Theglobe.com may be forced to repay $3.4 million in convertibles notes due to judgment in spam suit

By Sheri Kasprzak

New York, March 6 - Theglobe.com, Inc. announced Tuesday that it might be forced to repay $3.4 million in secured convertible demand notes after a district court judge found that the company was liable for violating the CAN-SPAM Act.

The company recently lost a lawsuit filed by MySpace, Inc. in U.S. District Court for the Central District of California, alleging theglobe.com sent at least 100,000 unsolicited and unauthorized commercial e-mail messages to MySpace members using MySpace user accounts that were established violating the web site's terms of service.

If the company is required to make the $3.4 million demand payment, it will not have the resources to pay it, according to an 8-K theglobe.com filed Tuesday with the Securities and Exchange Commission.

"Inasmuch as all of the assets of the company and its subsidiaries secure the convertible notes, in connection with any resulting proceeding to collect the indebtedness relating to the convertible notes, the note holders could seize and sell the assets of the company and its subsidiaries, any or all of which would have a material adverse effect on the financial condition and operations of the company, including the potential bankruptcy or cessation of business of the company," the company said in the SEC filing.

With regard to the suit, the theglobe.com estimates it will have to pay between $40 million and $120 million in damages, including $5.5 million for all of the 110,000 e-mails that were sent over MySpace.

Based in Fort Lauderdale, Fla., theglobe.com provides voice-over-internet protocol telephony services, computer games and internet service.

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