How to Read a 10Q: TheGlobe
Posted Fri May 4 17:21:45 2001 by sbaldwin |
By Steve Gilliard
Source Document: http://www.sec.gov/Archives/edgar/data/1066684/0000950130-01-001623.txt
theglobe.com ("theglobe" or "the Company") is
a network of nine wholly- owned properties (eight of
which are online properties and one of which is an
offline property) focused on delivering community
and/or games information to registered members in the
United States and abroad as of December 2000. Each of
these nine properties specializes in bringing people
together around shared topics of interest. We deliver
community through:
(1) our leading games information
network, games.theglobe.com, which consists of six
online properties: HappyPuppy.com, KidsDomain.com,
Computer Games Online (cdmag.com), Chips & Bits
(chipsbits.com), GamesDomain.com, and
ConsoleDomain.com, as well as our offline property
Computer Games Magazine;
(2) our flagship website,
theglobe.com, which features our community tools
globeclubs and uPublish!, both of which enable users
to personalize their online experience by interacting
with other users around similar interests;
(3) distribution of our community tools and services
and/or our games information content to other Web
properties; and
(4) providing web hosting services to
the small business sector (businesses and professional
webmasters).
| Unlike
most companies, theglobe.com actually bought a series of properties
they can sell when the inevitable bankruptcy comes. Happy Puppy,
Computer Games Online, along with Chips and Bits and GamesDomain are
actually all worth something. They have users. However, paying for them
either required cash or the quickest sale of stocks. |
theglobe.com. theglobe.com (www.theglobe.com), which
was founded in ---------------- 1995, is a "community"
of people sharing similar interests, issues and
passions through three core products designed to
facilitate communication: email and Web-based clubs
(globeclubs product), homepages (uPublish! product),
and forums.
.globeclubs. As a free, premium email
service, globeclubs offers powerful messaging
capabilities within a full-service worldwide
community, enabling users to send and post messages,
store club files, check member profiles, and meet new
people worldwide online. . uPublish! uPublish! is a
free full-service Web site builder offering several
tools, including a rich picture gallery, guestbooks,
email links, audio chat, banner exchanges, page
statistics, and audio messages. . Forums. Forums
provide users with a free unique place online to
publicly post ideas and points of view on a wide
variety of subjects by creating a new topic or adding
to a topic already in existence.
This audience presents to advertisers and
partners a vibrant environment in which to build
brands and enhance communications. theglobe.com offers
advertisers niche audiences within 14 channels of
interest, including: arts and books; business and
finance; careers; computers and Internet;
entertainment and games; health and fitness; hobbies
and pets; humanities and thought; news, government and
education; people and lifestyles; science and
technology; society and culture; sports and
recreation; and, travel and regions.
.WebJump.com. WebJump.com (www.webjump.com),
which we acquired in --------------- December 1999,
provides free services, Internet resources and
information to the small business owner online. It
primarily focuses on the small business/small
office-home office ("SOHO") market niche.
|
They should have sold this long ago. This company should have been sold
to Viacom or something in 1997. No one uses their website services now.
I have a webjump page, but I haven't visited it in years. |
We can deliver targeted advertising within different
vertical areas of our sites, allowing advertisers to
single out and effectively deliver their messages to
their targeted audiences. We have the ability to
target specific demographic data, which include, but
are not limited to, age, gender, product, sub-vertical
categorization and country. We believe that
sophisticated targeting is a critical element for
capturing worldwide advertising budgets for the
Internet. Additionally, we have been expanding the
amount and type of demographic data we collect (all
voluntarily provided by our users), which allows us to
offer more specific data to our advertising clients
for promotion of their products both online and
offline.
|
Translated: we have teen boys by the testes. They certainly have access to no other demographic. |
Our data processing systems and servers are hosted at
the New York Teleport in Staten Island, New York under
a three-year lease with Telehouse International
Corporation. The New York Teleport facility provides
security, electricity and premises for our systems.
The facility has four independent diesel generators
designed to provide power to these systems within
seconds of a power surge. If required, the diesel
generators can supply the data center's power for
several days. Telehouse International Corporation does
not guarantee that our Internet access will be
uninterrupted, error-free or secure.
|
Teleport orginally was designed to be a
telecommunications hub for Wall Street. I interviewed
one of the senior execs in 1990. They realized in the
mid-1990's that that was a limited market and the net
would be a better deal |
Properties
Our headquarters are located in an approximately
47,000 square foot facility located in New York City,
under a lease, which expires in January 2014. We
maintain a sales office in an approximately 4,000
square foot facility in San Francisco, California,
under a lease that expires in June 2004. We also
maintain approximately 12,000 square feet of office
space in three separate locations in Vermont in
connection with a portion of our Games Network. Two
of these leases are month to month and one expires in
September 2005 In connection with our operation of a
portion of our Games Network, we maintain 2,465 square
feet of office space in Birmingham, England, under a
lease that expires in October 2007. Our principal web
server equipment and operations are maintained by our
personnel at the New York Teleport facility in Staten
Island, New York. We rent approximately 2,800 square
feet of space under a Data Center Space Lease that
expires in August 2001.
Does anyone think this penny stock company will live to see their lease end? Doubt it.
|
We have received a letter from NASDAQ stating that
they have determined that we have failed to meet
NASDAQ's minimum listing requirements and as a result
our common stock could be delisted. We have appealed
the NASDAQ determination although there can be no
assurance our appeal will be successful.
In November 1998, we completed an initial public
offering of approximately 7.0 million shares of our
common stock. The initial offering price was $4.50 per
share which resulted in net proceeds of $27.3 million,
after underwriting discounts of $2.0 million and
offering costs $2.0 million.
In April 1999, we acquired Attitude Networks,
Ltd., a provider of online games information content
whose websites included Happy Puppy, Games Domain and
Kids Domain, three leading websites serving game
enthusiasts. The aggregate purchase price amounted to
$46.8 million and was comprised, in part, of
approximately 1.6 million shares of newly issued
common stock.
In December 1999, we acquired the web hosting
assets of Webjump.com, a web hosting property that
primarily focuses on small businesses. The total
purchase price for this transaction was $13.0 million
and was primarily comprised of 1.1 million shares of
newly issued Common Stock. An additional $12.5
million, payable in newly issued shares of Common
Stock, was contingent based upon the attainment of
certain performance targets measured as of November
30, 2000. Management determined that such targets were
not achieved as of the measurement date, however, on
February 14, 2001 the former shareholder group filed a
law suit against us claiming that they are entitled to
$9.5 million related to the above mentioned targets.
See Part I - Item 5 - Legal and Note 13 (d) to our
consolidated financial statements for additional
information.
In February 2000, we acquired Chips & Bits, Inc.
and Strategy Plus, Inc., providers of online and
offline entertainment content focused towards game
enthusiasts. The total purchase price for this
transaction was approximately $15.3 million and was
comprised, in part, of 1.9 million newly issued shares
of Common Stock. An additional $1.25 million, payable
in newly issued shares of Common Stock, is contingent
on the attainment of certain performance targets by
Chips & Bits, Inc. and Strategy Plus, Inc. The
contingent consideration, if any, will be recorded by
us when the contingency is resolved and the
consideration is or becomes issuable. Any additional
cost would be allocated to goodwill, and amortized
over the remaining life of the goodwill.
| Talk
about buying at the height of the market. I would say these companies
made out quite well in selling to the Globe. I think every one of these
properties were bought at double their real value and sold at much
higher rates than they would today.
Webjump was a small community site. HappyPuppy.com and its affliate
sites were worth $46m? It's a nice site, but anyone can replicate it.
Computer Games was a wargamer/rpg slanted magazine, which is when I
started reading it. Today, it competes with PC Gamer. |
Revenues increased to $29.9 million for the year
ended December 31, 2000 as compared with $18.6 million
for the year ended December 30, 1999.
WE EXPECT TO CONTINUE TO INCUR LOSSES.
We have incurred net losses in each quarter since
our inception and we expect that we will continue to
incur net losses for the foreseeable future. We had
net losses of approximately $103.9 million, $49.6
million, $16.0 million, $3.6 million and $0.8 million
for the years ended December 31, 2000, 1999, 1998,
1997 and 1996, respectively. As of December 31, 2000,
we had an accumulated deficit of approximately $173.9
million.
|
No, really? Lost how much? $173m with $29m in revenues. Jesus, no wonder no one will touch this dog of a company. |
OUR BUSINESS MODEL IS RELATIVELY NEW AND UNPROVEN.
Our business model is unproven and relatively new.
This model depends upon our ability to obtain more
than one type of revenue source by using our community
platform and games information properties ("Games
Network"). To be successful, we must, among other
things, develop and market products and services that
achieve broad market acceptance by our users,
advertisers and electronic commerce vendors.
|
Actually, it's a failed business model. |
Why theGlobe Failed
It is all over but the shouting. The people who ran this company,
Stephan "my family owns Nestle" Paternot and Todd "I need a Harvard
MBA" Kriezelman are now whining about their failure. The fact that
they're independently wealthy seems not to matter much, nor does having
partipated in a venture in which investors small and large got the
shaft.
- Too small a player
It was clear by 1997 that selling the globe was the only viable
solution. Taking it public might have worked as a personal enrichment
scheme, but as a long term solution, it was flawed from the begining.
Paternot and Kriezelman were 20 when they started this company up
at Cornell. Instead of admitting they were over their heads, they took
their act to the big city. Which was fine in 1995. But by 1997, it was
clear that they were in trouble or would soon be in trouble.
- Overpaid for properties
Their plan to buy up second/third tier gaming magazines and
websites was a good one, but they were too late to make it happen. It
was actually a clever plan to shift the focus of the globe into a
gaming network. The problem is that they paid what I would suggest is
twice the market value of these sites and Computer Strategy Magazine.
They paid over $80 m for these properties, which makes little sense
compared to their reach in the marketplace and their potential profit.
- Management stayed too long in place
Messrs Paternot and Kriezelman were clearly and completely over
their heads when they tried to run this company. We give them credit
for admitting this fact in public, but very low marks for stewardship,
which, if you want to play executive, is the only area that counts.
The key time to act for this company would have been before the
boom. Instead, they cashed out personally, while sacrificing the
company. There was little hope that this company could have survived
the boom profitably, since it was an also ran and wasn't making the key
alliances that they needed. By the time they brought in outside help,
as in a New CEO, it was too late to do anything.
Conclusion
It's tempting to waste text dumping on the personalities of Todd
and Steph, but theglobe's story is really one of timing. If the
principals had sold their properties to a larger company looking for a
portal solution in 1996-7, they would have made millions and saved
investors a lot of money in the process. Their hubris in going public
makes their arrogance interesting, but their story all too familiar and
preventable.
The Globe was always a second, maybe third-tier company, competing
with better run, smarter companies along the way. Companies that made a
practice of selling out as soon as they could. By going public, the
Globe ensured that a few key investors would get rich, but as we all
know, the stock has dropped to being nearly valueless today.
The worst part is that theGlobe's failure could take
down good, useful products like Computer Games, Chips
and Bits and Happy Puppy.
Also, the utility of Happy Puppy has lessened as the size of game
demos exploded past 20MB, lessening its desirability and appeal to
gamers without broadband connections. The gaming industry, a completely
seperate outpost of IT is contracting and shifting focus, and it is not
clear that the globe properties will be able to meet that shift.
Actually, it won't matter because another company will scoop up their good properties for pennies on the dollar.
Ultimately, theGlobe was a good idea which needed to be flipped and not foisted on the public.
|
|
|
|
