               --              --              --               --

  Net unrealized (loss) on securities                         --               --              --              --               --

  Comprehensive loss                                          --               --              --              --               --

  Issuance of stock options:
    Severance arrangement                                     --               --              --          13,000               --
    Acquisition                                               --               --              --          42,000               --
                                                   -------------      -----------   -------------   -------------    -------------

Balance, December 31, 2002                                    --       31,081,574          31,082     218,310,565         (371,458)

Year Ended December 31, 2003:
  Net loss                                                    --               --              --              --               --

  Net unrealized gain on securities                           --               --              --              --               --

  Comprehensive loss                                          --               --              --              --               --

  Issuance of preferred stock:
    Series F Preferred Stock                             500,000               --              --         500,000               --
    Series G Automatically Converting Preferred
      Stock                                            7,315,000               --              --       8,945,690               --

  Issuance of common stock:
    Conversion of Series G Automatically
      Converting Preferred Stock                      (7,315,000)      17,360,000          17,360       7,297,640               --

    Acquisition of Direct Partner Telecom, Inc.               --        1,375,000           1,375         636,625               --
    Exercise of stock options                                 --          429,000             429         118,166               --

  Beneficial conversion feature of
     Convertible Notes                                        --               --              --       1,750,000               --

  Employee stock-based compensation                           --               --              --         417,567               --

  Issuance of stock options to non-employees                  --               --              --         225,609               --

  Contributed capital in lieu of salary by officer            --               --              --         100,000               --

                                                   -------------      -----------   -------------   -------------    -------------
Balance, December 31, 2003                               500,000       50,245,574          50,246     238,301,862         (371,458)

Year Ended December 31, 2004:
  Net loss                                                    --               --              --              --               --

  Realized gain on securities                                 --               --              --              --               --

  Comprehensive loss                                          --               --              --              --               --

  Issuance of common stock:
    Private offering, net of offering costs                   --       33,381,647          33,382      26,939,363               --
    Conversion of Series F Preferred Stock and
      exercise of associated warrants                   (500,000)      19,639,856          19,640         480,360               --
    Conversion of $1,750,000 Convertible
      Notes                                                   --       22,829,156          22,829       1,654,546               --
    Conversion of $2,000,000 Bridge Note                      --        3,527,337           3,527       1,996,473               --
    Acquisition of SendTec, Inc.                          17,500       17,500,024          17,500      11,163,275               --
    Conversion of Series H Preferred Stock               (17,500)      17,500,500          17,500              --               --
    Exercise of warrants owned by Dancing Bear
      Investments                                             --        2,779,560           2,780          (2,780)              --
    Exercise of stock options                                 --          639,000             639         183,907               --
    Exercise of warrants                                      --        6,273,024           6,273           5,151               --

  Beneficial conversion feature of $2,000,000
    Bridge Note and warrants                                  --               --              --         687,000               --

  Employee stock-based compensation                           --               --              --         416,472               --

  Issuance of stock options to non-employees                  --               --              --         463,775               --
                                                   -------------      -----------   -------------   -------------    -------------

Balance, December 31, 2004                         $          --      174,315,678   $     174,316   $ 282,289,404    $    (371,458)
                                                   =============      ===========   =============   =============    =============

<CAPTION>
                                                    Accumulated
                                                        Other
                                                    Comprehensive    Accumulated
                                                    Income (Loss)      Deficit            Total
                                                   -------------    -------------    -------------
<S>                                                <C>              <C>              <C>
Balance, December 31, 2001                         $    (120,866)   $(214,532,615)   $   3,261,708

Year Ended December 31, 2002:
  Net loss                                                    --       (2,614,661)      (2,614,661)

  Disposal of Attitude Network-
    translation loss                                     121,516               --          121,516

  Net unrealized (loss) on securities                       (650)              --             (650)
                                                                                     -------------
  Comprehensive loss                                          --               --       (2,493,795)
                                                                                     -------------
  Issuance of stock options:
    Severance arrangement                                     --               --           13,000
    Acquisition                                               --               --           42,000
                                                   -------------    -------------    -------------

Balance, December 31, 2002                                    --     (217,147,276)         822,913

Year Ended December 31, 2003:
  Net loss                                                    --      (11,034,397)     (11,034,397)

  Net unrealized gain on securities                        1,562               --            1,562
                                                                                     -------------
  Comprehensive loss                                          --               --      (11,032,835)
                                                                                     -------------
  Issuance of preferred stock:
    Series F Preferred Stock                                  --         (500,000)         500,000
    Series G Automatically Converting Preferred
      Stock                                                   --       (7,620,000)       8,640,690

  Issuance of common stock:
    Conversion of Series G Automatically
      Converting Preferred Stock                              --               --               --

    Acquisition of Direct Partner Telecom, Inc.               --               --          638,000
    Exercise of stock options                                 --               --          118,595

  Beneficial conversion feature of
     Convertible Notes                                        --               --        1,750,000

  Employee stock-based compensation                           --               --          417,567

  Issuance of stock options to non-employees                  --               --          225,609

  Contributed capital in lieu of salary by officer            --               --          100,000
                                                   -------------    -------------    -------------

Balance, December 31, 2003                                 1,562     (236,301,673)       2,180,539

Year Ended December 31, 2004:
  Net loss                                                    --      (24,273,201)     (24,273,201)

  Realized gain on securities                             (1,562)              --           (1,562)
                                                                                     -------------
  Comprehensive loss                                          --               --      (24,274,763)
                                                                                     -------------
  Issuance of common stock:
    Private offering, net of offering costs                   --               --       26,972,745
    Conversion of Series F Preferred Stock and
      exercise of associated warrants                         --               --               --
    Conversion of $1,750,000 Convertible
      Notes                                                   --               --        1,677,375
    Conversion of $2,000,000 Bridge Note                      --               --        2,000,000
    Acquisition of SendTec, Inc.                              --               --       11,198,275
    Conversion of Series H Preferred Stock                    --               --               --
    Exercise of warrants owned by Dancing Bear
      Investments                                             --               --               --
    Exercise of stock options                                 --               --          184,546
    Exercise of warrants                                      --               --           11,424

  Beneficial conversion feature of $2,000,000
    Bridge Note and warrants                                  --               --          687,000

  Employee stock-based compensation                           --               --          416,472

  Issuance of stock options to non-employees                  --               --          463,775
                                                   -------------    -------------    -------------

Balance, December 31, 2004                         $          --    $(260,574,874)   $  21,517,388
                                                   =============    =============    =============
</TABLE>

See notes to consolidated financial statements.


                                       F-4
<PAGE>


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

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                  --------------------------------------------
                                                                      2004            2003            2002
                                                                  ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>
Cash Flows from Operating Activities:
  Net loss                                                        $(24,273,201)   $(11,034,397)   $ (2,614,661)
  Adjustments to reconcile net loss to net cash
    and cash equivalents used in operating activities:
      Depreciation and amortization                                  1,625,546         329,742          88,580
      Provision for excess and obsolete inventory                    1,289,196         110,126              --
      Provision for uncollectible accounts receivable                  198,537         114,888              --
      Non-cash interest expense                                        735,416       1,739,635              --
      Reserve against amounts loaned to Internet venture               506,500         495,000              --
      Employee stock compensation                                      416,472         417,567              --
      Compensation related to non-employee stock options               463,775         225,609              --
      Contingent commissions expenses                                  130,366              --              --
      Non-cash impairment charge                                     1,661,975         908,384              --
      Write-down of inventory deposit                                  221,450              --              --
      Loss on settlement of contractual obligation                     406,750              --              --
      Non-cash compensation                                                 --         100,000              --
      Loss on disposal or write-off of equipment                        69,709          61,072             855
      Non-cash gain on settlements of liabilities                     (352,455)        (64,207)             --
      Disposal of Attitude Network- translation loss                        --              --         121,516
      Gain on sale of Happy Puppy                                           --              --        (134,500)
      Other, net                                                        12,746          19,623          12,350
      Changes in operating assets and liabilities, net of
        acquisition and dispositions:
        Accounts receivable, net                                    (1,305,551)        328,453         290,502
        Inventory, net                                              (1,108,461)       (516,458)        168,583
        Prepaid and other current assets                              (392,969)     (1,058,806)        706,856
        Accounts payable                                             1,311,101         508,862          55,301
        Accrued expenses and other current liabilities                 609,124         253,215        (592,047)
        Deferred revenue                                                41,342           7,072         (59,957)
                                                                  ------------    ------------    ------------
            Net cash and cash equivalents used in operating
                activities                                         (17,732,632)     (7,054,620)     (1,956,622)
                                                                  ------------    ------------    ------------
Cash Flows from Investing Activities:
  Purchases of marketable securities                                        --     (10,345,828)             --
  Proceeds from sales and maturities of marketable securities          225,070      10,079,420          57,650
  Net cash acquired (paid) in acquisition of business               (2,389,520)         60,948              --
  Proceeds from sale of properties                                          --              --         135,000
  Purchases of property and equipment                               (2,683,342)     (2,424,791)        (32,250)
  Amounts loaned to Internet venture                                  (466,500)       (495,000)        (40,000)
  Patent costs incurred                                               (107,748)        (62,492)             --
  Other, net                                                            24,063          (7,600)         11,000
                                                                  ------------    ------------    ------------
            Net cash and cash equivalents provided by (used in)
                investing activities                                (5,397,977)     (3,195,343)        131,400
                                                                  ------------    ------------    ------------
Cash Flows from Financing Activities:
  Borrowings on notes payable and long-term debt                     2,000,000       1,750,000              --
  Payments on notes payable and long-term debt                        (151,898)       (545,529)        (13,184)
  Proceeds from issuance of preferred stock, net                            --       9,140,690              --
  Proceeds from issuance of common stock, net                       26,972,745              --              --
  Proceeds from exercise of common stock options                       184,546         118,595              --
  Proceeds from exercise of warrants                                    11,424              --              --
  Increase in (payments of) other long-term liabilities, net          (119,710)        122,487              --
                                                                  ------------    ------------    ------------
            Net cash and cash equivalents provided by (used in)
                financing activities                                28,897,107      10,586,243         (13,184)
                                                                  ------------    ------------    ------------
Net Increase (Decrease) in Cash and Cash Equivalents                 5,766,498         336,280      (1,838,406)

Cash and Cash Equivalents, Beginning                                 1,061,702         725,422       2,563,828
                                                                  ------------    ------------    ------------

Cash and Cash Equivalents, Ending                                 $  6,828,200    $  1,061,702    $    725,422
                                                                  ============    ============    ============
</TABLE>

See notes to consolidated financial statements                       (Continued)




                                       F-5


<PAGE>


                       THEGLOBE.COM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Continued)


<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                             ----------------------------------------
                                                                 2004           2003           2002
                                                             -------------   -------------   --------
<S>                                                          <C>             <C>             <C>
Supplemental Disclosure of Cash Flow Information:
  Cash paid during the period for:
    Interest                                                 $     184,093   $      39,819   $ 25,018
                                                             =============   =============   ========
    Income taxes                                             $          --   $          --   $     --
                                                             =============   =============   ========

Supplemental Disclosure of Non-Cash Transactions:
    Common stock, preferred stock and stock options
       issued in connection with the acquisition of
       SendTec, Inc.                                         $  11,198,275   $          --   $     --
                                                             =============   =============   ========
    Note payable issued in connection with acquisition of
       SendTec, Inc.                                         $   1,000,009   $          --   $     --
                                                             =============   =============   ========
    Common stock and warrants issued in connection with
       acquisition of Direct Partner Telecom, Inc.           $          --   $     638,000   $     --
                                                             =============   =============   ========
    Conversion of Series G Automatically Converting
       Preferred Stock into Common Stock                     $          --   $   7,315,000   $     --
                                                             =============   =============   ========
    Additional paid-in capital attributable to beneficial
       conversion features of Series F Preferred Stock,
       $1,750,000 Convertible Notes and $2,000,000
       Bridge Note                                           $     687,000   $   2,250,000   $     --
                                                             =============   =============   ========
    Preferred dividends recorded as a result of beneficial
       conversion features of preferred stock issued         $          --   $   8,120,000   $     --
                                                             =============   =============   ========
    Conversion of Series F Preferred Stock, $1,750,000
       Convertible Notes and $2,000,000 Bridge Note          $   4,177,375   $          --   $     --
                                                             =============   =============   ========
    Debt assumed in purchase of intangible asset             $          --   $          --   $122,960
                                                             =============   =============   ========
    Intangible asset purchased in exchange for warrants      $          --   $          --   $ 42,000
                                                             =============   =============   ========
    Debt assumed in purchase of property and equipment       $     164,870   $          --   $     --
                                                             =============   =============   ========
</TABLE>

See notes to consolidated financial statements.


                                       F-6


<PAGE>


                       THEGLOBE.COM, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE COMPANY

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

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

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

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

On September 1, 2004, the Company acquired SendTec, Inc.  ("SendTec"),  a direct
response marketing services and technology  company.  As more fully discussed in
Note 4,  "Acquisitions  and Disposition," the Company paid $6.0 million in cash,
excluding  transaction  costs, and issued debt and equity securities valued at a
total of approximately $12 million to purchase SendTec.

As of December 31, 2004, the Company's revenue sources were derived  principally
from the newly  acquired  operations  of SendTec  which  comprises our marketing
services  division,  as  well  as  from  the  operations  of our  games  related
businesses.  The Company's retail VoIP products and services have yet to produce
any significant revenue.


                                       F-7
<PAGE>


(a) PRINCIPLES OF CONSOLIDATION

The 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.

(b) 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.

(c) CASH AND CASH EQUIVALENTS

Cash  equivalents  consist of money  market funds and highly  liquid  short-term
investments with qualified  financial  institutions.  The Company  considers all
highly liquid securities with original  maturities of three months or less to be
cash  equivalents.  Included in cash and cash  equivalents  in the  accompanying
consolidated  balance sheet at December 31, 2004, was  approximately  $93,000 of
cash held in escrow for purposes of sweepstakes  promotions  being  conducted by
the VoIP telephony division.

(d) MARKETABLE SECURITIES

The  Company  accounts  for its  investment  in debt and  equity  securities  in
accordance with Statement of Financial  Accounting  Standards  ("SFAS") No. 115,
"Accounting  for Certain  Investments in Debt and Equity  Securities."  All such
investments  are  classified as  available-for-sale  as of December 31, 2004 and
2003.   Available-for-sale   securities  are  stated  at  market  value,   which
approximates  fair value,  and unrealized  holding gains and losses are excluded
from  earnings  and  included  as a  component  of  stockholders'  equity  until
realized.

The following is a summary of available-for-sale securities:

                             December 31, 2004          December 31, 2003
                          ------------------------   ------------------------
                            Cost       Fair Value      Cost        Fair Value
                          --------      --------      --------      --------
Preferred Securities      $     --      $     --      $225,000      $225,000
U.S. Treasury Bills         42,736        42,736        41,408        42,970
                          --------      --------      --------      --------

   Total                  $ 42,736      $ 42,736      $266,408      $267,970
                          ========      ========      ========      ========

During the year ended December 31, 2004 and 2003, the Company had no significant
gross realized gains or losses on sales of  available-for-sale  securities.  The
gross  unrealized  gain of $1,562 as of December 31, 2003,  has been included in
stockholders'  equity  as  "Accumulated  Other  Comprehensive   Income"  in  the
accompanying consolidated balance sheet.

(e) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of certain of the Company's financial instruments, including
cash, cash equivalents,  marketable  securities,  accounts receivable,  accounts
payable, accrued expenses and deferred revenue,  approximate their fair value at
December 31, 2004 and 2003 due to their short maturities.

(f) INVENTORY

Inventories  are recorded on a first in, first out basis and valued at the lower
of cost or market value. The Company's reserve for excess and obsolete inventory
as of December 31, 2004 and 2003,  was  approximately  $1,333,000  and $109,000,
respectively.

During the year ended December 31, 2004, the Company's VoIP telephony services
business recorded charges to cost of revenue totaling approximately $1,477,000
as a result of write-downs required to state its inventory on-hand and related
deposits for inventory on order at the lower of cost or market value. As of
December 31, 2004, such market values considered certain transactions, completed
subsequent to year-end, as well as the Company's estimate of future unit sales
and selling prices of its telephony equipment inventory in its retail VoIP
business.


                                       F-8
<PAGE>


Effective January 31, 2005, the Company formally  terminated its contract with a
supplier for VoIP telephony  handsets and reached an agreement with the supplier
to settle the  unconditional  purchase  obligation  under such  contract,  which
totaled approximately  $3,000,000 (see Note 11, "Commitments and Contingencies,"
for further  discussion).  As a result,  the Company recorded charges to cost of
revenue  which  increased  the  inventory  reserves  related to its VoIP handset
inventory by  approximately  $300,000 as of December 31, 2004.  During the third
quarter of 2004,  the Company had recorded a $600,000  charge to cost of revenue
and a  corresponding  increase to its reserve for excess and obsolete  inventory
related to the VoIP handset inventory.

In January  2005,  the Company  sold  essentially  all of its  voiceglo  adapter
inventory  on-hand for  $235,000  in cash.  As a result,  inventory  reserves at
December  31,  2004  include  approximately  $356,000 of  additional  provisions
related to cost of revenue  charges  required  to reflect the  voiceglo  adapter
inventory at net  realizable  value.  During 2004, the Company also made advance
payments  of   approximately   $299,000  towards  future  purchases  of  adapter
inventory.  The  Company  recorded a charge to cost of revenue of  approximately
$221,000 to write down the value of such  deposits  on  inventory  purchases  to
estimated net realizable value of $77,250 as of December 31, 2004.

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

(g) GOODWILL AND INTANGIBLE ASSETS

The Company accounts for goodwill and intangible  assets in accordance with SFAS
No. 142,  "Goodwill  and Other  Intangible  Assets."  SFAS No. 142 requires that
goodwill  and  other  intangibles  with  indefinite  lives  should  no longer be
amortized,  but rather be 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.

Goodwill is stated at cost.  At December  31, 2004 and 2003,  the Company had no
other  intangible  assets with indefinite  lives.  Intangible  assets subject to
amortization,  included in the  accompanying  consolidated  balance sheets as of
December 31, 2004 and 2003, were being  amortized on a straight-line  basis over
their  estimated  useful  lives,  ranging from three to five years.  See Note 3,
"Impairment Charges," for a discussion of the charges recorded by the Company as
a result of the review of  goodwill  and  intangible  assets for  impairment  in
connection  with the  preparation  of the  accompanying  consolidated  financial
statements.

(h) LONG-LIVED ASSETS

Long-lived  assets,  including  property and  equipment  and  intangible  assets
subject to amortization  are reviewed for impairment  whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable,  in accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived  Assets." If events or changes in circumstances  indicate
that the carrying amount of an asset, or an appropriate  grouping of assets, may
not be recoverable,  the Company estimates the undiscounted future cash flows to
result from the use of the asset, or asset group. If the sum of the undiscounted
cash flows is less than the carrying value, the Company recognizes an impairment
loss,  measured as the amount by which the carrying value exceeds the fair value
of the assets.  Fair values are based on quoted market values, if available.  If
quoted market values 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.

See Note 3, "Impairment  Charges," for discussion of impairment charges recorded
by the Company as a result of the review of long-lived  assets for impairment in
connection  with the  preparation  of the  accompanying  consolidated  financial
statements.

Property and equipment is stated at cost,  net of accumulated  depreciation  and
amortization.  Property and  equipment is  depreciated  using the  straight-line
method over the estimated useful lives of the related assets, as follows:

                                    Estimated
                                  Useful Lives
                                  -------------
VoIP Network equipment                3 years
Computer software                     3 years
Other equipment                       3 years
Furniture and fixtures              3-7 years
Leasehold improvements              3-6 years


                                       F-9
<PAGE>


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 three
years.

(i) CONCENTRATION OF CREDIT RISK

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

A single SendTec  customer  represented  $1,444,515,  or 22%, of SendTec's total
accounts receivable as of December 31, 2004.

(j) REVENUE RECOGNITION

COMPUTER GAMES BUSINESSES

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

The Company  participates  in barter  transactions  whereby  the Company  trades
marketing  data in exchange  for  advertisements  in the  publications  of other
companies.  Barter revenue and expenses are recorded at the fair market value of
services  provided or received,  whichever is more readily  determinable  in the
circumstances.  Revenue from barter  transactions  is  recognized as income when
advertisements or other products are delivered by the Company. Barter expense is
recognized  when  the  Company's  advertisements  are  run in  other  companies'
magazines,  which  typically  occurs within one to six months from the period in
which barter revenue is recognized.  Barter revenue  represented less than 1% of
consolidated net revenue for the year ended December 31, 2004 and  approximately
2% of consolidated net revenue in the years ended December 31, 2003 and 2002.

The Company uses outside agents to obtain new subscribers for its Computer Games
magazine, whereby the agents retain a percentage of the subscription proceeds as
their commission.  Previously these commissions had been classified as sales and
marketing  expense within the consolidated  statements of operations.  Effective
June 2004,  the Company  changed its method of accounting for these agency fees,
reporting them as a reduction of magazine sales subscription revenue. We believe
this alternative accounting method is a more commonly used industry practice and
is preferable under the circumstances.  This  reclassification  had no impact on
net loss as previously reported by the Company.  Net revenue in the accompanying
consolidated statements of operations has been shown net of such agency fees for
all periods  presented.  These  agency fees  totaled  approximately  $1,054,000,
$1,296,000 and $2,422,000 for the years ended December 31, 2004,  2003 and 2002,
respectively.  Newsstand sales of the games information  magazine are recognized
at the on-sale date of the magazine,  net of provisions  for estimated  returns.
Subscription  revenue,  which is net of agency fees, is deferred when  initially
received and recognized as income ratably over the subscription term.

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

MARKETING SERVICES

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

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


                                      F-10
<PAGE>


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

VOIP TELEPHONY SERVICES

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

(k) ADVERTISING COSTS

Advertising  costs  are  expensed  as  incurred  and are  included  in sales and
marketing expense. Advertising costs were approximately $2,051,000, $411,000 and
$182,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The
Company incurred no barter  advertising costs during the year ended December 31,
2004. Barter  advertising  costs were  approximately 2% of total net revenue for
each of the years ended December 31, 2003 and 2002.

(l) PRODUCT DEVELOPMENT

Product  development  expenses  include  salaries and related  personnel  costs;
expenses incurred in connection with website  development,  testing and upgrades
of our computer games website;  editorial and content costs;  and costs incurred
in the development of our retail VoIP products.  Product  development  costs and
enhancements to existing products are charged to operations as incurred.

(m) STOCK-BASED COMPENSATION

The Company follows SFAS No. 123,  "Accounting  for  Stock-Based  Compensation,"
which permits  entities to recognize as expense over the vesting period the fair
value of all stock-based  awards on the date of grant.  Alternatively,  SFAS 123
allows  entities to continue to apply the  provisions of  Accounting  Principles
Board  Opinion  No. 25 ("APB  25") and  provide  pro forma net  earnings  (loss)
disclosures for employee stock option grants as if the  fair-value-based  method
defined in SFAS 123 had been applied. Under this method, compensation expense is
recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  --  Transition  and  Disclosure  -- an amendment of SFAS No. 123,"
which provides  alternative  methods of transition for a voluntary change to the
fair value based method of accounting for stock-based compensation. SFAS No. 148
also requires more  prominent and more frequent  disclosures in both interim and
annual  financial  statements  about the method of  accounting  for  stock-based
compensation and the effect of the method used on reported results.  The Company
adopted the  disclosure  provisions  of SFAS No. 148 as of December 31, 2002 and
continues to apply the measurement provisions of APB No. 25.


                                      F-11
<PAGE>


Had the Company determined compensation expense based on the fair value at the
grant date for its stock options issued to employees under SFAS No. 123, the
Company's net loss would have been adjusted to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                   --------------------------------------------------
                                                       2004               2003               2002
                                                   ------------       ------------       ------------
<S>                                                <C>                <C>                <C>
Net loss - as reported                             $(24,273,201)      $(11,034,397)      $ (2,614,661)

    Add: Stock-based employee compensation
       expense included in net loss as
       reported                                         416,472            417,567                 --

    Deduct: Total stock-based employee
       compensation expense determined
       under fair value method for all awards        (1,606,271)        (1,821,170)           (99,339)
                                                   ------------       ------------       ------------
Net loss - pro forma                               $(25,463,000)      $(12,438,000)      $ (2,714,000)
                                                   ============       ============       ============
Basic net loss per share -
   as reported                                     $      (0.19)      $      (0.49)      $      (0.09)
                                                   ============       ============       ============
Basic net loss per share -
   pro forma                                       $      (0.20)      $      (0.53)      $      (0.09)
                                                   ============       ============       ============
</TABLE>

A total of 7,749,595  stock options were granted  during the year ended December
31, 2004,  including  1,490,430 stock options with a per share  weighted-average
fair value of $0.51 and whose  exercise  price  equaled the market  price of the
stock on the grant date. A total of 6,259,165  stock options were granted during
the year ended  December 31, 2004 with an exercise  price below the market price
of the stock on the grant  date and a per share  weighted-average  fair value of
$0.47. The per share weighted-average fair value of stock options granted during
2003 on a total of 3,907,450  options  whose  exercise  price equaled the market
price of the stock on the grant  date was  $0.82.  In  addition,  500,000  stock
options  were  granted in 2003 with an exercise  price below the market price of
the  stock on the  grant  date and a per share  weighted-average  fair  value of
$1.49. The per share weighted-average fair value of stock options granted during
2002  was  $0.02  on the date of  grant.  Fair  values  of  stock  options  were
calculated using the option-pricing  method with the following  weighted-average
assumptions:

                                     Year Ended December 31,
                                  -------------------------------
                                    2004       2003        2002
                                  --------   ---------   --------
Risk-free interest rate             3.00%        3.00%      4.78%
Expected life                 3 - 5 years      5 years   10 years
Volatility                           160%         160%  135%-160%
Expected dividend rate                 0            0          0

The  Company  follows  FASB   Interpretation  No  44,  "Accounting  for  Certain
Transactions  Involving  Stock  Compensation"  ("FIN  No.  44")  which  provides
guidance for applying  APB Opinion No 25. With  certain  exceptions,  FIN No. 44
applies  prospectively  to  new  awards,  exchanges  of  awards  in  a  business
combination,  modifications to outstanding  awards and changes in grantee status
on or after July 1, 2000.

(n) INCOME TAXES

The Company  accounts  for income  taxes using the asset and  liability  method.
Under this method,  deferred tax assets and  liabilities  are recognized for the
future tax  consequences  attributable to differences  between the  consolidated
financial  statement  carrying  amounts of existing  assets and  liabilities and
their  respective  tax bases for  operating  loss and tax credit  carryforwards.
Deferred  tax  assets and  liabilities  are  measured  using  enacted  tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets  and  liabilities  of  a  change  in  tax  rates  is  recognized  in  the
consolidated  results of  operations  in the period that the tax change  occurs.
Valuation  allowances are  established,  when necessary,  to reduce deferred tax
assets to the amount expected to be realized.

(o) NET LOSS PER COMMON SHARE

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


                                      F-12
<PAGE>


During the year ended December 31, 2003,  the Company  issued equity  securities
with common stock conversion  features which were  immediately  convertible into
Common  Stock.  As further  discussed  in Note 9,  "Stockholders'  Equity,"  the
Company  accounted for the issuance of these  securities in accordance with EITF
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios," which resulted in the recognition
of non-cash preferred  dividends totaling  $8,120,000 at the respective dates of
the  securities'  issuance.  Net loss  applicable  to  common  stockholders  was
calculated as follows:

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                   ---------------------------------------------
                                                        2004             2003            2002
                                                   -------------    -------------   ------------

<S>                                                <C>              <C>             <C>
Net loss                                           $ (24,273,201)   $ (11,034,397)  $ (2,614,661)
Beneficial conversion features of
   preferred stock and warrants                               --       (8,120,000)            --
                                                   -------------    -------------   ------------
Net loss applicable to common stockholders         $ (24,273,201)   $ (19,154,397)  $ (2,614,661)
                                                   =============    =============   ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    December 31,
                                                     -------------------------------------
                                                        2004          2003         2002
                                                     ----------    ----------   ----------

<S>                                                  <C>            <C>          <C>
Options to purchase common stock                     15,984,000     9,943,000    5,971,000
Common shares issuable upon conversion
    of Series F Preferred Stock                              --    16,667,000           --
Common shares issuable upon conversion
    of Convertible Notes                                     --    19,444,000           --
Common shares issuable upon exercise
    of Warrants                                      20,375,000    22,802,000    6,187,000
                                                     ----------    ----------   ----------
Total                                                36,359,000    68,856,000   12,158,000
                                                     ==========    ==========   ==========
</TABLE>

(p) COMPREHENSIVE INCOME (LOSS)

The Company reports  comprehensive income (loss) in accordance with the 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  $24.3  million,  $11.0  million and $2.5
million for the years ended  December  31,  2004,  2003 and 2002,  respectively,
which approximated the Company's reported net loss.

(q) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

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


                                      F-13
<PAGE>


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

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

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
affects  the  issuer's  accounting  for three  types of  freestanding  financial
instruments.  One type is  mandatorily  redeemable  shares,  which  the  issuing
company is obligated to buy back in exchange for cash or other assets.  A second
type,  which  includes  put  options and forward  purchase  contracts,  involves
instruments  that do or may require the issuer to buy back some of its shares in
exchange  for cash or other  assets.  The third type of  instrument  consists of
obligations  that can be settled  with shares,  the  monetary  value of which is
fixed,  tied solely or  predominantly  to a variable such as a market index,  or
varies  inversely with the value of the issuers'  shares.  SFAS No. 150 does not
apply to features embedded in a financial instrument that is not a derivative in
its entirety.  SFAS No. 150 also requires  disclosures about alternative ways of
settling the instruments and the capital structure of entities, whose shares are
mandatorily  redeemable.  Most of the guidance in SFAS No. 150 is effective  for
all  financial  instruments  entered into or modified  after May 31,  2003,  and
otherwise  is effective  from the start of the first  interim  period  beginning
after June 15,  2003.  The  adoption  of this  standard  did not have a material
impact on the Company's results of operations or financial position.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments Hedging Activities." This statement amends and clarifies
accounting for derivative instruments,  including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS
No. 149  became  effective  during the third  quarter of 2003 and did not have a
material impact on the Company's results of operations or financial position.

(r) RECLASSIFICATIONS

Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.


NOTE 2. GOING CONCERN CONSIDERATIONS

The Company's  December 31, 2004  consolidated  financial  statements  have been
prepared assuming the Company will continue as a going concern.  The Company has
suffered  recurring losses from operations  since inception,  has an accumulated
deficit as of December 31, 2004,  of  $260,574,874  and has recorded  impairment
charges (See Note 3, "Impairment  Charges" below for further  discussion) during
2004 and 2003 of  $1,661,975  and  $908,384,  respectively,  related to its VoIP
telephony  services  division.  Net cash and cash equivalents used in operations
totaled  $17,732,632  for 2004 due primarily to net losses  incurred by its VoIP
telephony services division.

During 2004,  the Company  expended  significant  costs to implement a number of
marketing  programs  geared  toward  increasing  the  number of its VoIP  retail
customers  and  telephony  revenue.  None of these  programs  have  proven to be
successful to any significant  degree.  At December 31, 2004, the Company's sole
source of liquidity  consisted of $6,828,200 of cash and cash  equivalents.  The
Company  continues to incur  substantial  consolidated net losses and management
believes  the Company  will  continue  to be  unprofitable  for the  foreseeable
future.  Consequently,  as of  March  25,  2005,  the  Company's  cash  and cash
equivalent   resources  had  diminished  to  approximately   $3,900,000.   These
conditions raise  significant doubt about the Company's ability to continue as a
going concern.

MANAGEMENT'S PLANS

During  October  2004,  the  Company  engaged  financial  advisors to assist the
Company in raising capital through a private placement of its equity securities,
or  in  entering  into  other  business  relationships  with  certain  strategic
investors. In February 2005, the Company engaged an additional financial advisor
to assist the  Company in  connection  with  raising  capital  through a private
placement of equity securities in either the Company or its SendTec wholly-owned
subsidiary  or  alternatively  in selling  either  part or all of the  Company's
businesses or assets,  including its SendTec business. The Company currently has
no access to credit facilities with traditional third


                                      F-14
<PAGE>


party  lenders  and  there  can be no  assurance  that it would be able to raise
capital or sell any of its businesses or assets. In addition, any financing that
could be obtained  would  likely  significantly  dilute  existing  shareholders.
Management  is  exploring  a number  of  strategic  alternatives  regarding  the
Company's  future  business  operations  and is in the process of developing and
implementing  internal  actions to improve the Company's  liquidity and business
performance.  The Company's future strategic  direction is highly dependent upon
the outcome of its efforts to raise  capital  and/or sell certain  businesses or
assets.

Subsequent  to December  31, 2004,  the Company  reevaluated  its existing  VoIP
telephony  services business plan and is currently in the process of terminating
and/or  modifying  certain  of its  existing  product  offerings  and  marketing
programs,  as well as  developing  and  testing  certain new VoIP  products  and
features.  The Company has also recently made the decision to discontinue  using
its SendTec business to perform marketing services for its VoIP business, and to
instead  dedicate 100% of SendTec's  marketing  services to support and grow its
own third party  customer base.  Additionally,  in order to reduce its near term
consolidated  net losses and cash usage, the Company is currently in the process
of  implementing  a number  of  cost-reduction  actions  at its  VoIP  telephony
services business,  including decreases in personnel and salary levels,  carrier
and data center costs, and marketing/advertising expenses.

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

There can be no assurance that the Company's new VoIP product  offerings will be
successful  in  attracting  a  sufficient  number of new  customers  to its VoIP
network and increasing  telephony revenue to desired levels. Even if the Company
is able to raise  additional  capital,  management  may at any  time,  decide to
terminate the  operations of its VoIP  telephony  services  business,  either by
asset  sale  or  abandonment,   if  future  investment  returns  are  considered
inadequate  and/or  preferable  investment  alternatives  exist. The Company may
alternatively  decide to enter into new lines of business including  potentially
exercising its purchase option to acquire Tralliance Corporation,  a development
stage  Internet-related  business  that is attempting to become the registry for
the ".travel"  top-level  domain,  a new segment of the Internet  devoted to the
travel  industry  (See  Note 4.  "Acquisitions  and  Dispositions"  for  further
details).

SUMMARY

If the Company is not successful in entering into a financing, sale, or business
transaction  that infuses  sufficient  cash resources into the Company  sometime
during the second quarter of 2005, management believes that it will no longer be
able to continue the  implementation  of its current VoIP business plan. In such
event,  it is likely  that the Company  would be required to either  temporarily
suspend or  permanently  shutdown the operation of its VoIP  telephony  services
business.  Additionally,  in such event, management believes that it may also be
required  to  revise  the  business  plan of some or all of its  other  business
segments and/or further implement  company-wide cost reduction  programs.  There
can be no assurance  that the Company would be successful in  implementing  such
revised business plans and effectively  restructuring its businesses so that the
Company  would have the ability to continue to operate as a going concern in the
future.

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

NOTE 3. IMPAIRMENT CHARGES

As a result of the  significant  operating and cash flow losses  incurred by the
Company's VoIP telephony  services  division during 2004 and 2003,  coupled with
management's  projection  of continued  losses in the  foreseeable  future,  the
Company  performed  an  evaluation  of  the  recoverability  of  the  division's
long-lived  assets  during  the first  quarter  of 2005 in  connection  with the
preparation  of  the  accompanying   consolidated   financial  statements.   The
evaluation  indicated  that the  carrying  value of  certain  of the  division's
long-lived  assets exceeded the fair value of such assets, as measured by quoted
market prices or other management  estimates.  As a result, the Company recorded
an impairment  charge of $1,661,975 in the accompanying  statement of operations
for the year ended  December  31,  2004.  The  impairment  charge  included  the
write-off  of the  carrying  value  of  amounts  previously  capitalized  by the
division  as  internal-use   software,   website  development  costs,   acquired
technology and patent costs, as well as certain other assets.

During the first quarter of 2004,  the Company's  management  decided to suspend
DPT's  wholesale  business and to dedicate  the DPT  physical  and  intellectual
assets to its retail  VoIP  business.  As a result,  the  Company  reviewed  the
long-lived  assets  associated  with the wholesale VoIP business for impairment.
Goodwill of $577,134 and the unamortized  balance of the non-compete  intangible
asset of $331,250  recorded in connection  with the May 2003  acquisition of DPT
were  written  off  and  recorded  as an  impairment  loss  in the  accompanying
statement of operations for the year ended  December 31, 2003.  Refer to Note 4,
"Acquisitions and Disposition" for a discussion of the purchase of DPT.


                                      F-15
<PAGE>


NOTE 4. ACQUISITIONS AND DISPOSITION

ACQUISITION OF SENDTEC, INC.

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

The preliminary SendTec purchase price allocation was as follows:

Cash                           $ 3,610,000
Accounts receivable              5,534,000
Other current assets               194,000
Fixed assets                     1,031,000
Non-compete agreements           1,800,000
Goodwill                        11,702,000
Other assets                       124,000
Assumed liabilities             (5,597,000)
                               -----------
                               $18,398,000
                               ===========

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

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

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

The following pro forma  condensed  consolidated  results of operations  for the
years ended  December  31,  2004 and 2003  assumes  the  acquisition  of SendTec
occurred as of January 1, 2003.  The pro forma results  reflected  below include
SendTec's  revenue  utilizing the revenue  recognition  methods  employed by the
Company since  SendTec's date of acquisition.  The pro forma  information is not
necessarily  indicative of what the actual results of operations of the combined
company would have been had the acquisition  occurred on January 1, 2003, nor is
it necessarily indicative of future results.


                                      F-16
<PAGE>


PRO FORMA RESULTS                                  2004            2003
                                               ------------    ------------
Years ended December 31,
Revenue                                        $ 36,559,000    $ 20,725,000
Net Loss                                        (22,453,000)     (9,502,000)

Basic and diluted net loss per common share    $      (0.14)   $      (0.24)


ACQUISITION OF DIRECT PARTNER TELECOM, INC.

On May 28,  2003,  the  Company  completed  the  acquisition  of 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  warrants are
exercisable  any time  before  May 23,  2013 at an  exercise  price of $0.72 per
share. In addition,  the former shareholders of DPT may earn additional warrants
to acquire up to 2,750,000  shares of the Company's  Common Stock at an exercise
price of $0.72 per share if DPT achieves  certain  revenue and earnings  targets
over  approximately the next three years.  Effective March 31, 2004,  500,000 of
the  earn-out  warrants  were  forfeited  as  performance  targets  had not been
achieved for the first of the three year periods.  An additional  750,000 of the
warrants will be forfeited  effective March 31, 2005, as performance targets for
the second of the three year  periods will not be  achieved.  The warrants  will
accelerate  and be deemed  earned in the event of a "change in  control"  of the
Company, as defined in the acquisition  documents.  In addition,  as part of the
transaction,  the Company agreed to repay loans totaling  $600,000 to certain of
the former shareholders of DPT, including $500,000 immediately after the closing
of the acquisition.  The Company issued  promissory  notes for $100,000,  with a
two-year maturity and interest at prime, for the balance.

The total purchase price of DPT was allocated as follows:

Cash                          $  61,000
Accounts receivable             155,000
Fixed assets                    196,000
Non-compete agreement           375,000
Goodwill                        577,000
Assumed debt to former
    shareholders               (600,000)
Other assumed liabilities      (126,000)
                              ---------
                              $ 638,000
                              =========

As part of the DPT acquisition  transaction,  the former Chief Executive Officer
of  DPT  agreed  to  an  employment   agreement   with  a  one-year  term  which
automatically  renewed for an additional  year.  The  employment  agreement also
contained  non-compete  provisions  during the term of the  agreement  and for a
period of three years following termination of the agreement, as specified.  The
$375,000  value assigned to the  non-compete  agreement was to be amortized on a
straight-line basis over 5 years.

As discussed in Note 1, as a result of decisions  made during the first  quarter
of 2004, the Company performed a review of its long-lived assets for impairment.
As a result, effective December 31, 2003, the Company wrote off the goodwill and
the  unamortized   balance  of  the  non-compete   agreement  arising  from  the
acquisition  of  DPT  which  totaled  $908,384.   Amortization  expense  of  the
non-compete  agreement  totaled  $43,750  in 2003.  The former  Chief  Executive
Officer of DPT terminated his employment with the Company effective May 2004.

The following pro forma  condensed  consolidated  results of operations  for the
years ended  December 31, 2003 and 2002 assumes the  acquisition of DPT occurred
as of  October  1,  2002,  the date  which DPT began  operations.  The pro forma
information  is not  necessarily  indicative of the results of operations of the
combined  company  had these  events  occurred at the  beginning  of the periods
presented, nor is it necessarily indicative of future results.

Years ended December 31,                            2003            2002
                                                ------------    ------------
Revenue                                        $  6,076,000    $  7,770,000
Net Loss                                        (11,116,000)     (2,860,000)

Basic and diluted net loss per common share    $      (0.50)   $      (0.09)


                                      F-17
<PAGE>

LOAN AND PURCHASE OPTION AGREEMENT

On February 25,  2003,  theglobe.com  entered  into a Loan and  Purchase  Option
Agreement  with  Tralliance  Corporation  ("Tralliance"),  a  development  stage
Internet related business  venture,  pursuant to which it agreed to fund, in the
form  of a  loan,  at the  discretion  of the  Company,  Tralliance's  operating
expenses and obtained the option to acquire all of the outstanding capital stock
of Tralliance  in exchange  for, when and if exercised,  $40,000 in cash and the
issuance  of  an  aggregate  of  2,000,000  unregistered  restricted  shares  of
theglobe.com's Common Stock (the "Option"). The Loan is secured by a lien on the
assets of the  venture.  The Option is  exercisable  at anytime on or before ten
days after  theglobe.com's  receipt of notice relating to the award of a certain
contract (the "Contract") currently being pursued by Tralliance. In the event of
the  exercise of the Option,  (i) the existing  CEO and CFO of  Tralliance  have
agreed to enter into employment agreements whereby each would agree to remain in
the employ of Tralliance for a period of two years  following the closing of the
Option in exchange  for base  compensation  plus  participation  in a bonus pool
based upon the pre-tax income of the venture and (ii) the shares of theglobe.com
Common Stock issued upon such exercise will be entitled to certain  "piggy-back"
registration  rights.  If the Option is not  exercised,  then  theglobe.com  has
agreed,  subject to certain  exceptions,  to forgive repayment of $60,000 of the
amount loaned.

On September 30, 2004, the Loan and Purchase Option  Agreement was amended so as
to reduce the aggregate consideration to be paid by the Company upon exercise of
the Option to 1,500,000  shares of the  Company's  Common  Stock.  Additionally,
effective  March 3, 2005,  the Loan and Purchase  Option  Agreement  and related
promissory note were amended extending the maturity date to April 1, 2005.

Advances to Tralliance  totaled  $1,001,500 and $535,000 as of December 31, 2004
and 2003,  respectively.  Due to the uncertainty of  collectibility of the Loan,
the  Company  has  provided  a  reserve  equal to the full  amount  of the Loan.
Additions to the Loan reserve of $506,500  and $495,000  were  included in other
expense in the accompanying  consolidated statements of operations for the years
ended December 31, 2004 and 2003,  respectively  (See the "Future Capital Needs"
section of Management's Discussion and Analysis or Plan of Operation for further
details).

ACQUISITION OF VOIP ASSETS

On  November  14,  2002,  the  Company  acquired  certain  VoIP  assets  from an
entrepreneur. 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 arrangement upon the attainment of certain performance targets by
December  31,  2003.  None of the  performance  targets had been  attained as of
December  31, 2003,  resulting in the  forfeiture  of the 425,000  warrants.  In
conjunction  with the  acquisition,  E&C  Capital  Partners,  a  privately  held
investment  holding company owned by our Chairman and Chief  Executive  Officer,
Michael  S.  Egan,  and  our  President,  Edward  A.  Cespedes,  entered  into a
non-binding  letter of intent with  theglobe.com to provide new financing in the
amount of $500,000  through the purchase of Series F Preferred  Stock.  Refer to
Note 9, "Stockholders' Equity," for further details.

As a result of the Company's review of certain long-lived assets for impairment,
the unamortized value of the assets acquired was written-off  effective December
31, 2004. See Notes 3 and 5 for further details.

DISPOSITION OF WEBSITE

On February 27, 2002, the Company sold all of the assets used in connection with
the Happy Puppy website for $135,000,  resulting in the recognition of a gain on
the sale of $134,500.


NOTE 5. INTANGIBLE ASSETS

The components of intangible assets were as follows:

<TABLE>
<CAPTION>
                                       December 31, 2004                    December 31, 2003
                               ------------------------------        ------------------------------
                                 Gross                                 Gross
                                Carrying          Accumulated         Carrying          Accumulated
                                 Amount          Amortization          Amount          Amortization
                               ----------         ----------         ----------         ----------
<S>                            <C>                <C>                <C>                <C>
Amortized Intangible Assets:

Non-compete agreements         $1,800,000         $  120,000         $       --         $       --
Digital telephony                      --                 --            227,452             28,432
                               ----------         ----------         ----------         ----------
                               $1,800,000         $  120,000         $  227,452         $   28,432
                               ==========         ==========         ==========         ==========
</TABLE>


                                      F-18
<PAGE>


As discussed in Note 4,  "Acquisitions and Disposition,"  certain  executives of
SendTec entered into new employment agreements with SendTec upon the acquisition
of SendTec by theglobe.com. The agreements contain certain noncompete provisions
for periods as specified by the agreements. The $1,800,000 value assigned to the
non-compete  agreements is being  amortized on a  straight-line  basis over five
years.

As  discussed  in  Note  3,  "Impairment  Charges,"  the  Company  performed  an
evaluation of the  recoverability of the long-lived assets of its VoIP telephony
services  division.  As a result,  effective  December  31,  2004,  the  Company
wrote-off the unamortized  balance of its digital telephony assets which totaled
$192,106.  Such assets  consisted of certain VoIP assets which were  recorded at
the value assigned to the warrants to acquire  1,750,000 shares of the Company's
Common Stock issued in connection with the acquisition of the assets on November
14, 2002 and patent application costs.

During the year ended December 31, 2004,  intangible asset amortization  totaled
$222,834,  including  $102,834 of amortization  related to the digital telephony
intangible  assets prior to their write-off as of December 31, 2004.  Intangible
asset amortization expense totaled $72,182 for the year ended December 31, 2003,
including $43,750 of amortization related to the non-compete  agreement recorded
in connection  with the  acquisition of DPT. As discussed in Note 3, the Company
wrote-off the $331,250  unamortized  balance of the non-compete  agreement as of
December 31,  2003.  There was no  amortization  expense for  intangible  assets
during the year ended  December  31,  2002.  As of  December  31,  2004,  annual
intangible asset amortization expense was projected to be as follows:

    Year ending December 31,

                  2005      $  360,000
                  2006         360,000
                  2007         360,000
                  2008         360,000
                  2009         240,000
                            ----------
                            $1,680,000
                            ==========


NOTE 6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                      December 31,
                                            -----------------------------
                                               2004               2003
                                            ----------         ----------
VoIP network equipment and software         $2,929,051         $1,712,537
Other equipment                              1,127,910            679,597
Capitalized software costs                     750,056            690,602
Land and building                              181,110            181,110
Furniture and fixtures                         348,888            149,714
Leasehold improvements                          18,798              9,402
                                            ----------         ----------
                                             5,355,813          3,422,962
Less: Accumulated depreciation and
        amortization                         1,949,443          1,006,579
                                            ----------         ----------
                                            $3,406,370         $2,416,383
                                            ==========         ==========

See Note 3, "Impairment Charges," for a discussion of write-offs recorded during
2004 in connection with the Company's  evaluation of the  recoverability  of the
VoIP telephony  services  division's  long-lived  assets.  The impairment charge
included the write-off of the carrying value of amounts  previously  capitalized
by the division as internal-use  software and website development costs, as well
as certain other property and equipment, which totaled $1,469,869.


                                      F-19
<PAGE>


NOTE 7. DEBT

Debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                        -----------------------------
                                                                           2004               2003
                                                                        ----------         ----------
<S>                                                                     <C>                <C>
4% Subordinated promissory note; interest and principal due
   September 1, 2005                                                    $1,000,009         $       --

10% Convertible Notes; interest and principal due May 2004                      --          1,750,000

Promissory notes issued in connection with the acquisition
   of DPT; interest and principal due May 2005; interest at
   prime rate (5.25% and 4.00% at December 31, 2004
   and 2003, respectively)                                                 100,000            100,000

Mortgage note payable; interest payable monthly at 9%;
  principal due May 2005                                                    73,351             82,612

Related party obligations payable in Canadian dollars;  due in
  monthly  installments of principal and interest approximating
  $3,500 through September 2006; interest at prime plus 2-3%                69,233            102,916

Financing of computer software and related maintenance costs;
  quarterly installments of principal and interest
  approximating $21,400 through September 2005                              61,809                 --
                                                                        ----------         ----------
                                                                         1,304,402          2,035,528
  Less: unamortized debt discount                                               --            121,041
  Less: short-term portion                                               1,277,405            121,919
                                                                        ----------         ----------

  Long-term portion                                                     $   26,997         $1,792,568
                                                                        ==========         ==========
</TABLE>

As discussed in Note 4, "Acquisitions and Disposition," on September 1, 2004 the
Company  issued a  subordinated  promissory  note in the amount of $1,000,009 in
connection with the acquisition of SendTec.

On February 2, 2004,  our Chairman and Chief  Executive  Officer and his spouse,
entered into a Note Purchase  Agreement with the Company  pursuant to which they
acquired  a demand  convertible  promissory  note  (the  "Bridge  Note")  in the
aggregate  principal amount of $2,000,000.  The Bridge Note was convertible into
shares of the Company's  Common Stock.  The Bridge Note provided for interest at
the rate of ten percent  per annum and was secured by a pledge of  substantially
all of the assets of the  Company.  Such  security  interest was shared with the
holders of the  Company's  $1,750,000  Convertible  Notes  issued to E&C Capital
Partners and certain affiliates of our Chairman and Chief Executive Officer.  In
addition,  the Chairman and Chief Executive Officer and his spouse were issued a
warrant to acquire  204,082 shares of the Company's  Common Stock at an exercise
price of $1.22 per share.  The Warrant is  exercisable  at any time on or before
February 2, 2009. The exercise price of the Warrant, together with the number of
shares for which such Warrant is exercisable,  is subject to adjustment upon the
occurrence of certain events.

An allocation of the proceeds  received from the issuance of the Bridge Note was
made between the debt  instrument  and the Warrant by  determining  the pro rata
share of the  proceeds  for each by  comparing  the fair value of each  security
issued to the total fair value.  The fair value of the  Warrant  was  determined
using the Black Scholes model.  The fair value of the Bridge Note was determined
by measuring the fair value of the common shares on an "as-converted"  basis. As
a result,  $170,000  was  allocated to the Warrant and recorded as a discount on
the debt  issued and  additional  paid in capital.  The value of the  beneficial
conversion feature of the Bridge Note was calculated by comparing the fair value
of the underlying common shares of the Bridge Note on the date of issuance based
on the  closing  price of our  Common  Stock as  reflected  on the  OTCBB to the
"effective"  conversion price. This resulted in a beneficial conversion discount
of  $517,000,  which  was  recorded  as  interest  expense  in the  accompanying
consolidated statement of operations for the year ended December 31, 2004 as the
Bridge Note was immediately  convertible  into common shares.  In addition,  the
value allocated to the Warrant and  characterized as discount on the Bridge Note
was recognized as interest expense, as the Bridge Note was due on demand.

In  connection  with the March 2004  private  offering of the  Company's  Common
Stock,  the Chairman  and his spouse  converted  the Bridge Note into  3,527,337
shares of theglobe.com Common Stock.


                                      F-20
<PAGE>


On May 22,  2003,  E&C Capital  Partners  together  with certain  affiliates  of
Michael  S.  Egan,  entered  into a Note  Purchase  Agreement  with the  Company
pursuant  to which they  acquired  convertible  promissory  notes (the  "Secured
Convertible Notes") in the aggregate principal amount of $1,750,000. The Secured
Convertible  Notes were  convertible at anytime into a maximum of  approximately
19,444,000  shares of the Company's  Common Stock at a blended rate of $0.09 per
share.  The  Secured  Convertible  Notes had a one year  maturity  date and were
secured  by a pledge of  substantially  all of the  assets of the  Company.  The
Secured  Convertible  Notes provided for interest at the rate of ten percent per
annum,  payable  semi-annually.  Effective  October 3, 2003,  the holders of the
Secured  Convertible  Notes waived the right to receive accrued interest payable
in shares of the Company's  Common Stock.  Additionally,  each of the holders of
the Secured  Convertible Notes agreed to defer receipt of interest until June 1,
2004.  Additional  interest  at ten percent  per annum  accrued on any  interest
amounts deferred. The outstanding balance of the Secured Convertible Notes as of
December 31, 2003,  has been  reflected  as long-term  debt in the  accompanying
consolidated  balance  sheet  as a  result  of the  conversion  of  the  Secured
Convertible Notes into the Company's Common Stock in March 2004.

In  addition,  E&C Capital  Partners  was issued a warrant  (the  "Warrant")  to
acquire  3,888,889  shares of the Company's Common Stock at an exercise price of
$0.15 per share.  The Warrant was  exercisable  at any time on or before May 22,
2013. An  allocation  of the proceeds  received from the issuance of the Secured
Convertible  Notes was made  between  the debt  instruments  and the  Warrant by
determining  the pro-rata  share of the proceeds for each by comparing  the fair
value of each  security  issued to the total fair  value.  The fair value of the
Warrant was  determined  using the Black  Scholes  model.  The fair value of the
Secured  Convertible  Notes was  determined  by measuring  the fair value of the
common shares on an "as-converted" basis. As a result, $290,500 was allocated to
the Warrant and recorded as a discount on the debt issued and additional paid in
capital.  The  value  of  the  beneficial  conversion  feature  of  the  Secured
Convertible  Notes was  calculated by comparing the fair value of the underlying
common shares of the Secured  Convertible Notes on the date of issuance based on
the  closing  price  of our  Common  Stock  as  reflected  on the  OTCBB  to the
"effective"  conversion  price.  This  resulted  in  a  preferential  conversion
discount,  limited to the previously discounted value of the Secured Convertible
Notes, of $1,459,500, which was recorded as interest expense in the accompanying
consolidated  statement of operations  for the year ended  December 31, 2003, as
the Secured Convertible Notes were immediately convertible into common shares.

Effective  August 18, 2004,  the maturity  date of the mortgage note payable was
extended to May 31, 2005.

Repayment of debt is due as follows:

         Year ending December 31,

               2005                   $1,277,405
               2006                       26,997
                                      ----------
                                      $1,304,402
                                      ==========

NOTE 8. INCOME TAXES

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2004 and
2003 are presented below.

                                              2004               2003
                                          ------------      ------------
Deferred tax assets (liabilities):
   Net operating loss carryforwards       $ 61,300,000      $ 57,642,000
   Allowance for doubtful accounts             483,000           244,000
   Issuance of warrants                      1,052,000           982,000
   Inventory reserve                           661,000            43,000
   Offering costs                              105,000                --
   Depreciation and amortization                46,000          (230,000)
   Other                                       153,000            80,000
                                          ------------      ------------
      Total gross deferred tax assets       63,800,000        58,761,000
Less: valuation allowance                  (63,800,000)      (58,761,000)
                                          ------------      ------------
      Total net deferred tax assets       $         --      $         --
                                          ============      ============


                                      F-21
<PAGE>


Because of the Company's lack of earnings history, the net deferred tax assets
have been fully offset by a 100% valuation allowance. The valuation allowance
for net deferred tax assets was $63.8 million and $58.8 million as of December
31, 2004 and 2003, respectively. The net change in the total valuation allowance
was $5.0 million and $4.0 million for the years ended December 31, 2004 and
2003, respectively.

In assessing  the  realizability  of deferred tax assets,  management  considers
whether it is more likely than not that some  portion or all of the deferred tax
assets will not be realized.  The ultimate  realization  of deferred tax assets,
which consist of tax benefits  primarily from net operating loss  carryforwards,
is dependent  upon the generation of future taxable income during the periods in
which those temporary  differences become deductible.  Management  considers the
scheduled reversal of deferred tax liabilities,  projected future taxable income
and tax planning  strategies in making this  assessment.  Of the total valuation
allowance of $63.8 million, subsequently recognized tax benefits, if any, in the
amount of $6.5 million will be applied directly to contributed capital.

At December 31, 2004, the Company had net operating loss carryforwards available
for  U.S.  and  foreign  tax  purposes  of  approximately  $162  million.  These
carryforwards expire through 2024.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
the  utilization  of net operating loss  carryforwards  may be limited under the
change in stock ownership  rules of the Code. As a result of ownership  changes,
which  occurred in August 1997 and May 1999, the Company's  private  offering in
March 2004 (together  with the exercise and conversion of various  securities in
connection  with such  private  offering)  and the  issuance of Common  Stock in
connection with the acquisition of SendTec on September 1, 2004, the Company may
have  substantially  limited or eliminated the availability of its net operating
loss  carryforwards.  There can be no assurance that the Company will be able to
avail itself of any net operating loss carryforwards.

NOTE 9. STOCKHOLDERS' EQUITY

As discussed in Note 4,  "Acquisitions  and  Disposition," on September 1, 2004,
the Company  closed upon an agreement  and plan of merger dated August 31, 2004,
pursuant to which the Company acquired all of the issued and outstanding  shares
of capital stock of SendTec. As part of the purchase price paid for SendTec, the
Company issued an aggregate of 17,500,024  shares of the Company's  Common Stock
and an  aggregate  of  175,000  shares  of  Series  H  Automatically  Converting
Preferred Stock (which were converted into  approximately  17,500,500  shares of
the Company's Common Stock effective December 1, 2004). In addition, warrants to
acquire shares of theglobe.com  Common Stock with an exercise price of $0.27 per
share  would be issued  to  SendTec  shareholders  when and if  SendTec  exceeds
forecasted operating income, as defined, of $10.125 million, for the year ending
December 31, 2005. The number of earn-out warrants would range from an aggregate
of 250,000 to 2,500,000 (if actual  operating  income exceeds the forecast by at
least 10%) and the earn-out  warrants will be  exercisable  for a period of five
years.

Each share of the Series H Preferred Stock was automatically  converted into 100
shares of theglobe's Common Stock on December 1, 2004, the effective date of the
amendment  to  the  Company's   certificate  of  incorporation   increasing  its
authorized shares of Common Stock from 200,000,000 shares to 500,000,000 shares.

The Company  agreed to file a registration  statement  relating to the resale of
the shares of Common  Stock  issued in the Merger and the shares of Common Stock
underlying the Series H Preferred Stock and to cause the  effectiveness  of such
registration on or before September 1, 2005. The Company also agreed to keep the
registration  statement  effective  until at least the third  anniversary of the
Closing.  Pursuant to the terms of the Merger, in general, the equity securities
issued in the Merger may not be sold or  otherwise  transferred  for a period of
one year without the prior written consent of the Company.

In March 2004,  theglobe.com  completed a private offering of 333,816 units (the
"Units") for a purchase  price of $85 per Unit (the  "Private  Offering").  Each
Unit  consisted of 100 shares of the Company's  Common  Stock,  $0.001 par value
(the "Common Stock"),  and warrants to acquire 50 shares of the Company's Common
Stock (the "Warrants").  The Warrants are exercisable for a period of five years
commencing  60 days after the initial  closing at an initial  exercise  price of
$0.001 per share.  The aggregate  number of shares of Common Stock issued in the
Private  Offering  was  33,381,647  shares  for an  aggregate  consideration  of
$28,374,400,  or  approximately  $0.57 per share  assuming  the  exercise of the
16,690,824 Warrants.  As of December 31, 2004,  approximately  11,102,000 of the
Warrants remain outstanding.

The Private Offering was directed solely to investors who are  sophisticated and
accredited  within the meaning of applicable  securities laws, most of whom were
not affiliates of the Company.  The purpose of the Private Offering was to raise
funds for use primarily in the Company's developing VoIP business, including the
deployment   of   networks,   website   development,   marketing   and   capital
infrastructure expenditures and working capital. Other intended uses of proceeds
included  funding  requirements in connection with theglobe's  other existing or
future business operations, including acquisitions.


                                      F-22
<PAGE>


Halpern Capital,  Inc., acted as placement agent for the Private  Offering,  and
was paid a commission of $1.2 million and issued a warrant to acquire  1,000,000
shares  of  Common  Stock  at  $0.001  per  share.  As  of  December  31,  2004,
approximately 459,000 of these warrants remain outstanding.

Pursuant to the terms of the Private Offering,  the Company filed a registration
statement  relating  to the  resale of the  Securities  on April 16,  2004 which
became effective on May 11, 2004.

In connection with the Private  Offering,  Michael S. Egan, our Chairman,  Chief
Executive  Officer  and  principal  stockholder,  together  with  certain of his
affiliates,  including E&C Capital Partners,  converted a $2,000,000 Convertible
Bridge Note,  $1,750,000 of Secured  Convertible  Notes and all of the Company's
outstanding  shares of Series F Preferred  Stock, and exercised (on a "cashless"
basis) all of the warrants  issued in connection  with the foregoing  $1,750,000
Secured  Convertible  Notes and Series F Preferred Stock,  together with certain
warrants  issued to Dancing Bear  Investments,  an  affiliate of Mr. Egan.  As a
result of such  conversions  and  exercises,  the Company issued an aggregate of
48,775,909 additional shares of Common Stock.

On July 2, 2003,  the Company  completed a private  offering of 17,360 shares of
Series G Automatically  Converting  Preferred Stock ("Series G Preferred Stock")
and warrants to acquire  3,472 shares of Series G Preferred  Stock at a purchase
price of $500 per share for a total of $8,680,000 in gross proceeds.  Each share
of Series G Preferred  Stock was  automatically  converted  into 1,000 shares of
theglobe's Common Stock on July 29, 2003, the effective date of the amendment to
the Company's  certificate of incorporation  increasing its authorized shares of
Common  Stock  from  100,000,000  shares to  200,000,000  shares  (the  "Capital
Amendment").  Similarly,  upon the effective date of the Capital Amendment, each
warrant  to acquire a share of the Series G  Preferred  Stock was  automatically
converted  into a warrant to acquire 1,000 shares of Common Stock.  The warrants
are  exercisable  for a period of 5 years at an initial  exercise price of $1.39
per share. A total of 17,360,000  shares of Common Stock were issued pursuant to
the  Series G  Preferred  Stock  private  offering,  while,  subject  to certain
adjustment  mechanisms,  a total of  3,472,000  shares of Common  Stock  will be
issuable upon exercise of the associated warrants.

At the time of the issuance of the Series G Preferred  Stock,  an  allocation of
proceeds  received  was made  between the  preferred  shares and the  associated
warrants.  The  allocation  was made by  determining  the pro-rata  share of the
proceeds for each by  comparing  the fair value of each  security  issued to the
total fair value.  The fair value of the warrants was determined using the Black
Scholes model.  The fair value of the Series G Preferred Stock was determined by
measuring the fair value of the common shares on an  "as-converted"  basis. As a
result, $1,365,000 was allocated to the warrants sold. In addition, the value of
the  preferential  conversion  was calculated by comparing the fair value of the
underlying  common  shares based on the closing  price of the  Company's  Common
Stock as  reflected  on the  OTCBB on the date of  issuance  to the  "effective"
conversion price. This resulted in a preferential conversion discount related to
the preferred shares and the associated  warrants,  limited to the proceeds from
the sale,  of  $7,315,000  and  $305,000,  respectively,  which were recorded as
dividends to the preferred  stockholders  in July 2003, as the preferred  shares
and  associated  warrants were  immediately  convertible  into common shares and
warrants to acquire common shares.

As more fully discussed in Note 7, "Debt," on May 22, 2003, Secured  Convertible
Notes  totaling  $1,750,000  were issued to E&C Capital  Partners  together with
certain  affiliates  of Michael  S. Egan.  The  Secured  Convertible  Notes were
convertible at anytime into a maximum of approximately  19,444,000 shares of the
Company's  Common Stock at a blended rate of $0.09 per share.  In addition,  E&C
Capital  Partners  was  issued a  warrant  to  acquire  3,888,889  shares of the
Company's  Common Stock at an exercise price of $0.15 per share. The warrant was
exercisable at any time on or before May 22, 2013.

On March 28, 2003, E&C Capital  Partners entered into a Preferred Stock Purchase
Agreement  with the Company  (the  "Preferred  Stock  Investment"),  whereby E&C
Capital Partners received 333,333 shares of Series F Preferred Stock convertible
into  shares of the  Company's  Common  Stock at a price of $0.03 per share.  If
fully converted,  and without regard to the anti-dilutive  adjustment mechanisms
applicable  to the Series F  Preferred  Stock,  an  aggregate  of  approximately
16,667,000 shares of Common Stock could be issued.  The Series F Preferred Stock
had a  liquidation  preference of $1.50 per share (and  thereafter  participates
with the  holders  of  Common  Stock on an  "as-converted"  basis),  included  a
dividend  at the rate of 8% per  annum  and  entitled  the  holder to vote on an
"as-converted"  basis with the holders of Common Stock. In addition,  as part of
the $500,000  investment,  E&C Capital  Partners  received  warrants to purchase
3,333,333  shares of the Company's  Common Stock at an exercise  price of $0.125
per share.  The  warrants  were  exercisable  at any time on or before March 28,
2013. E&C Capital Partners is entitled to certain demand  registration rights in
connection with its investment.

The proceeds  attributable  to the issuance of the Series F Preferred  Stock and
the  related  warrants  were  allocated  to each  security in the same manner as
described  in the  discussion  of the  Series G  Preferred  Stock.  As a result,
$83,000 was  allocated  to the  warrants  sold.  In  addition,  the value of the
preferential  conversion  was  calculated  by  comparing  the fair  value of the
underlying  common shares on the date of issuance  based on the closing price of
the  Company's  Common  Stock  as  reflected  on the  OTCBB  to the  "effective"
conversion price. This resulted in a preferential  conversion discount,  limited
to the  proceeds  from the  sale,  of  $417,000.  The sum of the two  discounts,
$500,000,  was  recorded as a dividend to the  preferred  stockholders  in March
2003, as the preferred shares were immediately convertible into common shares.


                                      F-23
<PAGE>


As a result of the  issuance  of the  Series F  Preferred  Stock,  the  Series G
Automatically  Converting  Preferred Stock, the $1,750,000  Secured  Convertible
Notes and the associated  warrants at their  respective  conversion and exercise
prices,  certain anti-dilution  provisions applicable to previously  outstanding
warrants to acquire approximately 4,103,000 shares of the Company's Common Stock
were triggered.  Like many types of warrants commonly issued,  these outstanding
warrants to acquire  shares of the  Company's  Common  Stock  included  weighted
average  anti-dilution  provisions  which  result in a lowering of the  exercise
price,  and an  increase  in the number of  warrants  to  acquire  shares of the
Company's Common Stock any time shares of common stock are issued (or options or
other  securities  exercisable or convertible into common stock) for a price per
share  less than the then  exercise  price of the  warrants.  As a result of the
Preferred Stock  Investment and the issuance of the Series G Preferred Stock and
the Secured Convertible Notes, the exercise price was lowered from approximately
$1.39 to $0.66 per share on these  warrants  and the  number of shares  issuable
upon exercise was proportionally  increased from approximately  4,103,000 shares
to 6,836,000 shares. As stated previously,  all of these warrants were exercised
on a cashless  basis in connection  with the March 2004 Private  Offering of the
Company's Common Stock.

Certain  holders of Common Stock are subject to substantial  restrictions on the
transfer  or sale of  shares  and also  have  certain  "piggy-back"  and  demand
registration rights which, with certain exceptions,  require the Company to make
all  reasonable  efforts to include  within  any of the  Company's  registration
statements to sell such  securities any shares that have been requested to be so
included.

NOTE 10. STOCK OPTION PLANS

During 1995,  the Company  established  the 1995 Stock  Option  Plan,  which was
amended (the  "Amended  Plan") by the Board of  Directors  in December  1996 and
August 1997.  Under the Amended  Plan, a total of 1,582,000  common  shares were
reserved for  issuance.  Any incentive  stock options  granted under the Amended
Plan were  required  to be granted  at the fair  market  value of the  Company's
Common Stock at the date the option was issued.

Under  the  Company's  1998  Stock  Option  Plan  (the  "1998  Plan") a total of
3,400,000 common shares were reserved for issuance and provides for the grant of
"incentive stock options"  intended to qualify under Section 422 of the Code and
stock options which do not so qualify.  The granting of incentive  stock options
is subject to  limitation  as set forth in the 1998 Plan.  Directors,  officers,
employees and  consultants of the Company and its  subsidiaries  are eligible to
receive grants under the 1998 Plan.

In January 2000,  the Board adopted the 2000 Broad Based  Employee  Stock Option
Plan (the "Broad Based  Plan").  Under the Broad Based Plan,  850,000  shares of
Common Stock were reserved for  issuance.  The intention of the Broad Based Plan
is that at least 50% of the options  granted will be to individuals  who are not
managers or officers of theglobe. In April 2000, the Company's 2000 Stock Option
Plan (the "2000 Plan") was adopted by the Board of Directors and approved by the
stockholders  of the Company.  The 2000 Plan  authorized the issuance of 500,000
shares of Common Stock,  subject to adjustment as provided in the 2000 Plan. The
Broad  Based Plan and the 2000 Plan  provide for the grant of  "incentive  stock
options"  intended to qualify  under  Section 422 of the Code and stock  options
which do not so qualify.  The granting of incentive  stock options is subject to
limitation  as set forth in the Broad  Based Plan and the 2000 Plan.  Directors,
officers,  employees and  consultants  of the Company and its  subsidiaries  are
eligible to receive grants under the Broad Based Plan and the 2000 Plan.

In September 2003, the Board adopted the 2003 Sales  Representative Stock Option
Plan  (the  "2003  Plan")  which  authorized  the  issuance  of up to  1,000,000
non-qualified  stock  options to purchase  the  Company's  Common Stock to sales
representatives  who are not  employed  by the Company or its  subsidiaries.  In
January 2004, the Board amended the 2003 Plan to include  certain  employees and
consultants of the Company.

The  Company's  Board of Directors  adopted a new benefit plan entitled the 2004
Stock  Incentive  Plan (the "2004  Plan") on August 31,  2004.  An  aggregate of
7,500,000  shares of the  Company's  Common Stock may be issued  pursuant to the
2004 Plan. Employees,  consultants, and prospective employees and consultants of
theglobe and its affiliates and non-employee  directors of theglobe are eligible
for grants of non-qualified stock options, stock appreciation rights, restricted
stock awards,  performance  awards and other  stock-based  awards under the 2004
Plan.

On December 1, 2004, based upon approval of the stockholders of the Company, the
2000 Plan was amended and restated to (i) increase the number of shares reserved
for  issuance  under the 2000 Plan by  7,500,000  shares to a total of 8,000,000
shares and (ii) to remove a previous plan  provision  that limited the number of
options that may be awarded to any one individual.

In  accordance  with  the  provisions  of  the  Company's  stock  option  plans,
nonqualified  stock  options  may  be  granted  to  officers,  directors,  other
employees,  consultants  and  advisors  of the  Company.  The  option  price for
nonqualified stock options shall be at least 85% of the fair market value of the
Company's  Common Stock.  In general,  options granted under the Company's stock
option  plans  expire  after a  ten-year  period  and in  certain  circumstances
options,  under the 1995 and 1998  plans,  are  subject to the  acceleration  of
vesting.  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. A committee


                                      F-24
<PAGE>


selected  by the  Company's  Board of  Directors  has the  authority  to approve
optionees and the terms of the stock options granted, including the option price
and the vesting terms.

As  discussed  in  Note  4,  "Acquisitions  and  Disposition,"  pursuant  to the
agreement and plan of merger in connection  with the  acquisition  of SendTec on
September 1, 2004,  the Company  issued an  aggregate  of 3,974,165  replacement
options to acquire shares of theglobe's  Common Stock for each of the issued and
outstanding  options to acquire shares of SendTec common stock held by employees
of SendTec.  Of these  replacement  options,  3,273,668 have exercise  prices of
$0.06 and 700,497  have  exercise  prices of $0.27 per share.  The Company  also
agreed to grant an  aggregate  of 225,000  options to  employees  of SendTec and
25,000  options to a  consultant  of SendTec at an  exercise  price of $0.34 per
share under similar terms as other stock option grants of theglobe.  The Company
also granted  1,000,000 stock options at an exercise price of $0.27 per share in
connection  with the  establishment  of a bonus  option  pool  pursuant to which
various  employees  of  SendTec  could vest in such  options if SendTec  exceeds
forecasted operating income, as defined, of $10.125 million, for the year ending
December 31, 2005.  Due to the  contingent  nature of the  1,000,000  bonus pool
stock options,  no amounts have been recognized in the results of operations for
the years ended December 31, 2004.

Excluding  the  aforementioned  stock  options  issued  in  connection  with the
acquisition of SendTec,  a total of 2,525,430  stock options were granted during
the year ended December 31, 2004,  including  grants of 390,000 stock options to
non-employees.  Options were granted during 2003 for a total of 4,407,450 shares
of Common Stock, of which 500,000 options were granted pursuant to an individual
nonqualified  stock  option  agreement  and  not  pursuant  to any of the  plans
described  above.  During 2002, a total of 5,347,500 stock options were granted,
of which  5,175,000  were  granted  pursuant to  individual  nonqualified  stock
options agreements and not pursuant to any of the plans described above.

The Company  applies APB Opinion No. 25 in  accounting  for grants to  employees
pursuant to stock option plans and,  accordingly,  compensation cost of $421,952
was recognized for stock options  granted to employees at exercise  prices below
fair market value  during the year ended  December  31,  2004,  including  those
issued  in  connection  with the  SendTec  acquisition.  During  the year  ended
December  31,  2003,  $233,750  was  recognized  for stock  options  granted  to
employees at exercise  prices  below fair market  value.  No stock  options were
granted to employees  with exercise  prices below fair market value during 2002.
In addition,  approximately  $17,188 and $152,884 of stock compensation  expense
was recorded during the years ended December 31, 2004 and 2003, respectively, as
a  result  of the  accelerated  vesting  of  stock  options  issued  to  certain
terminated  employees.  Compensation  cost  recognized in connection  with stock
options  granted in  recognition  of  services  rendered  by  non-employees  was
$463,775,  $225,609, and $13,000 for the years ended December 31, 2004, 2003 and
2002, respectively.

In 2000, the Company  repriced a group of stock options issued to its employees.
The Company is accounting  for these  re-priced  stock  options  using  variable
accounting  in  accordance  with  FIN  No.  44.  Accordingly,  the  stock  based
compensation  recorded in connection  with these  re-priced  stock options was a
credit  of  $22,666  in 2004  and  expense  of  $30,933  in 2003.  There  was no
compensation  charge  relating to the  re-priced  options  during the year ended
December 31, 2002.  At December  31,  2004, a total of 42,010  options  remained
outstanding which were being accounted for in accordance with FIN No. 44.

Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
                                                                                       Weighted
                                                    Options            Total           Average
                                                    Vested            Options       Exercise Price
                                                  ---------         -----------     ---------------
<S>                                               <C>                 <C>                <C>
Outstanding at December 31, 2002                   5,870,749           5,971,440         $0.63
                                                  ==========
Granted                                                                4,407,450          0.80
Exercised                                                               (429,000)         0.28
Canceled                                                                  (7,080)         1.07
                                                                     -----------
Outstanding at December 31, 2003                   8,475,232           9,942,810          0.72
                                                  ==========
Granted                                                                7,749,595          0.30
Exercised                                                               (639,000)         0.29
Canceled                                                              (1,069,220)         0.96
                                                                     -----------
Outstanding at December 31, 2004                  11,784,625          15,984,185         $0.51
                                                  ==========         ===========         =====

Options available at December 31, 2002                                 4,259,547
                                                                      ==========
Options available at December 31, 2003                                 1,359,177
                                                                      ==========
Options available at December 31, 2004                                10,203,732
                                                                      ==========
</TABLE>


                                      F-25


<PAGE>


The weighted  average  exercise prices and remaining lives of outstanding  stock
options and  weighted  average  exercise  prices of vested  stock  options as of
December 31, 2004 were as follows:

                            Options Outstanding     Options Vested
                            -------------------  --------------------
                            Weighted  Weighted              Weighted
                 Number     Average    Average    Number     Average
    Range      Outstanding    Life      Price     Vested      Price
-------------  -----------  --------  ---------  ---------  ---------
$ .01 -$ .02     5,075,000       7.5  $    0.02  4,875,000  $    0.02
  .035-  .035      200,000       7.4       0.035   200,000       0.035
  .04 -  .05        47,500       7.2       0.05     32,825       0.05
  .06 -  .06     3,273,668       8.4       0.06  1,979,873       0.06
  .14 -  .14       105,000       8.3       0.14    105,000       0.14
  .23 -  .34     2,045,497       6.5       0.28    555,748       0.28
  .37 -  .49       750,430       9.8       0.42    493,394       0.43
  .52 -  .54       327,000       9.5       0.52    101,737       0.53
  .56 -  .56     1,650,000       8.4       0.56  1,650,000       0.56
  .63 -  .65       210,000       8.4       0.63    178,128       0.63
  .90 - 1.03       625,000       9.1       0.97    489,844       0.98
 1.14 - 1.29       428,500       7.5       1.24    290,230       1.24
 1.33 - 1.47       212,500       8.7       1.41    122,501       1.41
 1.50 - 1.52       526,500       8.8       1.50    202,755       1.50
 1.59 - 1.59        16,590       5.2       1.59     16,590       1.59
 1.72 - 2.50        38,500       6.3       2.25     38,500       2.25
 4.50 - 6.69       332,500       3.7       4.69    332,500       4.69
15.75 -15.75       120,000       4.0      15.75    120,000      15.75
               -----------                      ----------
                15,984,185                      11,784,625
               ===========                      ==========

NOTE 11. COMMITMENTS AND CONTINGENCIES

NETWORK COMMITMENTS

The  Company  and  its  subsidiaries  are a party  to  various  network  service
agreements  which  provide for specified  services,  including the use of secure
data transmission  facilities,  capacity and other network carrier services. The
term of the  agreements  are  generally  for one year,  with the term of several
agreements  extending to three or five years.  Certain of the agreements contain
early cancellation penalties. Commitments under such network service agreements,
exclusive of regulatory taxes, fees and charges, are as follows:

   Year ending December 31:

            2005                            $2,063,000
            2006                               873,000
            2007                               503,000
            2008                               202,000
            2009                                12,000
            Thereafter                              --
                                            ----------
                                            $3,653,000
                                            ==========

Commitments for minimum usage requirements of approximately $43,000 are included
in the total  commitments  amount  for the year ended  December  31,  2005.  The
Company has recently terminated all other minimum usage requirement  commitments
for which it was obligated under previous network carrier agreements.


                                      F-26
<PAGE>


PURCHASE OBLIGATIONS

Effective January 31, 2005, the Company formally  terminated its contract with a
supplier  of VoIP  telephony  handsets  and agreed to settle  the  unconditional
purchase obligation under such contract, which totaled approximately $3,000,000.
The settlement  provided for (i) a cash payment of $200,000,  (ii) the return of
35,000 VoIP handset units from the Company's  inventory,  and (iii) the issuance
of 300,000 shares of theglobe.com Common Stock. The value attributed to the loss
on the settlement of the contractual obligation of $406,750 has been included in
the  accompanying  consolidated  statement  of  operations  for the  year  ended
December 31, 2004.

EMPLOYMENT AGREEMENTS

On August 1, 2003,  the Company  entered  into  employment  agreements  with its
Chairman and Chief  Executive  Officer,  President and Vice President of Finance
(its former Chief  Financial  Officer).  The three  agreements,  which are for a
period of one year and  automatically  extend for one day each day until  either
party notifies the other not to further extend the  employment  period,  provide
for annual base salaries  totaling  $650,000 and annual bonuses based on pre-tax
operating  income,  as defined,  for an annual minimum of $100,000 in total. The
agreements also provide for severance benefits under certain  circumstances,  as
defined,  which in the case of the Chairman and Chief Executive  Officer and the
President,  include  lump-sum  payments  equal  to  ten  times  the  sum  of the
executive's  base salary and the highest  annual bonus earned by the  executive,
and in the case of the Vice  President  of Finance,  include  lump-sum  payments
equal to two times the sum of the executive's base salary and the highest annual
bonus  earned by the  executive.  In addition,  these  severance  benefits  also
require  the Company to maintain  insurance  benefits  for a period of up to ten
years,  in the  case  of the  Chairman  and  Chief  Executive  Officer  and  the
President,  and up to two years,  in the case of the Vice  President of Finance,
substantially  equivalent to the insurance  benefits  existing upon termination.
Effective  June 1, 2004, the annual base salary of the Vice President of Finance
was reduced to $140,000.

As discussed in Note 4,  "Acquisitions  and Disposition," as part of the SendTec
acquisition  transaction  on September 1, 2004,  certain  executives  of SendTec
entered into new employment  agreements with SendTec. The employment  agreements
each have a term of five years and automatically renew for an additional year at
expiration unless either party provides the requisite notice of non-renewal. The
agreements  provide  for total  base  salaries  of  $900,000  per annum and also
contain  certain   noncompete   provisions  for  periods  as  specified  by  the
agreements.

On October 4, 2004, the Company entered into a new employment agreement with its
current Chief Technical Officer which provides for a base salary of $150,000 per
year.  The  agreement  has a term of two years and  automatically  renews for an
additional  two years unless  either  party  provides  the  requisite  notice of
non-renewal.  The agreement  also contains  certain  non-compete  provisions and
provides for specified severance payments.

SEVERANCE AGREEMENT

In the second quarter of 2002,  severance benefits of $699,833 were recorded and
paid. In connection with his termination, the former Chief Executive Officer was
paid $625,000 on May 31, 2002,  reflecting  the terms of his severance  package.
Additionally,  options to purchase  425,000 shares of the Company's Common Stock
at an  exercise  price of $0.035  per share (the  closing  price on May 6, 2002)
valued at $13,000 (calculated using  Black-Scholes) were granted on May 6, 2002,
further reflecting the terms of his severance package. These options immediately
vested upon grant and have a life of ten years.

OPERATING LEASES

The Company leases facilities under noncancelable operating leases. These leases
generally  contain  renewal  options  and  require  the  Company to pay  certain
executory  costs such as maintenance  and insurance.  Rent expense for the years
ended December 31, 2004, 2003 and 2002 totaled approximately $691,000,  $326,000
and $73,000, respectively.

Effective  September 1, 2003, the Company entered into a sublease  agreement for
office space with a company  controlled by our  Chairman.  The lease term is for
approximately  four years with base rent of  approximately  $284,000  during the
first  year  of  the  sublease.  Per  the  agreement,  base  rent  increases  by
approximately  $23,000  per year  thereafter.  Rent  expense  for the year ended
December 31, 2004, as noted in the preceding  paragraph  included  approximately
$334,000 of expense related to this sublease.


                                      F-27
<PAGE>


The  approximate  future minimum lease payments  under  noncancelable  operating
leases with initial or remaining terms of one year or more at December 31, 2004,
were as follows:

             2005                            $  867,000
             2006                               717,000
             2007                               433,000
             2008                               232,000
             2009                               232,000
             Thereafter                          39,000
                                             ----------
                                             $2,520,000
                                             ==========

TERMINATION OF 401(K) PLAN

During November 2002, the Company terminated its 401k plan.

SendTec,  which was  acquired  on  September  1, 2004,  maintained  a SIMPLE IRA
savings plan (the "Plan") for the benefit of all of SendTec's eligible employees
who had  completed  six months of service.  The Plan  allowed  employees to make
certain tax deferred voluntary contributions and discretionary  contributions by
SendTec.  Approximately $33,000 in Plan contributions were made by SendTec since
its acquisition by theglobe. The Plan was terminated December 31, 2004.

LETTER OF CREDIT

At December 31, 2004, the Company had $20,000 in outstanding  standby letters of
credit used to support an agreement with one of its telecommunications carriers.

LITIGATION

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

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

The Company has approved a settlement agreement and related agreements which set
forth the terms of a settlement between the Company, the Individual  Defendants,
the plaintiff class and the vast majority of the other  approximately 300 issuer
defendants. Among other provisions, the settlement provides for a release of the
Company and the Individual  Defendants for the conduct  alleged in the action to
be  wrongful.  The Company  would agree to undertake  certain  responsibilities,
including  agreeing to assign away,  not assert,  or release  certain  potential
claims the Company may have against its underwriters.  The settlement  agreement
also provides a guaranteed  recovery of $1 billion to  plaintiffs  for the cases
relating  to all of the  approximately  300  issuers.  To the  extent  that  the
underwriter  defendants  settle  all of the  cases for at least $1  billion,  no
payment will be required under the issuers' settlement agreement.  To the extent
that the underwriter defendants settle for less than $1 billion, the issuers are
required  to  make up the  difference.  It is  anticipated  that  any  potential
financial  obligation of the Company to plaintiffs  pursuant to the terms of the
settlement  agreement  and  related  agreements  will  be  covered  by  existing
insurance. The Company currently is not aware of any material limitations on the
expected recovery of any potential  financial  obligation to plaintiffs from its
insurance  carriers.  Its carriers are solvent,  and the Company is not aware of
any uncertainties as to the legal sufficiency of an insurance claim with respect
to any


                                      F-28
<PAGE>


recovery by plaintiffs.  Therefore,  we do not expect that the  settlement  will
involve any payment by the  Company.  If material  limitations  on the  expected
recovery  of any  potential  financial  obligation  to the  plaintiffs  from the
Company's  insurance  carriers  should arise,  the Company's  maximum  financial
obligation to plaintiffs pursuant to the settlement agreement would be less than
$3.4 million.  On February 15, 2005, the court granted  preliminary  approval of
the settlement agreement,  subject to certain modifications  consistent with its
opinion.  Judge Scheindlin  ruled that the issuer  defendants and the plaintiffs
must submit a revised  settlement  agreement  which provides for a mutual bar of
all contribution  claims by the settling and  non-settling  parties and does not
bar the parties from  pursuing  other  claims.  There will be a conference  with
Judge  Scheindlin  on  April  4,  2005 to  discuss  the  status  of the  revised
settlement  agreement.  The  underwriter  defendants will have an opportunity to
object to the  revised  settlement  agreement.  There is no  assurance  that the
parties  to the  settlement  will be  able  to  agree  to a  revised  settlement
agreement  consistent  with the  court's  opinion,  or that the court will grant
final approval to the settlement to the extent the parties reach  agreement.  If
the settlement agreement is not approved and the Company is found liable, we are
unable to  estimate  or predict  the  potential  damages  that might be awarded,
whether such damages would be greater than the Company's insurance coverage, and
whether such damages  would have a material  impact on our results of operations
or financial condition in any future period.

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

Through  December 31, 2004, the Company has recorded amounts due for commissions
pursuant to the terms of the  agreement  totaling  approximately  $246,000.  The
Company believes that this is the amount NeoPets has earned relating to services
performed and intends to vigorously defend its position.  It is too early in the
process to determine  the  likelihood of an  unfavorable  outcome,  however,  an
unfavorable  outcome  could  result  in a  liability  in  excess  of the  amount
recorded.

On  July  3,  2003,  an  action  was  commenced  against  one of  the  Company's
subsidiaries,  Direct  Partner  Telecom,  Inc.  ("DPT").  Global  Communications
Consulting Corp. v. Michelle Nelson,  Jason White,  VLAN, Inc.,  Geoffrey Amend,
James Magruder,  Direct Partner Telecom,  Inc., et al. was filed in the Superior
Court of New Jersey,  Monmouth County, and removed to the United States District
Court for the  District of New Jersey on September  16,  2003.  Plaintiff is the
former  employer of  Michelle  Nelson,  an  employee  of  theglobe  and a former
consultant of DPT.  Plaintiff  alleges that while Nelson was its  employee,  she
provided plaintiff's  confidential and proprietary trade secret information,  to
among others,  DPT and certain employees,  and diverted corporate  opportunities
from plaintiff to DPT and the other named  defendants.  Plaintiff asserts claims
against Nelson including breach of fiduciary duty, breach of the duty of loyalty
and tortious  interference with contract.  Plaintiff also asserts claims against
Nelson  and  DPT,  among  others,   for   contractual   interference,   tortious
interference  with  prospective   economic  advantage  and  misappropriation  of
proprietary information and trade secrets. Plaintiff seeks injunctive relief and
damages in an unspecified amount,  including punitive damages. The Answer to the
Complaint,  with  counterclaims,   was  served  on  October  20,  2003,  denying
plaintiff's  allegations of improper and unlawful conduct in their entirety. The
parties  reached an  amicable  resolution  of this  matter,  including  a mutual
release of all claims, which was filed with the Court in April 2004.

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

NOTE 12. RELATED PARTY TRANSACTIONS

Certain directors of the Company also serve as officers and directors of Dancing
Bear Investments,  Inc.  ("Dancing Bear").  Dancing Bear is a stockholder of the
Company and an entity controlled by our Chairman.

As  discussed  more  fully  in Note  7,  "Debt,"  in  connection  with a  demand
convertible  promissory  note in the  amount  of  $2,000,000  due the  Company's
Chairman  and his  spouse,  the Company  paid  interest  totaling  approximately
$17,500 during the year ended December 31, 2004.


                                      F-29
<PAGE>


Interest  expense on the $1,750,000  Convertible  Notes due E&C Capital Partners
together with certain affiliates of our Chairman totaled approximately $108,200,
excluding the  amortization of the discount on the Notes,  during the year ended
December 31, 2003.  The interest  remained  unpaid at December 31, 2003, and was
included in accrued  expenses in the  accompanying  consolidated  balance sheet.
Interest   expense   related  to  the  $1,750,000   Convertible   Notes  totaled
approximately  $32,000  during the year ended  December 31, 2004. As a result of
the conversion of the  $1,750,000  Convertible  Notes into the Company's  Common
Stock in March 2004,  all  interest  accrued was paid by the Company  during the
year ended December 31, 2004.

During the year ended December 31, 2004, the Company paid approximately $151,200
to an entity  controlled by the  Chairman's  son-in-law  for the production of a
commercial advertisement.

Several  entities  controlled  by our  Chairman  have  provided  services to the
Company  and  two of its  subsidiaries,  including:  the  lease  of  office  and
warehouse space; and the outsourcing of customer service and warehouse functions
for the Company's VoIP  operation.  During the years ended December 31, 2004 and
2003,  a total of  approximately  $566,000  and $383,000 of expense was recorded
related  to these  services,  respectively.  Approximately  $5,300  and  $70,000
related to these services was included in accounts  payable and accrued expenses
at December 31, 2004 and 2003.

Additionally,  included in other current assets in the accompanying Consolidated
Balance  Sheet at December 31, 2004,  was  approximately  $90,000  advanced to a
newly formed entity in which E&C Capital Partners has an ownership interest. The
entity was to provide marketing  services to theglobe's VoIP telephony  services
division.  The entity ceased  operations in January 2005.  E&C Capital  Partners
LLLP has  represented  to theglobe  that the $90,000 will be repaid prior to the
end of 2005.

STOCKHOLDERS' AGREEMENT

In connection with the acquisition of SendTec, certain of the SendTec executives
(whom  collectively  received  approximately  82% of the shares of  theglobe.com
Common  Stock and  Preferred  Stock  issued  in the  Merger),  theglobe  and the
Company's  Chairman and Chief Executive Officer and President  (individually and
on  behalf  of  certain  affiliated   entities)  entered  into  a  Stockholders'
Agreement.  Pursuant to the terms of the  Stockholders'  Agreement,  the SendTec
executives  granted an  irrevocable  proxy to vote their  shares to E&C  Capital
Partners  LLLP,  an affiliate  of the  Company's  Chairman  and Chief  Executive
Officer,  on all matters  (including the election of directors)  other than with
respect to certain  potential  affiliated  transactions  involving the Company's
Chairman and Chief  Executive  Officer or President.  After giving effect to the
grant of the proxy (and excluding  outstanding  options and warrants held by the
Chairman and Chief Executive Officer),  the Chairman and Chief Executive Officer
has voting power over approximately 83.6 million shares of theglobe representing
approximately  47.7% of the  issued and  outstanding  voting  securities  of the
Company.  The SendTec  executives were also granted certain  pre-emptive  rights
involving  potential new  issuances of  securities by theglobe,  together with a
co-sale  right  to  participate  in  certain  qualifying  sales  of stock by the
Chairman and Chief Executive Officer and the President and their affiliates.  In
addition,  the  Chairman and Chief  Executive  Officer and  President  and their
affiliates were granted a right of first refusal on certain sales (generally, in
excess of 10 million shares) by the SendTec executives,  together with the right
to  "drag-along"  the SendTec  executives  with regard to certain major sales of
their stock or a sale or merger of theglobe.

In 1997, the Chairman,  the former Co-Chief Executive Officers, two Directors of
the Company and Dancing Bear (an entity controlled by the Chairman) entered into
a Stockholders' Agreement (the "Stockholders'  Agreement") pursuant to which the
Chairman and Dancing  Bear or certain  entities  controlled  by the Chairman and
certain permitted  transferees (the "Chairman Group") agreed to vote for certain
nominees  of  the  former  Co-Chief   Executive  Officers  or  certain  entities
controlled  by the former  Co-Chief  Executive  Officers  and certain  permitted
transferees  (the "Former  Co-Chief  Executive  Officer Groups") to the Board of
Directors and the Former  Co-Chief  Executive  Officer Groups agreed to vote for
the  Chairman  Group's  nominees to the Board,  who would  represent  up to five
members of the Board.  Additionally,  pursuant to the terms of the Stockholders'
Agreement,  the former Co-Chief  Executive Officer and the two Directors granted
an irrevocable proxy to Dancing Bear with respect to any shares acquired by them
pursuant to the exercise of outstanding  Warrants transferred to each of them by
Dancing Bear. Such shares would be voted by Dancing Bear, which is controlled by
the  Chairman,  and would be  subject  to a right of first  refusal  in favor of
Dancing Bear upon certain private  transfers.  The Stockholders'  Agreement also
provided  that if the  Chairman  Group sold shares of Common  Stock and Warrants
representing  25% or more of the Company's  outstanding  Common Stock (including
the Warrants) in any private sale, the Former Co-Chief  Executive Officer Groups
and the two  Directors  of the Company  would be required to sell up to the same
percentage of their shares as the Chairman Group's sales. If either the Chairman
Group sold shares of Common  Stock or Warrants  representing  25% or more of the
Company's  outstanding  Common  Stock  (including  the  Warrants)  or the Former
Co-Chief  Executive  Officer Groups sold shares or Warrants  representing  7% or
more of the shares and Warrants of the Company in any private  sale,  each other
party to the Stockholders' Agreement,  including entities controlled by them and
their permitted transferees, had the option to sell up to the same percentage of
their  shares.  Effective  March  28,  2003,  the  Stockholders'  Agreement  was
terminated.


                                      F-30
<PAGE>


NOTE 13. SEGMENTS AND GEOGRAPHIC INFORMATION

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

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


                                      F-31
<PAGE>


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


<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                         -------------------------------------------
                                            2004            2003            2002
                                         ------------   ------------    ------------
<S>                                      <C>            <C>             <C>
NET REVENUE:
Computer games                           $  3,107,637   $  4,736,032    $  7,245,276
Marketing services                         13,408,183             --              --
VoIP telephony services                       391,154        548,081              --
Intersegment eliminations                    (865,942)            --              --
                                         ------------   ------------    ------------
                                         $ 16,041,032   $  5,284,113    $  7,245,276
                                         ============   ============    ============

INCOME (LOSS) FROM OPERATIONS:
Computer games                           $   (442,286)  $    120,907    $   (411,626)
Marketing services                          1,197,884             --              --
VoIP telephony services                   (20,538,124)    (5,116,437)         (1,196)
Corporate expenses                         (3,675,492)    (3,817,549)     (2,527,966)
                                         ------------    -----------    ------------
    Loss from operations                  (23,458,018)    (8,813,079)     (2,940,788)
    Other income (expense), net              (815,183)    (2,221,318)        338,127
                                         ------------    -----------    ------------
    Consolidated loss before income tax  $(24,273,201)  $(11,034,397)   $ (2,602,661)
                                         ============    ===========    ============

DEPRECIATION AND AMORTIZATION:
Computer games                           $     10,606   $     62,208    $     85,327
Marketing services                            227,270             --              --
VoIP telephony services                     1,355,532        258,334              --
Corporate expenses                             32,138          9,200           3,253
                                         ------------   ------------    ------------
                                         $  1,625,546   $    329,742    $     88,580
                                         ============   ============    ============

CAPITAL EXPENDITURES:
Computer games                           $     55,845   $         --    $     32,250
Marketing services                             40,324             --              --
VoIP telephony services                     2,537,133      2,366,047              --
Corporate                                      50,040         58,744              --
                                         ------------   ------------    ------------
                                         $  2,683,342   $  2,424,791    $     32,250
                                         ============   ============    ============

IDENTIFIABLE ASSETS:
Computer games                           $  2,000,230   $  1,957,714    $  2,602,834
Marketing services                         24,764,361             --              --
VoIP telephony services                     3,497,698      4,251,082         164,960
Corporate assets                            3,754,876        963,282         279,191
                                         ------------   ------------    ------------
                                         $ 34,017,165   $  7,172,078    $  3,046,985
                                         ============   ============    ============
</TABLE>

The Company's  historical net revenues have been earned primarily from customers
in the United States. In 2003, VoIP telephony services net revenue was primarily
attributable  to the sale of telephony  services  outside of the United  States.
Telephony  services  revenue  derived from  Thailand  represented  approximately
$458,000 or 9% of consolidated net revenue for the year ended December 31, 2003.
In  addition,  all  significant  operations  and  assets are based in the United
States.

Revenue  generated by two  customers of SendTec since its  acquisition  date, or
September 1, 2004,  represented  approximately  44% of consolidated  net revenue
reported for the year ended December 31, 2004.


                                      F-32
<PAGE>


NOTE 14. VALUATION AND QUALIFYING ACCOUNTS - ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
                    Balance
                       At        Additions     Additions                  Balance
                   Beginning     Charged To    Charged To                At End Of
Period Ended,      Of Period      Expense    Other Accounts Deductions    Period
-----------------  ----------  -------------  -----------  -----------  ----------
<S>                <C>         <C>            <C>          <C>          <C>
December 31, 2004  $  112,986  $    198,537   $     9,750  $   (47,260) $  274,013
December 31, 2003  $  128,613  $    114,888   $        --  $  (130,515) $  112,986
December 31, 2002  $3,203,295  $         --   $        --  $(3,074,682) $  128,613

</TABLE>

NOTE 15. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Quarter Ended
                               ------------------------------------------------------------
                                December 31,   September 30,      June 30,       March 31,
                                    2004          2004             2004            2004
                               -------------  ------------    -------------   -------------
<S>                            <C>            <C>             <C>             <C>
Net revenue                    $  10,660,697  $  3,698,108    $     826,230   $     855,997
Operating expenses                18,914,508     9,821,608        6,128,867       4,634,067
Loss from operations              (8,253,811)   (6,123,500)      (5,302,637)     (3,778,070)
Net loss                          (8,385,886)   (5,869,656)      (5,355,961)     (4,661,698)
Net loss applicable to common
   stockholders                   (8,385,886)   (5,869,656)      (5,355,961)     (4,661,698)

Basic and diluted net loss per
   share                       $       (0.05) $      (0.04)   $       (0.04)  $       (0.07)
</TABLE>

<TABLE>
<CAPTION>
                                                        Quarter Ended
                               ------------------------------------------------------------
                                 December 31,   September 30,   June 30,        March 31,
                                    2003            2003          2003            2003
                               -------------  -------------   -----------     -------------
<S>                            <C>            <C>             <C>             <C>
Net revenue                    $   1,492,237  $   1,447,784   $ 1,101,810     $   1,242,282
Operating expenses                 6,239,271      3,776,319     2,295,895         1,785,707
Loss from operations              (4,747,034)    (2,328,535)   (1,194,085)         (543,425)
Net loss                          (5,077,665)    (2,517,614)   (2,757,371)         (681,747)
Net loss applicable to common
   stockholders                   (5,077,665)   (10,137,614)   (2,757,371)       (1,181,747)

Basic and diluted net loss per
   share                       $       (0.10) $       (0.23)  $     (0.09)    $       (0.04)
</TABLE>

Net loss  applicable  to  common  stockholders  for the 2003  quarterly  periods
includes the preferred dividend impact of the beneficial  conversion features of
the preferred stock and warrants issued.

<TABLE>
<CAPTION>
                                                         Quarter Ended
                                 ------------------------------------------------------------
                                  December 31,    September 30,     June 30,      March 31,
                                      2002            2002            2002           2002
                                 --------------  ---------------  -------------  ------------
<S>                              <C>             <C>              <C>            <C>
Net revenue                      $   2,009,701   $    1,698,278   $  1,684,942   $ 1,852,355
Operating expenses                   1,873,157        2,225,921      3,330,776     2,756,210
Income (loss) from operations          136,544         (527,643)    (1,645,834)     (903,855)
Net income (loss)                       16,922         (492,046)    (1,633,429)     (506,108)
Net loss applicable to common
    stockholders                        16,922         (492,046)    (1,633,429)     (506,108)

Basic and diluted net loss per
   share                         $          --   $        (0.02)  $      (0.05)  $     (0.02)
</TABLE>


                                      F-33
<PAGE>


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

ITEM 8A. 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 December 31, 2004.
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  December 31, 2004
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.

ITEM 8B. OTHER INFORMATION

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

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


                                       85
<PAGE>

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

MANAGEMENT

The following  table sets forth the names,  ages and current  positions with the
Company held by our  Directors  and  Executive  Officers.  There is no immediate
family relationship between or among any of the Directors or Executive Officers,
and the Company is not aware of any  arrangement  or  understanding  between any
Director  or  Executive  Officer and any other  person  pursuant to which he was
elected to his current position.

                                             POSITION OR OFFICE
NAME                         AGE              WITH THE COMPANY
--------------------------------------------------------------------------------

Michael S. Egan               64      Chairman and Chief Executive Officer

Edward A. Cespedes            39      President, Treasurer and Chief Financial
                                      Officer and Director

Robin S. Lebowitz             40      Vice President of Finance and Director

Paul Soltoff                  50      Chief Executive Officer of SendTec

Michael S. Egan.  Michael Egan has served as theglobe.com's  Chairman since 1997
and as its Chief Executive  Officer since June 1, 2002. Since 1996, Mr. Egan has
been the  controlling  investor of Dancing Bear  Investments,  a privately  held
investment  company.  Since 2002, Mr. Egan has been the controlling  investor of
E&C Capital Partners LLLP, a privately held investment partnership.  Mr. Egan is
also Chairman of Certified Vacations,  a privately held wholesale travel company
which  was  founded  in 1980.  Certified  Vacations  specializes  in  designing,
marketing and delivering vacation packages.  Mr. Egan spent over 30 years in the
rental car business.  He began with Alamo Rent-A-Car in 1973, became an owner in
1979,  and became  Chairman and majority  owner from January 1986 until November
1996 when he sold the company to AutoNation.  In 2000,  AutoNation  spun off the
rental  division,  ANC Rental  (Other  OTC:  ANCXZ.PK),  and Mr.  Egan served as
Chairman  until  October  2003.  Prior  to  acquiring  Alamo,  he  held  various
administration  positions at Yale  University  and taught at the  University  of
Massachusetts at Amherst.  Mr. Egan is a graduate of Cornell University where he
received his Bachelor's degree in Hotel Administration.

Edward A.  Cespedes.  Edward  Cespedes has served as a director of  theglobe.com
since 1997, as President of theglobe.com since June 1, 2002 and as Treasurer and
Chief Financial Officer of theglobe.com  since February 1, 2005. Mr. Cespedes is
also the President of E&C Capital  Ventures,  Inc.,  the general  partner of E&C
Capital  Partners  LLLP.  Mr.  Cespedes  served  as the Vice  Chairman  of Prime
Ventures,  LLC, from May 2000 to February 2002. From August 2000 to August 2001,
Mr.  Cespedes  served as the President of the Dr. Koop Lifecare  Corporation and
was a member of the Company's  Board of Directors  from January 2001 to December
2001.  From 1996 to 2000, Mr.  Cespedes was a Managing  Director of Dancing Bear
Investments. Concurrent with his position at Dancing Bear Investments, from 1998
to 2000, Mr.  Cespedes also served as Vice  President for corporate  development
for  theglobe.com   where  he  had  primary   responsibility  for  all  mergers,
acquisitions,  and capital markets activities. In 1996, prior to joining Dancing
Bear  Investments,  Mr. Cespedes was the Director of Corporate Finance for Alamo
Rent-A-Car.  From 1988 to 1996, Mr.  Cespedes  worked in the Investment  Banking
Division of J.P. Morgan and Company,  where he most recently  focused on mergers
and  acquisitions.  In his capacity as a venture  capitalist,  Mr.  Cespedes has
served as a member of the board of directors of various portfolio companies. Mr.
Cespedes  is the  founder of the  Columbia  University  Hamilton  Associates,  a
foundation for university academic  endowments.  In 1988 Mr. Cespedes received a
Bachelor's degree in International Relations from Columbia University.

Robin S. Lebowitz. Robin Lebowitz has served as a director of theglobe.com since
December  2001,  as Secretary of  theglobe.com  since June 1, 2002,  and as Vice
President of Finance of theglobe.com  since February 23, 2004. Ms. Lebowitz also
served as Treasurer of  theglobe.com  from June 1, 2002 until  February 23, 2004
and as Chief Financial  Officer of theglobe.com from July 1, 2002 until February
23,  2004.  Ms.  Lebowitz  has worked in various  capacities  for the  Company's
Chairman,  Michael  Egan,  for  eleven  years.  She is  the  Controller/Managing
Director of Dancing Bear  Investments,  Mr.  Egan's  privately  held  investment
management and holding company.  Previously, Ms. Lebowitz served on the Board of
Directors of theglobe.com from August 1997 to October 1998. At Alamo Rent-A-Car,
she served as Financial  Assistant to the Chairman (Mr. Egan).  Prior to joining
Alamo,  Ms. Lebowitz was the Corporate Tax Manager at Blockbuster  Entertainment
Group where she worked from 1991 to 1994. From 1986 to 1989, Ms. Lebowitz worked
in the audit and tax departments of Arthur Andersen & Co. Ms. Lebowitz  received
a Bachelor of Science in Economics  from the Wharton School of the University of
Pennsylvania;  a Masters in Business Administration from the University of Miami
and is a Certified Public Accountant.


                                       86
<PAGE>


Paul  Soltoff.  Paul  Soltoff  has  served  as  Chairman  of the Board and Chief
Executive Officer of SendTec since its inception in February 2000.  Commensurate
with the SendTec  merger on  September  1, 2004,  Mr.  Soltoff  continued in the
position of Chief Executive Officer of SendTec, now theglobe.com's  wholly-owned
subsidiary,  and was elected to theglobe.com's  Board of Directors.  On February
21, 2005, Mr. Soltoff resigned as the Company's Director,  however, he continues
to serve as Chief Executive Officer of SendTec.  In 1997, Mr. Soltoff became the
Chief  Executive  Officer of Soltoff Direct  Corporation,  a specialized  direct
marketing  consulting  company  located in St.  Petersburg,  Florida.  Since the
inception of SendTec,  Soltoff Direct Corporation has been largely inactive. Mr.
Soltoff is a graduate of Temple  University  where he received  his  Bachelor of
Science degree in Business Marketing in 1995.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

Michael  Egan,  theglobe.com's  Chairman  and CEO,  was  Chairman  of ANC Rental
Corporation from late 2000 until October 2003 and was Chief Executive Officer of
ANC Rental Corporation from late 2000 until April 4, 2002. In November 2001, ANC
Rental  Corporation  filed  voluntary  petitions  for relief under Chapter 11 or
Title 11 of the United States  Bankruptcy  Code in the United States  Bankruptcy
Court for the District of Delaware (Case No. 01-11200).

Edward  Cespedes,  a director and the President,  Treasurer and Chief  Financial
Officer of  theglobe.com,  was also a director of Dr. Koop Lifecare  Corporation
from  January  2001 to December  2001.  In  December  2001,  Dr.  Koop  Lifecare
Corporation  filed petitions seeking relief under Chapter 7 of the United States
Bankruptcy Code.

BOARD MEETINGS AND COMMITTEES OF THE BOARD

Including  unanimous written actions of the Board, the Board of Directors met 24
times in 2004.  No  incumbent  director who was on the Board for the entire year
attended  less than 75% of the total number of all meetings of the Board and any
committees of the Board on which he or she served, if any, during 2004.

The Board of Directors has a standing  Audit and  Compensation  Committee but no
standing Nominating Committee.

AUDIT COMMITTEE

The Audit Committee, which was formed in July 1998, reviews, acts on and reports
to the Board of  Directors  with  respect to  various  auditing  and  accounting
matters,  including the selection of our independent auditors,  the scope of the
annual audits, fees to be paid to the auditors,  the performance of our auditors
and our accounting practices and internal controls. The Audit Committee operates
pursuant to a written charter, as amended,  adopted by the Board of Directors on
June 12, 2000. The current members of the Audit  Committee are Messrs.  Egan and
Cespedes  and Ms.  Lebowitz,  all of whom are  employee  directors.  None of the
current  committee  members are considered  "independent"  within the meaning of
applicable NASD rules.  Ms. Lebowitz  serves as the "audit  committee  financial
expert"  as  required  by  Section  407 of The  Sarbanes-Oxley  Act,  but is not
considered  independent  within the meaning of applicable NASD rules.  Including
unanimous written actions of the Committee,  the Audit Committee held 7 meetings
in 2004.

COMPENSATION COMMITTEE

The  Compensation  Committee,  which  met 9 times in 2004  (including  unanimous
written actions of the Committee),  establishes  salaries,  incentives and other
forms of  compensation  for officers and other  employees of  theglobe.com.  The
Compensation  Committee also approves option grants under all of our outstanding
stock based incentive plans.  The current members of the Compensation  Committee
are Messrs. Egan and Cespedes.

NOMINATING COMMITTEE

The Board of Directors does not have a separate  nominating  committee.  Rather,
the  entire  Board  of  Directors  acts as  nominating  committee.  Based on the
Company's Board currently  consisting only of employee  directors,  the Board of
Directors does not believe the Company would derive any significant benefit from
a separate nominating  committee.  Due primarily to their status as employees of
the Company,  none of the members of the Board are  "independent"  as defined in
the NASD listing  standards.  The Company  does not have a Nominating  Committee
charter.

In  recommending  director  candidates in the future,  the Board intends to take
into  consideration  such factors as it deems appropriate based on the Company's
current needs. These factors may include diversity, age, skills, decision-making
ability,   inter-personal   skills,   experience   with   businesses  and  other
organizations of comparable size,  community  activities and relationships,  and
the   interrelationship   between  the   candidate's   experience  and  business
background, and other Board members' experience and business background, whether
such candidate would be considered "independent," as such term is defined in the
NASD  listing  standards,  as well as the  candidate's  ability  to  devote  the
required time and effort to serve on the Board.


                                       87
<PAGE>


The  Board  will  consider  for  nomination  by the  Board  director  candidates
recommended  by  stockholders  if the  stockholders  comply  with the  following
requirements.  Under our By-Laws, if a stockholder wishes to nominate a director
at the Annual Meeting, we must receive the stockholder's written notice not less
than 60 days nor more  than 90 days  prior  to the date of the  annual  meeting,
unless we give our  stockholders  less  than 70 days'  notice of the date of our
Annual  Meeting.  If we provide less than 70 days' notice,  then we must receive
the stockholder's  written notice by the close of business on the 10th day after
we provide notice of the date of the Annual Meeting. The notice must contain the
specific  information  required  in our  By-Laws.  A copy of our  By-Laws may be
obtained by writing to the  Secretary.  If we receive a  stockholder's  proposal
within the time periods required under our By-Laws,  we may choose,  but are not
required, to include it in our proxy statement.  If we do, we may tell the other
stockholders  what  we  think  of the  proposal,  and how we  intend  to use our
discretionary authority to vote on the proposal. All proposals should be made in
writing and sent via  registered,  certified or express  mail,  to our executive
offices, 110 East Broward Boulevard, Suite 1400, Fort Lauderdale, Florida 33301,
Attention: Robin S. Lebowitz, Corporate Secretary.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Any  stockholder  who wishes to send  communications  to the Board of  Directors
should mail them addressed to the intended recipient by name or position in care
of: Corporate Secretary,  theglobe.com,  inc., 110 East Broward Boulevard, Suite
1400, Fort Lauderdale,  Florida, 33301. Upon receipt of any such communications,
the Corporate  Secretary will  determine the identity of the intended  recipient
and whether the communication is an appropriate stockholder  communication.  The
Corporate Secretary will send all appropriate stockholder  communications to the
intended   recipient.   An   "appropriate   stockholder   communication"   is  a
communication  from a person claiming to be a stockholder in the  communication,
the subject of which  relates  solely to the sender's  interest as a stockholder
and not to any other personal or business interest.

In the case of communications addressed to the Board of Directors, the Corporate
Secretary will send appropriate  stockholder  communications  to the Chairman of
the Board. In the case of communications  addressed to any particular directors,
the Corporate Secretary will send appropriate stockholder communications to such
director.  In the case of communications  addressed to a committee of the board,
the Corporate Secretary will send appropriate stockholder  communications to the
Chairman of such committee.

ATTENDANCE AT ANNUAL MEETINGS

The Board of Directors encourages, but does not require, its directors to attend
the Company's  annual meeting of  stockholders.  Last year, all of the Company's
directors attended the annual meeting.

CODE OF ETHICS

The Company has adopted a Code of Ethics  applicable to its officers,  including
its  principal  executive  officer,   principal  financial  officer,   principal
accounting  officer  or  controller  and any other  persons  performing  similar
functions.  The Code of Ethics will be provided free of charge by the Company to
interested parties upon request. Requests should be made in writing and directed
to the Company at the following address: 110 East Broward Boulevard; Suite 1400;
Fort Lauderdale, Florida 33301.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the  Securities  and Exchange Act of 1934 requires our officers
and  directors,  and persons who own more than ten percent (10%) of a registered
class of our equity securities,  to file certain reports regarding ownership of,
and  transactions  in, our  securities  with the SEC and with The  NASDAQ  Stock
Market, Inc. Such officers, directors, and 10% stockholders are also required to
furnish theglobe with copies of all Section 16(a) forms that they file.

Based  solely  on our  review  of  copies  of  Forms 3 and 4 and any  amendments
furnished  to us  pursuant  to Rule  16a-3(e)  and  Forms  5 and any  amendments
furnished  to us  with  respect  to  the  2004  fiscal  year,  and  any  written
representations  referred to in Item 405(b)(2)(i) of Regulation S-K stating that
no Forms 5 were  required,  we believe  that,  during the 2004 fiscal year,  our
officers and directors  have complied with all Section 16(a)  applicable  filing
requirements.



                                       88
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information concerning  compensation for services
in all capacities  awarded to, earned by or paid by us to those persons  serving
as the chief  executive  officer  at any time  during the last year and our four
other most  highly  compensated  executive  officers  (collectively,  the "Named
Executive Officers"):

<TABLE>
<CAPTION>
                                                                                    Long-Term
                                                                                 Compensation(1)
                                                                                -------------------
                                               Annual Compensation
                                     ---------------------------------------
                                                                                   Number of
                                                                                   Securities             All Other
Name and                                           Salary          Bonus           Underlying           Compensation
Principal Position                    Year           ($)            ($)            Options (#)               ($)
----------------------------------   --------    -----------    ------------    -------------------    -----------------
<S>                                   <C>           <C>              <C>              <C>                    <C>
Michael S. Egan,                      2004          250,000          77,500                  --                  --
Chairman, Chief Executive             2003          125,000          50,000           1,000,000                  --
  Officer (2)                         2002               --              --           2,507,500                  --

Edward A. Cespedes,                   2004          250,000          77,500                  --                  --
President, Treasurer and Chief        2003          225,000          50,000             550,000                  --
  Financial Officer (3)               2002          100,000          25,000           1,757,500              41,668

Albert J. Detz,                       2004          100,139              --             200,000                  --
Former Chief Financial Officer,
  Treasurer (4)

Robin S. Lebowitz,                    2004          144,167          17,500                  --                  --
Former Chief Financial Officer; (5)   2003          137,500              --             100,000                  --
  Vice President of Finance           2002           58,350          10,000             507,500                  --

Paul Soltoff,                         2004          100,000          17,000             477,337                  --
Chief Executive Officer, (6)
   SendTec, Inc.
</TABLE>

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

(1)   Included in long-term compensation for 2004 are 200,000 options granted to
      Mr. Detz at an exercise price of $0.38 per share.  In addition,  long-term
      compensation  for 2004  includes  replacement  options to acquire  477,337
      shares of theglobe.com  Common Stock granted to Mr. Soltoff at an exercise
      price of $0.06 per share in exchange  for options  which Mr.  Soltoff held
      prior to the  acquisition of SendTec,  Inc. by  theglobe.com.  Included in
      long-term  compensation for 2003 are 1,650,000  options granted during the
      year at $0.56 per  share to the  Named  Executive  Officers.  Included  in
      long-term  compensation  for 2002 are  7,500  options  granted  to each of
      Messrs.  Egan and  Cespedes  and Ms.  Lebowitz in June 2002 at an exercise
      price of  $0.04  per  share in  accordance  with  the  Company's  Director
      Compensation Plan; and 2,500,000,  1,750,000,  and 500,000 options granted
      in June 2002 at an  exercise  price of $0.02 per share  related to bonuses
      earned  in  2002  for  Messrs.   Egan  and  Cespedes  and  Ms.   Lebowitz,
      respectively.

(2)   Mr. Egan became an  executive  officer in July 1998.  We began  paying Mr.
      Egan a base salary in July 2003.  We did not pay Mr. Egan a base salary in
      2002 or 2001.

(3)   Mr.  Cespedes  became  President  in June  2002 and  Treasurer  and  Chief
      Financial  Officer in February 2005. Prior to this, Mr. Cespedes served as
      a consultant to the Company and was paid $41,668 for these services.

(4)   Mr. Detz became Chief  Financial  Officer and  Treasurer in June 2004 at a
      base salary of $175,000  per year.  Effective  February 1, 2005,  Mr. Detz
      resigned his positions with the Company.  Effective  February 2, 2005, Mr.
      Detz began performing various financial and accounting consulting services
      on a project basis to the Company.

(5)   Ms.  Lebowitz  became an  officer  of the  Company  in June 2002 and Chief
      Financial  Officer in July 2002. In February 2004, Ms.  Lebowitz  resigned
      her  position as Chief  Financial  Officer and became  Vice  President  of
      Finance.

(6)   Mr. Soltoff became a Director of the Company and Chief  Executive  Officer
      of SendTec,  Inc. in September  2004.  On February 21, 2005,  Mr.  Soltoff
      resigned  as the  Company's  Director  but  continues  to  serve as CEO of
      SendTec,  Inc. His current  base salary is $300,000  per year.  Salary for
      2004  represents  amounts earned since September 1, 2004, the date SendTec
      was acquired by the Company.


                                       89
<PAGE>


AGGREGATED  OPTION  EXERCISES IN THE LAST FISCAL YEAR AND 2004  YEAR-END  OPTION
VALUES

The following tables set forth for each of the Named Executive  Officers (a) the
number of options  exercised  during 2004,  (b) the total number of  unexercised
options for common stock  (exercisable and  unexercisable)  held at December 31,
2004, (c) the value of those options that were in-the-money on December 31, 2004
based  on the  difference  between  the  closing  price of our  Common  Stock on
December  31, 2004 and the exercise  price of the options on that date,  and (d)
the total number of options granted to such persons in 2004.

<TABLE>
<CAPTION>
                                                              Number of Securities                 Value of Unexercised
                                                          Underlying Unexercised Stock          In-the-Money Stock Options
                                                         Options at Fiscal Year-End (#)           at Fiscal Year End (1)
                                                         -------------------------------     ----------------------------------
                              Shares
                           Acquired on       Value                              Un-                                 Un-
Name                        Exercise #      Realized      Exercisable       Exercisable      Exercisable        Exercisable
-----------------------    -------------    ---------    --------------    -------------     -------------    -----------------
<S>                                <C>           <C>      <C>                <C>          <C>                  <C>
Michael S. Egan                    --            --       3,841,182            3,818      $   1,003,016        $      1,259
Edward  A. Cespedes                --            --       2,461,182            3,818            703,016               1,259
Albert J. Detz                     --            --          83,334          116,666              3,333               4,667
Robin S. Lebowitz                  --            --         625,025            9,055            208,722               3,378
Paul Soltoff                       --            --         238,669          238,668             85,921              85,920
</TABLE>
----------

(1)   Value  represents  closing  price of our Common Stock on December 31, 2004
      less the exercise  price of the stock option,  multiplied by the number of
      shares exercisable or unexercisable, as applicable.


OPTION GRANTS IN 2004
<TABLE>
<CAPTION>
                                                                Percent of
                                                                   Total                    Market
                                            Number of             Options        Exercise   Price
                                            Securities          Granted to       or Base   on Date
                                            Underlying           Employees        Price    of Grant
Name                                     Options Granted          in 2004       ($/Share)  ($/share) Expiration Date
-----------------------------------    ---------------------    ------------    ---------  --------- ---------------
<S>                                         <C>        <C>          <C>          <C>        <C>        <C>
Michael S. Egan                                   -                    -             -          -               -
Edward A. Cespedes                                -                    -             -          -               -
Albert J. Detz                              200,000    (1)          2.6%         $0.38      $0.38       6/04/2014
Robin S. Lebowitz                                 -                    -             -          -               -
Paul Soltoff                                477,337    (2)          6.2%         $0.06      $0.41      10/01/2013
</TABLE>
----------

(1)   60,000 of these  options  vested  immediately,  with the  balance  vesting
      ratably on a quarterly basis over the following three years as long as Mr.
      Detz was employed by the Company.  Upon Mr. Detz' resignation and pursuant
      to the terms of his  consulting  agreement,  130,000 of the options became
      vested effective  February 2, 2005, with the 70,000 remaining to vest upon
      Mr. Detz' performance of consulting  services on a continuous basis for at
      least six months from the  effective  date of the  agreement,  February 2,
      2005.

(2)   238,669 of these  options  vested on September  30, 2004 and the remainder
      vest on September 30, 2005.

EMPLOYMENT AGREEMENTS

CHIEF EXECUTIVE OFFICER EMPLOYMENT AGREEMENT AND PRESIDENT EMPLOYMENT AGREEMENT.
On August 1, 2003, we entered into separate employment agreements with our Chief
Executive  Officer  ("CEO"),  Michael  S.  Egan,  and our  President,  Edward A.
Cespedes.  The two  employment  agreements  are  substantially  similar and each
provides for the following:

      o     employment as one of our executives;

      o     an annual base salary of $250,000 with eligibility to receive annual
            increases  as  determined  in the sole  discretion  of the  Board of
            Directors;

      o     an annual cash bonus,  which will be awarded upon the achievement of
            specified  pre-tax  operating  income (not be less than  $50,000 per
            year);

      o     participation in all welfare, benefit and incentive plans (including
            equity based compensation plans) offered to senior management;


                                       90
<PAGE>


      o     a term of employment which commenced on August 1, 2003 and continues
            through  the  first  anniversary  thereof.  The  term  automatically
            extends for one day each day unless  either the Company or executive
            provides  written  notice to the other not to  further  extend.  The
            agreement  provides  that, in the event of termination by us without
            "cause" or by the  executive  for "good  reason"  (which  includes a
            "Change of Control"), the executive will be entitled to receive from
            us:

            -     (A) his base  salary  through the date of  termination  and an
                  amount  equal  to the  product  of (x) the  higher  of (i) the
                  executive's average annual incentive paid or payable under the
                  Company's annual incentive plan for the last three full fiscal
                  years,  including  any  portion  which  has  been  earned  but
                  deferred and (ii) the annual  incentive  paid or payable under
                  the  Company's  annual  incentive  plan for the most  recently
                  completed fiscal year, including any portion thereof which has
                  been earned but deferred  (and  annualized  if the fiscal year
                  consists of less than twelve full months or, if during  which,
                  the  executive  was employed for less than twelve full months)
                  and (y) a fraction,  the  numerator  of which is the number of
                  days  in  the  current   fiscal  year   through  the  date  of
                  termination, and the denominator of which is 365;

            -     (B) any accrued vacation pay; and

            -     (C) a lump-sum cash payment equal to ten (10) times the sum of
                  executive's base salary and highest annual incentive;

            -     for the  continued  benefit of  executive,  his spouse and his
                  dependents  for a period of ten (10) years  following the date
                  of termination, the medical, hospitalization, dental, and life
                  insurance  programs  in which  executive,  his  spouse and his
                  dependents were participating immediately prior to the date of
                  termination at the level in effect and upon  substantially the
                  same terms and conditions as existed  immediately prior to the
                  date of termination;

            -     reimbursement for any reasonable and necessary monies advanced
                  or  expenses  incurred  in  connection  with  the  executive's
                  employment; and

            -     executive will be vested,  as of the date of  termination,  in
                  all rights  under any equity  award  agreements  (e.g.,  stock
                  options   that  would   otherwise   vest  after  the  date  of
                  termination)   and  in  the  case  of  stock  options,   stock
                  appreciation  rights or similar  awards,  thereafter  shall be
                  permitted  to  exercise  any and all  such  rights  until  the
                  earlier  of  (i)  the  third   anniversary   of  the  date  of
                  termination  and  (ii)  the end of the  term  of  such  awards
                  (regardless  of any  termination  of  employment  restrictions
                  therein  contained) and any restricted stock held by executive
                  will become immediately vested as of the date of termination.

EMPLOYMENT  AGREEMENT WITH FORMER CHIEF FINANCIAL OFFICER.  We also entered into
an employment  agreement with our then Chief Financial  Officer  ("CFO"),  Robin
Segaul Lebowitz,  on August 1, 2003. Her employment  agreement  provides for the
following:

      o     employment as one of our executives;

      o     an annual base salary of $150,000 with eligibility to receive annual
            increases  as  determined  in the sole  discretion  of the  Board of
            Directors;

      o     a  discretionary  annual  cash  bonus,  which will be awarded at our
            Board's discretion;

      o     participation in all welfare, benefit and incentive plans (including
            equity based compensation plans) offered to senior management;

      o     term of employment  which  commenced on August 1, 2003 and continues
            through  the  first  anniversary  thereof.  The  term  automatically
            extends for one day each day unless  either the Company or executive
            provides  written  notice to the other not to  further  extend.  The
            agreement  provides  that, in the event of termination by us without
            "cause" or by the  executive  for "good  reason"  (which  includes a
            "Change of Control"), the executive will be entitled to receive from
            us:

            -     (A) her base  salary  through the date of  termination  and an
                  amount  equal  to the  product  of (x) the  higher  of (i) the
                  executive's average annual incentive paid or payable under the
                  Company's annual incentive plan for the last three full fiscal
                  years,  including  any  portion  which  has  been  earned  but
                  deferred and (ii) the annual  incentive  paid or payable under
                  the  Company's  annual  incentive  plan for the most  recently
                  completed fiscal year, including any portion thereof which has
                  been earned but deferred  (and  annualized  if the fiscal year
                  consists of less than twelve full months or, if during  which,
                  the  executive  was employed for less than twelve full months)
                  and (y) a fraction,  the  numerator  of which is the number of
                  days  in  the  current   fiscal  year   through  the  date  of
                  termination, and the denominator of which is 365;


                                       91
<PAGE>


            -     (B) any accrued vacation pay; and

            -     (C) a lump-sum  cash payment equal to two (2) times the sum of
                  executive's base salary and highest annual incentive;

            -     for the  continued  benefit of  executive,  her spouse and her
                  dependents for a period of two (2) years following the date of
                  termination,  the medical,  hospitalization,  dental, and life
                  insurance  programs  in which  executive,  her  spouse and her
                  dependents were participating immediately prior to the date of
                  termination at the level in effect and upon  substantially the
                  same terms and conditions as existed  immediately prior to the
                  date of termination;

            -     reimbursement for any reasonable and necessary monies advanced
                  or  expenses  incurred  in  connection  with  the  executive's
                  employment; and

            -     executive will be vested,  as of the date of  termination,  in
                  all rights  under any equity  award  agreements  (e.g.,  stock
                  options   that  would   otherwise   vest  after  the  date  of
                  termination)   and  in  the  case  of  stock  options,   stock
                  appreciation  rights or similar  awards,  thereafter  shall be
                  permitted  to  exercise  any and all  such  rights  until  the
                  earlier  of  (i)  the  third   anniversary   of  the  date  of
                  termination  and  (ii)  the end of the  term  of  such  awards
                  (regardless  of any  termination  of  employment  restrictions
                  therein  contained) and any restricted stock held by executive
                  will become immediately vested as of the date of termination.

Effective  February 23, 2004, Ms. Lebowitz's  employment  agreement was amended.
Ms.  Lebowitz's new title is Vice President,  Finance and effective June 1, 2004
her annual base salary is $140,000.

CHIEF  FINANCIAL  OFFICER  AND  TREASURER  AGREEMENT.  We also  entered  into an
agreement with our former Chief Financial Officer ("CFO") and Treasurer,  Albert
J. Detz, on June 3, 2004. That agreement had provided for the following:

      o     an annual base salary of $175,000 with eligibility to receive annual
            increases  as  determined  in the sole  discretion  of the  Board of
            Directors;

      o     a grant of 200,000 options to acquire  theglobe.com  Common Stock at
            an exercise price of $0.38 per share. 60,000 of these options vested
            immediately and the balance vest ratably on a quarterly basis over 3
            years;

      o     a  discretionary  annual  cash  bonus,  which will be awarded at our
            Board's discretion;

      o     participation in all welfare, benefit and incentive plans offered to
            senior management of the Company; and

      o     in the event of termination by us after six months of employment but
            less than one year,  the executive  will be entitled to receive from
            us his base  salary  for a period of three  months  from the date of
            such  termination.  In the event of termination by us after one year
            of employment, the executive will be entitled to receive from us his
            base  salary  for a  period  of six  months  from  the  date of such
            termination.

Effective February 1, 2005, Mr. Detz resigned his positions with the Company and
his  employment  with the  Company  ended.  Pursuant to a  consulting  agreement
effective  February 2, 2005,  Mr. Detz began  performing  various  financial and
accounting consulting services on a project basis to the Company.

SENDTEC CHIEF EXECUTIVE  OFFICER  EMPLOYMENT  AGREEMENT.  As part of the SendTec
Acquisition,  on September 1, 2004, we entered into an employment agreement with
Paul Soltoff to continue as Chief Executive  Officer  ("CEO") of SendTec,  Inc.,
now a wholly-owned  subsidiary of the Company. His employment agreement provides
for the following:

      o     an annual base salary of $300,000 with eligibility to receive annual
            increases  as  determined  in the sole  discretion  of the  Board of
            Directors;

      o     a  discretionary  annual  cash  bonus,  which will be awarded at our
            Board's discretion;

      o     participation in all welfare, benefit and incentive plans offered to
            senior management of the Company;

      o     a 5 year term of  employment  which  commenced on September 1, 2003.
            The  agreement  provides  that,  in the event of  termination  by us
            without "cause" or by the executive for "good reason," the executive
            will be entitled to receive  from us his base salary for a period of
            2 years from the date of such termination,  any accrued vacation pay
            and for the  continued  benefit  of  executive,  his  spouse and his
            dependents  for a  period  of one (1)  year  following  the  date of
            termination,   the  medical,   hospitalization,   dental,  and  life


                                       92
<PAGE>


            insurance programs in which executive, his spouse and his dependents
            were  participating  immediately prior to the date of termination at
            the  level in  effect  and upon  substantially  the same  terms  and
            conditions as existed  immediately prior to the date of termination;
            and

      o     customary  provisions relating to confidentiality,  work-product and
            covenants not to compete.


ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership  of our  Common  Stock as of  March  10,  2005  (except  as  otherwise
indicated) by (i) each person who owns  beneficially  more than 5% of our Common
Stock, (ii) each of our directors,  (iii) each of our "Named Executive Officers"
and (iv) all directors and executive officers as a group. A total of 175,186,997
shares of  theglobe.com's  Common Stock were issued and outstanding on March 10,
2005.

The amounts and  percentage of common stock  beneficially  owned are reported on
the basis of  regulations  of the  Securities  and Exchange  Commission  ("SEC")
governing the  determination  of beneficial  ownership of securities.  Under the
rules of the SEC, a person is deemed to be a "beneficial owner" of a security if
that person has or shares "voting power," which includes the power to vote or to
direct the voting of such security,  or  "investment  power," which includes the
power to dispose of or to direct the  disposition of such security.  A person is
also deemed to be a beneficial  owner of any securities of which that person has
a right to acquire beneficial  ownership within 60 days. Under these rules, more
than one person may be deemed a beneficial  owner of the same  securities  and a
person may be deemed to be a  beneficial  owner of  securities  as to which such
person has no economic interest.  Unless otherwise  indicated below, the address
of each person named in the table below is in care of  theglobe.com,  inc., P.O.
Box 029006, Fort Lauderdale, Florida 33302.

<TABLE>
<CAPTION>
                                                        SHARES BENEFICIALLY OWNED
                                                ---------------------------------------------
DIRECTORS, NAMED EXECUTIVE OFFICERS                                               TITLE OF
AND 5% STOCKHOLDERS                               NUMBER           PERCENT         CLASS
------------------------------------------     -----------         -------        -----------
<S>                                             <C>                <C>             <C>
Dancing Bear Investments, Inc. (1) ...           8,303,148           4.7%          Common

Michael S. Egan (2)(9) ...............          87,646,061          48.9%          Common

Edward A. Cespedes (3) ...............           2,462,153           1.4%          Common

Robin S. Lebowitz (4) ................             627,057             *           Common

Paul Soltoff (5) .....................          10,435,959           6.0%          Common

Albert J. Detz (6) ...................             130,000             *           Common

E&C Capital Partners LLLP (7) ........          61,168,886          34.9%          Common

Wellington Management Company, LLP (8)          24,136,050          13.1%          Common

Stockholder Agreement Group (9) ......          87,646,061          48.9%          Common

All directors and executive officers
  as a group (5 persons) .............          91,118,040          49.9%          Common
</TABLE>

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

*     less than 1%

(1)   Mr. Egan owns Dancing Bear Investments, Inc.

(2)   Includes  the shares  that Mr. Egan is deemed to  beneficially  own as the
      controlling  investor of Dancing  Bear  Investments,  Inc. and E&C Capital
      Partners,  LLLP and as the Trustee of the Michael S. Egan Grantor Retained
      Annuity  Trusts  for  the  benefit  of his  children.  Also  includes  (i)
      3,841,684  shares of our Common Stock  issuable  upon  exercise of options
      that are currently exercisable and 469 shares of our Common Stock issuable
      upon exercise of options that are exercisable  within 60 days of March 10,
      2005;  (ii) 3,541,337  shares of our Common Stock held by Mr. Egan's wife,
      as to which he disclaims beneficial ownership; and (iii) 204,082 shares of
      our Common  Stock  issuable  upon  exercise of warrants at $1.22 per share
      owned by Mr. Egan and his wife.

(3)   Includes  2,461,182  shares of our Common Stock  issuable upon exercise of
      options that are currently  exercisable and 971 shares of our Common Stock
      issuable upon exercise of options that are  exercisable  within 60 days of
      March 10, 2005.

(4)   Includes  625,025  shares of our Common Stock  issuable  upon  exercise of
      options  that are  currently  exercisable  and 2,032  shares of our Common
      Stock  issuable  upon exercise of options that are  exercisable  within 60
      days of March 10, 2005.

(5)   Includes  238,669 shares of Common Stock issuable upon exercise of options
      that are currently  exercisable or exercisable within 60 days of March 10,
      2005.


                                       93
<PAGE>


(6)   Includes  130,000  shares of our Common Stock  issuable  upon  exercise of
      options that are currently exercisable.

(7)   E&C  Capital  Partners,  LLLP  is  a  privately  held  investment  vehicle
      controlled  by our Chairman,  Michael S. Egan.  Our  President,  Edward A.
      Cespedes,  has  a  minority,   non-controlling  interest  in  E&C  Capital
      Partners,  LLLP. Includes 28,699,874 shares of Common Stock over which E&C
      holds an irrevocable proxy pursuant to the Stockholders' Agreement.

(8)   Includes  9,043,750  shares of our Common Stock  issuable upon exercise of
      warrants at $0.001 per share. The information about Wellington  Management
      Company,  LLP is as of December 31, 2004 and is derived from an SEC filing
      on Schedule 13G by  Wellington  Management.  Wellington  Management in its
      capacity  as an  investment  adviser,  may be  deemed  to have  beneficial
      ownership of 24,136,050  shares of Common Stock that are owned by numerous
      investment advisory clients,  none of which is known to have such interest
      with respect to more than five percent of the class of shares.  Wellington
      Management has shared voting  authority over 11,259,450  shares and shared
      dispositive  power over  24,136,050  shares.  Wellington  Management  is a
      registered  investment advisor under the Investment  Advisers Act of 1940,
      as amended.  Wellington  Management's  mailing address is 75 State Street,
      Boston, MA 02109.

(9)   In connection with the SendTec Acquisition, the Company and certain former
      executives  of SendTec  (consisting  of Paul Soltoff,  Eric Obeck,  Donald
      Gould,   Harry  Greene  and  Irv  and  Nadine  Brechner)  entered  into  a
      Stockholders'   Agreement  dated  September  1,  2004  with  Dancing  Bear
      Investments, Inc., E&C Capital Partners, LLLP ("E&C"), Michael S. Egan and
      Edward  Cespedes  (the   "Stockholders'   Agreement").   Pursuant  to  the
      Stockholders'  Agreement  the SendTec  executives  granted an  irrevocable
      proxy to vote their shares to E&C on all matters  (including  the election
      of  directors)  other than with  respect to certain  potential  affiliated
      transactions  involving Messr.  Egan or Cespedes.  The amount set forth in
      the table includes  28,699,874 shares of Common Stock over which E&C holds
      such  irrevocable  proxy.  The amount set forth in the table also includes
      3,842,153  shares of our Common Stock  issuable  upon  exercise of options
      that are currently  exercisable or exercisable within 60 days of March 10,
      2005 for Michael S. Egan, but does not include  options of an aggregate of
      511,837  held by the other  members of the  Stockholder  Agreement  Group.
      Please also refer to the appropriate footnotes relating to each individual
      member of the Stockholder Agreement Group.

Information   regarding   securities   authorized   for  issuance  under  equity
compensation plans is set forth under Item 4 of this Report on Form 10-KSB.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ARRANGEMENTS  WITH  ENTITIES  CONTROLLED BY VARIOUS  DIRECTORS AND OFFICERS.  On
November 14, 2002, E&C Capital Partners, LLLP ("E&C Partners"), a privately held
investment  holding company owned by Michael S. Egan, our Chairman and CEO and a
major stockholder, and Edward A. Cespedes, our President and a Director, entered
into a non-binding letter of intent with theglobe.com to provide $500,000 of new
financing  via the  purchase  of shares  of a new  Series F  Preferred  Stock of
theglobe.com.  On March 28, 2003, the parties signed a Preferred  Stock Purchase
Agreement  and other related  documentation  pertaining  to the  investment  and
closed on the investment.  Pursuant to the Preferred  Stock Purchase  Agreement,
E&C  Capital  Partners  received  333,333  shares  of Series F  Preferred  Stock
convertible  into shares of the  Company's  Common Stock at a price of $0.03 per
share.  The  conversion  price was subject to adjustment  upon the occurrence of
certain events, including downward adjustment on a weighted-average basis in the
event the Company  issued  securities at a purchase price below $0.03 per share.
If  fully  converted,   and  without  regard  to  the  anti-dilutive  adjustment
mechanisms  applicable  to  the  Series  F  Preferred  Stock,  an  aggregate  of
approximately  16,666,650 million shares of Common Stock would be issuable.  The
Series F Preferred  Stock had a  liquidation  preference of $1.50 per share (and
was  thereafter  entitled  to  participate  with  the  Common  Stock  on an  "as
converted" basis), and was entitled to a dividend at the rate of 8% per annum if
and to the extent  declared by the board and was also entitled to participate in
any dividend  declared on the  Company's  Common  Stock.  The Series F Preferred
Stock also was entitled to vote on an "as  converted"  basis with the holders of
Common  Stock.  In addition,  as part of the $500,000  investment,  E&C Partners
received  warrants to purchase  approximately 3.3 million shares of theglobe.com
Common  Stock  at an  exercise  price of  $0.125  per  share.  The  warrant  was
exercisable  at any time on or  before  March  28,  2013.  E & C  Partners  also
received certain demand registration rights in connection with its investment.

On May 22,  2003,  E&C  Partners  and certain  trusts,  of which Mr. Egan is the
trustee,  entered into a Note Purchase  Agreement  with the Company  pursuant to
which they acquired  convertible  promissory notes (the "Convertible  Notes") in
the  aggregate  principal  amount of  $1,750,000.  The  Convertible  Notes  were
convertible  at anytime into shares of the  Company's  Common Stock at a blended
rate of $.09 per share  (the  Convertible  Note held by E&C was  convertible  at
approximately  $.079 per share and the Convertible Notes held by the Trusts were
convertible at $.10 per share),  which if fully  converted,  would result in the
issuance of approximately  19,444,000  shares.  The Convertible  Notes had a one
year maturity  date,  which could be extended at the option of the holder of the
Note  for  periods  aggregating  two  years,  and was  secured  by a  pledge  of
substantially  all of the assets of the Company.  In addition,  E&C Partners was
issued a warrant to acquire 3,888,889 shares of theglobe.com  Common Stock at an
exercise price of $.15 per share.  The warrant was exercisable at any time on or
before May 22, 2013.  E&C Partners and the trusts are entitled to certain demand
and "piggy-back" registration rights in connection with their investment.

On February 2, 2004,  Michael S. Egan (our Chairman and Chief Executive Officer)
and his wife, S. Jacqueline  Egan,  entered into a Note Purchase  Agreement with
the Company  pursuant to which they acquired  convertible  promissory notes (the
"Bridge  Notes") in the aggregate  principal  amount of  $2,000,000.  The Bridge
Notes were  convertible at anytime into shares of the Company's  Common Stock at
an initial rate of $.98 per share. The conversion rate was initially  adjustable
based on an amount  equal to the rate at which the Company sold its Common Stock


                                       94
<PAGE>


in any  subsequent  qualified  private  offering  (defined as an offering  which
raises  a  minimum  of $7.5  million)  (or at a 20%  discount  to  such  amount,
depending upon the timing of completion,  and amount of, such private offering).
This  conversion  was  subsequently  adjusted  to $.57 per share,  which was the
effective  per share rate of the  subsequent  qualified  private  offering.  The
Bridge Notes were due on demand from the holder, and were secured by a pledge of
substantially all of the assets of the Company. The security interest was shared
with the holders of the  Company's  Secured  Convertible  Notes in the principal
amount of  $1,750,000.  The Bridge  Notes paid  interest at the rate of ten (10)
percent  per annum.  In  addition,  the Egans  were  issued a warrant to acquire
204,082  shares of  theglobe.com  Common Stock at an initial  exercise  price of
$1.22 per share.  This warrant is exercisable at any time on or before  February
2, 2009. The Egans are entitled to certain demand and "piggy-back"  registration
rights in connection with this investment.

On March 11, 2004, theglobe.com, inc. completed the PIPE Offering. In connection
with the PIPE Offering,  Mr. Egan,  our Chairman,  Chief  Executive  Officer and
principal  stockholder,  together  with  certain  of his  affiliates  and  other
parties,  converted  the  $2,000,000  Bridge  Note,  the  $1,750,000  of Secured
Convertible  Notes  and all of the  Company's  outstanding  shares  of  Series F
Preferred  Stock,  and  exercised  (on a  cashless  exercise  basis)  all of the
warrants issued in connection with the foregoing  Secured  Convertible Notes and
Series F Preferred Stock,  together with certain warrants issued to Dancing Bear
Investments  (an affiliate of Mr.  Egan).  As a result of such  conversions  and
exercises, the Company issued an aggregate of approximately 48.75 million shares
of Common Stock to such parties.

Interest  expense on the  $1,750,000  Convertible  Notes  totaled  approximately
$108,200,  excluding the  amortization of the discount on the Notes,  during the
year ended December 31, 2003. The interest remained unpaid at December 31, 2003,
and was included in accrued  expenses in our  consolidated  balance sheet.  As a
result of the conversion of the $1,750,000  Convertible Notes into the Company's
Common  Stock in March  2004,  all  accrued  interest,  including  approximately
$32,000  relating to the first quarter of 2004,  was paid by June 30, 2004. As a
result of the conversion of the $2,000,000 Bridge Note into the Company's Common
Stock in March 2004,  accrued interest of approximately  $17,500 relating to the
first quarter of 2004 was paid by June 30, 2004

Two of our  directors,  Mr. Egan and Ms.  Lebowitz,  also serve as officers  and
directors of Dancing Bear Investments,  Inc. ("Dancing Bear"). Dancing Bear is a
stockholder of the Company and an entity controlled by Mr. Egan, our Chairman.

Several  entities  controlled  by our  Chairman  have  provided  services to the
Company  and  two of its  subsidiaries,  including:  the  lease  of  office  and
warehouse space; and the outsourcing of customer service and warehouse functions
for the Company's VoIP operations.

We sublease  approximately  15,000 square feet of office space for our executive
offices from Certified Vacations,  a company which is controlled by our Chairman
and CEO Michael Egan. The sublease commenced on September 1, 2003 and expires on
July 31,  2007.  The  initial  base rent is $18.91 per square  foot on an annual
basis ($283,650 annually in the aggregate) and will increase on each anniversary
of the sublease by $1.50 per square foot. During 2003, approximately $148,000 of
expense was recorded  related to the lease of the office space.  During the year
ended August 31, 2004, approximately $334,000 of expense was recorded related to
the lease of the office space. In addition, from August 2003 through August 2004
we outsourced  our Customer  Service  function from  Certified  Vacations  under
renewable  short  term  agreements  at  incremental  cost,  for which we paid an
aggregate  of $109,000  during the year ended  December  31,  2003 and  $134,000
during the year ended December 31, 2004.

Beginning in August, 2003, our subsidiary, Voiceglo Holdings, Inc. ("voiceglo"),
began  outsourcing  warehouse  space and related  services  from  Thomas  Street
Logistics  LLC,  which is controlled by our Chairman and CEO,  Michael Egan, and
our  President,  Edward  Cespedes.  Our agreement  with Thomas Street  Logistics
included secure warehouse space, equipment rental, insurance,  utilities, office
space,  inventory management,  shipping services,  personnel and provisioning of
our equipment for $25,000 per month and a nominal  shipping and handling fee per
item shipped.  Effective,  April 15, 2004,  voiceglo  terminated its arrangement
with Thomas Street  Logistics and has  transitioned  these functions to voiceglo
personnel and warehouse space.  During 2003,  approximately  $126,000 of expense
was recorded for warehouse space and related outsourcing  functions.  During the
year ended December 31, 2004,  approximately $99,000 of expense was recorded for
warehouse space and related outsourcing functions.

In addition, as of December 31, 2004,  approximately $90,000 of advances made by
the Company to a newly formed entity  controlled  by our Chairman,  Global Voice
Network LLC,  remained  unpaid.  The entity was to provide services to voiceglo,
however, the entity ceased operations in January 2005. E&C Capital Partners LLLP
has represented to  theglobe.com  that the $90,000 will be repaid to the Company
prior to the end of 2005.

ARRANGEMENTS WITH RELATIVES.  In March 2004, the Company engaged the services of
Pay the Rent, a company  controlled  by the  son-in-law of our Chairman and CEO,
Michael Egan. Pay the Rent was contracted  for the  production,  audio and video
post-production,  voice-over,  and scoring of a television  commercial featuring
voiceglo. Payment in full in the amount of $151,200 was remitted during 2004. In
2003,  we reimbursed  Pay the Rent $18,013 for marketing and promotion  expenses
(at cost) for a separate marketing promotion.


                                       95
<PAGE>


ITEM 13. EXHIBITS

EXHIBITS

NO.  ITEM

3.1   Form of Fourth Amended and Restated  Certificate of  Incorporation  of the
      Company (3).

3.2   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation (19).

3.3   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation  filed with the  Secretary  of State of Delaware on July 29,
      2003 (19).

3.4   Certificate  relating to Previously  Outstanding Series of Preferred Stock
      and Relating to the  Designation,  Preferences  and Rights of the Series F
      Preferred Stock (14).

3.5   Certificate  of  Amendment  Relating to the  Designation  Preferences  and
      Rights of the Junior Participating Preferred Stock (16).

3.6   Form of By-Laws of the Company (19).

3.7   Certificate  of  Amendment  Relating to the  Designation  Preferences  and
      Rights of the Series H Automatically Converting Preferred Stock (18).

3.8   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation filed with the Secretary of State of Delaware on December 1,
      2004. (22)

4.1   Registration Rights Agreement, dated as of September 1, 1998(5).

4.2   Amendment  No.1 to  Registration  Rights  Agreement,  dated as of April 9,
      1999(6).

4.3   Specimen  certificate  representing  shares of Common Stock of the Company
      (4).

4.4   Amended and Restated Warrant to Acquire Shares of Common Stock (2).

4.5   Form of Rights  Agreement,  by and between the Company and American  Stock
      Transfer & Trust Company as Rights Agent (3).

4.6   Form of Warrant dated  November 12, 2002 to acquire shares of Common Stock
      (9).

4.7   Form of Warrant  dated  March 28, 2003 to acquire  shares of Common  Stock
      (14).

4.8   Form of Warrant  dated May 28,  2003 to acquire  an  aggregate  of 500,000
      shares of theglobe.com Common Stock (10).

4.9   Form of Warrant dated July 2, 2003 to acquire  securities of theglobe.com,
      inc. (11).

4.10  Form of Warrant dated March 5, 2004 to acquire securities of theglobe.com,
      inc. (17).

4.11  Form of Warrant relating to potential  issuance of Earn-out  Consideration
      (18).

10.1  Form of  Indemnification  Agreement  between  the  Company and each of its
      Directors and Executive Officers (1).

10.2  Lease  Agreement  dated January 12, 1999 between the Company and Broadpine
      Realty Holding Company, Inc. (6).

10.3  2000 Broad Based Stock Option Plan (7).

10.4  1998 Stock Option Plan, as amended (6).

10.5  1995 Stock Option Plan (1).

10.6  Employee Stock Purchase Plan (5).

10.7  Technology Purchase Agreement dated November 12, 2002, among theglobe.com,
      inc., and Brian Fowler (9).


                                       96
<PAGE>


10.8  Employment Agreement dated November 12, 2002, among theglobe.com, inc. and
      Brian Fowler (9).

10.9  Payment  Agreement  dated  November 12, 2002,  among  theglobe.com,  inc.,
      1002390 Ontario Inc., and Robert S. Giblett (9).

10.10 Release  Agreement dated November 12, 2002, among  theglobe.com,  inc. and
      certain other parties named therein (9).

10.11 Preferred   Stock  Purchase   Agreement   dated  March  28,  2003  between
      theglobe.com, inc. and E&C Capital Partners, LLLP. (14).

10.12 Loan and Purchase Option Agreement dated February 25, 2003 (13).

10.13 Amended and Restated Promissory Note (13).

10.14 Form of Stock Purchase Agreement (13).

10.15 Note Purchase Agreement dated May 22, 2003 between theglobe.com,  inc. and
      E&C Capital Partners, LLLP and certain other investors named therein (10)

10.16 Agreement  and Plan of Merger  dated May 23,  2003  between  theglobe.com,
      inc.,  DPT  Acquisition,  Inc.,  Direct  Partner  Telecom,  Inc.,  and the
      stockholders thereof (10).

10.17 Employment  Agreement  dated May 28, 2003 between  theglobe.com  and James
      Magruder (10).

10.18 Form of Subscription Agreement relating to the purchase of Units of Series
      G Preferred Stock and Warrants of theglobe.com, inc. (11).

10.19 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Michael S. Egan (12).

10.20 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Edward A. Cespedes (12).

10.21 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Robin Segaul Lebowitz (12).

10.22 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Michael S. Egan (12).

10.23 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Edward A. Cespedes (12).

10.24 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Robin Segaul Lebowitz (12).

10.25 Non-Qualified  Stock  Option  Agreement  dated as of July 17, 2003 between
      theglobe.com, inc. and Kellie L. Smythe (12).

10.26 2003 Sales Representatives Stock Option Plan (12).

10.27 Securities  Purchase  and  Registration  Agreement  dated  March  2,  2004
      relating  to the  purchase  of Units  of  Common  Stock  and  Warrants  of
      theglobe.com, inc. (15)

10.28 Amendment to the Service Order Agreement  Terms and Conditions  dated July
      30, 2003, and October 24, 2003 between XO Communications,  Inc. and Direct
      Partner Telecom, Inc., including XO Services Terms and Conditions.(15)*

10.29 Agreement  dated  August  7, 2003 by and  between  Promotion  and  Display
      Technology, Ltd. and theglobe.com, inc. (15) *

10.30 Broad Capacity  Services  Agreement  dated October 17, 2003 by and between
      Direct Partner Telecom, Inc. and Progress Telecom Corporation. (15)*

10.31 Agreement  and  Plan of  Merger  dated  August  31,  2004  by and  between
      theglobe.com,  inc., SendTec  Acquisition  Corporation and SendTec,  Inc.,
      among others (18).

10.32 Employment Agreement dated September 1, 2004 by and between SendTec,  Inc.
      and Paul Soltoff (18).


                                       97
<PAGE>


10.33 Stockholders'   Agreement   dated   September   1,  2004  by  and  between
      theglobe.com and certain named stockholders (18).

10.34 theglobe.com 2004 Amended and Restated Stock Option Plan (21).

10.35 Promissory Note dated September 1, 2004 (18).

10.36 Form of Potential  Conversion  Note  relating to Series H Preferred  Stock
      (18).

10.37 Termination   of   Agreement   dated  as  of  January  31,  2005   between
      theglobe.com, inc., and Promotion and Display Technology Ltd.**

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

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

18.1  Independent Accountant Preferability Letter

21.   Subsidiaries

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

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

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

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

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

1.    Incorporated  by  reference  from our  registration  statement on Form S-1
      filed July 24, 1998 (Registration No. 333-59751).

2.    Incorporated by reference from our Form S-1/A filed August 20, 1998.

3.    Incorporated by reference from our Form S-1/A filed September 15, 1998.

4.    Incorporated by reference from our Form S-1/A filed October 14, 1998.

5.    Incorporated  by reference  from our Form 10-K for the year ended December
      31, 1998 filed March 30, 1999.

6.    Incorporated by reference from our Form S-1 filed April 13, 1999.

7.    Incorporated  by reference  from our Form 10-Q for the quarter ended March
      31, 2000 dated May 15, 2000.

8.    Incorporated by reference from our Form 8-K filed August 13, 2002.

9.    Incorporated by reference from our Form 8-K filed on November 26, 2002.

10.   Incorporated by reference from our Form 8-K filed on June 6, 2003.

11.   Incorporated by reference from our Form 8-K filed on July 11, 2003.

12.   Incorporated by reference from our Form 10-QSB filed on November 14, 2003.

13.   Incorporated  by  reference  from our Form 8-K filed on March 3, 2003,  as
      amended on December 6, 2004.


                                       98
<PAGE>


14.   Incorporated by reference from our Form 10-K filed on March 31, 2003.

15.   Incorporated by reference from our Form 10-KSB filed on March 30, 2004.

16.   Incorporated  by reference  from our  Registration  Statement on Form SB-2
      filed on April 16, 2004 (Registration No. 333-114556).

17.   Incorporated by reference from our Form 8-K filed on March 17, 2004.

18.   Incorporated by reference from our Form 8-K filed September 7, 2004.

19.   Incorporated by reference from our Form SB-2 filed April 16, 2004.

20.   Incorporated  by reference from our Post Effective  Amendment No. 1 to our
      Form SB-2 filed on May 7, 2004.

21.   Incorporated by reference from our S-8 filed October 13, 2004.

22.   Incorporated by reference from our Form 8-K filed on December 2, 2004.

*     Confidential  portions  of  this  exhibit  have  been  omitted  and  filed
      separately  with the  Commission  pursuant to a request  for  confidential
      treatment.

**    Confidential  depository  account  information  has been omitted from this
      exhibit and will be made available to the Commission upon request.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Board of Directors,  upon the  recommendation  of the Audit  Committee,  has
appointed  Rachlin Cohen & Holtz,  LLP, Fort Lauderdale,  Florida as the firm of
independent  public  accountants  to audit our books and accounts for the fiscal
year ended December 31, 2004.

AUDIT FEES.  Audit fees include the  aggregate  fees billed for the audit of the
Company's annual  consolidated  financial  statements and the reviews of each of
the quarterly  consolidated financial statements included in the Company's Forms
10-KSB and Forms 10-QSB,  respectively.  The aggregate  audit fees billed to the
Company by Rachlin Cohen & Holtz, LLP were $104,739 and $202,977 during 2004 and
2003, respectively.

AUDIT-RELATED FEES. During the last two fiscal years, Rachlin Cohen & Holtz, LLP
provided the Company with the following  services that are reasonably related to
the performance of the audit of our financial statements:

      Assurance and related services related to audits and review of various SEC
      filings (including S-8's, proxy and private placements):  $29,784 for 2004
      and $8,641 for 2003; and

      Other services relating to consultation and research of various accounting
      pronouncements and technical issues: $3,574 for 2004 and $7,633 for 2003.

TAX FEES. The aggregate fees billed for tax services provided by Rachlin Cohen &
Holtz,  LLP in connection with tax  compliance,  tax consulting and tax planning
services during 2004 and 2003, were $81,963 and $78,079, respectively.

ALL OTHER FEES. Other than the fees for services  described above, there were no
additional fees billed by Rachlin Cohen & Holtz, LLP in 2004 or 2003.

PRE-APPROVAL  OF SERVICES BY THE EXTERNAL  AUDITOR.  In April of 2004, the Audit
Committee  adopted a policy for  pre-approval  of audit and permitted  non-audit
services by the Company's  external  auditor.  The Audit Committee will consider
annually and, if  appropriate,  approve the  provision of audit  services by its
external auditor and consider and, if appropriate,  pre-approve the provision of
certain  defined audit and non-audit  services.  The Audit  Committee  will also
consider  on a  case  by  case  basis  and,  if  appropriate,  approve  specific
engagements that are not otherwise  pre-approved.  Of the Audit-Related Fees and
Tax Fees described  above,  the Audit Committee  pre-approved  the audit related
engagements  but did not  pre-approve  the tax  related  services.  All such tax
related  services will be subject to  pre-approval by the Audit Committee in the
future.

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


                                       99
<PAGE>


SIGNATURES

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

Dated:  March 30, 2005           theglobe.com, inc

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





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


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated this 30th day of March 2005.

                                 /s/ Michael S. Egan
                                 -----------------------------
                                 Michael S. Egan
                                 Chairman, Director

                                 /s/ Edward A. Cespedes
                                 -----------------------------
                                 Edward A. Cespedes
                                 Director

                                 /s/ Robin Lebowitz
                                 -----------------------------
                                 Robin Lebowitz
                                 Director


                                      100

<PAGE>



EXHIBIT INDEX

NO.   ITEM

3.1   Form of Fourth Amended and Restated  Certificate of  Incorporation  of the
      Company (3).

3.2   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation (19).

3.3   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation  filed with the  Secretary  of State of Delaware on July 29,
      2003(19).

3.4   Certificate  relating to Previously  Outstanding Series of Preferred Stock
      and Relating to the  Designation,  Preferences  and Rights of the Series F
      Preferred Stock (14).

3.5   Certificate  of  Amendment  Relating to the  Designation  Preferences  and
      Rights of the Junior Participating Preferred Stock (16).

3.6   Form of By-Laws of the Company (19).

3.7   Certificate  of  Amendment  Relating to the  Designation  Preferences  and
      Rights of the Series H Automatically Converting Preferred Stock (18).

3.8   Certificate  of Amendment to Fourth  Amended and Restated  Certificate  of
      Incorporation filed with the Secretary of State of Delaware on December 1,
      2004 (22).

4.1   Registration Rights Agreement, dated as of September 1, 1998(5).

4.2   Amendment  No.1 to  Registration  Rights  Agreement,  dated as of April 9,
      1999(6).

4.3   Specimen  certificate  representing  shares of Common Stock of the Company
      (4).

4.4   Amended and Restated Warrant to Acquire Shares of Common Stock (2).

4.5   Form of Rights  Agreement,  by and between the Company and American  Stock
      Transfer & Trust Company as Rights Agent (3).

4.6   Form of Warrant dated  November 12, 2002 to acquire shares of Common Stock
      (9).

4.7   Form of Warrant  dated  March 28, 2003 to acquire  shares of Common  Stock
      (14).

4.8   Form of Warrant  dated May 28,  2003 to acquire  an  aggregate  of 500,000
      shares of theglobe.com Common Stock (10).

4.9   Form of Warrant dated July 2, 2003 to acquire  securities of theglobe.com,
      inc. (11).

4.10  Form of Warrant dated March 5, 2004 to acquire securities of theglobe.com,
      inc. (13).

4.11  Form of Warrant relating to potential  issuance of Earn-out  Consideration
      (18).

10.1  Form of  Indemnification  Agreement  between  the  Company and each of its
      Directors and Executive Officers (1).

10.2  Lease  Agreement  dated January 12, 1999 between the Company and Broadpine
      Realty Holding Company, Inc.(6).

10.3  2000 Broad Based Stock Option Plan (7).

10.4  1998 Stock Option Plan, as amended (6).

10.5  1995 Stock Option Plan (1).

10.6  Employee Stock Purchase Plan (5).

10.7  Technology Purchase Agreement dated November 12, 2002, among theglobe.com,
      inc., and Brian Fowler (9).


                                      101
<PAGE>


10.8  Employment Agreement dated November 12, 2002, among theglobe.com, inc. and
      Brian Fowler (9).

10.9  Payment  Agreement  dated  November 12, 2002,  among  theglobe.com,  inc.,
      1002390 Ontario Inc., and Robert S. Giblett (9).

10.10 Release  Agreement dated November 12, 2002, among  theglobe.com,  inc. and
      certain other parties named therein (9).

10.11 Preferred   Stock  Purchase   Agreement   dated  March  28,  2003  between
      theglobe.com, inc. and E&C Capital Partners, LLLP (14).

10.12 Loan and Purchase Option Agreement dated February 25, 2003 (13).

10.13 Amended and Restated Promissory Note (13).

10.14 Form of Stock Purchase Agreement (13).

10.15 Note Purchase Agreement dated May 22, 2003 between theglobe.com,  inc. and
      E&C Capital Partners, LLLP and certain other investors named therein (10)

10.16 Agreement  and Plan of Merger  dated May 23,  2003  between  theglobe.com,
      inc.,  DPT  Acquisition,  Inc.,  Direct  Partner  Telecom,  Inc.,  and the
      stockholders thereof (10).

10.17 Employment  Agreement  dated May 28, 2003 between  theglobe.com  and James
      Magruder (10).

10.18 Form of Subscription Agreement relating to the purchase of Units of Series
      G Preferred Stock and Warrants of theglobe.com, inc. (11).

10.19 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Michael S. Egan (12).

10.20 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Edward A. Cespedes (12).

10.21 Employment Agreement dated August 1, 2003 between  theglobe.com,  inc. and
      Robin Segaul Lebowitz (12).

10.22 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Michael S. Egan (12).

10.23 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Edward A. Cespedes (12).

10.24 Amended & Restated  Non-Qualified  Stock Option Agreement  effective as of
      August 12, 2002 between theglobe.com, inc. and Robin Segaul Lebowitz (12).

10.25 Non-Qualified  Stock  Option  Agreement  dated as of July 17, 2003 between
      theglobe.com, inc. and Kellie L. Smythe (12).

10.26 2003 Sales Representatives Stock Option Plan (12).

10.27 Securities  Purchase  and  Registration  Agreement  dated  March  2,  2004
      relating  to the  purchase  of Units  of  Common  Stock  and  Warrants  of
      theglobe.com, inc. (15)

10.28 Amendment to the Service Order Agreement  Terms and Conditions  dated July
      30, 2003, and October 24, 2003 between XO Communications,  Inc. and Direct
      Partner Telecom, Inc., including XO Services Terms and Conditions.(15)*

10.29 Agreement  dated  August  7, 2003 by and  between  Promotion  and  Display
      Technology, Ltd. and theglobe.com, inc. (15) *

10.30 Broad Capacity  Services  Agreement  dated October 17, 2003 by and between
      Direct Partner Telecom, Inc. and Progress Telecom Corporation. (15)*

10.31 Agreement  and  Plan of  Merger  dated  August  31,  2004  by and  between
      theglobe.com,  inc., SendTec  Acquisition  Corporation and SendTec,  Inc.,
      among others (18).

10.32 Employment Agreement dated September 1, 2004 by and between SendTec,  Inc.
      and Paul Soltoff (18).


                                      102
<PAGE>


10.33 Stockholders'   Agreement   dated   September   1,  2004  by  and  between
      theglobe.com and certain named stockholders (18).

10.34 theglobe.com 2004 Amended and Restated Stock Option Plan (21).

10.35 Promissory Note dated September 1, 2004 (18).

10.36 Form of Potential  Conversion  Note  relating to Series H Preferred  Stock
      (18).

10.37 Termination   of   Agreement   dated  as  of  January  31,  2005   between
      theglobe.com, inc., and Promotion and Display Technology Ltd.**

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

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

18.1  Independent Accountant Preferability Letter

21.   Subsidiaries

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

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

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

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

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

1.    Incorporated  by  reference  from our  registration  statement on Form S-1
      filed July 24, 1998 (Registration No. 333-59751).

2.    Incorporated  by  reference  as Exhibit to our Form S-1/A filed August 20,
      1998.

3.    Incorporated by reference from our Form S-1/A filed September 15, 1998.

4.    Incorporated by reference from our Form S-1/A filed October 14, 1998.

5.    Incorporated  by reference  from our Form 10-K for the year ended December
      31, 1998 filed March 30, 1999.

6.    Incorporated by reference from our Form S-1 filed April 13, 1999.

7.    Incorporated  by reference  from our Form 10-Q for the quarter ended March
      31, 2000 dated May 15, 2000.

8.    Incorporated by reference from our Form 8-K filed August 13, 2002.

9.    Incorporated by reference from our Form 8-K filed on November 26, 2002.

10.   Incorporated by reference from our Form 8-K filed on June 6, 2003.

11.   Incorporated by reference from our Form 8-K filed on July 11, 2003.

12.   Incorporated by reference from our Form 10-QSB filed on November 14, 2003.

13.   Incorporated  by  reference  from our Form 8-K filed on March 3, 2003,  as
      amended on December 6, 2004.


                                      103
<PAGE>


14.   Incorporated by reference from our Form 10-K filed on March 31, 2003.

15.   Incorporated by reference from our Form 10-KSB filed on March 30, 2004.

16.   Incorporated  by reference  from our  Registration  Statement on Form SB-2
      filed on April 16, 2004 (Registration No. 333-114556).

17.   Incorporated by reference from our Form 8-K filed on March 17, 2004.

18.   Incorporated by reference from our Form 8-K filed on September 7, 2004.

19.   Incorporated by reference from our Form SB-2 filed April 16, 2004.

20.   Incorporated  by reference from our Post Effective  Amendment No. 1 to our
      Form SB-2 filed on May 7, 2004.

21.   Incorporated by reference from our S-8 filed October 13, 2004.

22.   Incorporated by reference from our Form 8-K filed on December 2, 2004.


*     Confidential  portions  of  this  exhibit  have  been  omitted  and  filed
      separately  with the  Commission  pursuant to a request  for  confidential
      treatment.

**    Confidential  depository  account  information  has been omitted from this
      exhibit and will be made available to the Commission upon request.


                                      104