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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.
May 22, 2003 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)
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PRELIMINARY NOTE: This Report contains financial information and includes
forward-looking statements related to theglobe.com, inc. that involve risks and
uncertainties, including, but not limited to, integration of newly acquired
businesses (including the business of Direct Partner Telecom described in Item 2
below), product delivery, product launch dates, risks relating to the Internet,
further development of acquired technology, the availability of financing or
other capital to fund its plans and operations, the management of growth, market
acceptance of certain products, the Company's ability to compete successfully
against established competitors with greater resources, the uncertainty of
future governmental regulation 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, please see the
Company's filings with the Securities and Exchange Commission. Prospective
investors are cautioned that forward-looking statements are not guarantees of
performance. Actual results may differ materially and adversely from management
expectations. 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 and actual results may, and often
do, differ adversely from these forward-looking statements.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF DIRECT PARTNER TELECOM, INC.
On May 28, 2003, theglobe.com ("theglobe" or the "Company") acquired Direct
Partner Telecom, Inc., a Florida corporation, a development stage company
engaged in Voice over the Internet (or "VoIP") telephony services both
domestically and internationally. The Company acquired Direct Partner Telecom in
exchange for 1.375 million shares of Common Stock of theglobe.com and the
issuance of warrants to acquire 500,000 shares of theglobe's Common Stock at a
strike price of $0.72 per share. The warrants are exerciseable any time before
May 28, 2013. In addition, the former shareholders of Direct Partner Telecom may
earn additional warrants to acquire up to 2.75 million shares of theglobe's
Common Stock at a strike price of $0.72 if Direct Partner Telecom achieves
certain revenue and earnings targets over approximately the next three years.
These warrants will also accelerate and be deemed earned in the event of a
"change on control" (as defined in the acquisition documents) of the Company.
The former shareholders of Direct Partner Telecom are entitled to one demand
registration right in connection with the 1.375 million shares of common stock
issued at closing and the shares of common stock issuable upon exercise of the
warrants.
In addition, as part of the transaction, theglobe.com agreed to repay loans
totaling $600,000 to certain of the former shareholders of Direct Partner
Telecom. $500,000 was paid immediately after the closing of the acquisition and
promissory notes for $100,000, with a two year maturity, were issued for the
balance. The funds for payment of the $500,000 were obtained from the proceeds
of a secured convertible promissory note financing with certain affiliates of
theglobe, as described in Item 5 of this Report. As part of the acquisition,
James Magruder agreed to remain as CEO of Direct Partner Telecom, which is now a
wholly-owned subsidiary of theglobe, pursuant to a one year employment
agreement. In addition, Mr. Magruder was appointed Vice President of Network
Operations for theglobe. The employment agreement pays Mr. Magruder a base
salary of $125,000 per annum. The employment agreement also contains provisions
relating to confidentiality, inventions and non-competition.
Management believes that the acquisition of Direct Partner Telecom and its
operating infrastructure, combined with theglobe.com's patent pending digital
telephony technology, will enable the Company to accelerate the deployment and
marketing of its own VoIP services under the brand name "voiceglo". The
acquisition is anticipated to enable theglobe to offer services allowing
subscribers to terminate calls to over 200 international destinations by
mid-summer and to allow us to enter regional markets for international VoIP
telephony services.
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE
SECURED CONVERTIBLE NOTE FINANCING
On May 22, 2003, E&C Capital Partners, LLLP ("E&C Partners"), a company which is
owned by Michael S. Egan, our Chairman and Chief Executive Officer, and in which
Edward Cespedes, our President owns a minority interest, together with certain
trusts, of which Mr. Egan is the trustee (the "Trusts"), entered into a Note
Purchase Agreement with the Company pursuant to which they acquired convertible
promissory notes (the "Convertible Notes") in the aggregate principal amount of
$1,750,000. The Convertible Notes are convertible at anytime into shares of the
Company's common stock at a blended rate of $.09 per share (the Convertible Note
held by E&C Partners converts at approximately $.0794 per share and the
Convertible Notes held by the Trusts convert at $.10 per share). Assuming the
conversion of all of the Convertible Notes, and without regard to the potential
anti-dilutive adjustments described below, approximately 19,445,000 shares of
common stock would be issued. The Convertible Notes have a one year maturity
date, which may be extended at the option of the holder of the Note for periods
aggregating two years, and are secured by a pledge of substantially all of the
assets of the Company. The Convertible Notes bear interest at the rate of ten
(10) percent per annum, payable semi-annually. At the election of the holder of
the Convertible Notes, interest may be payable in shares of the Company's common
stock.
In addition, E&C Partners was issued a warrant to acquire 3,888,889 shares of
theglobe.com common stock at an exercise price of $.15 per share (the "Warrant"
and together with the Convertible Notes, the "Convertible Note Investment"). The
Warrant is exercisable at any time on or before May 22, 2013. E&C Partners and
the Trusts are entitled to certain demand and piggy-back registration rights in
connection with their investment. The conversion price of the Convertible Note
and the exercise price of the Warrant (together with the number of shares for
which such Warrant is exerciseable) is subject to adjustment upon the occurrence
of certain events, including downward adjustment on a weighted-average basis in
the event the Company should issue securities in the future at a purchase price
below the respective conversion price and exercise price of the Convertible
Notes and Warrants.
The Company used $500,000 of the proceeds from the sale of the Convertible Notes
to satisfy certain repayment obligations to certain of the former shareholders
of Direct Partner Telecom pursuant to the acquisition described in Item 2 of
this Form 8-K, and intends to use the balance of the proceeds from the sale of
the Convertible Notes for its general working capital requirements.
As a result of the issuance of the Convertible Notes and the warrants at the
applicable conversion and exercise prices, certain anti-dilution provisions
applicable to previously outstanding warrants to acquire approximately 5.375
million shares of theglobe.com common stock have been triggered. Like many types
of warrants commonly issued, these outstanding warrants to acquire shares of the
Company's common stock include weighted average anti-dilution provisions which
result in a lowering of the exercise price, and an increase in the number, of
warrants to acquire shares of the Company's common stock anytime shares of
common stock are issued (or options or other securities exercisable or
convertible into common stock) for a price per share less than the then exercise
price of the warrants. As a result of the Convertible Note Investment, the
exercise price was lowered from approximately $.96 to $.68 per share on these
warrants and the number of shares issuable upon exercise was proportionally
increased from approximately 5.375 million shares to 6.588 million shares.
Michael Egan and certain companies he controls (including E&C Capital) are the
Company's largest shareholder and if he elected to convert all of the
convertible securities which he owns (including the Convertible Notes) and
exercise all of his outstanding vested options and warrants, he would
beneficially own approximately 71% of the Company's issued and outstanding
shares of common stock.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a)(b) In accordance with Instruction 4 of this Item 7, financial statements and
pro forma information, if any, required by this Item will be filed by an
amendment to this initial report on Form 8-K not later than August 11, 2003 (60
days after the last date upon which this Form 8-K may have been filed [June 12,
2003] with respect to the matter described in Item 2 hereof).
(c) Exhibits
4.1 Form of Warrant dated May 22, 2003 to acquire an aggregate of 3,888,889
shares of theglobe.com Common Stock.
4.2 Form of Convertible Promissory Note
4.3 Form of Warrant dated May 28, 2003 to acquire an aggregate of 500,000
shares of theglobe.com Common Stock.
99.1 Note Purchase Agreement dated May 22, 2003 between thegloble.com, inc.
and E&C Capital Partners, LLLP, and certain other investors named
therein.
99.2 Agreement and Plan of Merger dated May 23, 2003 between theglobe.com,
DPT Acquisition, Inc., Direct Partner Telecom, Inc., and the
shareholders thereof.
99.3 Employment Agreement dated May 28, 2003 between theglobe.com and James
Magruder.
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: June 4, 2003 theglobe.com, inc.
By: /s/ Edward Cespedes
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Edward Cespedes, President
EXHIBIT INDEX
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Exhibit
No. Document Description
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4.1 Form of Warrant dated May 22, 2003 to acquire an aggregate of 3,888,889
shares of theglobe.com Common Stock.
4.2 Form of Convertible Promissory Note
4.3 Form of Warrant dated May 28, 2003 to acquire an aggregate of 500,000
shares of theglobe.com Common Stock.
99.1 Note Purchase Agreement dated May 22, 2003 between thegloble.com, inc.
and E&C Capital Partners, LLLP, and certain other investors named
therein.
99.2 Agreement and Plan of Merger dated May 23, 2003 between theglobe.com,
DPT Acquisition, Inc., Direct Partner Telecom, Inc., and the
shareholders thereof.
99.3 Employment Agreement dated May 28, 2003 between theglobe.com and James
Magruder.