OVERVIEW

As more fully discussed in the section below entitled "Sale of Tralliance and Share Issuance," on September 29, 2008, theglobe.com, inc. (the "Company" or "theglobe") consummated the sale of the business and substantially all of the assets of its Tralliance Corporation subsidiary ("Tralliance") to an entity controlled by Michael S. Egan, the Company's Chairman and Chief Executive Officer. We acquired Tralliance on May 9, 2005 and from the date of acquisition until September 29, 2008, Tralliance operated as the registry for the ".travel" top-level Internet domain.

As part of the consideration for the sale of its Tralliance business, theglobe received earn-out rights equal to 10% of the "net revenue" derived from ".travel" names registered by the acquirer, Tralliance Registry Management, from September 29, 2008 through May 5, 2015 (the "Earn-out"). The minimum Earn-out payable to theglobe will be at least $300 thousand in the first year following closing, increasing by $25 thousand in each subsequent year (pro-rated for the final year of the Earn-out). Immediately following the sale of its Tralliance business, theglobe became a shell company with no material operations or assets and no source of revenue other than under the Earn-out. theglobe presently intends to continue as a public company and make all the requisite filings under the Securities and Exchange Act of 1934. It has no current intent to seek to acquire or start any other businesses. It is expected that theglobe's future operating expenses as a public shell company will consist of customary public company expenses, including accounting, financial reporting, legal, audit and other related public company costs. For financial reporting purposes, theglobe will continue to report the financial position and results of operation of its Tralliance business as a component of its continuing operations.

In March 2007, management and the Board of Directors of the Company made the decision to cease all activities related to its computer games and VoIP telephony services businesses. Results of operations for the computer games and VoIP telephony services businesses have been reported separately as "Discontinued Operations" in the accompanying condensed consolidated statements of operations for all periods presented. The assets and liabilities of the computer games and VoIP telephony services have been included in the captions, "Assets of Discontinued Operations" and "Liabilities of Discontinued Operations" in the accompanying condensed consolidated balance sheets.

SALE OF TRALLIANCE AND SHARE ISSUANCE

On September 29, 2008, the Company (i) sold the business and substantially all of the assets of its Tralliance Corporation subsidiary to Tralliance Registry Management and (ii) issued 229 million shares of its Common Stock (the "Shares") to Registry Management (the "Purchase Transaction") (see Note 3, "Sale of Tralliance and Share Issuance" in the accompanying Notes to Consolidated Financial Statements). Tralliance Registry Management and Registry Management are entities directly or indirectly controlled by Michael S. Egan, our Chairman and Chief Executive Officer and principal stockholder, and each of our two remaining executive officers and Board members, Edward A. Cespedes, our President, and Robin Segaul Lebowitz, our Vice President of Finance, own a minority interest in Registry Management. After giving effect to the closing of the Purchase Transaction and the issuance of the Shares thereunder, Mr. Egan now beneficially owns approximately 77% of the Company's issued and outstanding Common Stock.

In connection with the Purchase Transaction, the Company received (i) consideration totaling approximately $6.4 million which consisted of the surrender to theglobe and satisfaction of secured demand convertible promissory notes issued by theglobe and held by Registry Management in the aggregate principal amount of $4.25 million, together with all accrued and unpaid interest of approximately $1.3 million through the date of closing of the Purchase Transaction and satisfaction of approximately $870 thousand in outstanding rent and miscellaneous fees due and unpaid to the Registry Management through the date of closing of the Purchase Transaction, and (ii) an earn-out equal to 10% (subject to certain minimums) of Tralliance Registry Management's "net revenue" (as defined) derived from ".travel" names registered by Tralliance Registry Management from September 29, 2008 through May 5, 2015 (the "Earn-out"). The minimum Earn-out payable by Tralliance Registry Management to theglobe will be at least $300 thousand in the first year of the Earn-out Agreement, increasing by $25 thousand each subsequent year (pro-rated for the final year of the Earn-out).

Commensurate with the closing of the Purchase Transaction, on September 29, 2008, the Company also entered into Termination Agreements with each of its executive officers (each a "Termination Agreement"). Pursuant to the Termination Agreements, the Company's employment agreements with each of Michael S. Egan, Edward A. Cespedes and Robin Segaul Lebowitz, the Chief Executive Officer, President and Vice President of Finance, all dated August 1, 2003, respectively, were terminated. Notwithstanding the termination of these employment agreements, each of Messrs. Egan, Cespedes and Ms. Lebowitz remains as an officer and director of the Company.

In connection with the closing of the Purchase Transaction, the Company entered into a Master Services Agreement ("Services Agreement") with Dancing Bear Investments, Inc. ("Dancing Bear"), an entity which is controlled by Mr. Egan. Under the terms of the Services Agreement, for a fee of $20 thousand per month ($240 thousand per annum), Dancing Bear will provide personnel and services to the Company so as to enable it to continue its existence as a public company without the necessity of any full-time employees of its own (after an initial transition period that ends December 31, 2008). The Services Agreement has an initial term of one year and is subject to renewal or early termination under certain events. Services under the Services Agreement include, without limitation, accounting, assistance with financial reporting, accounts payable, treasury/financial planning, record retention and secretarial and investor relations functions.

BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS; GOING CONCERN

We received a report from our independent registered public accountants, relating to our December 31, 2008 audited financial statements, containing an explanatory paragraph regarding our ability to continue as a going concern. Management believes that the recent sale of its Tralliance business on September 29, 2008 will significantly reduce the amount of operating and cash flow losses previously sustained by the Company. However, management does not believe that the sale of its Tralliance business will in itself allow the Company to become profitable and generate operating cash flows sufficient to fund its operations and pay its existing current liabilities (including those liabilities related to its discontinued operations) in the foreseeable future. Based upon our current cash resources and without the infusion of additional capital and/or the continued indulgence of its creditors, management does not believe the Company can operate as a going concern for any significant length of time beyond the end of March 31, 2009. See "Future and Critical Need for Capital" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations for further details.

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, our condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Due to the Sale of our Tralliance business and Share Issuance on September 29, 2008, and the discontinuance of our computer games and VoIP telephony services businesses in March 2007, the results of our operations for the year ended December 31, 2008 and the year ended December 31, 2007 are not necessarily comparable.

NET REVENUE. Net revenue totaled approximately $3.2 million for the year ended December 31, 2008 as compared to approximately $2.2 million for the year ended December 31, 2007, an increase of approximately $1.0 million. The increase is primarily attributable to revenue recognized during the third quarter of the current year of approximately $1.5 million related to the write-off of the remaining balance of deferred revenue as a result of the sale of the Company's Tralliance business on September 29, 2008. Additionally, the aforementioned Tralliance sale also resulted in no revenue bring recognized during the fourth quarter of 2008 compared to revenue of approximately $553 thousand recognized during the fourth quarter of 2007.

COST OF REVENUE. Cost of revenue totaled approximately $233 thousand for the year ended December 31, 2008 as compared to approximately $420 thousand for the year ended December 31, 2007, a decrease of approximately $187 thousand. Such decrease was due primarily to cost savings resulting from performing registration eligibility verification and .travel directory hosting functions in-house rather than utilizing third party providers in 2008 compared to 2007.

SALES AND MARKETING. Sales and marketing expenses totaled approximately $390 thousand for the year ended December 31, 2008 as compared to approximately $1.9 million for the year ended December 31, 2007, a decrease of approximately $1.5 million. During 2007, the Company incurred substantial sales and marketing costs related to promoting its .travel registry business in various international markets and developing its search.travel search engine business. During the fourth quarter of 2007, the majority of the Company's international marketing programs were terminated and in December 2007, the Company sold its www.search.travel business, resulting in decreases in international and search.travel sales and marketing costs of approximately $736 thousand and approximately $447 thousand in 2008 compared to 2007, respectively.

GENERAL AND ADMINISTRATIVE. General and administrative expenses totaled approximately $1.6 million for the year ended December 31, 2008 as compared to approximately $3.4 million for the year ended December 31, 2007, a decrease of approximately $1.8 million. During 2007, the Company restructured and reduced management and administrative staff resulting in a decrease in personnel costs of approximately $1.2 million in 2008 compared to 2007. Additionally, professional fees and travel and entertainment expenses decreased in 2008 and 2007 by approximately $188 thousand and $180 thousand, respectively.

RELATED PARTY TRANSACTIONS. Related party transaction expense totaled approximately $449 thousand for the year ended December 31, 2008 as compared to approximately $498 thousand for the year ended December 31, 2007, a decrease of approximately $49 thousand. Such decrease was due primarily to lower related party charges for office space in 2008 versus 2007.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense totaled approximately $399 thousand for the year ended December 31, 2008 as compared to $240 thousand for the year ended December 31, 2007. The $159 thousand increase is attributable mainly to higher intangible asset amortization expense of approximately $211 thousand recorded in the current year related primarily to the write-off of the remaining net book value of intangible assets which were deemed to have no future value as a result of the sale of the Company's Tralliance business on September 29, 2008.

GAIN ON TRALLIANCE ASSET SALE. During the year ended December 31, 2008, the Company recorded a gain of approximately $2.5 million related to the sale of its Tralliance business on September 29, 2008.

RELATED PARTY INTEREST EXPENSE. Related party interest expense for the year ended December 31, 2008 was approximately $359 thousand compared to $1.6 million for the year ended December 31, 2007, a decrease of approximately $1.3 million. During the second quarter and third quarter of 2007, a total of 1.25 million of non-cash interest expense was recorded related to the beneficial conversion features of a total of $1.25 million in convertible promissory notes acquired by an entity controlled by its Chairman and Chief Executive Officer.

INTEREST INCOME (EXPENSE), NET. Net interest income of approximately $3 thousand was reported for the year ended December 31, 2008 compared to total net interest income of $58 thousand reported for the year ended December 31, 2007. As a result of the Company's net losses incurred during 2007 and 2008 the Company had a lower level of funds available for investment during the 2008 period as compared to 2007.

RELATED PARTY OTHER INCOME. Related party other income of $75 thousand related to Earn-out payments received from Tralliance Registry Management was recognized during the year ended December 31, 2008. Related party other income of approximately $380 thousand related to the gain on the sale of www.search.travel to Search.Travel, LLC was recognized during the year ended December 31, 2007.

INCOME TAXES. The provision for income taxes for the year ended December 31, 2008 consists of approximately $16 thousand in federal alternative minimum taxes recorded and accrued as of December 31, 2008 (see Note 10, "Income Taxes" in the accompanying Notes to Consolidated Financial Statements for further details.).

                            DISCONTINUED OPERATIONS

Income from discontinued operations before income taxes totaled approximately
$50 thousand for the year ended December 31, 2008 as compared to a loss of
approximately $729 thousand for the year ended December 31, 2007, and is
summarized as follows:

                                                                            VoIP
                                                           Computer       Telephony
                                                            Games         Services         Total
Year ended December 31, 2008:
Net revenue                                               $   21,695     $         -     $  21,695
Operating expenses                                        $    5,860     $     5,309     $  11,169
Other income, net                                         $   32,916     $     6,978     $  39,894
Income from discontinued operations before income taxes   $   48,751     $     1,669     $  50,420



                                                                          VoIP
                                                         Computer      Telephony
                                                          Games         Services         Total
Year ended December 31, 2007:
Net revenue                                             $  634,164     $      630     $   634,794
Operating expenses                                      $  783,458     $  707,567     $ 1,491,025
Other income, net                                       $   34,556     $   92,435     $   126,991
Loss from discontinued operations before income taxes   $ (114,738 )   $ (614,502 )   $  (729,240 )

The results of the Company's discontinued operations for the year ended December 31, 2008 include a $64,000 provision for income taxes related to estimated taxes due in connection with an ongoing prior year audit of a former subsidiary company. No income tax provision was recorded for the year ended December 31, 2007.

LIQUIDITY AND CAPITAL RESOURCES

FUTURE AND CRITICAL NEED FOR CAPITAL

For the reasons described below, Company management does not believe that cash on hand and cash flow generated internally by the Company will be adequate to fund its limited overhead and other cash requirements beyond a short period of time. Additionally, we have received a report from our independent registered public accountants, relating to our December 31, 2008 audited financial statements, containing an explanatory paragraph regarding our ability to continue as a going concern.

During the years ended December 31, 2007 and 2008, the Company was able to continue operating as a going concern due principally to funding of $1.25 million received during 2007 from the sale of secured convertible demand promissory notes (the "2007 Convertible Notes") to an entity controlled by Michael S. Egan, its Chairman and Chief Executive Officer, additional funding of $380 thousand provided from the sale of all of the Company's rights related to its www.search.travel domain name and website to an entity also controlled by Mr. Egan in December 2007 and funding of $500 thousand received during 2008 under a Revolving Loan Agreement with an entity also controlled by Mr. Egan (See Note 8, "Debt" and Note 12, "Related Party Transactions" in the accompanying Notes to Consolidated Financial Statements for further details).

At December 31, 2008, the Company had a net working capital deficit of approximately $3.0 million, inclusive of a cash and cash equivalents balance of approximately $90 thousand. Such working capital deficit included (i) a total of approximately $523 thousand in principal and accrued interest owed under the aforementioned Revolving Loan Agreement to an entity controlled by Mr. Egan, and
(ii) an aggregate of approximately $2.7 million in unsecured accounts payable and accrued expenses owed to vendors and other non-related third parties (of which approximately $1.8 million relates to liabilities of our VoIP telephony service discontinued business, with a significant portion of such liabilities related to charges which have been disputed by theglobe). theglobe believes that its ability to continue as a going concern for any significant length of time in the future will be heavily dependent, among other things, on its ability to prevail and avoid making any payments with respect to such disputed vendor charges and/or to negotiate favorable settlements (including discounted payment and/or payment term concessions) with the aforementioned creditors.

As more fully discussed in Note 3, "Sale of Tralliance and Share Issuance" in the accompanying Consolidated Financial Statements, on September 29, 2008, the Company (i) sold the business and substantially all of the assets of its Tralliance Corporation subsidiary to Tralliance Registry Management, and (ii) issued 229 million shares of its Common Stock (the "Shares") to Registry Management (the "Purchase Transaction"). Tralliance Registry Management and Registry Management are entities controlled by Michael S. Egan. The closing of the Purchase Transaction resulted in the cancellation of all of the Company's remaining Convertible Debt, related accrued interest and rent and accounts payable owed to entities controlled by Mr. Egan as of the date of closing (totaling approximately $6.4 million). However, the Company continues to be obligated to repay its principal borrowings totaling $500 thousand, plus accrued interest at the rate of 10% per annum, due to an entity controlled by Mr. Egan under the aforementioned Revolving Loan Agreement. All unpaid borrowings under the Revolving Loan Agreement, including accrued interest, are due and payable by the Company in one lump sum on the earlier of (i) June 6, 2009, or (ii) the occurrence of an event of default as defined in the Revolving Loan Agreement. The Company currently has no ability to repay this loan when due. All borrowings under the Revolving Loan Agreement are secured by a pledge of all of the assets of the Company and its subsidiaries. After giving effect to the closing of the Purchase Transaction and the issuance of the Shares thereunder, Mr. Egan now beneficially owns approximately 77% of the Company's issued and outstanding Common Stock.

As additional consideration under the Purchase Transaction, Tralliance Registry Management is obligated to pay an earn-out to theglobe equal to 10% (subject to certain minimums) of Tralliance Registry Management's net revenue (as defined) derived from ".travel" names registered by Tralliance Registry Management from September 29, 2008 through May 5, 2015 (the "Earn-out"). The minimum Earn-out payable by Tralliance Registry Management to theglobe will be at least $300 thousand in the first year, increasing by $25 thousand in each subsequent year (pro-rated for the final year of the Earn-out).

In connection with the closing of the Purchase Transaction, the Company also entered into a Master Services Agreement with an entity controlled by Mr. Egan whereby for a fee of $20 thousand per month ($240 thousand per annum) such entity will provide personnel and services to the Company so as to enable it to continue its existence as a public company without the necessity of any full-time employees of its own. Additionally, commensurate with the closing of the Purchase Transaction, Termination Agreements with each of its current executive officers, which terminated their previous and then existing employment agreements, were executed. Notwithstanding the termination of these employment agreements, each of our current executive officers and directors remain as executive officers and directors of the Company.

Immediately following the closing of the Purchase Transaction, theglobe became a shell company with no material operations or assets, and no source of revenue other than under the Earn-out. It is expected that theglobe's future operating expenses as a public shell company will consist primarily of expenses incurred under the aforementioned Master Services Agreement and other customary public company expenses, including legal, audit and other miscellaneous public company costs.

Despite the significant reductions in operating and cash flow losses expected to be realized from selling its Tralliance business, and as a result of becoming a shell company, management believes that theglobe will most likely continue to incur operating and cash flow losses for the foreseeable future. However, assuming that no significant unplanned costs are incurred, management believes that theglobe's future losses will be limited. Further, in the event that Registry Management is successful in substantially increasing net revenue derived from ".travel" name registrations (and as the result maximizing theglobe's Earn-out revenue) in the future, theglobe's prospects for achieving profitability will be enhanced.

It is the Company's preference to avoid filing for protection under the U.S. Bankruptcy Code. However, based upon the Company's current financial condition as discussed above, management believes that additional debt or equity capital will need to be raised in order for theglobe to continue to operate as a going concern. Such capital will be needed both to (i) fund expected future operating losses and (ii) repay the $500 thousand of secured debt and related accrued interest due under the Revolving Loan Agreement and a portion of the $2.7 million unsecured indebtedness (assuming theglobe is successful in favorably resolving and settling certain disputed and non-disputed vendor charges related to such unsecured indebtedness).

Without the infusion of additional capital and/or the continued indulgence of its creditors, management does not believe the Company will have the ability to operate as a going concern for any significant length of time beyond March 31, 2009. Any such additional capital would likely come from Mr. Egan, or affiliates of Mr. Egan, as the Company currently has no access to credit facilities and has traditionally relied upon borrowings from related parties to meet short-term liquidity needs. Any such equity capital raised would likely result in very substantial dilution in the number of outstanding shares of the Company's Common Stock. Given theglobe's current financial condition and the state of the current United States capital markets and economy, it has no current intent to seek to acquire, or start, any other business.

CASH FLOW ITEMS

As of December 31, 2008, theglobe had approximately $90 thousand in cash and cash equivalents as compared to approximately $631 thousand as of December 31, 2007. Net cash flows used in operating activities of continuing operations totaled approximately $859 thousand and $3.3 million, for the years ended December 31, 2008 and 2007, respectively, or a decrease of approximately $2.4 million. Such decrease was attributable primarily to a lower net loss from continuing operations (after adjustments for the non-cash impacts attributable to the Tralliance Asset Sale in the current period and the non-cash impact related to beneficial conversion features of debt in the prior year) for the year ended December 31, 2008 compared to the year ended December 31, 2007.

Approximately $6 thousand in net cash flows were provided from the operating activities of discontinued operations during the year ended December 31, 2008 as compared to net cash flow usage of approximately $3.2 million during the prior year. Such decrease was attributable to the shutdown of the Company's computer games and VoIP telephony services businesses in March 2007.

Net cash flows from investing activities and net cash flows from financing activities for the year ended December 31, 2008 included allocations of $79 thousand and $113 thousand, respectively, related to transaction costs incurred in connection with the Purchase Transaction that was consummated on September 29, 2008. Net cash flows from investing activities for the year ended December 31, 2007 also included proceeds of $380 thousand received from the sale of www.search.travel in December 2007 as well as aggregate proceeds received from the sale of property and equipment of discontinued operations of $167 thousand. Net cash flows from financing activities for the year ended December 31, 2008 also included proceeds of $500 thousand borrowed under a Revolving Loan Agreement with Dancing Bear Investments, Inc., an entity controlled by the Company Chairman and Chief Executive Officer. Net cash flows from financing activities for the year ended December 31, 2007 included proceeds of $1.25 million related to secured demand convertible notes issued to Dancing Bear Investments, Inc.

CONTRACTUAL OBLIGATIONS

As a "smaller reporting company," as defined by Rule 12b-2 of the Exchange Act, we have elected scaled disclosure reporting and therefore are not required to provide the table required by (a)(5) of this Item.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2008, we did not have any material off-balance sheet arrangements that have or are reasonably likely to have a material effect on our current or future financial condition, revenues or expenses, results of operations, liquidity, or capital resources.

EFFECTS OF INFLATION

Management believes that inflation has not had a significant effect on our results of operations during 2008 and 2007.

The preparation of our financial statements in conformity with accounting . . .