**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-K**





(Mark
      One)





x **Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934**


**For
      the fiscal year ended December 31, 2006**





or





o **Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934**


**For
      the transition period from** ___________________________ **to** __________________________




COMMISSION
      FILE NO. 0-25053





**THEGLOBE.COM,
      INC.**


(EXACT
      NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)





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




110
      EAST
      BROWARD BOULEVARD, SUITE 1400, FORT LAUDERDALE, FL. 33301


(ADDRESS
      OF PRINCIPAL EXECUTIVE OFFICES)





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





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 if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


o
      Yes  x No




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


o
      Yes x No





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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (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-K
      or any amendment to this Form 10-K. x





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




Large
      accelerated filer o     Accelerated
      filer o    
Non-accelerated filer x





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


o
      Yes x No





Aggregate
      market value of the voting Common Stock held by non-affiliates of the registrant
      as of the close of business on March 19, 2007: $4,227,395.*





*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.





The
      number of shares outstanding of the Registrant's Common Stock, $.001 par value
      (the "Common Stock") as of March 19, 2007 was 172,484,838.







**theglobe.com,
      inc.**





**FORM
      10-K**





**TABLE
      OF CONTENTS**





PagePART
                IItem
                1.
            
            Business
            
            2Item
                1A.
            
            Risk
                Factors
            
            10Item
                1B.
            
            Unresolved
                Staff Comments
            
            23Item
                2.
            
            Properties
            
            23Item
                3.
            
            Legal
                Proceedings
            
            23Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            25PART
                IIItem
                5.
            
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            
            25Item
                6.
            
            Selected
                Financial Data
            
            29Item
                7.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
            
            30Item
                7A.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            48Item
                8.
            
            Financial
                Statements and Supplementary Data
            
            F-1Item
                9.
            
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            
            49Item
                9A.
            
            Controls
                and Procedures
            
            49Item
                9B.
            
            Other
                Information
            
            49PART
                IIIItem
                10.
            
            Directors,
                Executive Officers and Corporate Governance
            
            49Item
                11.
            
            Executive
                Compensation
            
            52Item
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            59Item
                13.
            
            Certain
                Relationships and Related Transactions, and Director Independence
            
            60Item
                14.
            
            Principal
                Accounting Fees and Services
            
            62PART
                IVItem
                15.
            
            Exhibits
                and Financial Statements Schedules
            
            63SIGNATURES
            
            
            
            68




i




**FORWARD
      LOOKING STATEMENTS**





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




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





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-K 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-K 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-K.




1





In
      this
      Form 10-K, 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.




**PART
      I**




**ITEM
      1. BUSINESS**





**DESCRIPTION
      OF BUSINESS**





During
      2006 theglobe.com, inc. (the "Company" or "theglobe") managed three primary
      lines of business, as follows:





·
            Computer
                games businesses —
                Our print
                publication business comprised of Computer Games magazine and MMOGames
                magazine (renamed from Massive Magazine in the first quarter of 2007);
                our
                online website business, comprised of the CGOnline website (www.cgonline.com),
                the MMOGames magazine website (www.mmogamesmag.com)and the Game Swap Zone website (www.gameswapzone.com);
                and our e-commerce games distribution company, Chips & Bits, Inc.
                (www.chipsbits.com).
                Our Now Playing magazine publication and the accompanying website
                were
                sold in January 2006 for approximately $130 thousand in cash;





·
            Voice
                over Internet Protocol (“VoIP”) telephony services business — Consisting
                of tglo.com, inc. (formerly known as voiceglo Holdings, Inc.). The
                term
                “VoIP” refers to a category of hardware and software that enables people
                to use the Internet to make phone calls;
                and





·
            Internet
                services business — Consisting of Tralliance Corporation (“Tralliance”)
                which is the registry for the “.travel” top-level Internet
                domain.





In
      March
      2007, management made the decision to shutdown the operations of both its
      computer games and VoIP telephony services lines of business and to focus 100%
      of its resources and efforts to further develop its Internet services business.
      See Note 19, “Subsequent Events,” of the Notes to Consolidated Financial
      Statements and the "Liquidity and Capital Resources" section of the Management's
      Discussion and Analysis of Financial Condition and Results of Operations
      included within this Form 10-K for a more complete discussion.





On
      October 31, 2005, the Company completed the sale of all of the business and
      substantially all of the net assets of SendTec, Inc. (“SendTec”), our direct
      response marketing services and technology company, for approximately $39.9
      million in cash. Results of operations for SendTec have been reported separately
      as “Discontinued Operations” in the accompanying consolidated statement of
      operations for the years ended December 31, 2005 and 2004. ****





During
      2006, 2005 and 2004, the Company's computer games business segment provided
      approximately 59%, 81% and 89%, respectively, of our consolidated net revenue
      from continuing operations. Tralliance which comprises our Internet services
      business segment contributed approximately 40% of our consolidated net revenue
      during 2006, up from approximately 8% in the prior year as Tralliance did not
      begin generating revenue until the fourth quarter of 2005. Our VoIP products
      and
      services have not produced any significant revenue. All revenue derived from
      the
      business segments which comprised our operations during 2006 was considered
      to
      be attributable to the United States because it was impracticable to determine
      the country of origin.





**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 continued to operate its Computer Games print magazine and the
      associated CGOnline website, as well as the e-commerce games distribution
      business of Chips & Bits. On June 1, 2002, Chairman Michael S. Egan and
      Director Edward A. Cespedes became Chief Executive Officer and President of
      the
      Company, respectively.




2





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





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





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. 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 originally planned to continue to operate
      the
      company as a subsidiary and engage in the provision of VoIP services to other
      telephony businesses on a wholesale transactional basis. In the first quarter
      of
      2004, the Company decided to suspend DPT’s wholesale business and dedicate the
      DPT physical and intellectual assets to its retail VoIP business. As a result,
      the Company wrote-off the goodwill associated with the purchase of DPT as of
      December 31, 2003, and has since employed DPT’s physical assets in the build out
      of its 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, Inc., (“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 was converted into 17,500,500
      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), and (iv) the issuance of a subordinated promissory note in the amount
      of $1 million. The Company also issued an aggregate of 3,974,165 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.





On
      August
      10, 2005, the Company entered into an Asset Purchase Agreement with
      RelationServe Media, Inc. ("RelationServe") whereby the Company agreed to sell
      all of the business and substantially all of the net assets of the SendTec
      marketing services subsidiary to RelationServe for $37.5 million in cash,
      subject to certain net working capital adjustments. On August 23, 2005, the
      Company entered into Amendment No. 1 to the Asset Purchase Agreement with
      RelationServe (the “1 st Amendment”
      and together with the original Asset Purchase Agreement, the “Purchase
      Agreement”). On October 31, 2005, the Company completed the asset sale.
      Including preliminary adjustments to the purchase price related to estimated
      excess working capital of SendTec as of the date of sale, the Company received
      an aggregate of approximately $39.9 million in cash pursuant to the Purchase
      Agreement. ****





Additionally,
      as contemplated by the Purchase Agreement, immediately following the asset
      sale,
      the Company completed the redemption of approximately 28.9 million shares of
      theglobe’s Common Stock owned by six members of the former management of SendTec
      for approximately $11.6 million in cash pursuant to a Redemption Agreement
      dated
      August 23, 2005. Pursuant to a separate Termination Agreement, the Company
      also
      terminated and canceled approximately 1.3 million stock options and the
      contingent interest in approximately 2.1 million earn-out warrants held by
      the
      six members of the former management in exchange for approximately $400 thousand
      in cash. The Company also terminated stock options of certain other
      non-management employees of SendTec and entered into bonus arrangements with
      a
      number of other non-management SendTec employees for amounts totaling
      approximately $600 thousand.




3





**OUR
      LINES OF BUSINESS**





**OUR
      INTERNET SERVICES BUSINESS**





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





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





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





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





In
      launching the “.travel” top-level domain registry, Tralliance adopted a phased
      approach consisting of three distinct stages. During the third quarter of 2005,
      Tralliance implemented phase one, which consisted of a pre-authentication of
      a
      limited group of potential registrants. During the fourth quarter of 2005,
      Tralliance implemented phase two, which involved the registration of the limited
      group of registrants who had been pre-authenticated. It was during this limited
      registration phase that Tralliance initially began collecting registration
      fees
      from its “.travel” registrars. Finally, in January 2006, Tralliance commenced
      the final phase of its launch, which culminated in live “.travel” registry
      operations. As of March 20, 2007 the total number of “.travel” domain names
      registered approximated 26,400.




4





On
      August
      15, 2006, the Company introduced its online search engine dedicated to the
      travel industry, www.search.travel .
      The
      search engine was developed by Tralliance to benefit both consumers at large
      and
“.travel” domain name registrants, as the search engine delivers qualified
      search results from the entire World Wide Web, giving priority to destinations
      and businesses that are authenticated “.travel” registrants. During August 2006,
      the Company launched a national television campaign to promote the new search
      engine and website. The Company has begun marketing the www.search.travel website
      to potential advertisers interested in targeting the travel consumer and plans
      to seek additional net revenue through the sale of advertising sponsorships.
      As
      of March 19, 2007, advertising net revenue attributable to the www.search.travel website
      has not been significant.





**OUR
      COMPUTER GAMES BUSINESS**





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





Historically,
      content of Computer Games Magazine and CGOnline focused primarily on the PC
      games market niche, which has experienced declining sales during recent years.
      Additionally, the overall games distribution marketplace has become increasingly
      competitive during recent years due to the increased selection and number of
      video games offered by mass merchants, regional chains, video game and PC
      software specialty stores, toy retail chains, consumer electronic stores and
      online retailers. Due in large part to the above factors, the total net revenue
      derived from the Company’s computer games business decreased significantly
      during the past several years (from $7.2 million in 2002 to $2.0 million in
      2006).





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





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





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




5





In
      March
      2007, management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its Computer Games businesses, including
      discontinuing the operations of its magazine publications, games distribution
      business and related websites. The Company’s decision to shutdown its Computer
      Games businesses was based primarily on the historical losses sustained by
      these
      businesses during the recent past and management’s expectations of continued
      future losses. The Company is currently in the process of implementing a
      business shutdown plan, which includes the termination of employee and vendor
      relationships and the collection and payment of outstanding accounts receivables
      and payables. We are also attempting to sell certain of the businesses’
component assets; however, we do not expect the proceeds from such sales to
      be
      significant. (See Note 19, “Subsequent Events,” in the Notes to Consolidated
      Financial Statements).





Our
      games
      businesses derived substantially all of their revenue from sales of magazines
      via subscriptions and newsstands, sale of advertising, primarily in our
      magazines but to a lesser extent on our websites, and to the sales of video
      and
      computer games products. Curtis Circulation Company, which handled the newsstand
      distribution of our games businesses magazine publications, accounted for
      approximately 12% of the total net revenue of our games business segment during
      2006. During each of the years ended December 31, 2005 and 2004, no single
      customer accounted for more than 10% of the total net revenue of our computer
      games business segment.





**OUR
      VOIP TELEPHONY BUSINESS**





On
      November 14, 2002, we entered the VoIP business by acquiring certain software
      assets from Brian Fowler. 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 VoIP
      product during the first quarter of 2004. These services allowed customers
      to
      communicate using VoIP technology for dramatically reduced pricing compared
      to
      traditional telephony networks. The services also offered traditional telephony
      features such as voicemail, caller ID, call forwarding, and call waiting for
      no
      additional cost to the customer, as well as incremental services that were
      not
      then supported by the public switched telephone network ("PSTN") like the
      ability to use numbers remotely and voicemail to email services. In the fourth
      quarter of 2004, the Company announced an "instant messenger" or "IM" related
      application which enabled users to chat via voice or text across multiple
      platforms using their preferred instant messenger service. During the second
      quarter of 2005, the Company released a number of new VoIP products and features
      which allowed users to communicate via mobile phones, traditional land line
      phones and/or computers. From the initial launch of its VoIP services in 2003
      through 2005, the Company continued to expand its VoIP network, which was
      comprised of switching hardware and software, servers, billing and inventory
      systems, and telecommunication carrier contractual relationships. Throughout
      this period, the capacity of our VoIP network greatly exceeded usage.





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





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





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




6





In
      March
      2007, management and the Board of Directors of the Company decided to
      discontinue the operating, research and development activities of its VoIP
      telephony services business and terminate all of the remaining employees of
      the
      business. At this time, the Company intends to only incur those costs required
      to maintain the service obligations of the license agreement with Speecho,
      LLC.
      The Company has no plans to actively market the further licensing of its chat,
      VoIP and video communications technology. The Company’s decision to discontinue
      the operations of its VoIP telephony services business was based primarily
      on
      the historical losses sustained by the business during the past several years,
      management’s expectations of continued losses for the foreseeable future and
      estimates of the amount of capital required to attempt to successfully monetize
      its business. (See Note 19, “Subsequent Events,” in the Notes to the
      Consolidated Financial Statements).





**COMPETITION**





**Internet
      Services Business**





We
      face
      competition from a number of businesses and organizations that have longer
      operating histories, greater name recognition and more advanced and complete
      technical systems. Additionally, many of our competitors are larger enterprises
      that have greater financial, technical and marketing resources than we have.





While
      we
      do not face direct competition for the registry of “.travel” domain names
      because of the exclusive nature of our ICANN contract, we compete with other
      companies that maintain the registries for different domain names, including
      Verisign, Inc., which manages the “.com” and “.net” registries; Afilias Limited,
      which manages the “.info” registry; and a number of country-specific domain name
      registries (such as “.uk” for domain names in the United Kingdom).





Our www.search.travel search
      engine competes for advertising dollars with large Internet portal and search
      engine sites, such as Google, America Online, MSN and Yahoo!, that offer
      listings or other advertising opportunities for travel companies. These
      companies have significantly greater financial, technical, marketing and other
      resources and larger client bases. In addition, we also compete with traditional
      media companies, such as newspaper and magazine publishers, that provide online
      advertising opportunities on their websites.





In
      developing and distributing future products and services for the Internet-based
      services markets and in seeking the renewal of our existing contract or
      obtaining new ICANN contracts, we expect to face intense competition from
      multiple competitors.





**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 certain technologies which
      we believe are proprietary. 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 have been awarded a
      patent for our VoIP technology related to the origination and termination of
      telephone calls between subscriber terminals connected to a public packet
      network **.**





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. 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. In the fourth quarter of 2005, we were sued by Sprint
      Communications Company, L.P. (“Sprint”) for alleged unauthorized use of
“inventions” described and claimed in seven patents held by Sprint. In August
      2006, we entered into a settlement agreement with Sprint which resolved the
      pending patent infringement lawsuit. As part of the settlement, we agreed to
      enter into a non-exclusive license under certain of Sprint’s patents. (See “Risk
      Factors-We Rely on Intellectual Property and Proprietary Rights.”).




7





**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. In addition, a number of
      federal, state, local and foreign legislative and regulatory proposals are
      under
      consideration. Laws and regulations have been and will likely continue to be
      adopted with respect to the Internet relating to, among other things, liability
      for information retrieved from or transmitted over the Internet, online content
      regulation, user privacy, data protection, pricing, content, copyrights,
      distribution, email solicitation, “spam”, 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. On June 1, 2006, we were sued by MySpace, Inc.
      (“MySpace”) for alleged violations of the CAN-SPAM Act, the Lanham Act and the
      California Business & Professions Code § 17529.5 (the “California Act”), as
      well as trademark infringement, false advertising, breach of contract, breach
      of
      the covenant of good faith and fair dealing, and unfair competition. On February
      28, 2007, the United States District Court for the Central District of
      California entered an order granting in part MySpace’s motion for summary
      judgment, finding that we were liable for violation of the CAN-SPAM Act and
      the
      California Business & Professions Code, and for breach of
      contract. **** On
      March
      15, 2007, the Company entered into a Settlement Agreement with MySpace whereby,
      among other things, the Company agreed to pay MySpace approximately $2.6 million
      on or before April 5, 2007 in exchange for a mutual release of all claims
      against one another, including any claims against the Company’s directors and
      officers. **** (See
      “Risk Factors-We Rely on Intellectual Property and Proprietary Rights.” and
“Item 3. Legal Proceedings”).




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





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 business operations, and ultimately our financial
      condition, operating results and future prospects.





Regardless
      of the type of state tax imposed, the threshold issue involving state taxation
      of any transaction is always whether sufficient nexus, or contact, exists
      between the taxing entity and the taxpayer or the transaction to which the
      tax
      is being applied. The concept of nexus is constantly changing and no bright
      line
      exists that would sufficiently alert a business as to whether it is subject
      to
      tax in a specific jurisdiction. All states which have attempted to tax Internet
      access or online services have done so by asserting that the sale of such
      information services, data processing services or other type of transaction
      is
      subject to tax in that particular state.




8





A
      handful
      of states impose taxes on computer services, data processing services,
      information services and other similar types of services. Some of these states
      have asserted that Internet access and/or online information services are
      subject to these taxes.





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





**Certain
      Other Regulation Affecting the Internet Generally**





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





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





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. 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.





**International
      Regulation of Internet Services**





Internationally,
      the European Union has 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.




9





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. 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 19, 2007, we had approximately 37 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.





**ITEM
      1A. RISK FACTORS**





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





**RISKS
      RELATING TO OUR BUSINESS GENERALLY**





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





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





As
      more
      fully discussed in Note 14, “Litigation,” of the Notes to Consolidated Financial
      Statements, on March 15, 2007, the Company entered into a Settlement Agreement
      with MySpace, Inc. (“MySpace”), related to a lawsuit which was filed by MySpace
      on June 1, 2006 in the United States District Court for the Central District
      of
      California (the “Court”). The lawsuit alleged, among other things, that the
      Company sent unsolicited and unauthorized commercial email messages to MySpace
      members in violation of certain federal and state laws and the Company’s
      contract with MySpace. On February 28, 2007, the Court entered an order (the
      “Order”) finding
      the Company liable for violating certain federal and state laws and for
      breaching its contract with MySpace. The
      Order was not a final judgment nor did it make a determination as to the actual
      amount of damages to be awarded. However, based upon preliminary estimates,
      the
      Company believes that total awarded damages could range from approximately
      $45.5
      million to $125.5 million, excluding “per incident” damages assessed under
      California law. Pursuant to the Settlement Agreement, the Company agreed to
      pay
      MySpace approximately $2.6 million on or before April 5, 2007 in exchange for
      a
      mutual release of all claims against one another, including any claims against
      the Company’s directors and officers. As part of the settlement, Michael Egan,
      the Company’s CEO, who is also an affiliate, agreed to enter into an agreement
      with MySpace on or before April 5 th pursuant
      to which he would, among other things, provide a letter of credit, cash or
      other
      equivalent security (collectively, the “Security”) in form and substance
      satisfactory to MySpace. Such Security is to expire and be released on the
      100 th day
      following the Company’s payment of the foregoing $2.6 million so long as no
      bankruptcy petition, assignment for the benefit of creditors or like
      liquidation, reorganization or insolvency proceeding is instituted or filed
      related to the Company during such 100-day period.




10





The
      Company does not currently have the resources to both pay the $2.6 million
      settlement amount and to fund operations beyond April 2007. The Company intends
      to seek to raise capital or otherwise borrow funds with which to pay such amount
      and otherwise to fund operations. Although there is no commitment to do so,
      any
      such funds would most likely come primarily from Mr. Egan or affiliates of
      Mr.
      Egan or the Company, as the Company currently has no access to credit facilities
      with traditional third party lenders and has historically relied on borrowings
      from related parties to meet short-term liquidity needs. Any such capital raised
      would not be registered under the Securities Act of 1933 and would not be
      offered or sold in the United States absent registration or an applicable
      exemption from registration requirements. There can be no assurance that the
      Company will be successful in raising such capital or borrowing such funds
      and
      any capital raised will likely result in very substantial dilution of the number
      of shares outstanding or which could be outstanding upon the exercise or
      conversion of any derivative securities issued by the Company as part of such
      capital raise. The failure to pay the $2.6 million to MySpace and/or the failure
      to satisfactorily provide the Security would result in a resumption of the
      litigation with MySpace and, in all likelihood, would have a material adverse
      effect on the Company, including the potential bankruptcy and cessation of
      business of the Company.





The
      Company continues to incur consolidated net losses and management believes
      that
      the Company will continue to be unprofitable in the foreseeable future. As
      of
      February 28, 2007, the Company had a net working capital deficit of
      approximately $7.3 million, inclusive of a cash and cash equivalents balance
      of
      approximately $4.0 million. Such working capital deficit includes a settlement
      liability of approximately $2.6 million owed to MySpace and an aggregate of
      $3.4
      million in secured convertible demand notes (the “Convertible Notes”) and
      accrued interest of approximately $611 thousand due to entities controlled
      by
      the Company’s Chairman and Chief Executive Officer. Inasmuch as substantially
      all of the assets of the Company and its subsidiaries secure the Convertible
      Notes, in connection with any resulting proceeding to collect the indebtedness
      related to the Convertible Notes, the noteholders could seize and sell the
      assets of the Company and its subsidiaries, any or all of which would have
      a
      material adverse effect on the financial condition and future operations of
      the
      Company, including the potential bankruptcy or cessation of business of the
      Company.





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to avoid such filing and continue as a going concern, we
      believe that, in addition to settling the MySpace litigation as discussed above,
      we must (i) quickly raise a sufficient amount of capital; (ii) successfully
      implement a business plan focused primarily on expanding our Tralliance Internet
      services revenue base, and reducing Tralliance and corporate overhead expenses;
      and (iii) successfully eliminate future losses incurred by our VoIP telephony
      services and computer games business segments by effectuating our planned
      shutdown and/or selling certain component assets of these businesses. There
      can
      be no assurance that the Company will be able to successfully complete any
      or
      all of the above actions which we believe are required in order to continue
      as a
      going concern.





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





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





·
            costs
                resulting from the operation of our
                business;




11




·
            failure
                to generate sufficient revenue; and




·
            selling,
                general and administrative
                expenses.





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





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





We
      are
      currently a party to litigation and other claims and/or disputes arising in
      the
      ordinary course of business. At this time, other than the $2.6 million
      settlement amount owed to MySpace, we cannot reasonably estimate the range
      of
      any loss or damages resulting from any of the pending lawsuits or claims due
      to
      uncertainty regarding the ultimate outcome. The defense of any litigation or
      the
      process required to resolve outstanding claims and/or disputes may be expensive
      and divert management's attention from day-to-day operations. An adverse outcome
      in any of these matters could materially and adversely affect our results of
      operations and financial position and may utilize a significant portion of
      our
      cash resources. See Note 14, “Litigation,” in the Notes to Consolidated
      Financial Statements for further details regarding outstanding
      lawsuits.





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





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








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





Our
      Internet services business is substantially dependent upon the continued growth
      in the general use of the Internet. Internet and electronic commerce growth
      may
      be inhibited for a number of reasons, including:





·
            inadequate
                network infrastructure;





·
            security
                and authentication concerns;





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





·
            general
                economic and business downturns;
                and





·
            catastrophic
                events, including war and
                terrorism.




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





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




12




·
            increased
                government regulation;





·
            potential
                governmental taxation of such services;
                and





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





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





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





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





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




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





We
      regard
      substantial elements of our websites and underlying technology, as well as
      certain VoIP technology assets, 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.




13




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





Litigation
      may be necessary in the future to enforce our intellectual property rights
      or to
      determine the validity and scope of the proprietary rights of others. However,
      we may not have sufficient funds or personnel to adequately litigate or
      otherwise protect our rights. Furthermore, we cannot assure you that our
      business activities and product offerings will not infringe upon the proprietary
      rights of others, or that other parties will not assert infringement claims
      against us, including claims related to providing hyperlinks to websites
      operated by third parties, sending unsolicited email messages or providing
      advertising on a keyword basis that links a specific search term entered by
      a
      user to the appearance of a particular advertisement. Moreover, from time to
      time, third parties have asserted and may in the future assert claims of alleged
      infringement by us of their intellectual property rights. In the fourth quarter
      of 2005, we were sued by Sprint Communications Company, L.P. (“Sprint”) for
      alleged unauthorized use of “inventions” described and claimed in seven patents
      held by Sprint. In August 2006, we entered into a settlement agreement with
      Sprint which resolved the pending patent infringement lawsuit. As part of the
      settlement, we agreed to enter into a non-exclusive license under certain of
      Sprint’s patents. Additionally, on February 28, 2007, the United States District
      Court for the Central District of California entered an order, related to the
      lawsuit filed against theglobe by MySpace, Inc. (“MySpace”), granting in part
      MySpace’s motion for summary judgment, finding that we were liable for violation
      of the CAN-SPAM Act and the California Business & Professions Code, and for
      breach of contract. On March 15, 2007, the Company entered into a Settlement
      Agreement with MySpace whereby, among other things, the Company agreed to pay
      MySpace approximately $2.6 million on or before April 5, 2007 in exchange for
      a
      mutual release of all claims against one another, including any claims against
      the Company’s directors and officers. **** See
      Note
      14, “Litigation,” in the Notes to Consolidated Financial Statements for further
      details regarding the litigation mentioned above.   Any litigation claims
      or counterclaims could impair our business because they could:





·
            be
                time-consuming;





·
            result
                in significant costs;





·
            subject
                us to significant liability for
                damages;




·
            result
                in invalidation of our proprietary
                rights;





·
            divert
                management's attention;





·
            cause
                product release delays; or





·
            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.




14





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





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





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





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





**OUR
      QUARTERLY OPERATING RESULTS FLUCTUATE.**





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





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





·
            sales
                of our recently discontinued businesses or
                assets;





·
            changes
                in the number of sales or technical
                employees;





·
            the
                level of traffic on our websites;





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





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




·
            overall
                usage and acceptance of the
                Internet;




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





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





·
            other
                costs relating to the maintenance of our
                operations;





·
            the
                restructuring of our business;




15




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





·
            competition
                from others providing services similar to
                ours.





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





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





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





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





·
            generate
                and maintain adequatewww.search.traveladvertising revenue;





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





·
            identify,
                attract, retain and motivate qualified
                personnel.





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





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





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





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





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





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





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





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





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




16




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





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





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





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





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





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





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





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




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





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




17





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





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





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





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




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





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





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




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





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




18





**RISKS
      RELATING TO OUR INTERNET SERVICES BUSINESS**





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





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





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





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





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




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





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




19





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





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





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





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




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





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





**RISKS
      RELATING TO OUR RECENTLY DISCONTINUED OPERATIONS**





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





In
      connection with our recent decision to discontinue the operations of our
      computer games and VoIP telephony services businesses, we are currently in
      the
      process of evaluating the recoverability of the carrying value of the remaining
      assets of these businesses. At the present time, management is not aware of
      any
      issues that would negatively impact the recoverability of these assets. However,
      there can be no assurance that future events will not occur, particularly with
      respect to the collection of approximately $500 thousand in accounts receivable
      of our computer games businesses, which will adversely impact the recoverability
      of these discontinued business assets. Any such adverse future events could
      negatively impact the Company’s already weakened liquidity and financial
      condition.





**WE
      MAY INCUR EXCESSIVE SHUTDOWN COSTS.**





In
      connection with our recent decision to discontinue the operations of our
      computer games and VoIP telephony services businesses, we are in the process
      of
      evaluating the amount of costs expected to be incurred in shutting down these
      businesses. The amount of these shutdown costs, including employee termination
      benefits and vendor contract termination costs, are not yet certain, however,
      at
      the present time, we believe that total shutdown costs for both businesses
      combined will range from between $20 thousand to $835 thousand. Although we
      will
      attempt to negotiate vendor settlements near the lower end of this range, there
      can be no assurance that we will be successful. Additionally, liabilities
      presently unknown to us could be identified in the future. Either or both of
      these adverse outcomes could negatively impact the Company’s already weakened
      liquidity and financial condition.




20





**RISKS
      RELATING TO OUR COMMON STOCK**





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





As
      of
      March 19, 2007, we had issued and outstanding approximately 172.5 million
      shares, of which approximately 84.8 million shares were freely tradable over
      the
      public markets. There is limited trading volume in our shares and we are now
      traded only in the over-the-counter market. Most of our outstanding restricted
      shares of Common Stock were issued more than one year ago and are therefore
      eligible to be resold over the public markets pursuant to Rule 144 promulgated
      under the Securities Act of 1933, as amended.





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





In
      addition, as of December 31, 2006, there were outstanding options to purchase
      approximately 20.1 million shares of our Common Stock, which become eligible
      for
      sale in the public market from time to time depending on vesting and the
      expiration of lock-up agreements. The shares issuable upon exercise of these
      options are registered under the Securities Act and consequently, subject to
      certain volume restrictions as to shares issuable to executive officers, will
      be
      freely tradable.




Also
      as
      of March 19, 2007, we had issued and outstanding warrants to acquire
      approximately 16.9 million shares of our Common Stock. **** Many
      of
      the outstanding instruments representing the warrants contain anti-dilution
      provisions pursuant to which the exercise prices and number of shares issuable
      upon exercise may be adjusted.





**OUR
      CHAIRMAN MAY CONTROL US.**





Michael
      S. Egan, our Chairman and Chief Executive Officer, beneficially owns or
      controls, directly or indirectly, approximately 150 million shares of our Common
      Stock as of March 19, 2007, which in the aggregate represents approximately
      58%
      of the outstanding shares of our Common Stock (treating as outstanding for
      this
      purpose the shares of Common Stock issuable upon exercise and/or conversion
      of
      the options, convertible promissory notes and warrants owned by Mr. Egan or
      his
      affiliates). Accordingly, Mr. Egan will be able to exercise significant
      influence over, if not control, any stockholder vote.





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





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




21





**OUR
      COMMON STOCK MAY BECOME SUBJECT TO CERTAIN "PENNY STOCK" RULES WHICH MAY MAKE
      IT
      A LESS ATTRACTIVE INVESTMENT.**





Since
      the
      trading price of our Common Stock is less than $5.00 per share, trading in
      our
      Common Stock would be subject to the requirements of Rule 15g-9 of the Exchange
      Act if our net tangible assets were to fall below $2.0 million. Under Rule
      15g-9, brokers who recommend penny stocks to persons who are not established
      customers and accredited investors, as defined in the Exchange Act, must satisfy
      special sales practice requirements, including requirements that they make
      an
      individualized written suitability determination for the purchaser; and receive
      the purchaser's written consent prior to the transaction. The Securities
      Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional
      disclosures in connection with any trades involving a penny stock, including
      the
      delivery, prior to any penny stock transaction, of a disclosure schedule
      explaining the penny stock market and the risks associated with that market.
      Such requirements may severely limit the market liquidity of our Common Stock
      and the ability of purchasers of our equity securities to sell their securities
      in the secondary market. For all of these reasons, an investment in our equity
      securities may not be attractive to our potential investors.




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





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





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





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





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





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




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





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





·
            the
                performance and public acceptance of our product
                lines;





·
            quarterly
                variations in our operating
                results;





·
            competitive
                announcements;





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





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




22




·
            news
                relating to trends in our markets.





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





**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





Not
      applicable.





**ITEM
      2. PROPERTIES**





Our
      corporate headquarters is located in Fort Lauderdale, Florida, where we sublease
      approximately 15,000 square feet of office space from a company which is
      controlled by our Chairman. We lease approximately 2,200 square feet of office
      space in Vermont in connection with the operations of our computer games
      division and also lease approximately 5,000 square feet of warehouse space
      in
      Pompano Beach, Florida. **** Additionally,
      we currently utilize space in secure telecommunications data centers located
      in
      several states which is used to house certain Internet routing and computer
      equipment.





**ITEM
      3. LEGAL PROCEEDINGS**





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





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





On
      March
      15, 2007, the Company entered into a Settlement Agreement with MySpace whereby
      it agreed to pay MySpace approximately $2.6 million on or before April 5, 2007
      in exchange for a mutual release of all claims against one another, including
      any claims against the Company’s directors and officers. As part of the
      settlement, Michael Egan, the Company’s CEO, who is also an affiliate of the
      Company, agreed to enter into an agreement with MySpace on or before April
      5 th pursuant
      to which he would, among other things, provide a letter of credit, cash or
      other
      equivalent security (collectively, “Security”) in form and substance
      satisfactory to MySpace. Such Security is to expire and be released on the
      100 th day
      following the Company’s payment of the foregoing $2.6 million so long as no
      bankruptcy petition, assignment for the benefit of creditors or like
      liquidation, reorganization or insolvency proceeding is instituted or filed
      related to the Company during such 100-day period.




23





The
      Company does not currently have the resources to both pay the $2.6 million
      settlement amount and to fund operations beyond April 2007. The Company intends
      to seek to raise capital or otherwise borrow funds with which to pay such amount
      and otherwise to fund operations. Although there is no commitment to do so,
      any
      such funds would most likely come primarily from Mr. Egan or affiliates of
      Mr.
      Egan or the Company. Any such capital raised would not be registered under
      the
      Securities Act of 1933 and would not be offered or sold in the United States
      absent registration or an applicable exemption from registration requirements.
      There can be no assurance that the Company will be successful in raising such
      capital or borrowing such funds and any capital raised will likely result in
      very substantial dilution of the number of shares outstanding or which could
      be
      outstanding upon the exercise or conversion of any derivative securities issued
      by the Company as part of such capital raise. The failure to pay the $2.6
      million to MySpace and/or the failure to satisfactorily provide the Security
      would result in a resumption of the litigation with MySpace and, in all
      likelihood, would have a material adverse effect on the Company, including
      the
      potential bankruptcy and cessation of business of the Company.





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





The
      lawsuits purport to be class actions filed on behalf of purchasers of the stock
      of the Company during the period from November 12, 1998 through December 6,
      2000. Plaintiffs allege that the underwriter defendants agreed to allocate
      stock
      in the Company's initial public offering to certain investors in exchange for
      excessive and undisclosed commissions and agreements by those investors to
      make
      additional purchases of stock in the aftermarket at pre-determined prices.
      Plaintiffs allege that the Prospectus for the Company's initial public offering
      was false and misleading and in violation of the securities laws because it
      did
      not disclose these arrangements. On December 5, 2001, an amended complaint
      was
      filed in one of the actions, alleging the same conduct described above in
      connection with the Company's November 23, 1998 initial public offering and
      its
      May 19, 1999 secondary offering. A Consolidated Amended Complaint, which is
      now
      the operative complaint, was filed in the Southern District of New York on
      April
      19, 2002. The action seeks damages in an unspecified amount. On February 19,
      2003, a motion to dismiss all claims against the Company was denied by the
      Court. On October 13, 2004, the Court certified a class in six of the
      approximately 300 other nearly identical actions (the “focus cases”) and noted
      that the decision is intended to provide strong guidance to all parties
      regarding class certification in the remaining cases. The Underwriter Defendants
      appealed the decision and the Second Circuit vacated the district court’s
      decision granting class certification in those six cases on December 5, 2006.
      Plaintiffs 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. It is unclear what impact the Second Circuit’s decision vacating
      class certification in the six focus cases will have on the settlement, which
      has not yet been finally approved by the Court. On
      December 14, 2006, Judge Scheindlin held a hearing. Plaintiffs informed the
      Court that they planned to file a petition for rehearing and rehearing *en
      banc* .
      The
      Court stayed all proceedings, including a decision on final approval of the
      settlement and any amendments of the complaints, pending the Second Circuit’s
      decision on Plaintiffs’ petition for rehearing. Plaintiffs filed the petition
      for rehearing and rehearing *en
      banc* on
      January 5, 2007.





Among
      other provisions, if it is ultimately approved by the Court, 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. On
      April
      20, 2006, JPMorgan Chase and the Plaintiffs reached a preliminary agreement
      to
      settle for $425 million. The JPMorgan Chase preliminary agreement has not yet
      been approved by the Court. In an amendment to the issuers’ settlement
      agreement, the issuers’ insurers agreed that the JPMorgan preliminary agreement,
      if approved, would offset the insurers’ obligation to cover the remainder of
      Plaintiffs’ guaranteed $1 billion recovery by 50% of the value of the JP Morgan
      settlement, or $212.5 million. Therefore, if the JP Morgan preliminary agreement
      to settle is finalized, and then preliminarily and finally approved by the
      Court, then the maximum amount that the issuers’ insurers will be potentially
      liable for is $787.5 million. It is unclear what impact the Second Circuit’s
      decision vacating class certification in the focus cases will have on the JP
      Morgan preliminary agreement.




24





It
      is
      anticipated that any potential financial obligation of the Company to plaintiffs
      pursuant to the terms of the issuers’ 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. However,
      if the JPMorgan Chase preliminary agreement is finalized, then preliminarily
      and
      finally approved, the Company’s maximum financial obligation would be less than
      $2.7 million.





There
      is
      no assurance that the court will grant final approval to the issuers’
settlement. If the settlement agreement is not approved and the Company is
      found
      liable, we are unable to estimate or predict the potential damages that might
      be
      awarded, whether such damages would be greater than the Company’s insurance
      coverage, and whether such damages would have a material impact on our results
      of operations or financial condition in any future period.




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





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




None.




**PART
      II**





**ITEM
      5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND 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 :





2006
            
            2005
            
            2004High
            
            Low
            
            High
            
            Low
            
            High
            
            LowFourth
                Quarter
            
            $
            0.09
            
            $
            0.05
            
            $
            0.49
            
            $
            0.24
            
            $
            0.56
            
            $
            0.36Third
                Quarter
            
            $
            0.27
            
            $
            0.08
            
            $
            0.45
            
            $
            0.10
            
            $
            0.65
            
            $
            0.24Second
                Quarter
            
            $
            0.31
            
            $
            0.09
            
            $
            0.16
            
            $
            0.08
            
            $
            0.96
            
            $
            0.28First
                Quarter
            
            $
            0.44
            
            $
            0.30
            
            $
            0.43
            
            $
            0.12
            
            $
            1.42
            
            $
            0.83





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.")




25





**HOLDERS
      OF COMMON STOCK**





We
      had
      approximately 657 holders of record of Common Stock as of March 19, 2007. 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.





**SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS AS OF**


**DECEMBER
      31, 2006**





Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            Number
                of securities remaining available for future issuance under equity
                compensation plansEquity
                Compensation plans approved by security holders
            
            
            11,271,620
            
            $
            0.56
            
            
            647,600Equity
                Compensation plans not approved by security holders
            
            
            8,871,000
            
            $
            0.11
            
            
            2,194,141Total
            
            
            20,142,620
            
            $
            0.36
            
            
            2,841,741





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





·
            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.·
            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.·
            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.·
            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 ten 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 65,000 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.




26




·
            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 ten years. In
                October
                of 2004, options to acquire 250,000 shares of Common Stock were issued
                to
                an employee at an exercise price of $0.52, of which 62,500 of these
                stock
                options vested immediately and the balance vests ratably on a quarterly
                basis over three years. These options have a life of ten years from
                date
                of grant. In June of 2006, options to acquire 1,000,000 shares of
                Common
                Stock were issued to two employees at an exercise price of $0.10,
                of which
                25% of these options vested immediately and the balance vests ratably
                on a
                quarterly basis over three years. These options have a life of ten
                years
                from date of grant. In August of 2006, options to acquire 2,655,000
                shares
                of Common Stock were issued to 28 employees at an exercise price
                of $0.14,
                of which 25% of these options vested immediately and the balance
                vests
                ratably on a quarterly basis over three years. These options have
                a life
                of ten years from date of grant.




27




**PERFORMANCE
      GRAPH**





The
      following graph compares the cumulative total return on theglobe’s common stock
      during the last five fiscal years with the NASDAQ Stock Market Index (U.S.
      Companies) and the AMEX Interactive Week Internet Index during the same period.
      The graph shows the value, at the end of each of the last five fiscal years,
      of
      $100 invested in theglobe common stock or the indices on December 31, 2001,
      and
      assumes the reinvestment of all dividends. Historical stock price performance
      is
      not necessarily indicative of future stock price performance.





graph




At
                December 312001
            
            2002
            
            2003
            
            2004
            
            2005
            
            2006theglobe
            
            $
            100
            
            $
            200
            
            $
            4,433
            
            $
            1,400
            
            $
            1,300
            
            $
            200NASDAQ
            
            $
            100
            
            $
            69
            
            $
            104
            
            $
            113
            
            $
            115
            
            $
            127AMEX
                Internet
            
            $
            100
            
            $
            57
            
            $
            98
            
            $
            119
            
            $
            120
            
            $
            137





The
      shares of our common stock were delisted from the NASDAQ national market in
      April 2001 and now trade in the over-the-counter market on what is commonly
      referred to as the electronic bulletin board or “OTCBB”, under the symbol
“TGLO.OB”.




28





**RECENT
      SALES OF UNREGISTERED SECURITIES**





None.





**ITEM
      6. SELECTED FINANCIAL DATA**





**SELECTED
      CONSOLIDATED FINANCIAL DATA OF THEGLOBE.COM, INC. (1)**





The
      selected consolidated balance sheet data as of December 31, 2006 and 2005 and
      the selected consolidated operating data for the years ended December 31, 2006,
      2005 and 2004 have been derived from our audited consolidated financial
      statements included elsewhere herein. The selected consolidated balance sheet
      data as of December 31, 2004, 2003 and 2002 and the selected consolidated
      operating data for the years ended December 31, 2003 and 2002 have been derived
      from our audited consolidated financial statements not included herein. The
      nature of our business has changed significantly from 2002 to 2006. As a result,
      our historical results are not necessarily comparable. Additionally, our
      historical results are not necessarily indicative of results for any future
      period. You should read these selected consolidated financial data, together
      with the accompanying notes, in conjunction with the “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations” section of this
      10-K and our consolidated financial statements and the related notes.




Year
                Ended December 31,2006
            
            2005(2)
            
            2004
            
            2003
            
            2002Operating
                Data:
            
            (In
                thousands, except per share data)Continuing
                Operations:Net
                revenue
            
            $
            3,482
            
            $
            2,395
            
            $
            3,499
            
            $
            5,284
            
            $
            7,245Operating
                expenses
            
            
            20,470
            
            
            24,940
            
            
            27,921
            
            
            14,097
            
            
            10,186Loss
                from continuing operations
            
            
            (16,974
            )
            
            (13,348
            )
            
            (24,876
            )
            
            (11,034
            )
            
            (2,615
            )Discontinued
                operations, net of tax
            
            
            —
            
            
            1,838
            
            
            603
            
            
            —
            
            
            —Net
                loss
            
            
            (16,974
            )
            
            (11,510
            )
            
            (24,273
            )
            
            (11,034
            )
            
            (2,615
            )Net
                loss applicable to commonstockholders
            
            
            (16,974
            )
            
            (11,510
            )
            
            (24,273
            )
            
            (19,154
            )
            
            (2,615
            )Basic
                and diluted net loss percommon
                share:Loss
                from continuing operations
            
            $
            (0.10
            )
            $
            (0.07
            )
            $
            (0.19
            )
            $
            (0.49
            )
            $
            (0.09
            )Net
                loss
            
            
            (0.10
            )
            
            (0.06
            )
            
            (0.19
            )
            
            (0.49
            )
            
            (0.09
            )Balance
                Sheet Data (at end of period):Total
                assets
            
            $
            7,405
            
            $
            21,411
            
            $
            34,017
            
            $
            7,172
            
            $
            3,047Long-term
                debt
            
            
            —
            
            
            —
            
            
            27
            
            
            1,793
            
            
            88





(1)
      Certain prior year amounts have been reclassified to conform to the current
      year
      presentation. These reclassifications had no effect on the net losses as
      previously reported by the Company. Significant events affecting our historical
      performance in 2004 through 2006 are described in Management's Discussion and
      Analysis of Financial Condition and Results of Operations.





(2)
      2005
      consolidated financial data include transactions related to (i) the sale of
      the
      business and substantially all of the net assets of SendTec, Inc. to
      RelationServe Media, Inc. on October 31, 2005 (the “SendTec Asset Sale”) and the
      resultant gain on sale of approximately $1.7 million, and (ii) the repurchase
      of
      Common Stock and termination of stock options and warrants in accordance with
      certain SendTec Asset Sale ancillary agreements, including the Redemption
      Agreement and the Termination Agreement.




29




**ITEM
      7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





**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, 2006 audited financial statements containing an explanatory
      paragraph stating that our recurring losses from operations and our accumulated
      deficit raise substantial doubt about our ability to continue as a going
      concern. 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.





**OVERVIEW**





During
      2006 theglobe.com, inc. (the "Company" or "theglobe") managed three primary
      lines of business, as follows:





·
              Computer
                  games businesses —
                  Our print
                  publication business comprised of Computer Games magazine and MMOGames
                  magazine (renamed from Massive Magazine in the first quarter of
                  2007); our
                  online website business, comprised of the CGOnline website (www.cgonline.com),
                  the MMOGames magazine website (www.mmogamesmag.com)and the Game Swap Zone website (www.gameswapzone.com);
                  and our e-commerce games distribution company, Chips & Bits, Inc.
                  (www.chipsbits.com).
                  Our Now Playing magazine publication and the accompanying website
                  were
                  sold in January 2006;





·
              Voice
                  over Internet Protocol (“VoIP”) telephony services business — Consisting
                  of tglo.com, inc. (formerly known as voiceglo Holdings, Inc.).
                  The term
                  “VoIP” refers to a category of hardware and software that enables people
                  to use the Internet to make phone calls;
                  and





·
              Internet
                  services business - Consisting of Tralliance Corporation which
                  is the
                  registry for the “.travel” top-level Internet
                  domain.





In
      March
      2007, management and the Board of Directors made the decision to shutdown the
      operations of both its Computer Games and VoIP telephony services lines of
      business and to focus 100% of its resources and efforts to further develop
      its
      Internet services business. See the "Liquidity and Capital Resources" section
      of
      this Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations for a more complete discussion.





On
      October 31, 2005, we completed the sale of the business and substantially all
      of
      the net assets of SendTec, Inc. (“SendTec”), a direct response marketing
      services and technology company, for approximately $39.9 million in cash. We
      acquired SendTec effective September 1, 2004. Results of operations for SendTec
      have been reported separately as “Discontinued Operations” in the accompanying
      consolidated statements of operations for the years ended December 31, 2005
      and
      2004.





**RESULTS
      OF OPERATIONS**





The
      nature of our business has significantly changed from 2004 to 2006. As a result
      of our decision to enter into the VoIP business, we have incurred substantial
      expenditures without corresponding revenue as we attempted to develop our VoIP
      product line and as we put into place the infrastructure for our VoIP products.
      In addition, we entered into two new business lines, marketing services and
      Internet services, as a result of our acquisitions of SendTec on September
      1,
      2004 and Tralliance on May 9, 2005, respectively. In addition, we sold the
      business and substantially all of the net assets of SendTec effective October
      31, 2005, and as a result have reported SendTec’s results of operations as
“Discontinued Operations” for the years ended December 31, 2005 and 2004. The
      results of operations of Tralliance are included in the Company's consolidated
      operating results only from its date of acquisition. Consequently, and primarily
      as a result of these factors, the results of operations for each of the years
      ended December 31, 2006, 2005 and 2004 are not necessarily comparable.




30





**YEAR
      ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005**





NET
      REVENUE. Net revenue totaled $3.5 million for the year ended December 31, 2006
      as compared to $2.4 million for the year ended December 31, 2005. The $1.1
      million increase in consolidated net revenue was principally the result of
      the
      additional revenue generated by our Internet services business segment.





**NET
      REVENUE BY BUSINESS SEGMENT:**





Years
                ended:
            
            2006
            
            2005Computer
                games
            
            $
            2,038,649
            
            $
            1,948,716Internet
                services
            
            
            1,408,737
            
            
            197,873VoIP
                telephony services
            
            
            34,638
            
            
            248,789$
            3,482,024
            
            $
            2,395,378





Increases
      of $72 thousand in net revenue derived from print advertisements in our magazine
      publications and $97 thousand in sales of our magazines as compared to the
      year
      ended December 31, 2005, were partially offset by a $79 thousand decrease in
      sales of products by our e-commerce games distribution company.





Advertising
      revenue from the sale of print advertisements in our magazine publications
      totaled approximately $1.4 million in each of the years ended December 31,
      2006
      and 2005, while net revenue attributable to the sale of our magazine
      publications totaled $417 thousand in 2006 compared to $320 thousand in 2005.
      Approximately 87% and 95% of the net revenue generated by our publishing
      operations, or $1.6 million, in each of 2006 and 2005, respectively, was
      attributable to our magazine publication which is focused on PC gaming. Over
      the
      last several years, the market for PC games has deteriorated, while the console
      games market has experienced growth. This shift in the gaming market negatively
      impacted the print advertising sales and circulation of our magazine focused
      on
      PC gaming. In order to attempt to capture market share of the current gaming
      audience, we introduced a new quarterly magazine publication in September 2006
      which focuses on “massively multiplayer online” (“MMO”) games, which contributed
      approximately $247 thousand in net revenue during 2006. During January 2006,
      we
      completed the sale of our Now Playing magazine which had contributed
      approximately $78 thousand in net revenue during 2005.





Sales
      of
      products by our e-commerce games distribution business totaled approximately
      $186 thousand, or 5% of consolidated net revenue, for the year ended December
      31, 2006. This represented a decline from the $265 thousand, or 11% of
      consolidated net revenue, reported for the year ended December 31, 2005. Our
      e-commerce games distribution business continued to operate in a highly
      competitive environment, experiencing competitive pressure from other Internet
      commerce websites such as Amazon.com. In addition, an increasing number of
      major
      retailers have increased the selection of video, console and PC games offered
      by
      both their traditional “bricks and mortar” locations and their online commerce
      sites resulting in increased competition.





Our
      Internet services business, Tralliance, contributed $1.4 million in net revenue
      for the year ended December 31, 2006 as compared to $198 thousand for the prior
      year. Tralliance, which was acquired in May 2005, began collecting fees for
      Internet domain name registrations in October 2005. Thus, the results of
      operations for 2006 include a full year of revenue recognition related to the
      operations of Tralliance versus three months of revenue recognition during
      2005.
      Net revenue attributable to such domain name registrations is recognized as
      revenue on a straight-line basis over the term of the registrations.





Net
      revenue generated by our VoIP telephony services division totaled $35 thousand
      in 2006 as compared to $249 thousand in 2005. During the second quarter of
      2006,
      the Company discontinued offering service to its small VoIP “paid” plan customer
      base and completed the implementation of a plan to significantly reduce the
      excess capacity and operating costs of its VoIP network.




31




**OPERATING
      EXPENSES BY BUSINESS SEGMENT:**





2006
            
            Cost
                of
              Revenue
            
            Sales
                and Marketing
            
            Product
                Development
            
            General
                and Administrative
            
            Depreciation
                and Amortization
            
            TotalComputer
                games
            
            $
            1,173,118
            
            $
            578,368
            
            $
            498,434
            
            $
            483,940
            
            $
            28,286
            
            $
            2,762,146Internet
                services
            
            
            454,563
            
            
            3,109,533
            
            
            —
            
            
            1,768,065
            
            
            232,575
            
            
            5,564,736VoIP
                telephony services
            
            
            2,532,994
            
            
            300,150
            
            
            880,711
            
            
            4,910,733
            
            
            785,379
            
            
            9,409,967Corporate
                expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            2,703,783
            
            
            29,616
            
            
            2,733,399$
            4,160,675
            
            $
            3,988,051
            
            $
            1,379,145
            
            $
            9,866,521
            
            $
            1,075,856
            
            $
            20,470,248




2005
            
            Cost
                of Revenue
            
            Sales
                and Marketing
            
            Product
                Development
            
            General
                and Administrative
            
            Depreciation
                and Amortization
            
            TotalComputer
                games
            
            $
            2,049,896
            
            $
            537,005
            
            $
            697,803
            
            $
            780,258
            
            $
            30,845
            
            $
            4,095,807Internet
                services
            
            
            86,486
            
            
            488,275
            
            
            —
            
            
            831,269
            
            
            87,112
            
            
            1,493,142VoIP
                telephony services
            
            
            6,288,577
            
            
            1,692,420
            
            
            693,056
            
            
            3,611,686
            
            
            1,109,743
            
            
            13,395,482Corporate
                expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            5,918,956
            
            
            36,598
            
            
            5,955,554$
            8,424,959
            
            $
            2,717,700
            
            $
            1,390,859
            
            $
            11,142,169
            
            $
            1,264,298
            
            $
            24,939,985





COST
      OF
      REVENUE. Cost of revenue totaled $4.2 million for the year ended December 31,
      2006 as compared to $8.4 million for the year ended December 31, 2005. The
      $4.2
      million decrease in consolidated cost of revenue was principally attributable
      to
      the decline in cost of revenue of the VoIP telephony services segment.





Cost
      of
      revenue related to our computer games business segment consists primarily of
      printing, delivery and other fulfillment costs of our games magazines and the
      cost of merchandise sold and shipping fees in connection with our e-commerce
      games distribution business. Cost of revenue of our computer games segment
      totaled $1.2 million for the year ended December 31, 2006, a decrease of $877
      thousand, or 43%, from the prior year. The decline in cost of revenue as
      compared to 2005 was principally the result of lower printing, paper and freight
      costs incurred in the production of our magazine publications. We reduced the
      total number of copies printed for each issue of our magazines and also
      published one less issue of our monthly gaming publication in 2006 as compared
      to 2005. In addition, the cost of revenue associated with our e-commerce games
      distribution business also declined as compared to 2005 primarily due to a
      lower
      volume of games sold.





Cost
      of
      revenue of our Internet services division consists primarily of fees paid to
      third party service providers which furnish outsourced services, including
      verification of registration eligibility, maintenance of the “.travel” directory
      of consumer-oriented registrant travel data, as well as other services. Fees
      for
      some of these services vary based on transaction levels or transaction types.
      Fees incurred for outsourced services are generally deferred and amortized
      to
      cost of revenue over the term of the related domain name registration. The
      results of operations for 2006 include a full year of cost of revenue related
      to
      the operations of Tralliance versus three months of costs during 2005, the
      principal factor contributing to the $368 thousand increase in cost of revenue
      as compared to the prior year. Cost of revenue as a percent of net revenue
      was
      approximately 32% for 2006 as compared to 44% for 2005. This was due in part
      to
      Tralliance performing more verifications of registration eligibility in-house
      during the last half of 2006.





Cost
      of
      revenue of our VoIP telephony services business segment is principally comprised
      of network data center, carrier transport and circuit interconnection costs,
      as
      well as personnel and consulting costs incurred in support of our Internet
      telecommunications network. During 2006, we placed significant emphasis on
      the
      reduction of excess capacity of our VoIP network, which included the
      renegotiation, non-renewal and/or termination of certain network agreements,
      as
      well as network personnel cost reductions. These efforts, as well as steps
      taken
      during the latter half of 2005 to reduce network support costs resulted in
      the
      $3.8 million decrease in cost of revenue of our VoIP telephony services business
      segment as compared to 2005. Network data center and carrier costs decreased
      $2.4 million, or 58%, and direct costs of employees supporting our Internet
      telecommunications network declined $588 thousand, or 58%, in comparison to
      the
      year ended December 31, 2005. Additionally, costs related to the purchase of
      network software declined $379 thousand as compared to 2005. The Company
      discontinued the capitalization of software development costs in its VoIP
      telephony business and began charging such costs to operations as
      incurred.




32




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 $4.0 million for the year ended December 31, 2006,
      an
      increase of $1.3 million from the $2.7 million reported for 2005.





On
      November 22, 2006, the Company entered into certain marketing services
      agreements with two entities and issued 10,000,000 warrants to the controlling
      shareholder of the entities as consideration. The fair value attributable to
      the
      warrants of $515 thousand, as calculated using the Black Scholes model, was
      charged to sales and marketing expenses of Tralliance as the two entities will
      be focusing their marketing efforts on our Internet services business. Excluding
      the charge related to the warrants, sales and marketing expenses of Tralliance
      totaled $2.6 million for the year ended December 31, 2006, or an increase of
      $2.1 million from the prior year. During August 2006, Tralliance introduced
      its
      web portal and search engine, www.search.travel ,
      through
      the use of a targeted television and Internet advertising campaign. As a result,
      total 2006 advertising costs of Tralliance increased $619 thousand from 2005
      to
      a total of $678 thousand. In addition, during the third quarter of 2006,
      Tralliance engaged several outside parties to promote its registry operations
      and the www.search.travel website
      internationally, which resulted in the recognition of $442 thousand of
      consulting fees and related costs. The Company also reassigned personnel from
      its VoIP telephony services division during 2006 to perform marketing functions
      for Tralliance which resulted in a $508 thousand increase in sales and marketing
      personnel costs of Tralliance as compared to 2005. The remaining $538 thousand
      increase in Tralliance’s sales and marketing expenses as compared to the year
      ended December 31, 2005, consisted primarily of higher public relations, trade
      show and promotional costs.





Sales
      and
      marketing expenses of our VoIP telephony services business segment totaled
      $300
      thousand for the year ended December 31, 2006, a decrease of $1.4 million,
      or
      82%, from the prior year. During 2005, the Company re-evaluated its existing
      VoIP telephony services business plan and began the process of terminating
      and/or modifying certain of its then existing product offerings and marketing
      programs. During 2006, the Company refocused its efforts on the further
      expansion of its “peer-to-peer”, or free service plan, customer base. As a
      result, the VoIP telephony services business segment significantly reduced
      its
      sales and marketing spending. Additionally, as discussed in the paragraph above,
      the Company reassigned certain personnel from its VoIP telephony services
      division during 2006 to perform marketing and administrative functions for
      Tralliance.





PRODUCT
      DEVELOPMENT. Product development expenses include salaries and related personnel
      costs; expenses incurred in connection with website development, testing and
      upgrades; editorial and content costs; and costs incurred in the development
      of
      our VoIP telephony products. Product development expenses totaled $1.4 million
      in each of the years ended December 31, 2006 and 2005. A $199 thousand decrease
      in product development costs incurred by our computer games businesses as
      compared to 2005, resulting principally from lower website development costs,
      was almost entirely offset by a $188 thousand increase in product development
      expenses incurred by our VoIP telephony services division, due primarily to
      higher personnel costs.




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. As discussed in Note 14,
“Litigation,” in the Notes to Consolidated Financial Statements, on March 15,
      2007, the Company and Michael Egan entered into a Settlement Agreement with
      MySpace, Inc. (the “Settlement Agreement”). The Settlement Agreement required,
      among other things, the Company to pay to MySpace approximately $2.6 million
      in
      cash on or before April 5, 2007. Excluding the $2.6 million settlement, as
      well
      as an increase of $680 thousand in attorneys’ fees incurred by the VoIP
      telephony services division as compared to 2005, consolidated general and
      administrative expenses declined $4.5 million as compared to the prior year.
      This decrease was principally due to $3.0 million lower bonus awards to
      executive officers. In addition, excluding the legal costs mentioned previously,
      general and administrative expenses of our VoIP telephony services division
      decreased $1.9 million, or 63%, as compared to the prior year primarily due
      to
      lower employee bonuses and information technology consulting costs. General
      and
      administrative expenses of our Internet services business increased $937
      thousand as compared to 2005 primarily due to increases in personnel costs
      of
      $340 thousand and travel and entertainment costs of $356 thousand. During 2006,
      we reassigned employees from the VoIP telephony services division in order
      to
      accommodate the increase in authentication and registration activity experienced
      by Tralliance. In order to increase awareness of the “.travel” top-level domain,
      we have increased our participation in travel industry meetings and conferences,
      both nationally and internationally, since the October 2005 launch of our
“.travel” domain registry operations which was the principal factor contributing
      to the increase in travel and entertainment costs.




33





As
      discussed in Note 1, “Organization and Summary of Significant Accounting
      Policies,” and Note 11, “Stock Option Plans,” of the Notes to Consolidated
      Financial Statements, we adopted Statement of Financial Accounting Standards
      No.
      123R (“SFAS No. 123R”) effective January 1, 2006 using the modified prospective
      application method. SFAS No. 123R generally requires all companies to apply
      a
      fair-value-based measurement method in accounting for share-based payment
      transactions with employees and to recognize the related cost in its financial
      statements. As a result, general and administrative expenses of the corporate
      division included approximately $436 thousand of additional stock compensation
      expense recognized in accordance with the requirements of SFAS No. 123R. Prior
      to January 1, 2006, we accounted for employee stock options pursuant to
      Accounting Principles Board Opinion No. 25 and financial results in the
      accompanying consolidated financial statements for prior periods have not been
      restated to give effect to the provisions of SFAS No. 123R. At December 31,
      2006, there was approximately $542 thousand of unrecognized compensation expense
      related to unvested stock options, excluding the 550,000 options which vest
      on
      the achievement of certain performance targets, which is expected to be
      recognized over a weighted-average period of 1.5 years.





DEPRECIATION
      AND AMORTIZATION. Depreciation and amortization expense totaled $1.1 million
      for
      the year ended December 31, 2006 as compared to $1.3 million for the prior
      year.
      The $324 thousand decrease in depreciation and amortization expense incurred
      by
      our VoIP telephony services division as compared to 2005 was partially offset
      by
      an increase of $145 thousand in depreciation and intangible asset amortization
      expenses incurred by our Internet services business.





INTEREST
      INCOME (EXPENSE), NET. Interest income, net of interest expense, totaled $120
      thousand for the year ended December 31, 2006. During the year ended December
      31, 2005, we reported a total of $4.1 million of net interest expense. A total
      of $4.0 million of non-cash interest expense was recorded during 2005 related
      to
      the beneficial conversion features of the $4.0 million of secured demand
      convertible promissory notes issued by the Company during 2005.





OTHER
      INCOME (EXPENSE), NET. Other income, net, of $19 thousand reported for 2006
      included a $130 thousand net gain on the sale of our Now Playing Magazine
      publication and associated website and a $130 thousand net loss on the sale
      of
      certain VoIP property and equipment. Other expense, net, of $274 thousand
      reported for 2005 included $280 thousand of reserves provided against amounts
      loaned by the Company to Tralliance prior to its acquisition in May
      2005.




INCOME
      TAXES. The income tax provision of $124 thousand recognized for continuing
      operations for the year ended December 31, 2006, resulted from additional state
      income taxes due upon the finalization of the Company’s 2005 consolidated tax
      returns. An income tax benefit of $13.6 million was recognized for continuing
      operations for the year ended December 31, 2005, as we were able to utilize
      our
      2005 losses incurred by continuing operations, as well as losses from prior
      years, to partially offset the 2005 income and gain on sale of our discontinued
      operations. As of December 31, 2006, the Company had net operating loss
      carryforwards available for U.S. tax purposes of approximately $162 million.
      These carryforwards expire through 2026. The Tax Reform Act of 1986 imposes
      substantial restrictions on the utilization of net operating losses and tax
      credits in the event of an "ownership change" of a corporation. Due to various
      significant changes in our ownership interests, as defined in the Internal
      Revenue Code of 1986, as amended, we have substantially limited the availability
      of our net operating loss carryforwards. There can be no assurance that we
      will
      be able to utilize any net operating loss carryforwards in the future. ****




34





**DISCONTINUED
      OPERATIONS**





As
      mentioned previously, the Company sold the business and substantially all of
      the
      net assets of SendTec, its marketing services business, effective October 31,
      2005. SendTec was originally acquired by the Company on September 1, 2004.
      Accordingly, the results of SendTec have been reported as discontinued
      operations for the year ended December 31, 2005.





Income
      from the activities of discontinued operations, net of income taxes, totaled
      approximately $69 thousand for the year ended December 31, 2005. The gain on
      the
      sale of SendTec included in the Company’s results of operations for 2005,
      totaled approximately $1.8 million, net of an income tax provision of
      approximately $13.2 million. Reference should be made to Note 3, “Discontinued
      Operations - SendTec, Inc.”, of the Notes to Consolidated Financial Statements
      for details regarding the sale.





**YEAR
      ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004**





**CONTINUING
      OPERATIONS**





NET
      REVENUE. Net revenue totaled $2.4 million for the year ended December 31, 2005
      as compared to $3.5 million for the year ended December 31, 2004. The $1.1
      million decrease in consolidated net revenue was principally the result of
      the
      $1.2 million decline in the net revenue of our computer games business segment.




**NET
      REVENUE BY BUSINESS SEGMENT:**





Years
                ended:
            
            2005
            
            2004Computer
                games
            
            $
            1,948,716
            
            $
            3,107,637Internet
                services
            
            
            197,873
            
            
            —VoIP
                telephony services
            
            
            248,789
            
            
            391,154$
            2,395,378
            
            $
            3,498,791





Decreases
      of $637 thousand in print advertisements in our magazine publications, $441
      thousand in sales of games products by our e-commerce games distribution company
      and $81 thousand in sales of our magazines, accounted for the decline in net
      revenue experienced by our computer games segment as compared to 2004.





Advertising
      revenue from the sale of print advertisements in our magazine publications
      totaled $1.4 million and $2.0 million for the years ended December 31, 2005
      and
      2004, respectively, or approximately 57% of each year’s consolidated net
      revenue. **** Net
      revenue attributable to the sale of our magazine publications totaled $320
      thousand in 2005 compared to $401 thousand in 2004. Our PC gaming focused
      magazine publication accounted for approximately 95% of the net revenue derived
      from our publishing business in 2005. As stated in the comparison of the year
      ended December 31, 2006 compared to the year ended December 31, 2005, over
      the
      last several years, the market for PC games has deteriorated, while the console
      games market has experienced growth. This shift in the gaming market negatively
      impacted our print advertising sales and the circulation of our PC gaming
      magazine.





Sales
      of
      products by our e-commerce games distribution business totaled approximately
      $265 thousand, or 11% of consolidated net revenue, for the year ended December
      31, 2005. This represented a decline from the $706 thousand, or 20% of
      consolidated net revenue, reported for the year ended December 31, 2004.





Our
      Internet services business, Tralliance, contributed $198 thousand in net revenue
      for the year ended December 31, 2005. Tralliance, which was acquired in May
      2005, began collecting fees for Internet domain name registrations in October
      2005. Net revenue attributable to such domain name registrations is recognized
      as revenue on a straight-line basis over the term of the registrations.





Net
      revenue generated by our VoIP telephony services division totaled $249 thousand
      in 2005 as compared to $391 thousand in 2004. During 2004 and 2005, we continued
      to experience difficulties in creating customer awareness and gaining customer
      acceptance of our paid VoIP telephony products. As a result, we revised our
      VoIP
      product offerings and shifted our focus on the development of new products
      and
      features. In addition, as a result of the liquidity issues experienced by the
      Company during 2005, VoIP marketing and advertising programs were curtailed.




35




**OPERATING
      EXPENSES BY BUSINESS SEGMENT:**





2005
            
            Cost
                of Revenue
            
            Sales
                and Marketing
            
            Product
                Development
            
            General
                and Administrative
            
            Depreciation
                and Amortization
            
            TotalComputer
                games
            
            $
            2,049,896
            
            $
            537,005
            
            $
            697,803
            
            $
            780,258
            
            $
            30,845
            
            $
            4,095,807Internet
                services
            
            
            86,486
            
            
            488,275
            
            
            —
            
            
            831,269
            
            
            87,112
            
            
            1,493,142VoIP
                telephony services
            
            
            6,288,577
            
            
            1,692,420
            
            
            693,056
            
            
            3,611,686
            
            
            1,109,743
            
            
            13,395,482Corporate
                expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            5,918,956
            
            
            36,598
            
            
            5,955,554$
            8,424,959
            
            $
            2,717,700
            
            $
            1,390,859
            
            $
            11,142,169
            
            $
            1,264,298
            
            $
            24,939,985





2004
            
            Cost
                of Revenue
            
            Sales
                and Marketing
            
            Product
                Development
            
            General
                and Administrative
            
            Depreciation
                and Amortization
            
            TotalComputer
                games
            
            $
            2,114,716
            
            $
            377,531
            
            $
            475,785
            
            $
            571,285
            
            $
            10,606
            
            $
            3,549,923VoIP
                telephony services
            
            
            6,940,023
            
            
            6,720,531
            
            
            578,101
            
            
            3,266,366
            
            
            1,355,532
            
            
            18,860,553Corporate
                expenses
            
            
            —
            
            
            —
            
            
            —
            
            
            3,409,123
            
            
            32,138
            
            
            3,441,261$
            9,054,739
            
            $
            7,098,062
            
            $
            1,053,886
            
            $
            7,246,774
            
            $
            1,398,276
            
            
            25,851,737VoIP
                telephony services:Impairment
                charge
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,661,975Loss
                on settlement ofcontractual
                obligation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            406,750$
            27,920,462





COST
      OF
      REVENUE. Cost of revenue totaled $8.4 million for the year ended December 31,
      2005 as compared to $9.1 million for the year ended December 31, 2004. The
      $630
      thousand decrease in consolidated cost of revenue was principally attributable
      to the decline in cost of revenue of the VoIP telephony services segment.





Cost
      of
      revenue of our computer games segment totaled $2.0 million for the year ended
      December 31, 2005, a decrease of $65 thousand from the year ended December
      31,
      2004. A decline of $268 thousand in cost of revenue associated with our
      e-commerce games distribution business resulting primarily from a lower volume
      of games sold as compared to 2004 was partially offset by a $203 thousand
      increase in cost of revenue attributable to our magazine publishing business.
      We
      began distribution of a new publication, Now Playing magazine, in March 2005
      which was the principal factor contributing to the increase in cost of revenue
      compared to 2004. We sold Now Playing magazine and the accompanying website
      in
      January 2006 for $130 thousand in cash.





During
      the years ended December 31, 2005 and 2004, VoIP telephony services cost of
      revenue included charges of approximately $71 thousand and $1.5 million,
      respectively, related to write-downs of telephony equipment inventory. Excluding
      the impact of such charges on both 2005 and 2004, cost of revenue of our VoIP
      telephony services division increased $754 thousand as compared to 2004.
      Throughout 2004, the Company increased its VoIP network capacity by entering
      into agreements with numerous carriers for leased equipment and services and
      with third parties for a number of leased data center facilities. The Company
      also expanded its internal network support function by hiring additional
      technical personnel. Due to the ramp-up of network costs during 2004, the
      Company incurred higher network operating and support costs during 2005 compared
      to 2004. In addition, the Company discontinued the capitalization of software
      development costs in its VoIP telephony business and began charging such costs
      to expense as incurred as a result of the review of long-lived assets for
      impairment performed in connection with the preparation of its 2004 year-end
      consolidated financial statements. Cost of revenue for the year ended December
      31, 2005 included approximately $420 thousand in expenses related to such
      software costs.




36





SALES
      AND
      MARKETING. Sales and marketing expenses totaled $2.7 million for the year ended
      December 31, 2005, a decrease of $4.4 million from the $7.1 million reported
      for
      2004. The VoIP telephony services business incurred significant costs during
      2004 for Internet and television advertising campaigns, as well as commissions
      expenses related to its VoIP products. During the first quarter of 2005, the
      Company re-evaluated its existing VoIP telephony services business plan and
      began the process of terminating and/or modifying certain of its existing
      product offerings and marketing programs. The Company also began to develop
      and
      test certain new VoIP products and features. As a result, the VoIP telephony
      services business segment essentially curtailed its sales and marketing efforts
      in 2005, which resulted in a year over year decline of $5.0 million in this
      expense category as compared to 2004. Partially offsetting this decline were
      the
      sales and marketing expenses incurred by Tralliance since date of acquisition
      of
      $488 thousand and an increase of $159 thousand in sales and marketing expenses
      of our computer games segment.





PRODUCT
      DEVELOPMENT. Product development expenses totaled $1.4 million for the year
      ended December 31, 2005 as compared to $1.1 million for the year ended December
      31, 2004. The increase in product development expenses as compared to 2004
      was
      primarily due to increases in website development costs incurred by our computer
      games businesses and personnel costs related to the continued development of
      our
      retail VoIP telephony products.





GENERAL
      AND ADMINISTRATIVE EXPENSES. General and administrative expenses of $11.1
      million for the year ended December 31, 2005 increased $3.9 million from the
      $7.2 million reported for 2004. The primary factors contributing to the increase
      in consolidated general and administrative expenses as compared to 2004 were
      $3.0 million in higher bonuses awarded to executive officers and the inclusion
      of approximately $831 thousand in general and administrative expenses incurred
      by our Internet services business in 2005. Tralliance, which comprises our
      Internet services segment, was acquired in May 2005 and the results of its
      operations have been included in our results only since its date of acquisition.





DEPRECIATION
      AND AMORTIZATION. Depreciation and amortization expense totaled $1.3 million
      for
      the year ended December 31, 2005 as compared to $1.4 million for the year ended
      December 31, 2004. Depreciation and amortization expense incurred by our VoIP
      telephony services division declined approximately $246 thousand in comparison
      to 2004 primarily as a result of the write-off of certain long-lived assets
      as
      of December 31, 2004.





INTEREST
      EXPENSE, NET. Interest expense, net of interest income, totaled $4.1 million
      for
      the year ended December 31, 2005 as compared to $666 thousand in 2004. A total
      of $4.0 million of non-cash interest expense was recorded during 2005 related
      to
      the beneficial conversion features of the $4.0 million of secured demand
      convertible promissory notes issued by the Company during 2005. During 2004,
      approximately $687 thousand of non-cash interest expense was recorded related
      to
      the beneficial conversion feature of the $2.0 million demand convertible
      promissory note acquired by our Chairman and Chief Executive Officer and his
      spouse in February 2004.





OTHER
      EXPENSE, NET. Other expense, net, included reserves against the amounts loaned
      by the Company to Tralliance prior to its acquisition, totaling approximately
      $280 thousand and $507 thousand in 2005 and 2004, respectively. Partially
      offsetting the 2004 expense, was a favorable settlement of a vendor claim
      previously disputed by the computer games business segment of approximately
      $350
      thousand.





INCOME
      TAXES. An income tax benefit of $13.6 million was recognized for continuing
      operations for the year ended December 31, 2005, as we were able to utilize
      our
      2005 losses incurred by continuing operations, as well as losses from prior
      years, to partially offset the 2005 income and gain on sale of our discontinued
      operations. During the year ended December 31, 2004, an income tax benefit
      of
      approximately $371 thousand was recognized for continuing operations which
      served to offset the income tax provision recorded for discontinued
      operations. ****





**DISCONTINUED
      OPERATIONS**





As
      mentioned previously, the Company sold the business and substantially all of
      the
      net assets of SendTec, its marketing services business, effective October 31,
      2005. SendTec was originally acquired by the Company on September 1, 2004.
      Accordingly, the results of SendTec have been reported as discontinued
      operations in the accompanying consolidated statements of operations for the
      years ended December 31, 2005 and 2004.




37





Income
      from the activities of discontinued operations, net of income taxes, totaled
      approximately $69 thousand for the year ended December 31, 2005 compared to
      $602
      thousand for the year ended December 31, 2004. The gain on the sale of SendTec
      included in the Company’s results of operations for 2005, totaled approximately
      $1.8 million, net of an income tax provision of approximately $13.2 million.
      Reference should be made to Note 3, “Discontinued Operations - SendTec, Inc.”,
      of the Notes to Consolidated Financial Statements for details regarding the
      sale.





**LIQUIDITY
      AND CAPITAL RESOURCES**





**FUTURE
      AND CRITICAL NEED FOR CAPITAL**





For
      the
      reasons described below, Company management does not believe that cash on hand
      and cash flow generated internally by the Company will be adequate to fund
      the
      operation of its businesses beyond a short period of time. Additionally, we
      have
      received a report from our independent accountants, relating to our December
      31,
      2006 audited financial statements, containing an explanatory paragraph stating
      that our recurring losses from operations and our accumulated deficit raise
      substantial doubts about our ability to continue as a going
      concern.





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





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





On
      March
      15, 2007, the Company entered into a Settlement Agreement with MySpace whereby
      it agreed to pay MySpace approximately $2.6 million on or before April 5, 2007
      in exchange for a mutual release of all claims against one another, including
      any claims against the Company’s directors and officers. As part of the
      settlement, Michael Egan, the Company’s CEO, who is also an affiliate of the
      Company, agreed to enter into an agreement with MySpace on or before April
      5 th pursuant
      to which he would, among other things, provide a letter of credit, cash or
      other
      equivalent security (collectively, “Security”) in form and substance
      satisfactory to MySpace. Such Security is to expire and be released on the
      100 th day
      following the Company’s payment of the foregoing $2.6 million so long as no
      bankruptcy petition, assignment for the benefit of creditors or like
      liquidation, reorganization or insolvency proceeding is instituted or filed
      related to the Company during such 100-day period.




38





The
      Company does not currently have the resources to both pay the $2.6 million
      settlement amount and to fund operations beyond April 2007. The Company intends
      to seek to raise capital or otherwise borrow funds with which to pay such amount
      and otherwise to fund operations. Although there is no commitment to do so,
      any
      such funds would most likely come primarily from Mr. Egan or affiliates of
      Mr.
      Egan or the Company, as the Company currently has no access to credit facilities
      with traditional third party lenders and has historically relied on borrowings
      from related parties to meet short-term liquidity needs. Any such capital raised
      would not be registered under the Securities Act of 1933 and would not be
      offered or sold in the United States absent registration or an applicable
      exemption from registration requirements. There can be no assurance that the
      Company will be successful in raising such capital or borrowing such funds
      and
      any capital raised will likely result in very substantial dilution of the number
      of shares outstanding or which could be outstanding upon the exercise or
      conversion of any derivative securities issued by the Company as part of such
      capital raise. The failure to pay the $2.6 million to MySpace and/or the failure
      to satisfactorily provide the Security would result in a resumption of the
      litigation with MySpace and, in all likelihood, would have a material adverse
      effect on the Company, including the potential bankruptcy and cessation of
      business of the Company.





The
      Company continues to incur consolidated net losses and management believes
      that
      the Company will continue to be unprofitable in the foreseeable future. As
      of
      February 28, 2007, the Company had a net working capital deficit of
      approximately $7.3 million, inclusive of a cash and cash equivalents balance
      of
      approximately $4.0 million. Such working capital deficit includes a settlement
      liability of approximately $2.6 million owed to MySpace and an aggregate of
      $3.4
      million in secured convertible demand notes (the “Convertible Notes”) and
      approximately $611 thousand of accrued interest due to entities controlled
      by
      the Company’s Chairman and Chief Executive Officer. Inasmuch as substantially
      all of the assets of the Company and its subsidiaries secure the Convertible
      Notes, in connection with any resulting proceeding to collect the indebtedness
      related to the Convertible Notes, the noteholders could seize and sell the
      assets of the Company and its subsidiaries, any or all of which would have
      a
      material adverse effect on the financial condition and future operations of
      the
      Company, including the potential bankruptcy or cessation of business of the
      Company.





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to avoid such filing and continue as a going concern, we
      believe that, in addition to settling the MySpace litigation as discussed above,
      we must (i) quickly raise a sufficient amount of capital; (ii) successfully
      implement a business plan focused primarily on expanding our Tralliance Internet
      services revenue base, and reducing Tralliance and corporate overhead expenses;
      and (iii) successfully eliminate future losses incurred by our VoIP telephony
      services and computer games business segments by effectuating our planned
      shutdown and/or selling certain component assets of these businesses. There
      can
      be no assurance that the Company will be able to successfully complete any
      or
      all of the above actions which we believe are required in order to continue
      as a
      going concern.





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





In
      March
      2007 management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its Computer Games businesses, including
      discontinuing the operations of its magazine publications, e-commerce games
      distribution business and related websites. The Company’s decision to shutdown
      its Computer Games businesses was based primarily on the historical losses
      sustained by these businesses during the recent past and management’s
      expectations of continued future losses. The Company is currently in the process
      of implementing a business shutdown plan, which includes the termination of
      employee and vendor relationships and the collection and payment of outstanding
      accounts receivables and payables. We are also attempting to sell certain of
      the
      businesses’ component assets; however, we do not expect the proceeds from such
      sales to be significant. As of December 31, 2006, the carrying amount of the
      major classes of the Computer Games business segment’s assets and liabilities
      consisted of current assets of $600 thousand, fixed assets of $39 thousand
      and
      current liabilities of $321 thousand.




39





In
      addition, in March 2007, management and the Board of Directors of the Company
      decided to discontinue the operating, research and development
      activities **** of
      its
      VoIP telephony services business and terminate all of the remaining employees
      of
      the business. At this time, the Company intends to only incur those costs
      required to maintain the service obligations of the license agreement with
      Speecho, LLC. The Company has no plans to actively market the further licensing
      of its chat, VoIP and video communications technology. The Company’s decision to
      discontinue the operations of its VoIP telephony services business was based
      primarily on the historical losses sustained by the business during the past
      several years, management’s expectations of continued losses for the foreseeable
      future and estimates of the amount of capital required to attempt to
      successfully monetize its business. The Company is currently in the process
      of
      implementing a business shutdown plan, which includes the termination of its
      existing carrier and vendor relationships, as well as the payment and/or
      settlement of outstanding payables. We are also attempting to sell certain
      of
      the businesses’ component assets; however, we do not expect the proceeds from
      such sales to be significant. As of December 31, 2006, the carrying amount
      of
      the major classes of the VoIP telephony services business segment’s assets and
      liabilities consisted of current assets of $139 thousand, fixed assets of $182
      thousand and current liabilities of approximately $2.3 million.





We
      are in
      the process of evaluating the recoverability of our existing computer games
      and
      VoIP telephony services businesses’ assets, and at this time, we do not
      anticipate significant future impairment or other charges in this regard. Any
      such charges, if and when determined to be required, will be recorded when
      identified. We are also in the process of evaluating the amount of costs
      expected to be incurred in shutting down our computer games and VoIP telephony
      services businesses. The amount of these shutdown costs, including costs related
      to employee termination benefits and vendor contract termination costs are
      not
      yet certain, however, at the present time, we believe that total cash
      expenditures for shutdown costs will range between $20 thousand and $135
      thousand for our computer games business and between zero and $700 thousand
      for
      our VoIP telephony services business. We currently expect the shutdown of our
      computer games and VoIP telephony services businesses to be substantially
      completed by the end of the second quarter of 2007.





The
      shares of our Common Stock were delisted from the NASDAQ national market in
      April 2001 and are now traded in the over-the-counter market on what is commonly
      referred to as the electronic bulletin board or OTCBB. Since the trading price
      of our Common Stock is less than $5.00 per share, trading in our Common Stock
      may also become subject to the requirements of Rule 15g-9 of the Exchange Act
      if
      our net tangible assets should fall below $2.0 million. Under Rule 15g-9,
      brokers who recommend penny stocks to persons who are not established customers
      and accredited investors, as defined in the Exchange Act, must satisfy special
      sales practice requirements, including requirements that they make an
      individualized written suitability determination for the purchaser; and receive
      the purchaser's written consent prior to the transaction. The Securities
      Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional
      disclosures in connection with any trades involving a penny stock, including
      the
      delivery, prior to any penny stock transaction, of a disclosure schedule
      explaining the penny stock market and the risks associated with that market.
      Such requirements may severely limit the market liquidity of our Common Stock
      and the ability of purchasers of our equity securities to sell their securities
      in the secondary market. We may also incur additional costs under state blue
      sky
      laws if we sell equity due to our delisting.





**CASH
      FLOW ITEMS**





**YEAR
      ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005**





As
      of
      December 31, 2006, we had approximately $5.3 million in cash and cash
      equivalents as compared to $16.5 million, excluding $1.0 million of funds held
      in escrow, as of December 31, 2005. Net cash and cash equivalents used in
      operating activities of continuing operations were $12.4 million and $17.6
      million, for the years ended December 31, 2006 and 2005, respectively. The
      period-to-period decrease in net cash and cash equivalents used in operating
      activities of continuing operations resulted primarily from the impact of lower
      losses from continuing operations before income taxes in 2006 compared to 2005,
      partially offset by lower non-cash expenses and lower favorable working capital
      changes in 2006 compared to 2005. The operating activities of discontinued
      operations provided approximately $3.0 million of net cash and cash equivalents
      during 2005.




40





Net
      cash
      and cash equivalents of $1.2 million were provided by investing activities
      during the year ended December 31, 2006. As a result of the October 2005 sale
      of
      the SendTec business, we were required to place $1.0 million of cash in an
      escrow account to secure our indemnification obligations. In March 2006,
      pursuant to the related escrow agreement, $750 thousand of the escrow funds
      were
      released to the Company, with the remaining $250 thousand released in December
      2006. The remaining $32 thousand in escrow funds released during 2006
      represented funds which had been held in escrow in connection with sweepstakes
      promotions conducted by the VoIP telephony services division. In addition,
      during 2006, we received proceeds of $138 thousand from the sale of certain
      VoIP
      property and equipment and $130 thousand from the sale of our Now Playing
      magazine publication and website. During 2005, our continuing operations used
      a
      total of $1.4 million in investing activities, including the $1.0 million in
      funds placed in escrow as a result of the SendTec sale mentioned above, $296
      thousand for capital expenditures and $280 thousand of loans to Tralliance
      prior
      to its acquisition by the Company.





Cash
      proceeds related to the October 31, 2005 sale of our SendTec marketing services
      business, net of related transaction costs and cash held by SendTec of
      approximately $2.4 million which was included in the sale, totaled approximately
      $34.8 million. Immediately following the sale of the SendTec business on October
      31, 2005, we completed the redemption of approximately 28.9 million shares
      of
      our Common Stock owned by six members of management of SendTec for approximately
      $11.6 million in cash pursuant to a Redemption Agreement dated August 23, 2005.
      Approximately $7.6 million of the redemption payment was allocated to the
      SendTec sale transaction and recorded as a reduction of the gain on the sale,
      with the remaining $4.0 million of the redemption payment attributed to the
      “fair value” of the shares of theglobe’s Common Stock redeemed and recorded as
      treasury shares. The “fair value” of the shares for financial accounting
      purposes was calculated based on the closing price of the Company’s Common Stock
      as reflected on the OTCBB on August 10, 2005, the date the principal terms
      of
      the Redemption Agreement were announced publicly. The closing of the redemption
      occurred on October 31, 2005.





Cash
      and
      cash equivalents used in financing activities totaled $12 thousand and $1.2
      million for the years ended December 31, 2006 and 2005, respectively. During
      2005, we received proceeds of $4.0 million from the issuance of Convertible
      Notes and we also paid $1.4 million of outstanding debt balances. As mentioned
      above, approximately $4.0 million of the total $11.6 million cash paid for
      the
      redemption of the 28.9 million shares of our Common Stock from the former
      management of SendTec was attributed to the “fair value” of the Common Stock
      issued for financial accounting purposes.





**YEAR
      ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004**





As
      of
      December 31, 2005, we had approximately $16.5 million in cash and cash
      equivalents as compared to $6.7 million as of December 31, 2004. These balances
      do not include cash held in escrow accounts totaling approximately $1.0 million
      and $93 thousand as of December 31, 2005 and 2004, respectively. Net cash and
      cash equivalents used in operating activities of continuing operations were
      $17.6 million and $19.6 million, for the years ended December 31, 2005 and
      2004,
      respectively **.** The
      period-to-period decrease in net cash and cash equivalents used in operating
      activities of continuing operations resulted primarily from decreased net losses
      attributable to continuing operations in combination with the impact of higher
      non-cash interest expense and favorable working capital changes in 2005 compared
      to 2004, partially offset by the $13.6 million deferred tax benefit recorded
      for
      continuing operations for 2005.





Net
      cash
      and cash equivalents provided by operating activities of discontinued operations
      totaled approximately $3.0 million in 2005, an increase of $1.1 million from
      the
      $1.9 million reported for 2004.





Net
      cash
      and cash equivalents of $1.4 million were used in investing activities of
      continuing operations during the year ended December 31, 2005 as compared to
      $3.1 million in 2004. Net funds placed in escrow accounts totaled $938 thousand
      in 2005 and $93 thousand in 2004. As a result of the October 2005 sale of the
      SendTec business, we were required to place $1.0 million of cash in an escrow
      account to secure our indemnification obligations. We incurred costs totaling
      $296 thousand and $2.6 million for capital expenditures during 2005 and 2004,
      respectively. Capital expenditures in 2004 related primarily to the development
      of our VoIP telephony network and VoIP customer billing system. We also loaned
      approximately $280 thousand and $467 thousand to Tralliance prior to its
      acquisition by the Company during the years ended December 31, 2005 and 2004,
      respectively **.**




41





Cash
      proceeds related to the October 31, 2005 sale of our SendTec marketing services
      business, net of related transaction costs and cash held by SendTec of
      approximately $2.4 million which was included in the sale, totaled approximately
      $34.8 million. Immediately following the sale of the SendTec business on October
      31, 2005, we completed the redemption of approximately 28.9 million shares
      of
      our Common Stock owned by six members of management of SendTec for approximately
      $11.6 million in cash pursuant to a Redemption Agreement dated August 23, 2005.
      Approximately $7.6 million of the redemption payment was allocated to the
      SendTec sale transaction and recorded as a reduction of the gain on the sale,
      with the remaining $4.0 million of the redemption payment attributed to the
      “fair value” of the shares of theglobe’s Common Stock redeemed and recorded as
      treasury shares. The “fair value” of the shares for financial accounting
      purposes was calculated based on the closing price of the Company’s Common Stock
      as reflected on the OTCBB on August 10, 2005, the date the principal terms
      of
      the Redemption Agreement were announced publicly. The closing of the redemption
      occurred on October 31, 2005. SendTec was originally acquired on September
      1,
      2004, for a total purchase price consisting of the payment of $6.0 million
      in
      cash, excluding transaction costs, and the issuance of debt and equity
      securities then valued at a total of approximately $12.4 million. As of the
      date
      of acquisition, SendTec held approximately $3.6 million of cash. Thus, we used
      a
      net amount of approximately $2.4 million of cash to acquire SendTec in 2004.





We
      used
      $1.2 million of cash and cash equivalents in financing activities during 2005.
      As discussed previously in the comparison of the results of operations for
      the
      year ended December 31, 2006 compared to the year ended December 31, 2005,
      we
      received proceeds of $4.0 million from the issuance of Convertible Notes during
      2005. We also paid $1.4 million of outstanding debt balances during 2005. As
      mentioned above, approximately $4.0 million of the total $11.6 million cash
      paid
      for the redemption of the 28.9 million shares of our Common Stock from the
      former management of SendTec was attributed to the “fair value” of the Common
      Stock issued for financial accounting purposes. During the year ended December
      31, 2004, $28.9 million of cash and cash equivalents were provided by financing
      activities. During March 2004, the Company completed a private offering of
      its
      Common Stock and warrants to acquire its Common Stock, for net proceeds totaling
      approximately $27.0 million. In addition, in February 2004, the Company issued
      a
      $2.0 million Bridge Note which was subsequently converted into our Common Stock
      in connection with the March 2004 private offering.





**CAPITAL
      TRANSACTIONS**





On
      November 22, 2006, the Company entered into certain Marketing Services
      Agreements (the “Marketing Services Agreements”) with two entities whereby the
      entities agreed to market certain of the Company’s products in exchange for
      certain commissions and promotional fees and which granted the Company exclusive
      right to certain uses of a tradename in connection with certain of the Company’s
      websites. Additionally, on November 22, 2006, in connection with the Marketing
      Services Agreements, the Company entered into a Warrant Purchase Agreement
      with
      Carl Ruderman, the controlling shareholder of the entities. The Warrant Purchase
      Agreement provides for the issuance to Mr. Ruderman of one warrant to purchase
      5,000,000 shares of the Company’s Common Stock at an exercise price of $0.15 per
      share with a three year term and a second warrant to purchase 5,000,000 shares
      of the Company’s Common Stock at an exercise price of $0.15 per share with a
      term of four years. Each warrant provides for the extension of the exercise
      term
      by an additional three years if certain criteria are met under the Marketing
      Services Agreements. The Warrant Purchase Agreement grants to Mr. Ruderman
      “piggy-back” registration rights with respect to the shares of the Company’s
      Common Stock issuable upon exercise of the warrants.





In
      connection with the issuance of the warrants, on November 22, 2006, Mr. Ruderman
      entered into a Stockholders’ Agreement with the Company’s chairman and chief
      executive officer, the Company’s president and certain of their affiliates.
      Pursuant to the Stockholders’ Agreement, Mr. Ruderman granted an irrevocable
      proxy over the shares issuable upon exercise of the warrants to E&C Capital
      Partners, LLLP and granted a right of first refusal over his shares to all
      of
      the other parties to the Stockholders’ Agreement. Mr. Ruderman also agreed to
      sell his shares under certain circumstances in which the other parties to the
      Stockholders’ Agreement have agreed to sell their respective shares. Mr.
      Ruderman was also granted the right to participate in certain sales of the
      Company’s Common Stock by the other parties to the Stockholders’
Agreement.





On
      August
      10, 2005, we entered into an Asset Purchase Agreement with RelationServe Media,
      Inc. ("RelationServe") whereby we agreed to sell all of the business and
      substantially all of the net assets of our SendTec marketing services subsidiary
      to RelationServe for $37.5 million in cash, subject to certain net working
      capital adjustments. On August 23, 2005, we entered into Amendment No. 1 to
      the
      Asset Purchase Agreement with RelationServe (the “1 st Amendment”
      and together with the original Asset Purchase Agreement, the “Purchase
      Agreement”). On October 31, 2005, we completed the asset sale. Including
      adjustments to the purchase price related to excess working capital of SendTec
      as of the date of sale, we received an aggregate of approximately $39.9 million
      in cash pursuant to the Purchase Agreement. In accordance with the terms of
      an
      escrow agreement established as a source to secure our indemnification
      obligations under the Purchase Agreement, $1.0 million of the purchase price
      and
      an aggregate of 2,272,727 shares of theglobe’s unregistered Common Stock (valued
      at $750 thousand pursuant to the terms of the Purchase Agreement based upon
      the
      average closing price of the stock in the 10 day period preceding the closing
      of
      the sale) were placed into escrow. During 2006, the escrowed cash and shares
      of
      theglobe’s Common Stock were released to the Company and the common shares were
      retired.




42




Additionally,
      as contemplated by the Purchase Agreement, immediately following the asset
      sale,
      we completed the redemption of 28,879,097 shares of our Common Stock owned
      by
      six members of management of SendTec for approximately $11.6 million in cash
      pursuant to a Redemption Agreement dated August 23, 2005. The 28,879,097 common
      shares redeemed were retired effective October 31, 2005. Pursuant to a separate
      Termination Agreement, we also terminated and canceled 1,275,783 stock options
      and the contingent interest in 2,062,785 earn-out warrants held by the six
      members of management in exchange for approximately $400 thousand in cash.
      We
      also terminated 829,678 stock options of certain other non-management employees
      of SendTec and entered into bonus arrangements with a number of other
      non-management SendTec employees for amounts totaling approximately $600
      thousand.





On
      May 9,
      2005, we exercised our option to acquire all of the outstanding capital stock
      of
      Tralliance. The purchase price consisted of the issuance of 2,000,000 shares
      of
      our Common Stock, warrants to acquire 475,000 shares of our Common Stock and
      $40
      thousand in cash. The warrants are exercisable for a period of five years at
      an
      exercise price of $0.11 per share. As part of the transaction, 10,000 shares
      of
      our Common Stock were also issued to a third party in payment of a finder’s fee
      resulting from the acquisition. The Common Stock issued as a result of the
      acquisition of Tralliance is entitled to certain "piggy-back" registration
      rights.





On
      April
      22, 2005, E&C Capital Partners, LLLP and E&C Capital Partners II, LLLP
      (the "Noteholders"), entities controlled by the Company's Chairman and Chief
      Executive Officer, entered into a Note Purchase Agreement (the "Agreement")
      with
      theglobe pursuant to which they acquired secured demand convertible promissory
      notes (the "Convertible Notes") in the aggregate principal amount of $1.5
      million. Under the terms of the Agreement, the Noteholders were also granted
      the
      optional right, for a period of 90 days from the date of the Agreement, to
      purchase additional Convertible Notes such that the aggregate principal amount
      of Convertible Notes issued under the Agreement could total $4.0 million (the
      "Option"). On June 1, 2005, the Noteholders exercised a portion of the Option
      and acquired an additional $1.5 million of Convertible Notes. On July 18, 2005,
      the Noteholders exercised the remainder of the Option and acquired an additional
      $1.0 million of Convertible Notes.





The
      Convertible Notes are convertible at the option of the Noteholders into shares
      of our Common Stock at an initial price of $0.05 per share. Through December
      31,
      2006, an aggregate of $600 thousand of Convertible Notes were converted by
      the
      Noteholders into an aggregate of 12,000,000 shares of our Common Stock. Assuming
      full conversion of all Convertible Notes which remain outstanding as of December
      31, 2006, an additional 68,000,000 shares of our Common Stock would be issued
      to
      the Noteholders. The Convertible Notes provide for interest at the rate of
      ten
      percent per annum and are secured by a pledge of substantially all of the assets
      of the Company. The Convertible Notes are due and payable five days after demand
      for payment by the Noteholders.





On
      September 1, 2004, we closed upon an agreement and plan of merger dated August
      31, 2004, pursuant to which we 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, we paid consideration consisting
      of: (i) $6.0 million 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 was converted into 17,500,500 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), and (iv) the issuance of a
      subordinated promissory note in the amount of $1.0 million. The subordinated
      promissory note provided for interest at the rate of four percent per annum
      and
      was due on September 1, 2005. We paid the principal and interest due under
      the
      terms of the subordinated promissory note on October 31, 2005, including default
      interest at a rate of 15% per annum for the period the debt was outstanding
      subsequent to the original due date.




43





In
      addition, warrants to acquire shares of our Common Stock would be issued to
      the
      former shareholders of SendTec when and if SendTec exceeded forecasted operating
      income, as defined, of $10.125 million, for the year ended December 31, 2005.
      The number of earn-out warrants issuable ranged from an aggregate of
      approximately 250,000 to 2,500,000 (if actual operating income exceeded the
      forecast by at least 10%). Pursuant to the Termination Agreement described
      above, the contingent interest in approximately 2,063,000 of the earn-out
      warrants was canceled effective October 31, 2005. The remainder of the earn-out
      warrants expired on December 31, 2005, as the operating income target was not
      achieved.





We
      also
      issued an aggregate of 3,974,165 replacement options to acquire shares of our
      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 3,273,668 had exercise prices of $0.06 per share and 700,497
      had
      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. We 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. In addition, we 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 warrants would have been earned.
      Pursuant to the Termination Agreement mentioned above, we terminated and
      canceled an aggregate of 2,105,461 stock options held by employees of SendTec
      effective October 31, 2005. The remaining 477,000 outstanding stock options
      related to the bonus option pool which was established as of the acquisition
      were terminated as the forecasted operating income targets for the year ended
      December 31, 2005 had not been achieved.





In
      March
      2004, we 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 our Common Stock, $0.001 par value (the "Common Stock"), and warrants
      to acquire 50 shares of our 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 approximately $28.4 million, or approximately
      $0.57 per share assuming the exercise of the 16,690,824 Warrants. As of December
      31, 2006, approximately 510,000 of the Warrants remained outstanding.





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
      our Common Stock at $0.001 per share. All of the shares underlying the warrant
      had been issued by year-end 2005.





In
      connection with the PIPE Offering, Michael S. Egan, our Chairman, Chief
      Executive Officer and principal stockholder, together with certain of his
      affiliates, including E&C Capital Partners, LLLP converted a $2,000,000
      Convertible Bridge Note, $1,750,000 of Secured Convertible Notes and all of
      the
      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, we issued an aggregate of 48,775,909
      additional shares of our 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
      our 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 our
      $1,750,000 Secured Convertible Notes issued on May 22, 2003 to E&C Capital
      Partners, LLLP and certain affiliates of Michael S. Egan. In addition, the
      Egans
      were issued a warrant to acquire 204,082 shares of our 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.




44




**CONTRACTUAL
      OBLIGATIONS**





The
      following table summarizes theglobe’s contractual obligations as of December 31,
      2006. These contractual obligations are more fully disclosed in Note 9, “Debt,”
and Note 13, “Commitments,” in the accompanying Notes to Consolidated Financial
      Statements.


Payments
                Due By PeriodLess
                than
            
            
            
            
            
            AfterTotal
            
            1
                year
            
            1-3
                years
            
            4-5
                years
            
            5
                yearsNotes
                payable*
            
            $
            3,400,000
            
            $
            3,400,000
            
            $
            —
            
            $
            —
            
            $
            —Network
                commitments
            
            
            539,000
            
            
            503,000
            
            
            36,000
            
            
            —
            
            
            —Registry
                commitments
            
            
            1,254,000
            
            
            329,000
            
            
            311,000
            
            
            220,000
            
            
            394,000Operating
                leases
            
            
            264,000
            
            
            248,000
            
            
            16,000
            
            
            —
            
            
            —Other
                purchase obligations
            
            
            240,000
            
            
            240,000
            
            
            —
            
            
            —
            
            
            —Total
                contractual obligations
            
            $
            5,697,000
            
            $
            4,720,000
            
            $
            363,000
            
            $
            220,000
            
            $
            394,000





*
      Excludes accrued and unpaid interest of approximately $556,000 as of December
      31, 2006.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





As
      of
      December 31, 2006, 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.





**EFFECTS
      OF INFLATION**





Due
      to
      relatively low levels of inflation in 2006, 2005 and 2004, inflation has not
      had
      a significant effect on our results of operations.





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





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





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





**REVENUE
      RECOGNITION**





The
      Company's revenue from continuing operations was derived principally from the
      sale of print advertisements under short-term contracts in our magazine
      publications; through the sale of our magazine publications through newsstands
      and subscriptions; from the sale of video games and related products through
      our
      e-commerce games distribution business; from the sale of Internet domain
      registrations and from the sale of VoIP telephony services. There is no
      certainty that events beyond anyone's control such as economic downturns or
      significant decreases in the demand for our services and products will not
      occur
      and accordingly, cause significant decreases in revenue.




45





**COMPUTER
      GAMES BUSINESSES**





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





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





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





**INTERNET
      SERVICES**





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





**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.





**VALUATION
      OF CUSTOMER RECEIVABLES**





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





**VALUATION
      OF INVENTORIES**





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





**GOODWILL
      AND INTANGIBLE ASSETS**





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




46





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





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





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





**LONG-LIVED
      ASSETS**





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




47





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





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





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





**ITEM
      7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Interest
      Rate Risk. Interest rate risk refers to fluctuations in the value of a security
      resulting from changes in the general level of interest rates. Investments
      that
      we classify as cash and cash equivalents have original maturities of three
      months or less and therefore, are not affected in any material respect by
      changes in market interest rates. At December 31, 2006 **,** debt
      was
      composed of $3.4 million of fixed rate instruments due to affiliates on demand
      with an aggregate average interest rate of 10.0%.





Foreign
      Currency Risk. We transact business in U.S. dollars. Foreign currency exchange
      rate fluctuations do not have a material effect on our results of operations.




48




**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**




**CONSOLIDATED
      FINANCIAL STATEMENTS**




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




**INDEX
      TO FINANCIAL STATEMENTS**




PAGEREPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            F-2CONSOLIDATED
                FINANCIAL STATEMENTSBALANCE
                SHEETS
            
            F-3STATEMENTS
                OF OPERATIONS
            
            F-4STATEMENTS
                OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVEINCOME
                (LOSS)
            
            F-5STATEMENTS
                OF CASH FLOWS
            
            F-6NOTES
                TO FINANCIAL STATEMENTS
            
            F-9




F-1





**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, 2006 and 2005, and the related consolidated
      statements of operations, stockholders' equity and comprehensive income (loss),
      and cash flows for each of the years in the three-year period ended December
      31,
      2006. 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. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audits included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall 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, 2006 and 2005, and the consolidated
      results of its operations and its cash flows for each of the years in the
      three-year period ended December 31, 2006, in conformity with accounting
      principles generally accepted in the United States.





The
      accompanying 2006 consolidated financial statements have been prepared assuming
      that the Company will continue as a going concern. As discussed in Note 2 to
      the
      consolidated financial statements, the Company has suffered recurring net losses
      and has a significant 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
      28,
      2007





F-2


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


**CONSOLIDATED
      BALANCE SHEETS**




DECEMBER
                31,
            
            DECEMBER
                31,2006
            
            2005ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            5,316,218
            
            $
            16,480,660Restricted
                cash
            
            
            —
            
            
            1,031,764Accounts
                receivable, less allowance for doubtful accounts ofof
                approximately $20,000 and $128,000, respectively
            
            
            589,180
            
            
            452,398Inventory,
                less reserves of approximately $370,000 and $434,000,respectively
            
            
            37,736
            
            
            66,271Prepaid
                expenses
            
            
            508,082
            
            
            1,022,771Other
                current assets
            
            
            21,546
            
            
            146,889Total
                current assets
            
            
            6,472,762
            
            
            19,200,753Property
                and equipment, net
            
            
            365,524
            
            
            1,455,653Intangible
                assets
            
            
            526,824
            
            
            715,035Other
                assets
            
            
            40,000
            
            
            40,000Total
                assets
            
            $
            7,405,110
            
            $
            21,411,441LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                Liabilities:Accounts
                payable
            
            $
            2,796,637
            
            $
            2,564,988Accrued
                expenses and other current liabilities
            
            
            4,284,655
            
            
            2,177,815Income
                taxes payable
            
            
            —
            
            
            806,406Deferred
                revenue
            
            
            1,294,532
            
            
            985,981Notes
                payable due affiliates
            
            
            3,400,000
            
            
            3,400,000Current
                portion of long-term debt
            
            
            —
            
            
            28,447Total
                current liabilities
            
            
            11,775,824
            
            
            9,963,637Deferred
                revenue
            
            
            232,433
            
            
            173,003Total
                liabilities
            
            
            12,008,257
            
            
            10,136,640Commitments
                and Contingencies (Notes 13 and 14)Stockholders'
                Equity (Deficit):Common
                stock, $0.001 par value; 500,000,000 shares authorized;172,484,838
                and 174,373,091 shares issued at December 31, 2006and
                December 31, 2005, respectively
            
            
            172,485
            
            
            174,373Additional
                paid-in capital
            
            
            289,088,557
            
            
            288,740,889Escrow
                shares
            
            
            —
            
            
            (750,000
            )Accumulated
                deficit
            
            
            (293,864,189
            )
            
            (276,890,461
            )Total
                stockholders' equity (deficit)
            
            
            (4,603,147
            )
            
            11,274,801Total
                liabilities and stockholders' equity (deficit)
            
            $
            7,405,110
            
            $
            21,411,441





See
      notes
      to consolidated financial statements.





F-3





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


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





Year
                Ended December 31,2006
            
            2005
            
            2004Net
                Revenue
            
            $
            3,482,024
            
            $
            2,395,378
            
            $
            3,498,791Operating
                Expenses:Cost
                of revenue
            
            
            4,160,675
            
            
            8,424,959
            
            
            9,054,739Sales
                and marketing
            
            
            3,988,051
            
            
            2,717,700
            
            
            7,098,062Product
                development
            
            
            1,379,145
            
            
            1,390,859
            
            
            1,053,886General
                and administrative
            
            
            9,866,521
            
            
            11,142,169
            
            
            7,246,774Depreciation
            
            
            887,645
            
            
            1,189,097
            
            
            1,295,442Intangible
                asset amortization
            
            
            188,211
            
            
            75,201
            
            
            102,834Impairment
                charge
            
            
            —
            
            
            —
            
            
            1,661,975Loss
                on settlement of contractual obligation
            
            
            —
            
            
            —
            
            
            406,75020,470,248
            
            
            24,939,985
            
            
            27,920,462Operating
                Loss from Continuing Operations
            
            
            (16,988,224
            )
            
            (22,544,607
            )
            
            (24,421,671
            )Other
                Income (Expense), net:Interest
                income (expense), net
            
            
            120,171
            
            
            (4,143,229
            )
            
            (666,348
            )Other
                income (expense), net
            
            
            18,638
            
            
            (274,082
            )
            
            (158,550
            )138,809
            
            
            (4,417,311
            )
            
            (824,898
            )Loss
                from Continuing OperationsBefore
                Income Tax
            
            
            (16,849,415
            )
            
            (26,961,918
            )
            
            (25,246,569
            )Income
                Tax Provision (Benefit)
            
            
            124,313
            
            
            (13,613,538
            )
            
            (370,891
            )Loss
                from Continuing Operations
            
            
            (16,973,728
            )
            
            (13,348,380
            )
            
            (24,875,678
            )Discontinued
                Operations, net of tax:Income
                from operations
            
            
            —
            
            
            68,801
            
            
            602,477Gain
                on sale of discontinued operations
            
            
            —
            
            
            1,769,531
            
            
            —Income
                from Discontinued Operations
            
            
            —
            
            
            1,838,332
            
            
            602,477Net
                Loss
            
            $
            (16,973,728
            )
            $
            (11,510,048
            )
            $
            (24,273,201
            )Earnings
                (Loss) Per Share -Basic
                and Diluted:Continuing
                Operations
            
            $
            (0.10
            )
            $
            (0.07
            )
            $
            (0.19
            )Discontinued
                Operations
            
            $
            —
            
            $
            0.01
            
            $
            —Net
                Loss
            
            $
            (0.10
            )
            $
            (0.06
            )
            $
            (0.19
            )Weighted
                Average Common Shares Outstanding
            
            
            174,674,000
            
            
            182,539,000
            
            
            127,843,000





See
      notes
      to consolidated financial statements.





F-4





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


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**


**AND
      COMPREHENSIVE INCOME (LOSS)**


Common
                  Stock
              
              Additional
                Paid-in
              
              Escrow
              
              Treasury
              
              AccumulatedPreferredStock
              
              Shares
              
              Amount
              
              Capital
              
              Shares
              
              Stock
              
              Deficit
              
              TotalBalance,
                  December 31, 2003
              
              $
              500,000
              
              
              50,245,574
              
              $
              50,246
              
              $
              238,301,862
              
              $
              -
              
              $
              (371,458
              )
              $
              (236,300,111
              )
              $
              2,180,539Year
                  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 ofoffering
                  costs
              
              
              -
              
              
              33,381,647
              
              
              33,382
              
              
              26,939,363
              
              
              -
              
              
              -
              
              
              -
              
              
              26,972,745Conversion
                  of Series F PreferredStock
                  and exercise ofassociated
                  warrants
              
              
              (500,000
              )
              
              19,639,856
              
              
              19,640
              
              
              480,360
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of $1,750,000Convertible
                  Notes
              
              
              -
              
              
              22,829,156
              
              
              22,829
              
              
              1,654,546
              
              
              -
              
              
              -
              
              
              -
              
              
              1,677,375Conversion
                  of $2,000,000Bridge
                  Note
              
              
              -
              
              
              3,527,337
              
              
              3,527
              
              
              1,996,473
              
              
              -
              
              
              -
              
              
              -
              
              
              2,000,000Acquisition
                  of SendTec
              
              
              17,500
              
              
              17,500,024
              
              
              17,500
              
              
              11,163,275
              
              
              -
              
              
              -
              
              
              -
              
              
              11,198,275Conversion
                  of Series HPreferred
                  Stock
              
              
              (17,500
              )
              
              17,500,500
              
              
              17,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of warrants ownedby
                  Dancing BearInvestments
              
              
              -
              
              
              2,779,560
              
              
              2,780
              
              
              (2,780
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of stock options
              
              
              -
              
              
              639,000
              
              
              639
              
              
              183,907
              
              
              -
              
              
              -
              
              
              -
              
              
              184,546Exercise
                  of warrants
              
              
              -
              
              
              6,273,024
              
              
              6,273
              
              
              5,151
              
              
              -
              
              
              -
              
              
              -
              
              
              11,424Beneficial
                  conversion featureof
                  $2,000,000 Bridge Noteand
                  warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              687,000
              
              
              -
              
              
              -
              
              
              -
              
              
              687,000Employee
                  stock-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              416,472
              
              
              -
              
              
              -
              
              
              -
              
              
              416,472Issuance
                  of stock options tonon-employees
              
              
              -
              
              
              -
              
              
              -
              
              
              463,775
              
              
              -
              
              
              -
              
              
              -
              
              
              463,775Balance,
                  December 31, 2004
              
              
              -
              
              
              174,315,678
              
              
              174,316
              
              
              282,289,404
              
              
              -
              
              
              (371,458
              )
              
              (260,574,874
              )
              
              21,517,388Year
                  Ended December 31, 2005:Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (11,510,048
              )
              
              (11,510,048
              )Issuance
                  of common stock:Settlement
                  of contractualobligation
              
              
              -
              
              
              300,000
              
              
              300
              
              
              73,950
              
              
              -
              
              
              -
              
              
              -
              
              
              74,250Acquisition
                  of Tralliance
              
              
              -
              
              
              2,010,000
              
              
              2,010
              
              
              196,877
              
              
              -
              
              
              -
              
              
              -
              
              
              198,887Conversion
                  of Convertible Notes
              
              
              -
              
              
              12,000,000
              
              
              12,000
              
              
              588,000
              
              
              -
              
              
              -
              
              
              -
              
              
              600,000Exercise
                  of stock options
              
              
              -
              
              
              2,001,661
              
              
              2,001
              
              
              164,840
              
              
              -
              
              
              -
              
              
              -
              
              
              166,841Exercise
                  of warrants
              
              
              -
              
              
              11,051,403
              
              
              11,051
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              11,051Beneficial
                  conversion features of$4,000,000
                  Convertible Notes
              
              
              -
              
              
              -
              
              
              -
              
              
              4,000,000
              
              
              -
              
              
              -
              
              
              -
              
              
              4,000,000Employee
                  stock-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              48,987
              
              
              -
              
              
              -
              
              
              -
              
              
              48,987Issuance
                  of stock options tonon-employees
              
              
              -
              
              
              -
              
              
              -
              
              
              176,050
              
              
              -
              
              
              -
              
              
              -
              
              
              176,050Stock-based
                  compensationrelated
                  to discontinuedoperations
              
              
              -
              
              
              -
              
              
              -
              
              
              455,054
              
              
              -
              
              
              -
              
              
              -
              
              
              455,054Issuance
                  of escrow shares
              
              
              -
              
              
              2,272,727
              
              
              2,273
              
              
              747,727
              
              
              (750,000
              )
              
              -
              
              
              -
              
              
              -Redemption
                  of common stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,043,074
              )
              
              -
              
              
              (4,043,074
              )Repurchase
                  of vested stock options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (420,585
              )
              
              (420,585
              )Retirement
                  of treasury stock
              
              
              -
              
              
              (29,578,378
              )
              
              (29,578
              )
              
              -
              
              
              -
              
              
              4,414,532
              
              
              (4,384,954
              )
              
              -Balance,
                  December 31, 2005
              
              
              -
              
              
              174,373,091
              
              
              174,373
              
              
              288,740,889
              
              
              (750,000
              )
              
              -
              
              
              (276,890,461
              )
              
              11,274,801Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (16,973,728
              )
              
              (16,973,728
              )Issuance
                  of common stock forservices
                  rendered
              
              
              -
              
              
              35,000
              
              
              35
              
              
              3,115
              
              
              -
              
              
              -
              
              
              -
              
              
              3,150Issuance
                  of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              515,262
              
              
              -
              
              
              -
              
              
              -
              
              
              515,262Exercise
                  of stock options
              
              
              -
              
              
              349,474
              
              
              350
              
              
              18,070
              
              
              -
              
              
              -
              
              
              -
              
              
              18,420Employee
                  stock-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              449,749
              
              
              -
              
              
              -
              
              
              -
              
              
              449,749Issuance
                  of stock options tonon-employees
              
              
              -
              
              
              -
              
              
              -
              
              
              109,199
              
              
              -
              
              
              -
              
              
              -
              
              
              109,199Retirement
                  of escrow shares
              
              
              -
              
              
              (2,272,727
              )
              
              (2,273
              )
              
              (747,727
              )
              
              750,000
              
              
              -
              
              
              -
              
              
              -Balance,
                  December 31, 2006
              
              $
              -
              
              
              172,484,838
              
              $
              172,485
              
              $
              289,088,557
              
              $
              -
              
              $
              -
              
              $
              (293,864,189
              )
              $
              (4,603,147
              )





See
      notes
      to consolidated financial statements.




F-5


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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





Year
                Ended December 31,2006
            
            2005
            
            2004Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (16,973,728
            )
            $
            (11,510,048
            )
            $
            (24,273,201
            )(Income)
                from discontinued operations
            
            
            —
            
            
            (1,838,332
            )
            
            (602,477
            )Net
                loss from continuing operations
            
            
            (16,973,728
            )
            
            (13,348,380
            )
            
            (24,875,678
            )Adjustments
                to reconcile net loss from continuing operations to net cash flows
                from
                operating activities:Depreciation
                and amortization
            
            
            1,075,856
            
            
            1,264,298
            
            
            1,398,276Non-cash
                expense related to issuance of warrants
            
            
            515,262
            
            
            —
            
            
            —Employee
                stock compensation
            
            
            449,749
            
            
            48,987
            
            
            182,970Loss
                on sale of property and equipment
            
            
            130,424
            
            
            —
            
            
            —Compensation
                related to non-employee stock options
            
            
            109,199
            
            
            176,050
            
            
            463,046Provision
                for uncollectible accounts receivable
            
            
            17,076
            
            
            125,000
            
            
            183,149Non-cash
                settlements of liabilities
            
            
            (384,060
            )
            
            —
            
            
            (352,455
            )Gain
                on sale of Now Playing magazine
            
            
            (130,000
            )
            
            —
            
            
            —Non-cash
                interest expense
            
            
            —
            
            
            4,000,000
            
            
            735,416Reserve
                against amounts loaned to Tralliance prior to acquisition
            
            
            —
            
            
            280,000
            
            
            506,500Provision
                for excess and obsolete inventory
            
            
            —
            
            
            191,261
            
            
            1,289,196Write-down
                of inventory deposit
            
            
            —
            
            
            77,250
            
            
            221,450Deferred
                tax benefit
            
            
            —
            
            
            (13,613,538
            )
            
            —Non-cash
                impairment charge
            
            
            —
            
            
            —
            
            
            1,661,975Loss
                on settlement of contractual obligation
            
            
            —
            
            
            —
            
            
            406,750Other,
                net
            
            
            6,839
            
            
            (136,284
            )
            
            212,821Changes
                in operating assets and liabilities, net of acquisitions and dispositions:Accounts
                receivable, net
            
            
            (153,858
            )
            
            542,912
            
            
            (327,756
            )Inventory,
                net
            
            
            28,535
            
            
            332,047
            
            
            (1,108,461
            )Prepaid
                and other current assets
            
            
            640,032
            
            
            86,824
            
            
            28,681Accounts
                payable
            
            
            634,383
            
            
            1,425,050
            
            
            (751,595
            )Accrued
                expenses and other current liabilities
            
            
            2,106,840
            
            
            (90,057
            )
            
            548,169Income
                taxes payable
            
            
            (806,406
            )
            
            —
            
            
            —Deferred
                revenue
            
            
            367,981
            
            
            995,269
            
            
            (12,876
            )Net
                cash flows from operating activities of continuing operations
            
            
            (12,365,876
            )
            
            (17,643,311
            )
            
            (19,590,422
            )Net
                cash flows from operating activities of discontinued operations
            
            
            —
            
            
            2,990,299
            
            
            1,857,790Net
                cash flows from operating activities
            
            
            (12,365,876
            )
            
            (14,653,012
            )
            
            (17,732,632
            )Cash
                Flows from Investing Activities:Purchases
                of property and equipment
            
            
            (86,158
            )
            
            (296,170
            )
            
            (2,643,018
            )Net
                cash released from / (placed in) escrow
            
            
            1,031,764
            
            
            (938,357
            )
            
            (93,407
            )Proceeds
                from the sale of property and equipment
            
            
            137,626
            
            
            —
            
            
            —Proceeds
                from the sale of Now Playing magazine
            
            
            130,000
            
            
            —
            
            
            —Amounts
                loaned to Tralliance prior to acquisition
            
            
            —
            
            
            (280,000
            )
            
            (466,500
            )Other,
                net
            
            
            —
            
            
            119,814
            
            
            141,385Net
                cash flows from investing activities of continuing operations
            
            
            1,213,232
            
            
            (1,394,713
            )
            
            (3,061,540
            )





(Continued)





F-6





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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





(Continued)





Year
                Ended December 31,2006
            
            2005
            
            2004Sale
                of discontinued operations, net of cash sold
            
            
            —
            
            
            34,762,384
            
            
            —Redemption
                agreement payment allocation to sale
            
            
            —
            
            
            (7,560,872
            )
            
            —Acquisition
                of discontinued operations, net of cash acquired
            
            
            —
            
            
            —
            
            
            (2,389,520
            )Purchases
                of property and equipment by discontinued operations
            
            
            —
            
            
            (184,115
            )
            
            (40,324
            )Net
                cash flows from investing activities
            
            
            1,213,232
            
            
            25,622,684
            
            
            (5,491,384
            )Cash
                Flows from Financing Activities:Proceeds
                from exercise of stock options and warrants
            
            
            18,420
            
            
            177,892
            
            
            195,970Borrowings
                on notes payable and long-term debt
            
            
            —
            
            
            4,000,000
            
            
            2,000,000Payments
                on notes payable and long-term debt
            
            
            (30,218
            )
            
            (1,358,623
            )
            
            (151,898
            )Redemption
                of common stock
            
            
            —
            
            
            (4,043,074
            )
            
            —Proceeds
                from issuance of common stock, net
            
            
            —
            
            
            —
            
            
            26,972,745Payments
                of other long-term liabilities, net
            
            
            —
            
            
            —
            
            
            (119,710
            )Net
                cash flows from financing activities
            
            
            (11,798
            )
            
            (1,223,805
            )
            
            28,897,107Net
                Increase / (Decrease) in Cash and Cash Equivalents
            
            
            (11,164,442
            )
            
            9,745,867
            
            
            5,673,091Cash
                and Cash Equivalents, at beginning of period
            
            
            16,480,660
            
            
            6,734,793
            
            
            1,061,702Cash
                and Cash Equivalents, at end of period
            
            $
            5,316,218
            
            $
            16,480,660
            
            $
            6,734,793




See
      notes
      to consolidated financial statements.




F-7





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


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





(Continued)





Year
                Ended December 31,2006
            
            2005
            
            2004Supplemental
                Disclosure of Cash Flow Information:Cash
                paid during the period for:Interest
            
            $
            12,958
            
            $
            87,140
            
            $
            184,093Income
                taxes
            
            $
            930,719
            
            $
            —
            
            $
            —Supplemental
                Disclosure of Non-Cash Transactions:Conversion
                of debt and equity securities into common stock
            
            $
            —
            
            $
            600,000
            
            $
            4,177,375Additional
                paid-in capital attributable to the beneficial conversionfeatures
                of debt and equity securities
            
            $
            —
            
            $
            4,000,000
            
            $
            687,000Common
                stock and warrants issued in connection with theacquisition
                of Tralliance Corporation
            
            $
            —
            
            $
            198,887
            
            $
            —Common
                stock, preferred stock and stock options issued inconnection
                with the acquisition of  SendTec, Inc.
            
            $
            —
            
            $
            —
            
            $
            11,198,275Note
                payable issued in connection with the acquisition ofSendTec,
                Inc.
            
            $
            —
            
            $
            —
            
            $
            1,000,009Common
                stock issued in connection with the settlement of acontractual
                obligation
            
            $
            —
            
            $
            74,250
            
            $
            —




See
      notes
      to consolidated financial statements.




F-8




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




**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**(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 continued to operate its Computer Games
      print magazine and the associated CGOnline website ( www.cgonline.com ),
      as
      well as the e-commerce games distribution business of Chips & Bits, Inc.
      ( www.chipsbits.com ).
      On
      June 1, 2002, Chairman Michael S. Egan and Director Edward A. Cespedes became
      Chief Executive Officer and President of the Company, respectively.





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





On
      May
      28, 2003, the Company acquired Direct Partner Telecom, Inc. ("DPT"), a company
      engaged in VoIP telephony services in exchange for 1,375,000 shares of the
      Company's Common Stock and the issuance of warrants to acquire 500,000 shares
      of
      the Company's Common Stock. The Company acquired all of the physical assets
      and
      intellectual property of DPT and originally planned to continue to operate
      the
      company as a subsidiary and engage in the provision of VoIP services to other
      telephony businesses on a wholesale transactional basis. In the first quarter
      of
      2004, the Company decided to suspend DPT's wholesale business and dedicate
      the
      DPT physical and intellectual assets to its retail VoIP business. As a result,
      the Company wrote-off the goodwill associated with the purchase of DPT as of
      December 31, 2003.





On
      September 1, 2004, the Company acquired SendTec, Inc. ("SendTec"), a direct
      response marketing services and technology company for a total purchase price
      of
      approximately $18.4 million. As more fully discussed in Note 3, "Discontinued
      Operations - SendTec Inc.,” on October 31, 2005, the Company completed the sale
      of all of the business and substantially all of the net assets of SendTec for
      approximately $39.9 million in cash.





As
      more
      fully discussed in Note 4, “Acquisition of Tralliance Corporation,” on May 9,
      2005, the Company exercised its option to acquire Tralliance Corporation
      (“Tralliance”), a company which had recently entered into an agreement to become
      the registry for the “.travel” top-level Internet domain. The Company issued
      2,000,000 shares of its Common Stock, warrants to acquire 475,000 shares of
      its
      Common Stock and paid $40,000 in cash to acquire Tralliance.





As
      of
      December 31, 2006, sources of the Company's revenue were derived principally
      from the operations of its games related businesses and its Internet services
      business conducted by Tralliance. The Company’s retail VoIP products and
      services have not produced any significant revenue. See Note 19, “Subsequent
      Events,” regarding the March 2007 decision by the Company’s management and Board
      of Directors to discontinue the operations of the Company’s computer games and
      VoIP telephony services businesses.





F-9




**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.





**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. In addition,
      the accompanying consolidated financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America on a going concern basis, which contemplates the realization of assets
      and the satisfaction of liabilities in the normal course of business (See Note
      2, “Going Concern Considerations”).





**CASH
      AND CASH EQUIVALENTS**





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





**RESTRICTED
      CASH**





Included
      in restricted cash in the accompanying consolidated balance sheet at December
      31, 2005, was approximately $1,000,000 of cash held in escrow in connection
      with
      the October 31, 2005 sale of all of the business and substantially all of the
      net assets of SendTec (see Note 3, “Discontinued Operations - SendTec, Inc.” for
      further discussion). In addition, at December 31, 2005, restricted cash included
      $31,764 of cash held in escrow for purposes of sweepstakes promotions being
      conducted by the VoIP telephony division. The Company has no restricted cash
      balances as of December 31, 2006.





**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
      were classified as held-to-maturity as of December 31, 2006 and 2005 and were
      being accounted for at amortized cost. The following is a summary of securities:





December
                31, 2006
            
            December
                31, 2005Amortized
            
            
            
            AmortizedCost
            
            Cost
                Basis
            
            Cost
            
            Cost
                BasisCommercial
                Paper
            
            $
            995,561
            
            $
            999,704
            
            $
            4,981,666
            
            $
            4,992,666Municipal
                Bond Funds
            
            
            —
            
            
            —
            
            
            1,000,000
            
            
            1,000,071Amount
                classified as cash equivalents
            
            $
            995,561
            
            $
            999,704
            
            $
            5,981,666
            
            $
            5,992,737





During
      the years ended December 31, 2006, 2005 and 2004, the Company had no significant
      gross realized gains or losses on sales of securities.





F-10





**FAIR
      VALUE OF FINANCIAL INSTRUMENTS**





The
      carrying amount of certain of the Company's financial instruments, including
      cash, cash equivalents, restricted cash, marketable securities, accounts
      receivable, accounts payable, accrued expenses and short-term deferred revenue,
      approximate their fair value at December 31, 2006 and 2005 due to their short
      maturities.





**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, 2006 and 2005, was approximately $370,000 and $434,000,
      respectively.




During
      the years ended December 31, 2005 and 2004, the Company's VoIP telephony
      services business recorded charges to cost of revenue totaling approximately
      $71,000 and $1,477,000, respectively, 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.





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. 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 VoIP adapter inventory
      on-hand for $235,000 in cash. As a result, approximately $356,000 of additional
      provisions for excess and obsolete inventory were recorded in order to reflect
      the VoIP adapter inventory at net realizable value as of December 31, 2004.
      During 2004, the Company also made advance payments of approximately $299,000
      towards future purchases of adapter inventory. The Company recorded charges
      of
      approximately $77,250 and $221,000 during the years ended December 31, 2005
      and
      2004, respectively, to write down the value of such deposits on inventory
      purchases.





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.





**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.





At
      December 31, 2006, the Company had no goodwill and had no other intangible
      assets with indefinite lives. Intangible assets subject to amortization and
      included in the accompanying consolidated balance sheet as of December 31,
      2006,
      which consist of the values assigned to certain non-compete agreements, are
      being amortized on a straight-line basis over an estimated useful life of five
      years. See Note 5, "Impairment Charge," 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 consolidated financial
      statements as of December 31, 2004.




F-11




**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
      5, "Impairment Charge," for discussion of the impairment charge 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 statement
      of
      operations for the year ended December 31, 2004.





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
                LivesVoIP
                network equipment
              Capitalized
                software
              Other
                equipment
              Furniture
                and fixtures
              Leasehold
                improvements
            
            3
                years
              3
                years
              3
                years
              3-7
                years
              3-4
                years





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.





**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 in the Company’s Internet services division is generally limited
      due to the large number of customers of the business. Two customers of the
      computer games division represented an aggregate of approximately $155,000,
      or
      26%, of net consolidated accounts receivable as of December 31, 2006. Trade
      accounts receivable of the VoIP telephony services division as of December
      31,
      2006, which approximated $25,000, consisted entirely of funds held as a deposit
      by our credit card processor.




F-12




**REVENUE
      RECOGNITION**





***Continuing
      Operations***





***COMPUTER
      GAMES BUSINESSES***





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





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. The Company had no barter revenue during
      the
      years ended December 31, 2006 and 2005. Barter revenue represented approximately
      2% of consolidated net revenue from continuing operations for the year ended
      December 31, 2004.





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





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





***INTERNET
      SERVICES***





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





***VOIP
      TELEPHONY SERVICES***





VoIP
      telephony services net 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.





***MARKETING
      SERVICES -Discontinued Operations***





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





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




F-13





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





**ADVERTISING
      COSTS**





Advertising
      costs are expensed as incurred and are included in sales and marketing expense.
      Advertising costs were approximately $1,019,000, $463,000 and
      $2,294,000 **** for
      the
      years ended December 31, 2006, 2005 and 2004, respectively. Barter advertising
      costs were approximately 2% and 4% of total net revenue from continuing
      operations for the years ended December 31, 2006 and 2005, respectively. The
      Company incurred no barter advertising costs for the year ended December 31,
      2004.





**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 websites; editorial and content costs; and costs incurred in
      the
      development of our VoIP products. Product development costs and enhancements
      to
      existing products are charged to operations as incurred.





**STOCK-BASED
      COMPENSATION**





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





Prior
      to
      January 1, 2006, the Company had historically followed SFAS No. 123, "Accounting
      for Stock-Based Compensation," which permitted entities to continue to apply
      the
      provisions of Accounting Principles Board Opinion No. 25 ("APB 25") and provide
      pro forma net earnings (loss) disclosures for employee stock option grants
      as if
      the fair-value-based method defined in SFAS No. 123 had been applied. Under
      this
      method, compensation expense was recorded on the date of grant only if the
      then
      current market price of the underlying stock exceeded the exercise price. The
      following table presents the Company's pro forma historical net loss had the
      Company determined compensation cost based on the fair value at the grant date
      for all of its employee stock options issued under SFAS No. 123:




F-14


Year
                Ended December 31,2005
            
            2004Net
                loss - as reported
            
            $
            (11,510,048
            )
            $
            (24,273,201
            )Add:
                Stock-based employee compensation expense included in net loss as
                reported
            
            
            502,217
            
            
            416,472Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value method for all awards
            
            
            (1,242,169
            )
            
            (1,606,271
            )Net
                loss - pro forma
            
            $
            (12,250,000
            )
            $
            (25,463,000
            )Basic
                net loss per share - as reported
            
            $
            (0.06
            )
            $
            (0.19
            )Basic
                net loss per share - pro forma
            
            $
            (0.07
            )
            $
            (0.20
            )





During
      the year ended December 31, 2006, a total of 6,130,000 stock options were
      granted with a per share weighted-average fair value of $0.14 and whose exercise
      price equaled the market price of the stock on the date of grant. A total of
      5,922,250 stock options were granted during the year ended December 31, 2005
      with a per share weighted-average fair value of $0.10 and whose exercise price
      equaled the market price of the stock on the grant date. 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.





Fair
      values of stock options were calculated using the Black Scholes option-pricing
      method based on the assumptions noted in the following table. Expected
      volatilities are based on the historical volatility of theglobe’s Common Stock,
      over a time period that is consistent with the expected life of the option.
      Effective January 1, 2006, the Company began using the simplified method as
      allowed by SEC Staff Accounting Bulletin No. 107 to calculate the expected
      term
      of stock option grants, which is the average of the option’s weighted average
      vesting period and its contractual term. The risk fee interest rate is based
      on
      the U.S. Treasury yield in effect at the time of the grant.




Year
                Ended December 31,2006
            
            2005
            
            2004Risk-free
                interest rate
            
            
            4.00
                - 5.00
            %
            
            3.00
                - 4.00
            %
            
            3.00
            %Expected
                term / life
            
            
            3
                - 6 years
            
            
            3
                - 5 years
            
            
            3
                - 5 yearsVolatility
            
            
            115
                -150
            %
            
            160
            %
            
            160
            %Weighted
                average volatility
            
            
            140
            %
            
            160
            %
            
            160
            %Expected
                dividend rate
            
            
            0
            
            
            0
            
            
            0





**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.





F-15





**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 convertible preferred stock and convertible notes (using the
      if-converted method), if any, and the shares issuable upon the exercise of
      stock
      options and warrants (using the treasury stock method). Common equivalent shares
      are excluded from the calculation if their effect is anti-dilutive or if a
      loss
      from continuing operations is reported.





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




December
                31,2006
            
            2005
            
            2004Options
                to purchase common stock
            
            
            20,143,000
            
            
            15,373,000
            
            
            15,984,000Common
                shares issuable uponconversion
                of Convertible Notes
            
            
            68,000,000
            
            
            68,000,000
            
            
            —Common
                shares issuable upon exerciseof
                Warrants
            
            
            16,911,000
            
            
            8,776,000
            
            
            20,375,000Total
            
            
            105,054,000
            
            
            92,149,000
            
            
            36,359,000





**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 $17.0 million, $11.5 million and $24.3
      million for the years ended December 31, 2006, 2005 and 2004, respectively,
      which approximated the Company's reported net loss.





**RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS**





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





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




F-16




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





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





**RECLASSIFICATIONS**





Certain
      amounts in the prior year financial statements have been reclassified to conform
      to the current year presentation. In accordance with SFAS No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets”, the operations of SendTec
      have been accounted for in accordance with the provisions of SFAS No. 144 and
      the results of SendTec’s operations have been included in income from
      discontinued operations for the 2005 and 2004 periods.





**(2)
      GOING CONCERN CONSIDERATIONS**





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





As
      more
      fully discussed in Note 14, “Litigation,” the Company is a defendant in a
      lawsuit which was filed by MySpace, Inc. (“MySpace”) on June 1, 2006 in the
      United States District Court for the Central District of California (the
“Court”). The lawsuit alleges, among other things, that the Company sent
      unsolicited and unauthorized commercial email messages to MySpace members in
      violation of certain federal and state laws and the Company’s contract with
      MySpace.





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





F-17


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





The
      Company does not currently have the resources to both pay the $2,550,000
      settlement amount and to fund operations beyond April 2007. The Company intends
      to seek to raise capital or otherwise borrow funds with which to pay such amount
      and otherwise to fund operations. Although there is no commitment to do so,
      any
      such funds would most likely come primarily from Mr. Egan or affiliates of
      Mr.
      Egan or the Company, as the Company currently has no access to credit facilities
      with traditional third party lenders and has historically relied on borrowings
      from related parties to meet short-term liquidity needs. Any such capital raised
      would not be registered under the Securities Act of 1933 and would not be
      offered or sold in the United States absent registration or an applicable
      exemption from registration requirements. There can be no assurance that the
      Company will be successful in raising such capital or borrowing such funds
      and
      any capital raised will likely result in very substantial dilution of the number
      of shares outstanding or which could be outstanding upon the exercise or
      conversion of any derivative securities issued by the Company as part of such
      capital raise. The failure to pay the $2,550,000 to MySpace and/or the failure
      to satisfactorily provide the Security would result in a resumption of the
      litigation with MySpace and, in all likelihood, would have a material adverse
      effect on the Company, including the potential bankruptcy and cessation of
      business of the Company.





The
      Company continues to incur consolidated net losses and management believes
      that
      the Company will continue to be unprofitable in the foreseeable future. As
      of
      February 28, 2007, the Company had a net working capital deficit of
      approximately $7,300,000 (unaudited), inclusive of a cash and cash equivalents
      balance of approximately $4,000,000 (unaudited). Such working capital deficit
      includes a settlement liability of $2,550,000 owed to MySpace and an aggregate
      of $3,400,000 in secured convertible demand notes (the “Convertible Notes”) and
      accrued interest of approximately $611,000 due to entities controlled by the
      Company’s Chairman and Chief Executive Officer. Inasmuch as substantially all of
      the assets of the Company and its subsidiaries secure the Convertible Notes,
      in
      connection with any resulting proceeding to collect the indebtedness related
      to
      the Convertible Notes, the noteholders could seize and sell the assets of the
      Company and its subsidiaries, any or all of which would have a material adverse
      effect on the financial condition and future operations of the Company,
      including the potential bankruptcy or cessation of business of the
      Company.





**Management’s
      Plans**





It
      is our
      preference to avoid filing for protection under the U.S. Bankruptcy Code.
      However, in order to avoid such filing and continue as a going concern, we
      believe that, in addition to settling the MySpace litigation as discussed above,
      we must (i) quickly raise a sufficient amount of capital; (ii) successfully
      implement a business plan focused primarily on expanding our Tralliance Internet
      services revenue base, and reducing Tralliance and corporate overhead expenses;
      and (iii) successfully eliminate future losses incurred by our VoIP telephony
      services and computer games business segments by effectuating our planned
      shutdown and/or selling certain component assets of these businesses. There
      can
      be no assurance that the Company will be able to successfully complete any
      or
      all of the above actions which we believe are required in order to continue
      as a
      going concern.





F-18





**(3)
      DISCONTINUED OPERATIONS - SENDTEC, INC.**





On
      August
      10, 2005, the Company entered into an Asset Purchase Agreement with
      RelationServe Media, Inc. ("RelationServe") whereby the Company agreed to sell
      all of the business and substantially all of the net assets of its SendTec
      marketing services subsidiary to RelationServe for $37,500,000 in cash, subject
      to certain net working capital adjustments. On August 23, 2005, the Company
      entered into Amendment No. 1 to the Asset Purchase Agreement with RelationServe
      (the “1 st Amendment”
      and together with the original Asset Purchase Agreement, the “Purchase
      Agreement”). On October 31, 2005, the Company completed the asset sale.
      Including adjustments to the purchase price related to estimated excess working
      capital of SendTec as of the date of sale, the Company received an aggregate
      of
      $39,850,000 in cash pursuant to the Purchase Agreement. **** In
      accordance with the terms of an escrow agreement established as a source to
      secure the Company’s indemnification obligations under the Purchase Agreement,
      $1,000,000 of the purchase price and an aggregate of 2,272,727 shares of
      theglobe’s unregistered Common Stock (valued at $750,000 pursuant to the terms
      of the Purchase Agreement based upon the average closing price of the stock
      in
      the 10 day period preceding the closing of the sale) were placed into escrow.





Additionally,
      as contemplated by the Purchase Agreement, immediately following the asset
      sale,
      the Company completed the redemption of 28,879,097 shares of its Common Stock
      owned by six members of management of SendTec for approximately $11,604,000
      in
      cash pursuant to a Redemption Agreement dated August 23, 2005, (the “Redemption
      Payment”). Pursuant to a separate Termination Agreement, the Company also
      terminated and canceled 1,275,783 stock options and the contingent interest
      in
      2,062,785 earn-out warrants held by the six members of management in exchange
      for approximately $400,000 in cash. The Company also terminated 829,678 stock
      options of certain other non-management employees of SendTec and entered into
      bonus arrangements with a number of other non-management SendTec employees
      for
      amounts totaling approximately $600,000. Approximately $4,043,000 of the
      Redemption Payment was attributed to the “fair value” of the shares of Common
      Stock redeemed and recorded as treasury shares. The “fair value” for financial
      accounting purposes was calculated based on the closing price of the Company’s
      Common Stock as reflected on the OTCBB on August 10, 2005, the date the
      principal terms of the Redemption Agreement were announced publicly. The closing
      of the redemption occurred on October 31, 2005. The remaining portion of the
      Redemption Payment, or approximately $7,561,000, was recorded as a reduction
      to
      the gain on the sale of the SendTec business, as the excess of the price paid
      to
      redeem the shares over the “fair value” for financial accounting purposes was
      attributed to the sale in accordance with FASB Technical Bulletin 85-6.





On
      March
      31, 2006, a partial release of $750,000 of the escrowed cash was made to the
      Company pursuant to the terms of the escrow agreement, less $318,750 of cash
      due
      to RelationServe in final settlement of the purchase price net working capital
      adjustments. On December 22, 2006, the remaining $250,000 of escrowed cash,
      as
      well as the Common Stock held in escrow, was released to the Company.





Results
      of operations for SendTec have been reported separately as “Discontinued
      Operations” in the accompanying consolidated statements of operations for the
      years ended December 31, 2005 and 2004. Summarized financial information for
      the
      discontinued operations of SendTec was as follows:




Year
                Ended December 31,2005
            
            2004Net
                revenue, net of intercompany eliminations
            
            $
            31,872,229
            
            $
            12,542,241Income
                from operations
            
            $
            1,014,430
            
            $
            973,368Provision
                for income taxes
            
            
            (945,629
            )
            
            (370,891
            )Income
                from operations, net of tax
            
            
            68,801
            
            
            602,477Gain
                on sale of business
            
            
            15,017,621
            
            
            —Provision
                for income taxes
            
            
            (13,248,090
            )
            
            —Gain
                on sale, net of tax
            
            
            1,769,531
            
            
            —Net
                income from discontinued operations, net of taxes
            
            $
            1,838,332
            
            $
            602,477




F-19


The
      Company originally acquired SendTec on September 1, 2004. 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 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.





In
      addition, warrants to acquire shares of the Company’s Common Stock would be
      issued to the former shareholders of SendTec when and if SendTec exceeded
      forecasted operating income, as defined, of $10.125 million, for the year ended
      December 31, 2005. The number of earn-out warrants issuable ranged from an
      aggregate of approximately 250,000 to 2,500,000 (if actual operating income
      exceeded the forecast by at least 10%). Pursuant to the Termination Agreement
      mentioned above, the contingent interest in 2,062,785 of the earn-out warrants
      was canceled effective October 31, 2005. The remainder of the earn-out warrants
      expired on December 31, 2005, as the operating income target was not achieved.





As
      part
      of the SendTec acquisition transaction, certain executives of SendTec entered
      into new employment agreements with SendTec. The employment agreements each
      had
      a term of five years and contained certain non-compete provisions for periods
      as
      specified by the agreements. The $1,800,000 value assigned to the non-compete
      agreements was being amortized on a straight-line basis over five years.
      Pursuant to the Termination Agreement mentioned above, the employment agreements
      were terminated effective October 31, 2005 and the unamortized balance of the
      non-compete intangible was charged to discontinued operations’ expense.





**(4)
      ACQUISITION OF TRALLIANCE CORPORATION**





On
      February 25, 2003, the Company entered into a Loan and Purchase Option
      Agreement, as amended, with Tralliance, an Internet related business venture,
      pursuant to which it agreed to fund, in the form of a loan, at the discretion
      of
      the Company, Tralliance's operating expenses and obtained the option to acquire
      all of the outstanding capital stock of Tralliance in exchange for, when and
      if
      exercised, $40,000 in cash and the issuance of an aggregate of 2,000,000
      unregistered restricted shares of the Company's Common Stock. The Loan was
      secured by a lien on the assets of the venture. On May 5, 2005, Tralliance
      and
      the Internet Corporation for Assigned Names and Numbers ("ICANN") entered into
      an agreement designating Tralliance as the registry for the ".travel" top-level
      domain. On May 9, 2005, the Company exercised its option to acquire all of
      the
      outstanding capital stock of Tralliance. The purchase price consisted of the
      issuance of 2,000,000 shares of the Company’s Common Stock, warrants to acquire
      475,000 shares of the Company’s Common Stock and $40,000 in cash. The warrants
      are exercisable for a period of five years at an exercise price of $0.11 per
      share. As part of the transaction, 10,000 shares of the Company’s Common Stock
      were also issued to a third party in payment of a finder's fee resulting from
      the acquisition. The Common Stock issued as a result of the acquisition of
      Tralliance is entitled to certain "piggy-back" registration rights. In addition,
      as part of the transaction, the Company agreed to pay approximately $154,000
      in
      outstanding liabilities of Tralliance immediately after the closing of the
      acquisition.





Upon
      acquisition, the then existing CEO and CFO of Tralliance entered into employment
      agreements, which included certain non-compete provisions, whereby each would
      agree to remain in the employ of Tralliance for a period of two years in
      exchange for annual base compensation totaling $200,000 to each officer, plus
      participation in a bonus pool based upon the pre-tax income of the venture.





The
      value
      assigned to the non-compete provisions of the employment agreements is being
      amortized on a straight-line basis over a five year estimated useful life.
      Annual amortization expense of the intangible assets is estimated to be:
      $158,047 for each of 2007 through 2009 and $52,683 in 2010. The related
      accumulated amortization as of December 31, 2006 and 2005 was $263,412 and
      $75,201, respectively. Amortization expense totaled $188,211 and $75,201 for
      the
      years ended December 31, 2006 and 2005, respectively.




F-20





Advances
      to Tralliance totaled $1,281,500 prior to its acquisition by the Company. Due
      to
      the uncertainty of the ultimate collectibility of the Loan, the Company had
      historically provided a reserve equal to the full amount of the funds advanced
      to Tralliance. For the years ended December 31, 2005 and 2004, additions to
      the
      reserve of $280,000 and $506,500, respectively, were included in other expense
      in the accompanying consolidated statements of operations.





**(5)
      IMPAIRMENT CHARGE**





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 its 2004 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.





**(6)
      INTANGIBLE ASSETS**





As
      discussed in Note 4, “Acquisition of Tralliance Corporation,” upon the May 9,
      2005 acquisition of Tralliance, the then existing CEO and CFO of Tralliance
      entered into employment agreements which include certain non-compete provisions
      as specified by the agreements. At December 31, 2006 and 2005, intangible assets
      consist of the $790,236 value assigned to the non-compete agreements which
      is
      being amortized on a straight-line basis over five years. Accumulated
      amortization as of December 31, 2006 and 2005 totaled $263,412 and $75,201,
      respectively.





As
      discussed in Note 5, "Impairment Charge," the Company performed an evaluation
      of
      the recoverability of the long-lived assets of its VoIP telephony services
      division, and as a result, effective December 31, 2004, the Company wrote-off
      the unamortized balance of its digital telephony intangible 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, as well as patent application costs.





During
      the years ended December 31, 2006 and 2005, intangible asset amortization
      totaled $188,211 and $75,201, respectively. During the year ended December
      31,
      2004, intangible asset amortization totaled $102,834 which represented
      amortization related to the VoIP intangible assets prior to their write-off
      as
      of December 31, 2004.





As
      of
      December 31, 2006, annual amortization expense of intangible assets is projected
      to be: $158,047 for each of 2007 through 2009 and $52,683 in 2010.




**(7)
      PROPERTY AND EQUIPMENT**





Property
      and equipment consisted of the following:




December
                31,2006
            
            2005VoIP
                network equipment and software
            
            $
            1,888,321
            
            $
            3,056,971Other
                equipment
            
            
            878,186
            
            
            870,706Capitalized
                software costs
            
            
            339,154
            
            
            262,349Furniture
                and fixtures
            
            
            204,686
            
            
            202,813Leasehold
                improvements
            
            
            7,007
            
            
            7,0073,317,354
            
            
            4,399,846Less:
                Accumulated depreciation and amortization
            
            
            2,951,830
            
            
            2,944,193$
            365,524
            
            $
            1,455,653




F-21




**(8)
      ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**





Accrued
      expenses and other current liabilities consisted of the following:





December
                31,2006
            
            2005Accrued
                legal settlement
            
            $
            2,550,000
            
            $
            —Interest
                payable on 10% promissory notes due affiliates
            
            
            556,164
            
            
            216,164Other
            
            
            1,178,491
            
            
            1,961,651$
            4,284,655
            
            $
            2,177,815





**(9)
      DEBT**





Debt
      consisted of the following:




December
                31,2006
            
            200510%
                Convertible Promissory Notes due to affiliates; due on demand
            
            $
            3,400,000
            
            $
            3,400,000Obligations
                payable in Canadian dollars; paid in fullSeptember
                2006
            
            
            —
            
            
            28,4473,400,000
            
            
            3,428,447Less:
                short-term portion
            
            
            3,400,000
            
            
            3,428,447Long-term
                portion
            
            $
            —
            
            $
            —





On
      April
      22, 2005, E&C Capital Partners, LLLP and E&C Capital Partners II, LLLP
      (the "Noteholders"), entities controlled by the Company's Chairman and Chief
      Executive Officer, entered into a Note Purchase Agreement (the "Agreement")
      with
      theglobe pursuant to which they acquired secured demand convertible promissory
      notes (the "Convertible Notes") in the aggregate principal amount of $1,500,000.
      Under the terms of the Agreement, the Noteholders were also granted the optional
      right, for a period of 90 days from the date of the Agreement, to purchase
      additional Convertible Notes such that the aggregate principal amount of
      Convertible Notes issued under the Agreement could total $4,000,000 (the
      "Option"). On June 1, 2005, the Noteholders exercised a portion of the Option
      and acquired an additional $1,500,000 of Convertible Notes. On July 18, 2005,
      the Noteholders exercised the remainder of the Option and acquired an additional
      $1,000,000 of Convertible Notes.





The
      Convertible Notes are convertible at the option of the Noteholders into shares
      of the Company's Common Stock at an initial price of $0.05 per share. Through
      December 31, 2006, an aggregate of $600,000 of Convertible Notes have been
      converted by the Noteholders into an aggregate of 12,000,000 shares of the
      Company’s Common Stock. Assuming full conversion of all Convertible Notes which
      remain outstanding as of December 31, 2006, an additional 68,000,000 shares
      of
      the Company's Common Stock would be issued to the Noteholders. The Convertible
      Notes provide for interest at the rate of ten percent per annum and are secured
      by a pledge of substantially all of the assets of the Company. The Convertible
      Notes are due and payable five days after demand for payment by the Noteholders.





As
      the
      Notes were immediately convertible into common shares of the Company at
      issuance, an aggregate of $4,000,000 of non-cash interest expense was recorded
      during the year ended December 31, 2005 as a result of the beneficial conversion
      features of the Convertible Notes. The value attributed to the beneficial
      conversion features was calculated by comparing the fair value of the underlying
      common shares of the Convertible Notes on the date of issuance based on the
      closing price of theglobe's Common Stock as reflected on the OTCBB to the
      conversion price and was limited to the aggregate proceeds received from the
      issuance of the Convertible Notes.





As
      discussed in Note 3, “Discontinued Operations - SendTec, Inc.,” 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. The subordinated
      promissory note provided for interest at the rate of four percent per annum
      and
      was due on September 1, 2005. The Company paid the principal and interest due
      under the terms of the subordinated promissory note on October 31, 2005,
      including default interest at a rate of 15% per annum for the period the debt
      was outstanding subsequent to the original due date.




F-22





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 Secured Convertible Notes issued to E&C
      Capital Partners, LLLP 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. 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.





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.





On
      May
      22, 2003, E&C Capital Partners, LLLP, 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. In addition, E&C Capital Partners, LLLP 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. In connection with the March 2004 private
      offering of the Company’s Common Stock discussed in Note 10, “Stockholders’
Equity”, E&C Capital Partners, LLLP, converted the $1,750,000 of Secured
      Convertible Notes and exercised (on a “cashless” basis) the 3,888,889 Warrant
      issued in connection with the $1,750,000 Secured Convertible Notes.





**(10)
      STOCKHOLDERS' EQUITY**





On
      November 22, 2006, the Company entered into certain Marketing Services
      Agreements (the “Marketing Services Agreements”) with two entities whereby the
      entities agreed to market certain of the Company’s products in exchange for
      certain commissions and promotional fees and which granted the Company exclusive
      right to certain uses of a tradename in connection with certain of the Company’s
      websites. Additionally, on November 22, 2006, in connection
      with the Marketing Services Agreements, the Company entered into a Warrant
      Purchase Agreement with Carl Ruderman, the controlling shareholder of the
      entities. The Warrant Purchase Agreement provides for the issuance to Mr.
      Ruderman of one warrant to purchase 5,000,000 shares of the Company’s Common
      Stock at an exercise price of $0.15 per share with a three year term and a
      second warrant to purchase 5,000,000 shares of the Company’s Common Stock at an
      exercise price of $0.15 per share with a term of four years. Each warrant
      provides for the extension of the exercise term by an additional three years
      if
      certain criteria are met under the Marketing Services Agreements. The Warrant
      Purchase Agreement grants to Mr. Ruderman “piggy-back” registration rights with
      respect to the shares of the Company’s Common Stock issuable upon exercise of
      the warrants. The $515,262 fair value of the warrants was determined using
      the
      Black Scholes model and was recorded as a charge to sales and marketing expense
      and additional paid in capital in the accompanying 2006 consolidated financial
      statements.




F-23





In
      connection with the issuance of the warrants, on November 22, 2006, Mr. Ruderman
      entered into a Stockholders’ Agreement with the Company’s chairman and chief
      executive officer, the Company’s president and certain of their affiliates.
      Pursuant to the Stockholders’ Agreement, Mr. Ruderman granted an irrevocable
      proxy over the shares issuable upon exercise of the warrants to E&C Capital
      Partners, LLLP and granted a right of first refusal over his shares to all
      of
      the other parties to the Stockholders’ Agreement. Mr. Ruderman also agreed to
      sell his shares under certain circumstances in which the other parties to the
      Stockholders’ Agreement have agreed to sell their respective shares. Mr.
      Ruderman was also granted the right to participate in certain sales of the
      Company’s Common Stock by the other parties to the Stockholders’
Agreement.





On
      December 31, 2005, the Company’s Board of Directors authorized the retirement of
      699,281 common shares held in treasury.





As
      discussed in Note 3, "Discontinued Operations - SendTec, Inc.," the Company
      completed the sale of the business and substantially all of the net assets
      of
      its SendTec marketing services subsidiary on October 31, 2005. As contemplated
      by the Purchase Agreement, immediately following the asset sale, the Company
      completed the redemption of 28,879,097 shares of its Common Stock owned by
      six
      members of management of SendTec for approximately $11,604,000 in cash pursuant
      to a Redemption Agreement dated August 23, 2005 (the “Redemption Payment”).
      Approximately $4,043,000 of the Redemption Payment was attributed to the “fair
      value” of the shares of Common Stock redeemed and recorded as treasury shares.
      The “fair value” for financial accounting purposes was calculated based on the
      closing price of the Company’s Common Stock as reflected on the OTCBB on August
      10, 2005, the date the principal terms of the Redemption Agreement were
      announced publicly. The closing of the redemption occurred on October 31, 2005.
      The remaining portion of the Redemption Payment, or approximately $7,561,000,
      was recorded as a reduction to the gain on the sale of the SendTec business,
      as
      the excess of the price paid to redeem the shares over the “fair value” for
      financial accounting purposes was attributed to the sale in accordance with
      FASB
      Technical Bulletin 85-6. The 28,879,097 common shares redeemed were retired
      effective October 31, 2005. Pursuant to a separate Termination Agreement, the
      Company also terminated and canceled 1,275,783 stock options and the contingent
      interest in 2,062,785 earn-out warrants held by the six members of management
      in
      exchange for approximately $400,000 in cash.





In
      accordance with the terms of an escrow agreement established as a source to
      secure the Company’s indemnification obligations under the Purchase Agreement,
      $1,000,000 of the purchase price and an aggregate of 2,272,727 shares of
      theglobe’s unregistered Common Stock (valued at $750,000 pursuant to the terms
      of the Purchase Agreement based upon the average closing price of the stock
      in
      the 10 day period preceding the closing of the sale) were placed into escrow.
      During the year ended December 31, 2006, the escrowed cash and shares of the
      theglobe’s Common Stock were released to the Company and the common shares were
      retired.





The
      Company originally acquired SendTec on September 1, 2004. 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 17,500,500
      shares of the Company's Common Stock effective 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), and (iv) the issuance of a subordinated promissory note in the amount
      of $1,000,009.




F-24




As
      more
      fully described in Note 4, “Acquisition of Tralliance Corporation,” on May 9,
      2005, the Company exercised its option to acquire all of the outstanding capital
      stock of Tralliance. The purchase price consisted of the issuance of 2,000,000
      shares of the Company’s Common Stock and warrants to acquire 475,000 shares of
      the Company’s Common Stock, as well as the payment of $40,000 in cash. The
      warrants are exercisable for a period of five years at an exercise price of
      $0.11 per share. The Common Stock issued as a result of the acquisition of
      Tralliance is entitled to certain “piggy-back” registration rights.





Reference
      should be made to Note 9, “Debt,” for the discussion of a Note Purchase
      Agreement entered into by certain related parties and theglobe on April 22,
      2005, providing for the issuance of an aggregate of $4,000,000 of Convertible
      Notes. The Convertible Notes are convertible at the option of the Noteholders
      into shares of the Company's Common Stock at an initial price of $0.05 per
      share. Through December 31, 2006, an aggregate of $600,000 of Convertible Notes
      had been converted by the Noteholders into an aggregate of 12,000,000 shares
      of
      the Company’s Common Stock. Assuming full conversion of all of the Convertible
      Notes which remain outstanding as of December 31, 2006, 68,000,000 shares of
      the
      Company’s Common Stock would be issued to the Noteholders.





In
      March
      2004, theglobe 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, 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, 2006,
      approximately 510,000 of the Warrants remain outstanding. **** 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. All of the shares underlying the warrant
      had
      been issued by December 31, 2005.





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, LLLP, 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, Inc., 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.





**(11)
      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.




F-25





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
      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. Stock option awards are generally granted with an
      exercise price equal to the market price of theglobe’s Common Stock at the date
      of grant with 25% of the stock option grant vesting immediately and the
      remainder vesting equally over the next twelve quarters.





A
      total
      of 6,130,000 stock options were granted during the year ended December 31,
      2006.
      The 2006 total included the issuance of 550,000 stock options in connection
      with
      a consulting agreement which will vest only upon achievement of certain
      performance targets, as well as grants of 250,000 stock options to other
      non-employees. Options were granted during 2005 for a total of 5,922,250 shares
      of Common Stock, including grants of 775,000 stock options to non-employees.
      During 2004, a total of 7,749,595 stock options were granted, of which 415,000
      were granted to non-employees.





As
      discussed in Note 3, "Discontinued Operations - SendTec, Inc.," 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 had exercise prices of
      $0.06
      and 700,497 had exercise prices of $0.27 per share. The Company also granted
      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. Additionally, the Company
      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 exceeded
      certain forecasted operating income targets for the year ending December 31,
      2005.





As
      a
      result of the sale of the SendTec business on October 31, 2005, and pursuant
      to
      a Termination Agreement, the Company terminated and canceled 1,275,783 stock
      options and the contingent interest in 2,062,785 earn-out warrants held by
      the
      six members of management in exchange for approximately $400,000 in cash. The
      Company also terminated 829,678 stock options of certain other non-management
      employees of SendTec and entered into bonus
      arrangements with a number of other non-management SendTec employees for amounts
      totaling approximately $600,000. Remaining outstanding stock options related
      to
      the bonus option pool which was established as of the acquisition, totaling
      477,000 options, were also terminated as the forecasted operating income targets
      for the year ended December 31, 2005 had not been achieved.




F-26





Stock
      option exercises during the years ended December 31, 2006, 2005 and 2004,
      resulted in cash inflows to the Company of $18,420, $166,841 and $184,546,
      respectively. The corresponding intrinsic value as of exercise date of the
      349,474 stock options exercised during the year ended December 31, 2006 was
      $119,628. Intrinsic values as of exercise date of the 2,001,661 and 639,000
      stock options exercised during the years ended December 31, 2005 and 2004 were
      $418,268 and $416,070, respectively.





Stock
      option activity during the year ended December 31, 2006 was as follows:




WeightedNumber
                of
            
            Weighted
                Average Exercise
            
            Average
                Remaining Contractual
            
            Aggregate
                IntrinsicOptions
            
            Price
            
            Term
            
            ValueOutstanding
                at December 31, 2005
            
            
            15,373,103
            
            $
            0.46Granted
            
            
            6,130,000
            
            
            0.17Exercised
            
            
            (349,474
            )
            
            0.05Canceled
            
            
            (1,011,009
            )
            
            0.73Outstanding
                at December 31, 2006
            
            
            20,142,620
            
            $
            0.36
            
            
            6.8
                years
            
            $
            195,700Exercisable
                at December 31, 2006
            
            
            14,905,815
            
            $
            0.43
            
            
            6.8
                years
            
            $
            195,700Options
                available at December 31, 2006
            
            
            2,841,741





A
      total
      of $449,749 of employee stock compensation expense was charged to operating
      expenses during the year ended December 31, 2006, including $13,584 resulting
      from modifications made to stock option grants to accelerate vesting upon
      termination of employees. Prior to the adoption of SFAS No. 123R on January
      1,
      2006, the Company had applied APB Opinion No. 25 in accounting for grants to
      employees pursuant to stock option plans. Compensation cost of $20,987 was
      recorded to operating expenses of continuing operations during the year ended
      December 31, 2005, primarily related to vesting of prior year employee option
      grants with below-market exercise prices. During the year ended December 31,
      2004, compensation cost of $188,450 was charged to operating expenses of
      continuing operations for stock options granted to employees at exercise prices
      below fair market value. In addition, $28,000 and $17,188 of stock compensation
      expense was recorded during the years ended December 31, 2005 and 2004,
      respectively, as a result of the accelerated vesting of stock options issued
      to
      certain terminated employees. Results of operations for the year ended December
      31, 2004 also included a credit of $22,668 recorded in connection with re-priced
      stock options issued to employees in 2000.





Compensation
      cost charged to operating expenses of continuing operations in connection with
      stock options granted in recognition of services rendered by non-employees
      was
      $109,199, $176,050 and $463,046, for the years ended December 31, 2006, 2005
      and
      2004, respectively. During 2006, the Company granted 550,000 stock options
      in
      connection with a consulting agreement whereby the stock options immediately
      vest upon the attainment of certain sales, marketing and promotional targets.
      In
      accordance with SFAS No. 123R, no stock compensation cost has been recognized
      in
      the accompanying consolidated statement of operations for the year ended
      December 31, 2006, as the performance targets had not yet been
      achieved.





F-27





At
      December 31, 2006, there was approximately $542,000 of unrecognized compensation
      expense related to unvested stock options, excluding the 550,000 options which
      vest on the achievement of certain performance targets, which is expected to
      be
      recognized over a weighted-average period of 1.5 years.





**(12)
      INCOME TAXES**





The
      total
      provision (benefit) for income taxes is summarized as follows:


Year
                  Ended December 31,2006
              
              2005
              
              2004Continuing
                  operations
              
              $
              124,313
              
              $
              (13,613,538
              )
              $
              (370,891
              )Discontinued
                  operations
              
              
              —
              
              
              14,193,719
              
              
              370,891$
              124,313
              
              $
              580,181
              
              $
              —




The
      provision (benefit) attributable to the loss from continuing operations before
      income taxes was as follows:




Year
                Ended December 31,2006
            
            2005
            
            2004Current:Federal
            
            $
            —
            
            $
            —
            
            $
            —State
            
            
            124,313
            
            
            —
            
            
            —124,313
            
            
            —
            
            
            —Deferred:Federal
            
            
            —
            
            
            (12,193,647
            )
            
            (332,207
            )State
            
            
            —
            
            
            (1,419,891
            )
            
            (38,684
            )—
            
            
            (13,613,538
            )
            
            (370,891
            )Provision
                (benefit) for income taxes
            
            $
            124,313
            
            $
            (13,613,538
            )
            $
            (370,891
            )




The
      following is a reconciliation of the federal income tax provision (benefit)
      at
      the federal statutory rate to the Company’s tax benefit attributable to
      continuing operations:




Year
                Ended December 31,2006
            
            2005
            
            2004Statutory
                federal income tax rate
            
            
            34.00
            %
            
            34.00
            %
            
            34.00
            %Beneficial
                conversion interest
            
            
            —
            
            
            (5.04
            )
            
            (0.29
            )Nondeductible
                items
            
            
            (0.08
            )
            
            (2.19
            )
            
            (0.05
            )State
                income taxes, net of federal benefit
            
            
            3.22
            
            
            3.96
            
            
            3.96Change
                in valuation allowance
            
            
            (39.09
            )
            
            19.92
            
            
            (20.17
            )Change
                in effective tax rate
            
            
            —
            
            
            —
            
            
            (11.52
            )Other
            
            
            1.22
            
            
            (0.15
            )
            
            (4.46
            )Effective
                tax rate
            
            
            (0.73
            )%
            
            50.50
            %
            
            1.47
            %





F-28




The
      tax
      effects of temporary differences that give rise to significant portions of
      the
      deferred tax assets and deferred tax liabilities at December 31, 2006 and 2005
      are presented below.




December
                31,
            
            December
                31,2006
            
            2005Deferred
                tax assets (liabilities):Net
                operating loss carryforwards
            
            $
            61,527,000
            
            $
            55,862,000Issuance
                of warrants
            
            
            1,182,000
            
            
            922,000Allowance
                for doubtful accounts
            
            
            —
            
            
            48,000Inventory
                reserve
            
            
            147,000
            
            
            164,000AMT
                tax credit
            
            
            313,000
            
            
            313,000Litigation
                settlement accrual
            
            
            977,000
            
            
            —Depreciation
                and amortization
            
            
            107,000
            
            
            (104,000
            )Other
            
            
            377,000
            
            
            203,000Total
                gross deferred tax assets
            
            
            64,630,000
            
            
            57,408,000Less:
                valuation allowance
            
            
            (64,630,000
            )
            
            (57,408,000
            )Total
                net deferred tax assets
            
            $
            —
            
            $
            —





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 $64.6 million and $57.4 million as of December 31,
      2006
      and 2005, respectively. The net change in the total valuation allowance was
      $7.2
      million and $6.4 million for the years ended December 31, 2006 and 2005,
      respectively. The Company had a tax benefit in 2005 of $13.6 million resulting
      from the effect of changes in the valuation assessment of current and prior
      year
      net operating losses, due to the sale of SendTec.





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 $64.6 million as of December 31, 2006, subsequently recognized
      tax
      benefits, if any, in the amount of $6.4 million will be applied directly to
      contributed capital.





At
      December 31, 2006, the Company had net operating loss carryforwards available
      for U.S. tax purposes of approximately $162.1 million. These carryforwards
      expire through 2026. 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. Due to various
      significant changes in our ownership interests, as defined in the Internal
      Revenue Code of 1986, as amended, the Company has substantially limited 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.




**(13)
      COMMITMENTS**





**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. 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 31:2007
            
            $
            503,0002008
            
            
            36,000$
            539,000





F-29




**REGISTRY
      COMMITMENTS**





Tralliance
      has entered into various agreements with unrelated third parties for the
      outsourcing of certain marketing, administrative and registry functions. Fees
      for some of these services vary based on transaction levels, but the agreements
      generally provide for annual and/or monthly payments, and in the case of one
      agreement specifies minimum payments of $100,000 annually. The term of the
      agreement which specifies the minimum payment of $100,000 annually continues
      for
      as long as the agreement designating Tralliance as the sole registry for the
      “.travel” top-level domain by the Internet Corporation for Assigned Names and
      Numbers (“ICANN”) is in effect, including any renewal periods. The initial term
      of the agreement with ICANN is ten years. Commitments under such marketing,
      administrative and registry agreements are as follows:




Year
                ending December 31:2007
            
            $
            329,0002008
            
            
            201,0002009
            
            
            110,0002010
            
            
            110,0002011
            
            
            110,000Thereafter
            
            
            394,000$
            1,254,000





**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 the Company’s 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 $640,000 (as amended) 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.





On
      October 4, 2004, the Company entered into a new employment agreement with its
      current Chief Technical Officer (“CTO”) which provides for a base salary of
      $150,000 per year. The agreement had an initial term of two years and
      automatically renewed for an additional two years upon the expiration of the
      initial term of the agreement.





F-30




The
      agreement also contains certain non-compete provisions and provides for
      specified severance payments. Effective March 16, 2007, the Company and the
      CTO
      entered into an employment termination agreement whereby each agreed to the
      mutual release of certain obligations under the original employment agreement,
      including the CTO’s right to receive any severance payments.





As
      discussed in Note 4, “Acquisition of Tralliance Corporation,” as part of the
      Tralliance acquisition on May 9, 2005, the then existing CEO and CFO of
      Tralliance entered into employment agreements, which include certain non-compete
      provisions, whereby each would agree to remain in the employ of Tralliance
      for a
      period of two years in exchange for annual base compensation totaling $200,000
      to each officer, plus participation in a bonus pool based upon the pre-tax
      income of the venture.





**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 charged to
      continuing operations for the years ended December 31, 2006, 2005 and 2004
      totaled approximately $700,000, $761,000 and $606,000, 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 years ended
      December 31, 2006, 2005 and 2004, as noted in the preceding paragraph included
      approximately $416,000, $353,000 and $334,000, respectively, of expense related
      to this sublease.





Tralliance
      Corporation, which was acquired May 9, 2005, subleases office space in New
      York
      City on a month-to-month basis from an entity controlled by its President for
      approximately $3,400 per month.





The
      approximate future minimum lease payments under noncancelable operating leases
      with initial or remaining terms of one year or more at December 31, 2006, were
      as follows:





2007
            
            $
            248,0002008
            
            
            12,0002009
            
            
            4,000$
            264,000





**OTHER
      COMMITMENTS**





The
      Company’s subsidiaries are a party to two separate agreements which contain
      cancellation clauses upon termination of the contracts. These contracts include
      fulfillment services in connection with our magazine publications and Internet
      marketing services. The financial commitment under the two contracts for the
      year ended December 31, 2007 is estimated to total approximately $240,000.





**(14)
      LITIGATION**





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




F-31





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





On
      March
      15, 2007, the Company entered into a Settlement Agreement with MySpace whereby
      it agreed to pay MySpace $2,550,000 on or before April 5, 2007 in exchange
      for a
      mutual release of all claims against one another, including any claims against
      the Company’s directors and officers. As part of the settlement, Michael Egan,
      the Company’s CEO, who is also an affiliate of the Company, agreed to enter into
      an agreement with MySpace on or before April 5 th pursuant
      to which he would, among other things, provide a letter of credit, cash or
      other
      equivalent security (collectively, “Security”) in form and substance
      satisfactory to MySpace. Such Security is to expire and be released on the
      100 th day
      following the Company’s payment of the foregoing $2,550,000 so long as no
      bankruptcy petition, assignment for the benefit of creditors or like
      liquidation, reorganization or insolvency proceeding is instituted or filed
      related to the Company during such 100-day period. In accordance with SFAS
      No.
      5, “Accounting for Contingencies,” the payment required by the Settlement
      Agreement has been included in accrued liabilities in the accompanying
      consolidated balance sheet as of December 31, 2006 and has been charged to
      general and administrative expenses in the accompanying consolidated statement
      of operations for the year ended December 31, 2006.





The
      Company does not currently have the resources to both pay the $2,550,000
      settlement amount and to fund operations beyond April 2007. The Company intends
      to seek to raise capital or otherwise borrow funds with which to pay such amount
      and otherwise to fund operations. Although there is no commitment to do so,
      any
      such funds would most likely come primarily from Mr. Egan or affiliates of
      Mr.
      Egan or the Company. Any such capital raised would not be registered under
      the
      Securities Act of 1933 and would not be offered or sold in the United States
      absent registration or an applicable exemption from registration requirements.
      There can be no assurance that the Company will be successful in raising such
      capital or borrowing such funds and any capital raised will likely result in
      very substantial dilution of the number of shares outstanding or which could
      be
      outstanding upon the exercise or conversion of any derivative securities issued
      by the Company as part of such capital raise. The failure to pay the $2,550,000
      to MySpace and/or the failure to satisfactorily provide the Security would
      result in a resumption of the litigation with MySpace and, in all likelihood,
      would have a material adverse effect on the Company, including the potential
      bankruptcy and cessation of business of the Company.





On
      October 4, 2005, Sprint Communications Company, L.P. (“Sprint”) filed a
      Complaint in the United States District Court for the District of Kansas against
      theglobe, theglobe’s subsidiary, tglo.com (formerly known as voiceglo Holdings,
      Inc. or “voiceglo”), and Vonage Holdings Corp. (“Vonage”). On October 12, 2005,
      Sprint filed a First Amended Complaint naming Vonage America, Inc. (“Vonage
      America”) as an additional defendant. Neither theglobe nor voiceglo has any
      affiliation with Vonage or Vonage America. Sprint alleged that theglobe and
      voiceglo had made unauthorized use of “inventions” described and claimed in
      seven patents held by Sprint. Sprint sought monetary and injunctive relief
      for
      this alleged infringement. On November 21, 2005, theglobe and voiceglo filed an
      Answer to Sprint’s First Amended Complaint, denying infringement and interposing
      affirmative defenses, including that each of the asserted patents were invalid.
      voiceglo counterclaimed against Sprint for a declaratory judgment of
      non-infringement and invalidity. On January 18, 2006, the court issued a
      Scheduling Order which called for, among other
      things, discovery to be completed by December 29, 2006, and for trial to
      commence August 7, 2007. On August 22, 2006, the Company, together with its
      subsidiary, and Sprint entered into a settlement agreement (the “Settlement”)
      which resolved the pending patent infringement lawsuit. As part of the
      Settlement, the Company and its subsidiary agreed to enter into a non-exclusive
      license under certain of Sprint’s patents.




F-32





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





The
      lawsuits purport to be class actions filed on behalf of purchasers of the stock
      of the Company during the period from November 12, 1998 through December 6,
      2000. Plaintiffs allege that the underwriter defendants agreed to allocate
      stock
      in the Company's initial public offering to certain investors in exchange for
      excessive and undisclosed commissions and agreements by those investors to
      make
      additional purchases of stock in the aftermarket at pre-determined prices.
      Plaintiffs allege that the Prospectus for the Company's initial public offering
      was false and misleading and in violation of the securities laws because it
      did
      not disclose these arrangements. On December 5, 2001, an amended complaint
      was
      filed in one of the actions, alleging the same conduct described above in
      connection with the Company's November 23, 1998 initial public offering and
      its
      May 19, 1999 secondary offering. A Consolidated Amended Complaint, which is
      now
      the operative complaint, was filed in the Southern District of New York on
      April
      19, 2002. The action seeks damages in an unspecified amount. On February 19,
      2003, a motion to dismiss all claims against the Company was denied by the
      Court. On October 13, 2004, the Court certified a class in six of the
      approximately 300 other nearly identical actions (the “focus cases”) and noted
      that the decision is intended to provide strong guidance to all parties
      regarding class certification in the remaining cases. The Underwriter Defendants
      appealed the decision and the Second Circuit vacated the district court’s
      decision granting class certification in those six cases on December 5, 2006.
      Plaintiffs 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. It is unclear what impact the Second Circuit’s decision vacating
      class certification in the six focus cases will have on the settlement, which
      has not yet been finally approved by the Court. On
      December 14, 2006, Judge Scheindlin held a hearing. Plaintiffs informed the
      Court that they planned to file a petition for rehearing and rehearing *en
      banc* .
      The
      Court stayed all proceedings, including a decision on final approval of the
      settlement and any amendments of the complaints, pending the Second Circuit’s
      decision on Plaintiffs’ petition for rehearing. Plaintiffs filed the petition
      for rehearing and rehearing *en
      banc* on
      January 5, 2007.





Among
      other provisions, if it is ultimately approved by the Court, 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. On
      April
      20, 2006, JPMorgan Chase and the Plaintiffs reached a preliminary agreement
      to
      settle for $425 million. The JPMorgan Chase preliminary agreement has not yet
      been approved by the Court. In an amendment to the issuers’ settlement
      agreement, the issuers’ insurers agreed that the JPMorgan preliminary agreement,
      if approved, would offset the insurers’ obligation to cover the remainder of
      Plaintiffs’ guaranteed $1 billion recovery by 50% of the value of the JP Morgan
      settlement, or $212.5 million. Therefore, if the JP Morgan preliminary agreement
      to settle is finalized, and then preliminarily and finally approved by the
      Court, then the maximum amount that the issuers’ insurers will be potentially
      liable for is $787.5 million. It is unclear what impact the Second Circuit’s
      decision vacating class certification in the focus cases will have on the JP
      Morgan preliminary agreement.





F-33




It
      is
      anticipated that any potential financial obligation of the Company to plaintiffs
      pursuant to the terms of the issuers’ 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. However,
      if the JPMorgan Chase preliminary agreement is finalized, then preliminarily
      and
      finally approved, the Company’s maximum financial obligation would be less than
      $2.7 million.





There
      is
      no assurance that the court will grant final approval to the issuers’
settlement. If the settlement agreement is not approved and the Company is
      found
      liable, we are unable to estimate or predict the potential damages that might
      be
      awarded, whether such damages would be greater than the Company’s insurance
      coverage, and whether such damages would have a material impact on our results
      of operations or financial condition in any future period.




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





**(15)
      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.





On
      November 22, 2006, the Company entered into a License Agreement (the “License
      Agreement”) with Speecho, LLC which grants a license to use the Company’s chat,
      VoIP and video communications technology for a minimum license fee of $10,000
      per month with an initial term of ten years. The Company’s Chairman, the
      Company’s President and the Company’s Vice President of Finance, as well as
      certain other employees of the Company, are members of a company that owns
      50%
      of the membership interests in Speecho, LLC. As of December 31, 2006, no revenue
      has yet been recognized by the Company related to the License Agreement.





As
      discussed more fully in Note 9, “Debt,” on April 22, 2005, E&C Capital
      Partners, LLLP and E&C Capital Partners II, LLLP, entities controlled by the
      Company’s Chairman, entered into a Note Purchase Agreement with the Company
      pursuant to which the entities ultimately acquired secured demand convertible
      promissory notes totaling $4,000,000. During the year ended December 31, 2005,
      an aggregate of $600,000 of the promissory notes were converted into the
      Company’s Common Stock. **** Interest
      associated with the demand convertible promissory notes of approximately
      $340,000 and $216,200 was charged to expense during the years ended December
      31,
      2006 and 2005, respectively, and remained unpaid as of December 31, 2006.





During
      the year ended December 31, 2004, a $2,000,000 demand convertible promissory
      note due to the Company’s Chairman and his spouse and $1,750,000 of Convertible
      Notes due E&C Capital Partners, LLLP, together with certain affiliates of
      the Chairman, were converted into the Company’s Common Stock. As a result,
      during 2004, approximately $49,500 of interest associated with the
      aforementioned convertible debt was charged to expense and $157,700 of interest,
      including accruals from the prior year, was paid.





During
      the year ended December 31, 2006, the Company paid $5,000 to an entity
      controlled by the Chairman’s son-in-law for various software and related
      services. 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 which was charged to sales and
      marketing expense.




F-34




Several
      entities controlled by our Chairman have provided services to the Company and
      various 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 first quarter of 2005, an entity controlled
      by our Chairman also began performing human resource and payroll processing
      functions for the Company and several of its subsidiaries. During the years
      ended December 31, 2006, 2005 and 2004, a total of approximately $466,000,
      $386,000 and $566,000 of expense was recorded related to these services,
      respectively. Approximately $158,000 and $134,000 related to these services
      was
      included in accounts payable and accrued expenses at December 31, 2006 and
      2005,
      respectively.





Additionally,
      included in other current assets in the accompanying consolidated balance sheet
      at December 31, 2005, was approximately $92,000 advanced to a newly formed
      entity in which E&C Capital Partners, LLLP had an ownership interest. The
      balance was repaid to the Company by E&C Capital Partners LLLP on January
      31, 2006.





Tralliance
      Corporation, which was acquired May 9, 2005, subleases office space in New
      York
      City on a month-to-month basis from an entity controlled by its President for
      approximately $3,400 per month. A total of approximately $41,000 and $23,000
      in
      rent expense related to this month-to-month sublease was included in the
      accompanying statement of operations for the years ended December 31, 2006
      and
      2005, respectively.





**(16)
      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. During the year ended December 31, 2006,
      the Company was organized in three operating segments for purposes of making
      operating decisions and assessing performance: (i) the computer games division,
      consisting of the operations of the Company’s magazine publications, the
      associated websites and the operations of its e-commerce games distribution
      business; (ii) the Internet services division, consisting of the operations
      of
      Tralliance, which was acquired on May 9, 2005; and (iii) the VoIP telephony
      services division, consisting of the activities involved in the sale and license
      of telecommunications services over the Internet to consumers and businesses.
      Identifiable assets of “discontinued operations” presented below consist of the
      net assets of the Company's former subsidiary, SendTec, the operations of which
      were sold effective October 31, 2005.





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





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


Year
                  Ended December 31,2006
              
              2005
              
              2004NET
                  REVENUE FROM CONTINUINGOPERATIONS:Computer
                  games
              
              $
              2,038,649
              
              $
              1,948,716
              
              $
              3,107,637Internet
                  services
              
              
              1,408,737
              
              
              197,873
              
              
              --VoIP
                  telephony services
              
              
              34,638
              
              
              248,789
              
              
              391,154$
              3,482,024
              
              $
              2,395,378
              
              $
              3,498,791




F-35




Year
                Ended December 31,2006
            
            2005
            
            2004OPERATING
                INCOME (LOSS) FROMCONTINUING
                OPERATIONS:Computer
                games
            
            $
            (723,497
            )
            $
            (2,147,091
            )
            $
            (442,286
            )Internet
                services
            
            
            (4,155,999
            )
            
            (1,295,269
            )
            
            —VoIP
                telephony services
            
            
            (9,375,329
            )
            
            (13,146,693
            )
            
            (20,538,124
            )Corporate
                expenses
            
            
            (2,733,399
            )
            
            (5,955,554
            )
            
            (3,441,261
            )Operating
                loss from continuing operations
            
            
            (16,988,224
            )
            
            (22,544,607
            )
            
            (24,421,671
            )Other
                income (expense), net
            
            
            138,809
            
            
            (4,417,311
            )
            
            (824,898
            )Loss
                from continuing operations before income tax
            
            $
            (16,849,415
            )
            $
            (26,961,918
            )
            $
            (25,246,569
            )DEPRECIATION
                AND AMORTIZATION OFCONTINUING
                OPERATIONS:Computer
                games
            
            $
            28,286
            
            $
            30,845
            
            $
            10,606Internet
                services
            
            
            232,575
            
            
            87,112
            
            
            —VoIP
                telephony services
            
            
            785,379
            
            
            1,109,743
            
            
            1,355,532Corporate
                expenses
            
            
            29,616
            
            
            36,598
            
            
            32,138$
            1,075,856
            
            $
            1,264,298
            
            $
            1,398,276CAPITAL
                EXPENDITURES OF CONTINUINGOPERATIONS:Computer
                games
            
            $
            12,155
            
            $
            28,001
            
            $
            55,845Internet
                services
            
            
            72,130
            
            
            119,862
            
            
            —VoIP
                telephony services
            
            
            —
            
            
            148,307
            
            
            2,537,133Corporate
            
            
            1,873
            
            
            —
            
            
            50,040$
            86,158
            
            $
            296,170
            
            $
            2,643,018




December
                31,2006
            
            
            2005
            
            
            2004IDENTIFIABLE
                ASSETS:Computer
                games
            
            $
            638,873
            
            $
            637,417
            
            $
            1,585,944Internet
                services
            
            
            725,756
            
            
            1,161,344
            
            
            —VoIP
                telephony services
            
            
            321,407
            
            
            1,817,809
            
            
            3,562,384Corporate
                assets *
            
            
            5,719,074
            
            
            17,794,871
            
            
            7,203,408Continuing
                operations
            
            
            7,405,110
            
            
            21,411,441
            
            
            12,351,736Discontinued
                operations
            
            
            —
            
            
            —
            
            
            21,665,429$
            7,405,110
            
            $
            21,411,441
            
            $
            34,017,165





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





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




F-36




**(17)
      SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)**





Quarter
                EndedDecember
                31,
            
            September
                30,
            
            June
                30,
            
            March
                31,2006
            
            2006
            
            2006
            
            2006Continuing
                Operations:Net
                revenue
            
            $
            1,041,156
            
            $
            909,938
            
            $
            829,773
            
            $
            701,157Operating
                expenses
            
            
            6,728,445
            
            
            3,739,883
            
            
            4,565,094
            
            
            5,436,826Operating
                loss
            
            
            (5,687,289
            )
            
            (2,829,945
            )
            
            (3,735,321
            )
            
            (4,735,669
            )Net
                loss
            
            
            (5,694,051
            )
            
            (2,952,380
            )
            
            (3,782,684
            )
            
            (4,544,613
            )Net
                loss applicable to commonstockholders
            
            
            (5,694,051
            )
            
            (2,952,380
            )
            
            (3,782,684
            )
            
            (4,544,613
            )Basic
                and diluted net loss per share
            
            $
            (0.03
            )
            $
            (0.02
            )
            $
            (0.02
            )
            $
            (0.03
            )




Quarter EndedDecember
                31,
            
            
            September
                30,
            
            
            June
                30,
            
            
            March
                31,2005
            
            
            2005
            
            
            2005
            
            
            2005Continuing
                Operations:Net
                revenue
            
            $
            705,960
            
            $
            409,258
            
            $
            631,676
            
            $
            648,484Operating
                expenses
            
            
            9,164,648
            
            
            5,700,276
            
            
            5,065,385
            
            
            5,009,676Operating
                loss
            
            
            (8,458,688
            )
            
            (5,291,018
            )
            
            (4,433,709
            )
            
            (4,361,192
            )Income
                (loss) from continuing operations
            
            
            4,137,876
            
            
            (6,007,862
            )
            
            (7,123,521
            )
            
            (4,354,873
            )Discontinued
                Operations, net of tax:Income
                (loss) from operations
            
            
            (1,626,856
            )
            
            636,055
            
            
            670,302
            
            
            389,300Gain
                on sale
            
            
            1,769,531
            
            
            —
            
            
            —
            
            
            —Net
                income (loss)
            
            
            4,280,551
            
            
            (5,371,807
            )
            
            (6,453,219
            )
            
            (3,965,573
            )Net
                income (loss) applicable to commonstockholders
            
            
            4,280,551
            
            
            (5,371,807
            )
            
            (6,453,219
            )
            
            (3,965,573
            )Basic
                and diluted net income (loss) per share:Continuing
                operations
            
            $
            0.02
            
            $
            (0.03
            )
            $
            (0.04
            )
            $
            (0.02
            )Discontinued
                operations
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Net
                income (loss)
            
            $
            0.02
            
            $
            (0.03
            )
            $
            (0.04
            )
            $
            (0.02
            )








**(18)
      VALUATION AND QUALIFYING ACCOUNTS - ALLOWANCE FOR DOUBTFUL
      ACCOUNTS**





AdditionsBalance
                at
            
            Additions
            
            Charged
            
            
            
            BalanceBeginning
            
            Charged
                to
            
            to
                Other
            
            
            
            at
                EndPeriod
                ended,
            
            of
                Period
            
            Expense
            
            Accounts
            
            Deductions
            
            of
                PeriodDecember
                31, 2006
            
            $
            128,378
            
            $
            17,076
            
            $
            —
            
            $
            (125,335
            )
            $
            20,119December
                31, 2005
            
            $
            274,013
            
            $
            125,000
            
            $
            —
            
            $
            (270,635
            )
            $
            128,378December 31, 2004
            
            $
            112,986
            
            $
            183,149
            
            $
            9,750
            
            $
            (31,872
            )
            $
            274,013




F-37




**(19)
      SUBSEQUENT EVENTS**





See
      Note
      14, “Litigation,” for information regarding the Settlement Agreement between
      MySpace, Inc., the Company and Michael Egan executed on March 15,
      2007.





In
      March
      2007, management and the Board of Directors of the Company made the decision
      to
      cease all activities related to its computer games businesses, including
      discontinuing the operations of its magazine publications, games distribution
      business and related websites. The Company’s decision to shutdown its computer
      games businesses was based primarily on the historical losses sustained by
      these
      businesses during the recent past and management’s expectations of continued
      future losses. The Company is currently in the process of implementing a
      business shutdown plan, which includes the termination of employee and vendor
      relationships and the collection and payment of outstanding accounts receivables
      and payables. We are also attempting to sell certain of the businesses’
component assets; however, we do not expect the proceeds from such sales to
      be
      significant. As of December 31, 2006, the carrying amount of the major classes
      of the computer games business segment’s assets and liabilities consisted of
      current assets of $600,000, fixed assets of $39,000 and current liabilities
      of
      $321,000.





In
      addition, in March 2007, management and the Board of Directors of the Company
      decided to discontinue the operating, research and development
      activities **** of
      its
      VoIP telephony services business and terminate all of the remaining employees
      of
      the business. At this time, the Company intends to only incur those costs
      required to maintain the service obligations of the license agreement with
      Speecho, LLC. The Company has no plans to actively market the further licensing
      of its chat, VoIP and video communications technology. The Company’s decision to
      discontinue the operations of its VoIP telephony services business was based
      primarily on the historical losses sustained by the business during the past
      several years, management’s expectations of continued losses for the foreseeable
      future and estimates of the amount of capital required to attempt to
      successfully monetize its business. The Company is currently in the process
      of
      implementing a business shutdown plan, which includes the termination of its
      carrier and vendor relationships, as well as the payment and/or settlement
      of
      outstanding payables. We are also attempting to sell certain of the businesses’
component assets; however, we do not expect the proceeds from such sales to
      be
      significant. As of December 31, 2006, the carrying amount of the major classes
      of the VoIP telephony services business segment’s assets and liabilities
      consisted of current assets of $139,000, fixed assets of $182,000 and current
      liabilities of $2,290,000.





The
      Company is in the process of evaluating the recoverability of its existing
      computer games and VoIP telephony services businesses’ assets, and at this time,
      does not anticipate significant future impairment or other charges in this
      regard. Any such charges, if and when determined to be required, will be
      recorded by the Company when identified. The Company is also in the process
      of
      evaluating the amount of costs expected to be incurred in shutting down its
      computer games and VoIP telephony services businesses. The amount of these
      shutdown costs, including costs related to employee termination benefits and
      vendor contract termination costs are not yet certain, however, at the present
      time, management believes that total cash expenditures for shutdown costs will
      range between $20,000 and $135,000 for the computer games business and between
      zero and $700,000 for the VoIP telephony services business. The Company
      currently expects the shutdown of its computer games and VoIP telephony services
      businesses to be substantially completed by the end of the second quarter of
      2007.





Effective
      January 1, 2007, the Computer Games and the VoIP telephony services business
      segments’ assets, liabilities and results of operations will be reported as
“Discontinued Operations” in accordance with SFAS No. 144, “Accounting for the
      Impairment or Disposal of Long-Lived Assets.”




F-38


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





None.





**ITEM
      9A. 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, 2006. Based on
      that
      evaluation, our Chief Executive Officer and our Chief Financial Officer have
      concluded that our disclosure controls and procedures are effective in alerting
      them in a timely manner to material information regarding us (including our
      consolidated subsidiaries) that is required to be included in our periodic
      reports to the SEC.





Our
      management, with the participation of our Chief Executive Officer and our Chief
      Financial Officer, have evaluated any change in our internal control over
      financial reporting that occurred during the quarter ended December 31, 2006
      that has materially affected, or is reasonably likely to materially affect,
      our
      internal control over financial reporting, and have determined there to be
      no
      reportable changes.





**ITEM
      9B. OTHER INFORMATION**





None.





**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**





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. Each of the following persons are Directors
      of
      the Company.




NAME
            
            AGE
            
            POSITION
                OR OFFICE WITH
              THE
                COMPANY
            
            DIRECTOR
              SINCEMichael
                S. Egan
            
            66
            
            Chairman
                and Chief Executive Officer
            
            1997Edward
                A. Cespedes
            
            41
            
            President,
                Treasurer and Chief Financial Officer and Director
            
            1997Robin
                S. Lebowitz
            
            42
            
            Vice
                President of Finance and Director
            
            2001





Michael
      S. Egan. Michael Egan has served as theglobe’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, Inc., 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
      Corporation (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.




49





Edward
      A.
      Cespedes. Edward Cespedes has served as a director of theglobe since 1997,
      as
      President of theglobe since June 1, 2002 and as Treasurer and Chief Financial
      Officer of theglobe 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,
      Inc.
      Concurrent with his position at Dancing Bear Investments, Inc., from 1998 to
      2000, Mr. Cespedes also served as Vice President for corporate development
      for
      theglobe where he had primary responsibility for all mergers, acquisitions,
      and
      capital markets activities. In 1996, prior to joining Dancing Bear Investments,
      Inc., 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 since December
      2001, as Secretary of theglobe since June 1, 2002, and as Vice President of
      Finance of theglobe since February 23, 2004. Ms. Lebowitz also served as
      Treasurer of theglobe from June 1, 2002 until February 23, 2004 and as Chief
      Financial Officer of theglobe from July 1, 2002 until February 23, 2004. Ms.
      Lebowitz has worked in various capacities for the Company’s Chairman, Michael
      Egan, for thirteen years. She is the Controller/Managing Director of Dancing
      Bear Investments, Inc., Mr. Egan’s privately held investment management and
      holding company. Previously, Ms. Lebowitz served on the Board of Directors
      of
      theglobe 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.





**INVOLVEMENT
      IN CERTAIN LEGAL PROCEEDINGS**





None.





**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 2005 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 2006 fiscal year, our officers, directors and all
      persons owning more than 10% of a registered class of our equity securities
      have
      complied with all Section 16(a) applicable filing requirements.




50





**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.





**BOARD
      MEETINGS AND COMMITTEES OF THE BOARD**





Including
      unanimous written actions of the Board, the **** Board
      of
      Directors met 14 times in 2006. 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 2006. ****





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” within the meaning of applicable SEC rules, but is not considered
“independent” within the meaning of applicable NASD rules. Including unanimous
      written actions of the Committee, the Audit Committee held 5 meetings in 2006.





*Compensation
      Committee* .
      The
      Compensation Committee, which met 9 times in 2006 (including unanimous written
      actions of the Committee), establishes salaries, incentives and other forms
      of
      compensation for officers and other employees of theglobe. The Compensation
      Committee (as well as the entire Board of Directors) 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 (including director candidates
      recommended by stockholders), 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.





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 Corporate 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.




51





*Shareholder
      Communications with the Board of Directors.* Any
      shareholder 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 shareholder communication. The
      Corporate Secretary will send all appropriate shareholder communications to
      the
      intended recipient. An "appropriate shareholder communication" is a
      communication from a person claiming to be a shareholder in the communication,
      the subject of which relates solely to the sender’s interest as a shareholder
      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 shareholder communications to the Chairman
      of
      the Board. In the case of communications addressed to any particular directors,
      the Corporate Secretary will send appropriate shareholder communications to
      such
      director. In the case of communications addressed to a committee of the Board,
      the Corporate Secretary will send appropriate shareholder 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. The Company did not hold an annual
      meeting last year.





**ITEM
      11. EXECUTIVE COMPENSATION**





**COMPENSATION
      DISCUSSION AND ANALYSIS**





**OVERVIEW**





The
      Company’s compensation program is intended to meet three principal objectives
      (1) attract, reward, and retain executive officers and other key employees;
      (2)
      motivate these individuals to achieve short-term and long-term corporate goals
      that enhance stockholder value; and (3) promote internal equity and external
      competitiveness. Our Compensation Committee, which for all periods included
      in
      this Compensation Discussion and Analysis, consisted of Mr. Michael S. Egan,
      our
      Chairman and Chief Executive Officer and Mr. Edward A. Cespedes, our President,
      Treasurer, Chief Financial Officer and a Director (See “Corporate Governance -
      Compensation Committee”), establishes our compensation policies as well as
      detail compensation plans and specific compensation levels for all Company
      employees and executives, including themselves. The Compensation Committee
      also
      administers the Company’s equity incentive plans.





The
      Compensation Committee’s compensation policies are based upon the following
      principles:





·
            Compensation
                levels should be competitive with pay plans for positions of similar
                responsibility at other companies of comparable complexity and
                size.





·
            Compensation
                plans should reward both individual performance and the achievement
                of the
                Company’s short-term and long-term strategic, operating and financial
                goals.





·
            Compensation
                levels should be higher for senior individuals with greater responsibility
                and greater ability to influence our achievement of strategic, operating
                and financial goals.





·
            Incentive
                compensation should be a greater part of total compensation for senior
                individuals with greater responsibility and the opportunity to create
                greater stockholder value.




52




**EMPLOYMENT
      AGREEMENTS**





On
      August
      1, 2003, we entered into separate employment agreements with each of our named
      executive officers. The employment agreements with the Chief Executive Officer
      and President each provide for an annual base salary of $250,000 with
      eligibility to receive annual increases as determined in the sole discretion
      of
      the Board of Directors and an annual cash bonus, which will be awarded upon
      the
      achievement of specified pre-tax operating income, not to be less than $50,000
      per year. The employment agreement, as amended, with the Vice President of
      Finance currently provides for an annual base salary of $140,000 and a
      discretionary annual cash bonus, awarded at the discretion of the Board of
      Directors.





Additionally,
      each of the employment agreements with the named executive officers provide
      for
      (i) employment as one of our executives; (ii) participation in all welfare,
      benefit and incentive plans, including equity based compensation plans, offered
      to senior management; and (iii) a term of employment which commenced on August
      1, 2003 through the first anniversary thereof, and which automatically extends
      for one day each day unless either the Company or the executive provides written
      notice to the other not to further extend. Each of the employment agreements
      also provides for certain payments and/or benefits upon termination, which
      are
      more fully described under the section, “Potential Payments Upon Termination or
      Change In Control”.





**ELEMENTS
      OF COMPENSATION**





Our
      executive compensation program has three primary elements: base salary, annual
      performance-based cash bonuses and the potential for long-term equity
      incentives. These primary elements are supplemented by the opportunity to
      participate in health, welfare and benefit plans that are generally available
      to
      all of our employees, as well as car allowances.





Base
      Salary .
      We
      provide our executive officers with base salary to provide them with a fixed
      base amount of compensation for services rendered during the fiscal year. We
      believe this is consistent with competitive practices and will help assure
      we
      retain qualified leadership in those positions. Base salary for each of our
      executive officers was initially established in their respective August 1,
      2003
      employment agreements, with no base salary increases subsequently awarded to
      any
      executive officer.





Cash
      Bonus .
      Additional compensation in the form of annual cash bonuses is made in accordance
      with each executive officer’s employment agreement, where applicable or at the
      discretion of the Compensation Committee, taking into account the performance
      and contributions made by the executive officers of theglobe. All executive
      officers bonuses are approved by the full Board. Our rationale for paying annual
      cash bonuses is based upon our desire to encourage achievement of short-term
      and
      long-term financial and operating results and to reward our executive officers
      for their performance in achieving desired results. For the 2006 fiscal year,
      cash bonuses of $50,000 each were awarded to Messrs. Egan and Cespedes,
      representing the minimal required amounts specified in their employment
      agreements, and a cash bonus of $25,000 was awarded to Robin S. Lebowitz, our
      Vice President of Finance. All 2006 fiscal year bonuses were paid in January
      2007. For the 2005 fiscal year, cash bonuses of $1,500,000 each were awarded
      to
      Messrs. Egan and Cespedes and a $125,000 bonus was awarded to Ms. Lebowitz.
      The
      2005 fiscal year bonuses were based principally on the contributions made by
      each of the aforementioned executive officers in selling the SendTec marketing
      services business on October 31, 2005 for net cash proceeds totaling
      approximately $23.0 million, or a ten (10) times cash-over-cash return. All
      2005
      fiscal year bonuses were paid in November 2005.





Long-Term
      Equity Incentives .
      Long-term incentives are provided primarily by stock option grants. The grants
      are designed to align the interest of each executive officer with those of
      the
      stockholder and provide each executive officer with a significant incentive
      to
      manage the Company from the perspective of an owner with an equity stake in
      the
      business. Each grant allows the executive officer to acquire shares of the
      Company’s Common Stock at a fixed price per share (the market price on the date
      of grant) over a specified time period (generally up to 10 years). The number
      of
      shares subject to each option grant is set at a level intended to create a
      meaningful opportunity for stock ownership based on the officer’s current
      position with the Company, the base salary associated with that position, the
      individual’s potential for increasing stockholder value, and the individual’s
      personal performance. The Compensation Committee does not adhere to any specific
      guidelines as to the relative option holding of the Company’s executive
      officers, nor does it have any program, plan or practice to time the grant
      of
      stock options in coordination with material non-public information.




53





Health,
      Welfare and Benefit Plans .
      To be
      competitive in attracting and retaining qualified personnel, we offer a standard
      range of health and welfare benefits to all employees, including our executive
      officers. These benefits include medical, prescription drugs and dental
      coverage, life insurance and disability and accidental death and dismemberment
      insurance. Under the benefit plans, the cost of employee coverage, including
      executive officers’ coverage, is borne 100% by the Company. All employees, with
      the exception of the executive officers, contribute towards the cost of spousal
      and dependent health insurance coverage. Additionally, our executive officers
      currently receive annual car allowances, totaling $17,000 for each of the
      Chairman and the President and $10,000 for the Vice President of
      Finance.





Deductibility
      of Compensation over $1 Million .
      Section
      162(m) of the Internal Revenue Code imposes a limit of $1 million, unless
      compensation is performance-based or another exception applies, on the amount
      that a publicly held corporation may deduct in any year for the compensation
      paid to its chief executive officer and the four other most highly compensated
      executive officers. The cash compensation paid to executive officers for the
      2006 fiscal year did not exceed the $1 million limit per officer. During the
      2005 fiscal year, however, Messrs. Egan and Cespedes’ compensation both exceeded
      $1 million. Therefore, in filing our 2005 federal and state income tax returns,
      our compensation deductions for executive officer pay were limited. However,
      current year losses and available prior year net operating losses were utilized
      in filing our 2005 returns, which served to eliminate substantially all of
      the
      incremental income taxes that would have been otherwise paid at that time.
      We
      are mindful of the potential impact that Section 162(m) may have on the income
      taxes that the Company may have to pay in the future and intend generally to
      structure our compensation arrangements, where feasible, to eliminate or
      minimize the impact of the Section 162(m) limitations.





Termination
      and Change-in-Control Payments .
      On
      August 1, 2003, the Company entered into separate employment agreements with
      each of our current executive officers that specify, among other things, the
      obligation of the Company in the case of termination or change-in-control.
      The
      Company’s obligations under these employment agreements are described in more
      detail in a subsequent section of this Report on Form 10-K which is entitled
      “Potential Payments Upon Termination or Change-In-Control.” These employment
      agreements were entered into to induce our executive officers to perform their
      roles and to continue employment with the Company for an extended period of
      time. The particular events which trigger termination payments under the
      employment agreements are generally based upon customary business practices
      in
      the United States.




54





**SUMMARY
      COMPENSATION TABLE**





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 principal executive officer and principal financial officer at any time
      during the last calendar year and our other executive officer for the year
      ended
      December 31, 2006 (collectively, the "Named Executive
      Officers"):




Name
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Option
              Awards(1)
              ($)
            
            All
                Other(2)($)
            
            Total
              ($)Michael
                S. Egan,
            
            
            2006
            
            
            250,000
            
            
            50,000
            
            
            —
            
            
            17,868
            
            
            317,868Chairman,
                Chief Executive
            
            
            2005
            
            
            250,000
            
            
            1,500,000
            
            
            175,000
            
            
            17,987
            
            
            1,942,987Officer(3)
            
            
            2004
            
            
            250,000
            
            
            77,500
            
            
            —
            
            
            13,853
            
            
            341,353Edward
                A. Cespedes,
            
            
            2006
            
            
            250,000
            
            
            50,000
            
            
            —
            
            
            33,605
            
            
            333,605President,
                Treasurer and Chief
            
            
            2005
            
            
            250,000
            
            
            1,500,000
            
            
            175,000
            
            
            31,714
            
            
            1,956,714Financial
                Officer(4)
            
            
            2004
            
            
            250,000
            
            
            77,500
            
            
            —
            
            
            28,064
            
            
            355,564Robin
                S. Lebowitz,
            
            
            2006
            
            
            140,000
            
            
            25,000
            
            
            13,000
            
            
            25,580
            
            
            203,580Former
                Chief Financial Officer;
            
            
            2005
            
            
            140,000
            
            
            125,000
            
            
            40,000
            
            
            14,632
            
            
            319,632Vice
                President of Finance(5)
            
            
            2004
            
            
            144,167
            
            
            17,500
            
            
            —
            
            
            
            (6)
            
            161,667





(1)
      Amounts represent the aggregate grant date fair value of stock options in
      accordance with Statement of Financial Accounting Standards No. 123R. See Note
      1, “Organization and Summary of Significant Accounting Policies - Stock Based
      Compensation,” and Note 11, “Stock Option Plans,” in the accompanying
      consolidated financial statements as of December 31, 2006 and for the year
      then
      ended for information regarding the assumptions used in the valuation of stock
      option awards.





(2)
      Other
      compensation includes car allowances paid to the named executive officers and
      the cost of life, disability and accidental death and dismemberment insurance
      premiums paid on behalf of the named executive officers. In the case of the
      President and the Vice President of Finance, other compensation also includes
      the cost of medical and dental insurance coverage for the named executive
      officer, their spouse and dependents, as applicable.





(3)
      Mr.
      Egan became an executive officer in July 1998. We began paying Mr. Egan a base
      salary in July 2003. The 2005 option awards include a grant of 1,750,000 options
      at an exercise price of $0.12 per share.





(4)
      Mr.
      Cespedes became President in June 2002 and Treasurer and Chief Financial Officer
      in February 2005. The 2005 option awards include a grant of 1,750,000 options
      at
      an exercise price of $0.12 per share.





(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. The option awards
      include grants of 400,000 and 100,000 options at an exercise price of $0.12
      and
      $0.14 per share in 2005 and 2006, respectively.





(6)
      Not
      reported as the aggregate of the items was less than $10,000.




55




The
      following plan-based awards were made to the Named Executive Officers in
      2006:





**2006
      GRANTS OF PLAN-BASED AWARDS TABLE**





Non-Incentive
                PlanOption
                Awards:
            
            
            
            ExerciseNumber
                of
            
            
            
            or
                BaseSecurities
            
            
            
            Price
                ofGrant
            
            Underlying
            
            
            
            Option
                AwardsName
            
            Date
            
            Options
                (#)
            
            
            
            ($/Share)Robin
                S. Lebowitz
            
            
            8/15/2006
            
            
            100,000
            (1)
            
            
            
            $
            0.14





(1)
      The
      stock option award was immediately exercisable at date of grant.





**OUTSTANDING
      EQUITY AWARDS AT FISCAL 2006 YEAR-END**


Number
                  of Securities
                Underlying
                  Unexercised Options (1)
              
              
              Option
              
              
              OptionName
              
              
              Exercisable
                  (#)
              
              
              Unexercisable
                  (#)
              
              
              Exercise
                  Price
                    ($)
              
              
              Expiration
                  DateMichael
                  S. Egan
              
              
              50,000
              
              
              —
              
              $
              4.50
              
              
              7/16/2008179,798
              
              
              —
              
              
              4.50
              
              
              8/1/200820,202
              
              
              —
              
              
              4.95
              
              
              8/1/200870,000
              
              
              —
              
              
              15.75
              
              
              1/6/200910,000
              
              
              —
              
              
              6.69
              
              
              2/17/20107,500
              
              
              —
              
              
              0.23
              
              
              6/27/20117,500
              
              
              —
              
              
              0.04
              
              
              6/21/20122,500,000
              
              
              —
              
              
              0.02
              
              
              8/13/20121,000,000
              
              
              —
              
              
              0.56
              
              
              5/22/20131,750,000
              
              
              —
              
              
              0.12
              
              
              4/7/2015Edward
                  A. Cespedes
              
              
              50,000
              
              
              —
              
              $
              4.50
              
              
              7/16/20087,500
              
              
              —
              
              
              4.50
              
              
              8/1/200850,000
              
              
              —
              
              
              15.75
              
              
              1/6/200915,000
              
              
              —
              
              
              6.69
              
              
              2/17/201020,000
              
              
              —
              
              
              2.50
              
              
              4/18/20107,500
              
              
              —
              
              
              2.38
              
              
              6/8/20107,500
              
              
              —
              
              
              0.23
              
              
              6/27/20117,500
              
              
              —
              
              
              0.04
              
              
              6/21/20121,750,000
              
              
              —
              
              
              0.02
              
              
              8/13/2012550,000
              
              
              —
              
              
              0.56
              
              
              5/22/20131,750,000
              
              
              —
              
              
              0.12
              
              
              4/7/2015Robin
                  S. Lebowitz
              
              
              1,580
              
              
              —
              
              $
              1.59
              
              
              5/31/201025,000
              
              
              —
              
              
              0.05
              
              
              12/14/20117,500
              
              
              —
              
              
              0.04
              
              
              6/21/2012500,000
              
              
              —
              
              
              0.02
              
              
              8/13/2012100,000
              
              
              —
              
              
              0.56
              
              
              5/22/2013400,000
              
              
              —
              
              
              0.12
              
              
              4/7/2015100,000
              
              
              —
              
              
              0.14
              
              
              8/16/2016


(1)
      All
      stock option awards included in the above table are fully vested. None of the
      named executive officers exercised any stock options during the year ended
      December 31, 2006.




56




**POTENTIAL
      PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL**





The
      Company has entered into separate employment agreements with each of the named
      executive officers which specify the obligations of the Company, as well as
      the
      named executive officer in the case of termination or a
      change-in-control.





Each
      of
      the employment agreements provide for payments to be made to the executive
      officers if they are terminated “without cause” or if the executive terminates
      with “good reason”, or in the event that the executive officer’s employment is
      terminated as a result of disability or death. Events which may be considered
      “good reason” as defined by the employment agreements include:





(a)
      any
      change in the duties, responsibilities or status of the executive officer that
      is inconsistent in any material and adverse respect with the executive’s
      position, duties, responsibilities or status with the Company;




(b)
      a
      material and adverse change in the executive officer’s titles or offices held
      with the Company;





(c)
      a
      reduction in the executive officer’s base salary, guaranteed bonus or bonus
      opportunity;





(d)
      the
      relocation of the Company’s principal executive offices or the executive
      officer’s own office location to a location more than 25 miles outside of Fort
      Lauderdale, Florida;





(e)
      any
      refusal by the Company or any affiliate to continue to permit the executive
      officer to engage in activities not directly related to the business of the
      Company which the executive officer was permitted to engage as of the date
      the
      employment agreement was entered into;





(f)
      any
      reason following a change in control, as defined by the employment agreement;
      or





(g)
      any
      other breach of a material provision of the employment agreement by the Company
      or any affiliate.





Each
      of
      the employment agreements between the Company and the Chief Executive Officer
      and the President provide, in the case of termination by the Company without
      cause or termination by the executive officer for good reason, the payment
      within five days of such termination of (i) any accrued and unpaid base salary;
      (ii) a pro-rated incentive payment, as defined by the agreement, for the current
      year through the date of termination; (iii) any accrued vacation pay; and (iv)
      a
      Lump-Sum Cash Payment (“Lump-Sum Cash Payment”) equal to ten times the sum of
      the executive officer’s base salary and highest annual incentive, as defined by
      the employment agreement. In addition, the employment agreements provide that
      the Company shall maintain in full force and effect, for a period of ten years
      following the date of termination, the medical, hospitalization, dental and
      life
      insurance programs in which the executive officer, 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. Such insurance benefits terminate
      on the date the executive officer receives equivalent coverage and benefits
      under the plans or programs of a subsequent employer. The employment agreements
      also provide for the acceleration of vesting of any stock, stock option, stock
      appreciation right or similar awards, as of the date of termination and permit
      the executive officer to exercise such awards until the earlier of (i) the
      third
      anniversary of the date of termination or (ii) the end of the term of the award.





The
      employment agreement between the Company and the Vice President of Finance
      provides for, in the case of termination by the Company without cause or
      termination by the executive officer for good reason, payments and benefits
      similar to the employment agreements of the Chief Executive Officer and
      President except that the Lump-Sum Cash Payment shall equal two times the sum
      of
      the Vice President of Finance’s base salary and highest annual incentive and the
      Company will be required to maintain insurance benefits for a period of two
      years following the date of termination.




57





In
      the
      event the named executive officer’s employment is terminated as a result of
      disability, the employment agreements provide for the payment of all accrued
      salary and benefits through the termination date, including a pro-rated
      incentive payment, as defined by the agreement, as well as the payment of
      insurance benefits for a period of one year subsequent to termination.





In
      the
      event the named executive officer’s employment is terminated as a result of the
      officer’s death, the employment agreements provide for the payment of all
      accrued salary and benefits through the termination date. Additionally, the
      employment agreements specify that the Company shall provide the named executive
      officer’s spouse and dependents with insurance benefits for a period of ten
      years in the case of the Chief Executive Officer and the President and for
      a
      period of one year in the case of the Vice President of Finance.





Assuming
      the named executive officers were terminated by the Company without cause or
      the
      named executive officers terminated with good reason as of December 31, 2006,
      Lump-Sum Cash Payments totaling $7,925,000 would be payable to each of the
      Chief
      Executive Officer and the President of the Company and a Lump-Sum Cash Payment
      totaling $391,666 would be payable to the Vice President of Finance of the
      Company. In addition, the Company’s estimated obligation for insurance benefits
      to be provided for the Chief Executive Officer, the President and the Vice
      President of Finance in accordance with their respective employment agreement
      totaled approximately $9,700, $168,000 and $31,000, respectively.




**COMPENSATION
      OF DIRECTORS**





Directors
      who are also our employees receive no compensation for serving on our Board
      or
      committees. We reimburse non-employee directors for all travel and other
      expenses incurred in connection with attending Board and committee meetings.
      Non-employee directors are also eligible to receive automatic stock option
      grants under our 1998 Stock Option Plan, as amended and restated. As of December
      31, 2006 there were no directors who met this definition.





Each
      director who becomes an eligible non-employee director for the first time
      receives an initial grant of options to acquire 25,000 shares of our Common
      Stock. In addition, each eligible non-employee director will receive an annual
      grant of options to acquire 7,500 shares of our Common Stock on the first
      business day following each annual meeting of stockholders that occurs while
      the
      1998 Stock Option Plan or 2000 Stock Option Plan is in effect. These stock
      options will be granted with per share exercise prices equal to the fair market
      value of our common stock as of the date of grant.




**COMPENSATION
      COMMITTEE**





**COMPENSATION
      COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION**





Michael
      S. Egan, theglobe’s Chairman and Chief Executive Officer and Edward A. Cespedes,
      theglobe’s President, Treasurer and Chief Financial Officer and Director served
      as members of the Compensation Committee of the Board of Directors during 2006.
      Although certain relationships and related transactions between Messrs. Egan
      and
      Cespedes and theglobe are disclosed in the section of this Annual Report on
      Form
      10-K entitled “Certain Relationships and Related Transactions,” none of these
      relationships or transactions relate to interlocking directorships or
      compensation committees.





**COMPENSATION
      COMMITTEE REPORT**





The
      Compensation Committee of the Board of Directors establishes our general
      compensation policies as well as the compensation plans and specific
      compensation levels for executive officers. The Compensation Committee also
      administers our stock based incentive plans for executive officers.




58





The
      Compensation Committee has reviewed the information provided within the
“Compensation Discussion and Analysis” section of this Annual Report on Form
      10-K and based on this review, the Compensation Committee has recommended to
      the
      entire Board of Directors that the “Compensation Discussion and Analysis” be
      included in the Company’s Annual Report on Form 10-K for the year ended December
      31, 2006.





**COMPENSATION
      COMMITTEE:**





Michael
      S. Egan


Edward
      A.
      Cespedes





**ITEM
      12. 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 19, 2007 (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 172,484,838 shares
      of
      theglobe’s Common Stock were issued and outstanding on March 19, 2007.





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.





SHARES
                BENEFICIALLY OWNEDDIRECTORS,
                NAMED EXECUTIVE OFFICERS
            
            
            
            
            
            TITLE
                OFAND
                5% STOCKHOLDERS
            
            NUMBER
            
            PERCENT
            
            CLASSDancing
                Bear Investments, Inc. (1)
            
            
            8,303,148
            
            
            4.8
            %
            
            CommonMichael
                S. Egan (1)(2)(6)(7)(8)
            
            
            149,699,034
            
            
            58.4
            %
            
            CommonEdward
                A. Cespedes (3)
            
            
            4,215,000
            
            
            2.4
            %
            
            CommonRobin
                S. Lebowitz (4)
            
            
            1,134,080
            
            
            *
            
            
            CommonCarl
                Ruderman (5)
            
            
            10,000,000
            
            
            5.5
            %
            
            CommonE&C
                Capital Partners, LLLP (6)(8)
            
            
            82,469,012
            
            
            38.1
            %
            
            CommonE&C
                Capital Partners II, LLLP(7)
            
            
            40,000,000
            
            
            19.4
            %
            
            CommonAll
                directors and executive officersas
                a group (3 persons)
            
            
            155,048,114
            
            
            59.3
            %
            
            Common





*
      less
      than 1%




59





(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., E&C Capital
      Partners, LLLP, and E&C Capital Partners II, LLLP and as the Trustee of the
      Michael S. Egan Grantor Retained Annuity Trusts for the benefit of his children.
      Also includes (i) 5,595,000 shares of our Common Stock issuable upon exercise
      of
      options that are currently exercisable; (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 4,215,000 shares of our Common Stock issuable upon exercise of options
      that are currently exercisable.





(4)
      Includes 1,134,080 shares of our Common Stock issuable upon exercise of options
      that are currently exercisable.





(5)
      Includes 10,000,000 shares of Common Stock issuable upon the exercise of
      warrants at $0.15 per share.





(6)
      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
      34,000,000 shares of our Common Stock issuable upon the conversion of the
      Convertible Notes. Also, includes 10,000,000 shares of Common Stock if and
      to
      the extent issued upon exercise of the warrants described in footnote (5) over
      which E&C holds an irrevocable proxy pursuant to the Stockholders’ Agreement
      described in footnote (8) below.





(7)
      E&C Capital Partners II, LLLP is a privately held investment vehicle
      controlled by our Chairman, Michael S. Egan. Includes 34,000,000 shares of
      our
      Common Stock issuable upon the conversion of the Convertible Notes.





(8)
      In
      connection with certain Marketing Services Agreements entered with Universal
      Media of Miami, Inc. and Trans Digital Media, LLC on November 22, 2006, the
      Company entered into a warrant purchase agreement with Carl Ruderman, the
      controlling shareholder of such entities. In connection with the issuance of
      the
      warrants, Mr. Ruderman entered into a Stockholders’ Agreement with our Chairman
      and Chief Executive Officer, Michael S. Egan, our President, Edward A. Cespedes,
      and certain of their affiliates. Pursuant to the Stockholders’ Agreement, Mr.
      Ruderman granted an irrevocable proxy over the shares issuable upon exercise
      of
      the warrants to E&C Capital Partners, LLLP and granted a right of first
      refusal over his shares to all of the other parties to the Stockholders’
Agreement. Mr. Ruderman also agreed to sell his shares under certain
      circumstances in which the other parties to the Stockholders’ Agreement have
      agreed to sell their respective shares. Mr. Ruderman was granted the right
      to
      participate in certain sales of the Company’s Common Stock by the other parties
      to the Stockholders’ Agreement. The amount set forth in the table includes
      10,000,000 shares of Common Stock if and to the extent issued upon exercise
      of
      the warrants described in footnote (5) over which E&C holds such irrevocable
      proxy.





**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**





Transactions
      with Related Persons .





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
      and Chief Executive Officer (“CEO”).





On
      November 22, 2006, the Company entered into a License Agreement (the “License
      Agreement”) with Speecho, LLC which grants a license to use the Company’s chat,
      VoIP and video communications technology for a minimum license fee of $10,000
      per month with an initial term of ten years. Mr. Egan, the Company’s Chairman
      and CEO, Mr. Cespedes, the Company’s President and Robin Lebowitz, the Company’s
      Vice President of Finance, as well as certain other employees of the Company,
      are members of Blue Wall, LLC, a company that owns 50% of the membership
      interests in Speecho, LLC. As of December 31, 2006, the Company had not
      recognized any revenue related to the License Agreement.




60





On
      November 22, 2006, the Company entered into certain Marketing Services
      Agreements (the “Marketing Services Agreements”) with two entities whereby the
      entities agreed to market certain of the Company’s products in exchange for
      certain commissions and promotional fees and which granted the Company exclusive
      right to certain uses of a tradename in connection with certain of the Company’s
      websites. Additionally, on November 22, 2006, in connection with the Marketing
      Services Agreements, the Company entered into a Warrant Purchase Agreement
      with
      Carl Ruderman, the controlling shareholder of the entities. The Warrant Purchase
      Agreement provides for the issuance to Mr. Ruderman of one warrant to purchase
      5,000,000 shares of the Company’s Common Stock at an exercise price of $0.15 per
      share with a three year term and a second warrant to purchase 5,000,000 shares
      of the Company’s Common Stock at an exercise price of $0.15 per share with a
      term of four years. Each warrant provides for the extension of the exercise
      term
      by an additional three years if certain criteria are met under the Marketing
      Services Agreements. The Warrant Purchase Agreement grants to Mr. Ruderman
      “piggy-back” registration rights with respect to the shares of the Company’s
      Common Stock issuable upon exercise of the warrants.





In
      connection with the issuance of the warrants, on November 22, 2006, Mr. Ruderman
      entered into a Stockholders’ Agreement with Mr. Egan, the Company’s chairman and
      chief executive officer, Mr. Cespedes, the Company’s president and certain of
      their affiliates. Pursuant to the Stockholders’ Agreement, Mr. Ruderman granted
      an irrevocable proxy over the shares issuable upon exercise of the warrants
      to
      E&C Capital Partners, LLLP and granted a right of first refusal over his
      shares to all of the other parties to the Stockholders’ Agreement. Mr. Ruderman
      also agreed to sell his shares under certain circumstances in which the other
      parties to the Stockholders’ Agreement have agreed to sell their respective
      shares. Mr. Ruderman was also granted the right to participate in certain sales
      of the Company’s Common Stock by the other parties to the Stockholders’
Agreement.





On
      April
      22, 2005, E&C Capital Partners, LLLP and E&C Capital Partners II, LLLP
      (the “Noteholders”), entities controlled by the Company's Chairman and CEO,
      entered into a Note Purchase Agreement (the "Agreement") with theglobe pursuant
      to which they acquired secured demand convertible promissory notes (the
      "Convertible Notes") in the aggregate principal amount of $1,500,000. Under
      the
      terms of the Agreement, the Noteholders were also granted the optional right,
      for a period of 90 days from the date of the Agreement, to purchase additional
      Convertible Notes such that the aggregate principal amount of Convertible Notes
      issued under the Agreement could total $4,000,000 (the “Option”). On June 1,
      2005, the Noteholders exercised a portion of the Option and acquired an
      additional $1,500,000 of Convertible Notes. On July 18, 2005, the Noteholders
      exercised the remainder of the Option and acquired an additional $1,000,000
      of
      Convertible Notes.





The
      Convertible Notes are convertible at the option of the Noteholders into shares
      of the Company's Common Stock at an initial price of $0.05 per share. During
      the
      year ended December 31, 2005 an aggregate of $600,000 of Convertible Notes
      were
      converted by the Noteholders into an aggregate of 12,000,000 shares of the
      Company’s Common Stock. Assuming full conversion of all Convertible Notes which
      remain outstanding as of December 31, 2006, an additional 68,000,000 shares
      of
      the Company’s Common Stock would be issued to the Noteholders. The Convertible
      Notes provide for interest at the rate of ten percent per annum and are secured
      by a pledge of substantially all of the assets of the Company. Approximately
      $340,000 of interest expense was recorded during the year ended December 31,
      2006 related to the Convertible Notes. As of December 31, 2006, a total of
      $556,200 in accrued interest related to the Convertible Notes remained unpaid.
      The Convertible Notes are due and payable five days after demand for payment
      by
      the Noteholders. The Noteholders are entitled to certain demand and “piggy-back”
registration rights in connection with their investment.





An
      entity
      controlled by our Chairman and CEO has provided services to the Company and
      various of its subsidiaries during the year ended December 31, 2006, including:
      the lease of office space and the outsourcing of human resources and payroll
      processing functions.





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. The sublease commenced on September 1, 2003 and expires on July 31,
      2007. The initial base rent of $18.91 per square foot on an annual basis
      ($283,650 annually in the aggregate), increases on each anniversary of the
      sublease by $1.50 per square foot. During the year ended December 31, 2006
      approximately $416,000 of expense was recorded related to the lease of office
      space from Certified Vacations, including allocated building operating expenses
      and sales taxes.




61





Beginning
      April 2005, we outsourced our human resources and payroll processing functions
      from Certified Vacations and approximately $50,000 of expense was recorded
      during the year ended December 31, 2006 related to these functions.





Review,
      Approval or Ratification of Transactions with Related Persons .
      The
      Board of Directors has adopted a Code of Ethics and Business Conduct, which
      applies to all officers, employees and directors of the Company. The Code of
      Ethics and Business Conduct describes the Company’s policies and standards for
      protecting the Company’s integrity and provides guidance to the Company’s
      officers, employees and directors in recognizing and reporting activities that
      conflict with, or have the appearance of conflicting with, the best interests
      of
      the Company and its stockholders. The Code of Ethics and Business Conduct
      provides that no officer, employee or director of the Company shall derive
      any
      personal gain from any Company activity unless the transaction has been fully
      disclosed to and approved in writing by the Company’s Compliance Officer, Ms.
      Lebowitz, or the Board of Directors as the case may be.





Director
      Independence .
      None of
      the current members of the Company’s Board of Directors are considered
“independent” within the meaning of applicable NASD rules





**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND SERVICES**





Audit
      Fees .
      The
      aggregate fees billed by Rachlin Cohen & Holtz LLP (“Rachlin Cohen”),
      independent public accountants, for professional services rendered for the
      audit
      of our annual financial statements during 2006 and 2005 and the reviews of
      the
      financial statements included in our Forms 10-Q and 10-K, as appropriate, were
      $128,625 and $110,645, respectively.





Audit-Related
      Fees .
      During
      the last two fiscal years, Rachlin Cohen provided the Company with the following
      services that are reasonably related to the performance of the audit of our
      financial statements:





The
      Company incurred no assurance and related services related to audits and review
      for various SEC filings (including S-8’s, proxy and private placements) during
      2006. Fees related to these services were $32,983 for 2005; and





Other
      services relating to consultation and research of various accounting
      pronouncements and technical issues were $3,340 for 2006 and $4,211 for 2005.





Tax
      Fees .
      The
      aggregate fees billed for tax services provided by Rachlin Cohen in connection
      with tax compliance, tax consulting and tax planning services during 2006 and
      2005, were $88,860 and $103,021, respectively.





All
      Other Fees .
      Except
      as described above, the Company had no other fees for services provided by
      Rachlin Cohen during 2006 and 2005.





Pre-Approval
      of Services by the External Auditor .
      In
      April 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. The Audit
      Committee pre-approved the audit related engagements and tax services billed
      by
      the amounts described above.





62





**PART
      IV**





**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**




(1)
            
            Financial
                statements are listed in the index to the consolidated financial
                statements on page F-1 of this Report.(2)
            
            No
                financial statement schedules are included because they are not applicable
                or are not required or the information required to be set forth therein
                is
                included in the consolidated financial statements or notes thereto.(3)
            
            Exhibit
                Index3.1
            
            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
                (18).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 (18).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
                (13).3.5
            
            Certificate
                of Amendment Relating to the Designation Preferences and Rights of
                the
                Junior Participating Preferred Stock (15).3.6
            
            Form
                of By-Laws of the Company (18).3.7
            
            Certificate
                of Amendment Relating to the Designation Preferences and Rights of
                the
                Series H Automatically Converting Preferred Stock (17).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
                (21).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
                (13).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.
                (16).




63




4.11
            
            Form
                of Warrant relating to potential issuance of Earn-out Consideration
                (17).4.12
            
            Form
                of Secured Demand Convertible Promissory Note (23).





4.13
            
            Security
                Agreement dated April 22, 2005 by and between theglobe.com, inc.
                and
                certain other parties named therein (23).4.14
            
            Unconditional
                Guaranty Agreement dated April 22, 2005 (23).10.1
            
            Form
                of Indemnification Agreement between the Company and each of its
                Directors
                and Executive Officers (1).10.2
            
            2000
                Broad Based Stock Option Plan (7).**10.3
            
            1998
                Stock Option Plan, as amended (6).**10.4
            
            1995
                Stock Option Plan (1).**10.5
            
            Employee
                Stock Purchase Plan (5).**10.6
            
            Technology
                Purchase Agreement dated November 12, 2002, among theglobe.com, inc.
                and
                Brian Fowler (9).10.7
            
            Employment
                Agreement dated November 12, 2002, among theglobe.com, inc. and Brian
                Fowler (9).**10.8
            
            Payment
                Agreement dated November 12, 2002, among theglobe.com, inc., 1002390
                Ontario Inc., and Robert S. Giblett (9).10.9
            
            Release
                Agreement dated November 12, 2002, among theglobe.com, inc. and certain
                other parties named therein (9).10.10
            
            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).10.11
            
            Form
                of Subscription Agreement relating to the purchase of Units of Series
                G
                Preferred Stock and Warrants of theglobe.com, inc. (11).10.12
            
            Employment
                Agreement dated August 1, 2003 between theglobe.com, inc. and Michael
                S.
                Egan (12).**10.13
            
            Employment
                Agreement dated August 1, 2003 between theglobe.com, inc. and Edward
                A.
                Cespedes (12).**10.14
            
            Employment
                Agreement dated August 1, 2003 between theglobe.com, inc. and Robin
                Segaul
                Lebowitz (12).**10.15
            
            Amended
                & Restated Non-Qualified Stock Option Agreement effective as of August
                12, 2002 between theglobe.com, inc. and Michael S. Egan (12).**10.16
            
            Amended
                & Restated Non-Qualified Stock Option Agreement effective as of August
                12, 2002 between theglobe.com, inc. and Edward A. Cespedes (12).**10.17
            
            Amended
                & Restated Non-Qualified Stock Option Agreement effective as of August
                12, 2002 between theglobe.com, inc. and Robin Segaul Lebowitz (12).**10.18
            
            2003
                Amended and Restated Non-Qualified Stock Option Plan (28).**




64




10.19
            
            Securities
                Purchase and Registration Agreement dated March 2, 2004 relating
                to the
                purchase of Units of Common Stock and Warrants of theglobe.com, inc.
                (14).10.20
            
            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 (14).*10.21
            
            Broad
                Capacity Services Agreement dated October 17, 2003 by and between
                Direct
                Partner Telecom, Inc. and Progress Telecom Corporation (14).*






10.22
            
            Agreement
                and Plan of Merger dated August 31, 2004 by and between theglobe.com,
                inc., SendTec Acquisition Corporation and SendTec, Inc., among others
                (16).10.23
            
            Employment
                Agreement dated September 1, 2004 by and between SendTec, Inc. and
                Paul
                Soltoff (16).**10.24
            
            Stockholders’
                Agreement dated September 1, 2004 by and between theglobe.com and
                certain
                named stockholders (17).10.25
            
            theglobe.com
                2004 Amended and Restated Stock Option Plan (20).10.26
            
            Promissory
                Note dated September 1, 2004 (17).10.27
            
            Form
                of Potential Conversion Note relating to Series H Preferred Stock
                (17).10.28
            
            Termination
                of Agreement dated as of January 31, 2005 by and between theglobe.com,
                inc. and Promotion and Display Technology Ltd. (22).10.29
            
            Consulting
                Agreement effective as of February 2, 2005 (fully executed as of
                March 28,
                2005) between theglobe.com, inc. and Albert J. Detz (22).**10.30
            
            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 (22).10.31
            
            First
                Amendment to Carrier Services Agreement dated March 25, 2005 (22).10.32
            
            Note
                Purchase Agreement dated April 22, 2005 by and between theglobe.com,
                inc.
                and certain named investors (23).10.33
            
            Asset
                Purchase Agreement dated as of August 10, 2005 by and among theglobe.com,
                inc., SendTec, Inc. and RelationServe Media, Inc. (24).10.34
            
            1stAmendment
                to the Asset Purchase Agreement dated as of August 23, 2005, by and
                among
                theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc. (25).10.35
            
            Redemption
                Agreement dated August 23, 2005 between theglobe.com, inc. and certain
                members of management of SendTec, Inc. (26).10.36
            
            Escrow
                Agreement dated as of October 31, 2005, by and among theglobe.com,
                inc.,
                SendTec, Inc., RelationServe Media, Inc. and Olshan Grundman Frome
                Rosenzweig & Wolosky LLP (27).10.37
            
            Termination
                Agreement dated as of October 31, 2005, by and among theglobe.com,
                inc.,
                SendTec, Inc., Paul Soltoff, Eric Obeck, Donald Gould, Harry Greene,
                Irvine and Nadine Brechner, as tenants by the entirety, Allen Vance,
                G.
                Thomas Alison and Steven Morvay (27).10.38
            
            .travel
                Sponsored TLD Registry Agreement dated May 5, 2005 by and between
                ICANN
                and Tralliance Corporation.




65




10.39
            
            Warrant
                Purchase Agreement dated as of November 22, 2006 by and between
                theglobe.com, inc. and Carl Ruderman.*10.40
            
            Stockholders’
                Agreement dated as of November 22, 2006 by and among theglobe.com,
                inc.,
                Michael S. Egan, Edward A. Cespedes, E&C Capital Partners, LLLP,
                E&C Capital Partners II, Ltd., Dancing Bear Investments, Inc. and Carl
                Ruderman.10.41
            
            Warrant
                to Acquire 5,000,000 shares of theglobe.com, inc. dated as of November
                22,
                2006 issued to Carl Ruderman.*10.42
            
            Warrant
                to Acquire 5,000,000 shares of theglobe.com, inc. dated as of November
                22,
                2006 issued to Carl Ruderman.*10.43
            
            Amended
                and Restated License Agreement dated as of January 26, 2007 by and
                between
                tglo.com, inc. and Speecho LLC.*10.44
            
            NeuLevel
                Master Service Agreement dated as of October 11, 2005 by and between
                NeuLevel, Inc. and Tralliance Corporation.*10.45
            
            Settlement
                Agreement between MySpace, Inc. and theglobe.com, inc. and Michael
                Egan.10.46
            
            Marketing
                Services Agreement dated as of November 22, 2006 between theglobe.com,
                inc. and Trans Digital Media, LLC.*10.47
            
            Marketing
                Services Agreement dated as of November 22, 2006 between theglobe.com,
                inc. and Universal Media of Miami, Inc.*21.
            
            Subsidiaries31.1
            
            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.




66





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 10-K filed on March 31, 2003.





14.
      Incorporated by reference from our Form 10-KSB filed on March 30, 2004.





15.
      Incorporated by reference from our Registration Statement on Form SB-2 filed
      on
      April 16, 2004 (Registration No. 333-114556).





16.
      Incorporated by reference from our Form 8-K filed on March 17, 2004.





17.
      Incorporated by reference from our Form 8-K filed September 7, 2004.





18.
      Incorporated by reference from our Form SB-2 filed April 16, 2004.





19.
      Incorporated by reference from our Post Effective Amendment No. 1 to our Form
      SB-2 filed on May 7, 2004.





20.
      Incorporated by reference from our S-8 filed October 13, 2004.





21.
      Incorporated by reference from our Form 8-K filed on December 2, 2004.





22.
      Incorporated by reference from our 10-KSB filed on March 30, 2005.





23.
      Incorporated by reference from our Form 8-K filed on April 26, 2005.





24.
      Incorporated by reference from our Form 8-K filed on August 16, 2005.





25.
      Incorporated by reference to Annex A of our Definitive Information Statement
      filed on September 15, 2005.





26.
      Incorporated by reference to Annex B of our Definitive Information Statement
      filed on September 15, 2005.





27.
      Incorporated by reference from our Form 8-K filed on November 4, 2005.





28.
      Incorporated by reference from our Form S-8 filed January 22, 2004.





*
      Confidential portions of this exhibit have been omitted and filed separately
      with the Commission pursuant to a request for confidential treatment.




**
      Management contract or compensatory plan or arrangement.




67


**SIGNATURES**
 
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized.
  theglobe.com,
                  inc.Dated:
                  March 30, 2007
              *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 Exchange Act of 1934, this report has
        been
        signed by the following persons on behalf of the Registrant in the capacities
        and on the dates indicated.
  */s/
                  Michael S.
                  Egan***
              
              *March
                  30, 2007**Michael
                  S. Egan**Chairman,
                  Director**/s/
                  Edward A. Cespedes***
              
              *March
                  30, 2007**Edward
                  A. Cespedes**Director**/s/
                  Robin Lebowitz***
              
              *March
                  30****,****2007**Robin
                  Lebowitz**Director*
  68
  **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
                    (18).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
                    (18).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
                    (13).3.5
                
                Certificate
                    of Amendment Relating to the Designation Preferences and Rights
                    of the
                    Junior Participating Preferred Stock (15).3.6
                
                Form
                    of By-Laws of the Company (18).3.7
                
                Certificate
                    of Amendment Relating to the Designation Preferences and Rights
                    of the
                    Series H Automatically Converting Preferred Stock (17).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 (21).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
                    (13).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.
                    (16).4.11
                
                Form
                    of Warrant relating to potential issuance of Earn-out Consideration
                    (17).4.12
                
                Form
                    of Secured Demand Convertible Promissory Note (23).4.13
                
                Security
                    Agreement dated April 22, 2005 by and between theglobe.com, inc.
                    and
                    certain other parties named therein (23).
  69
  4.14
                
                Unconditional
                    Guaranty Agreement dated April 22, 2005 (23).10.1
                
                Form
                    of Indemnification Agreement between the Company and each of
                    its Directors
                    and Executive Officers (1).10.2
                
                2000
                    Broad Based Stock Option Plan (7).**10.3
                
                1998
                    Stock Option Plan, as amended (6).**10.4
                
                1995
                    Stock Option Plan (1).**10.5
                
                Employee
                    Stock Purchase Plan (5).**10.6
                
                Technology
                    Purchase Agreement dated November 12, 2002, among theglobe.com,
                    inc. and
                    Brian Fowler (9).10.7
                
                Employment
                    Agreement dated November 12, 2002, among theglobe.com, inc. and
                    Brian
                    Fowler (9).**10.8
                
                Payment
                    Agreement dated November 12, 2002, among theglobe.com, inc.,
                    1002390
                    Ontario Inc., and Robert S. Giblett (9).10.9
                
                Release
                    Agreement dated November 12, 2002, among theglobe.com, inc. and
                    certain
                    other parties named therein (9).10.10
                
                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).10.11
                
                Form
                    of Subscription Agreement relating to the purchase of Units of
                    Series G
                    Preferred Stock and Warrants of theglobe.com, inc. (11).10.12
                
                Employment
                    Agreement dated August 1, 2003 between theglobe.com, inc. and
                    Michael S.
                    Egan (12).**10.13
                
                Employment
                    Agreement dated August 1, 2003 between theglobe.com, inc. and
                    Edward A.
                    Cespedes (12).**10.14
                
                Employment
                    Agreement dated August 1, 2003 between theglobe.com, inc. and
                    Robin Segaul
                    Lebowitz (12).**10.15
                
                Amended
                    & Restated Non-Qualified Stock Option Agreement effective as of
                    August
                    12, 2002 between theglobe.com, inc. and Michael S. Egan (12).**10.16
                
                Amended
                    & Restated Non-Qualified Stock Option Agreement effective as of
                    August
                    12, 2002 between theglobe.com, inc. and Edward A. Cespedes (12).**10.17
                
                Amended
                    & Restated Non-Qualified Stock Option Agreement effective as of
                    August
                    12, 2002 between theglobe.com, inc. and Robin Segaul Lebowitz
                    (12).**10.18
                
                2003
                    Amended and Restated Non-Qualified Stock Option Plan (28).**10.19
                
                Securities
                    Purchase and Registration Agreement dated March 2, 2004 relating
                    to the
                    purchase of Units of Common Stock and Warrants of theglobe.com,
                    inc. (14).10.20
                
                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 (14).*
  70
  10.21
                
                Broad
                    Capacity Services Agreement dated October 17, 2003 by and between
                    Direct
                    Partner Telecom, Inc. and Progress Telecom Corporation (14).*10.22
                
                Agreement
                    and Plan of Merger dated August 31, 2004 by and between theglobe.com,
                    inc., SendTec Acquisition Corporation and SendTec, Inc., among
                    others
                    (16).10.23
                
                Employment
                    Agreement dated September 1, 2004 by and between SendTec, Inc.
                    and Paul
                    Soltoff (16).**10.24
                
                Stockholders’
                    Agreement dated September 1, 2004 by and between theglobe.com
                    and certain
                    named stockholders (17).10.25
                
                theglobe.com
                    2004 Amended and Restated Stock Option Plan (20).10.26
                
                Promissory
                    Note dated September 1, 2004 (17).10.27
                
                Form
                    of Potential Conversion Note relating to Series H Preferred Stock
                    (17).10.28
                
                Termination
                    of Agreement dated as of January 31, 2005 by and between theglobe.com,
                    inc. and Promotion and Display Technology Ltd. (22).10.29
                
                Consulting
                    Agreement effective as of February 2, 2005 (fully executed as
                    of March 28,
                    2005) between theglobe.com, inc. and Albert J. Detz (22).**10.30
                
                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 (22).10.31
                
                First
                    Amendment to Carrier Services Agreement dated March 25, 2005
                    (22).10.32
                
                Note
                    Purchase Agreement dated April 22, 2005 by and between theglobe.com,
                    inc.
                    and certain named investors (23).10.33
                
                Asset
                    Purchase Agreement dated as of August 10, 2005 by and among theglobe.com,
                    inc., SendTec, Inc. and RelationServe Media, Inc. (24).10.34
                
                1stAmendment
                    to the Asset Purchase Agreement dated as of August 23, 2005,
                    by and among
                    theglobe.com, inc., SendTec, Inc. and RelationServe Media, Inc.
                    (25).10.35
                
                Redemption
                    Agreement dated August 23, 2005 between theglobe.com, inc. and
                    certain
                    members of management of SendTec, Inc. (26).10.36
                
                Escrow
                    Agreement dated as of October 31, 2005, by and among theglobe.com,
                    inc.,
                    SendTec, Inc., RelationServe Media, Inc. and Olshan Grundman
                    Frome
                    Rosenzweig & Wolosky LLP (27).10.37
                
                Termination
                    Agreement dated as of October 31, 2005, by and among theglobe.com,
                    inc.,
                    SendTec, Inc., Paul Soltoff, Eric Obeck, Donald Gould, Harry
                    Greene,
                    Irvine and Nadine Brechner, as tenants by the entirety, Allen
                    Vance, G.
                    Thomas Alison and Steven Morvay (27).10.38
                
                .travel
                    Sponsored TLD Registry Agreement dated May 5, 2005 by and between
                    ICANN
                    and Tralliance Corporation.10.39
                
                Warrant
                    Purchase Agreement dated as of November 22, 2006 by and between
                    theglobe.com, inc. and Carl Ruderman.*10.40
                
                Stockholders’
                    Agreement dated as of November 22, 2006 by and among theglobe.com,
                    inc.,
                    Michael S. Egan, Edward A. Cespedes, E&C Capital Partners, LLLP,
                    E&C Capital Partners II, Ltd., Dancing Bear Investments, Inc. and
                    Carl
                    Ruderman.
  71
  10.41
                
                Warrant
                    to Acquire 5,000,000 shares of theglobe.com, inc. dated as of
                    November 22,
                    2006 issued to Carl Ruderman.*10.42
                
                Warrant
                    to Acquire 5,000,000 shares of theglobe.com, inc. dated as of
                    November 22,
                    2006 issued to Carl Ruderman.*10.43
                
                Amended
                    and Restated License Agreement dated as of January 26, 2007 by
                    and between
                    tglo.com, inc. and Speecho LLC.*10.44
                
                NeuLevel
                    Master Service Agreement dated as of October 11, 2005 by and
                    between
                    NeuLevel, Inc. and Tralliance Corporation.*10.45
                
                Settlement
                    Agreement between MySpace, Inc. and theglobe.com, inc. and Michael
                    Egan.10.46
                
                Marketing
                    Services Agreement dated as of November 22, 2006 between theglobe.com,
                    inc. and Trans Digital Media, LLC.*10.47
                
                Marketing
                    Services Agreement dated as of November 22, 2006 between theglobe.com,
                    inc. and Universal Media of Miami, Inc.*21.
                
                Subsidiaries31.1
                
                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.
  72
 
 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 10-K filed on March 31, 2003.
 
 14.
        Incorporated by reference from our Form 10-KSB filed on March 30, 2004.
 
 15.
        Incorporated by reference from our Registration Statement on Form SB-2 filed
        on
        April 16, 2004 (Registration No. 333-114556).
 
 16.
        Incorporated by reference from our Form 8-K filed on March 17, 2004.
 
 17.
        Incorporated by reference from our Form 8-K filed September 7, 2004.
 
 18.
        Incorporated by reference from our Form SB-2 filed April 16, 2004.
 
 19.
        Incorporated by reference from our Post Effective Amendment No. 1 to our
        Form
        SB-2 filed on May 7, 2004.
 
 20.
        Incorporated by reference from our S-8 filed October 13, 2004.
 
 21.
        Incorporated by reference from our Form 8-K filed on December 2, 2004.
 
 22.
        Incorporated by reference from our 10-KSB filed on March 30, 2005.
 
 23.
        Incorporated by reference from our Form 8-K filed on April 26, 2005.
 
 24.
        Incorporated by reference from our Form 8-K filed on August 16, 2005.
 
 25.
        Incorporated by reference to Annex A of our Definitive Information Statement
        filed on September 15, 2005.
 
 26.
        Incorporated by reference to Annex B of our Definitive Information Statement
        filed on September 15, 2005.
 
 27.
        Incorporated by reference from our Form 8-K filed on November 4, 2005.
 
 28.
        Incorporated by reference from our Form S-8 filed January 22, 2004.
 
 *
        Confidential portions of this exhibit have been omitted and filed separately
        with the Commission pursuant to a request for confidential treatment.
 
 **
        Management contract or compensatory plan or arrangement.
 
 73