TGLO TheGlobe com Inc (PK)

(6) STOCK OPTION PLANS

We have several stock option plans under which nonqualified stock options may be granted to officers, directors, other employees, consultants and advisors of the Company. In general, options granted under the Company’s stock option plans expire after a ten-year period and generally vest no later than three years from the date of grant. Incentive options granted to stockholders who own greater than 10% of the total combined voting power of all classes of stock of the Company must be issued at 110% of the fair market value of the stock on the date the options are granted. As of June 30, 2008, there were approximately 7,383,000 shares available for grant under the Company’s stock option plans.

No stock options were granted by the Company during the six months ended June 30, 2008. A total of 100,000 stock options were granted during the six months ended June 30, 2007, with a weighted-average fair value of $0.07. There were no stock option exercises during the six months ended June 30, 2008 and 2007.

 

 Stock option activity during the six months ended June 30, 2008 was as follows:

On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The amended complaints include a number of changes, such as changes to the definition of the purported class of investors, and the elimination of the individual defendants as defendants. On September 27, 2007, the plaintiffs moved to certify a class in the six focus cases. On November 14, 2007, the issuers and the underwriters named as defendants in the six focus cases filed motions to dismiss the amended complaints against them. On March 26, 2008, the District Court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all other claims, the motions to dismiss were denied. We are awaiting a decision from the Court on the class certification motion.

Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter. We cannot predict whether we will be able to renegotiate a settlement that complies with the Second Circuit’s mandate.   If the Company is found liable, we are unable to estimate or predict the potential damages that might be awarded, whether such damages would be greater than the Company’s insurance coverage, and whether such damages would have a material impact on our results of operations or financial condition in any future period.

The Company is currently a party to certain other claims and disputes arising in the ordinary course of business, including certain disputes related to vendor charges incurred primarily as the result of the failure and subsequent shutdown of its discontinued VoIP telephony services business. The Company believes that it has recorded adequate accruals on its balance sheet to cover such disputed charges and is seeking to resolve and settle such disputed charges for amounts substantially less than recorded amounts. An adverse outcome in any of these matters, however, could materially and adversely effect our financial position, utilize a significant portion of our cash resources and adversely affect our ability our ability to continue as a going concern (see Note 5, “Discontinued Operations”).

 

·	executing our business plans;
·	our ability to increase revenue levels;
·	our ability to control and reduce operating expenses;
·	potential governmental regulation and taxation;
·	the outcome of pending litigation;
·	our ability to successfully resolve disputed liabilities;
·	our estimates or expectations of continued losses;
·	our expectations regarding future revenue and expenses;

SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO

THE SIX MONTHS ENDED JUNE 30, 2007

CONTINUING OPERATIONS

NET REVENUE. Net revenue totaled $1.091 million for the six months ended June 30, 2008 as compared to $1.077 million for the six months ended June 30, 2007, an increase of approximately $14 thousand, or 1.3%, from the prior year period. Approximately $163 thousand, or 15%, of total net revenue in the first half of 2007 was attributable to the sale of advertising on our www.search.travel website. The www.search.travel website, introduced in August 2006, was sold in December 2007. Total .travel domain names registered as of the end of the second quarter of 2008 was approximately 200.8 thousand of which 170.6 thousand were registered under our bulk purchase program established in December 2007 and approximately 30.2 thousand names were registered under our standard program. At June 30, 2007 there were approximately 27.1 thousand .travel domain names registered under our then standard program.

COST OF REVENUE. Cost of revenue totaled $149 thousand for the six months ended June 30, 2008, a decline of $44 thousand, or 23%, from the $193 thousand reported for the six months ended June 30, 2007. Cost of revenue as a percent of net revenue was approximately 14% for the first half of 2008 as compared to 18% for the same period of 2007. The decline in cost of revenue as compared to the first half of 2007 was due primarily the lower fee rate payable to “authenticate” a domain name subsequent to its initial year of registration.

SALES AND MARKETING. Sales and marketing expenses totaled $296 thousand for the six months ended June 30, 2008 versus $1.2 million for the same period in 2007, a decrease of approximately $934 thousand. During the first half of 2007 the sales and marketing costs related to search.travel were $255 thousand or approximately 20% of total sales and marketing cost for the period. As previously discussed the Company sold the www.search.travel website in December 2007. In April 2007 Tralliance introduced the .travel domain name in China; the one-time cost associated with the launch event was approximately $155 thousand. Beginning in the third quarter of 2006, Tralliance engaged several outside parties to promote its registry operations internationally. These relationships were either terminated or renegotiated in the fourth quarter of 2007 which resulted in a decrease in sales and marketing costs of approximately $324 thousand in the six months ended June 30, 2008 as compared to the same period of 2007. Additionally, public relations cost declined $117 thousand in the first half of 2008 compared to the first half of 2007.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled approximately $1.2 million in the first six months of 2008 as compared to approximately $2.2 million for the same period of the prior year, a decrease of $992 thousand, or 45.5%. During the second and third quarters of 2007 the Company restructured and reduced administrative staff resulting in a $674 thousand decline in personnel cost for the six months ended June 30, 2008 compared to the same period of 2007. Travel and entertainment expense was reduced by approximately $153 thousand in the first six months of 2008 from the comparable period of 2007. Also contributing to the overall reduction in general and administrative expenses in the first half of 2008 as compared to the same period of 2007 was an approximate $70 thousand reduction in office expense and a $33 thousand reduction in insurance expenses.

VALUATION OF ACCOUNTS RECEIVABLE

Provisions for the allowance for doubtful accounts are made based on historical loss experience adjusted for specific credit risks. Measurement of such losses requires consideration of the Company's historical loss experience, judgments about customer credit risk, subsequent period collection activity and the need to adjust for current economic conditions.

LONG-LIVED ASSETS

The Company's long-lived assets primarily consist of property and equipment, capitalized costs of internal-use software, and values attributable to covenants not to compete.

Long-lived assets held and used by the Company and intangible assets with determinable lives are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We evaluate recoverability of assets to be held and used by comparing the carrying amount of the assets, or the appropriate grouping of assets, to an estimate of undiscounted future cash flows to be generated by the assets, or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Fair values are based on quoted market values, if available. If quoted market prices are not available, the estimate of fair value may be based on the discounted value of the estimated future cash flows attributable to the assets, or other valuation techniques deemed reasonable in the circumstances.

CAPITALIZATION OF COMPUTER SOFTWARE COSTS

The Company capitalizes the cost of internal-use software which has a useful life in excess of one year in accordance with Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Subsequent additions, modifications, or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized computer software costs are amortized using the straight-line method over the expected useful life, or three years.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2007, the FASB issued SFAS 141R, “Business Combinations” (“SFAS 141R”) which requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R requires, among other things, that in a business combination achieved through stages (sometimes referred to as a “step acquisition”) that the acquirer recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with this Statement).

SFAS 141R also requires the acquirer to recognize goodwill as of the acquisition date, measured as a residual, which in most types of business combinations will result in measuring goodwill as the excess of the consideration transferred plus the fair value of any non-controlling interest in the acquiree at the acquisition date over the fair values of the identifiable net assets acquired. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect that the adoption of SFAS 141R will have a material impact on our financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements. SFAS No. 157 applies to other accounting standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. SFAS No. 157 was effective for the Company on January 1, 2008. The Company does not believe that SFAS No. 157 will have a material impact on its financial statements.