FORWARD LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
statements concern expectations, beliefs, projections, plans and strategies,
anticipated events or trends and similar expressions concerning matters that are
not historical facts. In some cases, you can identify forward-looking statements
by terminology, such as "may," "will," "should," "could," "expect," "plan,"
"anticipate," "believe," "estimate," "project," "predict," "intend," "potential"
or "continue" or the negative of such terms or other comparable terminology,
although not all forward-looking statements contain such terms. In addition,
these forward-looking statements include, but are not limited to, statements
regarding:
• our need for additional equity and debt capital financing to continue as a
going concern, and the sources of such capital;
• our intent with respect to future dividends;
• the continued forbearance of certain related parties from making demand for
payment under certain contractual obligations of, and loans to, the
Company; and
• our estimates with respect to certain accounting and tax matters.
These forward-looking statements reflect our current view about future events
and are subject to risks, uncertainties and assumptions. Unless required by law,
we do not intend to update any of the forward-looking statements after the date
of this Form 10-Q or to conform these statements to actual results. We wish to
caution readers that certain important factors may have affected and could in
the future affect our actual results and could cause actual results to differ
significantly from those expressed in any forward-looking statement. A
description of risks that could cause our results to vary appears under the
section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, as updated by those risks included in the
Form 10-Q. The most important factors that could prevent us from achieving our
goals, and cause the assumptions underlying forward- looking statements and the
actual results to differ materially from those expressed in or implied by those
forward-looking statements include, but are not limited to, the following:
• our ability to raise additional and sufficient capital;
• our ability to continue to receive funding from related parties;
• the impact of the COVID-19 pandemic on the economy and financial markets; and
• our ability to successfully estimate the impact of certain accounting and
tax matters.
The following discussion should be read together in conjunction with the
accompanying unaudited condensed financial statements and related notes thereto
and the audited financial statements and notes to those statements contained in
the Annual Report on Form 10-K for the year ended December 31, 2019.
OVERVIEW
theglobe.com, inc. (the "Company," "theglobe," "we" or "us") was incorporated on
May 1, 1995 and commenced operations on that date. Originally, we were an online
community with registered members and users in the United States and abroad. On
September 29, 2008, we consummated the sale of the business and substantially
all of the assets of our subsidiary, Tralliance Corporation ("Tralliance"), to
Tralliance Registry Management Company, LLC, an entity controlled by Michael S.
Egan, our former Chairman and Chief Executive Officer. As a result of and on the
effective date of the sale of our Tralliance business, which was our last
remaining operating business, we became a "shell company," as that term is
defined in Rule 12b-2 of the Exchange Act, with no material operations or
assets. We currently have no material operations or assets.
On December 20, 2017, our former Chief Executive Officer and majority
stockholder, Mr. Egan entered into the Purchase Agreement with Delfin for the
purchase by Delfin of shares owned by Mr. Egan representing approximately 70.9%
of our Common Stock. On the Closing Date, the former officers and directors,
including Mr. Egan, resigned from their respective positions with the Company.
Mr. Nichols was appointed the sole member of our Board and our sole executive
officer. Effective June 29, 2018, our Board appointed Mr. Frederick Jones as
President, Chief Executive Officer, Chief Financial Officer, and Director of the
Company, and Mr. Nichols resigned from his positions of President, Chief
Executive Officer, Chief Financial Officer, Director, and any other
directorships, offices or other positions with the Company.
As a shell company, our operating expenses have consisted primarily of, and we
expect them to continue to consist primarily of, customary public company
expenses, including personnel, accounting, financial reporting, legal, audit and
other related public company costs.
As of June 30, 2020, as reflected in our accompanying balance sheet, our current
liabilities exceed our total assets.
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BASIS OF PRESENTATION OF CONDENSED FINANCIAL STATEMENTS; GOING CONCERN
We received a report from our independent registered public accountants,
relating to our December 31, 2019 audited financial statements, containing an
explanatory paragraph regarding our ability to continue as a going concern. As a
shell company, our management believes that we will not be able to generate
operating cash flows sufficient to fund our operations and pay our existing
current liabilities. Based upon our current limited cash resources and without
the infusion of additional capital and/or the continued forbearance of our
creditors, our management does not believe we can operate as a going concern
beyond the next twelve months. 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 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
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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2020 COMPARED
TO THE
THREE MONTHS ENDED JUNE 30, 2019
NET REVENUE. Commensurate with the sale of our Tralliance business on
September 29, 2008, we became a shell company, and we have not had any material
operations since then. As a result, net revenue for both the three months ended
June 30, 2020 and 2019 was $0.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include only
customary public company expenses, including accounting, legal, audit, insurance
and other related public company costs. General and administrative expenses
totaled approximately $31,000 in the second quarter of 2020 as compared to
approximately $42,000 for the same quarter of the prior year. This decrease was
primarily due to decreased legal expenses due to securities filings in 2019.
RELATED PARTY INTEREST EXPENSE. Related party interest expense for the three
months ended June 30, 2020 totaled $11,051 compared to $7,687 for the three
months ended June 30, 2019. This increase consisted of interest due and payable
to Delfin for additional loan amounts.
NET LOSS. Net loss for the three months ended June 30, 2020 was approximately
$42,000 as compared to a net loss of approximately $49,000 for the three months
ended June 30, 2019. This decrease was primarily due to decreased legal
expenses, partially offset by an increase in interest expenses.
SIX MONTHS ENDED JUNE 30, 2020 COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2019
NET REVENUE. Commensurate with the sale of our Tralliance business on
September 29, 2008, we became a shell company, and we have not had any material
operations since then. As a result, net revenue for both the six months ended
June 30, 2020 and 2019 was $0.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include only
customary public company expenses, including accounting, legal, audit, insurance
and other related public company costs. General and administrative expenses
totaled approximately $67,000 for the first six months of 2020 as compared to
approximately $97,000 for the same period of the prior year. This decrease was
primarily due to decreased legal expenses.
RELATED PARTY INTEREST EXPENSE. Related party interest expense for the six
months ended June 30, 2020 totaled $22,103 compared to $14,428 for the six
months ended June 30, 2019. This increase consisted of interest due and payable
to Delfin as the loan amount has increased.
NET LOSS. Net loss for the six months ended June 30, 2020 was approximately
$89,000 as compared to a net loss of approximately $112,000 for the six months
ended June 30, 2019. This decrease was primarily due to decreased legal
expenses.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW ITEMS
As of June 30, 2020, we had $9,961 in cash as compared to $86,961 as of
December 31, 2019. Net cash flows used in operating activities totaled
approximately $77,000 for the six months ended June 30, 2020 compared to net
cash flows used in operating activities of approximately $101,000 for the six
months ended June 30, 2019.
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Net cash flows provided by financing activities totaled approximately $0 for the
six months ended June 30, 2020 compared to approximately $165,000 for the six
months ended June 30, 2019. Delfin funds theglobe when cash is needed, hence the
large increases/decreases in cash flow are attributed to receiving funding, then
using most of the funds until being funded again.
FUTURE AND CRITICAL NEED FOR CAPITAL
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the U.S. on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. Accordingly, the 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. However, for the reasons described below, our
management does not believe that cash on hand and cash flow generated internally
by us will be adequate to fund our limited overhead and other cash requirements
beyond the next twelve months. These reasons raise significant doubt about our
ability to continue as a going concern. Additionally, the COVID 19 pandemic
could have an adverse effect on our ability to continue operating. Please see
Item 1A. RISK FACTORS.
In March 2018, the Company executed a Promissory Note with Delfin, which was
amended and restated in May 2018 to $150,000, in November 2018 to $350,000, in
June 2019 to $465,000 and then again in November 2019 to increase the principal
amount to up to $554,100 to pay certain accrued expenses, accounts payable and
to allow the Company to have working capital. Interest accrues on the unpaid
principal balance at a rate of 8% per annum, calculated on a 365/66 day year, as
applicable. The Promissory Note is due upon demand. It may be prepaid in whole
or in any part at any time prior to demand. Management anticipates continued
funding from Delfin over the next twelve months as it determines the direction
of the Company and anticipates receiving additional capital at the end of
August 2020.
At June 30, 2020, we had a net working capital deficit of approximately
$633,000. This deficit included accrued expenses of approximately $21,000,
accounts payable of approximately $2,000 and approximately $619,000 in principal
and accrued interest owed under the Promissory Note with Delfin, the Company's
majority stockholder.
EFFECTS OF INFLATION
Management believes that inflation has not had a significant effect on our
results of operations during 2020 and 2019.
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 revenue and expenses during
the reporting period. Our estimates, judgments and assumptions are continually
evaluated based on available information and experience. Because of the use of
estimates inherent in the financial reporting process, actual results could
differ from those estimates.
Certain of our accounting policies require higher degrees of judgment than
others in their application. Primarily, these include valuation of accounts
payable and accrued expenses.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Management has determined that all recently issued accounting pronouncements
will not have a material impact on the Company's financial statements or do not
apply to the Company's operations.
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