UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934,
August 31, 2004 0-25053
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Date of Report (Date of earliest event reported) Commission File Number
THEGLOBE.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 14-1782422
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(State or other jurisdiction of (I.R.S. Employer Identification Number
incorporation or organization)
110 East Broward Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
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(Address of Principal Executive Offices) (Zip Code)
(954) 769-5900
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(Registrant's telephone number, including area code)
This Report includes forward-looking statements related to theglobe.com,
inc. that involve risks and uncertainties, including, but not limited to, risks
and uncertainties relating to integration of newly acquired businesses
(including our recent acquisition of Direct Partner Telecom) and assets, product
delivery, product launch dates (particularly as they pertain to our voiceglo
services), the Internet, development and protection of technology, the
management of growth, market acceptance of our voiceglo VoIP products, our
ability to compete successfully against established competitors with greater
resources, the uncertainty of future governmental regulation (particularly as it
pertains to the Internet and the provision of telephony services using the
Internet) and other risks. These forward-looking statements are made in reliance
on the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995. For further information about these and other factors that could affect
theglobe.com's future results and business plans, please see the Company's
filings with the Securities and Exchange Commission, including in particular our
Annual Report of Form 10-K for the year ended December 31, 2003 and our
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004 as well as
the risk factors set forth in this Report. Copies of these filings are available
online at http://www.sec.gov. Prospective investors are cautioned that
forward-looking statements are not guarantees of performance. Actual results may
differ materially and adversely from management expectations.
Items 1.01 and 2.01; Entry into a Material Definitive Agreement; Completion of
Acquisition or Disposition of Assets.
ACQUISITION OF SENDTEC, INC; MERGER.
On August 31, 2004, theglobe entered into, and on September 1, 2004,
closed upon, an Agreement and Plan of Merger (the "Merger") pursuant to which
theglobe acquired all of the issued and outstanding shares of capital stock of
SendTec, Inc., a Florida corporation based in St. Petersburg, Florida
("SendTec") through a merger of SendTec with theglobe's wholly owned subsidiary,
SendTec Acquisition Corp. Pursuant to the terms of the merger, in consideration
for the acquisition of SendTec, theglobe paid or will pay consideration
consisting of: (i) $6,000,000 in cash, (ii) the issuance of an aggregate of
17,500,000 shares of theglobe's common stock, (iii) the issuance of an aggregate
of 175,000 shares of Series H Automatically Converting Preferred Stock (which as
more fully described below, is convertible into 17,500,000 shares of theglobe's
common stock) (the "Preferred Stock"), and (iv) a subordinated promissory note
in the amount of $1 million (the "Note") (collectively, the "Initial Merger
Consideration"). In addition, warrants to acquire shares of common stock would
be issued to SendTec shareholders when and if SendTec exceeds forecasted
operating income, as defined, of $10.125 million (the "Income Target"), for the
year ending December 31, 2005 (the "Earn-out Consideration" and collectively
with the Initial Merger Consideration, the "Merger Consideration"). The number
of earn-out warrants would range from an aggregate of 250,000 to 2,500,000 (if
actual operating income exceeds the forecast by at least 10%). If and to the
extent the warrants are earned, the exercise price of the performance options
would be $.27 per share and they will be exercisable for a period of 5 years.
The Note bears interest at the rate of 4% per annum and matures in one lump sum
of principal and interest on September 1, 2005. theglobe paid the cash portion
of the consideration issued in the Merger from funds which it received from its
private offering of approximately $28.6 million in March of 2004.
The Merger Consideration will be distributed pro rata to the shareholders
of SendTec in accordance with their respective ownership interests, except for
any shareholder of SendTec who elects to dissent from the Merger and follows
applicable Florida law for the exercise of dissenters' rights (whom would
instead receive the cash value of their shares following a statutorily
prescribed appraisal procedure). As of September 7, 2004, the holders of 86.71%
of SendTec's shares had voted in favor of the Merger and no shareholder had
notified SendTec that he or she intended to dissent from the Merger. The
remaining shareholders of SendTec have until on or about September 27, 2004, to
provide notice of, and to otherwise follow the procedures for, the exercise of
dissenter's rights.
As part of the Merger, 100,000 shares of Preferred Stock (convertible into
10 million shares of common stock) (the "Escrow Shares") are being held in
escrow for potential recovery by theglobe in the event of a breach of the Merger
Agreement by SendTec or its shareholders. In general, the Escrow Shares,
together with the sums due under the Note, would be the sole source of recourse
against the shareholders of SendTec in the event of breach of the Merger
Agreement and theglobe would not have recourse against the cash portion or other
shares of common stock or Preferred Stock distributed to the SendTec
shareholders as part of the Merger Consideration. Assuming no claims are then
pending, the Escrow Shares would be distributed to SendTec shareholders after
expiration of one year from the date of closing.
Except as provided by law, the Preferred Stock will vote with the holders
of common stock on all matters on an "as-converted" basis, other than the
Capital Amendment described below as to which it will not vote. The Preferred
Stock will automatically convert into shares of theglobe's common stock on a 1
for 100 basis at such time as theglobe files an amendment to its certificate of
incorporation with the Delaware Secretary of State's Office to increase its
authorized shares of common stock from 200,000,000 to at least 300,000,000 (the
"Capital Amendment"). theglobe intends to seek shareholder authorization for
such amendment at its annual meeting of stockholders anticipated to be held in
November 2004. Five of the former shareholders of SendTec (whom collectively
received approximately 82% of the shares of common stock issued in the Merger,
together with theglobe's Chairman, Michael Egan (together with certain
affiliates which he controls), have agreed to vote (or have granted proxies to
so vote) in favor of the Capital Amendment. Together such former SendTec
shareholders and Mr. Egan control the vote over approximately 69.25 million of
theglobe's 156 million issued and outstanding shares of common stock (after
giving affect to the shares of common stock which were issued in the Merger).
The Capital Amendment will be approved if the holders of a majority of the
outstanding shares of common stock vote in its favor.
In the event that the Capital Amendment is not approved for any reason at
the annual meeting then on the 10th day following the failure to approve the
Capital Amendment, the remaining shares of Preferred Stock will automatically
convert into whatever number of shares of Common Stock which theglobe then has
remaining available for issuance (after giving affect to approximately 32.1
million shares reserved for issuance under previously outstanding options and
warrants), less up to 3 million additional shares as may be designated by
theglobe. After giving effect to the reservation of shares underlying
outstanding options and warrants to acquire shares of theglobe's common stock
(including options issued in connection with the Merger) and the shares of
common stock issued in the Merger, theglobe presently has issued and outstanding
(or reserved for issuance) approximately 197 million shares of common stock,
leaving a maximum of approximately 3 million shares (assuming no further shares
of common stock are issued prior to such date) which could be further issued
upon conversion of the Preferred Stock absent the increase in common stock
contemplated by the Capital Amendment or other arrangements satisfactory to the
holders of any options or warrants to acquire shares. With regard to any shares
of Preferred Stock which theglobe do not automatically convert into shares of
common stock, the holders of the Preferred Stock may thereafter convert such
remaining Preferred Stock into a subordinated promissory note (a "Conversion
Note") from theglobe. If issued, the Conversion Note will be due in one lump sum
on the later of the first anniversary of its issuance or December 31, 2005 and
will bear interest at the rate of 4% per annum. The principal amount of the
Conversion Note would be equal to the product of (A) the number of shares of
theglobe's common stock that would have been issued upon conversion of the
shares of the Preferred Stock that were not converted into common stock and (B)
the lesser of (i) the Fair Market Value, as defined, of theglobe's common stock
in the 20 trading days immediately prior to the conversion date and (ii) $0.83.
If none of the remaining shares of Preferred Stock were converted into common
stock, the maximum principal amount of the Conversion Note (based upon the
maximum conversion rate of $.083 per share) would be approximately $14.5
million.
2
The Company has agreed to file a registration statement relating to the
resale of the shares of the shares of common stock issued in the Merger and the
shares of common stock underlying the Preferred Stock on or before January 29,
2005 and to cause the effectiveness of such registration on or before September
1, 2005. The Company also agreed to keep the registration effective until at
least the third anniversary of the Closing. Pursuant to the terms of the Merger,
in general, the common stock and Preferred Stock (and the underlying shares of
common stock) issued in the Merger may not be sold or otherwise transferred for
a period of one (1) year without the prior written consent of the Company.
As part of the Merger, five top executives of SendTec entered into new
employment agreements with SendTec. These employment agreements each have a term
of 5 years and obligate SendTec to pay base salaries ranging from $300 thousand
to $175 thousand, consistent with the executive's salaries immediately before
the Merger, and provide for customary health insurance and other benefits
commensurate with the benefits which theglobe makes generally available to its
officers. As part of the Merger, the Company also increased the size of its
Board of Directors from 3 to 4 directors and elected Paul Soltoff, who serves as
Chief Executive Officer of SendTec, to the Board.
theglobe also issued an aggregate of approximately 4.0 million replacement
options to acquire shares of theglobe's common stock for each of the issued and
outstanding options to acquire shares of SendTec held by the former employees of
SendTec. Of these replacement options, approximately 3.27 million have exercise
prices of $0.06 per share and approximately 700 thousand have exercise prices of
$0.27 per share. The terms of these replacement options were as negotiated
between representatives of theglobe and the Stock Option Committee for SendTec
2000 Amended and Restated Stock Option Plan. theglobe.com also agreed to grant
an aggregate of 250,000 options to other employees of SendTec at an exercise
price of $.34 per share. Twenty-five percent of these options vested immediately
and the balance will vest in 3 equal annual installments assuming the continued
employment of the option holders. In addition, theglobe established a bonus
option pool pursuant to which various employees of SendTec could earn options to
acquire an aggregate of 1,000,000 shares of theglobe's Common Stock at an
exercise price of $0.27 per share on terms substantially similar to the
circumstances in which the Earn-out Consideration may be earned.
In connection with the Merger, the SendTec executives (whom collectively
received approximately 82% of the shares of common stock and Preferred Stock
issued in the Merger), theglobe and Messrs. Michael Egan and Edward Cespedes,
our Chairman and Chief Executive Officer and President, respectively
(individually and on behalf of certain affiliated entities) entered into a
Stockholders' Agreement. Pursuant to the terms of the Stockholders' Agreement,
the SendTec executives granted an irrevocable proxy to vote their shares to E&C
Capital Partners LLLP, an affiliate of Mr. Egan on all matters (including the
election of directors) other than with respect to certain potential affiliated
transactions involving Messr. Egan or Cespedes. The SendTec executives were also
granted certain pre-emptive rights involving potential new issuances of
securities by theglobe, together with a co-sale right to participate in certain
qualifying sales of stock by Messrs. Egan, Cespedes and their affiliates.
Messrs. Egan, Cespedes and their affiliates were granted a right of first
refusal on certain sales (generally, in excess of 10 million shares) by the
SendTec executives, together with the right to "drag-along" the SendTec
executives with regard to certain major sales of their stock or a sale or merger
of theglobe.
3
CERTAIN PRIOR RELATIONSHIPS BETWEEN THEGLOBE AND SENDTEC.
SendTec and theglobe are parties to a Marketing Services Master Agreement
dated July 23, 2004, whereby SendTec will provide various marketing and
advertising services to theglobe and its subsidiaries, including the production
of television infomercials and media planning and buying services. The Agreement
is for a period of 6 months, subject to early termination by either party on 30
days notice. theglobe is obligated to pay a monthly fee of $15,000 plus other
amounts specific to various work orders which theglobe has placed with SendTec.
Based upon 5 specific work orders currently outstanding, theglobe has paid
approximately $330,000 to date and anticipates that it will pay another
approximately $110,000 based upon these work orders.
SENDTEC'S BUSINESS.
SendTec, Inc. ("SendTec") was incorporated in February, 2000 in the State
of Florida and commenced operations on that date. Originally, SendTec
incorporated under the name prizecrazy.com and was envisioned to become a free
consumer gaming website that monetized consumer traffic on the website through
on-line "cost per impression" or "CPM" advertising. Because of a significant
decline in the pricing of on-line CPM advertising during this period of time,
the prizecrazy.com web site development was abandoned and the company modified
its business strategy so as to become a direct response marketing services
company. In conjunction with this change in strategy, prizecrazy.com changed its
name to DirectNet Advertising.net ("DNA") to better define the company's
operational focus.
At the time, DNA was one of only a few online marketing services companies
that was providing performance-based (i.e. cost-per-action, cost per lead, cost
per sale) advertising solutions to advertising clients. As part of its marketing
services offering, DNA also began developing proprietary software to facilitate
the tracking of actions online for its advertisers and its distribution network.
Today, SendTec's Results, Optimization, Yield ("ROY") online tracking software
provides the company with a unique competitive advantage by enabling SendTec to
optimize campaigns and by enabling advertising clients and distribution partners
to access real-time conversion information. In February of 2002, DNA acquired
100% of the stock of iFactz, Inc. ("iFactz") in a merger transaction. iFactz has
developed software that enables the tracking of online response to distinct
sources of offline advertising. The iFactz software provides an excellent
complementary platform for DNA's ROY tracking software and enables DNA to offer
a complete technology tracking solution for online and offline direct response
marketing. During this same period of time, DNA changed its name to SendTec,
Inc. to better define itself in the market.
Today, SendTec is a direct response marketing services and technology
company. SendTec provides customers a complete offering of direct marketing
products and services to help them market their products both on the Internet
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("online") and through traditional media channels such as television, radio and
print advertising ("offline"). By utilizing SendTec's marketing products and
services, SendTec's clients seek to increase the effectiveness and the return on
investment of their advertising campaigns. SendTec's online and offline direct
marketing products and services include strategic campaign development, creative
development, creative production and post-production, media buying and tracking,
campaign management, campaign analysis and optimization, technology systems
implementation and integration for campaign tracking and many other agency type
services. In addition, SendTec has a suite of technology solutions, ROY, SOAR
(an acronym for "SendTec Optimization and Reporting") and iFactz, which enable
it to deliver, track, and optimize direct marketing campaigns across multiple
distribution channels, including television, radio, direct mail, print and the
Internet. The combination of SendTec's direct marketing capabilities, technology
and experience in both online and offline marketing, enable its clients to
optimize their advertising campaigns across a broad spectrum of advertising
mediums. SendTec has three operating divisions, DirectNet Advertising, iFactz
and Creative South.
DirectNet Advertising (DNA):
DNA is the digital marketing services division of SendTec. DNA offers a variety
of products and services that enable on-line advertisers and publishers to
generate performance based results through online marketing channels such as,
web advertising, e-commerce up-sells, affiliate marketing, search marketing and
email marketing. DNA's broad range of products and services include creative
strategy and execution, strategic offer development, production planning, media
planning, media buying and search optimization. Through these products and
services DNA's clients can address all aspects of the marketing continuum, from
strategic planning through execution, including results management and campaign
refinements. DNA's proprietary technologies allow advertisers and publishers to
track, report and optimize online campaign activity all the way to the
"conversion level" (which means a consumer's actual response to the offer, as
for example, by making a purchase). DNA's knowledge of digital advertising
strategies, targeting methods, media placements and creative executions combined
with its innovative and dependable technology help DNA's clients to improve
their advertising performance and return on investment. DNA competes with a
variety of large and small advertising agencies but its primary competitors are
interactive marketing companies such as ValueClick, aQuantive, Advertising.com
and Performics. Currently the online performance based advertising market in
which DNA competes is still evolving and it is expected that certain government
regulations may eventually be implemented to better define acceptable practices
and methodologies.
iFactz
iFactz is SendTec's Application Service Provider or "ASP" technology that tracks
and reports the online responses that are generated from offline direct response
advertising. Historically, advertisers have lacked the ability to accurately
track which offline advertising yields results online and thus advertisers have
been unable to properly optimize their media buys. iFactz intelligently tracks
and reports web activity from all offline advertising - TV (even national
cable), radio, print and direct mail - in real time. iFactz's Intelligent
Sourcing(TM) is a patent-pending media technology that informs the user where
online customers come from, and what corresponding activity they produced on the
user's website. The iFactz patent was filed in November of 2001 and SendTec
expects the patent application for iFactz to he reviewed in the 1st quarter of
2005. iFactz's ASP design enables advertisers to implement and access the
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technology in a timely and cost efficient manner, as there are no cumbersome,
time-consuming and costly implementation expenses and lead times. iFactz is
licensed to clients both as a stand alone technology solution and as part of an
overall campaign offering. SendTec believes that, to date, iFactz has provided
SendTec with a significant competitive advantage, and that there are currently
no similar technologies available in the market. SendTec has spent over $225,000
of research and development cost on iFactz over the past two years.
Creative South
Creative South is the creative strategy, production and media buying division of
SendTec. Creative South services both on-line and off-line clients of SendTec,
and its production capabilities cover a range of distribution medias including
television, radio, direct mail, print and digital. Creative South has developed,
produced and distributed numerous direct response television campaigns for
customers and has received national awards for its creative and production work.
Creative South maintains in-house two state-of-the-art non-linear digital video
editing suites. Creative South's production department includes experienced
directors, producers and editors on staff. Creative South's media buying
department provides a full range of services including strategic media planning,
media trafficking, media buying, media tracking and post-buy media and financial
analysis. Creative South's media buying department has executed media buying
assignments for all types of television (broadcast and cable), radio and print
formats and Creative South's long time relationships with its media partners
have enabled SendTec to provide its clients competitive media prices.
Since its inception, SendTec has grown from 5 employees to approximately 47
employees currently. The address of SendTec's principal executive offices is 877
Executive Center Drive West Suite 300 St. Petersburg, Florida 33702. SendTec
also has an office in New York City.
RISK FACTORS RELATING TO SENDTEC AND THE ACQUISITION
RISKS RELATED TO THE ACQUISITION OF SENDTEC
Our Liquidity May Permanently Decrease As A Result Of The Sendtec Acquisition.
We May Require Additional Capital.
As part of the consideration for the SendTec acquisition, theglobe.com paid $6.0
million in cash and issued a subordinated promissory note for $1.0 million, due
one year after the closing, to the SendTec shareholders. As a result of the
acquisition, theglobe.com's liquidity is dependent upon the sufficiency of the
cash acquired from SendTec in the acquisition, of approximately $3 million, plus
cash flow anticipated to be generated internally by SendTec subsequent to the
acquisition. If cash flow generated by SendTec, on a short-term and long-term
basis, does not meet our expectations, our liquidity may permanently decrease
and our financial condition may be adversely affected. Although to date no
SendTec shareholder has so elected and approximately 87% of SendTec's
shareholders have voted in favor of the acquisition, our liquidity may also be
adversely affected if any significant portion of the remaining SendTec
shareholders elect to pursue dissenter's appraisal rights in connection with the
acquisition. In addition, the Preferred Stock issued as part of the Merger may
under certain limited circumstances be converted by the holders thereof into a
promissory note due in one lump sum on the later of the first anniversary of the
date of issuance and December 31, 2005. In such limited circumstances, the
Preferred Stock may be converted into a promissory note based upon the then Fair
Market Value, as defined, of our common stock (but not greater than $.83 per
share). If all remaining Preferred Stock were so converted at the maximum
conversion rate, the maximum principal amount of the Note would be $14.5
million. Our liquidity would be adversely affected by any such conversion and we
would likely need to raise significant capital. Our financial condition may also
be adversely affected.
6
The Anticipated Benefits Of The Sendtec Acquisition May Not Be Realized.
The success of the acquisition will depend, in part, on theglobe.com's ability
to realize the benefits of enhanced resources, growth opportunities and other
synergies of combining with SendTec and to effectively leverage the SendTec
marketing and technical resources following the merger. The merger involves
risks related to the integration, management, and retention of acquired client
relationships, operations and personnel. Integration of the businesses will be
complex, time-consuming and may disrupt the combined company's businesses if not
completed in a timely and efficient manner. Some of the difficulties that the
combined company may encounter include:
o diversion of management's attention from other business concerns;
o inability to use the acquired resources effectively; and
o demonstrating to the combined company's customers, vendors and partners
that the acquisition will not result in adverse changes to their
relationships.
If management focuses too much time, money and effort to integrate and utilize
SendTec's resources to improve theglobe's VOIP telephony business, the
operations and profitability of SendTec's traditional business may suffer.
The Market Price Of theglobe.com's Common Stock May Decline As A Result Of The
SendTec Acquisition.
The market price of theglobe.com's stock may decline as a result of the merger
if:
o integration of theglobe.com and SendTec is unsuccessful or is delayed;
o the combined company does not achieve the perceived benefits of the
acquisition as rapidly or to the extent anticipated by investors;
o the effect of the acquisition on the combined company's financial results
or condition is not consistent with the expectations of financial
investors; or
o the dilution in shareholder ownership related to the issuance of shares of
theglobe.com's common stock in connection with the acquisition is
perceived negatively by investors.
The market price of theglobe.com's common stock could also decline as a result
of unforeseen factors related to the acquisition.
Our Net Operating Loss Carry Forwards May Be Further Limited Due To The SendTec
Acquisition.
7
As of December 31, 2003, theglobe.com had net operating loss carryforwards
available for U.S. and foreign tax purposes of approximately $144 million. These
carryforwards expire through 2023. The Tax Reform Act of 1986 imposes
substantial restrictions on the utilization of net operating losses and tax
credits in the event of an "ownership change" of a corporation. Due to the
change in our ownership interests in August 1997 and May 1999 and the Company's
recently completed private offering in March 2004 (together with the exercise
and conversion of various securities in connection with such private offering),
as defined in the Internal Revenue Code of 1986, as amended, the Company may
have substantially limited or eliminated the availability of its net operating
loss carryforwards. The ownership change related to the shares of theglobe.com's
common stock issued in connection with the SendTec acquisition may have a
further negative impact upon theglobe.com's ability to utilize its net operating
loss carryforwards. There can be no assurance that the Company will be able to
avail itself of any net operating loss carryforwards in the future.
We Could Be Adversely Affected By An Impairment Of A Significant Amount Of
Goodwill And/Or Intangible Assets On Our Balance Sheet.
Our acquisition of SendTec has resulted in the recording of a significant amount
of goodwill and/or intangible assets on our balance sheet. The goodwill was
recorded because the fair value of the net assets acquired was less than the
purchase price. We may not realize the full value of the goodwill and/or
intangible assets. As such, we evaluate on a regular basis whether events and
circumstances indicate that some or all of the carrying value of goodwill and/or
intangible assets are no longer recoverable, in which case we would write off
the unrecoverable portion as a charge to our earnings.
RISKS RELATED TO SENDTEC'S BUSINESS
RISKS RELATED TO SENDTEC'S ONLINE MARKETING SERVICES
Any Decrease In Demand For Sendtec's Online Marketing Services Could
Substantially Reduce Sendtec's Revenues.
To date, a substantial portion of SendTec's revenues have been derived from
Internet advertising. SendTec expects that online advertising will continue to
account for a substantial portion of their revenues in the future. However,
SendTec's revenues from Internet advertising may decrease in the future for a
number of reasons, including the following:
o the rate at which Internet users click on advertisements or take action in
response to an advertisement has always been low and could decline as the
volume of Internet advertising increases;
o Internet users can install software programs that allow them to prevent
advertisements from appearing on their screens or block the receipt of
emails;
o advertisers may prefer an alternative Internet advertising format, product
or service which SendTec might not offer at that time; and
o SendTec may be unable to make the transition to new Internet advertising
formats preferred by advertisers.
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If SendTec's Pricing Models Are Not Accepted By Their Advertiser Clients,
SendTec Could Lose Clients And Their Revenues Could Decline.
Most of SendTec's services are offered to advertisers based on cost-per-action
or cost-per-click pricing models, under which advertisers only pay SendTec if
SendTec provides the results they specify. These results-based pricing models
differ from the fixed-rate pricing model used by many Internet advertising
companies, under which the fee is based on the number of times the advertisement
is shown without regard to effectiveness. SendTec's ability to generate
significant revenues from advertisers will depend, in part, on SendTec's ability
to demonstrate the effectiveness of their primary pricing models to advertisers,
who may be more accustomed to a fixed-rate pricing model.
Furthermore, intense competition among websites and other Internet advertising
providers has led to the development of a number of alternative pricing models
for Internet advertising. The proliferation of multiple pricing alternatives may
confuse advertisers and make it more difficult for them to differentiate among
these alternatives. In addition, it is possible that new pricing models may be
developed and gain widespread acceptance that are not compatible with SendTec's
business model or SendTec's technology. These alternatives, and the likelihood
that additional pricing models will be introduced, make it difficult for SendTec
to project the levels of advertising revenues or the margins that SendTec, or
the Internet advertising industry in general, will realize in the future. If
advertisers do not understand the benefits of SendTec's pricing models, then the
market for SendTec's services may decline or develop more slowly than SendTec
expects, which may limit SendTec's ability to grow their revenues or cause their
revenues to decline.
SendTec Depends On A Limited Number Of Clients For A Significant Percentage Of
Their Revenues, And The Loss Of One Or More Of These Advertisers Could Cause
SendTec's Revenues To Decline.
For the six months ended June 30, 2004 and for the year ended December 31, 2003,
revenues from SendTec's three largest clients accounted for 71% and 53% of their
total revenues, respectively. SendTec believes that a limited number of clients
will continue to be the source of a substantial portion of their revenues for
the foreseeable future. Key factors in maintaining SendTec's relationships with
these clients include SendTec's performance on individual campaigns, the
strength of SendTec's professional reputation and the relationships of SendTec's
key executives with client personnel. To the extent that SendTec's performance
does not meet client expectations, or their reputation or relationships with one
or more major clients are impaired, SendTec's revenues could decline and their
operating results could be adversely affected.
Any Limitation On SendTec's Use Of Data Derived From Their Clients' Advertising
Campaigns Could Significantly Diminish The Value Of SendTec's Services And Cause
SendTec To Lose Clients And Revenues.
When an individual visits SendTec's clients' websites, SendTec uses
technologies, including cookies and web beacons, to collect information such as
the user's IP address, advertisements delivered by SendTec that have been viewed
by the user and responses by the user to such advertisements. SendTec aggregates
and analyzes this information to determine the placement of advertisements
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across SendTec's affiliate network of advertising space. Although the data
SendTec collects from campaigns of different clients, once aggregated, are not
identifiable, SendTec's clients might decide not to allow SendTec to collect
some or all of this data or might limit SendTec's use of this data. Any
limitation on SendTec's ability to use such data could make it more difficult
for SendTec to deliver online marketing programs that meet client demands.
In addition, although SendTec's contracts generally permit SendTec to aggregate
data from advertising campaigns, SendTec's clients might nonetheless request
that SendTec discontinue using data obtained from their campaigns that have
already been aggregated with other clients' campaign data. It would be
difficult, if not impossible, to comply with these requests, and such requests
could result in significant expenditures of resources. Interruptions, failures
or defects in SendTec's data collection, mining and storage systems, as well as
privacy concerns regarding the collection of user data, could also limit
SendTec's ability to aggregate and analyze data from SendTec's clients'
advertising campaigns. If that happens, SendTec may lose clients and their
revenues may decline.
The Internet Advertising Industry Could Be Adversely Affected By General
Economic Downturns, Catastrophic Events Or Declines Or Disruptions In Industries
That Advertise Heavily On The Internet.
The Internet advertising industry is sensitive to both general economic and
business conditions and to specific events, such as acts of terrorism. In
addition, Internet advertising spending can be affected by the condition of
industries that advertise heavily on the Internet such as the financial
services, travel and entertainment industries. Some of these industries tend to
be sensitive to event-driven disruptions such as government regulation, war,
terrorism, disease, natural disasters and other significant events. A general
decline in economic conditions or disruptions in specific industries
characterized by heavy spending on Internet advertising, could cause a decline
in Internet advertising expenditures which could in turn cause a decline in
SendTec's revenues.
If The Market For Internet Advertising Fails To Continue To Develop, SendTec's
Revenues And SendTec's Operating Results Could Be Harmed.
SendTec's future success is highly dependent on the continued use and growth of
the Internet as an advertising medium. The Internet advertising market is
relatively new and rapidly evolving, and it uses different measurements than
traditional media to gauge its effectiveness. As a result, demand for and market
acceptance of Internet advertising services is uncertain. Many of SendTec's
current or potential advertiser clients have little or no experience using the
Internet for advertising purposes and have allocated only limited portions of
their advertising budgets to the Internet. The adoption of Internet advertising,
particularly by those entities that have historically relied upon traditional
media for advertising, requires the acceptance of a new way of conducting
business, exchanging information, measuring success and evaluating new
advertising products and services. Such clients find Internet advertising to be
less effective for promoting their products and services than traditional
advertising media. SendTec cannot assure you that the market for Internet
advertising will continue to grow or become sustainable. If the market for
Internet advertising fails to continue to develop or develops more slowly than
SendTec expects, SendTec's revenues and business could be harmed.
10
RISKS RELATED TO THE SUPPLY OF ADVERTISING SPACE
SendTec Depends On Online Publishers For Advertising Space To Deliver Its
Clients' Advertising Campaigns, And Any Decline In The Supply Of Advertising
Space Available Through SendTec's Network Could Cause SendTec's Revenues To
Decline.
The websites, search engines and email publishers that sell or venture their
advertising space to or with SendTec are not bound by long-term contracts that
ensure SendTec a consistent supply of advertising space, which SendTec refers to
as their inventory. SendTec generates a significant portion of their revenues
from the advertising inventory provided by a limited number of publishers. In
most instances, publishers can change the amount of inventory they make
available to SendTec at any time, as well as the price at which they make it
available. In addition, publishers may place significant restrictions on
SendTec's use of their advertising inventory. These restrictions may prohibit
advertisements from specific advertisers or specific industries, or restrict the
use of certain creative content or format. If a publisher decides not to make
inventory available to SendTec, or decides to increase the price, or places
significant restrictions on the use of such inventory, SendTec may not be able
to replace this with inventory from other publishers that satisfy SendTec's
requirements in a timely and cost-effective manner. If this happens, SendTec's
revenues could decline or SendTec's cost of acquiring inventory may increase.
SendTec's Growth May Be Limited If They Are Unable To Obtain Sufficient
Advertising Inventory That Meets SendTec's Pricing And Quality Requirements.
SendTec's growth depends on their ability to effectively manage and expand the
volume of their inventory of advertising space. To attract new advertisers,
SendTec must increase their supply of inventory that meets their performance and
pricing requirements. SendTec's ability to purchase or venture sufficient
quantities of suitable advertising inventory will depend on various factors,
some of which are beyond their control. These factors include:
o SendTec's ability to offer publishers a competitive price for their
inventory;
o SendTec's ability to estimate the quality of the available inventory; and
o SendTec's ability to efficiently manage their existing advertising
inventory.
In addition, the number of competing Internet advertising networks that purchase
advertising inventory from websites, search engine and email publishers
continues to increase. SendTec cannot assure you that SendTec will be able to
purchase or venture advertising inventory that meets their performance, price
and quality requirements, and if they cannot do so, SendTec's ability to
generate revenues could be limited.
Any Limitation On SendTec's Ability To Post Advertisements Throughout Their
Network Of Advertising Space Could Harm SendTec's Business.
SendTec executes advertising programs for clients primarily by posting
advertisements, which they refer to as ad delivery, on SendTec's affiliate
network of advertising space. SendTec's business could suffer from a variety of
factors that could limit or reduce their ability to post advertisements across
SendTec's affiliate network, including:
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o technological changes that render the delivery of SendTec's advertisements
obsolete or incompatible with the operating systems of consumers and/or
the systems of online publishers;
o lawsuits or injunctions based on claims that SendTec's ad delivery
methodologies violate the proprietary rights of other parties; and
o interruptions, failures or defects in SendTec's ad delivery and tracking
systems.
Consolidation Of Online Publishers May Impair SendTec's Ability To Provide
Marketing Services, Acquire Advertising Inventory At Favorable Rates And Collect
Campaign Data.
The consolidation of Internet advertising networks, web portals, search engines
and other online publishers could eventually lead to a concentration of
desirable advertising inventory on a very small number of networks and large
websites. Such concentration could:
o increase SendTec's costs if these publishers use their greater bargaining
power to increase rates for advertising inventory;
o impair SendTec's ability to provide marketing services if these publishers
prevent SendTec from distributing SendTec's clients' advertising campaigns
on their websites or if they adopt ad delivery systems that are not
compatible with SendTec's ad delivery methodologies; and
Sendtec's Business Could Be Harmed If The Use Of Tracking Technology Is
Restricted Or Becomes Subject To New Regulation.
In conjunction with the delivery of advertisements to websites, SendTec
typically place small files of information, commonly known as cookies, on an
Internet user's hard drive, generally without the user's knowledge or consent.
Cookie information is passed to SendTec through an Internet user's browser
software. SendTec use cookies to collect information regarding the
advertisements SendTec delivers to Internet users and their interaction with
these advertisements. SendTec uses this information to identify Internet users
who have received SendTec's advertisements in the past and to monitor and
prevent potentially fraudulent activity. In addition, SendTec's technology uses
this information to monitor the performance of ongoing advertising campaigns and
plan future campaigns.
Some Internet commentators and privacy advocates have proposed limiting or
eliminating the use of cookies and other Internet tracking technologies, and
legislation has been introduced in some jurisdictions to regulate Internet
tracking technologies. The European Union has already adopted a directive
requiring that when cookies are used, the user must be informed and offered an
opportunity to opt-out of the cookies' use. If there is a further reduction or
limitation in the use of Internet tracking technologies such as cookies:
12
o SendTec may have to replace or re-engineer SendTec's tracking technology,
which could require significant amounts of SendTec's time and resources,
may not be completed in time to avoid losing clients or advertising
inventory, and may not be commercially or technically feasible;
o SendTec may have to develop or acquire other technology to prevent fraud;
and
o SendTec may become subject to costly and time-consuming litigation or
investigations due to SendTec's use of cookie technology or other
technologies designed to collect Internet usage information.
Any one or more of these occurrences could result in increased costs, require
SendTec to change their business practices or divert management's attention.
If SendTec Or Their Advertiser Or Publisher Clients Fail To Comply With
Regulations Governing Consumer Privacy, SendTec Could Face Substantial Costs And
SendTec's Business Could Be Harmed.
SendTec's collection, maintenance and sharing of information regarding Internet
users could result in lawsuits or government inquiries. These actions may
include those related to U.S. federal and state legislation or European Union
directives limiting the ability of companies like SendTec to collect, receive
and use information regarding Internet users. Litigation and regulatory
inquiries are often expensive and time-consuming and their outcome is uncertain.
Any involvement by SendTec in any of these matters could require SendTec to:
o spend significant amounts on SendTec's legal defense;
o divert the attention of senior management from other aspects of SendTec's
business;
o defer or cancel new product launches as a result of these claims or
proceedings; and
o make changes to SendTec's present and planned products or services.
Further, SendTec cannot assure you that their advertiser and publisher clients
are currently in compliance, or will remain in compliance, with their own
privacy policies, regulations governing consumer privacy or other applicable
legal requirements. SendTec may be held liable if their clients use SendTec's
technology or the data SendTec collects on their behalf in a manner that is not
in compliance with applicable laws or regulations or their own stated privacy
standards.
SendTec May Be Liable For Content In The Advertisements They Deliver For
SendTec's Clients.
SendTec may be liable to third parties for content in the advertisements they
deliver if the artwork, text or other content involved violates copyrights,
trademarks or other intellectual property rights of third parties or if the
content is defamatory. Although SendTec generally receives warranties from their
advertisers that they have the right to use any copyrights, trademarks or other
intellectual property included in an advertisement and are normally indemnified
by the advertisers, a third party may still file a claim against SendTec. Any
claims by third parties against SendTec could be time-consuming, could result in
costly litigation and adverse judgments and could require SendTec to change
their business.
Misappropriation Of Confidential Information Held By SendTec Could Cause SendTec
To Lose Clients Or Incur Liability.
SendTec retains highly confidential information on behalf of their clients in
SendTec's systems and databases. Although SendTec maintains security features in
their systems, SendTec's operations may be susceptible to hacker interception,
break-ins and other disruptions. These disruptions may jeopardize the security
of information stored in and transmitted through SendTec's systems. If
confidential information is compromised, SendTec could be subject to lawsuits by
the affected clients or Internet users, which could damage SendTec's reputation
among their current and potential clients, require significant expenditures of
capital and other resources and cause SendTec to lose business and revenues.
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ADDITIONAL BUSINESS RISKS RELATING TO SENDTEC'S BUSINESS
SendTec Faces Intense And Growing Competition, Which Could Result In Price
Reductions, Reduced Operating Margins And Loss Of Market Share.
The direct response advertising market is highly competitive. If SendTec fails
to compete effectively against other advertising service companies, SendTec
could lose clients or advertising inventory and their revenues could decline.
SendTec expects competition to continue to increase because there are no
significant barriers to entry.
Many current and potential competitors have advantages over SendTec, such as
longer operating histories, greater name recognition, larger client bases,
greater access to advertising space on high-traffic websites and significantly
greater financial, technical and marketing resources. In addition, existing or
future competitors may develop or offer services that provide significant
performance, price, creative or other advantages over those offered by SendTec.
Current and potential competitors may establish cooperative relationships among
themselves or with third parties to increase the ability of their products and
services to address the needs of SendTec's clients and prospective clients. As a
result, it is possible that new competitors may emerge and rapidly acquire
significant market share.
If SendTec fails to compete successfully, SendTec could have difficulties
attracting and retaining advertising clients advertising inventory, which may
decrease their revenues and adversely affect SendTec's operating results.
Increased competition may also result in price reductions and reduced operating
income.
SendTec Generally Does Not Have Long-Term Contracts With Their Clients.
SendTec's clients typically hire them on a project-by-project basis or on an
annual contractual relationship. Moreover, SendTec's clients generally have the
right to terminate their relationships with SendTec without penalty and with
relatively short or no notice. Once a project is completed SendTec cannot assure
you that a client will engage SendTec for further services. From time to time,
highly successful engagements have ended because SendTec's client was acquired
and the new owners decided not to retain SendTec. A client that generates
substantial revenue for SendTec in one period may not be a substantial source of
revenue in a subsequent period. SendTec expects a relatively high level of
client concentration to continue, but not necessarily involve the same clients
from period to period. The termination of SendTec's business relationships with
any of their significant clients, or a material reduction in the use of
SendTec's services by any of their significant clients, could adversely affect
SendTec's future financial performance.
The Loss Of Key Personnel Or Any Inability To Attract And Retain Additional
Personnel Could Impair Sendtec's Ability To Maintain Or Expand Their Business.
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The loss of the services of members of SendTec's management team or other key
personnel could harm SendTec's business. SendTec's future success depends to a
significant extent on the continued service of their key management, client
service, product development, sales and technical personnel. SendTec does not
maintain key person life insurance on any of their executive officers and does
not intend to purchase any in the future. Although SendTec generally enters into
non-competition agreements with their employees, SendTec's business could be
harmed if one or more of their officers or key employees decided to join a
competitor or otherwise compete with SendTec.
SendTec's future success also depends on their ability to attract, retain and
motivate highly skilled personnel. If SendTec fails to hire and retain a
sufficient number of qualified client service, product development, sales and
technical personnel, SendTec may not be able to maintain or expand their
business.
If SendTec Fails To Manage Their Growth Effectively, SendTec's Expenses Could
Increase And SendTec's Management's Time And Attention Could Be Diverted.
As SendTec continues to increase the scope of their operations, SendTec will
need an effective planning and management process to implement their business
plan successfully in the rapidly evolving Internet advertising market. SendTec's
business, results of operations and financial condition will be substantially
harmed if they are unable to manage their expanding operations effectively.
SendTec plans to continue to expand their sales and marketing, customer support
and research and development organizations. Past growth has placed, and any
future growth will continue to place, a significant strain on SendTec's
management systems and resources. SendTec will likely need to continue to
improve their financial and managerial controls and SendTec's reporting systems
and procedures. In addition, SendTec will need to expand, train and manage their
work force. SendTec's failure to manage their growth effectively could increase
SendTec's expenses and divert management's time and attention.
If SendTec Fails To Establish, Maintain And Expand Their Technology Business And
Marketing Alliances And Partnerships, SendTec's Ability To Grow Could Be
Limited.
In order to grow SendTec's technology business, we must generate, retain and
strengthen successful business and marketing alliances with advertising
agencies.
SendTec depends, and expects to continue to depend, on SendTec's business and
marketing alliances, which are companies with which they have written or oral
agreements to work together to provide services to SendTec's clients and to
refer business from their clients and customers to SendTec. If companies with
which SendTec has business and marketing alliances do not refer their clients
and customers to SendTec to perform their online campaign and message
management, SendTec's revenue and results of operations would be severely
harmed.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
Merger Notes
15
In accordance with the SendTec Merger, theglobe issued, among other
things, a subordinated promissory note in the amount of $1 million (the "Note")
and an aggregate of 175,000 shares of Series H Automatically Converting
Preferred Stock (which as more fully described below, is convertible into
17,500,000 shares of theglobe's common stock) (the "Preferred Stock").
The Preferred Stock will automatically convert into shares of theglobe's
common stock on a 1 for 100 basis at such time as theglobe files an amendment to
its certificate of incorporation with the Delaware Secretary of State's Office
to increase its authorized shares of common stock from 200,000,000 to at least
300,000,000 (the "Capital Amendment"). theglobe intends to seek shareholder
authorization for such amendment at its annual meeting of stockholders
anticipated to be held in November 2004. Five of the former shareholders of
SendTec (whom collectively received approximately 82% of the shares of common
stock issued in the Merger, together with theglobe's Chairman, Michael Egan
(together with certain affiliates which he controls), have agreed to vote (or
have granted proxies to so vote) in favor of the Capital Amendment. Together
such former SendTec shareholders and Mr. Egan control the vote over
approximately 69.25 million of theglobe's 156 million issued and outstanding
shares of common stock (after giving affect to the shares of common stock which
were issued in the Merger). The Capital Amendment will be approved if the
holders of a majority of the outstanding shares of common stock vote in its
favor.
In the event that the Capital Amendment is not approved for any reason at
the annual meeting then on the 10th day following the failure to approve the
Capital Amendment, the remaining shares of Preferred Stock will automatically
convert into whatever number of shares of Common Stock which theglobe then has
remaining available for issuance (after giving affect to approximately 32.1
million shares reserved for issuance under previously outstanding options and
warrants), less up to 3 million additional shares as may be designated by
theglobe. After giving effect to the reservation of shares underlying
outstanding options and warrants to acquire shares of theglobe's common stock
(including options issued in connection with the Merger) and the shares of
common stock issued in the Merger, theglobe presently has issued and outstanding
(or reserved for issuance) approximately 197 million shares of common stock,
leaving a maximum of approximately 3 million shares (assuming no further shares
of common stock are issued prior to such date) which could be further issued
upon conversion of the Preferred Stock absent the increase in common stock
contemplated by the Capital Amendment or other arrangements satisfactory to the
holders of any options or warrants to acquire shares. With regard to any shares
of Preferred Stock which theglobe do not automatically convert into shares of
common stock, the holders of the Preferred Stock may thereafter convert such
remaining Preferred Stock into a subordinated promissory note (a "Conversion
Note") from theglobe. If issued, the Conversion Note will be due in one lump sum
on the later of the first anniversary of its issuance or December 31, 2005 and
will bear interest at the rate of 4% per annum. The principal amount of the
Conversion Note would be equal to the product of (A) the number of shares of
theglobe's common stock that would have been issued upon conversion of the
shares of the Preferred Stock that were not converted into common stock and (B)
the lesser of (i) the fair Market Value, as defined, of theglobe's common stock
in the 20 trading days immediately prior to the conversion date and (ii) $0.83.
If none of the remaining shares of Preferred Stock were converted into common
stock, the maximum principal amount of the Conversion Note (based upon the
maximum conversion rate of $.083 per share) would be approximately $14.5
million.
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Item 3.02, Unregistered Sales of Equity Securities, and Item 5.03, Amendments to
Articles of Incorporation or Bylaws; Change in Fiscal Year.
Merger Securities; Creation of Series H Preferred Stock
On September 1, 2004, theglobe closed upon an agreement and plan of merger
dated August 31, 2004 (the "Merger Agreement"), pursuant to which the Company
acquired all of the issued and outstanding shares of capital stock of SendTec,
Inc. ("SendTec"). Pursuant to the terms of the merger, in consideration for the
acquisition of SendTec, theglobe paid consideration consisting of: (i)
$6,000,000 in cash, (ii) the issuance of an aggregate of 17,500,000 shares of
theglobe's common stock (the "Common Shares"), (iii) the issuance of an
aggregate of 175,000 shares of Series H Automatically Converting Preferred Stock
(which as more fully described below, will convert into 17,500,000 shares of
theglobe's common stock) (the "Preferred Stock"), and (iv) a subordinated
promissory note in the amount of $1 million. In addition, theglobe agreed to
issue warrants to acquire shares of common stock to the SendTec shareholders
when and if SendTec exceeds forecasted operating income, as defined, of $10.125
million, for the year ending December 31, 2005 (the "Earn-out Warrants" and
collectively with the Common Shares and the Preferred Stock, the "Merger
Securities"). The number of earn-out warrants would range from an aggregate of
250,000 to 2,500,000 (if actual operating income exceeds the forecast by at
least 10%). If and to the extent the warrants are earned, the exercise price of
the performance warrants would be $.27 per share and they will be exercisable
for a period of 5 years. The Merger Securities was, or will be, distributed pro
rata to the shareholders of SendTec in accordance with their respective
ownership interests, except for any shareholder of SendTec who elects to dissent
from the Merger and follows applicable Florida law for the exercise of
dissenters' rights,
The Board of Directors created a series of 180,000 shares of the Series H
Preferred Stock pursuant to authority granted to it by theglobe's certificate of
incorporation which authorized the Board to amend theglobe's certificate of
incorporation without further action of its stockholders so as to create one of
more series of preferred stock, including the rights, preference and limitations
of such series of preferred stock. Except as provided by law, the Preferred
Stock will vote with the holders of common stock on all matters, except for the
Capital Amendment (on which it will not vote) described below, on an
"as-converted" basis. The Preferred Stock will automatically convert into shares
of theglobe's common stock on a 1 for 100 basis at such time as theglobe files
an amendment to its certificate of incorporation with the Delaware Secretary of
State's Office to increase its authorized shares of common stock from
200,000,000 to at least 300,000,000 (the "Capital Amendment"). theglobe intends
to seek shareholder authorization for such amendment at its annual meeting of
stockholders anticipated to be held in or about November, 2004. In the event
that the Capital Amendment is not approved for any reason at the annual meeting
then on the 10th day following the failure to approve the Capital Amendment, the
remaining shares of Preferred Stock will automatically convert into whatever
number of shares of Common Stock which theglobe then has remaining available for
issuance (after giving affect to approximately 32.1 million shares reserved for
issuance under previously outstanding options and warrants), less up to 3
million additional shares as may be designated by theglobe. After giving effect
to the reservation of shares underlying outstanding options and warrants to
acquire shares of theglobe's common stock (including options issued in
connection with the Merger) and the shares of common stock issued in the Merger,
theglobe presently has issued and outstanding (or reserved for issuance)
approximately 197 million shares of common stock, leaving a maximum of
approximately 3 million shares (assuming no further shares of common stock are
issued prior to such date) which could be further issued upon conversion of the
Preferred Stock absent the increase in common stock contemplated by the Capital
Amendment or other arrangements satisfactory to the holders of any options or
warrants to acquire shares. With regard to any shares of Preferred Stock which
theglobe does not automatically convert into shares of common stock, the holders
of the Preferred Stock may thereafter convert such remaining Preferred Stock
into a subordinated promissory note (a "Conversion Note") from theglobe. If
issued, the Conversion Note will be due in one lump sum on the first to occur of
(i) the first anniversary of its issuance or (ii) December 31, 2005 and will
bear interest at the rate of 4% per annum. The principal amount of the
Conversion Note would be equal to the product of (A) the number of shares of
theglobe's common stock that would have been issued upon conversion of the
shares of the Preferred Stock that were not converted into common stock and (B)
the lesser of (i) the Fair Market Value, as defined, of theglobe's common stock
in the 20 trading days immediately prior to the conversion date and (ii) $0.83.
17
The Company agreed to file a registration statement relating to the resale of
the shares of common stock issued in the Merger and the shares of common stock
underlying the Preferred Stock on or before January 29, 2005 and to cause the
effectiveness of such registration on or before September 1, 2005. The Company
also agreed to keep the registration statement effective until at least the
third anniversary of the Closing. Pursuant to the terms of the Merger, in
general, the common stock and Preferred Stock (and the underlying shares of
common stock) issued in the Merger may not be sold or otherwise transferred for
a period of one (1) year without the prior written consent of the Company.
The Merger Securities issued or issueable in the SendTec Acquisition were
directed solely to the approximately 35 shareholders of SendTec. The Company
believes that the SendTec shareholders were, either alone or with their
representatives in the Merger, sophisticated and further that substantially all
of the SendTec shareholders were accredited, within the meaning of such terms
under applicable securities laws. Consequently, the Company believes that such
offers and sales of the Merger Securities were exempt from registration pursuant
to Sections 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
promulgated thereunder.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
As part of the SendTec Merger, the Board of Directors voted to expand the
size of the Board from 3 to 4 persons and elected Paul Soltoff, the Chief
Executive Officer of SendTec to fill the vacancy. Mr. Soltoff will serve in such
capacity until the next annual meeting of stockholders at which he is
anticipated to stand for reelection.
Paul Soltoff has served as Chairman of the Board and Chief Executive
Officer of SendTec since its inception in February 2000. Commensurate with the
SendTec merger on September 1, 2004, Mr. Soltoff continued in the position of
Chief Executive Officer of SendTec, now theglobe.com's wholly owned subsidiary,
and was elected to theglobe.com's Board of Directors. In 1997, Mr. Soltoff
became the Chief Executive Officer of Soltoff Direct Corporation, a specialized
direct marketing consulting company located in St. Petersburg, Florida. Since
the inception of SendTec, Soltoff Direct Corporation has been largely inactive.
Item 9.01. Financial Statements and Exhibits.
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(a) Financial Statements of Business Acquired
The Registrant hereby undertakes to file the financial statements required
by the part not later than 71 calendar days after the date that this Form
8-K was due for filing.
(b) Pro Forma Financial Information
The Registrant hereby undertakes to file the pro forma financial
information required by the part not later than 71 calendar days after the
date that this Form 8-K was due for filing.
(c) Exhibits
4.1 Form of Earn-out Warrant to acquire securities of theglobe.com, inc.
4.2 Statement of Designation for Series H Automatically Converting Preferred
Stock
99.1 Agreement and Plan of Merger dated August 31, 2004 by and among theglobe,
inc., SendTec Acquisition Corp., and SendTec, Inc., among others.
99.2 Stockholders' Agreement dated September 1, 2004
99.3 Promissory Note dated September 1, 2004
99.4 Form of potential Conversion Note relating to Series H Preferred Stock
99.5 Employment Agreement dated September 1, 2004 between SendTec, Inc. and
Paul Soltoff, as Chief Executive Officer
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 7, 2004 theglobe.com, inc.
By: /s/ Edward Cespedes
--------------------------------------
Edward Cespedes, President
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