UNITED
STATES
SECURITIES
AND EXCHANGE
COMMISSION
WASHINGTON,
D.C.
20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION
13
OR 15(D)
OF THE
SECURITIES
EXCHANGE
ACT
OF 1934,
|
March
15, 2007
|
0-25053
|
|
Date
of Report (Date of earliest event reported)
|
Commission
File Number
|
THEGLOBE.COM,
INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
|
14-1782422
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
Number)
|
|
110
East Broward Boulevard, Suite 1400
|
|
Fort
Lauderdale, Florida 33301
|
|
(Address
of Principal Executive Offices) (Zip Code)
|
| |
|
(954)
769-5900
|
|
(Registrant’s
telephone number, including area
code)
|
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
This
Report includes forward-looking statements related to theglobe.com, inc. that
involve risks and uncertainties, including statements relating to our ability
to
raise capital and comply with the terms of the settlement agreement with
MySpace, Inc., described below. These forward-looking statements are made in
reliance on the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. For further information about these and other factors that
could affect theglobe.com’s future results and business plans, including
theglobe’s ability to continue operations as a going concern, please see the
Company’s filings with the Securities and Exchange Commission, including in
particular our Annual Report of Form 10-K for the year ended December 31, 2005
and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
Copies of these filings are available online at http://www.sec.gov. Prospective
investors are cautioned that forward-looking statements are not guarantees
of
performance. Actual results may differ materially and adversely from management
expectations.
Item
2.05. Costs Associated with Exit or Disposal Activities
In
March
2007, management and the Board made the decision to shutdown the operations
of
both the Company’s computer games (“Computer Games”) and VoIP telephony services
lines of business and to focus 100% of its resources and efforts to further
develop its Internet services business, which consists primarily of its
Tralliance “.travel” registry business.
The
decision to cease all activities related to its Computer Games businesses,
includes discontinuing the operations of its magazine publications, games
distribution business and related websites. The Company’s decision to shutdown
its Computer Games businesses was based primarily on the historical losses
sustained by these businesses during the recent past and management’s
expectations of continued future losses. The Company is currently in the process
of implementing a business shutdown plan, which includes the termination of
employee and vendor relationships and the collection and payment of outstanding
accounts receivables and payables. The Company is also attempting to sell
certain of the businesses’ component assets; however, management does not expect
the proceeds from such sales to be significant. As of December 31, 2006, the
carrying amount of the major classes of the Computer Games business segment’s
assets and liabilities consisted of current assets of $600 thousand, fixed
assets of $39 thousand and current liabilities of $321 thousand.
On
March
20, 2007, our Board authorized discontinuing the operating, research and
development activities of the Company’s VoIP telephony services business and
terminating all of the remaining employees of the business. At this time, the
Company intends to only incur those costs required to maintain the service
obligations of the license agreement with Speecho, LLC. The Company has no
plans
to actively market the further licensing of its chat, VoIP and video
communications technology. The Company’s decision to discontinue the operations
of its VoIP telephony services business was based primarily on the historical
losses sustained by the business during the past several years, management’s
expectations of continued losses for the foreseeable future and estimates of
the
amount of capital required to attempt to successfully monetize its business.
The
Company is currently in the process of implementing a business shutdown plan,
which includes the termination of its existing carrier and vendor relationships,
as well as the payment and/or settlement of outstanding payables. The Company
is
also attempting to sell certain of the businesses’ component assets; however,
management does not expect the proceeds from such sales to be significant.
As of
December 31, 2006, the carrying amount of the major classes of the VoIP
telephony services business segment’s assets and liabilities consisted of
current assets of $139 thousand, fixed assets of $182 thousand and current
liabilities of approximately $2.3 million.
The
Company is in the process of evaluating the recoverability of its existing
computer games and VoIP telephony services businesses’ assets, and at this time,
management does not anticipate significant future impairment or other charges
in
this regard. Any such charges, if and when determined to be required, will
be
recorded when identified. The Company is also in the process of evaluating
the
amount of costs expected to be incurred in shutting down its Computer Games
and
VoIP telephony services businesses. The amount of these shutdown costs,
including costs related to employee termination benefits and vendor contract
termination costs are not yet certain, however, at the present time, management
believes that total cash expenditures for shutdown costs will range between
$20
thousand and $135 thousand for the Computer Games business and between zero
and
$700 thousand for the VoIP telephony services business. Management currently
expects the shutdown of the Computer Games and VoIP telephony services
businesses to be substantially completed by the end of the second quarter of
2007.
Item
8.01. Other Events
On
June
1, 2006, MySpace, Inc. (“MySpace”) filed a lawsuit in the United States District
Court for the Central District of California against theglobe.com, Inc. (the
“Company”). The case is styled MySpace,
Inc. v theglobe.com,
CV
06-3391-RGK. MySpace alleged that the Company sent at least 100,000 unsolicited
and unauthorized commercial email messages to MySpace members using MySpace
user
accounts improperly established by the Company, that the user accounts were
used
in a false and misleading fashion and that the Company's alleged activities
constituted violations of the CAN-SPAM Act, the Lanham Act and California
Business & Professions Code § 17529.5, as well as trademark infringement,
false advertising, breach of contract, breach of the covenant of good faith
and
fair dealing, and unfair competition. MySpace seeks monetary penalties, damages
and injunctive relief for these alleged violations. It asserts entitlement
to
recover "a minimum of" $62.3 million damages, in addition to three times the
amount of MySpace's actual damages and/or disgorgement of the Company's
purported profits from alleged violations of the Lanham Act, punitive damages
and attorneys’ fees. Subsequent discovery in the case disclosed that the total
number of unsolicited messages was approximately 400,000.
On
February 28, 2007, the Court entered an order (the “Order”) granting in part
MySpace’s motion for summary judgment, finding that the Company was liable for
violation of the CAN-SPAM Act and the California Business & Professions
Code, and for breach of contract (as embodied in MySpace’s “Terms of Service”
contract). The Order also upheld as valid that portion of MySpace’s Terms of
Service contract which provides for liquidated damages of $50 per email message
sent after March 17, 2006 in violation of such Terms. The Company estimates
that
approximately 110,000 of the emails in question were sent after such date,
which
could have resulted in damages of approximately $5.5 million. In addition, the
CAN-SPAM Act provides for statutory damages of between $100 and $300 per email
sent in violation of the statute. Total damages under CAN-SPAM could therefore
have ranged between about $40 million to about $120 million. In addition, under
the California Act, statutory damages of $1,000,000 “per incident” could have
been assessed.
On
March
15, 2007, the Company entered into a Settlement Agreement with MySpace whereby
it agreed to pay MySpace $2,550,000 on or before April 5, 2007 in exchange
for a
mutual release of all claims against one another, including any claims against
the Company’s directors and officers. As part of the settlement, Mike Egan, the
Company’s CEO, who is also an affiliate of the Company, agreed to enter into an
agreement with MySpace on or before April 5th
pursuant
to which he would, among other things, provide a letter a credit, cash or other
equivalent security (collectively, “Security”) in form and substance
satisfactory to MySpace. Such Security is to expire and be released on the
100th
day
following the Company’s payment of the foregoing $2,550,000 so long as no
bankruptcy petition, assignment for the benefit of creditors or like
liquidation, reorganization or insolvency proceeding is instituted or filed
related to the Company during such 100-day period.
The
Company does not currently have the resources to both pay the $2,550,000
settlement amount and to fund operations beyond a short period of time. The
Company intends to seek to raise capital or otherwise borrow funds with which
to
pay such amount and otherwise to fund operations. Although there is no
commitment to do so, any such funds would most likely come primarily from Mr.
Egan or affiliates of Mr. Egan or the Company. Any such capital raised would
not
be registered under the Securities Act of 1933 and would not be offered or
sold
in the United States absent registration or an applicable exemption from
registration requirements. There can be no assurance that the Company will
be
successful in raising such capital or borrowing such funds and any capital
raised will likely result in very substantial dilution of the number of shares
outstanding or which could be outstanding upon the exercise or conversion of
any
derivative securities issued by the Company as part of such capital raise.
The
failure to pay the $2,550,000 to MySpace and/or the failure to satisfactorily
provide the Security would result in a resumption of the litigation with MySpace
and, in all likelihood, would have a material adverse effect on the Company,
including the potential bankruptcy and cessation of business of the
Company.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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| Dated:
March 21, 2007 |
theglobe.com,
inc. |
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By: |
/s/ Edward Cespedes |
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Edward
Cespedes, President |