Edgar Filing: THEGLOBE COM INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

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

FOR THE TRANSITION PERIOD FROM _______________ TO ___________________

COMMISSION FILE NO. 0-25053

theglobe.com, inc.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

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

(954) 769 - 5900

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No

The number of shares outstanding of the Registrant's Common Stock, $.001 par
value (the "Common Stock"), as of August 6, 2003 was 49,249,793.

theglobe.com, inc.

FORM 10-QSB

INDEX

PART I FINANCIAL INFORMATION

Page
----

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets at June 30, 2003
(unaudited) and December 31, 2002 1

Unaudited Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 2003 and 2002 2

Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2003 and 2002 3

Notes to Unaudited Condensed Consolidated Financial Statements 4

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11

Item 3. Controls and Procedures 31

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 32

Item 2. Changes in Securities and Use of Proceeds 32

Item 3. Defaults Upon Senior Securities 32

Item 4. Submission of Matters to a Vote of Security Holders 32

Item 5. Other Information 33

Item 6. Exhibits and Reports on Form 8-K 34

A. Exhibits
B. Reports on Form 8-K

Signatures 35

PART I FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

theglobe.com, inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31,
2003 2002
------------- -------------
(UNAUDITED) (NOTE 1(C))
ASSETS
Current assets:

Cash and cash equivalents ....................................... $ 2,460,278 $ 725,422
Accounts receivable, net ........................................ 931,332 1,247,390
Inventory, net .................................................. 374,019 363,982
Prepaid and other current assets ................................ 208,956 331,114
------------- -------------
Total current assets ......................................... 3,974,585 2,667,908

Intangible assets ............................................... 533,710 164,960
Goodwill ........................................................ 554,315 --
Property and equipment, net ..................................... 481,236 174,117
Other assets .................................................... 47,000 40,000
------------- -------------

Total assets ................................................. $ 5,590,846 $ 3,046,985
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................ $ 1,206,377 $ 1,395,929
Accrued expenses and other current liabilities .................. 565,504 447,189
Deferred revenue ................................................ 159,361 169,519
Current portion of long-term debt ............................... 1,589,332 123,583
------------- -------------
Total current liabilities .................................... 3,520,574 2,136,220

Long-term debt ....................................................... 187,852 87,852
Stock subscription deposits .......................................... 1,494,500 --
------------- -------------

Total liabilities ............................................ 5,202,926 2,224,072
------------- -------------

Stockholders' equity:
Common stock .................................................... 32,582 31,082
Preferred stock, at liquidation value ........................... 500,000 --
Additional paid-in capital ...................................... 221,230,190 218,310,565
Common stock, 699,281 common shares, held in treasury, at cost .. (371,458) (371,458)
Accumulated deficit ............................................. (221,003,394) (217,147,276)
------------- -------------
Total stockholders' equity ................................... 387,920 822,913
------------- -------------
Total liabilities and stockholders' equity ................... $ 5,590,846 $ 3,046,985
============= =============

See accompanying notes to unaudited condensed consolidated financial statements.

theglobe.com, inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
UNAUDITED UNAUDITED
------------------------------- -------------------------------
Net revenue:

Advertising ..................................... $ 477,986 $ 580,415 $ 1,024,855 $ 1,248,258
Electronic commerce and other ................... 780,910 1,833,375 1,892,391 3,695,555
Telephony services .............................. 196,904 -- 196,904 --
------------ ------------ ------------ ------------
Total net revenue .......................... 1,455,800 2,413,790 3,114,150 4,943,813

Cost of revenue .................................... 895,704 1,564,945 1,742,942 3,168,066
------------ ------------ ------------ ------------

Gross profit .................................. 560,096 848,845 1,371,208 1,775,747

Operating expenses:
Sales and marketing ............................. 628,737 1,021,143 1,196,380 2,086,521
Product development ............................. 234,098 192,312 387,809 378,511
General and administrative ...................... 891,346 1,281,224 1,524,530 1,860,404
------------ ------------ ------------ ------------
Total operating expenses ............................ 1,754,181 2,494,679 3,108,719 4,325,436
------------ ------------ ------------ ------------
Loss from operations ................................ (1,194,085) (1,645,834) (1,737,511) (2,549,689)
------------ ------------ ------------ ------------
Other income (expense), net:
Interest income (expense), net .................. (1,508,327) 1,987 (1,511,648) 5,429
Other income (expense), net ..................... (54,959) 7,015 (189,959) 404,020
------------ ------------ ------------ ------------
Other income (expense), net ......................... (1,563,286) 9,002 (1,701,607) 409,449
------------ ------------ ------------ ------------
Loss before income tax benefit ...................... (2,757,371) (1,636,832) (3,439,118) (2,140,240)
Income tax benefit .................................. -- (3,403) -- (703)
------------ ------------ ------------ ------------
Net loss ............................................ $ (2,757,371) $ (1,633,429) $ (3,439,118) $ (2,139,537)
============ ============ ============ ============
Basic and diluted net loss per common share ......... $ (0.09) $ (0.05) $ (0.13) $ (0.07)
============ ============ ============ ============
Weighted average basic and diluted shares outstanding 31,721,684 31,081,574 31,403,397 31,081,574
============ ============ ============ ============

See accompanying notes to unaudited condensed consolidated financial statements.

theglobe.com, inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX-MONTHS ENDED JUNE 30,
-----------------------------
2003 2002
----------- -----------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................................... $(3,439,118) $(2,139,537)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................................... 58,968 43,090
Non-cash interest expense ....................................................... 1,483,708 --
Reserve against amounts loaned to Internet venture .............................. 255,000 --
Contributed officer compensation ................................................ 100,000 --
Compensation related to non-employee stock options .............................. 11,750 --
(Gain) loss on sale of property and equipment ................................... -- (5,322)
Gain on sale of Happy Puppy assets .............................................. -- (134,500)
Non-cash favorable settlements of liabilities ................................... (64,207) (261,927)
Stock options granted in connection with termination ............................ -- 13,500

Changes in operating assets and liabilities, net of acquisition and dispositions:
Inventory, net .................................................................. (10,037) 83,713
Accounts receivable, net ........................................................ 470,496 290,444
Prepaid and other current assets ................................................ 123,200 727,814
Other assets .................................................................... 40,000 --
Accounts payable ................................................................ (219,903) 110,300
Accrued expenses and other current liabilities .................................. 109,383 (258,815)
Deferred revenue ................................................................ (10,158) (41,330)
----------- -----------

Net cash used in operating activities ............................................... (1,090,918) (1,572,570)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities ..................................... -- 639
Proceeds from sale of property and equipment .................................... -- 11,500
Cash acquired in acquisition of business ........................................ 60,948 --
Amounts loaned to Internet venture .............................................. (295,000) --
Purchases of property and equipment ............................................. (164,090) (29,010)
Payment of security deposits / escrow ........................................... (7,000) --
Net proceeds from sale of Happy Puppy assets .................................... -- 134,500
----------- -----------

Net cash provided by (used in) investing activities ................................. (405,142) 117,629
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing on notes payable ...................................................... 1,750,000 --
Proceeds from issuance of preferred stock ....................................... 500,000 --
Deposits on stock subscriptions ................................................. 1,494,500 --
Proceeds from exercise of common stock options .................................. 4,375 --
Payments on long-term debt, notes payable and capital lease obligations ......... (517,959) (1,530)
----------- -----------

Net cash provided by (used in) financing activities ................................. 3,230,916 (1,530)
----------- -----------
Net change in cash and cash equivalents ....................................... 1,734,856 (1,456,471)
Effect of exchange rate changes on cash and cash
equivalents ................................................................. -- 4,017
Cash and cash equivalents at beginning of period .................................... 725,422 2,563,828
----------- -----------
Cash and cash equivalents at end of period .......................................... $ 2,460,278 $ 1,111,374
=========== ===========

See accompanying notes to unaudited condensed consolidated financial statements.

theglobe.com, inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of theglobe.com

theglobe.com, inc. (the "Company" or "theglobe") was incorporated on
May 1, 1995 (inception) and commenced operations on that date.
theglobe.com was an online property with registered members and users
in the United States and abroad which allowed its users to personalize
their online experience by publishing their own content and interacting
with others having similar interests. However, due to the decline in
the advertising market, the Company was forced to take cost-reduction
and restructuring initiatives, which included closing its community
www.theglobe.com effective August 15, 2001. The Company then began to
aggressively seek buyers for some or all of its remaining online and
offline properties, which consisted primarily of games-related
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 (see Note 4).

Effective June 1, 2002, Chairman Michael S. Egan and Director Edward A.
Cespedes became Chief Executive Officer and President of the Company,
respectively. As of June 30, 2003, 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 online and
offline games properties, including continuing to operate the
properties or selling some or all of the properties.

As of June 30, 2003, 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; the sale of its Computer Games
magazine through newsstands and subscriptions; and the sale of Voice
over the Internet Protocol ("VoIP") telephony services. The Company's
primary business focus at the present time is the development and
commercialization of its VoIP telephony services under the brand name
"voiceglo."

On February 25, 2003, the Company 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. As of June 30, 2003, $295,000
has been advanced to this venture.

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, none of which have been attained as of
June 30, 2003. In conjunction with the acquisition, E&C Capital
Partners, a privately held investment vehicle 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 a new series of preferred securities. That investment closed on
March 28, 2003. (See Note 5).

The Company's December 31, 2002 consolidated financial statements have
been prepared assuming the Company will continue as a going concern. We
have received a report from our independent accountants containing an
explanatory paragraph stating that we have suffered recurring losses
from operations since inception that raise substantial doubt about our
ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.

(b) Principles of Consolidation

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

The unaudited interim condensed consolidated financial statements of
the Company as of June 30, 2003 and for the three and six months ended
June 30, 2003 and 2002 included herein have been prepared in accordance
with the instructions for Form 10-QSB under the Securities Exchange Act
of 1934, as amended, and Article 10 of Regulation S-X under the
Securities Act of 1933, as amended. Certain information and note
disclosures normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations
relating to interim condensed consolidated financial statements.

In the opinion of management, the accompanying unaudited interim
condensed consolidated financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present
fairly the financial position of the Company at June 30, 2003 and the
results of its operations for the three and six months ended June 30,
2003 and 2002 and its cash flows for the six months ended June 30, 2003
and 2002.

The results of operations for such periods are not necessarily
indicative of results expected for the full year or for any future
period. These financial statements should be read in conjunction with
the audited financial statements as of December 31, 2002, and for the
three years then ended and related notes included in the Company's Form
10-K filed with the Securities and Exchange Commission.

(d) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles 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 and other factors.
Actual results could differ from those estimates.

(e) Cash and Cash Equivalents

The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. The Company
had no cash equivalents at June 30, 2003 or December 31, 2002.

(f) Comprehensive Loss

The Company's comprehensive loss for the three and six month periods
ended June 30, 2003 and 2002 was the same as the net loss reported for
the same periods on the accompanying unaudited condensed consolidated
statements of operations. The Company had no accumulated other
comprehensive loss as of December 31, 2002.

(g) Inventory

Inventories, consisting of products available for sale, are recorded
using the average cost method and valued at the lower of cost or market
value. The Company's provision for obsolete inventory as of June 30,
2003 and December 31, 2002 was approximately $103,000 and $100,000,
respectively.

(h) 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 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 from the sale of international minutes of calling
time over the Internet.

Advertising revenues for the games information magazine are recognized
at the on-sale date of the magazine. Sales from the online store are
recognized as revenue when the product is shipped to the customer.
Freight out costs are included in net sales and have not been
significant to date. The Company provides an allowance for merchandise
sold through its online store. The allowance provided to date has not
been significant.

rata basis over the subscription term. Revenues from the Company's
share of the proceeds from its e-commerce partners' sales are
recognized upon notification from its partners of sales attributable to
the Company's sites, and to date, have been immaterial.

Telephony services revenue is recognized when all of the following
criteria are met: persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the seller's
price to the buyer is fixed or determinable and collectibility is
reasonably assured.

(i) Concentration of Credit Risk

Financial instruments, which subject the Company to concentrations of
credit risk, consist primarily of cash and cash equivalents and trade
accounts receivable. The Company maintains its cash and cash
equivalents with various financial institutions. 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.

For the three and six months ended June 30, 2003 and 2002, there were
no customers that accounted for over 10% of net revenue generated by
the Company.

(j) Net loss per share

Basic and diluted net loss per share were computed by dividing net loss
applicable to common stockholders by the weighted average number of
shares of common stock outstanding for each period presented. 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 share calculation due to the anti-dilutive effect.
Such potentially dilutive securities and common stock equivalents
consisted of the following for the three and six month periods ended
June 30:

2003 2002
---------- ----------

Options to purchase common stock ............. 8,220,000 3,344,000
Common shares issuable upon conversion of
Series F Preferred Stock ................. 16,667,000 --
Common shares issuable upon conversion of
Convertible Notes ........................ 19,444,000 --
Common shares issuable upon conversion of
Warrants ................................. 19,508,000 4,012,000
---------- ----------
Total ........................................ 63,839,000 7,356,000
========== ==========

Net loss attributable to common stockholders was calculated as follows:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------

Net loss .......................... $(2,757,371) $(1,633,429) $(3,439,118) $(2,139,537)
Preferred conversion feature
Of preferred stock ........... -- -- (500,000) --
----------- ----------- ----------- -----------
Net loss attributable to common
stockholders ................ $(2,757,371) $(1,633,429) $(3,939,118) $(2,139,537)
=========== =========== =========== ===========

(k) Segment Reporting

The Company applies the provisions of Statement of Financial Accounting
Standards ("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. With
the May 2003 acquisition of DPT, the Company is now organized in two
operating segments for purposes of making operating decisions and
assessing performance: computer games properties and VoIP telephony
services. The chief operating decision maker evaluates performance,
makes operating decisions and allocates resources based on financial
data consistent with the presentation in the accompanying condensed
consolidated financial statements. Separate segment disclosures have
not been presented due to their immateriality. The Company expects to
present segment disclosures beginning with the third quarter of 2003.

The Company's historical revenues have been earned primarily from
customers in the United States. DPT's net revenue was attributable to
the sale of telephony services outside of the United States. Telephony
services revenue attributable to services provided to customers with
operations in Thailand represented over 10% of consolidated net revenue
for the three months ended June 30, 2003. All significant operations
and assets of the Company are based in the United States.

(l) Recent Accounting Pronouncements

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. The Company believes that the
adoption of this standard will not have a material impact on the
Company's results of operations or financial position.

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 instruments 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 Company believes that the adoption
of this standard will not have a material impact on the Company's
results of operations or financial position.

(2) STOCK OPTIONS

On May 31, 2000, the Company offered to substantially all of its
employees, excluding executive officers and the Board of Directors, the
right to amend 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 amended 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 require variable
accounting in accordance with FIN No. 44. For the three and six months
ended June 30, 2003, there was no compensation charge relating to the
re-pricing due to the decrease in value of the common stock price.
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.

A total of 2,375,000 stock options were granted during the six months
ended June 30, 2003, including grants of 80,000 stock options to
non-employees. Compensation expense of $11,750 was recognized during
the six months ended June 30, 2003 with respect to non-employee stock
options. A total of 125,000 stock options were exercised and 1,500
stock options were cancelled during the six months ended June 30, 2003.

The Company estimates the fair value of each stock option at the grant
date by using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 2003: no dividend
yield; an expected life of five years; 160% expected volatility and
3.00% risk free interest rate.

In accordance with SFAS No. 123, the Company applies Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," to account for stock-based awards granted to employees.
Accordingly, no compensation cost was recognized for employee stock
options in the accompanying unaudited condensed consolidated financial
statements. Had the Company determined compensation cost based on the
fair value at the grant date for its employee stock options issued
under SFAS No. 123, the Company's net loss for the three and six months
ended June 30, 2003 would have increased to the pro forma amounts
below. No material grants or vesting of employee stock options occurred
during the three and six month periods ended June 30, 2002, thus pro
forma information for those periods has been omitted.

Period ended June 30, 2003, Three Months Six Months
------------- -------------
Net loss:

As reported ......................... $ (2,757,371) $ (3,439,118)
Pro forma ........................... (3,805,000) (4,487,000)

Basic and diluted loss per common share:
As reported ......................... $ (0.09) $ (0.13)
Pro forma ........................... (0.12) (0.16)

(3) LITIGATION

On and after August 3, 2001 and as of the date of this filing, six
putative shareholder class action lawsuits were filled 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.

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 compliant
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 and the plaintiff class. It is
anticipted that any potential financial obligations of the Company to
plaintiffs due 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 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.

In addition, subsequent to the quarter ended June 30, 2003, an action
was commenced against one of the Company's subsidiaries. Global
Communication 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, on
July 3, 2003. Plaintiff is the former employer of Michelle Nelson, a
consultant of Direct Partner Telecom, Inc. ("DPT"), a subsidiary of the
Company. 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 assets 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 is currently due to be filed on August 27,
2003. Defendants deny plaintiff's allegations of improper and unlawful
conduct in their entirety and intend to vigorously defend against these
claims. At the present time, we are unable 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.

(4) ACQUISITIONS AND DISPOSITION

Acquisition of Direct Partner Telecom, Inc.

On May 28, 2003, the Company acquired Direct Partner Telecom, Inc.
("DPT"), a company engaged in VoIP telephony services internationally,
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. 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 (in
thousands):

Cash .............................. $ 61
Accounts receivable .............. 155
Fixed assets ...................... 196
Non-compete agreement ............. 375
Goodwill .......................... 554
Assumed debt to former shareholders (600)
Other assumed liabilities ........ (103)
-----
Purchase price ................... $ 638
=====

As part of the 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 contains 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 is being amortized on a straight-line basis over 5 years.
Annual amortization expense of the non-compete agreement is estimated
to be $43,750 in 2003; $75,000 in 2004 through 2007; and $31,250 in
2008. The related accumulated amortization as of June 30, 2003, was
$6,250.

The following unaudited pro forma condensed consolidated results of
operations for the three and six months ended June 30, 2003, assumes
the acquisition occurred as of October 1, 2002, the date which DPT
began operations. There would be no change to the unaudited condensed
consolidated results of operations of the Company for the three and six
month periods ended June 30, 2002. 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.

Period ended June 30, 2003, Three Months Six Months
------------ -----------

Revenue ................................................ $ 1,798,000 $ 3,906,000
Net Loss .............................................. (2,782,000) (3,526,000)
Basic and diluted loss per common share ................ $ (0.09) $ (0.13)

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 and matures on December
12, 2003. 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 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 2,000,000 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. As of June 30, 2003,
$295,000 has been advanced to this venture. Due to the uncertainty of
collectibility of the Loan, as it is to a development stage business,
the Company has set up a reserve for all of the Loan except the $40,000
attributable to the acquisition should the Company exercise the Option.
The amount of the reserve, $255,000 was included in other expense in
the accompanying statement of operations for the six months ended June
30, 2003.

Disposition

On February 27, 2002 the Company sold to Internet Game Distribution,
LLC all of the assets used in connection with the Happy Puppy website.
The total consideration received was $135,000. 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. The Company
recognized a gain on the sale of $134,500, in the first quarter of
2002.

(5) OTHER EVENTS

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 "Convertible Notes") in the aggregate principal amount of
$1,750,000. The Convertible Notes are 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 Convertible Notes have
a one year maturity date, which may be extended at the option of the
holders of the Convertible Notes for periods aggregating two years, and
are secured by a pledge of substantially all of the assets of the
Company. The Convertible Notes bear interest at the rate of ten percent
per annum, payable semi-annually. At the election of the holders of the
Convertible Notes, interest may be payable in shares of the Company's
common stock.

In addition, E&C Capital Partners was issued a warrant ("Warrant") to
acquire 3,888,889 shares of the Company's common stock at an exercise
price of $0.15 per share. The Warrant is exercisable at any time on or
before May 22, 2013. The conversion prices of the Convertible Notes and
the exercise price of the Warrant, together with the number of shares
for which the Warrant is exercisable, are subject to adjustment upon
the occurrence of certain events, including downward adjustment on a
weighted-average basis in the event the Company should issue securities
in the future at a purchase price below the respective conversion
prices and exercise price of the Convertible Notes and Warrant.

An allocation of the proceeds received from the issuance of the
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 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 Convertible Notes was calculated by comparing
the fair value of the underlying common shares of the Convertible Notes
on the date of issuance to the "effective" conversion price. This
resulted in a

preferential conversion discount, limited to the previously discounted
value of the Convertible Notes, of $1,459,500, which was recorded as
interest expense in the accompanying unaudited condensed consolidated
statements of operations as the Convertible Notes were immediately
convertible into common shares.

On November 14, 2002, E & C Capital Partners, a privately held
investment holding company owned by Michael S. Egan, our Chairman and
CEO and a major shareholder, 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 (the "Preferred Stock 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 is subject to adjustment upon the occurrence of
certain events, including downward adjustment on a weighted-average
basis in the event the Company should issue 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 16,667,000 shares of
Common Stock could be issued. The Series F Preferred Stock has a
liquidation preference of $1.50 per share (and thereafter participates
with the holders of Common Stock on an "as-converted" basis), will pay
a dividend at the rate of 8% per annum and entitles 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
theglobe.com Common Stock at an exercise price of $0.125 per share. The
warrant is 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.

At the time of issuance of the preferred shares, an allocation of
proceeds received was made between the Series F Preferred Stock and the
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
F Preferred Stock was determined by measuring the fair value of the
common shares on an as converted basis. 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 to the 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, has been 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
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 theglobe.com common stock were triggered. Like many
types of warrants commonly issued, these outstanding warrants to
acquire shares of the Company's common stock include 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 anytime shares of common stock are issued
(or options or other securities exercisable or convertible into common
stock) for a price per share less than the then exercise price of the
warrants. As a result of the Preferred Stock Investment and the
issuance of the Convertible Notes, the exercise price was lowered from
approximately $1.39 to $0.68 per share on these warrants and the number
of shares issuable upon exercise was proportionally increased from
approximately 4,103,000 shares to 6,588,000 shares. The total number of
warrants outstanding as of June 30, 2003, including those issued in the
Preferred Stock Investment, the Convertible Notes and as a result of
the acquisition of DPT (including 3,175,000 certain earn-out warrants),
is approximately 19,508,000 (this total excludes the warrants issued
pursuant to the Series G Automatically Converting Preferred Stock
offering described in Note 6).

(6) SUBSEQUENT EVENTS

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 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 a total of 3,472,000 shares of
Common Stock will be issuable upon exercise of the associated warrants.
As of June 30, 2003, approximately $1,495,000 was received by the
Company and recorded in the accompanying condensed consolidated balance
sheet as stock subscription deposits.

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

FORWARD LOOKING STATEMENTS

The following Management's Discussion and Analysis of Financial
Condition and Results of Operations or Plan of Operation contains
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements can be identified by the use
of predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "plans," "may,"
"intends," "will," or similar terms. Investors are cautioned that any
forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results
may differ materially from those projected in the forward-looking
statements as a result of various factors described under "Risk
Factors" and elsewhere in this report. The following discussion should
be read together in conjunction with the accompanying unaudited
condensed consolidated financial statements and related notes thereto
and the audited consolidated financial statements and notes to those
statements contained in the Annual Report on Form 10-K for the year
ended December 31, 2002.

OVERVIEW AND PLAN OF OPERATION

As of June 30, 2003, the Company was involved in two business segments:
computer games properties and Voice over Internet Protocol ("VoIP")
telephony services. The games properties 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. Each of our games properties specializes in the
games business by delivering games information and selling games in the
United States and abroad. Our newly created VoIP operations include
Direct Partner Telecom, Inc. ("DPT"), an international licensed
telecommunications carrier engaged in the purchase and resale of
telecommunications services over the Internet and our new retail VoIP
service offering, voiceglo. DPT was acquired on May 28, 2003, 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. Management of the Company continues to actively explore a number
of strategic alternatives for its online and offline game properties,
including continuing to operate the properties or selling some or all
of the game properties.

As of June 30, 2003, 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.; through the sale of our games information magazine through
newsstands and subscriptions; and from the resale of international
minutes of calling time over the Internet.

On July 2, 2003, theglobe.com, inc. completed a private offering of a
newly created series of preferred stock known as the "Series G
Automatically Converting Preferred Stock" for an aggregate purchase
price of approximately $8.7 million. In accordance with the terms of
such Preferred Stock, the Series G Preferred shares converted into
common stock at $0.50 per share (or an aggregate of approximately 17.4
million shares) upon the filing of an 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 5 years at an exercise price
of $1.39 per common share. The purpose of the Private Offering was to
raise funds for use primarily in the Company's planned voiceglo
business, including the deployment of networks, website development,
marketing, and limited capital infrastructure expenditures and working
capital. Proceeds may also be used in connection with theglobe's other
existing or future business operations. Pursuant to the terms of the
Private Offering the Company is contractually obligated, subject to
certain limitations, to register the securities upon demand anytime
commencing one year after the sale of the securities.

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 "Convertible Notes") in the aggregate principal amount of
$1,750,000. The Convertible Notes are 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 Convertible Notes have
a one year maturity, which may be extended at the option of the holders
of the Convertible Notes for periods aggregating two years, and are
secured by a pledge of substantially all of the assets of the Company.
The Convertible Notes bear interest at the rate of ten percent per
annum, payable semi-annually. At the election of the holders of the
Convertible Notes, interest may be payable in shares of the Company's
common stock.

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 is exercisable at any
time on or before May 22, 2013. The conversion prices of the
Convertible Notes and the exercise price of the Warrant, together with
the number of shares for which the Warrant is exercisable is subject to
adjustment upon the occurrence of certain events, including downward
adjustment on a weighted-average basis in the event the Company should
issue securities in the future at a purchase price below the respective
conversion prices and exercise price of the Convertible Notes and
Warrant.

On March 28, 2003, E & C Capital Partners, a privately held investment
vehicle owned by our Chairman and Chief Executive Officer, Michael S.
Egan and our President, Edward A. Cespedes, signed a Preferred Stock
Purchase Agreement to provide new financing in the amount of $500,000
through the purchase of a new series of preferred securities (the
"Preferred Stock 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 is subject to
adjustment upon the occurrence of certain events, including downward
adjustment on a weighted-average basis in the event the Company should
issue 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 16,667,000 shares of Common Stock could be issued. The
Series F Preferred Stock has a liquidation preference of $1.50 per
share, will pay a dividend at the rate of 8% per annum and entitles 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 theglobe.com Common Stock at an exercise price of $0.125 per share.
The warrant is exercisable at any time on or before March 28, 2013. E &
C Capital Partners is entitled to certain demand registration rights in
connection with the Convertible Note and Preferred Stock Investments..

On November 14, 2002, we acquired certain VoIP assets. Our plans
regarding these VoIP assets are described below. We issued 1,750,000
warrants to acquire shares of our Common Stock in conjunction with the
closing of this acquisition. The Company also issued 425,000 warrants
to acquire shares of Common Stock as part of an earn-out arrangement.
These warrants are held in escrow by the Company and will only be
released upon attainment of certain performance targets.

Our VoIP Business

During the third quarter of 2003, theglobe.com intends to enter the
telephone business with a phone system based upon "Voice over the
Internet Protocol" or "VoIP." The Company's longer term objective is to
become a leading provider of feature-rich, voice communications
products and services delivered over the Internet. The Company's
acquisition of VoIP assets in November 2002 and its acquisition of DPT
in May 2003 have enabled the Company to establish the foundation for
its VoIP telephone business. At present, the Company is preparing the
launch of various products using the "voiceglo" brand name. The
products are intended to allow consumers and business enterprises to
communicate using VoIP for significantly reduced pricing compared to
traditional telephony networks. We are developing and intend to also
offer traditional telephony services with our VoIP services, such as
voicemail, caller id, call forwarding, and call waiting, as well as
incremental services that are not currently supported by the public
switched telephone network (such as the ability to use numbers remotely
and voice to email services).

Our voiceglo service is planned as a full-featured, full-service
alternative to the public switched telephone network (PSTN) available
to homes and enterprises with either broadband or dial-up (56K minimum)
Internet access. Our plans call for subscribers to be able to use
voiceglo service just like they would their traditional telephone
service. Calls made and received by subscribers will be carried over
their Internet connections and interconnect with the PSTN using
voiceglo's call signaling technology. The Company has applied for
patent protection for this technology, however, we cannot predict
whether a patent will be issued for this technology. Subscribers will
be issued traditional phone numbers, or alternatively, subscribers may
"port" or transfer their existing phone numbers to the voiceglo
service. Subscribers will be listed, unless they choose to be unlisted,
in the traditional PSTN "411" directory and in voiceglo's proprietary
directory. The Company's remote local number service will allow
subscribers to choose phone numbers from any area codes serviced by
voiceglo, allowing customers to keep phone numbers "for life," even if
they move. It will also allow them a local presence in areas where they
do not reside.

The voiceglo service is designed to be easy to use and mobile. As part
of entering into a minimum one year service contract, we intend to
offer at no-charge to subscribers a USB handset (a simple phone that
plugs into a personal computer's USB port) which can only be operated
using the voiceglo service. Additionally, the service can be used with
a personal computer's microphone and speakers, with any wi-fi enabled
device equipped with a speaker and microphone, or with existing
traditional phones with use of an adapter developed by the Company. We
anticipate that our subscribers will be able to log into their service
from any Internet connection in the world to make calls to their local
area code and receive calls made to their voiceglo phone numbers.

All calls to and between voiceglo subscribers will be free because they
are delivered over the Internet. Calls placed by voiceglo subscribers
to the public switched telephone network in the United States and
Canada will either be at a competitive low per minute rate or will be
"free" depending upon the voiceglo product offering selected by the
subscriber. International calling will also be at competitive rates.

Our VoIP products are subject to continuing development by the Company
and management continues to evaluate its business plans for these
proposed services. We expect to utilize substantial capital in
launching and expanding our VoIP operations and the Company may need to
raise additional capital to fully exploit its business plans for these
services. There are a number of significant risks to entry into, and
the conduct of business in, this market, including current and proposed
governmental regulation, potential taxation of services and many of the
risks detailed below under "Risk Factors."

RESULTS OF OPERATIONS

Three Months Ended June 30, 2003 Compared to the Three Months Ended
June 30, 2002

NET REVENUE. Net revenue totaled $1.5 million for the second quarter of
2003 as compared to $2.4 million in the same quarter of the prior year.
The $1.0 million decline in total net revenue was primarily
attributable to decreases in advertising, electronic commerce and other
net revenue, partially offset by net revenue generated by our telephony
services business.

Advertising revenue from the sale of print advertisements in our games
magazine was $0.5 million, or 33%, of total net revenue for the three
months ended June 30, 2003 versus $0.6 million, or 24%, of total net
revenue for the three months ended June 30, 2002. Barter advertising
revenue represented approximately 2% and 1% of total net revenue for
the second quarter of 2003 and 2002, respectively. The decrease in
advertising revenue was principally the result of the continued
weakness in the advertising market.

Electronic commerce and other net revenue is principally comprised of
sales of video games and related products through Chips & Bits, Inc.
and sales of the Company's Computer Games magazine through newsstands
and subscriptions. Sales through the online store accounted for $0.3
million, or 23%, of total net revenue for the second quarter of 2003 as
compared to $0.8 million, or 35%, of total net revenue for the same
period of 2002. The $0.5 million decrease was primarily the result of
recent advances and releases in 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 and profits. Net
revenue attributable to the sale of our games information magazine was
$0.4 million, or 31%, of total net revenue for the second quarter of
2003 as compared to $1.0 million, or 41%, of total net revenue for the
second quarter of 2002. The decline in net revenue from the sale of our
games magazine as compared to the second quarter of 2002 was primarily
the result of a decrease in the volume of subscriptions and a $0.2
million write-down of newsstand receivables.

Net revenue from telephony services totaled $0.2 million for the three
months ended June 30, 2003. As part of the Company's strategy to enter
the VoIP business, the Company acquired DPT on May 23, 2003, an
international licensed telecommunications carrier engaged in the
purchase and resale of telecommunications services over the Internet
internationally. Telephony services net revenue is derived principally
from the charges to customers for international call completion and is
dependent on the volume of minutes utilized.

COST OF REVENUE. Cost of revenue related to our games properties
consists primarily of Internet connection charges, personnel costs,
depreciation and maintenance costs of website equipment, printing costs
of our games magazine and the costs of merchandise sold and shipping
fees in connection with our online store. Cost of revenue of our games
properties totaled $0.7 million and $1.6 million in the second quarter
of 2003 and 2002, respectively. Gross margins of the Company's games
properties were 44% and 35% for the three months ended June 30, 2003
and 2002, respectively. The period-to-period increase in gross margins
of the games properties was primarily attributable to a higher
concentration of revenue derived from print advertisements in the games
magazine during the second quarter of 2003. Cost of revenue associated
with 2003 second quarter telephony services totaled $0.2 million and
consists primarily of termination and circuit costs.

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 $0.6 million and $1.0 million for the three
months ended June 30 2003 and 2002, respectively. The decrease in sales
and marketing expense as compared to the second quarter of 2002 was
principally the result of the 48% decline in net revenue attributable
to our games properties, and the corresponding decreases in commissions
expense and agency subscriptiion expense, partially offset by $0.1
million of expenses incurred in preparation for our launch of voiceglo,
our VoIP product.

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 product, voiceglo.
Product development expenses of $0.2 million remained relatively
unchanged from the same quarter of the prior year as the decrease in
product development expenses attributable to our games properties was
more than offset by consulting and website development expenses related
to our VoIP telephone service to be launched in the third quarter of
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 $0.9 million for the three
months ended June 30, 2003, as compared to $1.3 million for the same
quarter of 2002. In the second quarter of 2002, severance benefits of
$0.7 million were incurred by the Company in connection with the
termination of our former Chief Executive Officer, Charles Peck.
Excluding the impact of the 2002 severance benefits, general and
administrative expenses rose $0.3 million in comparison to the second
quarter of the prior year. An increase in headcount and legal expenses,
as well as other support costs, directly attributable to the Company's
new line of business, VoIP telephony services, were the principal
factors contributing to the increase in general and administrative
expenses.

INTEREST INCOME (EXPENSE), NET. Non-cash interest expense of $1.5
million was recorded in the 2003 second quarter related to the
beneficial conversion feature of the $1,750,000 in Convertible Notes
(the "Convertible Notes") issued on May 22, 2003. This expense resulted
as the 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 Convertible Notes and is being
amortized to interest expense over the term of the Convertible Notes.

OTHER INCOME (EXPENSE), NET. Other expense for the three months ended
June 30, 2003, includes an increase of $0.1 million in the reserve
against amounts loaned to a development stage Internet venture by the
Company, partially offset by the favorable settlement of amounts
previously in dispute with a vendor of Chips and Bits, Inc.

INCOME TAXES. No tax benefit was recorded for the three months ended
June 30, 2003. Due to the uncertainty surrounding the timing or
realization of the benefits of our net operating loss carryforwards in
future periods, we have recorded a 100% valuation allowance against our
otherwise recognizable deferred tax assets. At December 31, 2002, the
Company had net operating loss carryforwards available for U.S. and
foreign tax purposes of approximately $134 million. These carryforwards
expire through 2021. 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 the third quarter of 1997 and May
1999, as defined in the Internal Revenue Code of 1986, as amended,
future utilization of our net operating loss carryforwards prior to the
change of ownership will be subject to certain limitations or annual
restrictions. Additionally, any future ownership change could further
limit or eliminate the ability to use these carryforwards.

Six Months Ended June 30, 2003 Compared to the Six Months Ended June
30, 2002

NET REVENUE. Net revenue totaled $3.1 million for the six months ended
June 30, 2003 compared to $4.9 million for the six months ended June
30, 2002. The $1.8 million decrease in net revenue in comparison to the
first half of 2002 was principally the result of declines of $1.0
million in sales of games products by Chips and Bits, Inc., $0.9
million in sales of the computer games magazine and $0.2 million in
print advertisements, partially offset by the $0.2 million in telephony
services net revenue generated by DPT. Revenue from barter transactions
represented approximately 2% of total net revenue in the first half of
2003 as compared to approximately 1% of total net revenue in the same
period of the prior year.

COST OF REVENUE. Cost of revenue was $1.7 million and $3.2 million for
the six months ended June 30, 2003 and 2002, respectively. The $1.4
million decrease in cost of revenue as compared to the first half of
2002 was directly attributable to the lower level of revenue generated
from the sale of computer games, from the sale of print advertisements
in the computer games magazine and from subscription and newsstand
sales of the computer games magazine in the first six months of 2003,
partially offset by the $0.2 million in cost of revenue related to
telephone services. Gross margins of the Company's games properties
were 47% and 36% for the first six months of 2003 and 2002,
respectively. The increase in gross margins of the Company's games
properties was primarily the result of a shift in the mix of net
revenues to print advertising which represented 33% of total net
revenue for the first half of 2003 versus 25% for the same period of
the prior year.

SALES AND MARKETING. Sales and marketing expenses totaled $1.2 million
for the first six months of 2003, a decline of $0.9 million, or 43%,
from the $2.1 million for the first six months of 2002. The 41%
reduction in net revenue generated by the Company's games properties in
the first half of 2003 as compared to the same period of the prior
year, and the corresponding decreases in commissions expense and agency
subscription expense, were the principal factors contributing to the
decrease in sales and marketing expenses.

PRODUCT DEVELOPMENT. Product development expenses totaled $0.4 million
in both the first half of 2003 and 2002. A $0.1 million decline in
website, editorial, content and other development costs incurred by the
Company's games properties was more than offset by the $0.1 million in
consulting and website development expenses related to our VoIP
telephone service scheduled to be launched in the third quarter of
2003.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses of $1.5 million for the first six months of 2003 decreased
$0.3 million, or 18%, from the $1.9 million for the same period of
2002. During the second quarter of 2002,

severance benefits of $0.7 million were incurred by the Company in
connection with the termination of our former Chief Executive Officer,
Charles Peck. Excluding the impact of the 2002 severance benefits,
general and administrative expenses increased $0.4 million in the first
half of 2003 primarily due to increases in headcount and legal
expenses, as well as other support costs, directly attributable to the
Company's new VoIP telephony services business.

INTEREST INCOME (EXPENSE), NET. As discussed in the comparison of the
second quarter of 2003 versus 2002, non-cash interest expense of $1.5
million recorded in the 2003 second quarter was related to the
beneficial conversion feature of the $1,750,000 in Convertible Notes
issued on May 22, 2003. The expense resulted as the 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 Convertible Notes and is being amortized to interest
expense over the term of the Convertible Notes.

OTHER INCOME (EXPENSE), NET. Other expense, net of $0.2 million was
reported for the first half of 2003 as compared to other income, net of
$0.4 million for the same period of the prior year. Other expense in
2003 includes reserves against the amounts loaned by the Company to a
development stage Internet related business venture totaling $0.3
million, partially offset by $0.1 million in favorable vendor
settlements. Other income in 2002 included $0.3 million in favorable
vendor settlements, as well as the $0.1 million gain on the sale of
Happy Puppy assets.

INCOME TAXES. As was the case in the second quarter of 2003, no tax
benefit was recorded for the first six months of 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.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2003, we had approximately $2.5 million in cash and cash
equivalents as compared to $0.7 million as of December 31, 2002. Net
cash used in operating activities was $1.1 million and $1.6 million,
for the six months ended June 30, 2003 and 2002, respectively. The
period-to-period decrease in net cash used in operating activities
resulted primarily from a decrease in our net operating losses,
exclusive of the non-cash interest expense recorded in the first half
of 2003 as a result of the beneficial conversion feature of the $1.75
million in Convertible Notes and associated warrants issued in May
2003, as well as other non-cash charges and gains recorded in 2003 and
2002.

Net cash of $0.4 million was used in investing activities during the
first six months of 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, 2003,
approximately $0.3 million has been advanced to the venture. The
Company incurred $0.2 million in capital expenditures during the first
half of 2003, largely as a result of the launch of its VoIP telephone
service planned for the third quarter of 2003. Partially offsetting
these uses of funds in the first six months of 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. An additional 2,750,000
warrants may be issued if certain performance or other criteria are
satisfied. Net cash provided by investing activities during the first
six months of 2002 was $0.1 million resulting from the sale of the
assets of the Happy Puppy website.

Net cash provided by financing activities was $3.2 million for the
first six months of 2003. As discussed in the Notes to the condensed
consolidated financial statements, the Company issued $0.5 million in
Series F Convertible Preferred Stock in March 2003 and $1.75 million of
Convertible Notes in May 2003. 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
("Series G Preferred Stock") which closed on July 2, 2003. Proceeds
from the private offering of the Series G Preferred Stock and the
associated warrants to acquire additional shares of Series G Preferred
Stock totaled approximately $8.7 million. Effective July 29, 2003, each
share of the Series G Preferred Stock was automatically converted into
1,000 shares of theglobe's Common Stock and each warrant to acquire a
share of Series G Preferred Stock was automatically converted into a
warrant to acquire 1,000 shares of Common Stock. A total of 17,360,000
shares of Common Stock were issued pursuant to the Series G Preferred
Stock private offering, while a total of 3,472,000 shares of Common
Stock will be issuable upon exercise of the associated warrants.
Immediately after the May 2003 closing of the DPT acquisition, the
Company paid $0.5 million in cash to the former shareholders of DPT in
repayment of certain loans which they extended to DPT.

Our capital requirements depend on numerous factors, including market
acceptance of our services, the capital required to maintain our
websites and properties, the resources we devote to marketing and
selling our services, our entry into and development of new business
lines, including our "voiceglo" telephony services, and our brand
promotions and other factors. Although we received a report from our
independent accountants, relating to our December 31, 2002 audited
financial statements containing an explanatory paragraph stating that
our recurring losses from operations since inception and requirement
for additional financing raise substantial doubt about our ability to
continue as a going concern, after giving affect

to the capital raised from the sale of the Series F Preferred Stock,
Convertible Notes and Series G Preferred Stock (subsequently converted
into shares of Common Stock), management believes that it has
sufficient capital to continue its existing operations and fund the
launch and initial expansion of its new VoIP telephony business for at
least the next twelve months. Management and the Board of Directors
continue to explore a number of strategic alternatives and are also
continuing to identify and implement internal actions to improve the
Company's liquidity and financial performance. These alternatives may
include selling assets, which in any such case could result in
significant changes in our business plan, or entering into additional
new or different lines of business, such as our new VoIP telephone
business.

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 "Convertible Notes") in the aggregate principal amount of
$1,750,000. The Convertible Notes are 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 Convertible Notes have
a one year maturity, which may be extended at the option of the holders
of the Convertible Notes for periods aggregating two years, and are
secured by a pledge of substantially all of the assets of the Company.
The Convertible Notes bear interest at the rate of ten percent per
annum, payable semi-annually. At the election of the holders of the
Convertible Notes, interest may be payable in shares of the Company's
common stock.

On March 28, 2003, E & C Capital Partners, a privately held investment
holding company owned by Michael S. Egan, our Chairman and CEO and a
major shareholder, and Edward A. Cespedes, our President and a
Director, 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 conversion price is subject to adjustment upon the
occurrence of certain events, including downward adjustment on a
weighted-average basis in the event the Company should issue 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 16.7
million shares of Common Stock could be issued. The Series F Preferred
Stock has a liquidation preference of $1.50 per share, will pay a
dividend at the rate of 8% per annum and entitles 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 3.3 million shares of theglobe.com
Common Stock at an exercise price of $0.125 per share. The warrant is
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 in the Convertible Notes and the Series
F Preferred Stock.

In connection with his termination, our former Chief Executive Officer,
Charles Peck, was paid $625,000 on May 31, 2002 , reflecting the terms
of his severance package.

On July 2, 2003, theglobe.com, inc. completed a private offering of a
newly created series of preferred stock known as the "Series G
Automatically Converting Preferred Stock" for an aggregate purchase
price of approximately $8.7 million. In accordance with the terms of
such Preferred stock, the Series G Preferred shares converted into
common stock at $.50 per share (or an aggregate of approximately 17.4
million shares) upon the filing of an 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 5 years at an exercise price
of $1.39 per common share. The purpose of the Series G Preferred Stock
offering was to raise funds for use primarily in the Company's planned
voiceglo business, including the deployment of networks, website
development, marketing, and limited capital infrastructure expenditures
and working capital. Proceeds may also be used in connection with
theglobe's other existing or future business operations. Pursuant to
the terms of the Private Offering the Company is contractually
obligated, subject to certain limitations, to register the securities
upon demand anytime commencing one year after the sale of the
securities.

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.

As of June 30, 2003, our sole source of liquidity consisted of $2.5
million of cash and cash equivalents. With the exception of the $8.7
million in proceeds from the private offering of Series G Preferred
Stock, $1.5 million of which was received prior to June 30, 2003, which
was completed on July 2, 2003, we currently do not have access to any
other sources of funding, including debt and equity financing
facilities. The Company has limited operating capital and no current
access to credit facilities. Though we believe that we have enough
capital to last throughout the remainder of 2003, there is no guarantee
that we will have enough capital. If we are unable to keep operating
costs down, grow revenue, and maintain terms with our creditors, we may
have to try and raise additional funds through asset sales, bank
borrowings, or equity or debt financing. Obtaining any financing at all
is very unlikely and any financing that could be obtained would
probably dilute existing shareholders significantly.

EFFECTS OF INFLATION

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

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States of
America requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues 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, impairment of intangible assets,
restructuring reserves and income tax recognition of deferred tax
items. Our policy and related procedures for revenue recognition,
valuation of customer receivables and goodwill and other intangible
assets 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 resale of international minutes of calling time over the
Internet. 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 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' web sites or in their magazines, which typically
occurs within one to six months from the period in which the related
barter revenue is recognized.

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

Electronic Commerce and Other. Sales from the online store are
recognized as revenue when the product is shipped to the customer.
Freight out costs are included in net sales and have not been
significant to date. The Company provides an allowance for merchandise
sold through its online store. The allowance provided to date has not
been significant.

Newsstand sales of the games information magazine are recognized at the
on-sale date of the magazine, net of provisions for estimated returns.
Subscriptions are recorded as deferred revenue when initially received
and recognized as income pro ratably over the subscription term.
Revenues from the Company's share of the proceeds from its e-commerce
partners' sales are recognized upon notification from its partners of
sales attributable to the Company's sites.

Telephony Services. Telephony services revenue is recognized when all
of the following criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred or service has been rendered,
the seller's price to the buyer is fixed or determinable and
collectibility is reasonably assured.

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.

GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board ("FASB") issued
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.

We assess the impairment of goodwill and other identifiable intangibles
whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. 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 and 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.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

RISK FACTORS

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

FUTURE ACQUISITIONS, JOINT VENTURES OR STRATEGIC TRANSACTIONS ENTAIL
NUMEROUS RISKS AND UNCERTAINTIES. WE INTEND TO ENTER NEW LINES OF
BUSINESS.

We have begun to explore entering new business lines, including Voice
Over Internet Protocol ("VoIP") telephony services. In November 2002,
we acquired certain VoIP assets from an entrepreneur in exchange for a
total of 2,175,000 warrants to purchase our common stock. On May 23,
2003, we acquired Direct Partner Telecom, Inc. ("DPT"), an
international licensed telecommunications carrier engaged in the
purchase and resale of telecommunication services over the Internet.
The purchase price consisted of 1,375,000 shares of theglobe.com common
stock and 500,000 warrants to purchase theglobe.com common stock,
together with the ability to earn and additional 2,750,000 warrants. 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 DPT, as well as any future acquisitions or joint ventures
could result, and in some instances have resulted, in numerous risks
and uncertainties, including:

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

o large and immediate write-offs;

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
amortization expenses 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; and

o the risk that the acquired business will not perform as
expected.

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

We have incurred net losses in each quarter, except the fourth quarter
of 2002 where we had net income of $11,000, since our inception and we
expect that we will continue to incur net losses for the foreseeable
future. We had net losses of approximately $2.6 million, $40.6 million,
and $103.9 million for the years ended December 31, 2002, 2001 and
2000, respectively. The principal causes of our losses are likely to
continue to be:

o costs resulting from the operation of our businesses;

o costs relating to entering new business lines;

o failure to generate sufficient revenue; and

o general and administrative expenses.

Although we have restructured our businesses, we still expect to
continue to incur losses while we explore the sale of the remaining
assets of our games properties or other changes to our business.

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

Our VoIP business and games properties are substantially dependent
upon the continued growth in the general use of the Internet. The VoIP
business is also dependent on the growth in the use of the Internet for
telephones, personal computers and other devices. Internet and
electronic commerce growth may be inhibited for a number of reasons,
including:

o inadequate network infrastructure;

o security and authentication concerns;

o ease of access;

o inconsistent quality of service;

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

o bandwidth availability.

If 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. Web sites 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.

THE VOIP MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND WE WILL
NEED TO DEPEND ON NEW PRODUCT INTRODUCTION 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,
manufacturing, 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 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, if such new or enhanced
products do not achieve sufficient market acceptance, our operating
results will suffer and our business will not grow.

THE INTERNET TELEPHONY BUSINESS IS HIGHLY COMPETITIVE AND ALSO COMPETES
WITH TRADITIONAL 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 will
include major and emerging telecommunications carriers in the U.S. and
foreign telecommunications carriers. 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 planned voiceglo service offerings and of our
subsidiary, Direct Partner Telecom, 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
WorldCom, 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 may in the future
compete with us. These companies may offer the kinds of voice services
we 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 large number of telecommunications companies, including AT&T,
Deutsche Telekom, Cable & Wireless, WorldCom, Sprint and BT, currently
provide wholesale voice telecommunications service which compete with
the business of Direct Partner Telecom, and which will compete with our
planned VoIP telephony business. 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 RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

We regard substantial elements of our web sites 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 recently acquired. 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 web sites 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 or our members, of their
intellectual property rights. Any litigation claims or counterclaims
could impair our business because they could:

o be time-consuming;
o result in costly litigation;
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 web sites 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.

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 CURRENTLY UNDER DEVELOPMENT.

We are seeking to enter into new market areas and our success is partly
dependent on our ability to forge new marketing and engineering
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 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, such as the Internet, or emerging last mile
technologies such as cable, digital subscriber lines, and wireless
local loop, will not be a viable alternative to traditional circuit
switched telephony unless such networks and technologies can provide
reliability and quality consistent with these standards.

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.

We believe that maintaining awareness of the brand names of all of our
games properties ("Chips & Bits", "Strategy Plus" and "CGonline.com")
is critical to attracting potential buyers for these properties and to
expanding our member base, the traffic on our web sites and our
advertising and electronic commerce relationships. The closure of the
community web site at "www.theglobe.com", the Company's flagship web
site, adversely affected the public's perception of the Company and its
then existing businesses. If Internet users, advertisers and customers
do not perceive our games properties to be of high quality, the value
of the games properties brand names could be materially diluted.

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 revenues to justify these costs.

WE MAY FACE INCREASED GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES IN
OUR INDUSTRY.

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
may 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.

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

Chips & Bits 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, Inc. Gross margins for
Chips & Bits, Inc. were 29% and 24% for the quarters ended June 30,
2003 and 2002, respectively. Because of the large installed base of
personal computers, these revenue and gross margin percentages may
fluctuate with changes in the PC game market. However, the Company is
unable to predict when, if ever, there will be a turnaround in the PC
game market.

Competition among games-focused websites is also growing rapidly, as
new companies continue to enter the market and existing companies
continue to layer games applications onto their websites. We expect
that the market will continue to evolve rapidly, and the rate of
product innovations and new product introductions will remain high. We
face competitive pressures from many companies, both in the United
States and abroad. With the abundance of companies operating in the
games market, consumers and advertisers have a wide selection of
services to choose from. Our games information websites compete for
users and advertisers with:

o Games information sites such as Snowball's IGN, ZDnet's
Gamespot, and CNET's GameCenter; and

o Online games centers, where users can play games such as
Uproar, Pogo and Terra Lycos' Gamesville.

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. IN ADDITION, WE HAVE DRAMATICALLY REDUCED OUR
ADVERTISING SALES FORCE.

We historically derived a substantial portion of our revenues from the
sale of advertisements on our web sites and in our magazine Computer
Games Magazine. Our business model and revenues were highly dependent
on the amount of traffic on our web sites, our ability to properly
monetize website traffic and on the print circulation of our Computer
Games magazine. Due to our restructuring in August 2001 (the "August 3,
2001 restructuring"), we now have only two (2) sales people and will
have tremendous difficulty maintaining advertising revenues and
monetizing traffic to our games properties. In addition, the editorial
content on certain of the game properties is only being updated
periodically, if at all, which may lead to a further decrease in the
number of viewers and which could adversely effect our efforts to sell
these properties. The level of traffic on our sites determines the
amount of online advertising inventory we can sell and the price for
which we can sell our games business. Our ability to generate online
advertising revenues depends, in part, on our ability to create new
advertising programs without diluting the perceived value of our
existing programs. Due to the reduction in headcount, we are unable to
create new advertising programs going forward. 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 the Company. 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.

The development of the Internet advertising market has slowed
dramatically during the last two years and if it continues to slow
down, our business performance would continue to be materially
adversely affected. Moreover, measurements of site visitors may not be
accurate or trusted by our advertising customers. There are no
uniformly accepted standards for the measurement of

visitors to a web site, and there exists no single accurate measurement
for any given Internet visitor metric. Indeed, different website
traffic measurement firms will tend to arrive at different numbers for
the same metric. For any of the foregoing reasons, we cannot assure you
that advertisers will continue to purchase advertisements on our
websites.

WE MAY BE MATERIALLY ADVERSELY AFFECTED IF ELECTRONIC COMMERCE DOES NOT
BECOME A VIABLE SOURCE OF SIGNIFICANT REVENUES OR PROFITS FOR THE
COMPANY. IN ADDITION, OUR ELECTRONIC COMMERCE BUSINESS MAY RESULT IN
SIGNIFICANT LIABILITY CLAIMS AGAINST US.

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 may
adversely affect our electronic commerce due to the loss of traffic
referred by those sites to the Chips & Bits web site. 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;
o the possibility that our vendors may sell their products
through other sites; and
o intense competition for electronic commerce revenues,
resulting in downward pressure on gross margins.

In April 2000, we elected to shut down our e-commerce operations in
Seattle, Washington in order to focus our e-commerce operations on
video games and related products. Accordingly, we cannot assure you
that electronic commerce transactions will provide a significant or
sustainable source of revenues or profits. Additionally, due to the
ability of consumers to easily compare prices of similar products or
services on competing web sites and consumers' potential preference for
competing web site'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. If use of the Internet for
electronic commerce does not continue to grow, our business and
financial condition would be materially and adversely affected.

Additionally, consumers may sue us if any of the products that we sell
are defective, fail to perform properly or injure the user. 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.

INTERNET ADVERTISING HAS NOT PROVEN AS EFFECTIVE AS TRADITIONAL MEDIA.

The Internet advertising market is relatively new and continues to
evolve. We cannot yet gauge its effectiveness as compared to
traditional advertising media. Many of our current or potential
advertising partners have limited or no experience using the Internet
for advertising purposes and they have allocated only a limited portion
of their advertising budgets to Internet advertising. The adoption of
Internet advertising, particularly by those entities that have
historically relied upon traditional media, requires the acceptance of
a new way of conducting business, exchanging information and
advertising products and services. Advertisers that have traditionally
relied upon other advertising media may be reluctant to advertise on
the Internet or find it less effective.

No standards have been widely accepted to measure the effectiveness of
Internet advertising or to measure the demographics of our user base.
Additionally, no standards have been widely accepted to measure the
number of members, unique users, page views or impressions related to a
particular site. We cannot assure you that any standards will become
available in the future, that standards will accurately measure our
users or the full range of user activity on our sites or that
measurement services will accurately report our user activity based on
their standards. If standards do not develop, advertisers may not
advertise on the Internet. In addition, we depend on third parties to
provide these measurement services. These measurements are often based
on sampling techniques or other imprecise measures and may materially
differ from each other and from our estimates. We cannot assure you
that advertisers will accept our or other parties' measurements. The
rejection by advertisers of these measurements could have a material
adverse effect on our business and financial condition.

The sale of Internet advertising is subject to intense competition that
has resulted in a wide variety of pricing models, rate quotes and
advertising services. For example, advertising rates may be based on
the number of user requests for additional information made by clicking
on the advertisement, known as "click throughs," on the number of times
an advertisement is displayed to a user, known as "impressions," or on
the number of times a user completes an action at an advertiser's web
site after clicking through, known as "cost per action." Our contracts
with advertisers typically guarantee the advertiser a minimum

number of impressions. To the extent that minimum impression levels are
not achieved for any reason, including the failure to obtain the
expected traffic, our contracts with advertisers may require us to
provide additional impressions after the contract term, which may
adversely affect the availability of our advertising inventory. In
addition, certain long-term contracts with advertisers may be canceled
if response rates or sales generated from our site are less than
advertisers' expectations. This could have a material adverse effect on
us. Online advertisers are increasingly demanding "cost per click" and
"cost per action" advertising campaigns, which require many more page
views to achieve equal revenue, which significantly affects our
revenues. If online advertisers continue to demand those "cost per
action" deals, it could negatively impact our business.

Our revenues and the value of the assets we are seeking to sell could
be materially adversely affected if we are unable to adapt to other
pricing models for Internet advertising if they are adopted. It is
difficult to predict which, if any, pricing models for Internet
advertising will emerge as the industry standard. This makes it
difficult to project our future advertising rates and revenues. Online
advertising pricing has been declining. Additionally, it is possible
that Internet access providers may, in the future, act to block or
limit various types of advertising or direct solicitations, whether at
their own behest or at the request of users. Moreover, "filter"
software programs that limit or prevent advertising from being
delivered to an Internet user's computer are available. Widespread
adoption of this software could adversely affect the commercial
viability of Internet advertising. In addition, concerns regarding the
privacy of user data on the Web may reduce the amount of user data
collected in the future, thus reducing our ability to provide targeted
advertisements. This may, in turn, put downward pressure on cost per
thousand impressions ("CPM").

REVENUE IN PRIOR PERIODS IS NOT INDICATIVE OF FUTURE REVENUE.

Although we achieved significant total revenue growth during 1999 and
2000, our revenue substantially decreased in 2001, 2002, and again in
2003, due to the softness in the advertising market, which is expected
to continue; our cost-reduction and restructuring initiatives, which
have resulted in a dramatic reduction in our advertising sales force;
increased competition among games-focused websites; the closing of our
community website and our web-hosting property; and the sale of many of
our games properties.

In addition, we have chosen to enter into a new line of business, the
VoIP telephony services market. The Internet telephony services
industry is highly competitive and our senior management has no
experience operating in this industry. We cannot accurately predict
whether our planned VoIP business model will be successful or when VoIP
revenues will be significant in relation to our consolidated operating
results.

OUR QUARTERLY OPERATING RESULTS FLUCTUATE AND VARY BY SEASON.

Due to our significant change in operations, including the entry into a
new line of business, our historical quarterly operating results are
not reflective of future results. As a consequence, the trading price
of our Common Stock would almost certainly be materially and adversely
affected. 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 web sites;
o the overall demand for Internet telephony services, Internet
advertising and electronic commerce;
o the addition or loss of VoIP customers, advertisers on our
games properties and electronic commerce partners on our web
sites;
o overall usage and acceptance of the Internet;
o seasonal trends in advertising and electronic commerce sales
and member usage;
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;
o financial performance of other Internet companies who
advertise on our site; and
o competition from others providing services similar to those of
ours.

OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING 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 web sites;
o maintain or increase the percentage of our off-line
advertising inventory sold;
o maintain or increase both CPM levels and sponsorship revenues
for our games magazine;
o adapt to meet changes in our markets and competitive
developments;
o develop or acquire content for our services; and

o identify, attract, retain and motivate qualified personnel.

Moreover, we acquired DPT on May 23, 2003, as a result of our decision
to enter the VoIP services business. DPT began its operations in
October 2002, and its limited operating history, as well as our
inexperience in the Internet telephony business will make financial
forecasting even more difficult.

OUR MANAGEMENT TEAM IS INEXPERIENCED IN THE MANAGEMENT OF A PUBLIC
COMPANY AND IS SMALL FOR AN OPERATING COMPANY.

Our senior management team is few in number, and other than our
Chairman and President, have not had any previous experience managing 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 the Company. 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 the Company's restructuring,
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; WE HAVE FURTHER REDUCED OUR
BOARD OF 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. Mr. Egan is also Chairman of ANC Rental Corporation, a
spin off of the car rental business of AutoNation, Inc.

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 Chief Financial Officer, Treasurer, Secretary and Director, Ms.
Robin Segaul 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 A THIRD PARTY OUTSOURCED HOSTING FACILITIES OVER WHICH WE
HAVE LIMITED CONTROL.

Our principal servers are located in New York and New Jersey 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 due to the
transition or otherwise 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. 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 OR FOR PRODUCTS SOLD OVER THE INTERNET.

Users may access content on our web sites or the web sites of our
distribution partners or other third parties through web site 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 web
sites. 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 could also be exposed to
liability for third party content posted by users in our chat rooms or
on our bulletin boards.

We also 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.

COMPETITION FOR USERS AND ADVERTISERS, AS WELL AS COMPETITION IN THE
ELECTRONIC COMMERCE MARKET, IS INTENSE AND IS EXPECTED TO INCREASE
SIGNIFICANTLY.

Competition among games print magazines is high and increasing as
online and pc-based games continue to gain mainstream popularity, and
new, cutting-edge games and console systems continue to come to the
consumer market. The magazine publishing industry is highly
competitive. 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. Due
to our limited resources, we may not be able to compete effectively in
any of the preceding categories in the future. In addition to other
technology and games magazines, our magazine also competes for
advertising revenues with general-interest magazines and other forms of
media, including broadcast and cable television, radio, newspaper,
direct marketing and electronic media. In competing with
general-interest magazines and other forms of media, we rely on our
ability to reach a targeted segment of the population in a
cost-effective manner.

The market for users and Internet advertising among web sites is
rapidly evolving. Competition for users and advertisers, as well as
competition in the electronic commerce market, is intense and is
expected to increase significantly. Barriers to entry are relatively
insubstantial and we believe we will face competitive pressures from
many additional companies both in the United States and abroad.
Accordingly, pricing pressure on advertising rates will continue to
increase in the future, which could have a material adverse effect on
us to the extent that any remaining businesses rely on advertising. All
types of web sites compete for

users. Competitor web sites include other games information networks
and various other types of web sites. We believe that the principal
competitive factors in attracting users to a site are:

o functionality of the web site;

o brand recognition;

o affinity and loyalty;

o broad demographic focus;

o open access for visitors;

o critical mass of users;

o attractiveness of content and services to users; and

o pricing and customer service for electronic commerce sales.

We compete for users, advertisers and electronic commerce marketers
with the following types of companies:

o publishers and distributors of television, radio and print,
such as CBS, NBC and AOL Time Warner;

o electronic commerce web sites, such as Amazon.com; and

o other web sites serving game enthusiasts, including Ziff
Davis' Gamespot and CNET's Gamecenter.

Many of our existing and potential competitors and traditional media
companies, have the following advantages:

o longer operating histories in the Internet market, - greater
name recognition;

o larger customer bases;

o significantly greater financial, technical and marketing
resources; and,

o not seeking to sell their businesses.

In addition, there has been significant consolidation in the industry.
This consolidation may continue in the future. We could face increased
competition in the future from traditional media companies, including
cable, newspaper, magazine, television and radio companies. A number of
these large traditional media companies have been active in Internet
related activities including the games space. Those competitors may be
able to undertake more extensive marketing campaigns for their brands
and services, adopt more aggressive advertising pricing policies and
make more attractive offers to potential employees, distribution
partners, electronic commerce companies, advertisers, third-party
content providers and acquisition targets. Furthermore, our existing
and potential competitors may develop sites that are equal or superior
in quality to, or that achieve greater market acceptance than, our
sites. We cannot assure you that advertisers may not perceive our
competitors' sites as more desirable than ours.

Web browsers offered by Netscape and Microsoft also increasingly
incorporate prominent search buttons that direct traffic to services
that compete with ours. These features could make it more difficult for
Internet users to find and use our products and services. In the
future, Netscape, Microsoft and other browser suppliers may also more
tightly integrate products and services similar to ours into their
browsers or their browsers' pre-set home page. Additionally, entities
that sponsor or maintain high-traffic web sites or that provide an
initial point of entry for Internet viewers, such as the Regional Bell
Operating Companies, cable companies or Internet service providers,
such as Microsoft and America Online, offer and can be expected to
consider further development, acquisition or licensing of Internet
search and navigation functions that compete with us. These competitors
could also take actions that make it more difficult for viewers to find
and use our products and services.

Additionally, the electronic commerce market is rapidly evolving, and
we expect competition among electronic commerce merchants to continue
to increase significantly. Because the Internet allows consumers to
easily compare prices of similar products or services on competing web
sites and there are low barriers to entry for potential competitors,
gross margins for electronic commerce transactions may continue to be
narrow in the future. Many of the products that we sell on our web site
may be sold by the maker of the product directly, or by other web
sites. Competition among Internet retailers, our electronic commerce
partners and product makers may have a material adverse effect on our
ability to generate revenues through electronic commerce transactions
or from these electronic commerce partners.

WE ARE INVOLVED IN SECURITIES CLASS ACTION LITIGATION.

We are a party to the securities class action litigation described in
Note 3 to the Condensed Consolidated Financial Statements -
"Litigation". 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.

VARIOUS STOCKHOLDERS, INDIVIDUALLY OR IN THE AGGREGATE, CONTROL US.

Including all warrants, preferred stock, convertible notes, vested
options, and all options vesting within 60 days of August 6, 2003,
Michael S. Egan, our Chairman and Chief Executive Officer, beneficially
owns or controls, directly or indirectly, approximately 61,968,711
shares of our Common Stock, which in the aggregate represents
approximately 60.2% of the outstanding shares of our Common Stock
(treating as outstanding for this purpose the shares of Common Stock
issuable upon exercise or conversion of the preferred stock, warrants
and options 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.

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 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.

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 shareholders 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.

THE SALE OF SHARES ELIGIBLE FOR FUTURE SALE IN THE OPEN MARKET COULD
KEEP OUR STOCK PRICE FROM IMPROVING.

Sales of significant amounts of Common Stock in the public market in
the future, the perception that sales will occur or the registration of
such shares could materially and adversely affect the ability of the
market price of the Common Stock to increase even if our business
prospects were to improve. 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.

As of June 30, 2003, there were outstanding options to purchase
approximately 8,220,000 shares of 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 these
securities is registered under the Securities Act and consequently will
be freely tradeable. In addition, as of August 6, 2003, there are
outstanding warrants to purchase up to approximately 19,800,000 shares
of our Common Stock upon exercise, together with an additional
3,175,000 shares issuable upon exercise of warrants subject to earnout
arrangements. Additionally, as of August 6, 2003, the outstanding
shares of our Series F Preferred Stock and the $1,750,000 Convertible
Notes are convertible into approximately 16,667,000 shares and
19,444,000 shares of our Common Stock, respectively. Substantially all
of our stockholders holding restricted securities, including shares
issuable upon the exercise of warrants to purchase our Common Stock,
are entitled to registration rights under various conditions.

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.

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 due to the ongoing sale of our assets, the
percentage of the Company's 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 the Company has 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.

WE CHANGED OUR INDEPENDENT AUDITORS.

On August 8, 2002, we dismissed our independent accountants, KPMG LLP
("KPMG"), and engaged Rachlin Cohen & Holtz LLP ("Rachlin Cohen") as
our new independent accountants.

WE HAVE CLOSED OUR COMMUNITY SITE, OUR SMALL BUSINESS WEB-HOSTING
PROPERTY AND HAVE SOLD CERTAIN OF OUR GAMES PROPERTIES AND MAY SELL THE
REMAINDER OF OUR GAMES PROPERTIES. WE MAY NOT BE ABLE TO SELL THESE
PROPERTIES FOR ANY SIGNIFICANT VALUE.

Due to the significant and prolonged decline in the Internet
advertising sector, the Company elected to close its community web site
at "www.theglobe.com" and its small business web-hosting property at
"www.webjump.com" in August 2001. The Company has already sold
substantially all the assets of (i) Kaleidoscope Networks Limited, the
English subsidiary of Attitude Network Ltd. that operated
GamesDomain.com and GamesDomain.co.uk, (ii) KidsDomain.com and
KidsDomain.co.uk, and (iii) HappyPuppy.com and HappyPuppy.co.uk. In
addition, the Company sold the URL of webjump.com. The Company is
seeking buyers for its remaining games properties, Chips & Bits, Inc.,
an electronic commerce retailer that focuses primarily on game
enthusiasts' and Strategy Plus, Inc., a media property that publishes a
monthly games magazine and a game enthusiast web site. The Company may
be unable to sell its remaining games properties quickly, if at all,
which would result in continued depletion of its cash position since
the games business currently operates at a cash loss. The games
properties may also lose some of their value while we try to sell them
as we do not have full corporate staff to support these businesses. In
addition, the "theglobe.com" brand continues to lose significant value
since the website "www.theglobe.com" was taken offline August 15, 2001.
The closing of our community site and our small business web-hosting
site has also adversely affected our electronic commerce due to the
inability of those web sites after their closure to refer traffic to
the Chips & Bits web site. We cannot assure you that we will be able to
sell all or any of the remaining games business quickly, if at all, or
at any significant price, or that there will be any return to our
equity holders. In addition, the Company currently has a significant
net operating loss carry forward that may help to offset Federal income
taxes in the future, should the Company achieve profitability. The
rules governing use of the net operating loss carry forward asset are
complex and depend on a variety of factors, including maintaining some
continuity of existing business lines. There is no guarantee that we
will be able to maintain use of the net operating loss carry forward if
we choose to sell our games properties or enter different business
lines in the future.

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

As of December 31, 2002, our sole source of liquidity consisted of $0.7
million of cash and cash equivalents. We received a report from our
independent accountants, relating to our December 31, 2002 audited
financial statements, containing an explanatory paragraph stating that
our recurring losses from operations since inception and requirement
for additional financing raise substantial doubt about our ability to
continue as a going concern.

On July 2, 2003, we completed a private offering of a newly created
series of preferred stock known as the "Series G Automatically
Converting Preferred Stock" for an aggregate purchase price of
approximately $8.7 million. The proceeds from the private placement
will be used primarily for our planned VoIP business, including the
deployment of networks, website development, marketing and limited
capital infrastructure expenditures. Proceeds may also be used in
connection with working capital requirements of the Company's other
existing businesses or for future acquisitions or businesses. Cash flow
generated

from our new and existing operations may be insufficient to cover our
operating expenses, working capital and capital expenditure
requirements. We cannot assure you that additional financing from any
unaffiliated third party will be available on terms acceptable to us,
if at all. Additionally, any financing that could be obtained would
probably dilute existing shareholders significantly.

ITEM 3. CONTROLS AND PROCEDURES.

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

Our Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of our disclosure controls and procedures pursuant to
Securities Exchange Act Rule 13a-14 as of June 27, 2003, a date within
90 days prior to the filing date of this quarterly report. Based on
that evaluation, our Chief Executive Officer and our Chief Financial
Officer have concluded that our disclosure controls and procedures are
effective in alerting them in a timely manner to material information
regarding us (including our consolidated subsidiaries) that is required
to be included in our periodic reports to the SEC.

In addition, there have been no significant changes in our internal
controls or in other factors that could significantly affect those
controls subsequent to the date of our most recent evaluation. We
cannot assure you, however, that our system of disclosure controls and
procedures will always achieve its stated goals under all future
conditions, no matter how remote.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See note 3 of the Financial Statements included in this Report -
"Litigation"

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Sales of Unregistered Securities

On May 28, 2003, theglobe.com ("theglobe" or the "Company") acquired
Direct Partner Telecom, Inc., a Florida corporation, a company engaged
in Voice over the Internet (or "VoIP") telephony services
internationally. The Company acquired Direct Partner Telecom in
exchange for 1.375 million shares of Common Stock of theglobe.com and
the issuance of warrants to acquire 500,000 shares of theglobe's Common
Stock at a strike price of $0.72 per share. The warrants are
exerciseable any time before May 23, 2013. In addition, the former
shareholders of Direct Partner Telecom may earn additional warrants to
acquire up to 2.75 million shares of theglobe's Common Stock at a
strike price of $0.72 if Direct Partner Telecom achieves certain
revenue and earnings targets over approximately a three year period.
These warrants will also accelerate and be deemed earned in the event
of a "change of control" (as defined in the acquisition documents) of
the Company. The five former shareholders of Direct Partner Telecom are
entitled to one demand registration right in connection with the 1.375
million shares of common stock issued at closing and the shares of
common stock issuable upon exercise of the warrants. The issuance of
the foregoing securities was exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of such
Act.

On May 22, 2003, E&C Capital Partners, LLLP ("E&C Partners"), a company
which is owned by Michael S. Egan, our Chairman and Chief Executive
Officer, and in which Edward Cespedes, our President owns a minority
interest, together with certain trusts, of which Mr. Egan is the
trustee (the "Trusts"), 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 are 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 Partners converts at
approximately $.0794 per share and the Convertible Notes held by the
Trusts convert at $.10 per share). Assuming the conversion of all of
the Convertible Notes, and without regard to the potential
anti-dilutive adjustments described below, approximately 19,445,000
shares of common stock would be issued. The Convertible Notes have a
one year maturity date, which may be extended at the option of the
holder of the Note for periods aggregating two years, and are secured
by a pledge of substantially all of the assets of the Company and its
subsidiaries. The Convertible Notes bear interest at the rate of ten
(10) percent per annum, payable semi-annually. At the election of the
holder of the Convertible Notes, interest may be payable in shares of
the Company's common stock.

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" and together with the Convertible Notes, the
"Convertible Note Investment"). The Warrant is 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. The conversion price of the Convertible Note and the
exercise price of the Warrant (together with the number of shares for
which such Warrant is exerciseable) is subject to adjustment upon the
occurrence of certain events, including downward adjustment on a
weighted-average basis in the event the Company should issue securities
in the future at a purchase price below the respective conversion price
and exercise price of the Convertible Notes and Warrants. This issuance
was exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) of such Act.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

The Company held its 2003 Annual Meeting of Shareholders on July 24,
2003. At the Annual Meeting, Edward A. Cespedes, Michael S. Egan and
Robin Segaul-Lebowitz, were reelected as Directors. All directors serve
for a term of one year or until their successors are duly elected and
qualified. Shareholders also voted to approve an amendment to the
certificate of incorporation of the Company to increase the total
authorized shares of common stock from 100,000,000 shares to 200,000,000
shares.

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

A. Election of Directors

FOR AGAINST WITHHELD*
--- ------- ---------

1. Edward A. Cespedes........ 40,537,221 -- 240,198

2. Michael S. Egan........... 40,536,221 -- 241,198

3. Robin Segaul-Lebowitz..... 40,537,221 -- 240,198

B. Proposal to Increase Authorized Shares

FOR AGAINST WITHHELD*

40,328,405 421,717 27,297

-----------------
* includes broker non-votes and abstentions

On July 2, 2003, theglobe.com, inc. completed a private offering of a
newly created series of preferred stock known as the "Series G
Automatically Converting Preferred Stock" for an aggregate purchase
price of approximately $8.7 million. In accordance with the terms of
such Preferred stock, the Series G Preferred shares converted into
common stock at $.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 5 years at an exercise price of $1.39 per
common share. The purpose of the Private Offering was to raise funds for
use primarily in the Company's planned voiceglo business, including the
deployment of networks, website development, marketing, and limited
capital infrastructure expenditures and working capital. Proceeds may
also be used in connection with theglobe's other existing or future
business operations. Pursuant to the terms of the Private Offering the
Company is contractually obligated, subject to certain limitations, to
register the securities upon demand anytime commencing one year after
the sale of the securities.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

4.1 Form of Warrant dated May 22, 2003 to acquire an
aggregate of 3,888,889 shares of theglobe.com Common
Stock. (1)

4.2 Form of Convertible Promissory Note (1)

4.3 Form of Warrant dated May 28, 2003 to acquire an
aggregate of 500,000 shares of theglobe.com Common
Stock. (1)

4.4 Certificate Relating to the Designation, Preferences
and Rights of Series G Preferred Stock. (2)

4.5 Form of Warrant dated July 2, 2003 to acquire
securities of theglobe.com, inc. (2)

10.1 Note Purchase Agreement dated May 22, 2003 between
thegloble.com, inc. and E&C Capital Partners, LLLP,
and certain other investors named therein. (1)

10.2 Agreement and Plan of Merger dated May 23, 2003
between theglobe.com, DPT Acquisition, Inc., Direct
Partner Telecom, Inc., and the shareholders thereof.
(1)

10.3 Employment Agreement dated May 28, 2003 between
theglobe.com and James Magruder.(1)

10.4 Form of Subscription Agreement relating to the
purchase of Units of securities of thegloble.com,
inc. (2)

31.1 Certification of the Chief Executive Officer pursuant
to Section 302 of The Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant
to Section 302 of The Sarbanes-Oxley Act of 2002.

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

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

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

(1) Incorporated by reference to our Form 8-K filed June 6, 2003,
relating to events dated May 22, 2003 and May 28, 2003.

(2) Incorporated by reference to our Form 8-K filed July 11, 2003,
relating to an Item 5 event dated July 2, 2003.

(b) Reports on Form 8-K.

Form 8-K related to an event dated May 22, 2003, relating to an Item 2
disclosure of the acquisition of Direct Partner Telecom, Inc. and an
Item 5 disclosure of a Note Purchase Agreement and issuance of a
warrant to acquire common stock.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-QSB to be signed on its
behalf by the undersigned thereto duly authorized.

theglobe.com, inc.

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

August 14, 2003

EXHIBIT INDEX

4.1 Form of Warrant dated May 22, 2003 to acquire an aggregate of
3,888,889 shares of theglobe.com Common Stock. (1)

4.2 Form of Convertible Promissory Note (1)

4.3 Form of Warrant dated May 28, 2003 to acquire an aggregate of
500,000 shares of theglobe.com Common Stock. (1)

4.4 Certificate Relating to the Designation, Preferences and
Rights of Series G Preferred Stock. (2)

4.5 Form of Warrant dated July 2, 2003 to acquire securities of
theglobe.com, inc. (2)

10.1 Note Purchase Agreement dated May 22, 2003 between
thegloble.com, inc. and E&C Capital Partners, LLLP, and
certain other investors named therein. (1)

10.2 Agreement and Plan of Merger dated May 23, 2003 between
theglobe.com, DPT Acquisition, Inc., Direct Partner Telecom,
Inc., and the shareholders thereof. (1)

10.3 Employment Agreement dated May 28, 2003 between theglobe.com
and James Magruder.(1)

10.4 Form of Subscription Agreement relating to the purchase of
Units of securities of thegloble.com, inc. (2)

31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of The Sarbanes-Oxley Act of 2002.

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

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

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

(1) Incorporated by reference to our Form 8-K filed June 6, 2003, relating
to events dated May 22, 2003 and May 28, 2003.

(2) Incorporated by reference to our Form 8-K filed July 11, 2003, relating
to an Item 5 event dated July 2, 2003.