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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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:
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our need for additional equity and debt capital financing to continue as a going concern, and the sources of such capital;
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our intent with respect to future dividends;
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the continued forbearance of certain related parties from making demand for payment under certain
contractual obligations of, and loans to, the Company; and
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our estimates with respect to certain accounting and tax matters.
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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, 2018. 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:
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our ability to raise additional and sufficient capital;
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our ability to continue to receive funding from related parties; and
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our ability to successfully estimate the impact of certain accounting and tax matters.
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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, 2018.
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, Mr. Egan, Mr.
Cespedes and Ms. Lebowitz resigned from their respective positions as officers and directors of the Company. William “Rusty”
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 September 30, 2019, as reflected in our accompanying
balance sheet, our current liabilities exceed our total assets.
BASIS OF PRESENTATION OF CONDENSED FINANCIAL
STATEMENTS; GOING CONCERN
We received a report from
our independent registered public accountants, relating to our December 31, 2018 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
SEPTEMBER 30, 2019 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2018
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 September 30, 2019 and 2018 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 $54,000 in the third quarter
of 2019 as compared to approximately $69,000 for the same quarter of the prior year.
RELATED PARTY INTEREST EXPENSE.
Related party interest expense for the three months ended September 30, 2019 totaled $9,376 compared to $2,430 for the three months
ended September 30, 2018. This increase consisted of interest due and payable to Delfin as the loan amount has increased.
NET LOSS. Net loss for the
three months ended September 30, 2019 was approximately $63,000 as compared to a net loss of approximately $71,000 for the three
months ended September 30, 2018.
NINE MONTHS ENDED
SEPTEMBER 30, 2019 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2018
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 nine months ended September 30, 2019 and 2018 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 $151,000 for the first nine months
of 2019 as compared to approximately $203,000 for the same period of the prior year. This decrease was primarily due to decreased
legal expenses.
RELATED PARTY TRANSACTIONS.
Related party interest expense for the nine months ended September 30, 2019 totaled $23,804 compared to $4,066 for the nine months
ended September 30, 2018. This increase consisted of interest due and payable to Delfin as the loan amount has increased. There
were also $60,000 in payments to a former officer in the nine months ended September 30, 2018.
NET LOSS. Net loss for the nine months
ended September 30, 2019 was approximately $175,000 as compared to a net loss of approximately $267,000 for the nine months ended
September 30, 2018. This decrease was primarily due to decreased legal expenses.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW ITEMS
As of September 30, 2019,
we had $26,459 in cash as compared to $5,895 as of December 31, 2018. Net cash flows used in operating activities of continuing
operations totaled approximately $144,000 for the nine months ended September 30, 2019 compared to net cash flows used in operating
activities of continuing operations of approximately $144,000 for the nine months ended September 30, 2018.
Net cash flows provided
by financing activities totaled approximately $165,000 for the nine months ended September 30, 2019 compared to approximately $145,000
for the nine months ended September 30, 2018.
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.
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 eight (8%) per annum, and is payable on the maturity date, calculated on a 365/366 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
the maturity date. Management anticipates continued funding from Delfin as it determines the direction of the Company.
At September 30, 2019, we had a
net working capital deficit of approximately $507,000. This deficit included accrued expenses of approximately $24,000,
accounts payable of approximately $11,000 and approximately $498,000 in principal and accrued interest owed under the
Promissory Note with Delfin, the Company’s majority shareholder.
EFFECTS OF INFLATION
Management believes that inflation has not had a
significant effect on our results of operations during 2019 and 2018.
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.