Edgar Filing: THEGLOBE COM INC

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 2004
REGISTRATION NO. 333-114556

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

POST EFFECTIVE AMENDMENT NO. 1 TO FORM SB-2

REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

THEGLOBE.COM, INC.
(Name of small business issuer in its charter)

110 EAST BROWARD BLVD, SUITE 1400
FT. LAUDERDALE, FL 33301
(954) 769-5900
(Address and telephone number of principal executive offices)

Name, address and telephone number of Copies of all communications to:
agent for service:

EDWARD A. CESPEDES, PRESIDENT DONALD E. THOMPSON, II, ESQ.
110 EAST BROWARD BOULEVARD PROSKAUER ROSE LLP
SUITE 1400 2255 GLADES ROAD, SUITE 340W
FT. LAUDERDALE, FLORIDA 33301 BOCA RATON, FLORIDA 33431
(954) 769-5900 TEL (561) 241-7400 -
FAX (561) 241-7145

Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Registration
To be Registered Registered (1) Per Security (2) Offering Price Fee
----------------------------------------------------------------------------------------------------------------

Common stock, par $.001 (3) 100,598,406 $.92 $ 92,550,534 $ 11,726
Common stock, par $.001 (4) 26,798,534 $.92 24,654,651 3,124
Common stock, par $.001 (5) 3,000,000 $.92 2,760,000 350
------------ ------------ ---------
130,396,940 $119,965,185 $ 15,200(6)
============ ============ =========

(1) This registration statement covers any additional shares of common stock of
theglobe.com, inc. that become issuable by reason of (i) any stock dividend,
stock split, recapitalization or any other similar transaction without receipt
of consideration that results in an increase in the number of shares of our
outstanding common stock or (ii) any changes in the exercise price of certain
warrants in accordance with the terms thereof.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended, based on
the average of the bid and asked price for our common stock on the OTC Bulletin
Board on April 14, 2004.

(3) Represents shares of common stock held by the Selling Stockholders.

(4) Represents shares of common stock issuable upon the exercise of outstanding
warrants and other rights.

(5) Represents shares of common stock which may be issuable to a certain Selling
Stockholder upon the achievement of various earn-out requirements.

(6) $16,301 was previously paid in connection with the initial filing of the
registration statement on April 16, 2004. The Registrant added an additional
3,000,000 shares to the registration statement issuable under the circumstances
set forth in footnote (5) above and removed from registration an aggregate of
12,445,644 shares which could have been issuable to certain of the Selling
Stockholders whom acquired securities in the Company's March 2004 private
offering, in the event the Registrant does not satisfy its registration
obligations to such Stockholders, for a net reduction of 9,445,644 shares.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the registration shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION SEPTEMBER 17, 2004

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

PROSPECTUS

[LOGO] theglobe.com

UP TO 130,396,940 SHARES OF COMMON STOCK

This offering relates to the resale of an aggregate of up to 130,396,940 shares
of the common stock, $.001 par value (the "Common Stock"), of theglobe.com, inc.
by persons who are referred to in this prospectus as "Selling Stockholders". The
shares that may be resold pursuant to this prospectus include 100,598,406 shares
of Common Stock owned by the Selling Stockholders, 26,798,534 shares of Common
Stock issuable upon the exercise of warrants owned by the Selling Stockholders
and 3,000,000 shares of Common Stock which may be issued to one of our Selling
Stockholders upon the attainment of certain business goals. Our filing of the
registration statement of which this prospectus is a part is intended to satisfy
our obligations to certain of the Selling Stockholders to register for resale
the shares issued to them and the shares issuable upon exercise of the warrants
issued to them.

We are not offering or selling any shares of our Common Stock pursuant to this
prospectus. We will not receive any proceeds from the sale of the shares by the
Selling Stockholders. We will, however, receive proceeds if Selling Stockholders
pay cash to exercise some or all of the warrants owned by the Selling
Stockholders. We will bear the expenses of the offering of the shares, except
that the Selling Stockholders will pay any applicable underwriting discounts,
brokerage fees or commissions and transfer taxes, as well as fees and
disbursements of their counsel and advisors.

Our Common Stock is quoted on the over-the-counter or OTC Bulletin Board under
the trading symbol "TGLO.OB." On August 16, 2004, the average of the bid and
asked price of our Common Stock was $.27. The Selling Stockholders may sell the
shares from time to time in public or private transactions occurring on or off
the OTC Bulletin Board, at prevailing market prices or at negotiated prices.
Sales may be made directly to purchasers or through brokers or to dealers, who
are expected to receive customary commissions or discounts.

This prospectus is a part of a registration statement that we filed with the
Securities and Exchange Commission. You should read both this prospectus and any
related prospectus supplement together with additional information described
under "Where You Can Find More Information".

All references in this prospectus to "theglobe", "the Registrant", "the
Company," "we," "us," or "our" mean theglobe.com, inc. and, as the context
requires, its subsidiaries.

YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 2 BEFORE
MAKING A DECISION TO PURCHASE SHARES OF OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is September ___, 2004.

TABLE OF CONTENTS

Page

PROSPECTUS SUMMARY...........................................................1

RISK FACTORS.................................................................3

FORWARD-LOOKING STATEMENTS..................................................16

USE OF PROCEEDS.............................................................17

DETERMINATION OF OFFERING PRICE.............................................17

SELLING STOCKHOLDERS........................................................18

PLAN OF DISTRIBUTION........................................................25

LEGAL PROCEEDINGS...........................................................26

MANAGEMENT..................................................................27

EXECUTIVE COMPENSATION......................................................30

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................34

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............36

DESCRIPTION OF SECURITIES...................................................38

VALIDITY OF SECURITIES......................................................44

EXPERTS ....................................................................44

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES....................................................44

DESCRIPTION OF BUSINESS.....................................................46

RECENT EVENTS ..............................................................54

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...................87

DESCRIPTION OF PROPERTY.....................................................97

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....................97

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................99

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..........................................132

WHERE YOU CAN FIND MORE INFORMATION........................................132

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that which
is contained in this prospectus. This prospectus may be used only where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of securities.

PROSPECTUS SUMMARY

This summary highlights key aspects of the information contained elsewhere in
this prospectus. This summary does not contain all of the information you should
consider before investing in our securities. You should read this entire
prospectus carefully, especially the risks of investing in our securities
discussed under "Risk Factors."

References to "we," "us," "our company" and "theglobe" refer to theglobe.com,
inc. together with its subsidiaries.

OUR BUSINESS

As of December 31, 2003, we managed two primary lines of business. One line
consists of our historical network of three wholly-owned businesses, each of
which specializes in the games business by delivering games information and
selling games in the United States and abroad. These businesses are: our print
publication Computer Games Magazine; our Computer Games Online website
(www.cgonline.com), which is the online counterpart to Computer Games Magazine;
and our Chips & Bits, Inc. (www.chipsbits.com) games distribution company.
Management of the Company continues to actively explore a number of strategic
alternatives for our online and offline game properties, including continuing
these operations or selling some or all of these properties.

The second line of business, which we recently began, is our VoIP telephony
services and includes voiceglo Holdings, Inc., a wholly-owned subsidiary, that
offers VoIP-based phone service. The term "VoIP", which means "Voice over the
Internet Protocol", refers to a category of hardware and software that enables
people to use the Internet to make phone calls.

As of December 31, 2003, our revenue sources were principally from the sale of
print advertising in our Computer Games magazine; the sale of video games and
related products through Chips & Bits, Inc., our games distribution business;
and the sale of our Computer Games magazine through newsstands and
subscriptions. Management's intent, going forward, is to devote substantial
monetary, management and human resources to our VoIP business.

Described below are certain significant transactions and events regarding our
company which occurred in the last two years.

On June 1, 2002, Chairman Michael S. Egan and Director Edward A. Cespedes became
our Chief Executive Officer and President, respectively.

On November 14, 2002, we acquired certain VoIP assets from Brian Fowler (now our
Chief Technology Officer) and we are now pursuing opportunities related to this
acquisition under the brand names "voiceglo" and "GloPhone".

On May 28, 2003, we acquired Direct Partner Telecom, Inc. ("DPT"). DPT was a
specialized international communications carrier providing VoIP communications
services to emerging countries. We 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 we decided to suspend further wholesale telephony business in DPT and to
dedicate the DPT physical and intellectual assets to our developing retail VoIP
business.

In March 2004, we completed a private offering of 333,816 units for a purchase
price of $85 per unit (the "PIPE Offering"). Each unit consisted of 100 shares
of the Company's Common Stock, and warrants to acquire 50 shares of the Common
Stock at an exercise price of $.001 per share. The aggregate number of shares of
Common Stock issued in the PIPE Offering was 33,381,647 shares for an aggregate
consideration of $28,374,400, or approximately $0.57 per share assuming the
exercise of the 16,690,824 warrants. The purpose of the PIPE Offering was to
raise funds for use primarily in our developing retail VoIP business, including
the deployment of networks, website development, marketing, and capital
infrastructure expenditures and working capital. We were obligated to file the
registration statement, of which the prospectus is a part, pursuant to the terms
of PIPE Offering.

Most of our investors from prior capital raises also elected to register their
shares for resale pursuant to the registration statement. The registration
statement, which related to the resale of up to approximately 131 million of our
shares (including approximately 27 million shares underlying outstanding
warrants to acquire our Common Stock and 3,000,000 shares of Common Stock which
may be issued upon the attainment of certain business goals), became effective
on May 11, 2004.

Our executive offices are located at 110 East Broward Blvd., Suite 1400, Fort
Lauderdale, Florida 33301. Our telephone number is (954) 769-5900.

THE SENDTEC ACQUISITION

On September 1, 2004, we closed on the acquisition of SendTec, Inc., an
advertising and direct response marketing services company based in St.
Petersburg, Florida (the "SendTec Acquisition"). In exchange for the acquisition
of SendTec we paid or will pay consideration consisting of: (i) $6,000,000 in
cash, (ii) the issuance of an aggregate of 17,500,000 shares of our common
stock, (iii) the issuance of an aggregate of 175,000 shares of our Series H
Automatically Converting Preferred Stock (which is convertible into 17,500,000
shares of our common stock), and (iv) a subordinated promissory note in the
amount of $1 million. We also issued an aggregate of approximately 4,000,000
replacement options to acquire our common stock for each of the issued and
outstanding options to acquire SendTec held by the former employees of SendTec.
In addition, warrants to acquire shares of common stock would be issued to
SendTec shareholders when and if SendTec exceeds forecasted operating income, as
defined, of $10.125 million, for the year ending December 31, 2005. The number
of earn-out warrants would range from an aggregate of 250,000 to 2,500,000 (if
actual operating income exceeds the forecast by at least 10%). Please see
"Recent Events" for further information relating to the acquisition of SendTec,
its business, risk factors relating to the acquisition and SendTec, together
with the historical and pro forma financial statements included in this
Prospectus.

THE OFFERING:

Common stock offered by Selling Stockholders 100,598,406 shares
Common stock issuable upon exercise
of outstanding warrants 26,798,534 shares
Common stock issuable upon attainment of certain
business goals 3,000,000 shares

Common stock outstanding:
Prior to the offering (1) 132,040,349 shares
After the offering (2)(3) 161,838,883 shares

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

(1) As of April 5, 2004. Does not include securities issued subsequent to April
5, 2004, including securities issued as part of the SendTec Acquisition.

(2) Assumes that all outstanding warrants and rights are earned and exercised,
other than those issued or issuable as part of the SendTec Acquisition.

(3) Assumes that all 3,000,000 shares which are subject to issuance upon
attainment of certain business goals held by one of the Selling Stockholders are
earned and issued.

RISK FACTORS

This offering and an investment in our securities involves a high degree of
risk. Investors should consider each of the risks and uncertainties described in
this section, in the "Recent Events" section, and all of the other information
in this prospectus before deciding to invest in our common stock. Our business,
financial condition and results of operations could be severely harmed by any of
the following risks. The trading price of our common stock could decline if any
of these risks and uncertainties develop into actual events. Investors may lose
all or part of the money paid to buy our common stock.

RISKS RELATING TO OUR BUSINESS GENERALLY

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

Since our inception, we have incurred net losses in each quarter, except the
fourth quarter of 2002 where we had net income of approximately $17,000. We
expect that we will continue to incur net losses for the foreseeable future. We
had net losses of approximately $11 million and $2.6 million for the years ended
December 31, 2003 and 2002, respectively, and approximately $10.0 million for
the first half of 2004. The principal causes of our losses are likely to
continue to be:

o costs resulting from the operation of our businesses;

o costs relating to entering new business lines;

o failure to generate sufficient revenue; and

o selling, general and administrative expenses.

Although we have restructured our businesses, we still expect to continue to
incur losses as we develop our VoIP telephony services business and while we
explore a number of strategic alternatives for our online and offline games
properties, including continuing to operate the properties, acquisition or
development of additional businesses or complementary products, selling some or
all of the properties or other changes to our business.

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

We have entered into a new business line, VoIP telephony services. In November
2002, we acquired certain VoIP assets from an entrepreneur in exchange for
1,750,000 warrants to purchase our common stock. On May 28, 2003, we acquired
Direct Partner Telecom, Inc. ("DPT"), an international licensed
telecommunications carrier then engaged in the purchase and resale of
telecommunication services over the Internet. We may also enter into new or
different lines of business, as determined by management and our Board of
Directors. The acquisitions of VoIP assets and of DPT, as well as any future
acquisitions or joint ventures could result, and in some instances have resulted
(particularly as it pertains to DPT), in numerous risks and uncertainties,
including:

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

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

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

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

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

o the risks of entering a new or different line of business;

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

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

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

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

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

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

o inadequate network infrastructure;

o security and authentication concerns;

o inconsistent quality of service;

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

o inadequate bandwidth availability.

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

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

o increased government regulation;

o potential governmental taxation of such services; and

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

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

There are an increasing number of federal, state, local and foreign laws and
regulations pertaining to the Internet and telecommunications. In addition, a
number of federal, state, local and foreign legislative and regulatory proposals
are under consideration. Laws or regulations have been and may continue to be
adopted with respect to the Internet relating to, among other things, fees and
taxation of VoIP telephony services, liability for information retrieved from or
transmitted over the Internet, online content regulation, user privacy and
quality of products and services. Changes in tax laws relating to electronic
commerce could materially affect our business, prospects and financial
condition. Moreover, the applicability to the Internet of existing laws
governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws or regulations, may decrease the
growth in the use of the Internet or VoIP telephony services, may impose
additional burdens on electronic commerce or may alter how we do business. This
could decrease the demand for our existing or proposed services, increase our
cost of doing business, increase the costs of products sold through the Internet
or otherwise have a material adverse effect on our business, plans, prospects,
results of operations and financial condition.

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

WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

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

We pursue the registration of our trademarks in the United States and
internationally. We are also seeking 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 will not infringe upon the proprietary rights of others,
or that other parties will not assert infringement claims against us, including
claims related to providing hyperlinks to websites operated by third parties or
providing advertising on a keyword basis that links a specific search term
entered by a user to the appearance of a particular advertisement. Moreover,
from time to time, third parties may assert claims of alleged infringement by us
of their intellectual property rights. Any litigation claims or counterclaims
could impair our business because they could:

o be time-consuming;

o result in significant costs;

o subject us to significant liability for damages;

o result in invalidation of our proprietary rights;

o divert management's attention;

o cause product release delays; or

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

We license from third parties various technologies incorporated into our 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
services or could adversely affect the performance of our existing services
until equivalent technology can be identified, licensed and integrated.

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

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

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

If we fail to promote and maintain our various brands or our games properties'
brand values are diluted, our businesses, operating results, financial
condition, and our ability to attract buyers for the games properties 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 a new line
of business, our historical quarterly operating results are not necessarily
reflective of future results. The factors that will cause our quarterly
operating results to fluctuate in the future include:

o acquisitions of new businesses or sales of our assets;

o declines in the number of sales or technical employees;

o the level of traffic on our websites;

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

o the addition or loss of VoIP customers, advertisers on our games
properties and electronic commerce partners on our websites;

o overall usage and acceptance of the Internet;

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

o other costs relating to the maintenance of our operations;

o the restructuring of our business;

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

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

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

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

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

o attract customers to our VoIP telephony service;

o maintain or increase sponsorship revenues for our games magazine;

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

o identify, attract, retain and motivate qualified personnel.

OUR MANAGEMENT TEAM IS INEXPERIENCED IN THE MANAGEMENT OF A PUBLIC COMPANY.

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

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

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

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

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

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

WE DEPEND ON HIGHLY QUALIFIED TECHNICAL AND MANAGERIAL PERSONNEL.

Our future success also depends on our continuing ability to attract, retain and
motivate highly qualified technical expertise and managerial personnel necessary
to operate our businesses. We may need to give retention bonuses and stock
incentives to certain employees to keep them, which can be costly to us. We may
be unable to attract, assimilate or retain highly qualified technical and
managerial personnel in the future. Wages for managerial and technical employees
are increasing and are expected to continue to increase in the future. We have
from time to time in the past experienced, and could continue to experience in
the future if we need to hire any additional personnel, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications. In addition,
we may have difficulty attracting qualified employees due to our restructuring
in 2000 and 2001, financial position and scaling down of operations. Also, we
may have difficulty attracting qualified employees to work in the geographically
remote location in Vermont of Chips & Bits, Inc. and Strategy Plus, Inc. If we
were unable to attract and retain the technical and managerial personnel
necessary to support and grow our businesses, our businesses would likely be
materially and adversely affected.

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

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

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

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

Due to the relationships with his related entities, Mr. Egan will have an
inherent conflict of interest in making any decision related to transactions
between the related entities and us. We intend to review related party
transactions in the future on a case-by-case basis.

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

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

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

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

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

Users may access content on our websites or the websites of our distribution
partners or other third parties through website links or other means, and they
may download content and subsequently transmit this content to others over the
Internet. This could result in claims against us based on a variety of theories,
including defamation, obscenity, negligence, copyright infringement, trademark
infringement or the wrongful actions of third parties. Other theories may be
brought based on the nature, publication and distribution of our content or
based on errors or false or misleading information provided on our websites.
Claims have been brought against online services in the past and we have
received inquiries from third parties regarding these matters. The 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 whom we are
entitled to receive a share of any revenue from the purchase of goods and
services through direct links from our sites. We sell products directly to
consumers which may expose us to additional legal risks, regulations by local,
state, federal and foreign authorities and potential liabilities to consumers of
these products and services, even if we do not ourselves provide these products
or services. We cannot assure you that any indemnification that may be provided
to us in some of these agreements with these parties will be adequate. Even if
these claims do not result in our liability, we could incur significant costs in
investigating and defending against these claims. The imposition of potential
liability for information carried on or disseminated through our systems could
require us to implement measures to reduce our exposure to liability. Those
measures may require the expenditure of substantial resources and limit the
attractiveness of our services. Additionally, our insurance policies may not
cover all potential liabilities to which we are exposed.

WE ARE INVOLVED IN SECURITIES CLASS ACTION LITIGATION.

We are a party to the securities class action litigation described in Note 9 to
the Consolidated Financial Statements - "Commitments and Contingencies". The
defense of the litigation may increase our expenses and will occupy management's
attention and resources, and an adverse outcome in this litigation could
materially adversely affect us.

WE MAY HAVE TO TAKE ACTIONS TO AVOID REGISTRATION UNDER THE INVESTMENT COMPANY
ACT.

Under the Investment Company Act of 1940 (the "1940 Act"), a company meeting the
definition of an "investment company" is subject to various stringent legal
requirements on its operations. A company can become subject to the 1940 Act if,
among other reasons, it owns investment securities with a value exceeding 40
percent of the value of its total assets (excluding government securities and
cash items) on an unconsolidated basis, unless a particular exemption of safe
harbor applies. Although we are not currently subject to the 1940 Act, at some
point in the future the percentage of our assets which consist of investment
securities may exceed 40 percent of the value of its total assets on an
unconsolidated basis. Rule 3a-2 of the 1940 Act provides a temporary exemption
from registration under the 1940 Act, for up to one year, for companies that
have a bona fide intent to engage, as soon as reasonably possible, in business
other than investing, reinvesting, owning, holding or trading in securities
("transient investment companies"). If, due to future sales of our assets or
changes in the value of our existing assets, we become subject to the 1940 Act,
we intend to take all actions that would allow reliance on the one-year
exemption for "transient investment companies", including a resolution by the
Board of Directors that we have a bona fide intent to engage, as soon as
reasonably possible, in business other than investing, reinvesting, owning,
holding or trading in securities. After the one-year period, we would be
required to comply with the 1940 Act unless our operations and assets result in
us no longer meeting the definition of Investment Company.

RISKS RELATING TO OUR VOICE OVER THE INTERNET BUSINESS

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

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

o the identification of market demand for new products;

o access to sufficient capital to complete our development efforts;

o product and feature selection;

o timely implementation of product design and development;

o product performance;

o cost-effectiveness of products under development;

o securing effective manufacturing processes; and

o success of promotional efforts.

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

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

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

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

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

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

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

WE ARE UNABLE TO PREDICT THE VOLUME OF USAGE AND OUR CAPACITY NEEDS FOR OUR VOIP
BUSINESS; DISADVANTAGEOUS CONTRACTS WOULD REDUCE OUR OPERATING MARGINS.

We have entered into a number of, and may have to enter into additional,
long-term agreements (generally from one to five years) for leased
communications transmission capacity with various carriers. Many of these
agreements have minimum use requirements pursuant to which we are able to
negotiate lower overall per minute usage rates assuming the utilization of all
of such minutes. To the extent that we have overestimated (or in the future
overestimate) our call volume, we are obligated to pay for more transmission
capacity than we actually use, resulting in costs without corresponding revenue.
Our minimum commitments under existing carrier agreements presently greatly
exceed our actual usage. Conversely, in the future, if we underestimate our
capacity needs, we may be required to obtain additional transmission capacity
through more expensive means or such capacity may not be available. As a result
our margins could be reduced and our business, financial condition and results
of operations could be materially and adversely affected.

We have also entered into a contract with a supplier to purchase a minimum
number of telephony handsets, and may enter into similar arrangements with other
suppliers for other equipment related to our VoIP services. In general, we can
achieve better per unit pricing for such equipment if we enter into larger
commitments. To the extent we overestimate our needs for and enter into binding
agreements to purchase such equipment, we may be obligated to buy more of such
equipment than we can reasonably use in our business in the foreseeable future,
if at all. In the event that we are not able to sell our telephony equipment in
sufficient quantities and at sufficient prices, charges related to potential
excess inventory commitments and write-downs in the value of our telephony
inventory assets may be required in future periods.

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

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

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

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

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

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

ONLINE CREDIT CARD FRAUD CAN HARM OUR BUSINESS.

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

RISKS RELATING TO OUR HISTORICAL BUSINESS

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

Our subsidiary, Chips & Bits, Inc. depends on major releases in the Personal
Computer (PC) market for the majority of sales and profits. The game industry's
focus on X-Box, Playstation and GameCube has dramatically reduced the number of
major PC releases, which resulted in significant declines in revenues and gross
margins for Chips & Bits. Because of the large installed base of personal
computers, revenue and gross margin percentages may fluctuate with changes in
the PC game market. However, we are unable to predict when, if ever, there will
be a turnaround in the PC game market.

In addition, many companies involved in the games market may be acquired by,
receive investments from, or enter into commercial relationships with larger,
well-established and well-financed companies. As a result of this highly
fragmented and competitive market, consolidations and strategic ventures may
continue in the future.

WE HAVE HISTORICALLY RELIED SUBSTANTIALLY ON ONLINE AND PRINT ADVERTISING
REVENUES. THE ONLINE AND PRINT ADVERTISING MARKETS HAVE SIGNIFICANTLY DECLINED.

We historically derived a substantial portion of our revenues from the sale of
advertisements on our website and in our magazine Computer Games Magazine. Our
business model and revenues were highly dependent on the amount of traffic on
our websites, our ability to properly monetize website traffic and on the print
circulation of our Computer Games magazine. Print and online advertising have
dramatically decreased since the middle of 2000, and may continue to decline,
which could continue to have a material effect on us. Many advertisers have been
experiencing financial difficulties which could materially impact our revenues
and our ability to collect our receivables. For these reasons, we cannot assure
you that our current advertisers will continue to purchase advertisements from
our games properties.

WE MAY BE MATERIALLY ADVERSELY AFFECTED IF ELECTRONIC COMMERCE DOES NOT BECOME A
VIABLE SOURCE OF SIGNIFICANT REVENUES OR PROFITS.

In February 2000, we acquired Chips & Bits, Inc., a direct marketer of video
games and related products over the Internet. However, we have limited
experience in the sale of products online as compared to many of our competitors
and the development of relationships with manufacturers and suppliers of these
products. In addition, the closing of our community site and our small business
web-hosting site adversely affected our electronic commerce due to the loss of
traffic referred by those sites to the Chips & Bits website. We also face many
uncertainties, which may affect our ability to generate electronic commerce
revenues and profits, including:

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

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

o the level of product returns;

o merchandise shipping costs and delivery times;

o our ability to manage inventory levels;

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

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

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

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

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

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

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

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 August 16, 2004, we had issued and outstanding approximately 138 million
shares, of which approximately 30.2 million shares were freely tradeable over
the public markets. There is limited trading volume in our shares and we are now
traded only in the over-the-counter market. On April 16, 2004, we filed a
registration statement relating to the potential resale of up to approximately
131 million of our shares (including approximately 27 million shares underlying
outstanding warrants to acquire our Common Stock). The registration statement
became effective on May 11, 2004. Sales of significant amounts of Common Stock
in the public market in the future, the perception that sales will occur or the
registration of additional shares pursuant to existing contractual obligations
could materially and adversely drive down the price of our stock. In addition,
such factors could adversely affect the ability of the market price of the
Common Stock to increase even if our business prospects were to improve.
Substantially all of our stockholders holding restricted securities, including
shares issuable upon the exercise of warrants to purchase our Common Stock, have
registration rights under various conditions. Also, we may issue additional
shares of our common stock or other equity instruments which may be convertible
into common stock at some future date, which could further adversely affect our
stock price.

In addition, as of August 16, 2004, there were outstanding options to purchase
approximately 9,960,000 shares of our Common Stock, which become eligible for
sale in the public market from time to time depending on vesting and the
expiration of lock-up agreements. The issuance of shares upon exercise of these
options is registered under the Securities Act and consequently, subject to
certain volume restrictions as to shares issuable to executive officers, will be
freely tradable.

OUR CHAIRMAN MAY CONTROL US.

Michael S. Egan, our Chairman and Chief Executive Officer, beneficially owns or
controls, directly or indirectly, approximately 59 million shares of our Common
Stock as of August 16, 2004, which in the aggregate represents approximately 42%
of the outstanding shares of our Common Stock (treating as outstanding for this
purpose the shares of Common Stock issuable upon exercise of the options and
warrants owned by Mr. Egan or his affiliates). Accordingly, Mr. Egan would
likely 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 trading volume of our shares has
dramatically declined since the delisting. In addition, we are now subject to a
Rule promulgated by the Securities and Exchange Commission that, if we fail to
meet criteria set forth in such Rule, various practice requirements are imposed
on broker-dealers who sell securities governed by the Rule to persons other than
established customers and accredited investors. For these types of transactions,
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transactions
prior to sale. Consequently, the Rule may have a materially adverse effect on
the ability of broker-dealers to sell the securities, which may materially
affect the ability of stockholders to sell the securities in the secondary
market.

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.

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

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

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

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

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

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

OUR STOCK PRICE IS VOLATILE.

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

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

o entrance into new lines of business, including acquisitions of
businesses;

o quarterly variations in our operating results;

o competitive announcements;

o sales of any of our remaining games properties;

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

o news relating to trends in our markets.

The stock market has experienced significant price and volume fluctuations, and
the market prices of technology companies, particularly Internet-related
companies, have been highly volatile. Our stock is also more volatile due to the
limited trading volume.

FORWARD-LOOKING STATEMENTS

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

o implementing our business strategy;

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

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

o potential governmental regulation and taxation;

o our intellectual property;

o our estimates of future revenue and profitability;

o our estimates or expectations of continued losses;

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

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

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

o attracting and retaining customers and employees;

o rapid technological changes in our industry and relevant markets;

o sources of revenue and anticipated revenue;

o plans for future acquisitions; and

o competition in our market.

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 prospectus or to conform these statements to
actual results. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus 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 prospectus.

In this prospectus, 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.

USE OF PROCEEDS

We will not receive any proceeds upon the sale of shares of Common Stock by the
Selling Stockholders. The Company will only receive proceeds in the event the
Selling Stockholders exercise their warrants. We intend to use the proceeds from
the exercise of warrants for working capital and other general corporate
purposes.

DETERMINATION OF OFFERING PRICE

The shares of Common Stock will be sold at prevailing market prices at the time
of the sale or at negotiated prices by the Selling Stockholders.

SELLING STOCKHOLDERS

The following table sets forth certain information known to us with respect to
the beneficial ownership of the Company's common stock as of April 5, 2004 by
the Selling Stockholders who may sell their Common Stock pursuant to this
prospectus. This information is based upon information provided by each
respective Selling Stockholder and Schedules 13D and other public accounts filed
with the Commission.

The shares offered by this prospectus may be offered for sale from time to time
by the Selling Stockholders. Because the Selling Stockholders may offer all,
some or none of the shares pursuant to this prospectus, and because there are
currently no agreements, arrangements or understandings with respect to the sale
of any shares, no estimate can be given as to the number of shares that will be
held by the Selling Stockholders after the completion of this offering,
accordingly, it is assumed that all the shares offered pursuant to this
prospectus are sold. No selling stockholder has, or within the past three years
has had, any position, office or other material relationship with us or any of
our predecessors or affiliates, except as noted.

The number of shares of Common Stock beneficially owned by the Selling
Stockholders includes the shares of Common Stock beneficially owned by the
Selling Stockholders as of May 11, 2004, the date of this original prospectus
and shares of Common Stock underlying warrants held by the Selling Stockholders
that are exercisable within sixty days (60) days of such date. Except as
otherwise indicated, to our knowledge, the Selling Stockholders have sole voting
and investment power with respect to all shares beneficially owned by them, or
with respect to the shares underlying warrants, will have sole voting and
investment power at the time such shares are sold. The percentages shown in the
table below are based upon 132,040,349 shares of Common Stock outstanding as of
April 5, 2004 (which do not include the securities issued as part of the SendTec
Acquisition). The numbers shown in the column "Shares Being Offered" include
additional shares of Common Stock that may be issued to many of the Selling
Stockholders upon exercise of any warrant held by them.

Number of Number of Percentage
Shares Number of Shares Beneficial
Beneficially Shares Shares Beneficially Ownership
Owned Before Underlying Being Offered Owned After After
Selling Stockholder this Offering Warrants(1) this this
Offering(2) Offering
------------------------------------------------------------------------------------------------------------------------------

Telstra Super Pty Ltd. ................... 360,000 120,000 360,000 0
Wellington Management Portfolios (Dublin) -
Global Smaller Companies Equity Portfolio. 202,500 67,500 202,500 0
New Zealand Funds Management Limited...... 300,000 100,000 300,000 0
SEI Institutional Investments Trust, Small
Cap Fund.................................. 1,350,000 450,000 1,350,000 0
Seligman Portfolios, Inc., Seligman Global
Smaller Companies Portfolio............... 33,750 11,250 33,750 0
Australian Retirement Fund................ 420,000 140,000 420,000 0
Emergency Services Superannuation Board... 285,000 95,000 285,000 0
Retail Employees Superannuation Trust..... 495,000 165,000 495,000 0
SEI Institutional Investments Trust, Small
Mid Cap Equity Fund ...................... 255,000 85,000 255,000 0
Talvest Global Small Cap Fund............. 345,000 115,000 345,000 0
BC Telecom Pension Plan for Management and
Exempt Employees.......................... 75,000 25,000 75,000 0
J B Were Global Small Companies Pooled Fund 1,425,000 475,000 1,425,000 0
SEI Institutional Managed Trust, Small Cap
Growth Fund............................... 1,575,000 525,000 1,575,000 0
Seligman Global Fund Series, Inc., Seligman
Global Smaller Companies Fund............. 900,000 300,000 900,000 0
TELUS Corporation Foreign Equity Active Pool 165,000 55,000 165,000 0
British Columbia Investment Management
Corporation............................... 645,000 215,000 645,000 0
The Dow Chemical Employees' Retirement Plan 1,155,000 385,000 1,155,000 0
The Robert Wood Johnson Foundation........ 1,425,000 475,000 1,425,000 0
Laborers' District Council and Contractors'
of Ohio Pension Fund...................... 375,000 125,000 375,000 0
Wellington Trust Company, National
Association Multiple Collective Investment
Funds Trust, Emerging Companies Portfolio. 1,800,000 600,000 1,800,000 0
Government of Singapore Investment Company
Pte, Ltd.................................. 4,950,000 1,650,000 4,950,000 0
New York State Nurses Association Pension 780,000 260,000 780,000 0
Plan......................................
Oregon Investment Council................. 2,550,000 850,000 2,550,000 0
Wellington Trust Company, National
Association Multiple Common Trust Funds
Trust, Emerging Companies Portfolio....... 1,950,000 650,000 1,950,000 0
Howard Hughes Medical Institute........... 1,275,000 425,000 1,275,000 0
Ohio Carpenters' Pension Fund............. 405,000 135,000 405,000 0
The Retirement Program Plan for Employees of
Union Carbide Corporation................. 1,050,000 350,000 1,050,000 0
The Maritime Life Discovery Fund.......... 585,000 195,000 585,000 0
Proximity Partners, LP.................... 611,775 203,925 611,775 0
Proximity Fund LP......................... 611,775 203,925 611,775 0
Gamma Opportunity Capital Partners LP..... 882,450 588,300 882,450 0
Enable Growth Partners.................... 611,700 203,900 611,700 0
Capital Ventures International........... 3,058,800 1,019,600 3,058,800 0
SF Capital Partners, Ltd.................. 3,211,800 1,070,600 3,211,800 0
Longview Fund, LP......................... 1,764,750 588,250 1,764,750 0
Longview Equity Fund, LP.................. 2,084,550 694,850 2,084,550 0
Longview International Equity Fund, LP.... 694,800 231,600 694,800 0
Alpha Capital AG.......................... 1,764,750 588,250 1,764,750 0

Manuel Senderos F......................... 1,588,235 529,412 1,588,235 0
Gruber & McBaine International............ 344,250 114,750 344,250 0
Jon D. Gruber & Linda W. Gruber........... 344,250 114,750 344,250 0
Lagunitas Partners LP..................... 996,750 332,250 996,750 0
J. Patterson McBaine...................... 150,000 50,000 150,000 0
Seneca Capital LP......................... 520,500 173,500 520,500 0
Seneca Capital International Ltd.......... 1,008,900 336,300 1,008,900 0
Sergio Rosengaus Leizgold................. 150,000 50,000 150,000 0
Carinthia Pte, Ltd........................ 1,614,707 538,236 1,614,707 0
Mauricio Garduno.......................... 529,411 176,470 529,411 0
Paul Tomasi............................... 432,950 117,650 352,950 80,000 *
Garrett Pettingell (3).................... 106,618(17) 14,706 44,118 62,500 *
Idlewyld, LLC............................. 337,956 337,956 337,956 0
David Dohrmann............................ 11,914 11,914 11,914 0
William C. Begien......................... 109,489 109,489 109,489 0
Baruch & Shoshana Halpern, ............... 540,641 540,641 540,641 0
Huizenga Investments Limited Partnership (4) 2,400,000 400,000 2,400,000 0
Berard Holdings Limited Partnership....... 600,000 100,000 600,000 0
Actarus Fund II, LLP (4).................. 1,380,000 230,000 1,380,000 0
Stephan Paternot (4)...................... 364,957 364,957 364,957 0
Michael E. Maroone........................ 240,000 40,000 240,000 0
Henry C. Duques (4)....................... 60,000 10,000 60,000 0
Robert W. and Sarah M. Tuthill, BDE....... 96,425 14,000 84,000 12,425 *
Robert Emmett McTigue..................... 60,000 10,000 60,000 0
James A. Jordan, IRA...................... 240,000 40,000 240,000 0
Janet Jordan.............................. 136,000 20,000 120,000 16,000 *
Marjorie W. Egan.......................... 120,000 20,000 120,000 0
Susan B. Segaul (5)....................... 60,000 10,000 60,000 0
Michael G. Moore.......................... 245,000 40,000 240,000 5,000 *
Celeste V. Allen (6)...................... 120,000 20,000 120,000 0
Rosalie V. Arthur (7)..................... 70,002 10,000 60,000 10,002 *
Robert F. and Mary M. Dwors, JTROS........ 72,000 12,000 72,000 0
Weezor I Limited Partnership.............. 60,000 10,000 60,000 0
Ron Castell............................... 60,000 10,000 60,000 0
James J. and Nancy W. Blosser, JTROS...... 60,000 10,000 60,000 0
Ted and Carol Drum, JTROS................. 60,000 10,000 60,000 0
William J. Gross.......................... 60,400 10,000 60,000 400 *
Thomas G. Egan III (8).................... 240,000 40,000 240,000 0
John T. Mooney (9)........................ 145,000 20,000 120,000 25,000 *
Grant J. and Eliza Egan Smith, JTROS (9).. 60,000 10,000 60,000 0
Kenneth and Jessica Beir, TBE (10)........ 168,125 20,000 120,000 48,125 *
Laurent F. Sidon (11)..................... 381,000 40,000 240,000 141,000 *
Thomas First.............................. 120,000 20,000 120,000 0
Revocable Living Trust of George E. Pittinos 240,000 40,000 240,000 0
Jan Vitrofsky (12)........................ 24,000 4,000 24,000 0
Kenneth and Marguerite Larsen, JTROS...... 240,000 40,000 240,000 0
Charles P. and Linda H. Irwin, JTROS...... 60,000 10,000 60,000 0
Macdonald and Juliet H. Clark, JTROS...... 120,000 20,000 120,000 0
Daniel Walsh.............................. 24,000 4,000 24,000 0
Michael J. Kennelty (13).................. 148,084 4,000 24,000 124,084 *
Robert Giannini........................... 60,000 10,000 60,000 0
Stephen N. Lipton......................... 170,000 20,000 120,000 50,000 *
John M. Pennekamp......................... 72,000 12,000 72,000 0
Michael and Joan Sher, TROS (14).......... 60,000 10,000 60,000 0
Jack Paltani.............................. 120,000 20,000 120,000 0
Albert R. Paonessa........................ 60,000 10,000 60,000 0
John A. Schneider......................... 240,000 40,000 240,000 0
Thomas W. Scott........................... 240,000 40,000 240,000 0

Gregory A. McLaughlin as trustee of the
Tripp, Scott, Conklin & Smith, PA Profit
Sharing Plan fbo Norman D. Tripp.......... 480,000 80,000 480,000 0
Tripperoo Family Limited Partnership Class
AA Florida Limited Partnership............ 480,000 80,000 480,000 0
Tripp Scott P.A. Amended and Restated Profit
Sharing Plan fbo Dennis Dustin Smith...... 180,000 30,000 180,000 0
Smith Trust............................... 60,000 10,000 60,000 0
Tripp Scott Conklin & Smith PSP fbo Garry W.
Johnson................................... 65,000 10,000 60,000 5,000 *
Philip P. and Susan A. Smith, JTROS....... 240,000 40,000 240,000
The Nantucket Irrevocable Trust (15)...... 2,400,000 400,000 2,400,000 0
David A. Mitchell......................... 276,000 46,000 276,000 0
Frank Fowler.............................. 96,000 16,000 96,000 0
Charles A. Hinnant........................ 120,000 20,000 120,000 0
R.F. Decosimo............................. 70,000 10,000 60,000 10,000 *
Eloise D. Robbins......................... 230,000 30,000 180,000 50,000 *
Barbara N. and Walter D. Moore, Jr., JTWROS 60,000 10,000 60,000 0
J. Melville Armstrong..................... 60,000 10,000 60,000 0
Joseph F. Decosimo........................ 510,000 80,000 480,000 30,000 *
Rita F. Kerr.............................. 84,000 14,000 84,000 0
W.A. Bryan Patten ........................ 1,325,000 200,000 1,200,000 125,000 *
Michael F. McGauley....................... 250,000 20,000 120,000 130,000 *
Judith F. Stone........................... 60,000 10,000 60,000 0
Brenda G. McKenzie........................ 240,000 40,000 240,000 0
Creel Medical Service, Inc. Profit Sharing
Trust..................................... 60,000 10,000 60,000 0
Joy W. Jones.............................. 60,000 10,000 60,000 0
Lawrence Partners, LP..................... 70,000 10,000 60,000 10,000 *
Lesslie W. Lee, IRA....................... 60,000 10,000 60,000 0
Brent S. Mills............................ 60,000 10,000 60,000 0
Stan Martynski Rollover IRA 65,000 10,000 60,000 5,000 *
Brent L. Norris, M.D...................... 60,000 10,000 60,000 0
Thomas R. Northcott, IRA.................. 60,000 10,000 60,000 0
Patten & Patten, Inc. Profit Sharing Plan. 120,000 20,000 120,000 0
Patten & Patten, Inc. Profit Sharing fbo
Frank M. Robbins, III..................... 180,000 30,000 180,000 0
Jack Stocker.............................. 70,000 10,000 60,000 10,000 *
R. Alan Winger............................ 60,000 10,000 60,000 0
James L. Wolford.......................... 240,000 40,000 240,000 0
Lawrence I. Young, M.D. IRA Rollover...... 60,000 10,000 60,000 0
711 East Company.......................... 360,000 60,000 360,000 0
Suntrust Bank, Chattanooga Trustee for
Miller & Martin Profit Sharing Plan - James
M. Haley IV............................... 60,000 10,000 60,000 0
Suntrust Bank, Chattanooga Trustee for
Miller & Martin Profit Sharing Plan - Lowry
F. Kline, DIA............................. 60,000 10,000 60,000 0
Suntrust Bank, Chattanooga Trustee for
Miller & Martin Projet Sharing Plan - Howard
Levine.................................... 60,000 10,000 60,000 0
A-OK Supply Co. Employee Profit Sharing Plan 60,000 10,000 60,000 0
Charlie H. Armstrong & Barbara Mayer
Armstrong, JTWROS......................... 70,000 10,000 60,000 10,000 *
Jean R. Bowden............................ 60,000 10,000 60,000 0
James L. Caldwell, Jr..................... 60,000 10,000 60,000 0
Malcolm B. Daniell and Zella C. Daniell
JTWROS.................................... 120,000 20,000 120,000 0

Eliot Family Limited Partnership.......... 120,000 20,000 120,000 0
George I. Haigler......................... 48,000 8,000 48,000 0
Julia Elizabeth Haigler-Baker............. 12,000 2,000 12,000 0
Margaret Susan Haigler.................... 12,000 2,000 12,000 0
Ruth A. Liu............................... 60,000 10,000 60,000 0
T.E. Mynatt, Jr........................... 60,000 10,000 60,000 0
Kathleen Cartter Patten................... 157,500 20,000 120,000 37,500 *
William Allen Bryan Patten................ 160,000 20,000 120,000 40,000 *
Fred Robinson............................. 60,000 10,000 60,000 0
Sarah Caldwell Patten..................... 157,500 20,000 120,000 37,500 *
Michael A. Stoker......................... 60,000 10,000 60,000 0
W.A. Bryan Patten and Z. Cartter Patten,
III Trustees U/WZ. Cartter Patten, Jr.
- Sons Trust.............................. 340,000 40,000 240,000 100,000 *
Wayne E. Tipps............................ 60,000 10,000 60,000 0
Charles R. Adcock......................... 60,000 10,000 60,000 0
Douglas W. Curtis, IRA.................... 60,000 10,000 60,000 0
Fletcher Bright........................... 240,000 40,000 240,000 0
Robert W. Jones........................... 60,000 10,000 60,000 0
J. Nelson and Deanne W. Irvine, JTWROS.... 60,000 10,000 60,000 0
Joel B. Clements, MD Rollover IRA........ 60,000 10,000 60,000 0
C. Robert Clark Rollover IRA.............. 60,000 10,000 60,000 0
Donald A. Bodley Rollover IRA............. 60,000 10,000 60,000 0
Richard E. Cormier Rollover IRA........... 60,000 10,000 60,000 0
Linda T. Collins Rollover IRA............. 60,000 10,000 60,000 0
John W. Moore, IRA........................ 60,000 10,000 60,000 0
John A. Kosik, IRA........................ 84,000 14,000 84,000 0
John A. Hewgley, IRA...................... 60,000 10,000 60,000 0
Paul E. Henson, Jr. M.D. Rollover IRA..... 70,000 10,000 60,000 10,000 *
A.R. Fortune, II Rollover IRA............. 60,000 10,000 60,000 0
Charles P. Driver Rollover IRA............ 60,000 10,000 60,000 0
Henry Crumbliss Rollover IRA.............. 60,000 10,000 60,000 0
Robert T. Spalding Rollover IRA........... 60,000 10,000 60,000 0
Robert L. Raitz, M.D. Rollover IRA........ 60,000 10,000 60,000 0
Earl T. McGhee Rollover IRA............... 60,000 10,000 60,000 0
Bonnie G. McBride Rollover IRA............ 60,000 10,000 60,000 0
Steve A. McKenzie......................... 240,000 40,000 240,000 0
Frank J.B. Varallo........................ 240,000 40,000 240,000 0
Kevin Lancey.............................. 80,000(16) 55,000 80,000 0
Jeffrey S. Roschman....................... 1,760,000(16) 1,210,000 1,760,000 0
Robert J. Roschman........................ 1,760,000(16) 1,210,000 1,760,000 0
James L. Magruder (18).................... 660,000(16) 275,000 525,000 135,000 *
Todd Krizelman (19)....................... 709,976 272,521 272,521 437,455 *
Brian Fowler (20)......................... 1,815,000 1,750,000 1,750,000 65,000 *
Michael S. Egan (21)...................... 58,943,274(22) 204,082 48,979,991 9,963,283 7.3
S. Jacqueline Egan (23)................... 3,745,419(24) 204,082 3,731,419 14,000 *
E&C Capital Partners LLLP (25)............ 32,469,012 0 32,469,012 0
Dancing Bear Investments, Inc. (26)....... 8,303,148 0 2,779,560 5,523,588 4.2
The Michael S. Egan Grantor Retained
Annuity Trust F/B/O Sarah Egan 2,007,000 0 2,000,000 7,000 *
Mooney (27)...............................
The Michael S. Egan Grantor Retained
Annuity Trust F/B/O Eliza Shenners 2,007,000 0 2,000,000 7,000 *
Egan (27).................................
The Michael S. Egan Grantor Retained
Annuity Trust F/B/O Catherine Lewis 2,014,000 0 2,000,000 14,000 *
Egan (27).................................

The Michael S. Egan Grantor Retained
Annuity Trust F/B/O Teague Michael
Thomas Egan (27).......................... 2,014,000 0 2,000,000 14,000 *
The Michael S. Egan Grantor Retained
Annuity Trust F/B/O Riles Martin
Michael Egan (27)......................... 2,014,000 0 2,000,000 14,000 *
NeoPets, Inc.(28) 3,000,000 0 3,000,000 0
-------------------------------------------------------------

TOTAL 142,182,214** 26,798,534** 130,396,940** 11,785,274**

* less than 1%

** Does not count more than once shares which are beneficially owned by more
than one person.

(1) Pursuant to Rule 13d-3 of the Exchange Act, as used in this table,
"beneficial ownership" means the sole or shared power to vote, or to direct the
disposition of, a security and a person is deemed to have "beneficial ownership"
of any security that the person has the right to acquire within 60 days of April
5, 2004. Without limiting the generality of the foregoing, includes all of the
underlying shares of common stock in the column labeled "Number of Shares
Underlying Warrants".

(2) Assumes the sale by the Selling Stockholders of all shares registered
hereby.

(3) Mr. Pettingell was our Chief Financial Officer until June 2004.

(4) A former director (or a company controlled by such a former director) of
ours who resigned or whose term ended in June 2001.

(5) Mother of Robin Lebowitz, one of our executive officers.

(6) President of Certified Vacations, a company controlled by our Chairman,
Michael Egan.

(7) One of our former board members who resigned in November 2001.

(8) Brother of our Chairman, Michael Egan.

(9) Son-in-law or daughter of our Chairman, Michael Egan.

(10) Brother-in-law of our Chairman, Michael Egan.

(11) Son-in-law of our Chairman, Michael Egan. A company controlled by Laurent
Sidon also provides services to us. See "Certain Relationships and Related
Transactions".

(12) Serves as the President of Thomas Street Logistics LLC, a company
controlled by our Chairman, Michael Egan. Thomas Street Logistics provides
services to the Company. See "Certain Relationships and Related Transactions".

(13) One of our full-time employees.

(14) Parents-in-law of our President, Edward Cespedes.

(15) Trust for the benefit of the children of our Chairman, Michael Egan.

(16) Includes shares underlying certain earn-out warrants, which have not yet
been earned as follows: (i) Lancey, 45,000 warrants; (ii) J. Roschman, 990,000
warrants; (iii) R. Roschman, 990,000 warrants; and (iv) Magruder, 225,000
warrants. J. Roschman has agreed, when and if such warrants are earned, to
transfer 500,000 of such warrants to Izor Investments.

(17) His beneficial ownership includes 50,000 shares of our common stock
issuable upon exercise of options that are currently exercisable, and 12,500
shares of our common stock issuable upon exercise of options that are
exercisable within 60 days of April 5, 2004.

(18) Mr. Magruder was the Director of Carrier Relations of our subsidiary,
Direct Partner Telecom until May 2004.

(19) One of our former directors who did not seek reelection in June 2002.

(20) Mr. Fowler is our Chief Technology Officer.

(21) Mr. Egan is our Chairman and Chief Executive Officer.

(22) Includes the shares that Mr. Egan is deemed to beneficially own as the
controlling investor of Dancing Bear Investments, Inc. and E&C Capital Partners,
LLLP and as the Trustee of each of the Michael S. Egan Grantor Retained Annuity
Trusts for the benefit of his children. Also includes (i) 3,838,269 shares of
our common stock issuable upon exercise of options that are currently
exercisable and 971 shares of our common stock issuable upon exercise of options
that are exercisable within 60 days of April 5, 2004; (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.

(23) Ms. Egan is the spouse of Mr. Egan, our Chairman and Chief Executive
Officer.

(24) Includes 204,082 shares of our common stock issuable upon exercise of
warrants owned jointly by Mr. and Mrs. Egan.

(25) 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.

(26) Dancing Bear Investments, Inc., is controlled by our Chairman, Michael
Egan.

(27) Each of these Trusts is for the benefit of one of the children of our
Chairman, Michael Egan.

(28) NeoPets, Inc. is a party to an agreement with us relating to advertising
and marketing. All 3,000,000 of such shares are issuable in various stages
subject to meeting certain business criteria set forth in the agreement.

PLAN OF DISTRIBUTION

The Selling Stockholders, or by their pledgees, transferees or other successors
in interest, may sell the shares of Common Stock from time to time in public or
private transactions occurring on or off the OTC Bulletin Board, at prevailing
market prices or at negotiated prices. Sales may be made directly to purchasers
or through brokers or to dealers, who are expected to receive customary
commissions or discounts. To this end, the Selling Stockholders may offer their
shares for sale in one or more of the following transactions listed and
described below:

o In the over-the-counter market, including the OTC Bulletin Board;

o Through the facilities of any national securities exchange or U.S.
automated inter-dealer quotation system of a registered national
securities association on which any of the shares of Common Stock
are then listed, admitted to unlisted trading privileges or included
for quotation in privately negotiated transactions;

o In transactions other than on such exchanges or in the
over-the-counter market;

o In connection with short sales of our common stock;

o In ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

o In block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;

o In purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o In privately negotiated transactions;

o Broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;

o In a combination of any such methods of sale; and

o Any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

If the Selling Stockholders sell their shares directly, or indirectly through
underwriters, broker-dealers or agents acting on their behalf, in connection
with such sales, the broker-dealers or agents may receive compensation in the
form of commissions, concessions, allowances or discounts from the Selling
Stockholders and/or the purchasers of the shares for whom they may act as agent
or to whom they sell the shares as principal or both. Such commissions,
concessions, allowances or discounts might be in excess of customary amounts. To
comply with the securities laws of certain jurisdictions, the securities offered
in this prospectus will be offered or sold in those jurisdictions only through
registered or licensed broker/dealers. In addition, in certain jurisdictions the
securities offered in this prospectus may not be offered or sold unless they
have been registered or qualified for sale in those jurisdictions, or unless an
exemption from registration or qualification is available and is complied with.
We are not aware of any definitive selling arrangement at the date of this
prospectus between any Selling Stockholder and any broker-dealer or agent. We
will not receive any of the proceeds from the sale of the shares by the Selling
Stockholders, but may receive certain funds upon the exercise of warrants as
described under "Use of Proceeds."

In connection with the distribution of their shares, certain of the Selling
Stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with the Selling
Stockholders.

The Selling Stockholders may also sell the shares short and redeliver the shares
of Common Stock to close out the short positions.

The Selling Stockholders may also enter into option or other transactions with
broker-dealers, which require the delivery of the shares to the broker-dealer.

The Selling Stockholders may also loan or pledge their shares to a
broker-dealer. The broker-dealer may then sell the loaned shares or, upon a
default, may sell the pledged shares.

The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledges or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.

The Selling Stockholders and any dealer acting in connection with the offering
or any broker executing a sell order on behalf of a selling stockholder may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). In that case, any profit on the sale of shares
by a selling stockholder and any commissions or discounts received by any such
broker or dealer may be deemed to be underwriting compensation under the
Securities Act. Any such broker or dealer may be required to deliver a copy of
this prospectus to any person who purchases any of the shares from or through
such broker or dealer. These shares may later be distributed, sold, pledged,
hypothecated or otherwise transferred. In addition to any other applicable laws
or regulations, Selling Stockholders must comply with regulations relating to
distributions by Selling Stockholders, including Regulation M under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

LEGAL PROCEEDINGS

On and after August 3, 2001 and as of the date of this filing, the Company is
aware that six putative shareholder class action lawsuits were filed against the
Company, certain of its current and former officers and directors, 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. The Company has approved a
settlement agreement and related agreement which set forth the terms of a
settlement between the Company, the plaintiff class and the vast majority of the
other approximately 300 issuer defendants. Among other provisions, the
settlement provides for a release of the Company and the individual defendants
for the conduct alleged in the action to be wrongful. The Company would agree to
undertake certain responsibilities, including agreeing to assign away, not
assert, or release certain potential claims the Company may have against its
underwriters. It is anticipated that any potential financial obligation of the
Company to its plaintiffs pursuant to the terms of the settlement agreement and
related agreements will be covered by existing insurance. Therefore, the Company
does not expect that the settlement will involve any payment by the Company. The
settlement agreement has not yet been executed. The agreement will be subject to
approval by the court, which cannot be assured. We cannot opine as to whether or
when a settlement will occur or be finalized. Due to the inherent uncertainties
of litigation, we cannot accurately predict the ultimate outcome of the
litigation. Any unfavorable outcome of this litigation could have a material
adverse impact on our business, financial condition and results of operations.

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

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

MANAGEMENT

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

POSITION OR OFFICE

NAME AGE WITH THE COMPANY
--------------------------------------------------------------------------------

Michael S. Egan 64 Chairman and Chief Executive officer

Edward A. Cespedes 38 President and Director

Albert J. Detz 56 Chief Financial Officer

Robin S. Lebowitz 40 Vice President of Finance and Director

Paul Soltoff 50 Chief Executive Officer of
SendTec and Director

Michael S. Egan. Michael Egan has served as theglobe.com's Chairman since 1997
and as its Chief Executive Officer since June 1, 2002. Since 1996, Mr. Egan has
been the controlling investor of Dancing Bear Investments, a privately held
investment company. 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 is a member of the Board of Directors of Boca Resorts, Inc. (NYSE: RST)
(formerly Florida Panthers Holdings, Inc.) and a member of the Board of
Directors of the Horatio Alger Association. Mr. Egan spent over 30 years in the
rental car business. He began with Alamo Rent-A-Car in 1973, became an owner in
1979, and became Chairman and majority owner from January 1986 until November
1996 when he sold the company to AutoNation. In 2000, AutoNation spun off the
rental division, ANC Rental (Other OTC: ANCXZ.PK), and Mr. Egan served as
Chairman until October 2003. Prior to acquiring Alamo, he held various
administration positions at Yale University and taught at the University of
Massachusetts at Amherst. Mr. Egan is a graduate of Cornell University where he
received his Bachelor's degree in Hotel Administration.

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

Albert J. Detz. Albert Detz was appointed Chief Financial Officer of
theglobe.com on June 3, 2004. From October 2002 to June 2004 Mr. Detz was
retired. From January 2001 to September 2002, Mr. Detz served as Vice President,
Finance for NationsRent, Inc. From July 1998 to August 2000, Mr. Detz served as
Senior Vice President and Chief Financial Officer of Gerald Stevens, Inc. During
1998 and 1999, Mr. Detz additionally served as Vice President, Chief Financial
Officer of Data Core Software Corporation during their development stage period.
Mr. Detz worked at Blockbuster Entertainment Group, a division of Viacom Inc.
from 1991 to 1997, having most recently served as Senior Vice President and
Chief Financial Officer from October 1994 to June 1997. Prior to Blockbuster,
Mr. Detz served in various finance related positions including Vice President,
Corporate Controller, for 11 years within the Computer Systems Division of Gould
Electronics, Inc., and at Encore Computer Corporation. Prior to these
experiences, Mr. Detz worked in the audit department of Coopers & Lybrand. Mr.
Detz is a graduate of the Pennsylvania State University where he received his
Bachelors degree in Business Administration.

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

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

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

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

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

Albert J. Detz, the Chief Financial Officer of theglobe.com, was Vice President,
Finance for NationsRent, Inc. from January 2001 to September 2002. In December
2001, NationsRent, Inc. filed voluntary petitions for relief under Chapter 11 or
Title 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware (Case No. 01-11628 PJW). Mr. Detz was also
the Senior Vice President and Chief Financial Officer of Gerald Stevens, Inc.
from July 1998 to August 2000. In April 2001, Gerald Stevens, Inc. filed
voluntary petitions for relief under Chapter 11 or Title 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court in Miami Florida (Case No.
01-13984 BKC-RAM through 01-14039 BKC-RAM).

EXECUTIVE COMPENSATION

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

Long-Term
Compensation(1)
-------------------
Annual Compensation
---------------------------------------
Number of
Securities All Other
Name and Salary Bonus Underlying Compensation
Principal Position Year ($) ($) Options (#) ($)
---------------------------------- -------- ----------- ------------ ------------------- -----------------

Michael S. Egan, 2003 125,000 50,000 1,000,000 -
Chairman, Chief Executive 2002 - - 2,507,500 -
Officer (2) 2001 - - 7,500 -

Edward A. Cespedes, 2003 225,000 50,000 550,000 -
President (3) 2002 100,000 25,000 1,757,500 41,668

Robin S. Lebowitz, 2003 137,500 - 100,000 -
Chief Financial Officer (4) 2002 58,350 10,000 507,500 -

(1) Included in long-term compensation for 2003 are 1,650,000 options granted
during the year at $0.56 per share to the Named Executive Officers. Details of
these grants may be found in the table of Options Grants in 2003 on page 27.
Included in long-term compensation for 2002 are 7,500 options granted to each of
Messrs. Egan and Cespedes and Ms. Lebowitz in June 2002 at an exercise price of
$0.04 per share in accordance with the Company's Director Compensation Plan;
2,500,000, 1,750,000, and 500,000 options granted in June 2002 at an exercise
price of $0.02 per share related to bonuses earned in 2002 for Messrs. Egan and
Cespedes and Ms. Lebowitz, respectively. Included in long-term compensation for
2001 are 7,500 options granted to Mr. Egan in June 2001 at an exercise price of
$0.23 in accordance with the Company's Director Compensation Plan.

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

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

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

Mr. Albert Detz became Chief Financial Officer of the Company in June of 2004.
His current base salary is $175,000 per year. He also received options to
acquire 200,000 shares at an exercise price of $0.38 per share. 60,000 of these
options vested immediately and the balance vest ratably on a quarterly basis
over 3 years.

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND 2003 YEAR-END OPTION VALUES

The following tables set forth for each of the Named Executive Officers (a) the
number of options exercised during 2003, (b) the total number of unexercised
options for common stock (exercisable and unexercisable) held at December 31,
2003, (c) the value of those options that were in-the-money on December 31, 2003
based on the difference between the closing price of our common stock on
December 31, 2003 and the exercise price of the options on that date, and (d)
the total number of options granted to such persons in 2003.

Number of Securities Value of Unexercised
Underlying Unexercised Stock In-the-Money Stock Options
Options at Fiscal Year-End (#) at Fiscal Year End (1)
------------------------------- ----------------------------------
Shares
Acquired on Value Un- Un-
Name Exercise # Realized Exercisable Exercisable Exercisable Exercisable
----------------------- ------------- --------- -------------- ------------- ------------- -----------------

Michael S. Egan - - 3,837,298 7,702 $ 4,053,562 $ 9,363
Edward A. Cespedes - - 2,456,362 8,638 2,724,562 9,363
Robin S. Lebowitz - - 616,897 17,183 751,634 22,041

(1) Value represents closing price of our common stock on December 31, 2003 less
the exercise price of the stock option, multiplied by the number of shares
exercisable or unexercisable, as applicable.

OPTION GRANTS IN 2003
Percent of
Total
Number of Options Exercise
Securities Granted to or Base
Underlying Employees Price
Name Options Granted in 2003 ($/Share) Expiration Date
----------------------------------- --------------------- ------------ ------------ ----------------------

Michael S. Egan 1,000,000 (1) 25.86% $0.56 5/22/2013
Edward A. Cespedes 550,000 (1) 14.22% $0.56 5/22/2013
Robin S. Lebowitz 100,000 (1) 2.59% $0.56 5/22/2013

(1) These options were granted on May 21, 2003, vested immediately and have a
life of ten years from date of grant.

EMPLOYMENT AGREEMENTS

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

o employment as one of our executives;

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

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

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

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

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

- (B) any accrued vacation pay; and

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

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

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

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

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

o employment as one of our executives;

o an annual base salary of $150,000 with eligibility to receive annual
increases as determined in the sole discretion of the Board of
Directors;

o a discretionary annual cash bonus, which will be awarded at our
Board's discretion;

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

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

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

- (B) any accrued vacation pay; and

- (C) a lump-sum cash payment equal to two (2) times the sum of
executive's base salary and highest annual incentive;

- for the continued benefit of executive, her spouse and her
dependents for a period of two (2) years following the date of
termination, the medical, hospitalization, dental, and life
insurance programs in which executive, her spouse and her
dependents were participating immediately prior to the date of
termination at the level in effect and upon substantially the
same terms and conditions as existed immediately prior to the
date of termination;

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

Effective February 23, 2004, Ms. Lebowitz's employment agreement was amended.
Ms. Lebowitz's new title is Vice President, Finance and effective June 1, 2004
her annual base salary is $140,000.

CHIEF FINANCIAL OFFICER AND TREASURER AGREEMENT. We also entered into an
agreement with our Chief Financial Officer ("CFO") and Treasurer, Albert J.
Detz, on June 3, 2004. The agreement provides for the following:

o an annual base salary of $175,000 with eligibility to receive annual
increases as determined in the sole discretion of the Board of
Directors;

o a grant of 200,000 options to acquire theglobe.com Common Stock at
an exercise price of $0.38 per share. 60,000 of these options vested
immediately and the balance vest ratably on a quarterly basis over 3
years;

o a discretionary annual cash bonus, which will be awarded at our
Board's discretion;

o participation in all welfare, benefit and incentive plans offered to
senior management of the Company; and

o although there is no stated term of employment, in the event of
termination by us after six months of employment but less than one
year, the executive will be entitled to receive from us his base
salary for a period of three months from the date of such
termination. In the event of termination by us after one year of
employment, the executive will be entitled to receive from us his
base salary for a period of six months from the date of such
termination.

SENDTEC CHIEF EXECUTIVE OFFICER EMPLOYMENT AGREEMENT. As part of the SendTec
Acquisition, on September 1, 2004, we entered into an employment agreement with
Paul Soltoff to continue as Chief Executive Officer ("CEO") of SendTec, Inc.,
now a wholly-owned subsidiary of the Company. His employment agreement provides
for the following:

o an annual base salary of $300,000 with eligibility to receive annual
increases as determined in the sole discretion of the Board of
Directors;

o a discretionary annual cash bonus, which will be awarded at our
Board's discretion;

o participation in all welfare, benefit and incentive plans offered to
senior management of the Company;

o a 5 year term of employment which commenced on September 1, 2004.
The agreement provides that, in the event of termination by us
without "cause" or by the executive for "good reason", the executive
will be entitled to receive from us: his base salary for a period of
2 years from the date of such termination; any accrued vacation pay
or sick pay; and for the continued benefit of executive, his spouse
and his dependents for a period of one (1) year following the date
of termination, the medical, hospitalization, dental, and life
insurance programs in which executive, his spouse and his dependents
were participating immediately prior to the date of termination at
the level in effect and upon substantially the same terms and
conditions as existed immediately prior to the date of termination;
and

o customary provisions relating to confidentiality, work-product and
covenants not to compete.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ARRANGEMENTS WITH ENTITIES CONTROLLED BY VARIOUS DIRECTORS AND OFFICERS. On
November 14, 2002, E & C Capital Partners, LLLP ("E&C Partners"), a privately
held investment holding company owned by Michael S. Egan, our Chairman and CEO
and a major stockholder, and Edward A. Cespedes, our President and a Director,
entered into a non-binding letter of intent with theglobe.com to provide
$500,000 of new financing via the purchase of shares of a new Series F Preferred
Stock of theglobe.com. On March 28, 2003, the parties signed a Preferred Stock
Purchase Agreement and other related documentation pertaining to the investment
and closed on the investment. Pursuant to the Preferred Stock Purchase
Agreement, E & C Capital Partners received 333,333 shares of Series F Preferred
Stock convertible into shares of the Company's Common Stock at a price of $0.03
per share. The conversion price was subject to adjustment upon the occurrence of
certain events, including downward adjustment on a weighted-average basis in the
event the Company issued securities at a purchase price below $0.03 per share.
If fully converted, and without regard to the anti-dilutive adjustment
mechanisms applicable to the Series F Preferred Stock, an aggregate of
approximately 16,666,650 million shares of Common Stock would be issuable. The
Series F Preferred Stock had a liquidation preference of $1.50 per share (and
was thereafter entitled to participate with the Common Stock on an "as
converted" basis), and was entitled to a dividend at the rate of 8% per annum if
and to the extent declared by the board and was also entitled to participate in
any dividend declared on the Company's common stock. The Series F Preferred
Stock also was entitled to vote on an "as converted" basis with the holders of
Common Stock. In addition, as part of the $500,000 investment, E & C Partners
received warrants to purchase approximately 3.3 million shares of theglobe.com
Common Stock at an exercise price of $0.125 per share. The warrant was
exercisable at any time on or before March 28, 2013. E & C Partners also
received certain demand registration rights in connection with its investment.

On May 22, 2003, E&C Partners and certain trusts, of which Mr. Egan is the
trustee, entered into a Note Purchase Agreement with the Company pursuant to
which they acquired convertible promissory notes (the "Convertible Notes") in
the aggregate principal amount of $1,750,000. The Convertible Notes were
convertible at anytime into shares of the Company's common stock at a blended
rate of $.09 per share (the Convertible Note held by E&C were convertible at
approximately $.079 per share and the Convertible Notes held by the Trusts were
convertible at $.10 per share), which if fully converted, would result in the
issuance of approximately 19,445,000 shares. The Convertible Notes had a one
year maturity date, which could be extended at the option of the holder of the
Note for periods aggregating two years, and was secured by a pledge of
substantially all of the assets of the Company. In addition, E&C Partners was
issued a warrant to acquire 3,888,889 shares of theglobe.com common stock at an
exercise price of $.15 per share. The warrant was exercisable at any time on or
before May 22, 2013. E&C Partners and the trusts are entitled to certain demand
and piggy-back registration rights in connection with their investment.

On February 2, 2004, Michael S. Egan (our Chairman and Chief Executive Officer)
and his wife, S. Jacqueline Egan, entered into a Note Purchase Agreement with
the Company pursuant to which they acquired convertible promissory notes (the
"Bridge Notes") in the aggregate principal amount of $2,000,000. The Bridge
Notes were convertible at anytime into shares of the Company's common stock at
an initial rate of $.98 per share. The conversion rate was initially adjustable
based on an amount equal to the rate at which the Company sold its common stock
in any subsequent qualified private offering (defined as an offering which
raises a minimum of $7.5 million) (or at a 20% discount to such amount,
depending upon the timing of completion, and amount of, such private offering).
This conversion was subsequently adjusted to $.57 per share, which was the
effective per share rate of the subsequent qualified private offering (and which
is referenced elsewhere in this prospectus as the "PIPE Offering"). The Bridge
Notes were due on demand from the holder, and were secured by a pledge of
substantially all of the assets of the Company. The security interest was shared
with the holders of the Company's Secured Convertible Notes in the principal
amount of $1,750,000. The Bridge Notes paid interest at the rate of ten (10)
percent per annum. In addition, the Egans were issued a warrant to acquire
204,082 shares of theglobe.com common stock at an initial exercise price of
$1.22 per share. This warrant is exercisable at any time on or before February
2, 2009. The Egans are entitled to certain demand and piggy-back registration
rights in connection with this investment.

On March 11, 2004, theglobe.com, inc. completed the PIPE Offering. In connection
with the PIPE Offering, Mr. Egan, our Chairman, Chief Executive Officer and
principal stockholder, together with certain of his affiliates and other
parties, converted the $2,000,000 Bridge Note, the $1,750,000 of Secured
Convertible Notes and all of the Company's outstanding shares of Series F
Preferred Stock, and exercised (on a cashless exercise basis) all of the
warrants issued in connection with the foregoing Secured Convertible Notes and
Series F Preferred Stock, together with certain warrants issued to Dancing Bear
Investments (an affiliate of Mr. Egan). As a result of such conversions and
exercises, the Company issued an aggregate of approximately 48.75 million shares
of Common Stock to such parties.

Interest expense on the $1,750,000 Convertible Notes totaled approximately
$108,200, excluding the amortization of the discount on the Notes, during the
year ended December 31, 2003. The interest remained unpaid at December 31, 2003,
and was included in accrued expenses in our consolidated balance sheet. As a
result of the conversion of the $1,750,000 Convertible Notes into the Company's
Common Stock in March 2004, all accrued interest, including approximately
$32,000 relating to the first quarter of 2004, was paid by June 30, 2004. As a
result of the conversion of the $2,000,000 Bridge Note into the Company's Common
Stock in March 2004, accrued interest of approximately $17,500 relating to the
first quarter of 2004 was paid by June 30, 2004

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

We sublease approximately 15,000 square feet of office space for our executive
offices from Certified Vacations, a company which is controlled by our Chairman
and CEO Michael Egan. The sublease commenced on September 1, 2003 and expires on
July 31, 2007. The initial base rent is $18.91 per square foot on an annual
basis ($283,650 annually in the aggregate) and will increase on each anniversary
of the sublease by $1.50 per square foot. During 2003, approximately $148,000 of
expense was recorded related to the lease of the office space. During the six
months ended June 30, 2004, approximately $118,000 of expense was recorded
related to the lease of the office space. In addition, from August 2003 through
August 2004 we have outsourced our Customer Service function from Certified
Vacations under renewable short term agreements at incremental cost, for which
we paid an aggregate of $109,000 during the year ended December 31, 2003 and
$111,000 during the six months ended June 30, 2004.

Beginning in August, 2003, our subsidiary, Voiceglo Holdings, Inc. ("voiceglo"),
began outsourcing warehouse space and related services from Thomas Street
Logistics LLC, which is controlled by our Chairman and CEO, Michael Egan, and
our President, Edward Cespedes. Our agreement with Thomas Street Logistics
includes secure warehouse space, equipment rental, insurance, utilities, office
space, inventory management, shipping services, personnel and provisioning of
our equipment for $25,000 per month and a nominal shipping and handling fee per
item shipped. Effective, April 15, 2004, voiceglo terminated its arrangement
with Thomas Street Logistics and has transitioned these functions to voiceglo
personnel and warehouse space. During 2003, approximately $126,000 of expense
was recorded for warehouse space and related out-sourcing functions. During the
six months ended June 30, 2004, approximately $110,000 of expense was recorded
for warehouse space and related out-sourcing functions.

In addition, as of August 15, 2004, the Company had advanced approximately
$37,000 to a newly formed entity controlled by our Chairman, Global Voice
Network LLC. The Company is currently negotiating an agreement with Global Voice
Network to provide marketing services to voiceglo.

ARRANGEMENTS WITH RELATIVES. In March 2004, the Company engaged the services of
Pay the Rent, a company controlled by the son-in-law of our Chairman and CEO,
Michael Egan. Pay the Rent was contracted for the production, audio and video
post-production, voice-over, and scoring of a television commercial featuring
voiceglo. Payment in full in the amount of $151,200 was remitted during the six
months ended June 30, 2004. In 2003, we reimbursed Pay the Rent $18,013 for
marketing and promotion expenses (at cost) for a separate marketing promotion.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of our common stock as of August 16, 2004 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 137,960,267 shares of theglobe.com's common
stock were issued and outstanding on August 16, 2004 (which does not include the
securities issued as part of the SendTec Acquisition).

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 Owned
--------------------------------------------------
Directors, Named Executive Officers and 5% Stockholders Number Percent Title of Class
---------------------------------------------------------------- -------------- ------------- ---------------

Dancing Bear Investments, Inc. (1)......................... 8,303,148 6.0 Common
Michael S. Egan (2)........................................ 58,945,216 41.5 Common
Edward A. Cespedes (3)..................................... 2,460,211 1.8 Common
Robin S. Lebowitz (4)...................................... 622,993 * Common
Albert J. Detz (5)....... ................................. 71,667 * Common
E&C Capital Partners LLLP (6).............................. 32,469,012 23.5 Common
Wellington Management Company, LLP (7)..................... 27,131,250 18.5 Common
All directors and executive officers as a group
(4 persons).............................................. 62,100,087 42.8 Common

* less than 1%

(1) Dancing Bear Investments Inc.'s mailing address is P.O. Box 029006, Ft.
Lauderdale, FL 33302. Mr. Egan owns Dancing Bear Investments, Inc.

(2) Includes the shares that Mr. Egan is deemed to beneficially own as the
controlling investor of Dancing Bear Investments, Inc. and E&C Capital Partners,
LLLP and as the Trustee of the Michael S. Egan Grantor Retained Annuity Trusts
for the benefit of his children. Also includes (i) 3,840,211 shares of our
common stock issuable upon exercise of options that are currently exercisable
and 971 shares of our common stock issuable upon exercise of options that are
exercisable within 60 days of August 16, 2004; (ii) 3,541,337 shares of our
common stock held by Mr. Egan's wife, as to which he disclaims beneficial
ownership; and (iii) 204,082 shares of our common stock issuable upon exercise
of warrants at $1.22 per share owned by Mr. Egan and his wife.

(3) Includes 2,459,240 shares of our common stock issuable upon exercise of
options that are currently exercisable and 971 shares of our common stock
issuable upon exercise of options that are exercisable within 60 days of August
16, 2004.

(4) Includes 620,961 shares of our common stock issuable upon exercise of
options that are currently exercisable, and 2,032 shares of our common stock
issuable upon exercise of options that are exercisable within 60 days of August
16, 2004.

(5) Includes 60,000 shares of our common stock issuable upon exercise of options
that are currently exercisable, and 11,667 shares of our common stock issuable
upon exercise of options that are exercisable within 60 days of August 16, 2004.

(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. E&C Capital
Partners, LLLP's mailing address is P.O. Box 029006, Ft. Lauderdale, FL 33302.

(7) Includes 9,043,750 shares of our common stock issuable upon exercise of
warrants at $0.001 per share. All of such shares and warrants are owned of
record by client accounts and funds for which Wellington Management Company, LLP
acts as manager or advisor. Wellington's mailing address is 75 State Street,
Boston, MA 02109.

DESCRIPTION OF SECURITIES

GENERALLY

We are currently authorized to issue 203,000,000 shares of capital stock
consisting of:

o 200,000,000 shares of common stock, par value of $.001 per share
("Common Stock"), 137,960,267 shares of which were issued and
outstanding as of August 16, 2004, and

o 3,000,000 shares of preferred stock, $.001 par value, of which as of
August 16, 2004, 425,000 == shares of which have been designated as
"Series F Preferred Stock", of which no shares are issued and
outstanding, 25,000 shares of which have been designated as "Series
G Preferred Stock", of which no shares are issued and outstanding,
and 250,000 shares of which have been designated Junior
Participating Preferred, of which no shares are issued and
outstanding, and which was created as part of the Company's
stockholder rights plan. Subsequent to August 16, 2004, the Board
designated a series of 180,000 shares of the Preferred Stock as
"Series H Preferred Stock", of which 175,000 shares were issued as
part of the SendTec Acquisition. See "Recent Events - The SendTec
Acquisition."

Each holder of Common Stock is entitled to one vote per share on all matters
submitted to a vote of stockholders, including the election of directors. The
Common Stock does not have cumulative voting rights, which means that (subject
to the rights of the holders of any Preferred Stock), the holders of a majority
of the shares voting for election of directors can elect all members of the
Board of Directors. Subject to the preferential rights of the holders of shares
of Preferred Stock, the holders of Common Stock are entitled to share ratably in
such dividends, if any, as may be declared and paid by the Board of Directors
out of funds legally available therefore. At this time, we do not anticipate
paying any cash dividends for the foreseeable future. Upon liquidation or
dissolution of the Company, the holders of Common Stock of the Company will be
entitled to share ratably in the assets of the Company legally available for
distribution to stockholders after payment of liabilities and subject to the
prior rights of any holders of Preferred Stock then outstanding. Holders of
Common Stock have no conversion, sinking fund, redemption, preemptive or
subscription rights. The rights, preferences, and privileges of holders of
Common Stock are subject to the rights of the holders of shares of any series of
Preferred Stock which the Company may issue in the future.

The Board of Directors is authorized, subject to any limitations prescribed by
law, from time to time to issue up to an aggregate of 3,000,000 shares of
Preferred Stock in one or more classes or series, each of such class or series
to have such preferences, voting powers, qualifications and special or relative
rights or privileges as shall be determined by the Board of Directors in a
resolution or resolutions providing for the issue of such class or series of
Preferred Stock. Thus, any class or series may, if so determined by the Board of
Directors, have full voting rights with the Common Stock or superior or limited
voting rights, to be convertible into Common Stock or another security of the
Company, and have such other preferences, relative rights and limitations as the
Company's Board of Directors shall determine. As a result, any class or series
of Preferred Stock could have rights which could adversely affect the voting
power of the Common Stock or which could delay, defer or prevent a change in
control of the Company. The shares of any class or series of Preferred Stock
need not be identical. The preferences, relative rights and limitations of the
Series H Preferred Stock are described under "Recent Events - The SendTec
Acquisition."

OUTSTANDING OPTIONS AND WARRANTS

As of August 16, 2004, we had issued and outstanding options and warrants to
acquire approximately 9,960,000 and 18,650,000 shares of our Common Stock,
respectively. In addition to the warrants described above the Company also holds
in escrow warrants to acquire up to 2,250,000 shares of Common Stock, subject to
release over approximately the next two years (some of which may accelerate
under certain events) upon the attainment of certain performance objectives.
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.

REGISTRATION RIGHTS

The Company has filed the registration statement, which was originally declared
effective on May 11, 2004 and of which this prospectus is a part, pursuant to
registration rights which it granted as part of the March 2004 PIPE Offering.
Pursuant to the PIPE Offering, the Company agreed to file a registration
statement relating to the resale of the shares of common stock and the shares of
common stock underlying the warrants (the "Underlying Shares") issued in such
Offering no later than April 22, 2004. The Company further agreed to use all
reasonable efforts to cause such registration statement to be declared effective
no later than June 6, 2004, if the registration statement is not reviewed by the
Commission, or July 6, 2004, if the registration statement is reviewed by the
Commission, and to keep such registration statement effective until the earlier
of (i) March 15, 2006, (ii) the date by which all of the shares and Underlying
Shares have been sold pursuant to such registration statement, and (iii) the
date by which the shares and Underlying Shares are eligible to be sold by
non-affiliates of the Company under Rule 144(k) promulgated under the Securities
Act. If the Company had failed to meet such initial filing date or effective
date, the Company may have been liable for significant late fees to the
investors in the PIPE Offering. This prospectus is intended to satisfy our
obligations to the investors in the PIPE Offering.

Holders of substantially all other privately placed securities of the Company
also have certain registration rights, including various demand registration
rights which, subject to certain qualifications and deferrals, may be exercised
by certain of the investors commencing after the effective date of the
registration statement of which this prospectus is a part, and as to others,
commencing in July 2004 and thereafter. The Company has voluntarily included, on
a "piggy-back" basis, in this prospectus shares to be offered by other selling
stockholders who were granted registration rights by the Company prior to the
PIPE Offering.

As part of the PIPE Offering, Messrs. Egan and Cespedes, together with certain
other related parties and Halpern Capital, Inc., agreed to a lock-up of their
shares of Common Stock and warrants to acquire shares of Common Stock for a
period of 90 days commencing with the effective date of this prospectus.

LIMITATION ON LIABILITY

Our certificate of incorporation limits or eliminates the liability of our
directors or officers to us or our stockholders for monetary damages to the
fullest extent permitted by the Delaware General Corporation Law, or DGCL, as
amended. The DGCL provides that a director of our company shall not be
personally liable to us or our stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability:

o for any breach of such person's duty of loyalty;

o for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;

o for the payment of unlawful dividends and some other actions
prohibited by Delaware corporate law; and

o for any transaction resulting in receipt by such person of an
improper personal benefit.

The certificate of incorporation also provides that the directors shall be
entitled to the benefits of all limitations on the liability of directors
generally that now or hereafter become available under the DGCL.

The certificate of incorporation also contains provisions indemnifying our
directors, officers and employees to the fullest extent permitted by the DGCL.

We maintain directors' and officers' liability insurance to provide our
directors and officers with insurance coverage for losses arising from claims
based on breaches of duty, negligence, error and other wrongful acts.

RIGHTS AGREEMENT

Our board of directors adopted a Rights Agreement. Under the Rights Agreement:

o our board of directors declared a dividend of one preferred stock
purchase right (a "Right") for each outstanding share of our common
stock; and

o each Right entitles the registered holder a purchase from us one
one-thousandth of a share of a new series of junior participating
preferred stock, par value $.001 per share (the "Junior Preferred
Stock"), at a price to be determined by our board of directors, per
one one-thousandth of a share (the "Purchase Price"), with
adjustment.

The description and terms of the Rights are described in a Rights Agreement
between us and the designated Rights Agent. The description presented below is
intended as a summary only and is qualified in its entirety by reference to the
Rights Agreement, a form of which has been filed as an exhibit to one of
previous registration statements. See "Where You Can Find More Information".

The Rights are attached to all certificates representing outstanding shares of
our common stock, and no separate Right Certificates were distributed. The
Rights will separate from the shares of our common stock as soon as one of the
following two events occur:

o a public announcement that, without the prior consent of our board
of directors, a person or group (an "Acquiring Person"), including
any affiliates or associates of that person or group, acquired
beneficial ownership of securities having 15% or more of the voting
power of all our outstanding voting securities. Dancing Bear
Investments, Michael S. Egan, certain other designated individuals
or any entities controlled by these persons are not included in the
definition of Acquiring Person; and

o ten (10) business days, or a later date as our board of directors
may determine, following the commencement of, or announcement of an
intention that remains in effect for five (5) business days to make,
tender offer or exchange offer that would result in any person or
group becoming an Acquiring Person.

We refer to the earlier of these dates as the "Distribution Date." The first
date of public announcement that a person or group has become an Acquiring
Person is the "Stock Acquisition Date."

Until the Distribution Date, Rights will be transferred with and only with the
shares of our common stock. In addition, until the Distribution Date, or earlier
redemption or expiration, of the Rights:

o new common stock certificates issued upon transfer or new issuance
of shares of common stock will contain a notation incorporating the
Rights Agreement by reference; and

o the surrender for transfer of any certificates for shares of common
stock outstanding, even without a notation, will also constitute the
transfer of the Rights associated with the shares of common stock
represented by the certificate.

As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the shares of common stock as of the close of business on the Distribution
Date, and to each initial record holder of various shares of common stock issued
after the Distribution Date. The separate Right Certificates alone will evidence
the Rights. The Rights are not exercisable until the Distribution Date and will
expire at 5:00 P.M., New York, New York time, on the tenth (10th) anniversary of
the date of issuance, unless earlier redeemed by us as described below.

If any person becomes an Acquiring Person, except by a Permitted Offer as
defined below, each holder of a Right will have, under the terms of the Rights
Agreement, the right (the "Flip-In Right") to receive upon exercise the number
of shares of common stock, or, in the discretion of our board of directors, the
number of one-thousandths of a share of Junior Preferred Stock, or, in some
circumstances, our other securities, having a value immediately before the
triggering event equal to two times the Purchase Price. Notwithstanding the
description above, following the occurrence of the event described above, all
Rights that are, or generally were, beneficially owned by any Acquiring Person
or any affiliate or associate of an Acquiring Person will be null and void.

A "Permitted Offer" is a tender or exchange offer for all outstanding shares of
common stock which is at a price and on terms determined, before the purchase of
shares under the tender or exchange offer, by a majority of Disinterested
Directors, as defined below, to be adequate, taking into account all factors
that the Disinterested Directors deem relevant, and otherwise in our best
interests and our stockholders' best interest, other than the person or any
affiliate or associate on whose behalf the offer is being made, taking into
account all factors that the Disinterested Directors may deem relevant.

"Disinterested Directors" are our directors who are not our officers and who are
not Acquiring Persons or affiliates or associates of Acquiring Persons, or
representatives of any of them.

If, at any time following the Stock Acquisition Date,

o we are acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of
common stock immediately before the consummation of the transaction
are not the holders of all of the surviving corporation's voting
power; or

o more than 50% of our assets or earning power is sold or transferred
with or to an Interested Stockholder; or

o if in the transaction all holders of shares of common stock are not
offered the same consideration as any other person; then each holder
of a Right, except Rights which previously have been voided as
described above, shall afterwards have the right (the "Flip-Over
Right") to receive, upon exercise, shares of common stock of the
acquiring company having a value equal to two times the Purchase
Price. The holders of a Right will continue to have the Flip-Over
Right whether or not the holder exercises or surrenders the Flip-In
Right.

The Purchase Price payable, and the number of one-thousandths of a share of
Junior Preferred Stock or other securities issuable, upon exercise of the Rights
may be adjusted from time to time to prevent dilution in the event of any one of
the following:

o a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Junior Preferred Stock; the grant
to holders of the shares of Junior Preferred stock of various rights
or warrants to subscribe for or purchase shares of Junior Preferred
Stock at a price;

o or securities convertible into shares of Junior Preferred Stock with
a conversion price, less then the then current market price of the
shares of Junior Preferred Stock; or

o the distribution to holders of the shares of Junior Preferred Stock
of evidences of indebtedness or assets, excluding regular quarterly
cash dividends, or of subscription rights or warrants, other than
those referred to above.

The Purchase Price payable, and the number of one-thousandths of a share of
Junior Preferred Stock or other securities issuable, upon exercise of the Rights
may also be adjusted in the event of a stock split of the shares of common
stock, or a stock dividend on the shares of common stock payable in shares of
common stock, or subdivisions, consolidations or combinations of the shares of
common stock occurring, in any case, before the Distribution Date.

With some exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in the Purchase
Price. No fractional one-thousandths of a share of Junior Preferred Stock will
be issued and, instead, an adjustment in cash will be made based on the market
price of the shares of Junior Preferred Stock on the last trading day before the
date of exercise.

At any time before the earlier to occur of (1) a person becoming an Acquiring
Person or (2) the expiration of the Rights, we may redeem the Rights in whole,
but not in part, at a price of $.001 per Right (the "Redemption Price"), which
redemption shall be effective upon the action of our board of directors.
Additionally, we may redeem the then outstanding Rights in whole, but not in
part, at the Redemption Price at any one of the following times:

o after the triggering of the Flip-In Right and before the expiration
of any period during which the Flip-In Right may be exercised in
connection with a merger or other business combination transaction
or series of transactions involving us in which all holders of
shares of our common stock are not offered the same consideration
but not involving an Interested Stockholder, as defined in the
Rights Agreement;

o following an event giving rise to, and the expiration of the
exercise period for, the Flip-In Right if and for as long as no
person beneficially owns securities representing 15% or more of the
voting power of our voting securities; and

o when the Acquiring Person reduces his ownership below 5% in
transactions not involving us.

The redemption of Rights described above shall be effective only as of the time
when the Flip-In Right is not exercisable, and in any event, only after ten (10)
business days' prior notice. Upon the effective date of the redemption of the
Rights, the right to exercise the Rights will terminate and the only rights of
the holders of Rights will be to receive the Redemption Price.

The shares of Junior Preferred Stock purchasable upon exercise of the Rights
will be nonredeemable and junior to any other series of preferred stock we may
issue, unless otherwise provided in the terms of the stock. Each share of Junior
Preferred Stock will have a preferential quarterly dividend in an amount equal
to 1,000 times the dividend declared on each share of common stock, but in no
event less than $1.00. In the event of liquidation, the holders of Junior
Preferred Stock will receive a minimum preferred liquidation payment equal to
the greater of $1.00 or 1,000 times the payment made per each share of common
stock. Each share of Junior Preferred Stock will have 1,000 votes, voting
together with the shares of common stock. In the event of any merger,
consolidation or other transaction in which shares of common stock are
exchanged, each share of Junior Preferred Stock will be entitled to receive
1,000 times the amount and type of consideration received per share of common
stock. The rights of the Junior Preferred Stock as to dividends, liquidation and
voting, and in the vent of mergers and consolidations are protected by customary
anti-dilution provisions. Fractional shares of Junior Preferred Stock will be
issuable; however, we may elect to distribute depositary receipts in lieu of
fractional shares. In lieu of fractional shares other than fractions that are
multiples of one one-thousandth of a share, an adjustment in cash will be made
based on the market price of the Junior Preferred Stock on the last trading date
before the date of exercise.

Until a Right is exercised, the holder will have no rights as our stockholder,
including, without limitation, the right to vote or to receive dividends. While
the distribution of the Rights was not taxable to our stockholders, stockholders
may, depending upon the circumstances, recognize taxable income should the
Rights become exercisable or upon the occurrence of some subsequent events.

The Rights have various anti-takeover effects. The Rights will cause substantial
dilution to a person or group of persons that attempts to acquire us on terms
not approved by our board of directors. The Rights should not interfere with any
merger of other business combination approved by our board of directors before
the time that a person or group has acquired beneficial ownership of fifteen
percent (15%) or more of our common stock since the Rights may be redeemed by us
at the Redemption Price until that time.

"Interested Stockholder" means any Acquiring Person or any of their affiliates
or associates, or any other person in which an Acquiring Person or their
affiliates or associates have in excess of five percent (5%) of the total
combined economic or voting power, or any person acting in concert or on behalf
of any Acquiring Person or their affiliates or associates.

DELAWARE LAW AND VARIOUS CHARTER AND BY-LAWS PROVISIONS

DELAWARE LAW. We must comply with the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three (3) years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner.

A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An "interested
stockholder" is a person who, together with affiliates and associates, owns, or,
in some cases, within three (3) years prior, did own, fifteen percent (15%) or
more of the corporation's voting stock. Under Section 203, a business
combination between the Company and an interested stockholder is prohibited
unless it satisfies one of the following three (3) conditions:

o our board of directors must have previously approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;

o upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of our voting stock outstanding at
the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, shares owned by (1)
persons who are directors and also officers and (2) employee stock
plans, in some instances; and

o the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by
the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.

SPECIAL MEETINGS. Our by-laws provide that special meetings of stockholders for
any purpose or purposes can be called only upon the request of our chairman of
the board, our president, our board of directors, or the holders of shares
entitled to at least a majority of the votes at the meeting.

AMENDMENT OF OUR BY-LAWS. To adopt, repeal, alter or amend the provisions of our
by-laws, our by-laws require either the affirmative vote of the holders of at
least a majority of the voting power of all of the issued and outstanding shares
of our capital stock entitled to vote on the matter or by our board of
directors.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. Our by-laws
establish advance notice procedures for stockholders to make nominations of
candidates for election as directors, or bring other business before an annual
meeting of our stockholders. These procedures provide that only persons who are
nominated by or at the direction of our board of directors, or by a stockholder
who has given timely written notice to our secretary before the meeting at which
directors are to be elected, will be eligible for election as one of our
directors. Further, these procedures provide that at an annual meeting, the only
business that may be conducted is the business that has been specified in the
notice of the meeting given by, or at the direction of, our board of by a
stockholder who has given timely written notice to our secretary of such
stockholder's intention to bring that business before the meeting.

Under these procedures, notice of stockholder nominations to be made or business
to be conducted at an annual meeting must be received by us not less than 60
days nor more than 90 days before the date of the meeting, or, if less than 70
days' notice or prior public disclosure of the date of the meeting is given or
made to the stockholders, the 10th day following the earlier of (1) the day
notice was mailed, or (2) the day public disclosure was made. Under these
procedures, notice of a stockholder nomination to be made at a special meeting
at which directors are to be elected must be received by us not later than the
close of business on the tenth (10th) day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever occurs first.

Under our by-laws, a stockholder's notice nominating a person for election as a
director must contain specific information about the proposed nominee and the
nominating stockholder. If our chairman determines that a nomination was not
made in the manner described in our by-laws, the nomination will be disregarded.
Similarly, a stockholder's notice proposing the conduct of business must contain
specific information about the business and about the proposing stockholder. If
our chairman determines that business was not properly brought before the
meeting in the manner described in our by-laws, the business will not be
conducted.

By requiring advance notice of nominations by stockholders, our by-laws afford
our board an opportunity to consider the qualifications of the proposed nominee
and, to the extent deemed necessary or desirable by our board, to inform
stockholders about these qualifications. By requiring advance notice of other
proposed business, our by-laws also provide an orderly procedure for conducting
annual meetings of stockholders and, to the extent deemed necessary or desirable
by our board, provides our board with an opportunity to inform stockholders,
before meetings, of any business proposed to be conducted at the meetings,
together with any recommendations as to our board's position regarding action to
be taken with respect to the business, so that stockholders can better decide
whether to attend a meeting or to grant a proxy regarding the disposition of any
business.

Although our certificate does not give our board any power to approve or
disapprove stockholder nominations of the election of directors or proposals for
action, the foregoing provisions may have the effect of precluding a contest for
the election of directors or the consideration of stockholder proposals if the
proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of these nominees or proposals might be harmful or beneficial to
us and our stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock Transfer
& Trust Company.

VALIDITY OF SECURITIES

Proskauer Rose LLP will pass on the validity of the common stock offered under
this prospectus for the Company.

EXPERTS

The consolidated financial statements of theglobe.com are included herein and in
the registration statement in reliance upon the report of Rachlin Cohen & Holtz
LLP, independent registered public accounting firm, and upon the authority of
said firm as experts in accounting and auditing.

The consolidated financial statements of SendTec, Inc. included in this document
have been included herein and in the registration statement in reliance upon the
report of Gregory, Sharer & Stuart, P.A., independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES

Section 145 of the Delaware General Corporation Law ("DGCL") provides that, to
the extent a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, whether civil, criminal, administrative or investigative or in
defense of any claim, issue, or matter therein (hereinafter a "Proceeding"), by
reason of the fact that person is or was a director, officer, employee or agent
of a corporation or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (collectively an "Agent" of the
corporation) that person shall be indemnified against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.

The DGCL also provides that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened Proceeding by
reason of the fact that person is or was an Agent of the corporation, against
expenses (including attorney's fees), judgment, fines and amounts paid in
settlement actually and reasonably incurred by that person in connection with
such action, suit or proceeding if that person acted in good faith and in a
manner that person reasonably believed to be in, or not opposed to, the best
interest of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that person's conduct was
unlawful; provided, however, that in an action by or in the right of the
corporation, the corporation may not indemnify such person in respect of any
claim, issue, or matter as to which that person is adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such proceeding was brought determined that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is reasonably entitled to indemnity.

Article VI of the By-laws requires the Company to indemnify any person who was
or is a party or is threatened to be made a party to or is involved (including,
without limitation, as a witness) in any threatened, pending or completed
action, suit, arbitration, alternative dispute mechanism, investigation,
administrative hearing or any other proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) brought by reason of the fact that he or she is or was a director or
officer of the Company, or, while a director or officer of the Company, is or
was serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefits plan against expenses (including
attorneys' fees, judgments, fines, excise taxes under the Employee Retirement
Income Security Act of 1974, penalties and amounts paid in settlement) incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.

Article VI of the Company's Fourth Amended and Restated Certificate of
Incorporation (the "Certificate") provides that to the fullest extent that the
DGCL, as it now exists or may hereafter be amended, permits the limitation or
elimination of the liability of directors, a director of the Company shall not
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.

The Company has entered into indemnification agreements with certain of its
directors and officers. These agreements provide, in general, that the Company
will indemnify such directors and officers for, and hold them harmless from and
against, any and all amounts paid in settlement or incurred by, or assessed
against, such directors and officers arising out of or in connection with the
service of such directors and officers as a director or officer of the Company
or its Affiliates (as defined therein) to the fullest extent permitted by
Delaware Law.

The Company maintains directors' and officers' liability insurance which
provides for payment, on behalf of the directors and officers of the Company and
its subsidiaries, of certain losses of such persons (other than matters
uninsurable under law) arising from claims, including claims arising under the
Securities Act, for acts or omissions by such persons while acting as directors
or officers of the Company and/or its subsidiaries, as the case may be.

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that, in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.

DESCRIPTION OF BUSINESS

OVERVIEW

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. In October 2001, the Company sold all of the
assets used in connection with the Games Domain and Console Domain websites to
British Telecommunications plc, and all of the assets used in connection with
the Kids Domain website to Kaboose Inc. In February 2002, the Company sold all
of the assets used in connection with the Happy Puppy website to Internet Game
Distribution, LLC.

On June 1, 2002, Chairman Michael S. Egan and Director Edward A. Cespedes became
Chief Executive Officer and President of the Company, respectively. The Company
continues to operate its Computer Games print magazine and the associated
website Computer Games Online (www.cgonline.com), as well as the games
distribution business of Chips & Bits, Inc. (www.chipsbits.com). The Company
continues to actively explore a number of strategic alternatives for its
remaining online and offline game properties, including continuing its
operations or selling some or all of these properties. We may also enter into
additional or different lines of business. Except as described below, we have no
current arrangements or understanding by which we may enter into new or
additional lines of business.

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

In February 2003, the Company committed to fund operating expenses of a
development stage Internet venture at the Company's discretion in the form of a
loan. As of June 30, 2004 and December 31, 2003, approximately $0.7 million and
$0.5 million, respectively, had been advanced to the venture. We have the option
to acquire this development stage venture in exchange for the issuance of an
aggregate of 1,500,000 shares of our common stock.

On May 28, 2003, the Company acquired Direct Partner Telecom, Inc. ("DPT"), a
company engaged in VoIP telephony services in exchange for 1,375,000 shares of
the Company's Common Stock and the issuance of warrants to acquire 500,000
shares of the Company's Common Stock. The transaction included an earn-out
arrangement whereby the former stockholders of DPT may earn additional warrants
to acquire up to 2,750,000 shares of the Company's Common Stock at an exercise
price of $0.72 per share upon the attainment of certain performance targets by
DPT over approximately a three year period following the date of acquisition.
The performance targets for the first 500,000 of these earn-out warrants were
not achieved and expired on March 31, 2004. Subject to certain qualifications,
the warrants will also accelerate and be deemed earned in the event of a "change
in control" of the Company, as defined in the acquisition documents. DPT was a
specialized international communications carrier providing VoIP communications
services to emerging countries. DPT is headquartered in Ft. Lauderdale, Florida
with switching facilities in New York, New York and Miami, Florida. The DPT
network provides "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 and intends to employ these
physical assets in the build out of the VoIP network.

As of June 30, 2004, the Company's revenue sources were principally from the
sale of print advertising in its Computer Games magazine; the sale of video
games and related products through Chips & Bits, Inc., its games distribution
business; and the sale of its Computer Games magazine through newsstands and
subscriptions. Management's intent, going forward, is to devote substantial
monetary, management and human resources to the Company's retail VoIP business.

OUR PRODUCTS AND SERVICES

As of June 30, 2004, we managed two primary lines of business. One line consists
of our historical network of three wholly-owned businesses, each of which
specializes in the games business by delivering games information and selling
games in the United States and abroad. These businesses are: our print
publication Computer Games Magazine; our Computer Games Online website
(www.cgonline.com), which is the online counterpart to Computer Games Magazine;
and our Chips & Bits, Inc. (www.chipsbits.com) games distribution company.
Management of the Company continues to actively explore a number of strategic
alternatives for its remaining online and offline game properties, including
continuing its existing operations and using its cash on hand, selling some or
all of these properties and/or entering into new or different lines of business.

The second line of business, VoIP telephony services, includes voiceglo
Holdings, Inc., a wholly-owned subsidiary of theglobe.com that offers VoIP-based
phone service. The term "VoIP" refers to a category of hardware and software
that enables people to use the Internet to make phone calls.

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

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

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. These services allow consumers and
enterprises to communicate using VoIP technology for dramatically reduced
pricing compared to traditional telephony networks. The services also offer
traditional telephony features such as voicemail, caller ID, call forwarding,
and call waiting for no additional cost to the consumer, as well as incremental
services that are not currently supported by the public switched telephone
network ("PSTN") like the ability to use numbers remotely and voice to email
services.

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

o Browser-Based - a full functioning telephone that resides on the
computer desktop and also includes a web-based solution. The only
system requirements are a browser and an Internet connection. The
Company is seeking a patent to protect its position. The
browser-based product works on broadband, dial-up and wi-fi Internet
connections and can optionally be used with a USB phone.

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

The browser-based product is marketed under the name "GloPhone":

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

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

o GloPhone users speak free to other GloPhone users;

o The GloPhone is used by either utilizing the computer's microphone
and speakers or using an external device, such as a USB phone; and

o GloPhone users can use their service when traveling through the
"GloPhone Express" web-based application.

The home and business replacement products are marketed as different "packages"
under the "voiceglo" brand:

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

o User's can purchase a voiceglo adapter that allows use of
traditional telephone handsets with the voiceglo service;

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

o voiceglo users speak free to other voiceglo users.

Sales and Marketing. The Company is currently developing its product sales and
distribution strategy. The Company may market its services over a wide range of
distribution channels that may include: television infomercials, print media
advertising and Internet advertising and structured customer referral programs.
The Company is currently selling some of its services through both direct and
indirect sales channels (value-added resellers).

Development of our Network and Carrier Relationships; Equipment Suppliers. In
order to offer our services we have invested substantial time, capital and other
resources on the development of our VoIP network. Our VoIP network is comprised
of switching hardware and software, servers, billing and inventory systems, and
telecommunication carrier services. We own and operate VoIP switch equipment in
Miami and New York, and interconnect these switches utilizing a leased transport
network through numerous carrier agreements with third party providers. Through
these carrier relationships we are able to carry the traffic of our customers
over the Internet and interact with the PSTN. In general, we enter into from one
to five year agreements with these carriers pursuant to which, in exchange for
allocating and dedicating availability on their networks, we undertake to
provide minimum usage of these networks. The greater the minimum usage, the
lower our per minute charge for such usage, assuming full utilization of such
minutes. Given the recent introduction of our retail service offerings, our
minimum commitments under these carrier agreements presently greatly exceed our
actual usage. These Carrier relationships also provide the Company with a leased
network for telephone numbers, or "footprint", in more than 100 area codes in
approximately 34 states. The network also provides for both domestic and
international call termination. Although other sources of supply are available,
to assure a reliable source of supply for our VoIP offering, we have entered
into contracts with two principal suppliers for telephony handsets and adapters
related to our VoIP services. Handsets or adapters allow our customers to more
easily use their computers as telephones. Pursuant to our agreement with the
handset supplier we have committed to purchase, subject to satisfaction of
certain performance criteria relating to the handsets, a substantial number of
handsets by the end of 2004. See "Management's Discussion and Analysis or Plan
of Operation - Liquidity and Capital Resources".

Research and Development. Internet telephony is a technical service offering. As
a technology, basic VoIP service, although complex, is well-understood and has
been adapted by many companies that are selling basic services to consumers and
businesses worldwide. The Company, however, believes that in order to be
competitive and differentiate itself among its peers, it must continuously
upgrade its service offering. To that end, the Company is engaged in a program
of continuous development of its products. Since the initial launch of its VoIP
service, the Company has introduced a number of new features which have
increased the functionality of the products. Several major upgrades to the
Company's offerings are anticipated in 2004.

OUR COMPUTER GAMES BUSINESS

Computer Games Magazine. Computer Games Magazine is a consumer print magazine
for gamers.

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

- One of the most popular features of Computer Games is a CD ROM containing game
demos, which comes bundled monthly with the magazine in all newsstand editions
and a portion of copies mailed to subscribers.

Computer Games Online. Computer Games Online (www.cdmag.com) is the online
counterpart to Computer Games magazine. Computer Games Online is a source of
free computer games news and information for the sophisticated gamer, featuring
news, reviews and previews, along with a powerful Web-wide search engine.

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

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

Advertising. We continue to attract major advertisers to our Computer Games
print magazine, which is a widely respected consumer print magazine for gamers.
During the six months ended June 30, 2004 and the year ended December 31, 2003,
no single advertiser accounted for more than 10% of total net revenue. For the
twelve months ended December 31, 2003, over 40 clients advertised in our
Computer Games magazine. Following a series of cost reduction measures and
restructuring, we currently have an internal advertising sales staff of two (2)
professionals, both of whom are dedicated to selling advertising space in our
Computer Games print magazine. Although these professionals focus on developing
long-term strategic relationships with clients as they sell advertisements in
our Computer Games print magazine, most of our actual advertising contracts are
for periods of one to three months. All compensation to our sales personnel is
commission based.

In 2003 we hired an entertainment editor based in Los Angeles to develop an
entertainment publication that has been delivered within Computer Games magazine
starting in Spring, 2004. The new magazine, NowPlaying, covers movies, DVD,
television, music, games, comics and anime, and is designed to fulfill the wider
pop culture interests of our current readers and to attract a more diverse group
of advertisers; autos, television, telecommunications and film to name a few.
Additional sales staff needs are anticipated to be minimal.

COMPETITION

TELEPHONY BUSINESS. The telecommunications industry has experienced a great deal
of instability during the past several years. During the 1990s, forecasts of
very high levels of future demand brought a significant number of new entrants
and new capital investments into the industry. New global carriers were joined
by many of the largest traditional carriers and built large global or regional
networks to compete with the global wholesalers. However, in the last three
years many of the new global carriers and many industry participants have either
gone through bankruptcy or no longer exist. The networks were built primarily to
meet the expected explosion in bandwidth demand from data, with specific
emphasis upon Internet applications. Those forecasts have not materialized,
telecommunications capacity now far exceeds actual demand, and the resulting
marketplace is characterized by fierce price competition as traditional and next
generation carriers compete to secure market share. Resulting lower prices have
eroded margins and have kept many carriers from attaining positive cash flow
from operations.

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

Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
brand recognition and more established relationships in the industry than we
have. As a result, certain of these competitors may be able to adopt more
aggressive pricing policies which may hinder our ability to market our voice
services. We believe that our key competitive advantages are a function of our
continuing research and development, including our two method patents pending:

o Linking a telephone number to an IP address, allowing anyone,
anywhere in the world to dial a traditional telephone number to
originate a call to the distinct IP address of a voiceglo customer;
and

o Browser to telephone interface, which turns any browser into a voice
enabled communications device and includes many features commonly
available from traditional telephone service providers.

There can be no assurance that we will be successful in our efforts to patent
this technology.

COMPUTER GAMES BUSINESS. Competition among games print magazines is high. We
compete for advertising and circulation revenues principally with publishers of
other technology and games magazines with similar editorial content as our
magazine. The technology magazine industry has traditionally been dominated by a
small number of large publishers. We believe that we compete with other
technology and games publications based on the nature and quality of our
magazines' editorial content and the attractive demographics of our readers. In
recent years, demand for online and PC based games has decreased as non PC based
game consoles, including those from Sony (PlayStation II), Microsoft (X-Box) and
Nintendo (Game Boy and GameCube), have made major product advancements.

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 and are seeking to develop
additional propriety technology. We attempt to protect these assets by relying
on intellectual property laws. We also generally enter into confidentiality
agreements with our employees and consultants and in connection with our license
agreements with third parties. We also seek to control access to and
distribution of our technology, documentation and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without authorization or to
develop similar technology independently. We pursue the registration of our
trademarks in the United States and internationally and we are currently
pursuing patent protection for certain of our VoIP technology, including certain
technology related to our linkage of a telephone number to an IP address and our
browser to telephone interface.

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

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

IN GENERAL. We are subject to laws and regulations that are applicable to
various Internet activities. There are an increasing number of federal, state,
local and foreign laws and regulations pertaining to the Internet and
telecommunications, including Voice Over Internet Protocol ("VoIP" or "Internet
Telephony"). In addition, a number of federal, state, local and foreign
legislative and regulatory proposals are under consideration. Laws or
regulations have been and may continue to be adopted with respect to the
Internet relating to, among other things, fees and taxation of VoIP telephony
services, liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy and quality of products and
services. Changes in tax laws relating to electronic commerce could materially
affect our business, prospects and financial condition. Moreover, the
applicability to the Internet of existing laws governing issues such as
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment and personal privacy is uncertain and
developing. Any new legislation or regulation, or the application or
interpretation of existing laws or regulations, may decrease the growth in the
use of the Internet or VoIP telephony services, may impose additional burdens on
electronic commerce or may alter how we do business.

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

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

In the United States, the Federal Communications Commission ("FCC") has so far
declined to make a general conclusion that all forms of IP telephony services
constitute telecommunications services (rather than information services). The
FCC's Internet Policy Working Group was established to assist the FCC in
identifying, evaluating, and addressing policy issues that will arise as
telecommunications services move to Internet based platforms. It has held a
forum on VoIP issues to study and discuss issues including regulatory
classification and has held two solutions summits regarding VoIP: the first
solutions summit focused on VoIP solutions for E911 issues and the second
solutions summit focused on VoIP solutions for disability access issues. On
March 10, 2004, the FCC released its IP-enabled Services Notice of Proposed
Rulemaking which included guidelines and questions upon which it is seeking
public comment to determine what regulation, if any, will govern companies that
provide VoIP services. Specifically, the FCC has expressed an intention to
further examine the question of whether certain forms of phone-to-phone VoIP
services are information services or telecommunications services. The two are
treated differently in several respects, with certain information services being
regulated to a lesser degree than telecommunications services. The FCC has noted
that certain forms of phone-to-phone VoIP services bear many of the same
characteristics as more traditional voice telecommunications services and lack
the characteristics that would render them information services. The FCC has
indicated that the mechanisms for contributing to the Universal Service Fund,
issues as to applicability of access charges and other matters will be
considered in that context. On March 10, 2004, (on the same day that the FCC
released its IP-Enabled Services Notice of Proposed Rulemaking), in a response
to a petition by Pulver.com which sought a declaration that Pulver.com's Free
World Dialup ("FWD") is neither telecommunications nor a telecommunications
service, the FCC ruled that Pulver.com's FWD offering is an unregulated
information service subject to the Commission's jurisdiction. The ruling
specifically does not address whether traditional phone regulations might apply
to VoIP services in which end users interconnect with the traditional telephone
system.

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

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

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

Although Internet telephony and VoIP services are presently largely unregulated
by the state governments, such state governments and their regulatory
authorities may assert jurisdiction over the provision of intrastate IP
communications services where they believe that their telecommunications
regulations are broad enough to cover regulation of IP services. A number of
state regulators have recently taken the position that VoIP providers are
telecommunications providers and must register as such within their states. VoIP
operators have resisted such registration on the position that VoIP is not, and
should not be, subject to such regulations because VoIP is an information
service, not a telecommunication service. In a recent federal court decision,
the Minnesota Public Utilities Commission was enjoined in its attempt to enforce
traditional phone regulations against Vonage, a VoIP provider. This case is
currently on appeal in the United States Court of Appeals for the Eighth
Circuit. In addition, other states are not bound by that decision and may reject
the VoIP operator's position and may seek to subject us to regulation and
require us to pay associated charges and taxes. Various state regulatory
authorities have initiated proceedings to examine the regulatory status of
Internet telephony services, and in several cases rulings have been obtained to
the effect that the use of the Internet to provide certain intrastate services
does not exempt an entity from paying intrastate access charges in the
jurisdictions in question. As state governments, courts, and regulatory
authorities continue to examine the regulatory status of Internet telephony
services, they could render decisions or adopt regulations affecting providers
of Internet telephony services or requiring such providers to pay intrastate
access charges or to make contributions to universal service funding. Should the
FCC determine to regulate IP services, states may decide to follow the FCC's
lead and impose additional obligations as well.

The regulatory treatment of IP communications outside the United States varies
significantly from country to country. Some countries currently impose little or
no regulation on Internet telephony services, as in the United States. Other
countries, including those in which the governments prohibit or limit
competition for traditional voice telephony services, generally do not permit
Internet telephony services or strictly limit the terms under which those
services may be provided. Still other countries regulate Internet telephony
services like traditional voice telephony services, requiring Internet telephony
companies to make various telecommunications service contributions and pay other
taxes.

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

CERTAIN OTHER REGULATION AFFECTING THE INTERNET. 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. Various states have adopted and are considering
Internet-related legislation. Increased U.S. regulation of the Internet may slow
its growth, particularly if other governments follow suit, which may negatively
impact the cost of doing business over the Internet and materially adversely
affect our business, financial condition, results of operations and future
prospects. Legislation has also been proposed that would clarify the regulatory
status of VoIP service. The Company has no way of knowing whether legislation
will pass or what form it might take. Domain names have been the subject of
significant trademark litigation in the United States and internationally. The
current system for registering, allocating and managing domain names has been
the subject of litigation and may be altered in the future. The regulation of
domain names in the United States and in foreign countries may change.
Regulatory bodies are anticipated to establish additional top-level domains and
may appoint additional domain name registrars or modify the requirements for
holding domain names, any or all of which may dilute the strength of our names.
We may not acquire or maintain our domain names in all of the countries in which
our websites may be accessed, or for any or all of the top-level domain names
that may be introduced.

Internationally, the European Union has also enacted several directives relating
to the Internet. The European Union has, for example, adopted a directive that
imposes restrictions on the collection and use of personal data. Under the
directive, citizens of the European Union are guaranteed rights to access their
data, rights to know where the data originated, rights to have inaccurate data
rectified, rights to recourse in the event of unlawful processing and rights to
withhold permission to use their data for direct marketing. The directive could,
among other things, affect U.S. companies that collect or transmit information
over the Internet from individuals in European Union member states, and will
impose restrictions that are more stringent than current Internet privacy
standards in the U.S. In particular, companies with offices located in European
Union countries will not be allowed to send personal information to countries
that do not maintain adequate standards of privacy.

EMPLOYEES

As of August 16, 2004, we had approximately 81 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.

RECENT EVENTS

ACQUISITION OF SENDTEC

On September 1, 2004, we closed upon an agreement and plan of merger dated
August 31, 2004 (the "Merger Agreement") pursuant to which we acquired all of
the issued and outstanding shares of capital stock of SendTec, Inc., a Florida
corporation based in St. Petersburg, Florida ("SendTec") through a merger of
SendTec with theglobe's wholly owned subsidiary, SendTec Acquisition Corp.
Pursuant to the terms of the merger, in consideration for the acquisition of
SendTec, theglobe paid (or will pay) consideration consisting of: (i) $6,000,000
in cash, (ii) the issuance of an aggregate of 17,500,000 shares of theglobe's
common stock, (iii) the issuance of an aggregate of 175,000 shares of Series H
Automatically Converting Preferred Stock (which as more fully described below,
is convertible into 17,500,000 shares of theglobe's common stock) (the
"Preferred Stock"), and (iv) a subordinated promissory note in the amount of $1
million (the "Note") (collectively, the "Initial Merger Consideration"). In
addition, warrants to acquire shares of common stock would be issued to SendTec
shareholders when and if SendTec exceeds forecasted operating income, as
defined, of $10.125 million (the "Income Target"), for the year ending December
31, 2005 (the "Earn-out Consideration" and collectively with the Initial Merger
Consideration, the "Merger Consideration"). The number of earn-out warrants
would range from an aggregate of 250,000 to 2,500,000 (if actual operating
income exceeds the forecast by at least 10%). If and to the extent the warrants
are earned, the exercise price of the performance warrants would be $0.27 per
share and they will be exercisable for a period of 5 years. The Note bears
interest at the rate of 4% per annum and matures in one lump sum of principal
and interest on September 1, 2005. theglobe paid the cash portion of the
consideration issued in the Merger from funds which it received from its private
offering of approximately $28.6 million in March of 2004.

The Merger Consideration will be distributed pro rata to the shareholders of
SendTec in accordance with their respective ownership interests, except for any
shareholder of SendTec who elects to dissent from the Merger and follows
applicable Florida law for the exercise of dissenters' rights (whom would
instead receive the cash value of their shares following a statutorily
prescribed appraisal procedure). As of September 7, 2004, the holders of 86.71%
of SendTec's shares had voted in favor of the Merger and no shareholder had
notified SendTec that he or she intended to dissent from the Merger. The
remaining shareholders of SendTec have until on or about September 30, 2004, to
provide notice of, and to otherwise follow the procedures for, the exercise of
dissenter's rights.

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

Except as provided by law, the Preferred Stock will vote with the holders of
common stock on all matters on an "as-converted" basis, other than the Capital
Amendment described below as to which it will not vote. The Preferred Stock will
automatically convert into shares of theglobe's common stock on a 1 for 100
basis at such time as theglobe files an amendment to its certificate of
incorporation with the Delaware Secretary of State's Office to increase its
authorized shares of common stock from 200,000,000 to at least 300,000,000 (the
"Capital Amendment"). theglobe intends to seek shareholder authorization for
such amendment at its annual meeting of stockholders anticipated to be held in
November or December, 2004. Five of the former shareholders of SendTec (whom
collectively received approximately 82% of the shares of common stock issued in
the Merger, together with theglobe's Chairman, Michael Egan (together with
certain affiliates which he controls), have agreed to vote (or have granted
proxies to so vote) in favor of the Capital Amendment. After giving effect to
the proxies from such former SendTec shareholders, Mr. Egan controls the vote
over approximately 69.25 million of theglobe's 156 million issued and
outstanding shares of common stock (after giving affect to the shares of common
stock which may be issued in the Merger). The Capital Amendment will be approved
if the holders of a majority of the outstanding shares of common stock vote in
its favor.

In the event that the Capital Amendment is not approved for any reason at the
annual meeting then on the 10th day following the failure to approve the Capital
Amendment, the remaining shares of Preferred Stock will automatically convert
into whatever number of shares of Common Stock which theglobe then has remaining
available for issuance (after giving affect to approximately 32.1 million shares
reserved for issuance under previously outstanding options and warrants), less
up to 3 million additional shares as may be designated by theglobe. After giving
effect to the reservation of shares underlying outstanding options and warrants
to acquire shares of theglobe's common stock (including options issued in
connection with the Merger) and the shares of common stock issued in the Merger,
theglobe presently has issued and outstanding (or reserved for issuance)
approximately 197 million shares of common stock, leaving a maximum of
approximately 3 million shares (assuming no further shares of common stock are
issued prior to such date) which could be further issued upon conversion of the
Preferred Stock absent the increase in common stock contemplated by the Capital
Amendment or other arrangements satisfactory to the holders of any options or
warrants to acquire shares. With regard to any shares of Preferred Stock which
theglobe does not automatically convert into shares of common stock, the holders
of the Preferred Stock may thereafter convert such remaining Preferred Stock
into a subordinated promissory note (a "Conversion Note") from theglobe. If
issued, the Conversion Note will be due in one lump sum on the later of the
first anniversary of its issuance or December 31, 2005 and will bear interest at
the rate of 4% per annum. The principal amount of the Conversion Note would be
equal to the product of (A) the number of shares of theglobe's common stock that
would have been issued upon conversion of the shares of the Preferred Stock that
were not converted into common stock and (B) the lesser of (i) the Fair Market
Value, as defined, of theglobe's common stock in the 20 trading days immediately
prior to the conversion date and (ii) $0.83. If none of the remaining shares of
Preferred Stock were converted into common stock, the maximum principal amount
of the Conversion Note (based upon the maximum conversion rate of $0.83 per
share) would be approximately $14.5 million.

The Company has agreed to file a registration statement relating to the resale
of the shares of common stock issued in the Merger and the shares of common
stock underlying the Preferred Stock on or before January 29, 2005 and to cause
the effectiveness of such registration on or before September 1, 2005. The
Company also agreed to keep the registration statement effective until at least
the third anniversary of the Closing. Pursuant to the terms of the Merger, in
general, the common stock and Preferred Stock (and the underlying shares of
common stock) issued in the Merger may not be sold or otherwise transferred for
a period of one (1) year without the prior written consent of the Company.

As part of the Merger, five top executives of SendTec entered into new
employment agreements with SendTec. These employment agreements each have a term
of 5 years and obligate SendTec to pay base salaries ranging from $300 thousand
to $175 thousand, consistent with the executive's salaries immediately before
the Merger, and provide for customary health insurance and other benefits
commensurate with the benefits which theglobe makes generally available to its
officers. As part of the Merger, the Company also increased the size of its
Board of Directors from 3 to 4 directors and elected Paul Soltoff, who serves as
Chief Executive Officer of SendTec, to the Board.

theglobe also issued an aggregate of approximately 4.0 million replacement
options to acquire shares of theglobe's common stock for each of the issued and
outstanding options to acquire shares of SendTec held by the former employees of
SendTec. Of these replacement options, approximately 3.27 million have exercise
prices of $0.06 per share and approximately 700 thousand have exercise prices of
$0.27 per share. The terms of these replacement options were as negotiated
between representatives of theglobe and the Stock Option Committee for SendTec
2000 Amended and Restated Stock Option Plan. theglobe also agreed to grant an
aggregate of 250,000 options to other employees of SendTec at an exercise price
of $0.34 per share. Twenty-five percent of these options vested immediately and
the balance will vest in 3 equal annual installments assuming the continued
employment of the option holders. In addition, theglobe also established a bonus
option pool pursuant to which various employees of SendTec could earn options to
acquire an aggregate of 1,000,000 shares of theglobe's Common Stock at an
exercise price of $0.27 per share on terms substantially similar to the
circumstances in which the Earn-out Consideration may be earned.

In connection with the Merger, the SendTec executives (whom collectively
received approximately 82% of the shares of common stock and Preferred Stock
issued in the Merger), theglobe and Messrs. Michael Egan and Edward Cespedes,
our Chairman and Chief Executive Officer and President, respectively
(individually and on behalf of certain affiliated entities) entered into a
Stockholders' Agreement. Pursuant to the terms of the Stockholders' Agreement,
the SendTec executives granted an irrevocable proxy to vote their shares to E&C
Capital Partners LLLP, an affiliate of Mr. Egan on all matters (including the
election of directors) other than with respect to certain potential affiliated
transactions involving Messr. Egan or Cespedes. After giving effect to the grant
of the proxy (and excluding outstanding options and warrants held by Mr. Egan),
Mr. Egan has voting power over approximately 69.25 million shares of theglobe
representing approximately 44.5% of the issued and outstanding voting securities
of the Company after the SendTec Acquisition. The SendTec executives were also
granted certain pre-emptive rights involving potential new issuances of
securities by theglobe, together with a co-sale right to participate in certain
qualifying sales of stock by Messrs. Egan, Cespedes and their affiliates.
Messrs. Egan, Cespedes and their affiliates were granted a right of first
refusal on certain sales (generally, in excess of 10 million shares) by the
SendTec executives, together with the right to "drag-along" the SendTec
executives with regard to certain major sales of their stock or a sale or merger
of theglobe.

CERTAIN PRIOR RELATIONSHIPS BETWEEN THEGLOBE AND SENDTEC.

SendTec and theglobe are parties to a Marketing Services Master Agreement dated
July 23, 2004, whereby SendTec will provide various marketing and advertising
services to theglobe and its subsidiaries, including the production of
television infomercials and media planning and buying services. The Agreement is
for a period of 6 months, subject to early termination by either party on 30
days notice. theglobe is obligated to pay a monthly fee of $15,000 plus other
amounts specific to various work orders which theglobe has placed with SendTec.
Based upon 5 specific work orders currently outstanding, theglobe has paid
approximately $330,000 to date and anticipates that it will pay another
approximately $110,000 based upon these work orders.

SENDTEC'S BUSINESS

SendTec was incorporated in February, 2000 in the State of Florida and commenced
operations on that date. Originally, SendTec incorporated under the name
prizecrazy.com and was envisioned to become a free consumer gaming website that
monetized consumer traffic on the website through on-line "cost per impression"
or "CPM" advertising. Because of a significant decline in the pricing of on-line
CPM advertising during this period of time, the prizecrazy.com web site
development was abandoned and the company modified its business strategy so as
to become a direct response marketing services company. In conjunction with this
change in strategy, prizecrazy.com changed its name to DirectNet Advertising.net
("DNA") to better define the company's operational focus.

At the time, DNA was one of only a few online marketing services companies that
was providing performance-based (i.e. cost-per-action, cost per lead, cost per
sale) advertising solutions to advertising clients. As part of its marketing
services offering, DNA also began developing proprietary software to facilitate
the tracking of actions online for its advertisers and its distribution network.
Today, SendTec's Results, Optimization, Yield ("ROY") online tracking software
provides the company with a unique competitive advantage by enabling SendTec to
optimize campaigns and by enabling advertising clients and distribution partners
to access real-time conversion information. In February of 2002, DNA acquired
100% of the stock of iFactz, Inc. ("iFactz") in a merger transaction. iFactz has
developed software that enables the tracking of online response to distinct
sources of offline advertising. The iFactz software provides an excellent
complementary platform for DNA's ROY tracking software and enables DNA to offer
a complete technology tracking solution for online and offline direct response
marketing. During this same period of time, DNA changed it name to SendTec, Inc.
to better define itself in the market.

Today, SendTec is a direct response marketing services and technology company.
SendTec provides customers a complete offering of direct marketing products and
services to help them market their products both on the Internet ("online") and
through traditional media channels such as television, radio and print
advertising ("offline"). By utilizing SendTec's marketing products and services,
SendTec's clients seek to increase the effectiveness and the return on
investment of their advertising campaigns. SendTec's online and offline direct
marketing products and services include strategic campaign development, creative
development, creative production and post-production, media buying and tracking,
campaign management, campaign analysis and optimization, technology systems
implementation and integration for campaign tracking and many other agency type
services. In addition, SendTec has a suite of technology solutions, ROY, SOAR
(an acronym for "SendTec Optimization and Reporting") and iFactz, which enable
it to deliver, track, and optimize direct marketing campaigns across multiple
distribution channels, including television, radio, direct mail, print and the
Internet. The combination of SendTec's direct marketing capabilities, technology
and experience in both online and offline marketing, enable its clients to
optimize their advertising campaigns across a broad spectrum of advertising
mediums. SendTec has three operating divisions, DirectNet Advertising, iFactz
and Creative South.

DIRECTNET ADVERTISING (DNA)

DNA is the digital marketing services division of SendTec. DNA offers a variety
of products and services that enable on-line advertisers and publishers to
generate performance based results through online marketing channels such as,
web advertising, e-commerce up-sells, affiliate marketing, search marketing and
email marketing. DNA's broad range of products and services include creative
strategy and execution, strategic offer development, production planning, media
planning, media buying and search optimization. Through these products and
services DNA's clients can address all aspects of the marketing continuum, from
strategic planning through execution, including results management and campaign
refinements. DNA's proprietary technologies allow advertisers and publishers to
track, report and optimize online campaign activity all the way to the
"conversion level" (which means a consumer's actual response to the offer, as
for example, by making a purchase). DNA's knowledge of digital advertising
strategies, targeting methods, media placements and creative executions combined
with its innovative and dependable technology help DNA's clients to improve
their advertising performance and return on investment. DNA competes with a
variety of large and small advertising agencies but its primary competitors are
interactive marketing companies such as ValueClick, aQuantive, Advertising.com
and Performics. Currently the online performance based advertising market in
which DNA competes is still evolving and it is expected that certain government
regulations may eventually be implemented to better define acceptable practices
and methodologies.

IFACTZ

iFactz is SendTec's Application Service Provider or "ASP" technology that tracks
and reports the online responses that are generated from offline direct response
advertising. Historically, advertisers have lacked the ability to accurately
track which offline advertising yields results online and thus advertisers have
been unable to properly optimize their media buys. iFactz intelligently tracks
and reports web activity from all offline advertising - TV (even national
cable), radio, print and direct mail - in real time. iFactz's Intelligent
Sourcing(TM) is a patent-pending media technology that informs the user where
online customers come from, and what corresponding activity they produced on the
user's website. The iFactz patent was filed in November of 2001 and SendTec
expects the patent application for iFactz to be reviewed in the 1st quarter of
2005. iFactz's ASP design enables advertisers to implement and access the
technology in a timely and cost efficient manner, as there are no cumbersome,
time-consuming and costly implementation expenses and lead times. iFactz is
licensed to clients both as a stand alone technology solution and as part of an
overall campaign offering. SendTec believes that, to date, iFactz has provided
SendTec with a significant competitive advantage, and that there are currently
no similar technologies available in the market. SendTec has spent over $225,000
of research and development cost on iFactz over the past two years.

CREATIVE SOUTH

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

Since its inception, SendTec has grown from 5 employees to approximately 47
employees currently. The address of SendTec's principal executive offices is 877
Executive Center Drive West Suite 300 St. Petersburg, Florida 33702. SendTec
also has an office in New York City.

RISK FACTORS RELATING TO SENDTEC AND THE ACQUISITION

RISKS RELATED TO THEGLOBE.COM'S ACQUISITION OF SENDTEC

OUR LIQUIDITY MAY PERMANENTLY DECREASE AS A RESULT OF THE SENDTEC ACQUISITION.
WE MAY REQUIRE ADDITIONAL CAPITAL.

As part of the consideration for the SendTec acquisition, we paid $6.0 million
in cash and issued a subordinated promissory note for $1.0 million, due one year
after the closing, to the SendTec shareholders. As a result of the acquisition,
our liquidity is dependent upon the sufficiency of the cash acquired from
SendTec in the acquisition, of approximately $3 million, plus cash flow
anticipated to be generated internally by SendTec subsequent to the acquisition.
If cash flow generated by SendTec, on a short-term and long-term basis, does not
meet our expectations, our liquidity may permanently decrease and our financial
condition may be adversely affected. Although to date no SendTec shareholder has
so elected and approximately 87% of SendTec's shareholders have voted in favor
of the acquisition, our liquidity may also be adversely affected if any
significant portion of the remaining SendTec shareholders elect to pursue
dissenter's appraisal rights in connection with the acquisition. In addition,
the Preferred Stock issued as part of the Merger may under certain limited
circumstances be converted by the holders thereof into a promissory note due in
one lump sum on the later of the first anniversary of the date of issuance and
December 31, 2005. In such limited circumstances, the Preferred Stock may be
converted into a promissory note based upon the then Fair Market Value, as
defined, of our Common Stock (but not greater than $0.83 per share). If all
remaining Preferred Stock were so converted at the maximum conversion rate, the
maximum principal amount of the Note would be $14.5 million. Our liquidity would
be adversely affected by any such conversion and we would likely need to raise
significant capital. Our financial condition may also be adversely affected.

THE ANTICIPATED BENEFITS OF THE SENDTEC ACQUISITION MAY NOT BE REALIZED.

The success of the acquisition will depend, in part, on our ability to realize
the benefits of enhanced resources, growth opportunities and other synergies of
combining with SendTec and to effectively leverage the SendTec marketing and
technical resources following the merger. The merger involves risks related to
the integration, management, and retention of acquired client relationships,
operations and personnel. Integration of the businesses will be complex,
time-consuming and may disrupt the combined company's businesses if not
completed in a timely and efficient manner. Some of the difficulties that the
combined company may encounter include:

o diversion of management's attention from other business concerns;

o inability to use the acquired resources effectively; and

o demonstrating to the combined company's customers, vendors and
partners that the acquisition will not result in adverse changes to
their relationships.

If management focuses too much time, money and effort to integrate and utilize
SendTec's resources to improve theglobe's VoIP telephony business, the
operations and profitability of SendTec's traditional business may suffer.

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE AS A RESULT OF THE SENDTEC
ACQUISITION.

The market price of our stock may decline as a result of the merger if:

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

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

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

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

The market price of our common stock could also decline as a result of
unforeseen factors related to the acquisition.

OUR NET OPERATING LOSS CARRY FORWARDS MAY BE FURTHER LIMITED DUE TO THE SENDTEC
ACQUISITION.

As of December 31, 2003, we had net operating loss carryforwards available for
U.S. and foreign tax purposes of approximately $144 million. These carryforwards
expire through 2023. The Tax Reform Act of 1986 imposes substantial restrictions
on the utilization of net operating losses and tax credits in the event of an
"ownership change" of a corporation. Due to the change in our ownership
interests in August 1997 and May 1999 and the Company's recently completed
private offering in March 2004 (together with the exercise and conversion of
various securities in connection with such private offering), as defined in the
Internal Revenue Code of 1986, as amended, we may have substantially limited or
eliminated the availability of our net operating loss carryforwards. The
ownership change related to the shares of our common stock issued in connection
with the SendTec acquisition may have a further negative impact upon our ability
to utilize our net operating loss carryforwards. There can be no assurance that
we will be able to utilize any net operating loss carryforwards in the future.

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

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

RISKS RELATED TO SENDTEC'S BUSINESS

RISKS RELATED TO SENDTEC'S ONLINE MARKETING SERVICES

ANY DECREASE IN DEMAND FOR SENDTEC'S ONLINE MARKETING SERVICES COULD
SUBSTANTIALLY REDUCE SENDTEC'S REVENUES.

To date, a substantial portion of SendTec's revenues have been derived from
Internet advertising. SendTec expects that online advertising will continue to
account for a substantial portion of their revenues in the future. However,
SendTec's revenues from Internet advertising may decrease in the future for a
number of reasons, including the following:

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

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

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

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

IF SENDTEC'S PRICING MODELS ARE NOT ACCEPTED BY THEIR ADVERTISER CLIENTS,
SENDTEC COULD LOSE CLIENTS AND THEIR REVENUES COULD DECLINE.

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

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

SENDTEC DEPENDS ON A LIMITED NUMBER OF CLIENTS FOR A SIGNIFICANT PERCENTAGE OF
THEIR REVENUES, AND THE LOSS OF ONE OR MORE OF THESE ADVERTISERS COULD CAUSE
SENDTEC'S REVENUES TO DECLINE.

For the six months ended June 30, 2004 and for the year ended December 31, 2003,
revenues from SendTec's three largest clients accounted for 71% and 53% of their
total revenues, respectively. SendTec believes that a limited number of clients
will continue to be the source of a substantial portion of their revenues for
the foreseeable future. Key factors in maintaining SendTec's relationships with
these clients include SendTec's performance on individual campaigns, the
strength of SendTec's professional reputation and the relationships of SendTec's
key executives with client personnel. To the extent that SendTec's performance
does not meet client expectations, or their reputation or relationships with one
or more major clients are impaired, SendTec's revenues could decline and their
operating results could be adversely affected.

ANY LIMITATION ON SENDTEC'S USE OF DATA DERIVED FROM THEIR CLIENTS' ADVERTISING
CAMPAIGNS COULD SIGNIFICANTLY DIMINISH THE VALUE OF SENDTEC'S SERVICES AND CAUSE
SENDTEC TO LOSE CLIENTS AND REVENUES.

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

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

THE INTERNET ADVERTISING INDUSTRY COULD BE ADVERSELY AFFECTED BY GENERAL
ECONOMIC DOWNTURNS, CATASTROPHIC EVENTS OR DECLINES OR DISRUPTIONS IN INDUSTRIES
THAT ADVERTISE HEAVILY ON THE INTERNET.

The Internet advertising industry is sensitive to both general economic and
business conditions and to specific events, such as acts of terrorism. In
addition, Internet advertising spending can be affected by the condition of
industries that advertise heavily on the Internet such as the financial
services, travel and entertainment industries. Some of these industries tend to
be sensitive to event-driven disruptions such as government regulation, war,
terrorism, disease, natural disasters and other significant events. A general
decline in economic conditions or disruptions in specific industries
characterized by heavy spending on Internet advertising, could cause a decline
in Internet advertising expenditures which could in turn cause a decline in
SendTec's revenues.

IF THE MARKET FOR INTERNET ADVERTISING FAILS TO CONTINUE TO DEVELOP, SENDTEC'S
REVENUES AND SENDTEC'S OPERATING RESULTS COULD BE HARMED.

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

RISKS RELATED TO THE SUPPLY OF ADVERTISING SPACE

SENDTEC DEPENDS ON ONLINE PUBLISHERS FOR ADVERTISING SPACE TO DELIVER ITS
CLIENTS' ADVERTISING CAMPAIGNS, AND ANY DECLINE IN THE SUPPLY OF ADVERTISING
SPACE AVAILABLE THROUGH SENDTEC'S NETWORK COULD CAUSE SENDTEC'S REVENUES TO
DECLINE.

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

SENDTEC'S GROWTH MAY BE LIMITED IF THEY ARE UNABLE TO OBTAIN SUFFICIENT
ADVERTISING INVENTORY THAT MEETS SENDTEC'S PRICING AND QUALITY REQUIREMENTS.

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

o SendTec's ability to offer publishers a competitive price for their
inventory;

o SendTec's ability to estimate the quality of the available
inventory; and

o SendTec's ability to efficiently manage their existing advertising
inventory.

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

ANY LIMITATION ON SENDTEC'S ABILITY TO POST ADVERTISEMENTS THROUGHOUT THEIR
NETWORK OF ADVERTISING SPACE COULD HARM SENDTEC'S BUSINESS.

SendTec executes advertising programs for clients primarily by posting
advertisements, which they refer to as ad delivery, on SendTec's affiliate
network of advertising space. SendTec's business could suffer from a variety of
factors that could limit or reduce their ability to post advertisements across
SendTec's affiliate network, including:

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

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

o interruptions, failures or defects in SendTec's ad delivery and
tracking systems.

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

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

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

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

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

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

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

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

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

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

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

IF SENDTEC OR THEIR ADVERTISER OR PUBLISHER CLIENTS FAIL TO COMPLY WITH
REGULATIONS GOVERNING CONSUMER PRIVACY, SENDTEC COULD FACE SUBSTANTIAL COSTS AND
SENDTEC'S BUSINESS COULD BE HARMED.

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

o spend significant amounts on SendTec's legal defense;

o divert the attention of senior management from other aspects of
SendTec's business;

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

o make changes to SendTec's present and planned products or services.

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

SENDTEC MAY BE LIABLE FOR CONTENT IN THE ADVERTISEMENTS THEY DELIVER FOR
SENDTEC'S CLIENTS.

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

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

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

ADDITIONAL BUSINESS RISKS RELATING TO SENDTEC'S BUSINESS

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

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

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

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

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

SENDTEC GENERALLY DOES NOT HAVE LONG-TERM CONTRACTS WITH THEIR CLIENTS.

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

THE LOSS OF KEY PERSONNEL OR ANY INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD IMPAIR SENDTEC'S ABILITY TO MAINTAIN OR EXPAND THEIR BUSINESS.

The loss of the services of members of SendTec's management team or other key
personnel could harm SendTec's business. SendTec's future success depends to a
significant extent on the continued service of their key management, client
service, product development, sales and technical personnel. SendTec does not
maintain key person life insurance on any of their executive officers and does
not intend to purchase any in the future. Although SendTec generally enters into
non-competition agreements with their employees, SendTec's business could be
harmed if one or more of their officers or key employees decided to join a
competitor or otherwise compete with SendTec.

SendTec's future success also depends on their ability to attract, retain and
motivate highly skilled personnel. If SendTec fails to hire and retain a
sufficient number of qualified client service, product development, sales and
technical personnel, SendTec may not be able to maintain or expand their
business.

IF SENDTEC FAILS TO MANAGE THEIR GROWTH EFFECTIVELY, SENDTEC'S EXPENSES COULD
INCREASE AND SENDTEC'S MANAGEMENT'S TIME AND ATTENTION COULD BE DIVERTED.

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

IF SENDTEC FAILS TO ESTABLISH, MAINTAIN AND EXPAND THEIR TECHNOLOGY BUSINESS AND
MARKETING ALLIANCES AND PARTNERSHIPS, SENDTEC'S ABILITY TO GROW COULD BE
LIMITED.

In order to grow SendTec's technology business, SendTec must generate, retain
and strengthen successful business and marketing alliances with advertising
agencies.

SendTec depends, and expects to continue to depend, on SendTec's business and
marketing alliances, which are companies with which they have written or oral
agreements to work together to provide services to SendTec's clients and to
refer business from their clients and customers to SendTec. If companies with
which SendTec has business and marketing alliances do not refer their clients
and customers to SendTec to perform their online campaign and message
management, SendTec's revenue and results of operations would be severely
harmed.

FINANCIAL INFORMATION RELATING TO SENDTEC

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Certified Public Accountants F-1

Consolidated Financial Statements

Balance Sheets F-2

Statements of Income F-3

Statements of Stockholders' Equity F-4

Statements of Cash Flows F-5

Notes to Financial Statements F-6

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders
SendTec, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of SendTec, Inc.
and subsidiary as of December 31, 2003 and 2002, and the related consolidated
statements of income, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain a reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
the 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 financial statements referred to above present fairly, in
all material respects, the financial position of SendTec, Inc. and subsidiary at
December 31, 2003 and 2002, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

GREGORY, SHARER & STUART, P.A.

St. Petersburg, Florida
August 11, 2004

F-1

SENDTEC, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31,
2004 2003 2002
-------------- -------------- --------------
ASSETS (Unaudited)

Current Assets
Cash $ 2,861,441 $ 3,263,255 $ 1,185,083
Accounts receivable 4,242,990 3,456,493 2,142,535
Deferred production costs 62,726 102,565 10,970
Deferred tax asset - - 206,000
Prepaid expenses and other 129,525 33,739 21,791
-------------- -------------- --------------
Total Current Assets 7,296,682 6,856,052 3,566,379

Property And Equipment,
net of accumulated depreciation of $672,242 (unaudited) at June 30, 2004
and $607,690 and $385,798 at December 31, 2003 and 2002, respectively 712,983 558,433 636,179
Other Assets
Interest receivable 33,444 31,992 29,223
Other 16,660 11,285 12,593
-------------- -------------- --------------
Total Other Assets 50,104 43,277 41,816
-------------- -------------- --------------

TOTAL ASSETS $ 8,059,769 $ 7,457,762 $ 4,244,374
============== ============== ==============

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable $ 2,784,576 $ 2,882,902 $ 1,680,981
Accrued expenses 395,576 104,530 69,809
Customer advances 215,470 144,343 590,930
Income taxes payable - 797,000 -
Deferred tax liabilities 38,000 39,000 -
Other - - 277
-------------- -------------- --------------
Total Current Liabilities 3,433,622 3,967,775 2,341,997

Stockholders' Equity
Preferred stock, par value $.001; 10,000,000 shares authorized;
no shares issued or outstanding - - -
Common stock, par value $.001; 100,000,000 shares authorized;
4,378,822 (unaudited) shares issued at June 30, 2004 and 4,377,822
shares issued at December 31, 2003 and 2002; 4,032,794 (unaudited)
shares outstanding at June 30, 2004; and 4,031,794, and 4,076,794
shares outstanding at December 31, 2003 and 2002, respectively 4,378 4,377 4,377
Additional paid-in capital 2,488,738 2,486,489 2,486,489
Treasury stock, at cost;
346,028 (unaudited) shares at June 30, 2004;
346,028 and 301,028 shares at December 31, 2003 and 2002, respectively (75,580) (75,580) (60,580)
Notes receivable - common stock (55,350) (55,350) (55,350)
Retained earnings (accumulated deficit) 2,263,961 1,130,051 (472,559)
-------------- -------------- --------------
Total Stockholders' Equity 4,626,147 3,489,987 1,902,377
-------------- -------------- --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,059,769 $ 7,457,762 $ 4,244,374
============== ============== ==============

See the accompanying notes.

F-2

SENDTEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
2004 2003 2003 2002
---------------- ---------------- ---------------- ----------------
(Unaudited) (Unaudited)

Revenue $ 17,633,235 $ 9,830,756 $ 22,729,512 $ 11,185,402

Cost Of Sales 12,892,834 6,805,454 15,978,944 7,869,775
---------------- ---------------- ---------------- ----------------

Gross Profit 4,740,401 3,025,302 6,750,568 3,315,627

Operating Expenses
Selling, general, and administrative 2,748,811 1,564,515 3,908,018 2,747,220
Depreciation and amortization 126,341 102,068 221,892 240,000
---------------- ---------------- ---------------- ----------------
2,875,152 1,666,583 4,129,910 2,987,220

Other Income (Expense)
Interest 11,635 11,085 23,952 16,681
Other (19,974) - - -
---------------- ---------------- ---------------- ----------------
(8,339) 11,085 23,952 16,681
---------------- ---------------- ---------------- ----------------

Income Before Provision
For Income Taxes 1,856,910 1,369,804 2,644,610 345,088

Provision For Income Taxes 723,000 538,000 1,042,000 167,000
---------------- ---------------- ---------------- ----------------

NET INCOME $ 1,133,910 $ 831,804 $ 1,602,610 $ 178,088
================ ================ ================ ================

See the accompanying notes.

F-3

SENDTEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
AND THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)

COMMON STOCK ADDITIONAL
--------------------------------- PAID-IN TREASURY
SHARES AMOUNT CAPITAL STOCK
--------------- --------------- --------------- ---------------

Balance At December 31, 2001 2,362,267 $ 2,362 $ 1,913,504 $ (60,000)

Issuance of common stock 15,555 15 34,985 -

Issuance of common stock for iFactz 2,000,000 2,000 538,000 -

Repurchase of common stock for cash - - - (580)

Net income for the year - - - -
--------------- --------------- --------------- ---------------

BALANCE AT DECEMBER 31, 2002 4,377,822 4,377 2,486,489 (60,580)

Repurchase of common stock for cash - - - (15,000)

Net income for the year - - - -
--------------- --------------- --------------- ---------------

BALANCE AT DECEMBER 31, 2003 4,377,822 4,377 2,486,489 (75,580)

Issuance of common stock (unaudited) 1,000 1 2,249 -

Net income for the six months ended
June 30, 2004 (unaudited) - - - -
--------------- --------------- --------------- ---------------

BALANCE AT JUNE 30, 2004 (UNAUDITED) 4,378,822 $ 4,378 $ 2,488,738 $ (75,580)
=============== =============== =============== ===============

NOTES (ACCUMULATED
RECEIVABLE - DEFICIT) TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
--------------- --------------- ---------------

Balance At December 31, 2001 $ (55,350) $ (650,647) $ 1,149,869

Issuance of common stock - - 35,000

Issuance of common stock for iFactz - - 540,000

Repurchase of common stock for cash - - (580)

Net income for the year - 178,088 178,088
--------------- --------------- ---------------

BALANCE AT DECEMBER 31, 2002 (55,350) (472,559) 1,902,377

Repurchase of common stock for cash - - (15,000)

Net income for the year - 1,602,610 1,602,610
--------------- --------------- ---------------

BALANCE AT DECEMBER 31, 2003 (55,350) 1,130,051 3,489,987

Issuance of common stock (unaudited) - - 2,250

Net income for the six months ended
June 30, 2004 (unaudited) - 1,133,910 1,133,910
--------------- --------------- ---------------

BALANCE AT JUNE 30, 2004 (UNAUDITED) $ (55,350) $ 2,263,961 $ 4,626,147
=============== =============== ===============

See the accompanying notes.

F-4

SENDTEC, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
2004 2003 2003 2002
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,133,910 $ 831,804 $ 1,602,610 $ 178,088
Adjustments to reconcile net income
to net cash (used) provided by operating activities
Provision for bad debt - - - 22,775
Depreciation and amortization 126,341 102,068 221,892 240,000
Loss on disposal of property and equipment 19,974 - - -
Common stock issued for services - - - 10,000
(Increase) decrease in operating assets
Accounts receivable (786,497) (292,163) (1,313,958) (1,131,961)
Deferred production costs 39,839 (123,868) (91,595) (10,970)
Deferred taxes (1,000) 222,000 245,000 167,000
Interest receivable (1,452) (1,385) (2,769) (2,997)
Prepaid expenses and other assets (101,161) - (10,640) (5,261)
(Decrease) increase in operating liabilities

Accounts payable (98,326) 700,454 1,201,921 824,645
Accrued expenses 291,046 (6,704) 34,721 29,174
Customer advances 71,127 6,448 (446,587) 410,156
Income taxes payable (797,000) 316,000 797,000 -
Other liabilities - (277) (277) 277
--------------- --------------- --------------- ---------------
Net Cash (Used) Provided By Operating Activities (103,199) 1,754,377 2,237,318 730,926

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (310,865) (52,977) (144,146) (89,472)
Proceeds from sales of property and equipment 10,000 - - -
--------------- --------------- --------------- ---------------
Net Cash Used By Investing Activities (300,865) (52,977) (144,146) (89,472)

CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 2,250 - - 25,000
Purchase of common stock - - (15,000) (580)
--------------- --------------- --------------- ---------------

Net Cash Provided (Used) By Financing Activities 2,250 - (15,000) 24,420
--------------- --------------- --------------- ---------------

NET (DECREASE) INCREASE IN CASH (401,814) 1,701,400 2,078,172 665,874

CASH AT BEGINNING OF PERIOD 3,263,255 1,185,083 1,185,083 519,209
--------------- --------------- --------------- ---------------

CASH AT END OF PERIOD $ 2,861,441 $ 2,886,483 $ 3,263,255 $ 1,185,083
=============== =============== =============== ===============

NONCASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock for iFactz $ - $ - $ - $ 540,000
=============== =============== =============== ===============
Common stock issued for services $ - $ - $ - $ 10,000
=============== =============== =============== ===============

See the accompanying notes.

F-5

SENDTEC, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
JUNE 30, 2004 AND 2003 (UNAUDITED)
--------------------------------------------------------------------------------

NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature Of Operations

The accompanying consolidated financial statements include the accounts of
SendTec, Inc. (f/k/a DirectNet Advertising.Net, Inc.) and its wholly-owned
subsidiary iFactz, Inc. (collectively, the Company). All material intercompany
balances and transactions have been eliminated. The Company provides advertising
and marketing services for its customers located throughout the United States of
America. These services include distribution of internet advertising, purchase
of direct response television media for customers, and production of television
commercials for direct response advertising.

Effective December 31, 2003, iFactz, Inc. was merged into SendTec, Inc. The
merger had no impact on the consolidated financial statements of the Company.

Receivables And Credit Policies

Accounts receivable are uncollateralized customer obligations due under normal
trade terms generally requiring payment within 30 days from the invoice date.
Follow-up correspondence is made if unpaid accounts receivable go beyond 30
days.

Payments on accounts receivable are allocated to the specific invoices
identified on the customer's remittance advice.

Trade accounts receivable are stated at the amount management expects to collect
from outstanding balances. The carrying amounts of accounts receivable
approximate management's best estimate of the amounts that will be collected.
Management individually reviews all accounts receivable balances that exceed the
due date and estimates the portion, if any, of the balance that will not be
collected. Balances that are still outstanding after management has used
reasonable collection efforts are written off through a charge to earnings and a
credit to trade accounts receivable. Bad debt expense has not been material to
the financial statements.

Unbilled Revenue

Included in accounts receivable at December 31, 2003 and 2002 is unbilled
revenue of $1,058,590 and $658,488, respectively. At June 30, 2004, unbilled
revenue of $1,126,466 (unaudited) is included in accounts receivable.

Property And Equipment

Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
related assets.

Stock-Based Compensation

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, which provides companies an alternative to accounting for
stock-based compensation as prescribed under APB Opinion No. 25.

F-6

SFAS No. 123 encourages, but does not require, companies to recognize
compensation expense for stock-based awards based on their fair market value at
the date of grant. SFAS No. 123 allows companies to continue to follow existing
accounting rules (intrinsic value method under APB No. 25) provided that
pro-forma disclosures are made of what net income would have been had the new
fair value method been used. The required disclosures were amended in December
2002 with the issuance of SFAS No. 148, Accounting for Stock Based Compensation
- Transition and Disclosure. The Company has adopted the disclosure requirements
of SFAS No.123 as amended by SFAS No. 148, but will continue to account for
stock-based compensation under APB No. 25.

At June 30, 2004 and December 31, 2003 and 2002, the Company has a stock-based
compensation plan which is more fully described in Note E. No stock-based
employee compensation cost is reflected in net income for the unaudited period
ended June 30, 2004 or for the years ended December 31, 2003 and 2002. There
would have been no effect on net income if the Company had applied the fair
value recognition provisions of SFAS No. 123 to stock-based employee
compensation.

Business Combinations

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, which requires that all future business combinations be
recorded using the purchase method of accounting. The Company adopted SFAS No.
141 and it provisions effective July 1, 2001.

Use Of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that effect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

Revenue Recognition

The Company has three primary sources of revenue. One source is from the
distribution of internet advertising, which comprised approximately 79%
(unaudited) for the six month period ended June 30, 2004 and 60% and 65% of
total revenues for the years ended December 31, 2003 and 2002, respectively.
Revenue is recognized when users visit and complete actions at an advertiser's
website. Recorded revenue is based upon reports generated by the Company's
tracking software.

A second source of revenue is from purchasing and tracking direct response media
for customers. This revenue comprised approximately 14% (unaudited) for the six
month period ended June 30, 2004 and 29% and 21% of total revenues for the years
ended December 31, 2003 and 2002, respectively. The Company recognizes this
revenue when the media is aired. Amounts received from customers in advance are
included in customer advances and totaled approximately $31,000 (unaudited) at
June 30, 2004 and $44,000 and $453,000 at December 31, 2003 and 2002,
respectively.

A third source of revenue is primarily from the production of direct response
advertising programs for clients. Production generally takes eight to 12 weeks
and the Company usually collects amounts up front and at various points
throughout production. This revenue category also includes other miscellaneous
services such as website development. Revenue from this category comprised
approximately 7% (unaudited) for the six month period ended June 30, 2004 and
11% and 14% of total revenues for the years ended December 31,

F-7

2003 and 2002, respectively. Revenue is recognized when the programs are
complete and have been delivered or are available for immediate and
unconditional delivery.

Amounts received from customers prior to the completion of commercials are
included in customer advances and totaled approximately $184,000 (unaudited) at
June 30, 2004 and $100,000 and $138,000 at December 31, 2003 and 2002,
respectively. Direct costs associated with the production of commercials in
process are included in deferred production costs and totaled approximately
$63,000 (unaudited) at June 30, 2004 and $103,000 and $11,000 at December 31,
2003 and 2002, respectively.

NOTE B - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

June 30, 2004 December 31,
Useful Lives (Unaudited) 2003 2002
-------------- ----------------- ----------------- ---------------

Equipment 5 years $ 407,632 $ 367,028 $ 222,882
Furniture and fixtures 7 years 172,455 7,650 7,650
Leasehold improvement 6 years 13,693 - -
Software 3 to 5 years 791,445 791,445 791,445
----------------- ----------------- ---------------
1,385,225 1,166,123 1,021,977
Less accumulated depreciation (672,242) (607,690) (385,798)
----------------- ----------------- ---------------
$ 712,983 $ 558,433 $ 636,179
================= ================= ===============

NOTE C - ACQUISITION OF IFACTZ

Effective February 2002, the Company acquired all of the outstanding shares of
iFactz, Inc. (an entity with stockholders common to both entities) in exchange
for 2,000,000 of the Company's shares. The value of the Company's shares was
estimated to be $.27 per share (based on a recent stock transaction) and totaled
$540,000. The sole asset of iFactz was developed software that tracks offline
media sources. The Company has allocated the full purchase price to software and
has included it with property and equipment. The software is being amortized
using the straight-line method over an estimated useful life of five years. The
consolidated financial statements include the operating results of iFactz from
the date of acquisition.

NOTE D - STOCKHOLDERS' EQUITY

Treasury Stock

During 2002, the Company purchased 78,806 shares of its common stock from a
former employee for $580. The price was based on the amount originally paid for
the shares. During 2003, the Company purchased 45,000 shares of its common stock
from two stockholders for a total of $15,000.

Notes Receivable - Common Stock

Prior to 2002, the Company issued 205,000 shares of its common stock to three
Company officers in exchange for promissory notes totaling $55,350. The value of
the shares was based upon management's estimate of the fair value of the shares
in June 2001. These notes mature in June 2006 and bear interest at the

F-8

Mid-Term Applicable Federal Rate in accordance with Section 1274(d) of the
Internal Revenue Code of 1986, as amended. The notes receivable are included as
a reduction of stockholders' equity.

NOTE E - STOCK OPTION PLAN

The Company's stock option plan (the Plan) was approved by the stockholders of
the Company effective February 2000. A maximum of 750,000 shares of the
Company's common stock may be issued under the Plan. The maximum term of the
stock options granted is 10 years and most optionees vest in the options over a
24-month period.

The purpose of the Plan is to provide additional incentives to officers, other
key employees and directors of and important consultants to the Company by
encouraging them to invest in shares of the Company's common stock and, thereby,
acquire a proprietary interest in the Company and an increased personal interest
in the Company's continued success and progress.

Options under the Plan may be options which qualify under Section 422 of the
Internal Revenue Code (Incentive Stock Options) or options which do not qualify
under Section 422 (Nonqualified Options). The following table summarizes option
activity:

Weighted
Average
Year ended December 31, 2002 Shares Exercise Price
---------------- ---------------

Stock option activity outstanding at beginning of year 160,800 $ 2.25
Granted 76,250 2.25
Expired or surrendered (149,500) (2.25)
---------------- ---------------
Outstanding at end of year 87,550 $ 2.25
================ ===============

Exercisable at end of year 25,275 $ 2.25
================ ===============

Year ended December 31, 2003
Stock option activity outstanding at beginning of year 87,550 $ 2.25
Granted 241,150 2.25
Expired or surrendered (10,500) (2.25)
---------------- ---------------
Outstanding at end of year 318,200 $ 2.25
================ ===============

Exercisable at end of year 52,050 $ 2.25
================ ===============

Six months ended June 30, 2004 (unaudited)
Stock option activity outstanding at beginning of period 318,200 $ 2.25
Granted 121,900 2.55
Exercised (1,000) (2.25)
Expired or surrendered (55,000) (2.25)
---------------- ---------------
Outstanding at end of period 384,100 $ 2.34
================ ===============

Exercisable at June 30, 2004 83,800 $ 2.25
================ ===============

F-9

The weighted average life of the options is five years. The estimated fair value
of stock options at the time of the grant using the Black-Scholes option pricing
model was as follows at June 30, 2004 (unaudited) and December 31, 2003 and
2002:

Fair value per option $ -
Assumptions:
Annualized dividend yield 0%
Expected volatility 0%
Risk free interest rate 4%
Expected option terms (in years) 5

NOTE F - LEASES

The Company has noncancelable operating lease agreements for buildings and
equipment. Future minimum lease payments required under the operating leases are
as follows at December 31, 2003:

2004 $ 25,040
2005 219,732
2006 225,225
2007 230,856
2008 236,627
Thereafter 304,694
----------------
$ 1,242,174
================

Rent expense for all operating leases was approximately $81,000 (unaudited) for
the six month period ended June 30, 2004 and $133,000 and $113,000 for the years
ended December 31, 2003 and 2002, respectively.

NOTE G - INCOME TAXES

The provision for income taxes consists of the following:

June 30, December 31,
2004 2003 2003 2002
----------------- ----------------- ----------------- -----------------
(Unaudited)

Current
Federal $ 618,000 $ 271,000 $ 681,000 $ -
State 106,000 46,000 116,000 -
----------------- ----------------- ----------------- -----------------
724,000 317,000 797,000 -
Deferred
Federal (1,000) 189,000 209,000 142,000
State - 32,000 36,000 25,000
----------------- ----------------- ----------------- -----------------
(1,000) 221,000 245,000 167,000
----------------- ----------------- ----------------- -----------------
$ 723,000 $ 538,000 $ 1,042,000 $ 167,000
================= ================= ================= =================

F-10

The income tax expense differs from the amount computed using the statutory
federal income tax rate as follows:

June 30, December 31,
2004 2003 2003 2002
----------------- ----------------- ----------------- -----------------
(Unaudited)

Income tax expense at federal statutory rate $ 631,000 $ 466,000 $ 899,000 $ 117,000
State tax expense, net of federal benefit 67,000 50,000 96,000 13,000
Amortization of acquired software 20,000 20,000 41,000 34,000
Other 5,000 2,000 6,000 3,000
----------------- ----------------- ----------------- -----------------
$ 723,000 $ 538,000 $ 1,042,000 $ 167,000
================= ================= ================= =================

Tax effects of temporary differences that give rise to the deferred tax assets
and liabilities relate to the following:

June 30, 2004 December 31,
Deferred tax assets (Unaudited) 2003 2002
----------------- ---------------- ------------------

Accrued liabilities $ 24,000 $ 11,000 $ 228,000
Other 2,000 5,000 10,000

Deferred tax liabilities
Depreciation and amortization (64,000) (55,000) (32,000)
----------------- ---------------- ------------------
Net deferred tax (liabilities) assets $ (38,000) $ (39,000) $ 206,000
================= ================ ==================

During 2003, the Company used federal and state net operating loss carryforwards
to offset taxable income of approximately $602,000.

NOTE H - CREDIT CONCENTRATIONS

The Company maintains its cash accounts with a commercial bank that has branches
located in the Tampa Bay area of Florida. Deposits at this bank exceeded federal
insurance limits by approximately $3,981,000 at December 31, 2003.

NOTE I - SIGNIFICANT CUSTOMERS AND SUPPLIERS

71% (unaudited) of the Company's revenue was from three customers for the six
month period ended June 30, 2004. For 2003 and 2002, 53% and 62%, respectively,
of the Company's revenue was from three customers and four customers.

As of June 30, 2004, eight customers comprised approximately 87% (unaudited) of
total accounts receivable. As of December 31, 2003 and 2002, five and six
customers comprised approximately 89% and 86% of total accounts receivable,
respectively.

The Company utilizes the services of a media supplier which accounts for
approximately 29% (unaudited) of the Company's cost of sales for the six month
period ended June 30, 2004 and 35% and 30% of the Company's cost of sales for
2003 and 2002, respectively.

F-11

NOTE J - RETIREMENT PLAN

Effective January 1, 2003, the Company established a SIMPLE IRA savings plan
(Plan) which is maintained for the benefit of all eligible employees who have
completed six months of service. The Plan allows employees to make certain tax
deferred voluntary contributions. The Company contributes to the Plan such
amounts as deemed appropriate. Contributions made by the Company totaled
approximately $32,000 (unaudited) for the six months ended June 30, 2004 and
$57,000 for the year ended December 31, 2003.

F-12

THEGLOBE.COM, INC.
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Page
----

Introduction to Pro Forma Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PF-2

Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2004. . . . PF-4

Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 2003. . . . . . . . . . . . . . . . . . . . . . . PF-5

Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 2004 . . . . . . . . . . . . . . . . . . . . . PF-6

Notes to Pro Forma Condensed Consolidated Financial Statements. . . . . . PF-7

PF-1

THEGLOBE.COM, INC.
INTRODUCTION TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following pro forma condensed consolidated financial statements give effect
to the acquisition of SendTec, Inc. ("SendTec") by theglobe.com, inc.
("theglobe" or the "Company"), which was completed on September 1, 2004. The pro
forma condensed consolidated balance sheet of theglobe as of June 30, 2004 has
been prepared as if the Company's acquisition of SendTec had been consummated on
June 30, 2004. The pro forma condensed consolidated statements of operations of
theglobe for the year ended December 31, 2003 and the six months ended June 30,
2004 are presented as if the Company's acquisition of SendTec occurred on
January 1, 2003 and the effect was carried forward through the balance of the
year 2003 and the six month period ended June 30, 2004.

Pursuant to the terms of the agreement and plan of merger, theglobe paid or will
pay consideration consisting of: (i) $6,000,000 in cash, (ii) the issuance of an
aggregate of 17,500,000 shares of theglobe's Common Stock, (iii) the issuance of
an aggregate of 175,000 shares of Series H Automatically Converting Preferred
Stock (the "Preferred Stock"), and (iv) a subordinated promissory note in the
amount of $1,000,000 (the note bears interest at the rate of 4% per annum and
matures in one lump sum of principal and interest on the first anniversary date
of the note).

The Preferred Stock will vote with the holders of theglobe.com Common Stock on
all matters on an "as-converted" basis. The Preferred Stock will automatically
convert into shares of theglobe's Common Stock on a 1 for 100 basis at such time
as theglobe files an amendment to its certificate of incorporation to increase
its authorized shares of Common Stock from 200,000,000 to at least 300,000,000
(the "Capital Amendment"). theglobe intends to seek shareholder authorization
for such amendment at its annual meeting of stockholders anticipated to be held
in November 2004. In the event the Capital Amendment is not approved for any
reason, then the remaining Preferred Stock may be converted into a promissory
note under certain circumstances.

theglobe also issued an aggregate of approximately 4,000,000 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 stock options, approximately 3,270,000 have
exercise prices of $0.06 per share and approximately 700,000 have exercise
prices of $0.27 per share. theglobe also agreed to grant an aggregate of 250,000
options to other employees of SendTec at an exercise price of $0.34 per share.

As part of the acquisition, certain executives of SendTec entered into new
employment agreements with SendTec. The employment agreements each have a term
of five years and automatically renew for an additional year at expiration
unless either party provides the requisite notice of non-renewal. The agreements
also contain certain non compete provisions for periods as specified by the
agreements.

PF-2

THEGLOBE.COM, INC.
INTRODUCTION TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)

In addition, warrants to acquire up to an additional 2,500,000 shares of
theglobe Common Stock at an exercise price of $0.27 per share will be issued to
SendTec shareholders when and if SendTec achieves certain operating income, as
defined, for the year ending December 31, 2005. The warrants will be exercisable
for five years. theglobe also intends to establish a bonus option pool pursuant
to which various employees of SendTec could earn options to acquire an aggregate
of 1,000,000 shares of theglobe's Common Stock at an exercise price of $0.27 per
share if the aforementioned operating income target is achieved. Due to the
contingent nature of these warrants and options, no adjustments have been
included in the accompanying pro forma condensed consolidated financial
statements as a result of the issuance of such warrants and options.

The pro forma condensed consolidated financial statements are based upon
available information and certain assumptions considered reasonable by
management. The pro forma condensed consolidated financial statements reflect
theglobe's preliminary purchase price allocation, which will be subject to
further adjustment as theglobe finalizes the allocation of purchase price in
accordance with generally accepted accounting principles. The pro forma
condensed consolidated financial statements do not represent what the Company's
financial position would have been assuming the completion of the Company's
acquisition of SendTec had occurred on June 30, 2004, or what the Company's
results of operations would have been assuming the completion of the Company's
acquisition of SendTec had occurred on January 1, 2003, nor do they project the
Company's financial position or results of operations at any future date or for
any future period. These pro forma condensed consolidated financial statements
should be read in conjunction with the other financial statements included
herein.

PF-3

THEGLOBE.COM, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2004
(UNAUDITED)

theglobe SENDTEC PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED
------------- ------------- ------------- --------------

Assets
Current Assets:
Cash and cash equivalents $ 20,049,601 $ 2,861,441 $ (6,000,000)(a) $ 16,911,042
Marketable securities 42,960 - - 42,960
Accounts receivable, net 698,481 4,242,990 (10,000)(e) 4,931,471
Inventory, net 1,302,145 - - 1,302,145
Prepaid and other current assets 2,094,348 192,251 - 2,286,599
------------- ------------- ------------- --------------

Total current assets 24,187,535 7,296,682 (6,010,000) 25,474,217

Intangible assets, net 210,144 - 1,800,000 (c) 2,010,144

Goodwill - - 10,741,297 (c) 10,741,297

Property and equipment, net 3,815,714 712,983 314,480 (c) 4,843,177

Other assets 35,625 50,104 (33,444)(d) 52,285
------------- ------------- ------------- --------------

Total assets $ 28,249,018 $ 8,059,769 $ 6,812,333 $ 43,121,120
============= ============= ============= ==============

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 2,250,585 $ 2,784,576 $ (10,000)(e) $ 5,025,161
Accrued expenses and other current liabilities 1,109,518 395,576 26,206 (d) 1,856,300
325,000 (b)
Customer advances - 215,470 - 215,470
Income taxes payable - - - -
Deferred tax liability - 38,000 - 38,000
Deferred revenue 179,704 - - 179,704
Notes payable and current portion of long-term debt 318,954 - 1,000,000 (a) 1,318,954
------------- ------------- ------------- --------------

Total current liabilities 3,858,761 3,433,622 1,341,206 8,633,589

Long-term debt 43,114 - - 43,114
Other long-term liabilities 158,744 - - 158,744
------------- ------------- ------------- --------------

Total liabilities 4,060,619 3,433,622 1,341,206 8,835,447
------------- ------------- ------------- --------------

Stockholders' Equity:
Preferred stock, at liquidation value - - 17,500 (a) 17,500
Common stock 138,660 4,378 17,500 (a) 156,160
(4,378)(c)
Additional paid-in capital 270,740,529 2,488,738 9,677,500 (a) 280,802,803
384,774 (a)
(2,488,738)(c)
Treasury stock, at cost (371,458) (75,580) 75,580 (c) (371,458)
Notes receivable on common stock - (55,350) 55,350 (d) -
Accumulated other comprehensive income - - -
Retained earnings / (Accumulated deficit) (246,319,332) 2,263,961 (2,263,961)(c) (246,319,332)
------------- ------------- ------------- --------------

Total stockholders' equity 24,188,399 4,626,147 5,471,127 34,285,673
------------- ------------- ------------- --------------

Total liabilities and stockholders' equity $ 28,249,018 $ 8,059,769 $ 6,812,333 $ 43,121,120
============= ============= ============= ==============

The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.

PF-4

THEGLOBE.COM, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(UNAUDITED)

theglobe SENDTEC PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED
------------ ---------- ----------- ------------

Net revenue:
Marketing services $ - $22,729,512 $ - $ 22,729,512
Advertising 2,555,002 - - 2,555,002
Magazine sales 2,014,458 - - 2,014,458
Electronic commerce and other 1,462,911 - - 1,462,911
Telephony services 548,081 - - 548,081
------------ ---------- ----------- ------------

Total net revenue 6,580,452 22,729,512 - 29,309,964
------------ ---------- ----------- ------------

Operating expenses:
Cost of marketing services sold - 15,978,944 - 15,978,944
Cost of products and publications sold 3,252,498 - - 3,252,498
Data communications, telecom and network
operations 1,448,840 - - 1,448,840
Sales and marketing 3,297,897 - 1,434,711 (i) 4,732,608
Product development 902,415 - - 902,415
General and administrative 5,253,755 3,908,018 (1,434,711)(i) 8,124,459
397,397 (k)
Depreciation 257,560 221,892 62,756 (f) 542,208
Amortization of intangibles 72,182 - 360,000 (f) 432,182
Impairment charge 908,384 - - 908,384
------------ ---------- ----------- ------------

Total operating expenses 15,393,531 20,108,854 820,153 36,322,538
------------ ---------- ----------- ------------

Loss from operations (8,813,079) 2,620,658 (820,153) (7,012,574)
------------ ---------- ----------- ------------

Other income (expense), net:
Interest income (expense), net (1,777,689) 23,952 (2,769)(h) (1,796,506)
(40,000)(l)
Other expense, net (443,629) - - (443,629)
------------ ---------- ----------- ------------

Other expense, net (2,221,318) 23,952 (42,769) (2,240,135)
------------ ---------- ----------- ------------

Loss before income taxes (11,034,397) 2,644,610 (862,922) (9,252,709)
Income taxes - 1,042,000 (1,042,000)(j) -
------------ ---------- ----------- ------------

Net loss $ (11,034,397) $ 1,602,610 $ 179,078 $ (9,252,709)
============ ========== =========== ============

Basic and diluted net loss per common share $ (0.13)
============

Weighted average basic and diluted shares outstanding 73,711,000
============

The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.

PF-5

THEGLOBE.COM INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED)

theglobe SENDTEC PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED
------------ ----------- ----------- ------------

Net revenue:
Marketing services $ - $ 17,633,235 $ (10,000)(g) $ 17,623,235
Advertising 804,082 - - 804,082
Magazine sales 236,651 - - 236,651
Electronic commerce and other 434,141 - - 434,141
Telephony services 207,353 - - 207,353
------------ ----------- ----------- ------------

Total net revenue 1,682,227 17,633,235 (10,000) 19,305,462
------------ ----------- ----------- ------------

Operating expenses:
Cost of marketing services sold - 12,892,834 - 12,892,834
Cost of products and publications sold 1,193,889 - - 1,193,889
Data communications, telecom and network
operations 2,299,537 - - 2,299,537
Sales and marketing 2,726,856 - 961,295 (i) 3,678,151
(10,000)(g)
Product development 372,059 - - 372,059
General and administrative 3,635,900 2,748,811 (961,295)(i) 5,546,060
122,644 (k)
Depreciation 492,350 126,341 42,646 (f) 661,337
Amortization of intangibles 42,343 - 180,000 (f) 222,343
------------ ----------- ----------- ------------

Total operating expenses 10,762,934 15,767,986 335,290 26,866,210
------------ ----------- ----------- ------------

Loss from operations (9,080,707) 1,865,249 (345,290) (7,560,748)
------------ ----------- ----------- ------------

Other expense, net:
Interest income (expense), net (802,123) 11,635 (1,452)(h) (791,940)
Other expense, net (134,829) (19,974) - (154,803)
------------ ----------- ----------- ------------

Other expense, net (936,952) (8,339) (1,452) (946,743)
------------ ----------- ----------- ------------

Loss before income taxes (10,017,659) 1,856,910 (346,742) (8,507,491)
Income taxes - 723,000 (723,000)(j) -
------------ ----------- ----------- ------------

Net loss $ (10,017,659) $ 1,133,910 $ 376,258 $ (8,507,491)
============ =========== =========== ============

Basic and diluted net loss per common share $ (0.06)
============

Weighted average basic and diluted shares outstanding 137,914,000
============

The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements.

PF-6

THEGLOBE.COM, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. Historical Financial Statements

The historical financial data presented in these pro forma condensed
consolidated financial statements includes the historical balance sheet of
theglobe and SendTec at June 30, 2004 and the historical statements of
operations of theglobe and SendTec for the year ended December 31, 2003
and for the six months ended June 30, 2004.

NOTE 2. Pro Forma Adjustments

Adjustments included in the column under the heading "Pro Forma
Adjustments" include the following:

Balance Sheet

(a). Represents the consideration paid or payable by theglobe for the
acquisition of SendTec, including: (i) $6.0 million in cash; (ii) a $1.0
million subordinated promissory note; (iii) the issuance of 17.5 million
shares of theglobe's Common Stock plus preferred shares convertible into
an additional 17.5 million shares of theglobe's Common Stock; and (iv) the
granting of replacement stock options to former employees of SendTec to
purchase an aggregate of approximately 4.0 million shares of theglobe's
Common Stock. The valuation assigned to the common stock, preferred shares
and replacement stock options issued as a result of the acquisition was
based on the closing price of theglobe.com Common Stock on August 25,
2004. The pro forma amounts also assume that no stockholders of SendTec
exercise dissenter's appraisal rights.

(b). Represents estimated transaction costs, including banking, legal and
accounting expenses incurred in connection with theglobe's acquisition of
SendTec.

(c). Represents the preliminary allocation of the purchase price paid for
the acquisition of SendTec, including: (i) the assignment of values to
specifically identifiable assets and liabilities; (ii) the recording of
the excess of purchase price over individual assigned values to goodwill;
and (iii) the elimination of the historical stockholders' equity balances
of SendTec.

(d). Represents adjustments related to the repayment of outstanding loans,
including principal and accrued interest portions, by three (3) officers
of SendTec from the proceeds of bonuses paid to such officers in August
2004, including payments made to these officers for income tax gross-ups.

(e). Represents the elimination of accounts receivable and accounts
payable balances due to SendTec from theglobe at June 30, 2004.

PF-7

THEGLOBE.COM, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 2. Pro Forma Adjustments (continued)

Statement of Operations

(f). Adjustment to recognize the incremental amortization of capitalized
software and the amortization of intangible assets related to employee
non-compete agreements based upon preliminary values assigned to assets
acquired in SendTec merger.

(g). Adjustment to eliminate revenue billed by SendTec to theglobe against
the related sales and marketing expense recorded by theglobe.

(h). Adjustment to eliminate interest income recorded in connection with
loans to three (3) officers of SendTec which were repaid in August 2004.

(i). Adjustment to reclassify certain sales and marketing expenses
recorded by SendTec to conform to classification methods used by theglobe.

(j). Adjustment to eliminate income tax expense recorded by SendTec based
upon the planned filing of theglobe and SendTec consolidated income tax
returns.

(k). Adjustment to record amortization of deferred compensation related to
replacement stock options granted to former employees of SendTec.

(l). Adjustment to record interest expense related to the $1.0 million
subordinated promissory note issued in connection with the SendTec
acquisition.

(m). The weighted average basic and diluted shares outstanding for the six
months ended June 30, 2004 and the twelve months ended December 31, 2003
assume the conversion of the preferred shares into shares of theglobe.com
Common Stock as of January 1, 2003.

PF-8

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

During 2000 and 2001, the Company restructured its business operations and sold
off or closed most of its businesses. As of June 30, 2004, we managed two
primary lines of business. One line consists of our historical network of three
wholly owned businesses, each of which specializes in the games business by
delivering games information and selling games in the United States and abroad.
These businesses are: our print publication Computer Games Magazine; our
Computer Games Online website (www.cgonline.com), which is the online
counterpart to Computer Games Magazine; and our Chips & Bits, Inc.
(www.chipsbits.com) games distribution company.

The second line of business, voice over Internet protocol ("VoIP") telephony
services, includes voiceglo Holdings, Inc., a wholly-owned subsidiary of
theglobe.com that offers VoIP web-based, home and business phone service. The
term "VoIP" refers to a category of hardware and software that enables people to
use the Internet to make phone calls.

As of June 30, 2004, our revenues were derived principally from the sale of
print advertisements under short-term contracts in our games information
magazine Computer Games, through the sale of video games and related products
through our games distribution business Chips & Bits, Inc.; and through the sale
of our games information magazine through newsstands and subscriptions. Our VoIP
products and services had yet to produce any significant revenue.

On September 1, 2004, the Company closed on the acquisition of SendTec, Inc., an
advertising and direct response marketing services company based in St.
Petersburg, Florida (the "SendTec Acquisition"). In exchange for the acquisition
of SendTec the Company paid or will pay consideration consisting of: (i)
$6,000,000 in cash, (ii) the issuance of an aggregate of 17,500,000 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 is convertible into
17,500,000 shares of the Company's Common Stock), and (iv) a subordinated
promissory note in the amount of $1 million. The Company also issued an
aggregate of approximately 4,000,000 replacement options to acquire the
Company's Common Stock for each of the issued and outstanding options to acquire
SendTec held by the former employees of SendTec. In addition, warrants to
acquire shares of theglobe.com Common Stock would be issued to SendTec
shareholders when and if SendTec exceeds forecasted operating income, as
defined, of $10.125 million, for the year ending December 31, 2005. The number
of earn-out warrants would range from an aggregate of 250,000 to 2,500,000 (if
actual operating income exceeds the forecast by at least 10%).

RESULTS OF OPERATIONS

The nature of the business being conducted by us has significantly changed from
2002 to 2004. As a result of our decision to enter into the VoIP business we
have incurred substantial expenditures without corresponding revenue as we
develop our VoIP product line and as we put into place the infrastructure for
our VoIP products. Consequently, and primarily as a result of these factors, the
results of operations for the year ended December 31, 2003 are not necessarily
comparable to the year ended December 31, 2002. Similarly, the results of
operations for the six months ended June 30, 2004 are not necessarily comparable
to the six months ended June 30, 2003.

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

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

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

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

Net revenue attributable to the sale of our games information magazine was $0.7
million, or 14%, of total net revenue for the 2003 year as compared to $1.0
million, or 14%, of total net revenue in 2002. As discussed in Note 1(j) of the
Notes to Consolidated Financial Statements, we use outside agents to obtain new
subscribers for our Computer Games magazine, whereby the agents retain a
percentage of the subscription proceeds as their commission. Previously these
commissions had been classified as sales and marketing expense within the
consolidated statements of operations. Effective June 2004, we changed our
method of accounting for these agency fees, reporting them as a reduction of
magazine sales subscription revenue. We believe this alternative accounting
method is a more commonly used industry practice and is preferable under the
circumstances. This reclassification had no impact on our net loss as previously
reported. Net revenue as presented in the accompanying consolidated statements
of operations is shown net of approximately $1.3 million and $2.4 million of
agency fees for the years ended December 31, 2003 and 2002, respectively. The
decline in net revenue from the sale of our games magazine as compared to the
previous year was primarily the result of a decrease in the circulation base of
our games magazine. As rates for print advertising charged to advertisers are
driven largely by the circulation of the publication, the decline in the
circulation base of our games magazine has also contributed to the decrease in
our advertising revenue.

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

Net revenue from telephony services totaled $0.5 million for the year ended
December 31, 2003. As part of the Company's strategy to enter the VoIP business,
the Company acquired DPT, an international licensed telecommunications carrier
engaged in the purchase and resale of telecommunications services over the
Internet, on May 28, 2003. Telephony services net revenue generated by DPT
during 2003 represented approximately 89% of total telephony services net
revenue and was derived principally from the charges to customers for
international call completion based on the volume of minutes utilized. As a
result of management's decision during the first quarter of 2004 to suspend
DPT's wholesale business and dedicate the DPT physical and intellectual assets
to its retail VoIP business, net revenue derived from the wholesale business of
DPT is not expected to represent a significant component of telephony services
net revenue in the near term. Net revenue attributable to the launch of the
Company's retail VoIP products represented the remaining 11% of total 2003
telephony services net revenue. Although the Company launched its basic suite of
retail VoIP offerings on a "national" basis during the fourth quarter of 2003,
the Company has continued to focus significant resources on further development
of its VoIP products, most recently evidenced by the 2004 first quarter launch
of its "GloPhone" product line. In addition, the Company has continued to
formulate its marketing strategy and distribution network for its VoIP products.

COST OF PRODUCTS AND PUBLICATIONS SOLD. Cost of products and publications sold
related to our games division consists primarily of printing costs of our games
magazine, Internet connection charges, personnel costs, maintenance costs of
website equipment and the costs of merchandise sold and shipping fees in
connection with our online store. Cost of products and publications sold by our
games division totaled approximately $3.1 million and $5.6 million for the years
ended December 31, 2003 and 2002, respectively. The gross margin of the
Company's games division approximated 34% in 2003 as compared to 23% in 2002.
The overall improvement in the gross margin of the games division as compared to
the prior year resulted from the increase in advertising revenue as a percentage
of total net revenue, coupled with an improvement in the gross profit margin of
Chips & Bits. The remaining $0.2 million of cost of products sold for 2003
consisted primarily of customer equipment costs related to the sale of the
Company's voiceglo service launched during mid-August 2003.

DATA COMMUNICATIONS, TELECOM AND NETWORK OPERATIONS. This expense category,
which totaled $1.4 million in 2003, relates to the Company's entry into the VoIP
business in 2003 and includes carrier transport and circuit interconnection
costs related to the Company's wholesale telephony services business marketed by
DPT and the Company's retail telephony services business marketed under the
voiceglo and GloPhone brand names. Personnel and consulting costs incurred in
support of the Company's Internet telecommunications network are also included
in this expense category. Data communications, telecom and network operations
expenses are expected to increase in the future as the Company further expands
its data communications network and expands its telecommunications carrier
relationships in order to support its VoIP product line.

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

PRODUCT DEVELOPMENT. Product development expenses include salaries and related
personnel costs, expenses incurred in connection with website development,
testing and upgrades; editorial and content costs; and costs incurred in the
development of our voiceglo and GloPhone branded products. Product development
expenses increased to $0.9 million for the year ended December 31, 2003, as
compared to $0.7 million for the year ended December 31, 2002. The increase was
principally attributable to personnel costs and consulting expenses relating to
the development of our retail VoIP telephony products and services, which
totaled approximately $0.3 million during 2003.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist
primarily of salaries and related personnel costs for general corporate
functions including finance, human resources and facilities, outside legal and
professional fees, directors and officers insurance, bad debt expenses and
general corporate overhead costs. General and administrative expenses were $5.3
million for the year ended December 31, 2003, as compared to $2.8 million for
the year ended December 31, 2002. Increases in headcount and the resulting
personnel expenses, as well as other general and administrative expenses
directly attributable to the Company's new line of business, VoIP telephony
services, were major factors contributing to the $2.5 million increase in total
general and administrative expenses. Other expense categories which increased as
compared to 2002 largely as a result of the Company's entrance into the VoIP
business, included legal fees, other professional fees and facilities costs.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization expense of approximately $0.1
million recorded during 2003 represented the amortization of the non-compete
agreement recorded in connection with the acquisition of DPT prior to its
write-off at year-end and amortization of capitalized patent costs related to
our retail VoIP products.

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

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

OTHER EXPENSE, NET. Other expense, net, of $0.4 million was reported for the
year ended December 31, 2003. Other expense in 2003 includes reserves against
the amounts loaned by the Company to a development stage Internet related
business venture totaling $0.5 million.

INCOME TAXES. No tax benefit was recorded for the year ended December 31, 2003
as we recorded a 100% valuation allowance against our otherwise recognizable
deferred tax assets due to the uncertainty surrounding the timing or ultimate
realization of the benefits of our net operating loss carryforwards in future
periods. The income tax provision recorded for the year ended December 31, 2002
was based solely on state and local taxes on business and investment capital.
Our effective tax rate differs from the statutory Federal income tax rate,
primarily as a result of the uncertainty regarding our ability to utilize our
net operating loss carryforwards. As of December 31, 2003, the Company had net
operating loss carryforwards available for U.S. and foreign tax purposes of
approximately $144 million. These carryforwards expire through 2023. The Tax
Reform Act of 1986 imposes substantial restrictions on the utilization of net
operating losses and tax credits in the event of an "ownership change" of a
corporation. Due to the change in our ownership interests in August 1997 and May
1999 and the Company's recently completed PIPE Offering in March 2004 (together
with the exercise and conversion of various securities in connection with such
PIPE Offering), as defined in the Internal Revenue Code of 1986, as amended, the
Company may have substantially limited or eliminated the availability of its net
operating loss carryforwards. There can be no assurance that the Company will be
able to avail itself of any net operating loss carryforwards.

SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003

NET REVENUE. Net revenue totaled $1.7 million for the first six months of 2004
as compared to $2.3 million in the same period of the prior year. The $0.6
million decline in total net revenue was principally the result of declines of
$0.3 million in sales of games products by Chips and Bits, Inc., $0.2 million in
print advertisements and $0.1 million in sales of the computer games magazine.
As discussed in the comparison of the year ended December 31, 2003 compared to
the year ended December 31, 2002, we changed the classification of agency fees
paid to third parties as commissions for obtaining new subscribers to our
Computer Games magazine. Previously these commissions had been classified as
sales and marketing expense within the consolidated statements of operations.
Effective June 2004, we changed our method of accounting for these commissions,
reporting them as a reduction of magazine sales subscription revenue. We believe
this alternative accounting method is a more commonly used industry practice and
is preferable under the circumstances. This reclassification had no impact on
our net loss as previously reported. Net revenue in the accompanying condensed
consolidated statements of operations has been shown net of approximately
$537,000 and $770,000 of agency fees for the six months ended June 30, 2004 and
2003, respectively. Net revenue generated by our telephony services division
totaled $0.2 million for both the first half of 2004 and 2003. Telephony
services net revenue for the first six months of 2003 was solely attributable to
the operation of DPT's wholesale business. During the first quarter of 2004,
management decided to suspend the wholesale business of DPT and dedicate DPT's
physical and intellectual assets to the Company's retail VoIP business.
Telephony services net revenue for the first six months of 2004 consisted solely
of revenue attributable to sale of our voiceglo and GloPhone branded retail
products.

COST OF PRODUCTS AND PUBLICATIONS SOLD. Cost of products and publications sold
was $1.2 million and $1.5 million for the six months ended June 30, 2004 and
2003, respectively. The $0.3 million decrease in cost of products and
publications sold as compared to the same period in 2003 was directly
attributable to the lower level of revenue generated from the sale of computer
games and from subscription and newsstand sales of the computer games magazine
in the first half of 2004.

DATA COMMUNICATIONS, TELECOM AND NETWORK OPERATIONS. As stated in the comparison
of the year ended December 31, 2003 compared to the year ended December 31,
2002, this expense category includes carrier transport and circuit
interconnection costs related to our telephony services business, as well as
personnel and consulting costs incurred in support of our Internet
telecommunications network. The $2.3 million in expenses reported for the first
six months of 2004 represent costs related to our retail telephony services
business marketed under the voiceglo and GloPhone brand names, while the $0.2
million in expenses reported for the same period of the prior year represent
costs related to our wholesale telephony services business which was suspended
at the beginning of 2004. Data communications, telecom and network operations
expenses are expected to increase in the future as we further expand our data
communications network and expand our telecommunications carrier relationships
in order to support the Company's VoIP product line.

SALES AND MARKETING. Sales and marketing expenses totaled $2.7 million for the
first six months of 2004 versus $0.4 million for the first six months of 2003.
An increase of $2.4 million in sales and marketing expenses of the VoIP
telephony services division was offset slightly by a decrease of $0.1 million in
sales and marketing expenses of the games division. Increases in Internet and
television advertising and commissions expenses related to free GloPhone
sign-ups, coupled with higher personnel costs, were the principal factors
contributing to the increase in sales and marketing expenses of the VoIP
telephony services division in the first half of 2004 as compared to the first
half of 2003.

PRODUCT DEVELOPMENT. Product development expenses totaled $0.4 million for both
the first six months of 2004 and 2003. Expenses of the Games division accounted
for approximately 63% and 72% of total product development expenses for the
first half of 2004 and 2003, respectively.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses of $3.6
million for the first six months of 2004 increased $2.1 million from the $1.5
million reported for the same period of 2003. Increases in personnel expenses
and other general and administrative expenses directly attributable to our VoIP
telephony services division were principally responsible for the increase in
this expense category as compared to the first half of 2003. Other expense
categories which increased as compared to 2003 largely as a result of the
Company's entrance into the VoIP business included legal fees,
information-technology consulting, other professional fees and facilities costs.

DEPRECIATION. Depreciation expense totaled $0.5 million for the six months ended
June 30, 2004. The increase from the same period of the prior year resulted
principally from investments related to the development of our VoIP network and
to a lesser extent to costs incurred in the development of our VoIP telephony
customer billing system.

INTEREST EXPENSE, NET. On February 2, 2004, our Chairman and Chief Executive
Officer and his spouse, entered into a Note Purchase Agreement with the Company
pursuant to which they acquired a demand convertible promissory note (the
"Bridge Note") in the aggregate principal amount of $2,000,000. Non-cash
interest expense of $0.7 million was recorded in the first quarter of 2004
related to the beneficial conversion feature of the Bridge Note as the Bridge
Note was convertible into our Common Stock at a price below the fair market
value of our Common Stock (for accounting purposes), based on the closing price
of our Common Stock as reflected on the OTCBB on the issuance date of the Note.
As discussed in the comparison of the year ended December 31, 2003 compared to
the year ended December 31, 2002, approximately $1.5 million of non-cash
interest expense was recorded during the second quarter of 2003 as a result of
the beneficial conversion features of the $1,750,000 of Secured Convertible
Notes issued on May 22, 2003.

OTHER EXPENSE, NET. Reserves against the amounts loaned by the Company to a
development stage Internet related business venture were the principal
components of other expense, net for both the first six months of 2004 and 2003.

INCOME TAXES. As was the case in 2003, no tax benefit was recorded for the first
six months of 2004 as we recorded a 100% valuation allowance against our
otherwise recognizable deferred tax assets due to the uncertainty surrounding
the timing or ultimate realization of the benefits of our net operating loss
carryforwards in future periods.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ITEMS.

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

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

Net cash of $3.2 million was used in investing activities during the year ended
December 31, 2003. As further described below, the Company incurred $2.4 million
in capital expenditures during 2003, primarily within the VoIP telephony
services division. These expenditures included costs in the development of our
VoIP telephony network used to support the retail VoIP product line, as well as
the Company's historical wholesale VoIP business. Additionally, in February
2003, the Company committed to fund operating expenses of a development stage
Internet venture at the Company's discretion in the form of a loan. As of
December 31, 2003, approximately $0.5 million had been advanced to the venture.
During 2003, the Company invested approximately $10.3 million in marketable
securities, the funds of which were principally from the proceeds received in
connection with the issuance of the Company's Series G Preferred Stock.
Approximately $10.1 million of investments were sold throughout the second half
of 2003 as working capital was required to fund operations. Partially offsetting
these uses of funds in 2003 was the $0.1 million in net cash acquired upon the
May 2003 acquisition of DPT. The purchase price of DPT consisted of the issuance
of 1,375,000 shares of the Company's Common Stock and the issuance of warrants
to acquire 500,000 shares of the Company's Common Stock. Warrants to acquire an
additional 2,750,000 shares of our Common Stock could be issued if certain
performance or other criteria are satisfied. Effective March 31, 2004, 500,000
of the earn-out warrants were forfeited as performance targets had not been
achieved for the first of the earn-out periods. Net cash provided by investing
activities in 2002 was $0.1 million principally resulting from the sale of the
assets of the Happy Puppy website.

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

SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003

As of June 30, 2004, we had approximately $20.0 million in cash and cash
equivalents as compared to $1.1 million as of December 31, 2003. Net cash used
in operating activities was $8.2 million and $1.1 million, for the six months
ended June 30, 2004 and 2003, respectively. The period-to-period increase in net
cash used in operating activities resulted primarily from the increase in our
net operating losses as we seek to expand our VoIP business, partially offset by
the favorable impact of non-cash interest expense recorded in both 2004 and 2003
as a result of the beneficial conversion features of convertible debt securities
issued, as well as other non-cash charges recorded in 2004.

Net cash of $1.7 million was used in investing activities during the first six
months of 2004. We incurred $1.7 million in capital expenditures during the
first six months of 2004, primarily related to the development of our VoIP
telephony network and to a lesser extent to the development of our VoIP
telephony customer billing system. We also loaned approximately $0.2 million and
$0.3 million to a development stage Internet related business venture during the
first six months of 2004 and 2003, respectively.

Net cash provided by financing activities was $29.0 million for the first six
months of 2004. As discussed below and in the Notes to the Consolidated
Financial Statements, the Company completed a private offering of its Common
Stock and warrants to acquire its Common Stock in March 2004 resulting in the
issuance of 33,381,647 shares of Common Stock, and warrants to acquire
16,690,824 shares of its Common Stock, for gross proceeds of approximately $28.4
million. Offering costs included $1.2 million in cash commissions paid to the
placement agent and approximately $0.2 million in legal and accounting fees. In
addition, on February 2, 2004, the Company issued a $2,000,000 Bridge Note which
was subsequently converted into our Common Stock in connection with the March
2004 private offering. Proceeds of approximately $0.2 million were received from
the exercise of stock options and warrants during the first six months of 2004.
Cash provided by financing activities during the six months ended June 30, 2003,
included proceeds from the issuance of $0.5 million in Series F Convertible
Preferred Stock and $1.75 million of Secured Convertible Notes. In addition,
prior to the end of the 2003 second quarter, the Company received $1.5 million
in cash deposits towards the private offering of Series G Automatically
Converting Preferred Stock which closed on July 2, 2003.

FUTURE CAPITAL NEEDS.

In order to offer our VoIP services we have invested substantial capital and
made substantial commitments related to the development of the VoIP network and
to the purchase of telephony equipment to be offered for sale to our retail
customers. The VoIP network is comprised of switching hardware and software,
servers, billing and inventory systems, and telecommunication carrier services.
We own and operate VoIP switch equipment in Miami, Atlanta and New York, and
interconnect these switches utilizing a leased transport network through
numerous carrier agreements with third party providers. Through these carrier
relationships we are able to carry the traffic of our customers over the
Internet and interact with the PSTN. We generally enter into from one to five
year agreements with these carriers pursuant to which, in exchange for
allocating and dedicating availability on their networks assuming the actual
usage of the minutes, we undertake to provide minimum usage of these networks.
In general, the larger our commitment the lower our per minute cost of usage of
the network. Our minimum commitments under these carrier agreements presently
greatly exceed our actual usage.

Based upon our existing contractual commitments, we anticipate that spending
requirements, excluding carrier transport usage expenses, for our VoIP network
over the next twelve months will be substantially as follows:

o Planned network hardware capital expenditures for switching and
server equipment are projected to be approximately $2.5 - $3.0
million;

o Planned network software capital expenditures are projected to be
approximately $200,000; and

o Planned network data center and carrier circuit interconnection
service expenses, exclusive of regulatory taxes, fees and charges,
are projected to be approximately $3.0 million.

Our minimum commitment for carrier transport usage expenses over the next twelve
months, exclusive of regulatory taxes, fees and charges, is estimated to be
approximately $1.5 million.

We have entered into a contract with a supplier for telephony handsets related
to our VoIP services. Subject to the supplier's compliance with the terms of the
contract, we have committed to purchase additional equipment from this supplier
during the remainder of 2004 totaling approximately $3.0 million. Based upon
current inventory levels and our sales projections, we do not anticipate the
business need to purchase additional quantities of these handsets during the
remainder of 2004. As of June 30, 2004, total telephony inventory and cash
deposits towards the purchase of telephony inventory totaled $1.9 million, of
which approximately $1.1 million related to these handsets. In the event that we
are not able to sell our telephony equipment in sufficient quantities and at
sufficient prices, charges related to potential excess inventory commitments and
write-downs in the value of our telephony inventory assets may be required in
future periods.

In addition, we have entered into a contract with a software vendor under which
we license the software which we use to bill our VoIP telephony customers.
Additionally, we outsource information-technology personnel, including
programmers and system analysts, from this same software vendor and other
information-technology consulting companies on a per diem rate basis. We expect
to add increased functionality and scalability to our existing telephony
customer billing system and to incur significant future costs in accomplishing
these objectives. Our telephony billing system development plans, including the
timing of future expenditures, will be heavily dependent on the rate of growth
of our VoIP telephony customer base and revenue levels. Based upon the above, we
anticipate that costs to be incurred within the next twelve months in developing
our telephony customer billing system will range from approximately $0.6 million
to $1.0 million.

We also anticipate that we will incur substantial costs in the marketing of our
retail VoIP products and services over the next twelve months. Various internet
and television advertising programs and marketing partnership arrangements are
committed to or otherwise planned by the Company during the remainder of 2004
and in 2005. Because our retail VoIP business is in the early stage of
development, we are not able to estimate the effectiveness of our planned
advertising programs or our future customer and revenue levels with reasonable
accuracy. Our acquisition of SendTec, which was completed on September 1, 2004,
is expected to improve our ability to market our retail VoIP products and
otherwise monetize our VoIP customer base. However, the benefits to be derived
from SendTec's advertising expertise in increasing our future VoIP customer and
revenue levels cannot be accurately projected at this time. Additionally, our
liquidity is further dependent upon SendTec's ability to continue to generate
sufficient cash flow from its traditional lines of business. Our liquidity and
capital resources can also be significantly impacted in the event that the
automatic conversion of the Preferred Stock does not occur or there are
significant dissenting shareholders relating to the SendTec acquisition. See
Recent Events -- Risks Related to theglobe.com's Acquisition of SendTec.

As a result of the foregoing, there can be no assurance that cash on hand and
cash flow generated internally by the Company will be adequate to fund the
operation of its businesses and the implementation of its current VoIP business
plan over the next twelve months. Additionally, during the next twelve months,
there can be no assurance that the capital needs of the Company will not change
or that we will not enter into additional lines of business in addition to the
SendTec Acquisition. In any of such events, we may be required to make
significant changes to our current business plans, including the implementation
of company-wide cost reduction and/or asset sales programs, or alternatively to
raise additional capital. We currently have no access to credit facilities with
traditional third party lenders and there can be no assurance that we would be
able to raise any such capital. In addition, any financing that could be
obtained would likely significantly dilute existing stockholders.

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. The trading volume of our
shares has dramatically declined since the delisting. In addition, we are now
subject to a Rule promulgated by the Securities and Exchange Commission that, if
we fail to meet criteria set forth in such Rule, various practice requirements
are imposed on broker-dealers who sell securities governed by the Rule to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transactions prior to sale. Consequently, the Rule may have a
materially adverse effect on the ability of broker-dealers to sell the
securities, which may materially affect the ability of shareholders to sell the
securities in the secondary market. Consequently, it has also made it more
difficult for us to raise additional capital, although the Company has had some
success in offering its securities as consideration for the acquisition of
various business opportunities or assets. We will also incur additional costs
under state blue sky laws if we sell equity due to our delisting.

CAPITAL TRANSACTIONS.

In March 2004, the Company completed a private offering of 333,816 units (the
"Units") for a purchase price of $85 per Unit (the "PIPE Offering"). Each Unit
consisted of 100 shares of the Company's Common Stock, $0.001 par value (the
"Common Stock"), and warrants to acquire 50 shares of the Company's Common Stock
(the "Warrants"). The Warrants are exercisable for a period of five years
commencing 60 days after the initial closing at an initial exercise price of
$0.001 per share. The aggregate number of shares of Common Stock issued in the
PIPE Offering was 33,381,647 shares for an aggregate consideration of
$28,374,400, or approximately $0.57 per share assuming the exercise of the
16,690,824 Warrants. As of June 30, 2004, approximately 11,607,000 of the
Warrants remain outstanding.

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

Halpern Capital, Inc., acted as placement agent for the Private Offering, and
was paid a commission of $1.2 million and issued a warrant to acquire 1,000,000
shares of Common Stock at $0.001 per share. As of June 30, 2004, approximately
459,000 of these warrants remain outstanding.

The purpose of the PIPE Offering was to raise funds for use primarily in the
Company's developing VoIP business, including the deployment of networks,
website development, marketing, and capital infrastructure expenditures and
working capital. Proceeds may also be used in connection with the Company's
other existing or future business operations, including acquisitions.

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

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

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

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

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

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

EFFECTS OF INFLATION

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

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States 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, capitalization of computer
software costs and impairment of intangible assets. Our accounting policies and
procedures related to these areas are summarized below.

REVENUE RECOGNITION

The Company's revenues were derived principally from the sale of print
advertisements under short-term contracts in our games information magazine
Computer Games; through the sale of our games information magazine through
newsstands and subscriptions; from the sale of video games and related products
through our online store Chips & Bits; 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.

The Company's games division participates in barter transactions. Barter
revenues and expenses are recorded at the fair market value of services provided
or received, whichever is more readily determinable in the circumstances.
Revenue from barter transactions is recognized as income when advertisements or
other products are delivered by the Company. Barter expense is recognized when
the Company's advertisements are run on other companies' websites or in their
magazines, which typically occurs within one to six months from the period in
which the related barter revenue is recognized. Barter advertising revenues
represented approximately 2% of consolidated net revenue for each of the years
ended December 31, 2003 and 2002, respectively.

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

MAGAZINE SALES. The Company uses outside agents to obtain new subscribers for
its Computer Games magazine, whereby the agents retain a percentage of the
subscription proceeds as their commission. Previously these commissions had been
classified as Sales and Marketing expense within the consolidated statements of
operations. Effective June 2004, the Company has changed the classification of
these agency fees, reporting them as a reduction of magazine sales subscription
revenue. We believe this alternative accounting method is a more commonly used
industry practice and is preferable under the circumstances. Newsstand sales of
the games information magazine are recognized at the on-sale date of the
magazine, net of provisions for estimated returns. Subscription revenue, which
is net of agency fees, is deferred when initially received and recognized as
income ratably over the subscription term.

ELECTRONIC COMMERCE AND OTHER. Sales 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.

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

VALUATION OF CUSTOMER RECEIVABLES

Provisions for 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. If our demand forecast is greater than
our actual demand for our products, we may be required to record charges related
to increases in our inventory valuation reserves. The value of our inventory is
also dependent on our estimate of future average selling prices, and, if our
projected average selling prices are over estimated, we may be required to
adjust our inventory value to reflect the lower of cost or market. Due to the
large number of units in our VoIP telephony services division inventory,
decreases in average selling prices of our inventory of VoIP telephony services
products could result in a significant adjustment and have a material impact on
our financial position and results of operations. Our inventories include high
technology items that are specialized in nature or subject to rapid
obsolescence. While we have committed to or otherwise planned various marketing
programs which contemplate the sale of our inventory items on hand and which we
are committed to purchase, such programs may not be successful. This may result
in on-hand inventory levels and purchase commitments which are considered to be
excess or obsolete, which would need to be written down or written off and which
could have a material impact on our financial position and results of
operations.

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 three
years.

INTANGIBLE ASSETS

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

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

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

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

o Significant negative industry or economic trends.

When we determine that the carrying value of goodwill or other identified
intangibles may not be recoverable, we measure any impairment based on a
projected discounted cash flow method using a discount rate determined by our
management to be commensurate with the risk inherent in our current business
model.

As a result of management's decision during the first quarter of 2004, to
suspend the wholesale business of Direct Partner Telecom, Inc. ("DPT") and to
dedicate the DPT physical and intellectual assets to its retail VoIP business,
we reviewed the long-lived assets associated with the Company's wholesale VoIP
business for impairment. As a result, the goodwill and non-compete intangible
asset recorded in connection with the May 2003 acquisition of DPT were written
off and recorded as an impairment loss in the Company's statement of operations
for the year ended December 31, 2003.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

On March 31, 2004, the FASB issued its Exposure Draft, "Share-Based Payment,"
which is a proposed amendment to SFAS No. 123, "Accounting for Stock-Based
Compensation." The Exposure Draft would require all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. FASB expects that a final standard
would be effective for public companies for fiscal years beginning after
December 15, 2004. The Company does not intend to adopt a fair-value based
method of accounting for stock-based employee compensation until a final
standard is issued by the FASB that requires this accounting.

In December 2003, the FASB issued Interpretation No. 46R, "Consolidation of
Variable Interest Entities," an Interpretation of ARB 51. This statement
requires under certain circumstances consolidation of variable interest entities
(primarily joint ventures and other participating activities). The Company has
not yet evaluated the impact of this pronouncement on the Company.

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

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

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123 as
it relates to the transition by an entity to the fair value method of accounting
for stock-based employee compensation. The provisions of SFAS No. 148 are
effective for financial statements for fiscal years ending after December 15,
2002. The adoption of this statement did not have a significant impact on the
Company's financial position or results of its operations.

In November 2002, the FASB issued Interpretation 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" and an interpretation of SFAS No. 5, 57, and 107 and
rescission of SFAS Interpretation No. 34. This statement addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees. This interpretation also
clarifies the requirements related to the recognition of a liability by a
guarantor at the inception of a guarantee for the obligations the guarantor has
undertaken in issuing that guarantee. The adoption of this statement did not
have a significant impact on the Company's financial position or results of
operations.

In November 2002, the EITF addressed the accounting for revenue arrangements
with multiple deliverables in Issue 00-21, "Accounting for Revenue Arrangements
with Multiple Deliverables," ("EITF 00-21"). EITF 00-21 provides guidance on how
the arrangement consideration should be measured, whether the arrangement should
be divided into separate units of accounting, and how the arrangement
consideration should be allocated among the separate units of accounting. EITF
00-21 is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The adoption of EITF 00-21 did not have a
significant impact on the Company's financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities. SFAS 146
became effective in the first quarter of 2003 and did not have a significant
impact on the results of operations or financial position of the Company.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." The statement addresses accounting for and reporting obligations
relating to the retirement of long lived assets by requiring that the fair value
of a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
adoption of SFAS No. 143 did not have a material effect on the consolidated
financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2003 and June 30, 2004, 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.

DESCRIPTION OF PROPERTY

Our corporate headquarters is located in Fort Lauderdale, Florida, where we
lease approximately 26,000 square feet of office space. 15,000 square feet of
this space is sublet from a company which is controlled by our Chairman and the
remaining 11,000 square feet is sublet from an unaffiliated company. We maintain
approximately 9,500 square feet of office space in two separate locations in
Vermont in connection with the operations of our Computer Games magazine and
Chips & Bits, Inc. We own one property and the other is a lease which expires in
September 2005. In June of 2004, we signed a two year lease for approximately
5,000 square feet of warehouse space in Pompano Beach, Florida. Additionally, we
have obtained collocation space in secure telecommunications data centers
located in Florida, Georgia and New York which is used to house certain Internet
routing and computer equipment.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

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

2004 2003 2002
------------- --------------- --------------
High Low High Low High Low
----- ----- ----- ----- ----- ------
Fourth Quarter - - $2.12 $1.30 $0.17 $0.05
Third Quarter - - $1.97 $1.12 $0.10 $0.015
Second Quarter $0.96 $0.28 $2.56 $0.13 $0.07 $0.03
First Quarter $1.42 $0.83 $0.20 $0.06 $0.07 $0.025

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.")

HOLDERS OF COMMON STOCK

We had approximately 675 holders of record of Common Stock as August 16, 2004.
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 OFFERED UNDER EQUITY COMPENSATION PLANS AS OF AUGUST 16, 2004

Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
Plan outstanding options, options, future
Category warrants warrants and rights issuance under equity
and rights compensation plans
----------------------- ---------------------------- -------------------------- -----------------------------

Equity Compensation 4,256,700 $ 1.51 368,787
plans approved by
security holders

Equity Compensation 5,701,000 $ 0.16 194,000
plans not approved by
security holders

Total 9,957,700 $ 0.74 562,787

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

o 200,000 shares of Common Stock of theglobe.com, inc., par value
$0.001 per share, issued to Charles Peck pursuant to the
Non-Qualified Stock Option Agreement dated June 1, 2002 at an
exercise price of $0.035 per share. These stock options vested
immediately and have a life of ten years from date of grant.

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

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

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

o The Company's 2003 Amended and Restated Non-Qualified Stock Option
Plan (the "2003 Plan"). The purpose of the 2003 Plan is to
strengthen theglobe.com, inc. by providing an incentive to certain
employees and consultants (or in certain circumstances, individuals
who are the principals of certain consultants) of the Company or any
subsidiary of the Company, with a view toward encouraging them to
devote their abilities and industry to the success of the Company's
business enterprise. The 2003 Plan is administered by a Committee
appointed by the Board to administer the Plan, which has the power
to determine those eligible individuals to whom options shall be
granted under the 2003 Plan and the number of such options to be
granted and to prescribe the terms and conditions (which need not be
identical) of each such option, including the exercise price per
share subject to each option and vesting schedule of options granted
thereunder, and make any amendment or modification to any agreement
consistent with the terms of the 2003 Plan. The maximum number of
shares that may be made the subject of options granted under the
2003 Plan is 1,000,000 and no option may have a term in excess of 10
years. Options to acquire an aggregate of 41,000 shares of Common
Stock have been issued to various independent sales agents at a
weighted average exercise price of $1.54. These stock options vested
immediately and have a life of ten years from date of grant. Options
to acquire an aggregate of 400,000 shares of Common Stock have been
issued to various employees and independent contractors at a
weighted average exercise price of $1.00. These stock options vested
immediately and have a life of ten years from date of grant. Options
to acquire an aggregate of 110,000 shares of Common Stock have been
issued to two independent contractors at a weighted average exercise
price of $1.22. These stock options vested immediately and have a
life of five years from date of grant. Options to acquire 200,000
shares of Common Stock were issued to our former Chief Financial
Officer at an exercise price of $1.06 per share. 50,000 of these
stock options vested immediately and the balance was to vest ratably
on a quarterly basis over three years. These options will expire on
September 1, 2004.

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

THEGLOBE.COM, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

PAGE
----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-1

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheets F-2

Statements of Operations F-3

Statements of Stockholders' Equity and Comprehensive Income(Loss) F-4

Statements of Cash Flows F-5

Notes to Financial Statements F-7

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, 2003 and 2002, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss), and cash flows for each of the years ended December 31, 2003 and
2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
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, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
years ended December 31, 2003 and 2002, in conformity with U.S. generally
accepted accounting principles.

RACHLIN COHEN & HOLTZ LLP

Fort Lauderdale, Florida

February 20, 2004, except for Note 14, as to which the date is March 24, 2004

F-1

100

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, December 31, December 31,
2004 2003 2002
------------- ------------- -------------
ASSETS (Unaudited)
------

Current Assets:
Cash and cash equivalents $ 20,049,601 $ 1,061,702 $ 725,422
Marketable securities 42,960 267,970 --
Accounts receivable, less allowance for doubtful
accounts of approximately $233,000 (unaudited),
$113,000 and $130,000, respectively 698,481 958,487 1,247,390
Inventory, less reserves of approximately
$123,000 (unaudited), $109,000 and $100,000,
respectively 1,302,145 770,314 363,982
Prepaid expenses 1,139,387 550,930 331,114
Deposits on inventory purchases 882,700 820,675 --
Other current assets 72,261 26,357 --
------------ ------------- -------------
Total current assets 24,187,535 4,456,435 2,667,908

Intangible assets 210,144 199,020 164,960
Property and equipment, net 3,815,714 2,416,383 174,117
Other assets 35,625 100,240 40,000
------------ ------------- -------------

Total assets $ 28,249,018 $ 7,172,078 $ 3,046,985
============ ============= =============

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

Current Liabilities:
Accounts payable $ 2,250,585 $ 1,935,142 $ 1,395,929
Accrued expenses and other current liabilities 1,109,518 840,376 447,189
Deferred revenue 179,704 176,591 169,519
Notes payable and current portion of long-term debt 318,954 121,919 123,583
------------ ------------- -------------
Total current liabilities 3,858,761 3,074,028 2,136,220

Long-term debt 43,114 1,792,568 87,852
Other long-term liabilities 158,744 124,943 --
------------ ------------- -------------
Total liabilities 4,060,619 4,991,539 2,224,072
------------ ------------- -------------

Stockholders' Equity:
Preferred stock, $0.001 par value; 3,000,000
shares authorized; 333,333 shares issued and
outstanding at December 31, 2003,at liquidation value -- 500,000 --
Common stock, $0.001 par value; 200,000,000 shares
authorized; 138,659,545 (unaudited), 50,245,574, and
and 31,081,574 shares issued at June 30, 2004,
December 31, 2003 and December 31, 2002, respectively 138,660 50,246 31,082
Additional paid-in capital 270,740,529 238,301,862 218,310,565
Treasury stock, 699,281 common shares, at cost (371,458) (371,458) (371,458)
Accumulated other comprehensive income -- 1,562 --
Accumulated deficit (246,319,332) (236,301,673) (217,147,276)
------------ ------------- -------------
Total stockholders' equity 24,188,399 2,180,539 822,913
------------ ------------- -------------
Total liabilities and stockholders' equity $ 28,249,018 $ 7,172,078 $ 3,046,985
============ ============= =============

See notes to consolidated financial statements.

F-2

101

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended June 30, Year Ended December 31,
---------------------------- ---------------------------
2004 2003 2003 2002
------------ ------------ ------------- ------------
(Unaudited)

Net Revenue:
Advertising $ 804,082 $ 1,024,855 $ 2,555,002 $ 3,131,371
Magazine sales 236,651 368,336 718,119 1,039,578
Electronic commerce and other 434,141 753,997 1,462,911 3,074,327
Telephony services 207,353 196,904 548,081 --
------------ ------------ ------------- ------------
1,682,227 2,344,092 5,284,113 7,245,276
------------ ------------ ------------- ------------

Operating Expenses:
Cost of products and publications sold 1,193,889 1,548,700 3,252,498 5,563,010
Data communications, telecom and network operations 2,299,537 194,242 1,448,840 --
Sales and marketing 2,726,856 426,322 2,001,558 1,101,417
Product development 372,059 387,809 902,415 652,997
General and administrative 3,635,900 1,465,561 5,253,755 2,780,060
Depreciation 492,350 52,718 257,560 88,580
Amortization of intangible assets 42,343 6,250 72,182 --
Impairment charge -- -- 908,384 --
------------ ------------ ------------- ------------
10,762,934 4,081,602 14,097,192 10,186,064
------------ ------------ ------------- ------------

Loss from Operations (9,080,707) (1,737,510) (8,813,079) (2,940,788)
------------ ------------ ------------- ------------

Other Income (Expense):
Interest income (expense), net (802,123) (1,511,649) (1,777,689) 349,895
Other expense, net (134,829) (189,959) (443,629) (11,768)
------------ ------------ ------------- ------------
(936,952) (1,701,608) (2,221,318) 338,127
------------ ------------ ------------- -----------

Loss Before Provision for Income Taxes (10,017,659) (3,439,118) (11,034,397) (2,602,661)

Provision for Income Taxes -- -- -- 12,000
------------ ------------ ------------- ------------
Net Loss $(10,017,659) $ (3,439,118) $(11,034,397) $ (2,614,661)
============ ============ ============= ============

Basic and Diluted Net Loss Per Common Share $ (0.10) $ (0.13) $ (0.49) $ (0.09)
============ ============ ============= ============

Weighted Average Common Shares Outstanding 102,914,000 30,704,000 38,710,917 30,382,293
============ ============ ============= ============

See notes to consolidated financial statements.

F-3

102

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)

COMMON STOCK ADDITIONAL
PREFERRED ------------------------------- PAID-IN
STOCK SHARES AMOUNT CAPITAL
------------- ------------- ------------- -------------

Balance at December 31, 2001 $ -- 31,081,574 $ 31,082 $ 218,255,565

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

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

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

Comprehensive loss -- -- -- --

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

Balance, December 31, 2002 -- 31,081,574 31,082 218,310,565

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

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

Comprehensive loss -- -- -- --

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

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

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

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

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

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

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

Balance, December 31, 2003 500,000 50,245,574 50,246 238,301,862

Six Months Ended June 30, 2004:
Net loss (unaudited) -- -- -- --

Realized gain on securities (unaudited) -- -- -- --

Comprehensive loss (unaudited) -- -- -- --

Issuance of common stock:
Private offering, net of offering costs
(unaudited) -- 33,381,647 33,382 26,940,962
Conversion of Series F Preferred Stock and
exercise of associated warrants (unaudited) (500,000) 19,639,856 19,640 480,360
Conversion of $1,750,000 Convertible
Notes (unaudited) -- 22,829,156 22,829 1,654,546
Conversion of $2,000,000 Bridge Note
(unaudited) -- 3,527,337 3,527 1,996,473
Exercise of warrants owned by Dancing Bear
Investments (unaudited) -- 2,779,560 2,780 (2,780)
Exercise of stock options (unaudited) -- 489,000 489 176,557
Exercise of warrants (unaudited) -- 5,767,415 5,767 5,151

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

Employee stock-based compensation
(unaudited) -- -- -- 168,304

Issuance of stock options to non-
employees (unaudited) -- -- -- 332,094
------------- ------------- ------------- -------------

Balance, June 30, 2004 (unaudited) $ -- 138,659,545 $ 138,660 $ 270,740,529
============= ============= ============= =============

ACCUMULATED
OTHER
TREASURY COMPREHENSIVE ACCUMULATED
STOCK INCOME (LOSS) DEFICIT TOTAL
------------- ------------- ------------- -------------

Balance at December 31, 2001 $ (371,458) $ (120,866) $(214,532,615) $ 3,261,708

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

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

Net unrealized (loss) on securities -- (650) -- (650)
-------------

Comprehensive loss -- -- -- (2,493,795)
-------------

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

Balance, December 31, 2002 (371,458) -- (217,147,276) 822,913

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

Net unrealized gain on securities -- 1,562 -- 1,562
-------------

Comprehensive loss -- -- -- (11,032,835)
-------------

Issuance of preferred stock:
Series F Preferred Stock -- -- (500,000) 500,000
Series G Automatically Converting Preferred Stock -- -- (7,620,000) 8,640,690

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

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

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

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

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

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

Balance, December 31, 2003 (371,458) 1,562 (236,301,673) 2,180,539

Six Months Ended June 30, 2004:
Net loss (unaudited) -- -- (10,017,659) (10,017,659)

Realized gain on securities (unaudited) -- (1,562) -- (1,562)
-------------

Comprehensive loss (unaudited) -- -- -- (10,019,221)
-------------

Issuance of common stock:
Private offering, net of offering costs
(unaudited) -- -- -- 26,974,344
Conversion of Series F Preferred Stock and
exercise of associated warrants (unaudited) -- -- -- --
Conversion of $1,750,000 Convertible
Notes (unaudited) -- -- -- 1,677,375
Conversion of $2,000,000 Bridge Note
(unaudited) -- -- -- 2,000,000
Exercise of warrants owned by Dancing Bear
Investments (unaudited) -- -- -- --
Exercise of stock options (unaudited) -- -- -- 177,046
Exercise of warrants (unaudited) -- -- -- 10,918

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

Employee stock-based compensation
(unaudited) -- -- -- 168,304

Issuance of stock options to non-
employees (unaudited) -- -- -- 332,094
------------- ------------- ------------- -------------

Balance, June 30, 2004 (unaudited) $ (371,458) $ -- $(246,319,332) $ 24,188,399
============= ============= ============= =============

See notes to consolidated financial statements.

F-4

103

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, Year Ended December 31,
--------------------------- --------------------------
2004 2003 2003 2002
------------ ------------ ------------ ------------
(Unaudited)

Cash Flows from Operating Activities:
Net loss $ (10,017,659) $ (3,439,118) $(11,034,397) $ (2,614,661)
Adjustments to reconcile net loss to net cash
and cash equivalents used in operating activities:
Depreciation and amortization 534,693 58,968 329,742 88,580
Provision for excess and obsolete inventory 16,515 -- 110,126 --
Provision for uncollectible accounts receivable 121,509 -- 114,888 --
Non-cash interest expense 735,416 1,483,708 1,739,635 --
Reserve against amounts loaned to Internet venture 222,500 255,000 495,000 --
Employee stock compensation 168,304 -- 417,567 --
Compensation related to non-employee stock options 332,094 11,750 225,609 --
Contingent commissions expenses 155,968 -- -- --
Options granted in connection with severance arrangement -- -- -- 13,000
Non-cash impairment charge -- -- 908,384 --
Non-cash compensation -- 100,000 100,000 --
Loss on disposal or write-off of equipment -- -- 61,072 855
Foreign exchange loss on Canadian denominated debt -- -- 19,623 --
Non-cash gain on settlements of liabilities -- (64,207) (64,207) --
Disposal of Attitude Network- translation loss -- -- -- 121,516
Gain on sale of Happy Puppy -- -- -- (134,500)
Other, net 9,347 -- -- (650)

Changes in operating assets and liabilities,
net of Acquisition and dispositions:
Accounts receivable, net 138,497 470,496 328,453 290,502
Inventory, net (548,346) (10,037) (516,458) 168,583
Prepaid and other current assets (690,108) 123,200 (1,058,806) 706,856
Accounts payable 315,443 (219,903) 508,862 55,301
Accrued expenses and other current liabilities 268,123 109,383 253,215 (592,047)
Deferred revenue 3,113 (10,158) 7,072 (59,957)
------------- ------------ ------------ ------------
Net cash and cash equivalents used in operating
activities (8,234,591) (1,130,918) (7,054,620) (1,956,622)
------------- ------------ ------------ ------------

Cash Flows from Investing Activities:
Purchases of marketable securities -- -- (10,345,828) --
Proceeds from sales and maturities of marketable securities 225,070 -- 10,079,420 57,650
Cash acquired in acquisition of business -- 60,948 60,948 --
Proceeds from sale of properties -- -- -- 135,000
Purchases of property and equipment (1,696,525) (164,090) (2,424,791) (32,250)
Amounts loaned to Internet venture (182,500) (255,000) (495,000) (40,000)
Patent costs incurred (66,079) -- (62,492) --
Other, net (14,500) (7,000) (7,600) 11,000
------------- ------------ ------------ ------------
Net cash and cash equivalents provided by (used in)
investing activities (1,734,534) (365,142) (3,195,343) 131,400
------------- ------------ ------------ ------------

Cash Flows from Financing Activities:
Borrowings on notes payable and long-term debt 2,000,000 1,750,000 1,750,000 --
Deposits on stock subscriptions -- 1,494,500 -- --
Payments on notes payable and long-term debt (85,573) (517,959) (545,529) (13,184)
Proceeds from issuance of preferred stock, net -- 500,000 9,140,690 --
Proceeds from issuance of common stock, net 26,974,344 -- -- --
Proceeds from exercise of common stock options 177,046 4,375 118,595 --
Proceeds from exercise of warrants 10,918 -- -- --
Increase in (payments of) other long-term liabilities, net (119,711) -- 122,487 --
------------- ------------ ------------ ------------
Net cash and cash equivalents provided by (used in)
financing activities 28,957,024 3,230,916 10,586,243 (13,184)
------------- ------------ ------------ ------------

Net Increase (Decrease) in Cash and Cash Equivalents 18,987,899 1,734,856 336,280 (1,838,406)

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

Cash and Cash Equivalents, Ending $ 20,049,601 $ 2,460,278 $ 1,061,702 $ 725,422
============= ============ ============ ============

(Continued)

See notes to consolidated financial statements.

F-5

104

THEGLOBE.COM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

Six Months Ended June 30, Year Ended December 31,
---------------------------- ---------------------------
2004 2003 2003 2002
------------ ------------ ------------ ------------
(Unaudited)

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 172,454 $ 11,606 $ 39,819 $ 25,018
============ ============ ============ ============
Income taxes $ -- $ -- $ -- $ --
============ ============ ============ ============

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

See notes to consolidated financial statements.

F-6

105

THEGLOBE.COM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE COMPANY

The Company continues to operate its Computer Games print magazine and the
associated website Computer Games Online (www.cgonline.com), as well as the
games distribution business of Chips & Bits, Inc. (www.chipsbits.com). The
Company continues to actively explore a number of strategic alternatives for its
remaining online and offline game properties, including continuing its
operations and using its cash on hand, selling some or all of these properties
and/or entering into new or different lines of business.

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

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

As of December 31, 2003 and June 30, 2004, the Company's revenue sources were
principally from the operations of our games related properties. The Company's
retail VoIP products and services have yet to produce any significant revenue.
Management's intent, going forward, is to devote substantial monetary,
management and human resources to the Company's retail VoIP business.

PROFITABILITY AND LIQUIDITY CONSIDERATIONS

At December 31, 2003, the Company reflected stockholders' equity of $2,180,539.
However, as of December 31, 2003, the Company had an accumulated deficit of
$236,301,673 and had incurred net losses for each of the years ended December
31, 2003 and 2002 of $11,034,397 and $2,614,661, respectively. Since November
2002, the Company has been expending significant resources in connection with
the launch of its VoIP telephony business. In response to the previously
described circumstances, management has the following plans:

F-7

106

LIQUIDITY

As further discussed in Note 14, "Subsequent Events," during the first quarter
of 2004, the Company completed a private offering of common stock for total
proceeds of approximately $28,374,400. The purpose of the private offering was
to raise funds for use primarily in the Company's developing voiceglo business,
including the deployment of networks, website development, marketing, and
capital infrastructure expenditures and working capital. Proceeds may also be
used in connection with theglobe's other existing or future business operations.

PROFITABILITY

In order to achieve and maintain profitability the Company believes it needs to
build and sustain a customer base of a certain size. Once it has reached this
size, revenue will be sufficient to cover fixed costs associated with the
construction and maintenance of the telephony services network and
administrative overhead. To reach this size, the Company must execute a
marketing plan which attracts a substantial number of potential customers to the
Company's website. From this number, management believes an estimated percentage
will download the Company's free software. Of that group, management believes a
percentage will upgrade to a monthly pay-as-you go plan.

The growth needed to maintain profitability will be a function of the Company's
ability to manage customer churn and to continue to upgrade the network.
Customer churn rate should become predictable as the customer population grows.
Incremental network expansion and upgrade should cost less, on a per customer
basis, then the initial network build out.

SUMMARY

Management believes that the actions presently being taken by the Company
provide the opportunity for the Company to improve profitability. However, there
can be no assurances that management's plans will be achieved.

(a) PRINCIPLES OF CONSOLIDATION

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

(b) UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited interim consolidated financial statements of the Company as of
June 30, 2004 and for the six months ended June 30, 2004 and 2003 included
herein are unaudited. These financial statements and disclosures have been
prepared by the Company in accordance with generally accepted accounting
principles in the United States for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles in the United States for complete financial
statements. In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company at June 30, 2004 and the results of its operations and its cash
flows for the six months ended June 30, 2004 and 2003. The results of operations
for such periods are not necessarily indicative of results expected for the full
year or for any future period.

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 and other factors. Actual results could
differ from those estimates.

(d) CASH AND CASH EQUIVALENTS

Cash equivalents consist of money market funds and highly liquid short-term
investments with qualified financial institutions. The Company considers all
highly liquid securities with original maturities of three months or less to be
cash equivalents. Included in cash and cash equivalents in the accompanying
unaudited consolidated balance sheet at June 30, 2004, was approximately $32,000
of cash held in escrow for purposes of sweepstakes promotions being conducted by
the VoIP telephony division.

F-8

107

(e) MARKETABLE SECURITIES

The Company accounts for its investment in debt and equity securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." All such
investments are classified as available-for-sale as of December 31, 2003 and
June 30, 2004. Available-for-sale securities are stated at market value, which
approximates fair value, and unrealized holding gains and losses are excluded
from earnings and included as a component of stockholders' equity until
realized.

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

June 30, 2004 December 31, 2003
------------------------ ------------------------
Cost Fair Value Cost Fair Value
---------- ------------ ---------- ------------
(Unaudited)

Preferred Securities $ -- $ -- $ 225,000 $ 225,000
U.S. Treasury Bills 42,960 42,960 41,408 42,970
---------- ------------ ---------- ------------

Total $ 42,960 $ 42,960 $ 266,408 $ 267,970
========== ============ ========== ============

During the six months ended June 30, 2004 and 2003, the Company had no
significant gross realized gains or losses on sales of available-for-sale
securities. During the year ended December 31, 2003, the Company had no
significant realized gains on sales of available-for-sale securities. The gross
unrealized gain of $1,562 as of December 31, 2003, has been included in
stockholders' equity as "Accumulated Other Comprehensive Income" in the
accompanying consolidated balance sheet. The Company had no available-for-sale
securities as of December 31, 2002.

(f) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of certain of the Company's financial instruments, including
cash, cash equivalents, short-term investments, accounts receivable, accounts
payable, accrued expenses and deferred revenue, approximate their fair value at
June 30, 2004 and December 31, 2003 and 2002 due to their short maturities.

(g) 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 June 30, 2004, December 31, 2003 and 2002, was approximately $123,000
(unaudited), $109,000, and $100,000, respectively.

The Company manages its inventory levels based on internal forecasts of customer
demand for its products, which is difficult to predict and can fluctuate
substantially. If the Company's demand forecast is greater than the actual
customer demand for its products, the Company may be required to record charges
related to increases in its inventory valuation reserves. 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 adjust its inventory value to reflect the lower of
cost or market. Due to the large number of units in the Company's VoIP telephony
services division inventory, decreases in average selling prices of the
inventory of VoIP telephony services products could result in a significant
adjustment and have a material impact on the Company's financial position and
results of operations. In addition, the Company's inventories include high
technology items that are specialized in nature or subject to rapid
obsolescence. While the Company has committed to or otherwise planned various
marketing programs which contemplate the sale of its inventory items on hand and
items covered by outstanding inventory purchase commitments, such programs may
not be successful. This may result in on-hand inventory levels and purchase
commitments which are considered to be excess or obsolete, which would need to
be written down or written off and which could have a material impact on the
Company's financial position and results of operations.

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108

(h) LONG-LIVED ASSETS

Long-lived assets, including property and equipment, goodwill and other
intangible assets are reviewed for impairment annually or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, the Company estimates the
undiscounted future cash flows to result from the use of the asset and its
ultimate disposition. 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 asset. Fair
value would generally be determined by market value.

During the first quarter of 2004, the Company's management decided to suspend
DPT's wholesale business and to dedicate the DPT physical and intellectual
assets to its retail VoIP business. As a result, the Company reviewed the
long-lived assets associated with the wholesale VoIP business for impairment.
Goodwill of $577,134 and the unamortized balance of the non-compete intangible
asset of $331,250 recorded in connection with the May 2003 acquisition of DPT
were written off and recorded as an impairment loss in the accompanying
statement of operations for the year ended December 31, 2003. Refer to Note 2,
"Acquisitions and Disposition" for a discussion of the purchase of DPT.

Intangible assets included in the accompanying consolidated balance sheets as of
June 30, 2004 and December 31, 2003, are being amortized on a straight-line
basis over their estimated useful lives or three years.

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

Estimated
Useful Lives
-------------
Network equipment 3 years
Computer equipment and software 3 years
Office equipment 3 years
Furniture and fixtures 3-7 years
Leasehold improvements 5 years

(i) CONCENTRATION OF CREDIT RISK

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

(j) REVENUE RECOGNITION

ADVERTISING

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

F-10

109

The Company participates in barter transactions whereby the Company trades
marketing data in exchange for advertisements in the publications of other
companies. Barter revenue and expenses are recorded at the fair market value of
services provided or received, whichever is more readily determinable in the
circumstances. Revenue from barter transactions is recognized as income when
advertisements or other products are delivered by the Company. Barter expense is
recognized when the Company's advertisements are run in other companies'
magazines, which typically occurs within one to six months from the period in
which barter revenue is recognized. Barter revenue represented approximately 4%
(unaudited) and 3% (unaudited) of consolidated net revenue for the six months
ended June 30, 2004 and 2003, respectively. Barter revenue represented
approximately 2% of consolidated net revenue for each of the years ended
December 31, 2003 and 2002, respectively.

MAGAZINE SALES

The Company uses outside agents to obtain new subscribers for its Computer Games
magazine, whereby the agents retain a percentage of the subscription proceeds as
their commission. Previously these commissions had been classified as sales and
marketing expense within the consolidated statements of operations. Effective
June 2004, the Company changed its method of accounting for these agency fees,
reporting them as a reduction of magazine sales subscription revenue. We believe
this alternative accounting method is a more commonly used industry practice and
is preferable under the circumstances. This reclassification had no impact on
net loss as previously reported by the Company. Net revenue in the accompanying
consolidated statements of operations has been shown net of such agency fees for
all periods presented. These agency fees totaled approximately $537,000
(unaudited) and $770,000 (unaudited) for the six months ended June 30, 2004 and
2003, and $1,296,000 and $2,422,000 for the years ended December 31, 2003 and
2002, respectively. Newsstand sales of the games information magazine are
recognized at the on-sale date of the magazine, net of provisions for estimated
returns. Subscription revenue, which is net of agency fees, is deferred when
initially received and recognized as income ratably over the subscription term.

ELECTRONIC COMMERCE AND OTHER

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

TELEPHONY SERVICES

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

(k) ADVERTISING COSTS

Advertising costs are expensed as incurred and are included in sales and
marketing expense. Advertising costs were approximately $1,289,000 (unaudited)
and $125,000 (unaudited) for the six months ended June 30, 2004 and 2003,
respectively. Barter advertising costs were approximately 2% (unaudited) of
total net revenue for the six months ended June 30, 2003. The Company incurred
no barter advertising costs during the six months ended June 30, 2004.
Advertising costs were approximately $411,000 and $182,000 for the years ended
December 31, 2003 and 2002, respectively. Barter advertising costs were
approximately 2% of total net revenue for each of the years ended December 31,
2003 and 2002.

(l) PRODUCT DEVELOPMENT

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

(m) STOCK-BASED COMPENSATION

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

F-11

110

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

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

Six Months Ended June 30, Year Ended December 31,
----------------------------- -----------------------------
2004 2003 2003 2002
------------- ------------- ------------- -------------
(Unaudited)

Net loss - as reported $ (10,017,659) $ (3,439,118) $ (11,034,397) $ (2,614,661)
============= ============= ============= =============
Net loss - pro forma $ (10,832,000) $ (4,487,000) $ (12,438,000) $ (2,714,000)
============= ============= ============= =============

Basic net loss per share -
as reported $ (0.10) $ (0.13) $ (0.49) $ (0.09)
============= ============= ============= =============
Basic net loss per share -
pro forma $ (0.11) $ (0.16) $ (0.53) $ (0.09)
============= ============= ============= =============

A total of 1,285,000 stock options were granted during the six months ended June
30, 2004, including 600,000 (unaudited) stock options with a per share
weighted-average fair value of $0.71 (unaudited) and whose exercise price
equaled the market price of the stock on the grant date. In addition, a total of
685,000 (unaudited) stock options were granted during the six months ended June
30, 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 $1.22 (unaudited). The per
share weighted-average fair value of stock options granted during 2003 on a
total of 3,907,450 options whose exercise price equaled the market price of the
stock on the grant date was $0.82. In addition, 500,000 stock options were
granted in 2003 with an exercise price below the market price of the stock on
the grant date and a per share weighted-average fair value of $1.49. The per
share weighted-average fair value of stock options granted during 2002 was $0.02
on the date of grant. Fair values of stock options were calculated using the
option-pricing method with the following weighted-average assumptions:

Six Months Ended Year Ended
June 30, December 31,
---------------- --------------------
2004 2003 2002
---------------- --------- --------
(Unaudited)

Risk-free interest rate 3.00% 3.00% 4.78%
Expected life 5 years 5 years 10 years
Volatility 160% 160% 135%-160%
Expected dividend rate 0 0 0

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

F-12

111

(n) INCOME TAXES

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

(o) NET LOSS PER COMMON SHARE

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

During the year ended December 31, 2003, the Company issued equity securities
with common stock conversion features which were immediately convertible into
common stock. As further discussed in Note 7, "Stockholders' Equity", the
Company accounted for the issuance of these securities in accordance with EITF
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios," which resulted in the recognition
of non-cash preferred dividends totaling $8,120,000 at the respective dates of
the securities' issuance. Net loss applicable to common stockholders was
calculated as follows:

Six Months Ended June 30, Year Ended December 31,
------------------------------ -----------------------------
2004 2003 2003 2002
-------------- ------------- ------------- ------------
(Unaudited)

Net loss $ (10,017,659) $ (3,439,118) $ (11,034,397) $ (2,614,661)
Beneficial conversion features of
preferred stock and warrants -- (500,000) (8,120,000) --
-------------- ------------- ------------- ------------
Net loss applicable to common
stockholders $ (10,017,659) $ (3,939,118) $ (19,154,397) $ (2,614,661)
============== ============= ============= ============

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

June 30, December 31,
----------------------- -----------------------
2004 2003 2003 2002
---------- ---------- ---------- ----------
(Unaudited)

Options to purchase common stock 9,923,000 8,220,000 9,943,000 5,971,000
Common shares issuable upon conversion
of Series F Preferred Stock -- 16,667,000 16,667,000 --
Common shares issuable upon conversion
of Convertible Notes -- 19,444,000 19,444,000 --
Common shares issuable upon exercise
of Warrants 20,880,000 19,508,000 22,802,000 6,187,000
---------- ---------- ---------- ----------
Total 30,803,000 63,839,000 68,856,000 12,158,000
========== ========== ========== ==========

F-13

112

Refer to Note 14, "Subsequent Events," for a discussion of the conversion of the
Series F Preferred Stock and the Convertible Notes and the exercise of warrants
during the first quarter of 2004.

(p) COMPREHENSIVE INCOME (LOSS)

The Company reports comprehensive income (loss) in accordance with the SFAS No.
130, "Reporting Comprehensive Income". Comprehensive income (loss) generally
represents all changes in stockholders' equity during the year except those
resulting from investments by, or distributions to, stockholders. The Company
had no other comprehensive income or loss during the six months ended June 30,
2004 and 2003. As of December 31, 2003, the Company's accumulated other
comprehensive income included in the accompanying consolidated balance sheet
totaled $1,562. The Company had no accumulated other comprehensive income or
loss as of December 31, 2002.

(q) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On March 31, 2004, the Financial Accounting Standards Board (FASB) issued its
Exposure Draft, "Share-Based Payment," which is a proposed amendment to SFAS No.
123, "Accounting for Stock-Based Compensation." The Exposure Draft would require
all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on their fair values.
FASB expects that a final standard would be effective for public companies for
fiscal years beginning after December 15, 2004. The Company does not intend to
adopt a fair-value based method of accounting for stock-based employee
compensation until a final standard is issued by the FASB that requires this
accounting.

In December 2003, the FASB issued Interpretation 46R, "Consolidation of Variable
Interest Entities," an Interpretation of ARB 51. This statement requires under
certain circumstances consolidation of variable interest entities (primarily
joint ventures and other participating activities). The Company has not yet
evaluated the impact of this pronouncement on the Company.

F-14

113

(r) RECLASSIFICATIONS

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

NOTE 2. ACQUISITIONS AND DISPOSITION

ACQUISITION OF DIRECT PARTNER TELECOM, INC.

On May 28, 2003, the Company completed the acquisition of Direct Partner
Telecom, Inc. ("DPT"), a company engaged in VoIP telephony services, in exchange
for 1,375,000 shares of the Company's common stock and the issuance of warrants
to acquire 500,000 shares of the Company's common stock. The warrants are
exercisable any time before May 23, 2013 at an exercise price of $0.72 per
share. In addition, the former shareholders of DPT may earn additional warrants
to acquire up to 2,750,000 shares of the Company's Common Stock at an exercise
price of $0.72 per share if DPT achieves certain revenue and earnings targets
over approximately the next three years. Effective March 31, 2004, 500,000 of
the earn-out warrants were forfeited as performance targets had not been
achieved for the first of the three year periods. These warrants will also
accelerate and be deemed earned in the event of a "change in control" of the
Company, as defined in the acquisition documents. In addition, as part of the
transaction, the Company agreed to repay loans totaling $600,000 to certain of
the former shareholders of DPT, including $500,000 immediately after the closing
of the acquisition. The Company issued promissory notes for $100,000, with a
two-year maturity and interest at prime, for the balance.

The total purchase price of DPT was allocated as follows:

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

$ 638,000
=========

As part of the DPT acquisition transaction, the former Chief Executive Officer
of DPT agreed to an employment agreement with a one-year term which
automatically renews for an additional year. The employment agreement also
contained non-compete provisions during the term of the agreement and for a
period of three years following termination of the agreement, as specified. The
$375,000 value assigned to the non-compete agreement was to be amortized on a
straight-line basis over 5 years. Amortization expense of the non-compete
agreement totaled $43,750 in 2003.

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

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

F-15

114

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

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

LOAN AND PURCHASE OPTION AGREEMENT

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

On July 12, 2004, the Loan and Purchase Option Agreement was amended for the
purpose of establishing and/or revising various terms and conditions in the
event that the Contract is awarded to the venture by August 31, 2004. This
amendment included, among other things, (i) a reduction in the maximum number of
shares issuable upon exercise of the Option from 2,000,000 to 1,500,000 shares,
(ii) a commitment by the Company to fund $360,000 to the venture at the time of
Contract award, and (iii) the establishment of limits related to monthly
operating expense payments and cash distributions from the venture to the
Company and employees of the venture assuming that the Option is exercised by
the Company. Additionally, effective August 31, 2004, the Loan and Purchase
Option Agreement and related promissory note were amended extending the maturity
date to October 31, 2004. As of September 15, 2004, the Contract has not yet
been awarded and the Company has not completed the renegotiation of the terms of
the Purchase Option Agreement.

Advances to this business venture totaled $717,500 (unaudited) and $535,000 as
of June 30, 2004 and December 31, 2003, respectively. Due to the uncertainty of
collectibility of the Loan, the Company has provided a reserve equal to the full
amount of the Loan. Additions to the Loan reserve of $222,500 (unaudited),
$255,000 (unaudited) and $495,000 were included in other expense in the
accompanying consolidated statements of operations for the six months ended June
30, 2004 and 2003, and the year ended December 31, 2003, respectively.

ACQUISITION OF VOIP ASSETS

On November 14, 2002, the Company acquired certain VoIP assets from an
entrepreneur. In exchange for the assets, the Company issued warrants to acquire
1,750,000 shares of its common stock and an additional 425,000 warrants as part
of an earn-out arrangement upon the attainment of certain performance targets by
December 31, 2003. None of the performance targets had been attained as of
December 31, 2003, resulting in the forfeiture of the 425,000 warrants. In
conjunction with the acquisition, E&C Capital Partners, a privately held
investment holding company owned by our Chairman and Chief Executive Officer,
Michael S. Egan, and our President, Edward A. Cespedes, entered into a
non-binding letter of intent with theglobe.com to provide new financing in the
amount of $500,000 through the purchase of Series F Preferred Stock. Refer to
Note 7, "Stockholders' Equity," for further details.

DISPOSITION OF WEBSITE

On February 27, 2002, the Company sold all of the assets used in connection with
the Happy Puppy website for $135,000, resulting in the recognition of a gain on
the sale of $134,500. The Company received $67,500 immediately, and $67,500 to
be held in escrow until the Company transferred all assets used in connection
with the Happy Puppy website. On May 6, 2002, $67,500 was released to the
Company.

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116

NOTE 3. INTANGIBLE ASSETS

The components of intangible assets were as follows:

June 30, 2004 December 31, 2003 December 31, 2002
----------------------- --------------------------- ----------------------------
Gross Gross Gross
Carrying Accumulated Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization Amount Amortization
--------- ------------ ------------ ------------ ------------ ------------
(Unaudited)

Amortized Intangible Assets:
Digital Telephony $ 279,209 $ 69,065 $ 227,452 $ 28,432 $ 164,960 $ --
========= =========== ============ ============ ============ ============

Digital telephony assets include certain VoIP assets which were recorded at the
value assigned to the warrants to acquire 1,750,000 shares of the Company's
Common Stock issued in connection with the acquisition of the assets on November
14, 2002 and patent application costs incurred to-date.

During the six months ended June 30, 2004 and 2003, intangible asset
amortization totaled $42,343 (unaudited) and $6,250 (unaudited). Intangible
asset amortization expense totaled $72,182 for the year ended December 31, 2003,
including $43,750 of amortization related to the non-compete agreement recorded
in connection with the acquisition of DPT. As discussed in Note 1(h), the
Company wrote-off the $331,250 unamortized balance of the non-compete agreement
as of December 31, 2003. There was no amortization expense for intangible assets
during the year ended December 31, 2002. As of December 31, 2003, annual
intangible asset amortization expense was projected to be $75,818 each year in
2004 and 2005; and $47,384 in 2006.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

June 30, December 31,
----------- ------------------------
2004 2003 2002
----------- ----------- ----------
(Unaudited)

Network equipment and software $ 2,637,617 $ 1,712,537 $ --
Computer equipment 870,336 679,597 523,829
Capitalized software costs 1,414,413 690,602 89,452
Land and building 181,110 181,110 181,110
Furniture and fixtures 201,335 149,714 141,493
Leasehold improvements 9,402 9,402 --
----------- ----------- ----------
5,314,213 3,422,962 935,884
Less: Accumulated depreciation and

amortization 1,498,499 1,006,579 761,767
----------- ----------- ----------
$ 3,815,714 $ 2,416,383 $ 174,117
=========== =========== ==========

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117

NOTE 5. DEBT

Debt consisted of the following:

June 30, December 31,
---------- ----------------------
2004 2003 2002
---------- ---------- ----------
(Unaudited)

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

Promissory notes issued in connection with the acquisition
of DPT; interest and principal due May 2005; interest
at prime rate (4% at June 30, 2004 and December 31, 2003) 100,000 100,000 --

Mortgage note payable; interest payable monthly at 9%;
principal due May 2005 80,423 82,612 91,202

Related party obligations payable in Canadian dollars;
due in monthly installments of principal and interest
approximating $3,300 through September 2006; interest
at prime plus 2-3% 80,960 102,916 120,233

Financing of computer software and related maintenance costs;
quarterly installments of principal and interest
approximating $21,400 through September 2005 100,685 -- --
--------- ---------- ----------
362,068 2,035,528 211,435
Less: unamortized debt discount -- 121,041 --
Less: short-term portion 318,954 121,919 123,583
--------- ---------- ----------

Long-term portion $ 43,114 $1,792,568 $ 87,852
========= ========== ==========

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

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

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118

Reference should be made to Note 14, "Subsequent Events," for a discussion of
theglobe.com's issuance of a $2,000,000 demand convertible promissory note (the
"Bridge Note") and associated warrant and the completion of a private offering
of its securities for aggregate consideration of $28,374,400, and the related
conversion of the Bridge Note and the Secured Convertible Notes and the exercise
of the associated Warrant during the first quarter of 2004.

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

Repayment of debt is due as follows:

Year ending December 31:

2004 $ 1,871,918
2005 139,306
2006 24,304
-------------
$ 2,035,528
=============

NOTE 6. INCOME TAXES

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2003,
and 2002 are presented below.

2003 2002
------------ ------------
Deferred tax assets (liabilities):
Net operating loss carryforwards $ 57,642,000 $ 53,820,000
Allowance for doubtful accounts 244,000 53,000
Issuance of warrants 982,000 725,000
Depreciation and amortization (230,000) 124,000
Other 123,000 58,000
------------ ------------
Total gross deferred tax assets 58,761,000 54,780,000
Less: valuation allowance (58,761,000) (54,780,000)
------------ ------------
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 $58.8 million and $54.8 million as of December
31, 2003 and 2002, respectively. The net change in the total valuation allowance
was $4.0 million and $(.1) million for the years ended December 31, 2003 and
2002, respectively.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets,
which consist of tax benefits primarily from net operating loss carryforwards,
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Of the total valuation
allowance of $58.8 million, subsequently recognized tax benefits, if any, in the
amount of $6.4 million will be applied directly to contributed capital.

At December 31, 2003, the Company had net operating loss carryforwards available
for U.S. and foreign tax purposes of approximately $144 million. These
carryforwards expire through 2023.

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

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119

NOTE 7. STOCKHOLDERS' EQUITY

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

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

As more fully discussed in Note 5, "Debt", on May 22, 2003, Secured Convertible
Notes totaling $1,750,000 were issued to E&C Capital Partners together with
certain affiliates of Michael S. Egan. The Secured Convertible Notes were
convertible at anytime into a maximum of approximately 19,444,000 shares of the
Company's common stock at a blended rate of $0.09 per share. In addition, E&C
Capital Partners was issued a warrant to acquire 3,888,889 shares of the
Company's common stock at an exercise price of $0.15 per share. The warrant was
exercisable at any time on or before May 22, 2013. Reference should be made to
Note 14, "Subsequent Events," for a discussion of theglobe.com's completion of a
private offering of its securities for aggregate consideration of $28,374,400
and the related conversion of the Secured Convertible Notes and the exercise of
the associated Warrant during the first quarter of 2004.

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

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

As a result of the issuance of the Series F Preferred Stock, the Series G
Automatically Converting Preferred Stock, the Secured Convertible Notes and the
associated warrants at their respective conversion and exercise prices, certain
anti-dilution provisions applicable to previously outstanding warrants to
acquire approximately 4,103,000 shares of the Company's Common Stock were
triggered. Like many types of warrants commonly issued, these outstanding
warrants to acquire shares of the Company's Common Stock included weighted
average anti-dilution provisions which result in a lowering of the exercise
price, and an increase in the number of warrants to acquire shares of the
Company's Common Stock any time shares of common stock are issued (or options or

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120

other securities exercisable or convertible into common stock) for a price per
share less than the then exercise price of the warrants. As a result of the
Preferred Stock Investment and the issuance of the Series G Preferred Stock and
the Secured Convertible Notes, the exercise price was lowered from approximately
$1.39 to $0.66 per share on these warrants and the number of shares issuable
upon exercise was proportionally increased from approximately 4,103,000 shares
to 6,836,000 shares. As of December 31, 2003, approximately 95% of such warrants
were beneficially owned by Michael S. Egan.

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

Reference should be made to Note 14, "Subsequent Events," for a discussion of
certain equity transactions during the first quarter of 2004, including the
conversion of the Series F Preferred Stock into Common Stock, the exercise of
the warrants issued in connection with the Series F Preferred Stock, as well as
other previously outstanding warrants.

NOTE 8. STOCK OPTION PLANS

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

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

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

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

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.

During the six months ended June 30, 2004, a total of 1,285,000 (unaudited)
stock options were granted pursuant to the plans described above. Options were
granted during 2003 for 4,407,450 shares of Common Stock, of which 500,000
options were granted pursuant to an individual nonqualified stock option
agreement and not pursuant to any of the plans described above. During 2002, a
total of 5,347,500 stock options were granted, of which 5,175,000 were granted
pursuant to individual nonqualified stock options agreements and not pursuant to
any of the plans described above.

The Company applies APB Opinion No. 25 in accounting for grants to employees
pursuant to stock option plans and, accordingly, compensation cost of
approximately $151,000 (unaudited) and $233,750 was recognized for stock options
granted to employees at exercise prices below fair market value during the six
months ended June 30, 2004 and in 2003, respectively. No stock options were

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121

granted to employees with exercise prices below fair market value during 2002.
In addition, approximately $17,200 (unaudited) and $152,884 of stock
compensation expense was recorded during the six months ended June 30, 2004 and
the year ended December 31, 2003, respectively, as a result of the accelerated
vesting of stock options issued to certain terminated employees. Compensation
cost recognized in connection with stock options granted in lieu of services
rendered by non-employees was $332,094 (unaudited), $225,609, and $13,000 for
the six months ended June 30, 2004, and the years ended December 31, 2003 and
2002, respectively.

On May 31, 2000, the Company offered to substantially all of its employees,
excluding executive officers and the Board of Directors, the right to cancel
certain outstanding stock options and receive new options with an exercise price
equal to the then current fair market value of the stock. Options to purchase a
total of approximately 1.1 million shares, approximately 20% of outstanding
options on that date, were canceled and approximately 856,000 new options were
granted at an exercise price of $1.594 per share, which was based on the closing
price of the Company's Common Stock on May 31, 2000. The new options vest at the
same rate that they would have vested under previous option plans. The Company
is accounting for these re-priced stock options using variable accounting in
accordance with FIN No. 44. In addition, as a result of options which were
granted within six months of the cancellations, an additional 244,000 options
also required variable accounting in accordance with FIN No. 44. For the year
ended December 31, 2003, approximately $30,933 of compensation expense was
recorded in connection with the re-priced stock options. There was no
compensation charge relating to the re-priced options during the six months
ended June 30, 2004 and 2003 and the year ended December 31, 2002. At June 30,
2004 and December 31, 2003, a total of 48,000 (unaudited) and 82,480 options,
respectively, remained outstanding which were being accounted for in accordance
with FIN No. 44. Depending upon movements in the market value of the Company's
Common Stock, this accounting treatment may result in significant non-cash
compensation charges in future periods.

Stock option activity during the periods indicated is as follows:

Weighted
Options Total Average
Vested Options Exercise Price
---------- ---------- --------------

Outstanding at December 31, 2001 3,104,349 $ 5.77

Granted 5,347,500 0.02
Exercised -- --
Canceled (2,480,409) 3.31
----------
Outstanding at December 31, 2002 5,870,749 5,971,440 0.63
==========
Granted 4,407,450 0.80
Exercised (429,000) 0.28
Canceled (7,080) 1.07
----------
Outstanding at December 31, 2003 8,475,232 9,942,810 0.72
=========
Granted (unaudited) 1,285,000 0.90
Exercised (unaudited) (489,000) 0.36
Canceled (unaudited) (816,110) 0.95
----------
Outstanding at June 30, 2004 (unaudited) 8,622,182 9,922,700 $ 0.74
========== ========== ==========

Options available at December 31, 2002 4,259,547
==========
Options available at December 31, 2003 1,359,177
==========
Options available at June 30, 2004 (unaudited) 597,787
==========

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122

The exercise price and weighted average lives of the outstanding and vested
stock options as of June 30, 2004 are as follows (Unaudited):

Options Outstanding Options Vested
------------------- --------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range Outstanding Life Price Vested Price
------------- ----------- -------- --------- --------- ---------
$ .02 -$ .02 4,875,000 8.1 $ 0.02 4,875,000 $ 0.02
.035- .035 200,000 7.9 0.035 200,000 0.035
.04 - .05 47,500 7.7 0.05 26,885 0.05
.14 - .14 105,000 8.8 0.14 105,000 0.14
.23 - .23 15,000 7.0 0.23 10,976 0.23
.38 - .42 250,000 9.9 0.39 72,500 0.39
.53 - .53 46,000 6.4 0.53 40,110 0.53
.56 - .56 1,650,000 8.9 0.56 1,650,000 0.56
.63 - .78 212,000 8.9 0.63 169,252 0.63
.90 - 1.06 840,000 9.6 0.99 528,593 1.00
1.14 - 1.29 428,500 8.0 1.24 250,538 1.24
1.33 - 1.47 212,500 9.2 1.41 97,813 1.41
1.50 - 1.52 526,500 9.3 1.50 121,815 1.50
1.59 - 1.59 23,700 5.7 1.59 23,700 1.59
1.72 - 2.50 38,500 6.9 2.25 38,500 2.25
4.50 - 6.69 332,500 4.2 4.69 332,500 4.69
15.75 -15.75 120,000 4.5 15.75 120,000 15.75
----------- ---------
9,922,700 8,663,182
=========== =========

The exercise price and weighted average lives of the outstanding and vested
stock options as of December 31, 2003 are as follows:

Options Outstanding Options Vested
------------------- --------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range Outstanding Life Price Vested Price
------------- ----------- -------- --------- --------- ---------
$ .02 -$ .02 4,875,000 8.6 $ 0.02 4,875,000 $ 0.02
.035- .035 230,000 8.4 0.035 230,000 0.035
.04 - .05 47,500 8.2 0.05 20,945 0.05
.14 - .14 230,000 9.3 0.14 230,000 0.14
.20 - .23 515,000 9.5 0.20 165,218 0.20
.53 - .53 53,200 6.9 0.53 37,635 0.53
.56 - .56 1,650,000 9.4 0.56 1,650,000 0.56
.63 - .80 302,000 9.4 0.66 217,126 0.65
1.14 - 1.29 408,500 9.7 1.25 183,346 1.25
1.32 - 1.49 272,500 9.7 1.40 133,125 1.39
1.50 - 1.52 806,500 9.8 1.50 183,375 1.50
1.59 - 1.59 34,610 6.2 1.59 32,773 1.59
1.62 - 2.50 65,500 8.3 1.99 64,189 1.99
4.50 - 6.69 332,500 4.7 4.69 332,500 4.69
15.75 -15.75 120,000 5.0 15.75 120,000 15.75
----------- ---------
9,942,810 8,475,232
=========== =========

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123

NOTE 9. COMMITMENTS AND CONTINGENCIES

NETWORK COMMITMENTS

The Company and its subsidiaries are a party to various network service
agreements which provide for specified services, including the use of secure
data transmission facilities, capacity and other network services. The term of
the agreements typically range from one to five years. Certain of the agreements
contain minimum usage commitments or early cancellation penalties. Commitments
under such network service agreements, including estimated minimum usage
commitments for certain contracts which have not yet fully commenced, are as
follows:

Year ending December 31:

2004 $ 3,549,000
2005 940,000
2006 911,000
2007 520,000
2008 332,000
Thereafter --
-----------
$ 6,252,000
===========

PURCHASE OBLIGATIONS

The Company has contractual purchase obligations to certain of its suppliers
providing for the purchase of certain equipment or services. As of December 31,
2003, the Company's unconditional purchase obligations totaled approximately
$3,412,000, which pursuant to the contract are due to be paid during 2004.

EMPLOYMENT AGREEMENTS

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

As discussed in Note 2, "Acquisitions and Disposition", as part of the May 2003
acquisition transaction of DPT, its former Chief Executive Officer agreed to an
employment agreement with a one-year term which automatically renews for an
additional year. Pursuant to the agreement, the employee served as the Vice
President of Network Operations at a base salary of $125,000 per annum. The
agreement also contains non-compete provisions during the term of the agreement
and for a period of three years following termination of the agreement, as
specified. Effective May 2004, the employee terminated his employment with the
Company.

In conjunction with the November 2002 acquisition of certain digital telephony
intangible assets, the Company entered into an employment agreement with the
Seller whereby he serves as Chief Technical Officer of theglobe.com. Per the
Agreement, he receives a base salary of $125,000 per annum and is subject to
significant non-compete provisions. The term of the employment agreement is
annual with renewal options and contains a severance provision which provides
base salary for the longer of the remaining term of the first year of the
agreement or six months.

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124

SEVERANCE AGREEMENT

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

OPERATING LEASES

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

Effective September 1, 2003, the Company entered into a sublease agreement for
office space with a company controlled by our Chairman. The lease term is for
five years with base rent of approximately $284,000 during the first year of the
sublease. Per the agreement, base rent increases by approximately $23,000 per
year thereafter. Rent expense for the year ended December 31, 2003, as noted in
the preceding paragraph included approximately $106,000 of expense related to
this sublease.

The approximate future minimum lease payments under noncancelable operating
leases with initial or remaining terms of one year or more at December 31, 2003,
were as follows:

2004 $ 306,000
2005 315,000
2006 338,000
2007 206,000
2008 1,000
Thereafter --
-------------
$ 1,166,000
=============

Effective June 4, 2004, the Company entered into a sublease agreement for
additional office space in the same building housing its corporate headquarters.
The lease term is for two years with base rent of approximately $250,000 during
the first year of the sublease. The Company has the option of extending the
sublease for an additional period of 54 months. Per the agreement, the base rent
increases by approximately $11,100 per year, including the option period.

In addition, the Company entered into a lease agreement for warehouse space
effective June 1, 2004. The lease term is for two years with base rent of
approximately $33,000 and $34,000 during the first and second years of the
lease, respectively.

TERMINATION OF 401(K) PLAN

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

LETTER OF CREDIT

At June 30, 2004, the Company had $20,000 (unaudited) in outstanding standby
letters of credit used to support an agreement with one of its
telecommunications carriers. As of December 31, 2003, the Company had
approximately $20,000 in outstanding standby letters of credit used to support
inventory purchases.

LITIGATION

On and after August 3, 2001 and as of the date of this filing, six putative
shareholder class action lawsuits were filed against the Company, certain of its
current and former officers and directors, and several investment banks that
were the underwriters of the Company's November 23, 1998 initial public offering
and its May 19, 1999 secondary offering. The lawsuits were filed in the United
States District Court for the Southern District of New York. The complaints
against the Company have been consolidated into a single action and a
Consolidated Amended Complaint, which is now the operative complaint, was filed
on April 19, 2002.

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125

The lawsuit purports to be a class action 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. The action seeks damages in an unspecified
amount.

The action is being coordinated with approximately 300 other nearly identical
actions filed against other companies. On July 15, 2002, the Company moved to
dismiss all claims against it and the Individual Defendants. On October 9, 2002,
the Court dismissed the Individual Defendants from the case without prejudice
based on stipulations of dismissal filed by the plaintiffs and the Individual
Defendants. On February 19, 2003, the Court denied the motion to dismiss the
complaint against the Company. The Company has approved a Memorandum of
Understanding ("MOU") and related agreements which set forth the terms of a
settlement between the Company, the plaintiff class and the vast majority of the
other approximately 300 issuer defendants. Among other provisions, the
settlement contemplated by the MOU 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. It is anticipated that any potential financial
obligation of the Company to plaintiffs pursuant to the terms of the MOU and
related agreements will be covered by existing insurance. Therefore, the Company
does not expect that the settlement will involve any payment by the Company. The
MOU and related agreements are subject to a number of contingencies, including
the negotiation of a settlement agreement and its approval by the Court. We
cannot opine as to whether or when a settlement will occur or be finalized and,
consequently, are unable at this time to determine whether the outcome of the
litigation will have a material impact on our results of operations or financial
condition in any future period.

The Answer to the Complaint, with counterclaims, was served on October 20, 2003,
denying plaintiff's allegations of improper and unlawful conduct in their
entirety. The parties reached an amicable resolution of this matter, including a
mutual release of all claims, which was filed with the Court in April 2004.

NOTE 10. RELATED PARTY TRANSACTIONS

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

As discussed more fully in Note 14, Subsequent Events, in connection with a
demand convertible promissory note in the amount of $2,000,000 due the Company's
Chairman and his spouse, the Company paid interest totaling approximately
$17,500 (unaudited) during the six months ended June 30, 2004.

Interest expense on the $1,750,000 Convertible Notes due E&C Capital Partners
together with certain affiliates of our Chairman totaled approximately $108,200,
excluding the amortization of the discount on the Notes, during the year ended
December 31, 2003. The interest remained unpaid at December 31, 2003, and was
included in accrued expenses in the accompanying consolidated balance sheet. As
a result of the conversion of the $1,750,000 Convertible Notes into the
Company's Common Stock in March 2004, all interest accrued, including
approximately $32,000 (unaudited) related to the first quarter of 2004, had been
paid by June 30, 2004.

F-26

126

During the six months ended June 30, 2004, the Company paid approximately
$151,200 (unaudited) to an entity controlled by the Chairman's son-in-law for
the production of a commercial advertisement.

Several entities controlled by our Chairman have provided services to the
Company and two of its subsidiaries, including: the lease of office and
warehouse space; and the outsourcing of customer service and warehouse functions
for the Company's VoIP operation. During the six months ended June 30, 2004 and
the year ended December 31, 2003, a total of approximately $338,700 (unaudited)
and $383,000 of expense was recorded related to these services, respectively.
Approximately $70,000 related to these services was included in accounts payable
and accrued expenses at December 31, 2003.

In addition, as of June 30, 2004, the Company had advanced approximately $11,000
to a newly formed entity in which E&C Capital Partners has an ownership
interest. The Company is currently negotiating an agreement with the entity
whereby the entity would provide marketing services to theglobe.com's VoIP
telephony services division.

STOCKHOLDERS' AGREEMENT

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

NOTE 11. SEGMENTS AND GEOGRAPHIC INFORMATION

The Company applies the provisions of SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information", which establishes annual and interim
reporting standards for operating segments of a company. SFAS No. 131 requires
disclosures of selected segment-related financial information about products,
major customers and geographic areas. Effective with the May 2003 acquisition of
DPT, the Company is now organized in two operating segments for purposes of
making operation decisions and assessing performance: the computer games
division and the VoIP telephony services division. The computer games division
consists of the operations of the Company's Computer Games print magazine and
the associated website Computer Games Online (www.cgonline.com) and the
operations of Chips & Bits, Inc., its games distribution business. The VoIP
telephony services division is principally involved in the sale of
telecommunications services over the Internet to consumers and other
telecommunications service providers.

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, cash equivalents and marketable securities. There are no
intersegment sales. The accounting policies of the segments are the same as
those for the Company as a whole.

F-27

127

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

Six Months Ended June 30, Year Ended December 31,
-------------------------- --------------------------
2004 2003 2003 2002
------------ ----------- ------------ -----------
(Unaudited)

NET REVENUE:
Computer games and other $ 1,474,874 $ 2,147,188 $ 4,736,032 $ 7,245,276
VoIP telephony services 207,353 196,904 548,081 --
------------ ----------- ------------ -----------
$ 1,682,227 $ 2,344,092 $ 5,284,113 $ 7,245,276
============ =========== ============ ===========

INCOME (LOSS) FROM OPERATIONS:
Computer games and other $ (312,011) $ (102,636) $ 120,907 $ (411,626)
VoIP telephony services (6,766,254) (385,413) (5,116,437) (1,196)
Corporate expenses (2,002,442) (1,249,461) (3,817,549) (2,527,966)
------------ ----------- ------------ -----------
Loss from operations (9,080,707) (1,737,510) (8,813,079) (2,940,788)
Other income (expense), net (936,952) (1,701,608) (2,221,318) 338,127
------------ ----------- ------------ -----------
Consolidated loss before income tax $(10,017,659) $(3,439,118) $(11,034,397) $(2,602,661)
============ =========== ============ ===========

DEPRECIATION AND AMORTIZATION:
Computer games and other $ 4,788 $ 44,209 $ 62,208 $ 85,327
VoIP telephony services 516,399 13,518 258,334 --
Corporate 13,506 1,241 9,200 3,253
------------ ----------- ------------ -----------
$ 534,693 $ 58,968 $ 329,742 $ 88,580
============ =========== ============ ===========

CAPITAL EXPENDITURES:
Computer games and other $ 26,607 $ -- $ -- $ 32,250
VoIP telephony services 1,633,397 149,054 2,366,047 --
Corporate 36,521 15,036 58,744 --
------------ ----------- ------------ -----------
$ 1,696,525 $ 164,090 $ 2,424,791 $ 32,250
============ =========== ============ ===========

June 30, December 31,
------------ --------------------------
2004 2003 2002
------------ ------------ -----------
(Unaudited)

IDENTIFIABLE ASSETS:
Computer games and other $ 1,717,614 $ 1,957,714 $ 2,602,834
VoIP telephony services 7,394,084 4,251,082 164,960
Corporate assets 19,137,320 963,282 279,191
------------ ------------ -----------
$ 28,249,018 $ 7,172,078 $ 3,046,985
============ ============ ===========

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

During the six months ended June 30, 2004, there were no customers that
accounted for over 10% of consolidated net revenue. A single customer of the
Computer Games magazine accounted for approximately 13% (unaudited) consolidated
net revenue during the six months ended June 30, 2003.

F-28

128

NOTE 12. VALUATION AND QUALIFYING ACCOUNTS - ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance
At Additions Additions Balance
Beginning Due To Charged To At End Of
Period Ended, Of Period Acquisitions Expense Deductions Period
----------------- ---------- ------------- ----------- ----------- ----------

June 30, 2004
(Unaudited) $ 112,986 $ -- $ 121,509 $ (1,188) $ 233,307

December 31, 2003 $ 128,613 $ -- $ 114,888 $ (130,515) $ 112,986

December 31, 2002 $3,203,295 $ -- $ -- $(3,074,682) $ 128,613

NOTE 13. SUMMARY OF QUARTERLY FINANCIAL INFORMATION - (UNAUDITED)

Quarter Ended
-------------------------------
June 30, March 31,
2004 2004
-------------- ---------------
Net revenue $ 826,230 $ 855,997
Operating expenses 6,128,867 4,634,067
Loss from operations (5,302,637) (3,778,070)
Net loss (5,355,961) (4,661,698)
Net loss applicable to common
stockholders (5,355,961) (4,661,698)

Basic and diluted net loss per
share $ (0.04) $ (0.07)

Quarter Ended
----------------------------------------------------------
December 31, September 30, June 30, March 31,
2003 2003 2003 2003
-------------- --------------- ------------ -----------

Net revenue $ 1,492,237 $ 1,447,784 $ 1,101,810 $1,242,282
Operating expenses 6,239,271 3,776,319 2,295,895 1,785,707
Loss from operations (4,747,034) (2,328,535) (1,194,085) (543,425)
Net loss (5,077,665) (2,517,614) (2,757,371) (681,747)
Net loss applicable to common
stockholders (5,077,665) (10,137,614) (2,757,371) (1,181,747)

Basic and diluted net loss per
share $ (0.10) $ (0.23) $ (0.09) $ (0.04)

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

F-29

129

Quarter Ended
------------------------------------------------------------
December 31, September 30, June 30, March 31,
2002 2002 2002 2002
-------------- --------------- ------------- ------------

Net revenue $ 2,009,701 $ 1,698,278 $ 1,684,942 $ 1,852,355
Operating expenses 1,873,157 2,225,921 3,330,776 2,756,210
Income (loss) from operations 136,544 (527,643) (1,645,834) (903,855)
Net income (loss) 16,922 (492,046) (1,633,429) (506,108)
Net loss applicable to common
stockholders 16,922 (492,046) (1,633,429) (506,108)

Basic and diluted net loss per
share $ -- $ (0.02) $ (0.05) $ (0.02)

NOTE 14. SUBSEQUENT EVENTS

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

An allocation of the proceeds received from the issuance of the Bridge Note was
made between the debt instrument and the Warrant by determining the pro rata
share of the proceeds for each by comparing the fair value of each security
issued to the total fair value. The fair value of the Warrant was determined
using the Black Scholes model. The fair value of the Bridge Note was determined
by measuring the fair value of the Common Shares on an "as-converted" basis. As
a result, $170,000 (unaudited) 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 (unaudited), which was recorded as interest
expense in the accompanying unaudited consolidated statement of operations for
the six months ended June 30, 2004 as the Bridge Note was immediately
convertible into common shares. In addition, the value allocated to the Warrant
and characterized as discount on the Bridge Note was recognized as interest
expense, as the Bridge Note was due on demand.

In March 2004, theglobe.com completed a private offering of 333,816 units (the
"Units") for a purchase price of $85 per Unit (the "Private Offering"). Each
Unit consisted of 100 shares of the Company's Common Stock, $0.001 par value
(the "Common Stock"), and warrants to acquire 50 shares of the Company's Common
Stock (the "Warrants"). The Warrants are exercisable for a period of five years
commencing 60 days after the initial closing at an initial exercise price of
$0.001 per share. The aggregate number of shares of Common Stock issued in the
Private Offering was 33,381,647 shares for an aggregate consideration of
$28,374,400, or approximately $0.57 per share assuming the exercise of the
16,690,824 Warrants. As of June 30, 2004, approximately 11,607,000 (unaudited)
of the Warrants remain outstanding.

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

F-30

130

The securities offered were not registered under the Securities Act of 1933 and
may not be offered or resold in the United States absent registration or an
applicable exemption from such registration requirements. Pursuant to the terms
of the Private Offering, the Company filed a registration statement relating to
the resale of the Securities on April 16, 2004 which became effective on May 11,
2004.

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

Pursuant to the Company's Stockholder Rights Agreement (the "Agreement") dated
November 12, 1998, the Company's Board of Directors authorized and declared a
dividend consisting of a stock purchase right (a "Right") for each outstanding
share of the Company's then outstanding Common Stock and all new shares of
Common Stock issued, as defined by the Agreement. In general, each Right
entitles the holder the right, under certain circumstances, to purchase one
one-thousandth of a share of the Company's Junior Participating Preferred Stock,
subject to adjustment as defined by the Agreement. The Rights were intended to
have various anti-takeover effects, including causing substantial dilution to
any person or any group of persons that attempts to acquire the Company on terms
not approved by our Board of Directors. In connection with the Agreement, on
April 13, 2004, the Board of Directors of the Company adopted a resolution
amending the Certificate of Designation of the Corporation increasing the number
of shares of the Company's Junior Participating Preferred Stock from 100,000
shares to 250,000 shares.

On May 6, 2004, the Company entered into an agreement with an Internet-based
business which provides for the payment of commissions to the business based
upon the number of new customer leads and revenue generated from such customers.
The agreement also provides for the payment of certain cash and stock bonuses,
including the issuance of up to a maximum of 3,000,000 shares of the Company's
Common Stock, in the event that certain business objectives, mainly related to
the acquisition of a significant number of new customer leads, are achieved by
the business. The Company has not issued any shares of its Common Stock to-date
and has accrued an aggregate of approximately $156,000 (unaudited) on its
balance sheet as of June 30, 2004 in connection with the bonus consideration.

Acquisition (unaudited)

F-31

131

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

On August 8, 2002, we dismissed our independent public accountants, KPMG LLP
("KPMG"), and engaged Rachlin Cohen & Holtz LLP ("Rachlin Cohen") as our new
independent public accountants. This change was approved by our Board of
Directors.

The audit reports issued by KPMG on our consolidated financial statements as of
and for the years ended December 31, 2001 and December 31, 2000, did not contain
any adverse opinion or a disclaimer of opinion, and were not qualified or
modified, as to uncertainty, audit scope or accounting principles, except as
follows:

KPMG's report on the consolidated financial statements of theglobe.com, inc. and
subsidiaries as of and for the years ended December 31, 2001 and 2000, contained
a separate paragraph stating "the Company has suffered recurring losses from
operations since inception that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty".

During fiscal years ended December 31, 2001 and December 31, 2000, and the
subsequent interim period from January 1, 2002 through our dismissal of KPMG on
August 8, 2002, there were no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to KPMG's satisfaction,
would have caused KPMG to make reference to the subject matter of the
disagreement in connection with its reports on our consolidated financial
statements for such years; and there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.

The Company furnished KPMG with a copy of its Report on Form 8-K relating to the
foregoing change in accountants and requested KPMG to furnish it with a letter
addressed to the Securities and Exchange Commission ("Commission") stating
whether it agrees with the statements set forth above. A copy of KPMG's letter
to the Commission dated August 13, 2002 was filed as an exhibit on Form 8-K on
August 13, 2002 and as an exhibit on Form 10-K for the fiscal year ended
December 31, 2002 filed on March 31, 2003.

During the fiscal years ended December 31, 2001 and December 31, 2000 and
through August 8, 2002, we did not consult with Rachlin Cohen with respect to
the application of accounting principles to a specified transaction, or the type
of audit opinion that might be rendered on our consolidated financial
statements, or any other matters or events described in Item 304(a)(2)(i) and
(ii) of Regulation S-K.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form SB-2 with the Securities and
Exchange Commission relating to the securities offered by this prospectus. This
prospectus does not contain all of the information provided in the registration
statement and the exhibits and schedules to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance we
refer you to the copy of the contract or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference. For further information with respect to us and the securities
offered by this prospectus, we refer you to the registration statement,
exhibits, and schedules.

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

132

130,396,940 SHARES

COMMON STOCK

PROSPECTUS

[LOGO] theglobe.com

September __, 2004

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

133

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the offering, including Post-Effective Amendment No.
1, all of which are to be borne by the Company, are as follows:

SEC Registration Fee* $ 16,301
Printing Expenses* 11,800
Accounting Fees and Expenses* 18,500
Legal Fees and Expenses 336,500
Registrar and Transfer Agent Fee* 2,500
Miscellaneous* 5,000
--------
Total* $390,601

* ESTIMATED

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

On November 14, 2002, the Company acquired certain Voice over Internet Protocol
("VoIP") assets from Brian Fowler (now Chief Technology Officer of the Company)
in exchange for the issuance of warrants to acquire 1,750,000 shares of the
Company's common stock and the potential to earn a warrant to acquire an
additional 425,000 shares as part of an earn-out arrangement. The performance
targets for the warrants to acquire an additional 425,000 shares were not met
and expired on December 31, 2003. The exercise price of the warrants is $0.065
and the warrants are exercisable at anytime before November 12, 2012.

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

On May 28, 2003, the Company acquired Direct Partner Telecom, Inc. ("DPT"), a
company engaged in VoIP telephony services. DPT was a specialized international
communications carrier providing VoIP communications services to emerging
countries. The purchase price consisted of 1,375,000 shares of theglobe.com
common stock and warrants to purchase an additional 500,000 shares of common
stock, together with the ability to earn additional warrants to purchase up to
an additional 2,750,000 shares. The performance targets for the first 500,000 of
these earn-out warrants were not achieved and expired on March 31, 2004. Subject
to certain qualifications, the warrants will also accelerate and be deemed
earned in the event of a "change in control" of the Company, as defined in the
acquisition documents. The initial warrants (and any additional warrants if and
to the extent earned) have an exercise price of $.72 per share and expire on May
22, 2013.

134

On July 2, 2003, the Company completed a private offering of Series G Preferred
Stock for an aggregate purchase price of approximately $8.7 million. In
accordance with the terms of such Preferred stock, the Series G Preferred shares
converted into common stock at $0.50 per share (or an aggregate of approximately
17.4 million shares) upon the filing of an amendment to the Company's
certificate of incorporation to increase its authorized shares of Common Stock
from 100,000,000 shares to 200,000,000 shares. Such an amendment was filed on
July 29, 2003. Investors also received warrants to acquire approximately 3.5
million shares of common stock. The warrants are exercisable for a period of
five years at an exercise price of $1.39 per common share. The exercise price of
the warrants, together with the number of warrants issuable upon exercise, are
subject to adjustment upon the occurrence of certain events. The purpose of the
Series G Preferred Stock offering was to raise funds for use primarily in the
Company's VoIP telephony services business, including the deployment of
networks, website development, marketing, and limited capital infrastructure
expenditures and working capital. The investors in the Series G Preferred Stock
Offering, together with the former stockholders of DPT, are entitled to one
demand registration right commencing in July 2004.

In addition, the Egans were issued a warrant to acquire 204,082 shares of
theglobe.com 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 Egans are entitled
to certain demand and piggy-back registration rights in connection with their
investment. The exercise price of the warrant (together with the number of
shares for which such warrant is exercisable) is subject to adjustment upon the
occurrence of certain events.

On March 11, 2004, theglobe.com, inc. completed a private offering of 329,916
units (the "Units") for a purchase price of $85 per Unit (the "PIPE Offering").
Each Unit consisted of 100 shares of the Company's common stock and warrants to
acquire 50 shares of the common stock (the "PIPE Warrants"). The PIPE Warrants
are exercisable for a period of five (5) years commencing May 4, 2004 at an
initial exercise price of $.001 per share. The Company also granted an option to
one party to acquire an additional 3,900 Units on or before March 22, 2004 on
the same terms, which option was fully exercised. Assuming the exercise of the
PIPE Warrants, the aggregate number of shares of common stock issued in the PIPE
Offering was 50,072,471 shares for an aggregate consideration of $28,374,400, or
approximately $.57 per share.

Halpern Capital, Inc., acted as placement agent for the PIPE offering, and was
paid a commission of $1.2 million and issued a warrant to acquire 1,000,000
shares of common stock at $.001 per share.

Pursuant to the terms of the PIPE Offering the Company was contractually
obligated to file a registration statement relating to the resale of the
Securities on or about April 22, 2004 and to cause such registration statement
to become effective before on or about July 6, 2004 (or 30 days earlier if such
registration statement is not reviewed by the SEC). In the event the Company was
late in any of its registration obligations, it would have been liable for
payment of a late fee of 5% of the amount raised in the PIPE Offering per month
(not to exceed 25% in the aggregate), unless such fee was waived under certain
conditions. Any such late fee would have been payable in either cash or
additional shares of Common Stock (valued for such purpose at $.57 per share),
or any combination of the two, at the option of the Company.

In connection with the PIPE Offering, Mr. Egan, our Chairman, Chief Executive
Officer and principal stockholder, together with certain of his affiliates and
other parties, converted the $2,000,000 Bridge Note, an aggregate of $1,750,000
of Secured Convertible Notes and all of the Company's outstanding shares of
Series F Preferred Stock, and exercised all of the warrants issued in connection
with the foregoing Secured Convertible Notes and Series F Preferred Stock,
together with certain warrants issued to Dancing Bear Investments (an affiliate
of Mr. Egan). As a result of such conversions and exercises, the Company issued
an aggregate of approximately 48.75 million shares of Common Stock.

On May 6, 2004, the Company entered into an agreement with NeoPets, Inc. which
provides for certain marketing and advertising services associated with the
Company's voiceglo VoIP services on NeoPets website. As part of the
consideration for such services, the Company agreed to issue up to 3,000,000
shares in various stages upon the attainment of certain business objectives. The
Company agreed to certain registration rights relating to the shares issued or
issuable and agreed to cause the registration of such shares.

All of the foregoing private offerings or acquisitions were directed solely to a
limited number of investors who are sophisticated and, with the exception of the
November 2002 acquisition from Brian Fowler, who are accredited within the
meaning of applicable securities laws. The Company believes that such offers and
sales were exempt from registration pursuant to Sections 4(2) of the Securities
Act of 1933 and Regulation D promulgated thereunder.

135

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

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

Except as provided by law, the Preferred Stock will vote with the holders of
common stock on all matters on an "as-converted" basis, other than the Capital
Amendment described below as to which it will not vote. The Preferred Stock will
automatically convert into shares of theglobe's common stock on a 1 for 100
basis at such time as theglobe files an amendment to its certificate of
incorporation with the Delaware Secretary of State's Office to increase its
authorized shares of common stock from 200,000,000 to at least 300,000,000 (the
"Capital Amendment"). theglobe intends to seek shareholder authorization for
such amendment at its annual meeting of stockholders anticipated to be held in
November 2004. Five of the former shareholders of SendTec (whom collectively
received approximately 82% of the shares of common stock issued in the Merger,
together with theglobe's Chairman, Michael Egan (together with certain
affiliates which he controls), have agreed to vote (or have granted proxies to
so vote) in favor of the Capital Amendment. Together with such former SendTec
shareholders and Mr. Egan control the vote over approximately 69.25 million of
theglobe's 156 million issued and outstanding shares of common stock (after
giving affect to the shares of common stock which were issued in the Merger).
The Capital Amendment will be approved if the holders of a majority of the
outstanding shares of common stock vote in its favor.

136

The Company has agreed to file a registration statement relating to the resale
of the shares of common stock issued in the Merger and the shares of common
stock underlying the Preferred Stock on or before January 29, 2005 and to cause
the effectiveness of such registration on or before September 1, 2005. The
Company also agreed to keep the registration effective until at least the third
anniversary of the Closing. Pursuant to the terms of the Merger, in general, the
common stock and Preferred Stock (and the underlying shares of common stock)
issued in the Merger may not be sold or otherwise transferred for a period of
one (1) year without the prior written consent of the Company.

The Merger Securities issued or issuable in the SendTec Acquisition were
directed solely to the approximately 35 shareholders of SendTec. The Company
believes that the SendTec shareholders were, either alone or with their
representatives in the merger, sophisticated and further that substantially all
of the SendTec shareholders were accredited, within the meaning of such terms
under applicable securities laws. Consequently, the Company believes that such
offers and sales of the Merger Securities were exempt from registration pursuant
to Sections 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
promulgated thereunder.

137

ITEM 27. EXHIBITS

NO. ITEM

3.1 Form of Fourth Amended and Restated Certificate of Incorporation of the
Company (3).

3.2 Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation.**

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.**

3.4 Certificate relating to Previously Outstanding Series of Preferred Stock and
Relating to the Designation, Preferences and Rights of the Series F Preferred
Stock (14).

3.5 Certificate of Amendment Relating to the Designation Preferences and Rights
of the Junior Participating Preferred Stock.**

3.6 Form of By-Laws of the Company. **

3.7 Certificate of Amendment Relating to the Designation Preferences and Rights
of the Series H Automatically Converting Preferred Stock (18).

4.1 Registration Rights Agreement, dated as of September 1, 1998(5).

4.2 Amendment No.1 to Registration Rights Agreement, dated as of April 9,
1999(6).

4.3 Specimen certificate representing shares of Common Stock of the Company (4).

4.4 Amended and Restated Warrant to Acquire Shares of Common Stock (2).

4.5 Form of Rights Agreement, by and between the Company and American Stock
Transfer & Trust Company as Rights Agent (3).

4.6 Form of Warrant dated November 12, 2002 to acquire shares of Common Stock
(9).

4.7 Form of Warrant dated March 28, 2003 to acquire shares of Common Stock (14).

4.8 Form of Warrant dated May 28, 2003 to acquire an aggregate of 500,000 shares
of theglobe.com Common Stock (10).

4.9 Form of Warrant dated July 2, 2003 to acquire securities of theglobe.com,
inc. (11).

4.10 Form of Warrant dated March 5, 2004 to acquire securities of theglobe.com,
inc. (17).

4.11 Form of Warrant relating to potential issuance of Earn-out Consideration
(18).

5.1 Opinion of Proskauer Rose LLP**

10.1 Form of Indemnification Agreement between the Company and each of its
Directors and Executive Officers (1).

10.2 Lease Agreement dated January 12, 1999 between the Company and Broadpine
Realty Holding Company, Inc.(6).

10.3 2000 Broad Based Stock Option Plan (7).

10.4 1998 Stock Option Plan, as amended (6).

10.5 1995 Stock Option Plan (1).

10.6 Employee Stock Purchase Plan (5).

10.7 Technology Purchase Agreement dated November 12, 2002, among theglobe.com,
inc., and Brian Fowler (9).

10.8 Employment Agreement dated November 12, 2002, among theglobe.com, inc. and
Brian Fowler (9).

10.9 Payment Agreement dated November 12, 2002, among theglobe.com, inc.,
1002390 Ontario Inc., and Robert S. Giblett (9).

138

10.10 Release Agreement dated November 12, 2002, among theglobe.com, inc. and
certain other parties named therein (9).

10.11 Preferred Stock Purchase Agreement dated March 28, 2003 between
theglobe.com, inc. and E&C Capital Partners, LLLP. (14).

10.12 Loan and Purchase Option Agreement dated February 25, 2003 (13).*

10.13 Amended and Restated Promissory Note (13).*

10.14 Form of Stock Purchase Agreement (13).*

10.15 Note Purchase Agreement dated May 22, 2003 between theglobe.com, inc. and
E&C Capital Partners, LLLP and certain other investors named therein (10)

10.16 Agreement and Plan of Merger dated May 23, 2003 between theglobe.com,
inc., DPT Acquisition, Inc., Direct Partner Telecom, Inc., and the stockholders
thereof (10).

10.17 Employment Agreement dated May 28, 2003 between theglobe.com and James
Magruder (10).

10.18 Form of Subscription Agreement relating to the purchase of Units of Series
G Preferred Stock and Warrants of theglobe.com, inc. (11).

10.19 Employment Agreement dated August 1, 2003 between theglobe.com, inc. and
Michael S. Egan (12).

10.20 Employment Agreement dated August 1, 2003 between theglobe.com, inc. and
Edward A. Cespedes (12).

10.21 Employment Agreement dated August 1, 2003 between theglobe.com, inc. and
Robin Segaul Lebowitz (12).

10.22 Amended & Restated Non-Qualified Stock Option Agreement effective as of
August 12, 2002 between theglobe.com, inc. and Michael S. Egan (12).

10.23 Amended & Restated Non-Qualified Stock Option Agreement effective as of
August 12, 2002 between theglobe.com, inc. and Edward A. Cespedes (12).

10.24 Amended & Restated Non-Qualified Stock Option Agreement effective as of
August 12, 2002 between theglobe.com, inc. and Robin Segaul Lebowitz (12).

10.25 Non-Qualified Stock Option Agreement dated as of July 17, 2003 between
theglobe.com, inc. and Kellie L. Smythe (12).

10.26 2003 Sales Representatives Stock Option Plan (12).

10.27 Securities Purchase and Registration Agreement dated March 2, 2004
relating to the purchase of Units of Common Stock and Warrants of theglobe.com,
inc. (15)

10.28 Amendment to the Service Order Agreement Terms and Conditions dated July
30, 2003, and October 24, 2003 between XO Communications, Inc. and Direct
Partner Telecom, Inc., including XO Services Terms and Conditions.(15)*

10.29 Agreement dated August 7, 2003 by and between Promotion and Display
Technology, Ltd. and theglobe.com, inc. (15) *

10.30 Broad Capacity Services Agreement dated October 17, 2003 by and between
Direct Partner Telecom, Inc. and Progress Telecom Corporation. (15)*

10.31 Agreement and Plan of Merger dated August 31, 2004 by and between
theglobe.com, inc., SendTec Acquisition Corporation and SendTec, Inc., among
others (18).

10.32 Employment Agreement dated September 1, 2004 by and between SendTec, Inc.
and Paul Soltoff (18).

10.33 Stockholders' Agreement dated September 1, 2004 by and between
theglobe.com and certain named stockholders (18).

10.34 theglobe.com 2004 Stock Option Plan. ***

10.35 Promissory Note dated September 1, 2004 (18).

139

10.36 Form of Potential Conversion Note relating to Series H Preferred Stock
(18).

16. Letter dated August 13, 2002 from KPMG LLP relating to change of independent
certified accountants (8).

21. Subsidiaries **

23.1 Consent of Rachlin Cohen & Holtz LLP. ***

23.2 Consent of Proskauer Rose LLP (included in Exhibit 5.1) **

23.3 Consent of Gregory, Sharer & Stuart, P.A. ***

24. Power of Attorney (16)

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

1. Incorporated by reference from our registration statement on Form S-1
filed July 24, 1998 (Registration No. 333-59751).

2. Incorporated by reference from our Form S-1/A filed August 20, 1998.

3. Incorporated by reference from our Form S-1/A filed September 15, 1998.

4. Incorporated by reference from our Form S-1/A filed October 14, 1998.

5. Incorporated by reference from our Form 10-K for the year ended December
31, 1998 filed March 30, 1999.

6. Incorporated by reference from our Form S-1 filed April 13, 1999.

7. Incorporated by reference from our Form 10-Q for the quarter ended March
31, 2000 dated May 15, 2000.

8. Incorporated by reference from our Form 8-K filed August 13, 2002.

9. Incorporated by reference from our Form 8-K filed on November 26, 2002.

10. Incorporated by reference from our Form 8-K filed on June 6, 2003.

11. Incorporated by reference from our Form 8-K filed on July 11, 2003.

12. Incorporated by reference from our Form 10-QSB filed on November 14, 2003.

13. Incorporated by reference from our Form 8-K filed on March 3, 2003.

14. Incorporated by reference from our Form 10-K filed on March 31, 2003.

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

16. Included on the signature page to this registration statement.

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

18. Incorporated by reference from our Form 8-K filed to report events dated
August 31, 2004 and September 1, 2004.

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

** Previously filed

*** Filed herewith

140

ITEM 28. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:

(i) include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) reflect in the prospectus any facts or events which, individually or in the
aggregate, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and

(iii) include any additional or changed material information with respect to the
plan of distribution.

(2) That, for the purpose of determining liability under the Securities Act,
each such post effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

141

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has caused this Post Effective Amendment No. 1 to the Form SB-2
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Fort Lauderdale, State of Florida, on the 17 of
September, 2004.

theglobe.com, inc.

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

Pursuant to the requirements of the Securities Act of 1933, this Post Effective
Amendment No. 1 to the Form SB-2 Registration Statement has been signed by the
following persons in the capacities and on the date indicated.

/s/ Michael S. Egan September 17, 2004
----------------------------------------------
Michael S. Egan, Chief Executive
Officer and Director
(Principal Executive Officer)

/s/ Edward A. Cespedes September 17, 2004
----------------------------------------------
Edward A. Cespedes, Director

/s/ Robin Segaul Lebowitz September 17, 2004
----------------------------------------------
Robin Segaul Lebowitz, Director

/s/ Paul Soltoff September 17, 2004
----------------------------------------------
Paul Soltoff, Director

/s/ Albert J. Detz September 17, 2004
----------------------------------------------
Albert J. Detz, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)

142

EXHIBIT INDEX