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

During the year ended December 31, 2007 and the first quarter of 2008, the Company was able to continue operating as a going concern due principally to funding of $1,250,000 received from the sale of secured convertible demand promissory notes to an entity controlled by Michael Egan, its Chairman and Chief Executive Officer. Additionally, in December 2007, additional funding of $380,000 was 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. At March 31, 2008, the Company had a net working capital deficit of approximately $9,888,000, inclusive of a cash and cash equivalents balance of approximately $336,000. Such working capital deficit included an aggregate of $4,650,000 in secured convertible demand debt, related accrued interest of approximately $1,071,000 and accounts payable totaling approximately $644,000 due to entities controlled by Mr. Egan (See Note 7, "Related Party Transactions" for further details). Additionally, such working capital deficit included approximately $1,878,000 of net liabilities of discontinued operations, with a significant portion of such liabilities related to charges which have been disputed by the Company.

Notwithstanding previous cost reduction actions taken by the Company and its decision to shutdown its unprofitable computer games and VoIP telephony services businesses in March 2007 (see Note 4, "Discontinued Operations" for further details), the Company continues to incur substantial consolidated net losses, although reduced in comparison with prior periods, and management believes that the Company will continue to be unprofitable in the foreseeable future. Based upon the Company's current financial condition, as discussed above, and without the infusion of additional capital, management does not believe that the Company will be able to fund its operations beyond the end of May 2008.

As more fully discussed in Note 3, "Proposed Tralliance Transaction", on February 1, 2008, the Company announced that it had entered into a letter of intent to sell substantially all of the business and net assets of its Tralliance Corporation subsidiary and to issue approximately 269,000,000 shares of its Common Stock to an entity controlled by Mr. Egan (the "Proposed Tralliance Transaction"). In the event that this Proposed Tralliance Transaction is consummated, all of the Company's remaining secured and unsecured debt owed to entities controlled by Mr. Egan (which was approximately $5,721,000 and $644,000 at March 31, 2008, respectively) will be exchanged or cancelled. Additionally, the consummation of the Proposed Tralliance Transaction would also result in significant reductions in the Company's cost structure, based upon the elimination of Tralliance's operating expenses. Although substantially all of Tralliance's revenue would also be eliminated, approximately 10% of Tralliance's future net revenue through May 5, 2015 would be essentially retained through the contemplated net revenue earn-out provisions of the Proposed Tralliance Transaction. Additionally, the consummation of the Proposed Tralliance Transaction would increase Mr. Egan's ownership in the Company to approximately 84% (assuming exercise of all outstanding stock options and warrants) and would significantly dilute all other existing shareholders. The foregoing description is preliminary in nature and there may be significant changes between such preliminary terms and the terms of any final definitive purchase agreement.

MANAGEMENT'S PLANS

Management expects that the consummation of the Proposed Tralliance Transaction will significantly reduce the amount of net losses currently being sustained by the Company. However, management does not believe that the consummation of the Proposed Tralliance Transaction 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. Accordingly, assuming that the Proposed Tralliance Transaction is consummated, management believes that additional capital infusions (although reduced in comparison with the amounts of capital required during the Company's recent past) will continue to be needed in order for the Company to continue to operate as a going concern.

In the event that the Proposed Tralliance Transaction is not consummated, management expects that significantly more capital will need to be invested in the Company in the near term than would be required in the event that the Proposed Tralliance Transaction is consummated. Also, inasmuch as substantially all of the assets of the Company and its subsidiaries secure the convertible demand debt owed to entities controlled by Mr. Egan, in connection with any resulting proceeding to collect this debt, such entities could seize and sell the assets of the Company and it subsidiaries, any or all of which would have a material adverse effect on the financial condition and future operations of the Company, including the potential bankruptcy or cessation of business of the Company.

It is our preference to avoid filing for protection under the U.S. Bankruptcy Code. However, in order to continue operating as a going concern for any length of time beyond May 2008, we believe that we must quickly raise capital. Although there is no commitment to do so, any such funds would most likely come from Michael Egan or affiliates of Mr. Egan or the Company as the Company currently has no access to credit facilities with traditional third parties and has historically relied upon borrowings from related parties to meet short-term liquidity needs. Any such capital raised would not be registered under the Securities Act of 1933 and would not be offered or sold in the United States absent registration requirements. Further, any securities issued (or issuable) in connection with any such capital raise will likely result in very substantial dilution of the number of outstanding shares of the Company's Common Stock.

The amount of capital required to be raised by the Company will be dependent upon a number of factors, including (i) whether or not the Proposed Tralliance Transaction is consummated; (ii) our ability to increase Tralliance net revenue levels; (iii) our ability to control and reduce operating expenses; and (iv) our ability to successfully settle disputed and other outstanding liabilities related to our discontinued operations. There can be no assurance that the Proposed Tralliance Transaction will be consummated nor that the Company will be successful in raising a sufficient amount of capital, executing any of its current or future business plans or in continuing to operate as a going concern on a long-term basis. The consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

On February 1, 2008 the Company announced that it had entered into a letter of intent to sell substantially all of the business and net assets of its Tralliance Corporation subsidiary and to issue approximately 269,000,000 shares of its Common Stock, to The Registry Management Company, LLC, a privately held entity controlled by Michael S. Egan, theglobe.com's Chairman, CEO and controlling investor (the "Proposed Tralliance Transaction").

As part of the purchase consideration for the Proposed Tralliance Transaction, Mr. Egan and certain of his affiliates will exchange and surrender all of their right, title and interest to certain secured demand convertible notes (the "2005 Convertible Notes and 2007 Convertible Notes"), accrued and unpaid interest thereon, as well as accrued and unpaid rent and miscellaneous fees that are due and outstanding as of the date of the closing of the Proposed Tralliance Transaction. At March 31, 2008, amounts due under the 2005 Convertible Notes and 2007 Convertible Notes, accrued and unpaid interest thereon, and accrued and unpaid rent and miscellaneous fees totaled approximately $4,650,000, $1,071,000 and $644,000, respectively, which amounts collectively equal $6,365,000 (see Note 7, "Related Party Transactions" for additional details).

As additional consideration, The Registry Management Company will pay an earn-out to theglobe equal to 10% (subject to certain minimums) of The Registry Management Company's net revenue derived from ".travel" names registered by The Registry Management Company through May 5, 2015. The total net present value of the minimum guaranteed earn-out payments is estimated to be approximately $1,300,000, bringing the total purchase consideration for the Proposed Tralliance Transaction to approximately $7,665,000 (based upon March 31, 2008 liability balances as discussed above).

The Proposed Tralliance Transaction is subject to the negotiation and closing of a definitive purchase agreement, receipt of an independent fairness opinion, and shareholder approval. The Proposed Tralliance Transaction is expected to close no earlier that the second quarter of 2008. The foregoing description is preliminary in nature and there may be significant changes between such preliminary terms and the terms of any final definitive purchase agreement. As of May 9, 2008, the Company and The Registry Management Company continue to work toward finalizing a definitive agreement, however as of such date, no definitive agreement has been entered into.

(4) DISCONTINUED 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 businesses, including discontinuing the operations of its magazine publications, games distribution business and related websites. The Company's decision to shutdown its computer games businesses was based primarily on the historical losses sustained by these businesses during the recent past and management's expectations of continued future losses. As of March 31, 2008, all significant elements of its computer games business shutdown plan have been completed by the Company, except for the collection and payment of remaining outstanding accounts receivables and payables.

In addition, in March 2007, management and the Board of Directors of the Company decided to discontinue the operating, research and development activities of its VoIP telephony services business and terminate all of the remaining employees of the business. 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. On April 2, 2007, theglobe agreed to transfer to Michael Egan all of its VoIP intellectual property in consideration for his agreement to provide the Security in connection with the MySpace litigation Settlement Agreement (See Note 6, "Litigation," for further discussion). The Company had previously written off the value of the VoIP intellectual property as a result of its evaluation of the VoIP telephony services business' long-lived assets in connection with the preparation of the Company's 2004 year-end consolidated financial statements. As of March 31, 2008, all significant elements of its VoIP telephony services business shutdown plan have been completed by the Company, except for the resolution of certain vendor disputes and the payment of remaining outstanding vendor payables.

Results of operations for the Computer Games and VoIP telephony services businesses have been reported separately as "Discontinued Operations" in the accompanying condensed consolidate statements of operations for all periods presented. The assets and liabilities of the computer games and VoIP telephony services businesses have been included in the captions, "Assets of Discontinued Operations" and "Liabilities of Discontinued Operations" in the accompanying condensed consolidated balance sheets.

The following is a summary of the assets and liabilities of the discontinued operations of the computer games and VoIP telephony services businesses as included in the accompanying condensed consolidated balance sheets. A significant portion of the net liabilities of discontinued operations at March 31, 2008 and December 31, 2007 relate to charges that have been disputed by the Company and for which estimates have been required.

                                           March 31,     December 31,
                                             2008            2007
Assets:
Computer Games
Accounts receivable, net                  $    21,574   $       30,000
                                               21,574           30,000
VoIP Telephony Services                             -                -

Total assets of discontinued operations   $    21,574   $       30,000



                                                March 31,     December 31,
                                                  2008            2007
Liabilities:
Computer Games
Accounts payable                               $    35,583   $       35,583
Subscriber liability, net                            4,989            5,398
                                                    40,572           40,981
VoIP Telephony Services
Accounts payable                                 1,609,016        1,632,653
Other accrued expenses                             228,710          228,710
                                                 1,837,726        1,861,363

Total liabilities of discontinued operations   $ 1,878,298   $    1,902,344

Summarized results of operations financial information for the discontinued operations was as follows:

Periods Ended March 31,                       2008        2007

Computer Games:
Net revenue                                 $      -   $  588,499

Loss from operations, net of tax            $ (3,906 ) $ (364,474 )

VoIP Telephony Services:
Net revenue                                 $      -   $      374

Income (Loss) from operations, net of tax   $  4,871   $ (796,562 )

The Company has estimated the costs expected to be incurred in shutting down its computer games and VoIP telephony services businesses and has accrued charges as of March 31, 2008, as follows:

                                                                    VoIP
                                                    Computer      Telephony
                                                     Games         Services

Total Estimated Shut-Down Costs Charged to
Discontinued Operations Through March 31, 2008:
Contract termination costs                        $          -   $    416,466
Other costs                                       $     24,235   $          -
                                                  $     24,235   $    416,466

Included in Liabilities at March 31, 2008:
Charged to discontinued operations                $    245,235   $    428,966
Payment of costs                                       (24,235 )      (61,000 )
Settlements credited to discontinued operations       (221,000 )      (12,500 )
                                                  $          -   $    355,466

Net current liabilities of discontinued operations at March 31, 2008 include accounts payable and accruals totaling approximately $355,466 related to the estimated shut-down costs summarized above.

(5) STOCK OPTION PLANS

We have several stock option plans under which nonqualified stock options may be granted to officers, directors, other employees, consultants and advisors of the Company. In general, options granted under the Company's stock option plans expire after a ten-year period and generally vest no later than three years from the date of grant. Incentive options granted to stockholders who own greater than 10% of the total combined voting power of all classes of stock of the Company must be issued at 110% of the fair market value of the stock on the date the options are granted. As of March 31, 2008, there were approximately 7,383,000 shares available for grant under the Company's stock option plans.

No stock options were granted by the Company during the three months ended March 31, 2008. A total of 100,000 stock options were granted during the three months ended March 31, 2007, with a weighted-average fair value of $0.07. There were no stock option exercises during the three months ended March 31, 2008 and 2007.

Stock option activity during the three months ended March 31, 2008 was as follows:

                                                               Weighted
                                                           Average Exercise
                                         Total Options          Price
Outstanding at December 31, 2007             16,340,660   $             0.40
Granted                                               -
Exercised                                             -
Canceled                                       (739,500 )               0.39
Outstanding at March 31, 2008                15,601,160   $             0.41
Options exercisable at March 31, 2008        15,319,552   $             0.41

The weighted-average remaining contractual terms of stock options outstanding and stock options exercisable at March 31, 2008 were 6.0 years and 5.9 years, respectively. The aggregate intrinsic value of both options outstanding and stock options exercisable at March 31, 2008 was $0.

Stock compensation cost is recognized on a straight-line basis over the vesting period. Stock compensation expense totaling $8,551 was charged to continuing operations during the three months ended March 31, 2008, including $426 of expense resulting from the vesting of non-employee stock options. During the three months ended March 31, 2007, stock compensation expense of $104,656 charged to continuing operations included $3,136 of expense related to the vesting of non-employee stock options and $34,423 from the accelerated vesting of stock options issued to terminated employees.

At March 31, 2008, there was approximately $38,000 of unrecognized compensation expense related to unvested stock options which is expected to be recognized over a weighted-average period of 1.3 years.

The Company estimates the fair value of each stock option at the grant date by using the Black Scholes option-pricing model using the following assumptions: no dividend yield; a risk free interest rate based on the U.S. Treasury yield in effect at the time of grant; an expected option life based on historical and expected exercise behavior; and expected volatility based on the historical volatility of the Company's stock price, over a time period that is consistent with the expected life of the option.

(6) LITIGATION

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

On February 28, 2007, the Court entered an order (the "Order") granting in part MySpace's motion for summary judgment, finding that the Company was liable for violation of the CAN-SPAM Act and the California Business & Professions Code, and for breach of contract (as embodied in MySpace's "Terms of Service" contract). The Order also upheld as valid that portion of MySpace's Terms of Service contract which provides for liquidated damages of $50 per email message sent after March 17, 2006 in violation of such Terms. The Company estimated 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 provided 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, Michael Egan, the Company's CEO, who is also an affiliate of the Company, agreed to enter into an agreement with MySpace on or before April 5th pursuant to which he would, among other things, provide a letter of credit, cash or other equivalent security (collectively, "Security") in form and substance satisfactory to MySpace. Such Security was to expire and be released (and in fact did expire and was 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 was instituted or filed related to the Company during such 100-day period. In accordance with SFAS No. 5, "Accounting for Contingencies," the $2,550,000 payment required by the Settlement Agreement was accrued and has been included in current liabilities in the consolidated balance sheet as of December 31, 2006 and has been reflected as an expense of discontinued operations in the consolidated statement of operations for the year ended December 31, 2006.

On April 2, 2007, theglobe agreed to transfer to Michael Egan all of its VoIP intellectual property in consideration for his agreement to provide the Security in connection with the Settlement Agreement. On April 13, 2007, Michael Egan and an entity wholly-owned by Michael Egan, and MySpace entered into a Security Agreement, an Indemnity Agreement and an Escrow Agreement (the "Security Agreements") providing for the Security. On April 18, 2007, theglobe paid MySpace $2,550,000 in cash as settlement of the claims. MySpace and theglobe filed a consent judgment and stipulated permanent injunction with the Court on April 19, 2007, which among other things, dismissed all claims alleged in the lawsuit with prejudice.

On and after August 3, 2001 six putative shareholder class action lawsuits were filed against the Company, certain of its current and former officers and directors (the "Individual Defendants"), and several investment banks that were the underwriters of the Company's initial public offering and secondary offering. The lawsuits were filed in the United States District Court for the Southern District of New York. A Consolidated Amended Complaint, which is now the operative complaint, was filed in the Southern District of New York 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. The purported class action alleges violations of Sections 11 and 15 of the Securities Act of 1933 (the "1933 Act") and Sections 10(b), Rule 10b-5 and 20(a) of the Securities Exchange Act of 1934 (the "1934 Act"). Plaintiffs allege that the underwriter defendants agreed to allocate stock in the Company's initial public offering and its secondary 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 Prospectuses for the Company's initial public offering and its secondary offering were 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. On October 9, 2002, the Court dismissed the Individual Defendants from the case without prejudice. This dismissal disposed of the Section 15 and 20(a) control person claims without prejudice. On December 5, 2006, the Second Circuit vacated a decision by the district court granting class certification in six of the coordinated cases, which are intended to serve as test, or "focus," cases. The plaintiffs selected these six cases, which do not include the Company. On April 6, 2007, the Second Circuit denied a petition for rehearing filed by the plaintiffs, but noted that the plaintiffs could ask the district court to certify more narrow classes than those that were rejected.

On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The amended complaints include a number of changes, such as changes to the definition of the purported class of investors, and the elimination of the individual defendants as defendants. On September 27, 2007, the plaintiffs moved to certify a class in the six focus cases. On November 14, 2007, the issuers and the underwriters named as defendants in the six focus cases filed motions to dismiss the amended complaints against them. On March 26, 2008, the District Court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all other claims, the motions to dismiss were denied. We are awaiting a decision from the Court on the class certification motion.

Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter. We cannot predict whether we will be . . .