|
ITEM 1.
|
|
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
THEGLOBE.COM,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
SEPTEMBER 30,
2018
(Unaudited)
|
|
|
DECEMBER 31,
2017
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
936
|
|
|
$
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
936
|
|
|
$
|
440
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
83,500
|
|
|
$
|
26,000
|
|
|
Accounts payable
|
|
|
60,977
|
|
|
|
—
|
|
|
Accrued interest due to related party
|
|
|
4,066
|
|
|
|
—
|
|
|
Notes payable due to related party
|
|
|
144,959
|
|
|
|
—
|
|
|
Total current liabilities
|
|
|
293,502
|
|
|
|
26,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 500,000,000 shares authorized
, 441,480,473
issued and outstanding at September 30, 2018 and December 31, 2017
|
|
|
441,480
|
|
|
|
441,480
|
|
|
Additional paid-in capital
|
|
|
296,594,042
|
|
|
|
296,594,042
|
|
|
Accumulated deficit
|
|
|
(297,328,088
|
)
|
|
|
(297,061,082
|
)
|
|
Total stockholders’ deficit
|
|
|
(292,566
|
)
|
|
|
(25,560
|
)
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
936
|
|
|
$
|
440
|
|
See notes to unaudited condensed consolidated
financial statements.
THEGLOBE.COM,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(UNAUDITED)
|
|
|
(UNAUDITED)
|
|
|
Net Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
68,896
|
|
|
|
32,995
|
|
|
|
202,939
|
|
|
|
74,040
|
|
|
Related party fees
|
|
|
—
|
|
|
|
60,000
|
|
|
|
60,000
|
|
|
|
180,000
|
|
|
|
|
|
68,896
|
|
|
|
92,995
|
|
|
|
262,939
|
|
|
|
254,040
|
|
|
Operating Loss from Continuing Operations
|
|
|
(68,896
|
)
|
|
|
(92,995
|
)
|
|
|
(262,939
|
)
|
|
|
(254,040
|
)
|
|
Other Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party interest expense
|
|
|
2,430
|
|
|
|
16,384
|
|
|
|
4,066
|
|
|
|
47,425
|
|
|
Loss from Continuing Operations Before Income Tax
|
|
|
(71,326
|
)
|
|
|
(109,379
|
)
|
|
|
(267,005
|
)
|
|
|
(301,465
|
)
|
|
Income Tax Provision
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Loss from Continuing Operations
|
|
|
(71,326
|
)
|
|
|
(109,379
|
)
|
|
|
(267,005
|
)
|
|
|
(301,465
|
)
|
|
Discontinued Operations, net of tax:
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(375
|
)
|
|
Net Loss
|
|
$
|
(71,326
|
)
|
|
$
|
(109,379
|
)
|
|
$
|
(267,005
|
)
|
|
$
|
(301,840
|
)
|
|
Loss Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Discontinued Operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Weighted Average Common Shares Outstanding
|
|
|
441,480,473
|
|
|
|
441,480,473
|
|
|
|
441,480,473
|
|
|
|
441,480,473
|
|
See notes to unaudited condensed consolidated
financial statements.
THEGLOBE.COM,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(UNAUDITED)
|
|
|
(UNAUDITED)
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(267,005
|
)
|
|
$
|
(301,840
|
)
|
|
Add back: loss from discontinued operations
|
|
|
—
|
|
|
|
375
|
|
|
Net loss from continued operations
|
|
|
(267,005
|
)
|
|
|
(301,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss from continuing operations to net cash flows used in operating activities
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Prepaid and other current assets
|
|
|
—
|
|
|
|
(666
|
)
|
|
Accounts payable to related parties
|
|
|
—
|
|
|
|
180,000
|
|
|
Accounts payable
|
|
|
60,977
|
|
|
|
(100
|
)
|
|
Accrued expenses and other current liabilities
|
|
|
57,500
|
|
|
|
(5,500
|
)
|
|
Accrued interest due to related party
|
|
|
4,066
|
|
|
|
47,424
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities of continued operations
|
|
|
(144,462
|
)
|
|
|
(80,307
|
)
|
|
Net cash flows used in operating activities of discontinued operations
|
|
|
—
|
|
|
|
(375
|
)
|
|
Net cash flows used in operating activities
|
|
|
(144,462
|
)
|
|
|
(80,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Borrowings on notes payable
|
|
|
144,959
|
|
|
|
50,000
|
|
|
Net cash flows provided by financing activities
|
|
|
144,959
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase/(Decrease) in Cash
|
|
|
496
|
|
|
|
(30,682
|
)
|
|
Cash at beginning of period
|
|
|
440
|
|
|
|
31,285
|
|
|
Cash at end of period
|
|
$
|
936
|
|
|
$
|
603
|
|
See notes to unaudited condensed consolidated
financial statements.
THEGLOBE.COM,
INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THEGLOBE.COM
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 (“Tralliance Registry Management”), 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.
On December 20, 2017, Delfin Midstream LLC
(“Delfin”) entered into a Common Stock Purchase Agreement with certain of our stockholders for the purchase of a total
of 312,825,952 shares of our Common Stock, par value $0.001 per share (“Common Stock”), representing approximately
70.9% of our Common Stock. On December 31, 2017 (the “Closing Date”), Mr. Egan, Edward A. Cespedes and Robin S. 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, 2018, as reflected in
our accompanying Consolidated Balance Sheet, our current liabilities exceed our total assets. Additionally, we received a report
from our independent registered public accountants, relating to our December 31, 2017 audited financial statements, containing
an explanatory paragraph regarding our ability to continue as a going concern. We prefer to avoid filing for protection under the
U.S. Bankruptcy Code. However, unless we are successful in raising additional funds through the offering of debt or equity securities,
we may not be able to continue to operate as a going concern for any significant length of time in the future. Notwithstanding
the above, we currently intend to continue operating as a public company and making all the requisite filings under the Exchange
Act.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include
the accounts of the Company. All significant intercompany balances and transactions have been eliminated in consolidation.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited interim condensed consolidated
financial statements of the Company at September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 included
herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended,
and Article 10 of Regulation S-X under the Securities Act of 1933, as amended. Certain information and note disclosures normally
included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations relating to interim condensed consolidated financial statements.
In the opinion of management, the accompanying
unaudited interim condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company at September 30, 2018 and the results of its operations and its
cash flows for the three and nine months ended September 30, 2018 and 2017. The results of operations and cash flows for such periods
are not necessarily indicative of results expected for the full year or for any future period.
USE OF ESTIMATES
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the 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. These estimates and assumptions
relate primarily to valuations of accounts payable and accrued expenses.
NET INCOME PER SHARE
The Company reports basic and diluted net
income per common share in accordance with FASB ASC Topic 260, “Earnings Per Share.” Basic earnings per share is computed
using the weighted average number of common shares outstanding during the period. Common equivalent shares consist of the incremental
common shares issuable upon the exercise of stock options (using the treasury stock method). Common equivalent shares are excluded
from the calculation if their effect is anti-dilutive.
Due to the anti-dilutive effect of potentially
dilutive securities or common stock equivalents that could be issued, such securities were excluded from the diluted net loss per
common share calculation for all periods presented. Such potentially dilutive securities and common stock equivalents consisted
of the following for the periods ended September 30:
|
|
|
|
2018
|
|
|
|
2017
|
|
|
Options to purchase common stock
|
|
|
—
|
|
|
|
—
|
|
RECENT ACCOUNTING PRONOUNCEMENTS
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.
(2) LIQUIDITY
AND GOING CONCERN CONSIDERATIONS
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 will be adequate to fund its limited overhead
and other cash requirements beyond a short period of time. These reasons raise substantial doubt about the Company’s ability
to continue as a going concern, for a period within a year after the date the financial statements are issued.
Since 2008, the Company was able to continue
operating as a going concern due principally to funding of $500,000 received during 2008 under a Revolving Loan Agreement with
an entity controlled by Michael S. Egan, the former Chairman and Chief Executive Officer and total proceeds of approximately $2,437,000
received during 2009 through the second quarter of 2015 under an Earn-out Agreement with an entity also controlled by Mr. Egan
(as more fully discussed below), as well as the forbearance of its creditors. More recently, the Company received fundings of $50,000
each in March 2016, November 2016 and March 2017 as well as $10,000 in November 2017 under Promissory Notes entered into with the
same entity that provided funding under the Revolving Loan Agreement (the “Promissory Notes”). In connection with the
Closing with Delfin Midstream LLC the Promissory Notes have been fully satisfied.
On December 20, 2017, Michael S. Egan, our
former Chief Executive Officer and majority stockholder, and certain of our other stockholders (each a “Seller” and
collectively the “Sellers”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with
Delfin. Pursuant to the terms of the Purchase Agreement, Delfin agreed to purchase from the Sellers an aggregate of 312,825,952
shares of our Common Stock, representing approximately 70.9% of the issued and outstanding shares of our Common Stock. The closing
of the purchase and sale transaction occurred on December 31, 2017 (the “Closing Date”). In connection with the transaction,
we terminated the Master Services Agreement we had entered into with an entity controlled by Mr. Egan and satisfied all promissory
notes and other borrowings under the credit line with respect to indebtedness owed to related parties. Delfin beneficially owns
approximately 70.9% of our Common Stock and continues to own such amount as of the date of this filing.
Since the Closing Date of the Purchase Agreement,
Delfin has continued to fund the Company through loans to the Company. At September 30, 2018, the Company had a net working capital
deficit of approximately $293,000. Such working capital deficit included accrued expenses of approximately $84,000, accounts payable
of approximately $61,000 and approximately $149,000 in principal and accrued interest owed under the March 2018 Promissory Note
with Delfin, the Company’s majority shareholder, which was amended and restated in May 2018 to $150,000 and then again on
November 2, 2018 to increase the principal amount to up to $350,000 to pay certain accrued expenses, accounts payable over the
last six months, and to allow the Company to have some working capital.
MANAGEMENT’S PLANS
Management anticipates continued funding
from Delfin as it determines the direction of the Company.
(3) DEBT
In March 2018, the Company executed a Promissory
Note with Delfin, which was amended and restated in May 2018 to $150,000 and then again on November 2, 2018 to increase the principal
amount to up to $350,000 to pay certain accrued expenses, accounts payable over the last six months, and to allow the Company to
have some 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 party at any time prior to the maturity date. The Company expects continued funding from Delfin.
(4) STOCK OPTION
PLANS
As of September 30, 2018, all of the Company’s
stock option plans have been terminated and there are no shares available for grant under these plans. Remaining stock options
outstanding and exercisable expired in August 2016.
There were no stock option grants or exercises
during each of the nine months ended September 30, 2018 and 2017.
(5) RELATED PARTY
TRANSACTIONS
In connection with the closing of the
Tralliance Purchase Transaction, the Company also entered into a Master Services Agreement (“Services Agreement”)
with Dancing Bear Investments, Inc. (“Dancing Bear”), an entity which was controlled by Mr. Egan, our former
Chairman and CEO. Under the terms of the Services Agreement, for a fee of $20,000 per month ($240,000 per annum), Dancing
Bear provides 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. The Services Agreement had an initial term of one year. In connection
with the Delfin transaction, the Services Agreement has been terminated. 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. Related party fees related to the Master Services Agreement of
$60,000 and $180,000 was recognized in our Consolidated Statement of Operations during the three months and nine months ended
September 30, 2017. Any balances owed under the Services agreement were satisfied with the Delfin transaction. There are
$60,000 in payments to a former officer in the nine months ended September 30, 2018.
In March 2018, the Company executed a Promissory
Note with Delfin, which was amended and restated in May 2018 to $150,000 and then again on November 2, 2018 to increase the principal
amount to up to $350,000 to pay certain accrued expenses, accounts payable over the last six months, and to allow the Company to
have some working capital. The Company expects continued funding from Delfin. Related party interest expense associated with such
debt totaling $4,066 and $47,425 has been recognized in our Condensed Consolidated Statement of Operations for the nine months
ended September 30, 2018 and 2017, respectively. See Note 3, “Debt,” for a more complete discussion of related party
debt.
(6) SUBSEQUENT
EVENTS
The Company’s management evaluated
subsequent events through the time of the filing of this report on Form 10-Q. The Company’s management is not aware of any
significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a
material impact on its consolidated financial statements.
(7) REVISION
OF FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE
30,
2018
During the
course of preparing the quarterly report on Form 10-Q for the quarter ended September 30, 2018, the Company identified
an error related to certain expenses not being recorded in the second quarter of 2018 in connection with the failure to
accrue a payment totaling $60,000 to a former officer, which resulted in the understatement of its net loss for the three and
six months ended June 30, 2018. The reason for the error was related to certain information not being provided to the
Company's accounting staff as a result of the Company's transition of certain financial and accounting duties to a new Chief
Executive Officer and a new Chief Financial Officer in the second quarter of 2018.
The
following tables
reconcile the prior period as reported to the as revised balances:
|
|
|
June 30, 2018
|
|
|
|
|
As
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
|
Condensed
Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
$
|
1,706
|
|
|
$
|
-
|
|
|
$
|
1,706
|
|
|
Total
Assets
|
|
$
|
1,706
|
|
|
$
|
-
|
|
|
$
|
1,706
|
|
|
Total Current
Liabilities
|
|
$
|
162,946
|
|
|
$
|
60,000
|
|
|
$
|
222,946
|
|
|
Total Liabilities
|
|
$
|
162,946
|
|
|
$
|
60,000
|
|
|
$
|
222,946
|
|
|
Total Stockholders'
Equity
|
|
$
|
(161,240
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(221,240
|
)
|
|
|
|
For The Three Months Ended
|
|
|
For The Six Months Ended
|
|
|
|
|
June 30, 2018
|
|
|
June 30, 2018
|
|
|
|
|
|
As
Reported
|
|
|
|
Adjustment
|
|
|
|
As
Revised
|
|
|
|
As
Reported
|
|
|
|
Adjustment
|
|
|
|
As
Revised
|
|
|
Condensed
Consolidated Statement of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Operating
Expenses
|
|
$
|
41,444
|
|
|
$
|
60,000
|
|
|
$
|
101,444
|
|
|
$
|
134,044
|
|
|
$
|
60,000
|
|
|
$
|
194,044
|
|
|
Loss
From Continuing Operations
|
|
$
|
(42,803
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(102,803
|
)
|
|
$
|
(135,680
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(195,680
|
)
|
|
Net Loss
|
|
$
|
(42,803
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(102,803
|
)
|
|
$
|
(135,680
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(195,680
|
)
|
|
Net Loss
Per Share - Basic and Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
-
|
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
-
|
|
|
$
|
(0.00
|
)
|
|
Weighted
Average Number of Common Shares Outstanding - Basic and Diluted
|
|
|
441.480,473
|
|
|
|
-
|
|
|
|
441,480,473
|
|
|
|
441,480,473
|
|
|
|
-
|
|
|
|
441,480,473
|
|
|
|
|
For The Six Months Ended
|
|
|
|
|
June 30, 2018
|
|
|
|
|
|
As
Reported
|
|
|
|
Adjustment
|
|
|
|
As
Revised
|
|
|
Condensed Consolidated Statement
of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(135,680
|
)
|
|
$
|
(60,000
|
)
|
|
$
|
(195,680
|
)
|
|
Changes
in accrued expenses and other liabilities
|
|
$
|
945
|
|
|
$
|
60,000
|
|
|
$
|
60,945
|
|
|
Net Cash
Used In Operating Activities
|
|
$
|
(68,693
|
)
|
|
$
|
-
|
|
|
$
|
(68,693
|
)
|
In
accordance with SEC Staff Accounting Bulletin No 108, the Company has evaluated this error, based on an analysis of
qualitative and quantitative factors, as to whether it was material to the condensed consolidated statement of operations for
the three and six months ended June 30, 2018 and if amendments of previously filed financial statements with the SEC are
required. The Company has determined that quantitatively and qualitatively, the error has no material impact to the condensed
consolidated statement of operations for the three and six months ended June 30, 2018 or other prior periods.
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
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 “Risk Factors” and elsewhere in this 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; 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 consolidated financial statements and related notes thereto and
the audited consolidated financial statements and notes to those statements contained in the Annual Report on Form 10-K for the
year ended December 31, 2017.
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. 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 September 30, 2018, as reflected in
our accompanying Consolidated Balance Sheet, our current liabilities exceed our total assets.
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, 2017 audited consolidated 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 in the foreseeable
future. 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 a short period of time. 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 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.
RESULTS OF OPERATIONS
THREE MONTHS
ENDED SEPTEMBER 30, 2018 COMPARED
TO THE THREE MONTHS ENDED SEPTEMBER 30, 2017
CONTINUING OPERATIONS
NET REVENUE. Commensurate with the sale
of our Tralliance business on September 29, 2008, we became a shell company. As a result, net revenue for both the three months
ended September 30, 2018 and 2017 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 $69,000 in the third quarter of
2018 as compared to approximately $33,000 for the same quarter of the prior year, primarily arising from increased accounting
and legal expenses.
RELATED PARTY TRANSACTIONS. Related party
fees totaled $0 for the three months ended September 30, 2018 as compared to approximately $60,000 for the same quarter of the
prior year relating to management services fees payable to Dancing Bear for accounting, finance, administrative and managerial
support.
RELATED PARTY INTEREST EXPENSE. Related
party interest expense for the three months ended September 30, 2018 totaled $2,430 compared to approximately $16,000 for the three
months ended September 30, 2017 and consisted of interest due and payable to Delfin in 2018 and Dancing Bear in 2017.
NINE MONTHS
ENDED SEPTEMBER 30, 2018 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2017
CONTINUING OPERATIONS
NET REVENUE. Net revenue totaled $0 for
both the nine months ended September 30, 2018 and 2017.
GENERAL AND ADMINISTRATIVE EXPENSES.
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 $203,000 for the
first nine months of 2018 as compared to approximately $74,000 for the same period of 2017, primarily arising from increased
accounting and legal expenses.
RELATED PARTY TRANSACTIONS. Related
party fees totaled $60,000 for the nine months ended September 30, 2018 as compared to approximately $180,000 for the nine
months ended September 30, 2017 relating to management services fees payable to Dancing Bear for accounting, finance,
administrative and managerial support in 2017 and payments to a former officer in 2018.
RELATED PARTY INTEREST EXPENSE. Related
party interest expense for the nine months ended September 30, 2018 and 2017 was approximately $4,000 and $47,000, respectively,
and consisted of interest due and payable to Delfin in 2018 and Dancing Bear in 2017.
INCOME TAXES. No tax benefit was recorded
for the losses incurred during the first nine months of 2018 or the first nine months of 2017 as we recorded a 100% valuation allowance
against our otherwise recognizable deferred tax assets due to the uncertainty surrounding the timing or ultimate realization of
the benefits of our net operating loss carryforwards in future periods.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW ITEMS
As of September 30, 2018, we had $936 in
cash as compared to $440 as of December 31, 2017. Net cash flows used in operating activities of continuing operations totaled
approximately $144,000 for the nine months ended September 30, 2018 compared to net cash flows used in operating activities of
continuing operations of $80,000 for the nine months ended September 30, 2017.
FUTURE AND CRITICAL NEED FOR CAPITAL
The accompanying consolidated 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 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. 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 a short period of time. These reasons raise substantial doubt about our ability to
continue as a going concern.
Since 2008, we have been able to continue
operating as a going concern due principally to funding of $500,000 received during 2008 under a Revolving Loan Agreement with
an entity controlled by Mr. Egan, our former Chairman and Chief Executive Officer, and total proceeds of approximately $2,437,000
received during 2009 through the second quarter of 2015 under an Earn-out Agreement with an entity also controlled by Mr. Egan
(as more fully discussed below), as well as the forbearance of our creditors. More recently, we received funding of $50,000 each
in March 2016, November 2016 and March 2017 as well as $10,000 in November 2017 under Promissory Notes entered into with the same
entity that provided funding under the Revolving Loan Agreement. In connection with the closing of the purchase of Common Stock
by Delfin, the Promissory Notes were fully satisfied.
In March 2018, the Company executed a Promissory
Note with Delfin, which was amended and restated in May 2018 to $150,000 and then again on November 2, 2018 to increase the principal
amount to up to $350,000 to pay certain accrued expenses, accounts payable over the last six months, and to allow the Company to
have some 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, 2018, we had a net working
capital deficit of approximately $293,000. This deficit included accrued expenses of approximately $84,000, accounts payable of
approximately $61,000 and approximately $149,000 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 2018 and 2017.
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.