UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2009
Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number: 000-51161
ODIMO INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware
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22-3607813
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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9858 Clint Moore Road, Boca Raton, Fl
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33496
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(Address of principal executive offices)
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(Zip Code)
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(954) 993-4703
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.
Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark if the registrant is a shell company, in Rule 12b(2) of the Exchange Act.
Yes
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No
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The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon
the closing price of its Common Stock on June 30, 2009 as reported by the OTCBB was approximately
$44,994. Shares of voting stock held by each officer and director and by each person who owns 10%
or more of the outstanding voting stock as of such date have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of March 25, 2010, 11,086,575 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
ODIMO INCORPORATED
FORM 10-K — ANNUAL REPORT
For the Fiscal Year Ended December 31, 2009
TABLE OF CONTENTS
PART I
FORWARD-LOOKING STATEMENTS
This report contains various forward-looking statements regarding our business, financial
condition, results of operations and future plans and projects. Forward-looking statements discuss
matters that are not historical facts and can be identified by the use of words such as “believes,”
“expects,” “anticipates,” “intends,” “estimates,” “projects,” “can,” “could,” “may,” “will,”
“would” or similar expressions. In this report, for example, we make forward-looking statements
regarding, among other things, our expectations about our ability to continue as a going concern.
Although these forward-looking statements reflect the good faith judgment of our management,
such statements can only be based upon facts and factors currently known to us. Forward-looking
statements are inherently subject to risks and uncertainties, many of which are beyond our control.
As a result, our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth below under
the caption “Risk Factors.” For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You
should not unduly rely on these forward-looking statements, which speak only as of the date on
which they were made. They give our expectations regarding the future but are not guarantees. We
undertake no obligation to update publicly or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, unless required by law.
Non-Operating Shell Company
We are a non operating shell corporation. We intend to effect a merger, acquisition or other
business combination with an operating company by using a combination of capital stock, cash on
hand, or other funding sources, if available. We intend to devote substantially all of our time to
identifying potential merger or acquisition candidates. There can be no assurances that we will
enter into such a transaction in the near future or on terms favorable to us, or that other funding
sources will be available.
Cessation of Online Retailing Business of the Company
Prior to May 2006, we were an online retailer of high quality diamonds and fine jewelry,
current season brand name watches and luxury goods through three websites, www.diamond.com,
www.worldofwatches.com and www.ashford.com. In May 2006, we sold assets related to our online
diamond and jewelry business operations, including our domain name
www.diamond.com
. In
December 2006, we sold assets related to our online watch business operations, including our domain
name
www.worldofwatches.com
. In April 2007, we sold our domain name www.ashford.com and
related intellectual property rights, product images and other intangibles.
Other than Amerisa Kornblum, our President and Chief Executive Officer, who, commencing in
2008, serves the Company for no compensation, we have no full time employees.
Going Concern
Our independent registered public accounting firm’s report on our financial statements for the
fiscal year ended December 31, 2009 includes an explanatory paragraph regarding our ability to
continue as a going concern. As shown in our historical financial statements, we have incurred
significant recurring net losses and negative cash flows from operations for the past several years
and as of December 31, 2009, our financial statements reflect negative working capital and a
stockholders’ equity deficiency.
These conditions raise substantial doubt about our ability to continue as a going concern.
Further, the registered public accounting firm’s report states that the financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
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On August 24, 2009, we received from the State of Delaware a cash refund in the amount of
approximately $110,000, which represented a refund of previously paid Delaware franchise fees.
On March 2, 2009 we sold 3,333,333 newly issued shares of our common stock, par value $.001,
to four investors for a gross purchase price of $50,000. An entity controlled by Alan Lipton, our
Chairman of the Board, purchased 1,000,000 of these shares. There were no underwriting discounts or
commissions paid in connection with the sale of these shares.
On February 4, 2008 we sold 714,284 newly issued shares of our common stock, par value $.001,
to three investors for a gross purchase price of $100,000. An entity controlled by Alan Lipton, our
Chairman of the Board and Amerisa Kornblum, our President and Chief Financial Officer each
purchased 178,571 of these shares. There were no underwriting discounts or commissions paid in
connection with the sale of these shares.
We may seek to raise additional capital through the issuance of equity or debt, including
loans from related parties, to acquire sufficient liquidity to satisfy our future liabilities. Such
additional capital may not be available timely or on terms acceptable to us, if at all. Our plans
to repay our liabilities as they become due may be impacted adversely by our inability to have
sufficient liquid assets to satisfy our liabilities.
Available Information
We make available free of charge our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished to the Securities and
Exchange Commission. All of our filings with the SEC may be obtained at the SEC’s Public Reference
Room. The SEC maintains an Internet site that contains reports, proxy and other information
statements and other information regarding issuers that file electronically with the SEC at
www.sec.gov
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Some of the statements in this report and in particular, statements found in Management’s
Discussion and Analysis of Financial Condition and Results of Operations, that are not historical
in nature may constitute forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are often identified by the words “will,” “should,”
“anticipate,” “believe,” “expect,” “intend,” “estimate,” “hope,” or similar expressions. These
statements reflect management’s current views with respect to future events and are subject to
risks and uncertainties. There are important factors that could cause actual results to differ
materially from those in forward-looking statements, many of which are beyond our control. These
factors, risks and uncertainties include, but are not limited to, the factors described below.
Our actual results, performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements, and accordingly, we can give no assurances
that any of the events anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what impact they will have on our results of operations or financial condition.
In view of these uncertainties, investors are cautioned not to place undue reliance on these
forward-looking statements. We expressly disclaim any obligation to publicly revise any
forward-looking statements that have been made to reflect the occurrence of events after the date
hereof.
You should carefully consider the risks and uncertainties described below, together with all
other information included in this report, including the consolidated financial statements and the
related notes herein, as well as in our other public filings, before making any investment decision
regarding our stock. If any of the following risks actually occurs, our business, financial
condition, results of operations and future prospects would likely be materially and adversely
affected. In that event, the market price of our stock could decline and you could lose all or part
of your investment.
We are a non-operating shell company.
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We are a public shell company with no operations and we are seeking to effect a merger,
acquisition or other business combination with an operating company by using a combination of
capital stock, cash on hand, or other funding sources, if available. There can be no assurances
that we will be successful in identifying acquisition candidates or that if identified we will be
able to consummate a transaction on terms acceptable to us.
While we anticipate having sufficient liquid assets to satisfy our liabilities, if we do not
have sufficient liquid assets to satisfy our liabilities we will seek to raise additional capital
through the issuance of equity or debt, including loans from related parties. Such additional
capital may not be available timely or on terms acceptable to us, if at all. Our plans to repay our
liabilities as they become due may be impacted adversely by our inability to have sufficient liquid
assets to satisfy our liabilities. Our independent registered public accounting firm’s report on
our financial statements for the fiscal year ended December 31, 2009 includes an explanatory
paragraph regarding our ability to continue as a going concern. As shown in our historical
financial statements, we have incurred significant recurring net losses and negative cash flows
from operations for the past several years and as of December 31, 2009, our financial statements
reflect negative working capital and a stockholders’ equity deficiency.
We do not intend to pay dividends on our common stock, and, consequently, your only opportunity to
achieve a return on your investment is if the price of our common stock appreciates.
We have never declared or paid any cash dividends on our common stock and do not intend to pay
dividends on our common stock for the foreseeable future. We intend to invest our future earnings,
if any, to fund our growth.
Our common stock is currently quoted for trading on the Over the Counter Bulletin Board which may
adversely impact the liquidity of our shares and reduce the value of an investment in our stock.
Effective August 14, 2006, our common stock was delisted from quotation on the Nasdaq Global
Market (formerly known as the Nasdaq National Market) and on the same day our common stock became
quoted on the Over-The-Counter Market on the NASD Electronic Bulletin Board (OTCBB). Our common
stock has historically been sporadically or “thinly traded” (meaning that the number of persons
interested in purchasing our shares at or near ask prices at any given time may be relatively small
or non-existent) and no assurances can be given that a broader or more active public trading market
for our common stock will develop or be sustained in the future or that current trading levels will
be sustained. You may be unable to sell at or near ask prices or at all if you desire to liquidate
your shares. This situation is attributable to a number of factors, including the fact that we are
a small company which is relatively unknown to stock analysts, stock brokers, institutional
investors and others in the investment community that generate or influence sales volume. As a
consequence, there may be periods of several days or more when trading activity in our shares is
minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of
trading activity that will generally support continuous sales without an adverse effect on share
price.
Because our common stock is considered a “penny stock” any investment in our common stock is
considered to be a high-risk investment and is subject to restrictions on marketability.
Our common stock is currently traded on the Over-The-Counter Bulletin Board (“OTC Bulletin
Board”) and is considered a “penny stock.” The OTC Bulletin Board is generally regarded as a less
efficient trading market than the NASDAQ Market.
The SEC has adopted rules that regulate broker-dealer practices in connection with
transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with respect to transactions
in such securities is provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to
deliver a standardized risk disclosure document prepared by the SEC, which specifies information
about penny stocks and the nature and significance of risks of the penny stock market. The
broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer and any salesperson in the transaction, and monthly account
statements indicating the market value of each penny stock held in the customer’s account. In
addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise
exempt from those rules, the broker-dealer must
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make a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the transaction. These disclosure
requirements may have the effect of reducing the trading activity in the secondary market for our
common stock.
Since our common stock is subject to the regulations applicable to penny stocks, the market
liquidity for our common stock could be adversely affected because the regulations on penny stocks
could limit the ability of broker-dealers to sell our common stock and thus your ability to sell
our common stock in the secondary market. There is no assurance our common stock will be quoted on
NASDAQ or the NYSE or listed on any exchange, even if eligible.
Our stock price has been and may continue to be volatile.
The market price for our common stock has been and is likely to continue to be volatile. The
market price of our common stock may fluctuate significantly in response to a number of factors,
most of which we cannot control.
Future sales of our common stock may cause our stock price to decline.
A small number of our current stockholders hold a substantial number of shares of our common
stock. Shares held by our officers, directors and principal stockholders are considered “restricted
securities” within the meaning of Rule 144 under the Securities Act and, are eligible for resale
subject to the volume, manner of sale, holding period and other limitations of Rule 144.
Sales of a substantial number of shares, or the expectation that such sale may occur, could
significantly reduce the market price of our common stock. Moreover, the holders of a substantial
number of our shares of common stock have rights to require us to file registration statements to
permit the resale of their shares in the public market or to include their shares in registration
statements that we may file for ourselves or other stockholders. We also have registered all common
stock that we may issue under our stock incentive plan. Accordingly, these shares, when registered,
can be freely sold in the public market upon issuance, subject to restrictions under the securities
laws. If any of these stockholders cause a large number of securities to be sold in the public
market, the sales could reduce the trading price of our common stock. These sales also could impede
our ability to raise future capital.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent
a change in control, even if an acquisition would be beneficial to our stockholders, which could
affect our stock price adversely and prevent attempts by our stockholders to replace or remove our
current management.
Our restated certificate of incorporation and restated bylaws contain provisions that may
delay or prevent a change in control, discourage bids at a premium over the market price of our
common stock and adversely affect the market price of our common stock and the voting and other
rights of the holders of our common stock. These provisions include:
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Our board of directors has the exclusive right to elect directors to fill a vacancy created
by the expansion of the board of directors or the resignation, death or removal of a director,
which prevents stockholders from being able to fill vacancies on our board of directors;
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Our stockholders may not act by written consent. As a result, a holder or holders
controlling a majority of our capital stock would be able to take certain actions only at a
stockholders’ meeting;
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No stockholder may call a special meeting of stockholders. This may make it more difficult
for stockholders to take certain actions;
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Our stockholders may not remove a director without cause, and our certificate of
incorporation provides for a classified board of directors with staggered, three-year terms. As a
result, it could take up to three years for stockholders to replace the entire board;
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Our certificate of incorporation does not provide for cumulative voting in the election of
directors. This
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limits the ability of minority stockholders to elect director candidates;
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Stockholders must provide advance notice to nominate individuals for election to the board
of directors or to propose matters that can be acted upon at a stockholders’ meeting. These
provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies
to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our
company; and
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Our board of directors may issue, without stockholder approval, shares of undesignated
preferred stock. The ability to authorize undesignated preferred stock makes it possible for our
board of directors to issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to acquire us.
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As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions.
Under Delaware law, a corporation may not engage in a business combination with any holder of 15%
or more of its capital stock unless the holder has held the stock for three years or, among other
things, the board of directors has approved the transaction. Our board of directors could rely on
Delaware law to prevent or delay an acquisition of us.
A significant portion of our voting power is concentrated and, as a result, our other stockholders’
ability to influence corporate matters may be limited.
Elao, LLC, a limited liability company controlled by Alan Lipton and a trust established for
the benefit of Mr. Lipton’s minor child together own approximately 38.5% of our outstanding voting
stock. Accordingly, Mr. Lipton will have significant influence over the management and affairs of
Odimo and over all matters requiring stockholder approval, including the election of directors and
significant corporate transactions, such as a merger or other sale of Odimo or its assets, for the
foreseeable future. This concentrated control limits the ability of our other stockholders to
influence corporate matters and, as a result, Mr. Lipton may take actions that Odimo’s other
stockholders do not view as beneficial.
Our ability to use net operating loss carryforwards may be limited.
Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount
of net operating loss carryforwards that may be used to offset taxable income when a corporation
has undergone significant changes in its stock ownership. We have preliminarily reviewed the
applicability of the annual limitations imposed by Section 382 caused by previous changes in our
stock ownership and believe the availability of our net operating loss carryforwards is
substantially limited. There can be no assurance that we will be able to utilize any net operating
loss carryforwards in the future. This limitation may adversely affect our ability to attract
certain business combination candidates and/or consummate a business combination with an operating
business.
Our limited resources make it impracticable to conduct a complete and exhaustive search for a
business combination.
Our limited resources and the lack of extensive management will likely make it impracticable
to conduct a complete and exhaustive investigation and analysis of a business opportunity before we
commit our resources thereto. Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if we had more funds
available to us, would be desirable. We will be particularly dependent in making decisions upon
information provided by the promoter, owner, sponsor, or others associated with the business
opportunity seeking our participation.
ITEM 2. PROPERTIES
Our corporate office address is Boca Raton, Florida, where we lease approximately 200 square
feet pursuant to a month to month agreement. We pay approximately $200 per month for this space.
ITEM 3. LEGAL PROCEEDINGS
None.
5
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market Information
Our common stock was quoted for trading on the Nasdaq National Market from February 15, 2005
through August 13, 2006 and has been quoted for trading on the OTCBB since August 14, 2006 under
the symbol ODMO. Prior to February 15, 2005, there was no public market for our common stock. The
following table sets forth the high and low closing sales prices for our common stock as reported
on the OTCBB for the quarterly periods for fiscal years 2008 and 2009. The high and low bid prices
for the periods indicated reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.
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High
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Low
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First Quarter 2009
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0.025
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0.011
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Second Quarter 2009
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0.025
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0.015
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Third Quarter 2009
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0.06
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0.015
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Fourth Quarter 2009
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0.08
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0.016
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First Quarter 2008
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0.13
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0.05
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Second Quarter 2008
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0.08
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0.05
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Third Quarter 2008
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0.09
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0.08
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Fourth Quarter 2008
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0.04
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0.009
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The approximate number of holders of record of our common stock as of March 25, 2010 is 39,
inclusive of those brokerage firms and/or clearing houses holding shares of common stock for their
clientele (with each such brokerage house and/or clearing house being considered as one holder).
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We currently intend to
retain all available funds and any future earnings for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable future.
Equity Compensation Plan
The following table details our equity compensation plan as of December 31, 2009:
6
2009 EQUITY COMPENSATION PLAN INFORMATION
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(c)
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Number of
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securities
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(a)
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remaining
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Number of
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(b)
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available
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securities to
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Weighted-
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for future
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be
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average
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issuance
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issued upon
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exercise price
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under equity
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exercise of
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of
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compensation plan
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outstanding
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outstanding
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(excluding
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options,
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options,
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securities
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warrants
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warrants
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reflected in
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Plan Category
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and rights
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and rights
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column (a))
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Equity compensation plans approved by security holders
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26,000
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$
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24.48
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533,391
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Equity compensation plans not approved by security
holders
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—
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—
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Total
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26,000
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$
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24.48
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533,391
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Recent Sales of Unregistered Securities
On March 2, 2009 we sold 3,333,333 newly issued shares of our common stock, par value $.001,
to four investors for a gross purchase price of $50,000. An entity controlled by Alan Lipton, our
Chairman of the Board purchased 1,000,000 of these shares. There were no underwriting discounts or
commissions paid in connection with the sale of these shares.
On February 4, 2008 we sold 714,284 newly issued shares of our common stock, par value $.001,
to three investors for a gross purchase price of $100,000. An entity controlled by Alan Lipton, our
Chairman of the Board and Amerisa Kornblum, our President and Chief Financial Officer each
purchased 178,571 of these shares. There were no underwriting discounts or commissions paid in
connection with the sale of these shares. We relied upon the exemption from registration contained
in Section 4(2) of the Securities Act of 1933 in making the sale.
Repurchases of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in Item 10(f)(1)
of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not
required to provide the information requested by this Item 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth previously
under the caption “Risk Factors.” This Management’s Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our consolidated financial statements
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and related notes included elsewhere in this report.
Overview
We ceased operations as an online retailer at December 31, 2006 and, other than commissions we
earned prior to April 2007 which were based on a percentage of gross sales made to visitors to our
www.ashford.com homepage who were redirected to websites owned and operated by others, we have
recorded no net sales or other operating revenue since our fiscal year ended December 31, 2007. We
do not expect to generate operating revenue until such time as we consummate a business combination
with an operating business, if at all. Our historical operating results disclosed in this Report on
Form 10-K are not meaningful to our future results. On August 24, 2009, we received from the State
of Delaware a cash refund in the amount of approximately $110,000, which represented a refund of
previously paid Delaware franchise fees.
Our independent registered public accounting firm’s report on our financial statements for the
fiscal year ended December 31, 2009 includes an explanatory paragraph regarding our ability to
continue as a going concern. As shown in our historical financial statements, we have incurred
significant recurring net losses and negative cash flows from operations for the past several years
and as of December 31, 2009, our financial statements reflect negative working capital and a
stockholders’ equity deficiency.
These conditions raise substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Results of Operations
Comparison of Years Ended December 31, 2009 and 2008
General and Administrative Expenses.
General and administrative expenses for the years ended
December 31, 2009 and 2008 were $95,000 and $105,000, respectively. During 2009, such expenses
consisted primarily of rent, accounting and other general and administrative expenses. We
anticipate that our general and administrative expenses will remain low until such time as we
effect a merger or other business combination with an operating business, if at all.
Net Income(Loss).
Net income, including a cash refund for franchise fees of $110,000, was
$17,000 for the year ended December 31, 2009 compared to a net loss of $99,000 for the year ended
December 31, 2008.
Liquidity and Capital Resources
As of December 31, 2009, we had cash of approximately $122,000 and total liabilities of
approximately $243,000. On March 2, 2009 we sold 3,333,333 newly issued shares of our common stock,
par value $.001, to four investors for a gross purchase price of $50,000 which is being used for
working capital. An entity controlled by Alan Lipton, our Chairman of the Board purchased 1,000,000
of these shares. There were no underwriting discounts or commissions paid in connection with the
sale of these shares. On February 4, 2008, we sold 714,284 newly issued shares of common stock, par
value $.001, to four investors for a gross purchase price of $100,000, which we are using for
working capital.
We intend to continue devoting substantially all of our time to identifying merger or
acquisition candidates. In the event we locate an acceptable operating business, we intend to
effect the transaction utilizing any combination of our Common Stock, cash on hand, or other
funding sources that we reasonably believe are available. However, there can be no assurances that
we will be able to consummate a merger or acquisition of an operating business on terms favorable
to us, if at all, or that other funding sources will be available. If such shares of Common Stock
are issued, our stockholders will experience a dilution of their ownership interest. If a
substantial number of shares of common stock are issued in connection with a business combination,
a change in control may occur.
Discussion of Cash Flows
8
Net cash provided by operating activities for the year ended December 31, 2009 was $71,000
compared to net cash used in operating activities for the year ended December 31, 2008 of $119,000
due to the cash refund received of approximately $110,000 in 2009.
Net cash provided by investing activities in the year ended December 31, 2009 was $0 compared
to net cash provided by investing activities of $6,000 in the year ended December 31, 2008.
Net cash provided by financing activities in the year ended December 31, 2009 was $50,000 as
compared to $113,000 of net cash provided by financing activities in the year ended December 31,
2008. Net cash provided by financing activities in 2009 and 2008 related to proceeds from sale of
common stock.
Liquidity Sources
Our current source of liquidity consists of cash on hand and sale of securities. As of
December 31, 2009, we had $122,000 of cash on hand.
Until required for other purposes, our cash and cash equivalents are maintained in deposit
accounts or highly liquid investments with original maturities of 90 days or less at the time of
purchase.
We had previously borrowed from Alan Lipton, our Chairman of the Board of Directors the net
sum of $525,000. We issued to Mr. Lipton an 8% promissory note in exchange for the funds (the
“Note”). Under the Note, $525,000 plus all interest was repayable by the Company upon the earlier
to occur of (a) January 16, 2010; or (ii) the occurrence of a change in control of the Company. Our
repayment obligation under the Note was secured by all of the Company’s assets. We used the
proceeds of the loans from Mr. Lipton for working capital purposes, including payment of our
existing liabilities. As of April 14, 2008, we were informed by Alan Lipton that he had released us
from repaying all amounts we owed to him under the Note.
On March 2, 2009 we sold 3,333,333 newly issued shares of our common stock, par value $.001,
to four investors for a gross purchase price of $50,000. An entity controlled by Alan Lipton, our
Chairman of the Board purchased 1,000,000 of these shares. There were no underwriting discounts or
commissions paid in connection with the sale of these shares.
On February 4, 2008 we sold 714,284 newly issued shares of our common stock, par value $.001,
to three investors for a gross purchase price of $100,000. An entity controlled by Alan Lipton, our
Chairman of the Board, and Amerisa Kornblum, our President and Chief Financial Officer each
purchased 178,571 of these shares. There were no underwriting discounts or commissions paid in
connection with the sale of these shares.
We may seek to raise additional capital through the issuance of equity or debt, including
loans from related parties, to acquire sufficient liquidity to satisfy our future liabilities. Such
additional capital may not be available timely or on terms acceptable to us, if at all. Our plans
to repay our liabilities as they become due may be impacted adversely by our inability to have
sufficient liquid assets to satisfy our liabilities.
Contractual Obligations
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in Item 10(f)(1)
of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not
required to provide the information requested by this section.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
Outstanding Stock Options
9
As of December 31, 2009, we had outstanding vested options to purchase approximately 26,000
shares of common stock, at a weighted average exercise price of $24.48 per share. We have no
outstanding unvested options. The per share value of each share of common stock underlying the
vested options, based on the difference between the weighted average exercise price per option and
the estimated fair market value of the shares ranges from $0 to $16.25 per share.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires us to make
significant estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, and expenses and related disclosures of contingent assets and liabilities. On an ongoing
basis, we evaluate our estimates, including those related to income taxes, and contingencies and
litigation. We base our estimates on historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or
conditions.
While our significant accounting policies are described in more detail in Note 1 to our
financial statements included in this report, we believe the policies discussed below are the most
critical to understanding our financial position and results of operations.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized by applying statutory tax rates in effect in the
years in which the differences between the financial reporting and tax filing bases of existing
assets and liabilities are expected to reverse. We have considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need for a valuation
allowance against our deferred tax assets. We have recorded a full valuation allowance against our
deferred tax assets since we have determined that it is more likely than not that we may not be
able to realize our deferred tax asset in the future.
Recent Accounting Developments
In February 2010, Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2010-09,
Subsequent Events (Topic 855) Amendments to Certain Recognition and
Disclosure Requirements
, which amends disclosure requirements within Subtopic 855-10. An entity
that is an SEC filer is not required to disclose the date through which subsequent events have been
evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s
requirements. ASU 2010-09 is effective upon issuance. The adoption of ASU 2010-09 did not have a
material impact on the Company’s financial statements.
In January 2010, FASB issued ASU 2010-06,
Improving Disclosures about Fair Value Measurements
,
which provides amendments to subtopic 820-10 that require separate disclosure of significant
transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of
separate information regarding purchases, sales, issuances and settlements for Level 3 fair value
measurements. Additionally, ASU 2010-06 provides amendments to subtopic 820-10 that clarify
existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU
2010-06 is effective for financial statements issued for interim and annual periods ending after
December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in
the rollforward of activity in Level 3 fair value measurements, which are effective for interim and
annual periods ending after December 15, 2010. The Company does not expect the adoption of ASU
2010-06 to have a material impact on its financial statements.
In December 2009, FASB issued ASU 2009-17,
Consolidations (Topic 810) Improvements to Financial
Reporting by Enterprises Involved with Variable Interest Entities
, which replaces the
quantitative-based risks and rewards calculation for determining which enterprise, if any, has a
controlling financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity’s economic performance and (1) the obligation to absorb
losses of the entity or (2) the
10
right to receive benefits from the entity. ASU 2009-17 also requires additional disclosures
about an enterprise’s involvement in variable interest entities. ASU 2009-17 is effective as of the
beginning of each reporting entity’s first annual reporting period that begins after November 15,
2009. The Company does not expect the adoption of ASU 2009-17 to have a material impact on its
financial statements.
In August 2009, FASB issued ASU 2009-05,
Fair Value Measurements and Disclosures (Topic 820)
Measuring Liabilities at Fair Value,
which provides amendments to Subtopic 820-10, Fair Value
Measurements and Disclosures-Overall, for the fair value measurement of liabilities. ASU 2009-05
clarifies that in circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value. ASU 2009-05 is
effective for the first reporting (including interim periods) beginning after issuance. The
adoption of ASU 2009-05 did not have a material impact on the Company’s financial statements.
In June 2009, FASB issued
Accounting Standards Codification
(“ASC”) 105, Generally Accepted
Accounting Principles, which establishes the Codification as the single source of authoritative
GAAP recognized by the FASB to be applied by nongovernmental entities. All guidance contained in
the Codification carries an equal level of authority. Following this statement, FASB will not issue
new standards in the form of statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates, which will serve only to: (1)
update the Codification; (2) provide background information about the guidance; and (3) provide the
bases for conclusions on the change(s) in the Codification. ASC 105 was effective for financial
statements issued for interim and annual periods ending after September 15, 2009. The Codification
supersedes all existing non-SEC accounting and reporting standards. The adoption of ASC 105 did not
have an impact on the Company’s financial statements.
In April 2009, FASB issued amendments to ASC 820-10,
Fair Value Measurements and Disclosures
,
which provides amendments to guidelines for making fair value measurements more consistent and
provides additional authoritative guidance in determining whether a market is active or inactive
and whether a transaction is distressed. The amendments are applied to all assets and liabilities
(i.e., financial and non-financial) and requires enhanced disclosures. The amendments are effective
for periods ending after June 15, 2009. The adoption of the ASC 820-10 amendments did not have an
impact on the Company’s financial statements.
In December 2007, the FASB issued ASC Topic 805, Business Combinations (“ASC 805”). ASC 805
requires an entity to measure a business acquired at fair value and to recognize goodwill
attributable to any noncontrolling interests (previously referred to as minority interests) rather
than just the portion attributable to the acquirer. ASC 805 also results in fewer exceptions to the
principle of measuring assets acquired and liabilities assumed in a business combination at fair
value. In addition, ASC 805 requires payments to third parties for consulting, legal, audit, and
similar services associated with an acquisition to be recognized as expenses when incurred rather
than capitalized as part of the business combination.
Also in December 2007, the FASB issued ASC Topic 810, Consolidation (“ASC 810”). ASC 810 requires
that accounting and reporting for minority interests be recharacterized as noncontrolling interests
and classified as a component of equity. The Company simultaneously adopted ASC 805 and ASC 810 as
of January 1, 2009, as required. These standards will have no impact on the previous acquisitions
recorded by the Company in the Company’s financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in Item 10(f)(1)
of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not
required to provide the information requested by this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the list of financial statements filed with this report under Item 15 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
11
None.
ITEM 9A(T). CONTROLS AND PROCEDURES
a.
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms and that such information is accumulated and communicated to Amerisa Kornblum, our chief
executive officer and chief financial officer, as appropriate, to allow for timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
we recognize that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives, and management is
required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
Due to the material weakness (discussed below in subsection c of this Item), our disclosure
controls and procedures were not effective as of December 31, 2009 to ensure that the information
required to be disclosed in our SEC reports is recorded, processed, summarized and reported within
the requisite time periods and that such information is accumulated and disclosed appropriately.
Notwithstanding this material weakness, we believe that the financial statements included
herein fairly present, in all material respects, our financial condition, results of operations and
cash flows for the periods and dates presented.
b.
Changes in Internal Control Over Financial Reporting.
Our management has determined that there have been no changes in the Company’s internal
control over financial reporting during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
c.
Management Report On Internal Control Over Reporting.
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Because of its
inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated
Framework. Based on our assessment using those criteria, our management concluded that our internal
control over financial reporting was not effective as of December 31, 2009 because we create,
review and process financial data without internal independent review.
Since January 2007, Amerisa Kornblum began to serve as both our Chief Executive Officer and
Chief Financial Officer whereas prior to that date, Ms. Kornblum was the Chief Financial Officer.
Commencing January 1, 2007, we have observed that, although our operations subsequent to the year
ended December 31, 2006 are limited, we have a material weakness in our internal controls over
financial reporting in that we create, review and process financial data without internal
independent review due to our not having sufficient personnel. Due to this material weakness, there
is more than a remote likelihood that a material misstatement of our financial statements could
occur and not be detected, prevented or corrected. Notwithstanding this material weakness, we
believe that the financial statements included in this Form 10-K fairly present, in all material
respects, our financial condition, results of operations and cash flows for the periods and dates
presented.
This Annual Report on Form 10-K does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting. Management’s report was
not subject to attestation by our registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit us to provide only management’s report in this
Annual Report.
12
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth our executive officer and each Class I director, Class II
director, and Class III director, their ages and present positions with Odimo as of March 20, 2009.
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Alan Lipton
|
|
|
59
|
|
|
Chairman of the Board, Class III Director
|
|
Amerisa Kornblum
|
|
|
48
|
|
|
Chief Executive Officer, Chief Financial
Officer, Secretary and Treasurer
|
|
Sidney Feltenstein(1)
|
|
|
69
|
|
|
Class III Director
|
|
Stanley Stern(2)
|
|
|
52
|
|
|
Class I Director
|
|
Steven Tishman(3)
|
|
|
53
|
|
|
Class II Director
|
|
|
|
|
|
(1)
|
|
Member of the Audit Committee, the Compensation Committee and the Nominating Committee.
|
|
|
|
(2)
|
|
Member of the Compensation Committee and Nominating Committee.
|
|
|
|
(3)
|
|
Member of the Audit Committee.
|
Alan Lipton
has been our Chairman of the Board of Directors since May 2004 and a member of our
Board of Directors since November 1999. From November 1999 through May 11, 2006, Mr. Lipton was our
Chief Executive Officer and President. From 1983 to 1994 Mr. Lipton was the Chief Executive Officer
of Jan Bell Marketing, Inc., which was a publicly held watch and jewelry retailer and supplier to
wholesale price clubs. After retiring from Jan Bell Marketing in 1994, Mr. Lipton founded the
Lipton Foundation, a philanthropic organization. From 1994 to the present, Mr. Lipton has been
involved with the Lipton Foundation and in various real estate development projects in South
Florida.
Amerisa Kornblum
has been our Chief Financial Officer and Treasurer since November 1999, our
Secretary since November 2005 and our Chief Executive Officer since January 2007. From October 1997
to November 1999, Ms. Kornblum served as Chief Financial Officer of Gold Coast Media, Inc. From
1994 through 1997, Ms. Kornblum was a financial systems consultant, for various catalog and retail
companies. From 1988 to 1993, Ms. Kornblum worked for Jan Bell Marketing, Inc. in various
capacities, including Controller, Director of Internal Audit, and Director of Investor Relations.
From 1985 to 1988, Ms. Kornblum was a senior auditor for Deloitte & Touche LLP. Ms. Kornblum is a
certified public accountant in the State of Florida. Ms. Kornblum is married to Jeff Kornblum, our
former President and Chief Executive Officer.
Sidney Feltenstein
has been a member of our Board of Directors since May 2004. Mr. Feltenstein
currently is a private investor. From June 2006 through February 2008, Mr. Feltenstein was the
Chairman of Sagittarius Brands, a restaurant holding company. From 1995 to 2002, Mr. Feltenstein
served as Chairman, President and Chief Executive Officer of Yorkshire Global Restaurants, an
operator of A&W Restaurants and Long John Silver’s restaurants. Mr. Feltenstein has served in a
variety of operations and marketing management positions in the restaurant business including Chief
Marketing Officer for Dunkin Donuts and Executive President of Worldwide Marketing for Burger King
Corporation. Mr. Feltenstein is active in various organizations, including the International
Franchise Association. From 2003 through 2007, Mr. Feltenstein
was a
director of BUCA, Inc., a publicly traded restaurant
company.
Stanley Stern
was a member of our Board of Directors from November 1999 through May 2004 and
rejoined the Board in February 2005. Since March 2004, Mr. Stern has been a Managing Director and
head of investment banking
13
with Oppenheimer & Co. Inc., an investment banking firm. From February 2002 to March 2004, Mr.
Stern served as a Managing Director and head of investment banking with C.E. Unterberg, Towbin, an
investment banking firm. From January 2000 to February 2002, Mr. Stern served as Managing Director
of STI Ventures Advisory USA Inc. and as a member of the board of directors and the investment
committee of STI Ventures. Mr. Stern also serves as the chairman of the board of Tucows, Inc., and
is a director of Fundtech, a provider of financial payment processing solutions.
Steven Tishman
has been a member of our Board of Directors since February 2005. Since October
2002, he has been a Managing Director of Rothschild Inc., a merchant banking firm. From November
1999 to July 2002, Mr. Tishman was a Managing Director of Robertson Stephens, Inc., an investment
banking firm. Mr. Tishman is also a director of Cedar Fair, L.P., an operator of amusement parks.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that our directors and executive
officers and persons who own more than 10% of our common stock file initial reports of ownership
and reports of changes of ownership with the SEC. Reporting persons are required by the SEC
regulations to furnish us with copies of all Section 16(a) forms they file. These reports are
available for review on our website at www.odimo.com. Based solely on a review of these reports, we
believe that all directors and executive officers complied with all Section 16(a) filing
requirements for 2009.
Code of Conduct and Ethics
Our Board of Directors has adopted a code of business conduct and ethics applicable to our
directors, officers and employees, in accordance with applicable federal securities laws and the
Nasdaq Rules. Upon written request to our Corporate Secretary, Odimo Incorporated
,
9858 Clint
Moore Road, Boca Raton, Fl
,
we will provide, without charge, any person with a copy of our Code
of Conduct and Ethics.
Audit Committee Financial Experts
Our Board of Directors has determined that both Mr. Tishman and Mr. Feltenstein satisfy the
definition of “audit committee financial expert” as promulgated by the SEC by virtue of their
educational and work experience as described above and are both independent from our executive
officers in accordance with the definition of “independence” as promulgated by the American Stock
Exchange.
ITEM 11. EXECUTIVE COMPENSATION
Since January 2007, Amerisa Kornblum has been our only executive officer. From January 2007
through December 2007, we paid Ms. Kornblum $2,500 per month. Commencing January 2008, Ms. Kornblum
agreed to continue to serve in her capacity as our sole executive officer for no compensation.
Since January 2007, Ms. Kornblum has served us as our sole executive officer with no written
employment agreement. Due to our severely limited resources we are unable to attract other
executive talent and we are unable to offer any compensation to Ms. Kornblum. While we have, in the
past and may in the future grant stock options as a means to attract and provide equity incentives
to executives, no options have been granted since 2004 and all options that have heretofore been
granted to prior executive officers have been cancelled.
Amerisa Kornblum, our sole executive officer (the “Named Executive”) was paid no compensation
and no amounts were accrued for her services during 2008 and 2009.
Stock Options /Equity Awards
No stock options or equity awards were granted, exercised or outstanding in favor of any of
the Named Executive during our fiscal year ended December 31, 2009.
Pension Benefits
14
We do not have any plan that provides for payments or other benefits at, following, or in
connection with, retirement.
Nonqualified Deferred Compensation
We do not have any plan that provides for deferred compensation.
Stock Ownership Guidelines
We have not implemented stock ownership guidelines for our executive officers.
Compensation Committee Interlocks and Insider Participation
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in Item 10(f)(1)
of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not
required to provide the information requested by this section.
Director Compensation
We do not pay directors compensation but have in the past, reimbursed directors for certain
expenses incurred by them in connection with their duties to the Company.
Communications with Directors
Stockholders may communicate with our Board of Directors or one or more directors by sending a
letter addressed to our Board or to any one or more directors in care of our Corporate Secretary,
Odimo Incorporated, 9858 Clint Moore Road, Boca Raton, Fl, in an envelope clearly marked
“Stockholder Communication.”
Our Corporate Secretary’s office will forward such correspondence
unopened to Mr. Feltenstein or Mr. Tishman, or another independent director as the Board of
Directors may specify from time to time, unless the envelope specifies that it should be delivered
to another director. If multiple communications are received on a similar topic, our Corporate
Secretary may, in her discretion, forward only representative correspondence.
Compensation Committee Report
As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in Item 10(f)(1)
of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not
required to provide the information requested by this section.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 19, 2010, certain information with respect to the
beneficial ownership of Odimo’s Common Stock by (i) each stockholder known by Odimo to be the
beneficial owner of more than 5% of Odimo’s Common Stock, (ii) each director of Odimo, (iii) each
executive officer named in the Summary Compensation Table above, and (iv) all directors and
executive officers of Odimo as a group. This table is based upon information supplied by officers,
directors and principal stockholders and Schedules 13D and 13G filed with the SEC.
Except as otherwise indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to all shares of
common stock held by them and their address is our address.
15
Applicable percentage ownership in the following table is based on 11,086,575 shares of
common stock outstanding as of March 19, 2010.
PRINCIPAL STOCKHOLDERS
|
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|
|
|
|
|
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|
Shares
|
|
|
|
|
|
|
|
Beneficially
|
|
|
|
|
|
Beneficial Owner
|
|
Owned
|
|
|
Percentage
|
|
|
5% STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
ELAO, LLC(1)
|
|
|
3,096,058
|
|
|
|
27.93
|
%
|
|
c/o Alan Lipton
|
|
|
|
|
|
|
|
|
|
|
|
Lily Maya
Lipton Family Trust (1)
c/o Alan Lipton, Trustee
|
|
|
4,274,629
|
|
|
|
38.56
|
%
|
|
|
|
Relao 2,
LLC(4)
c/o Charles Rennert
100 SE 2
nd
Street 2900
Miami Fl 33131
|
|
|
1,178,571
|
|
|
|
10.63
|
%
|
|
|
|
Bruce Galloway(3)
Gary Herman (3)
c/o Galloway Capital Management, LLC
720 Fifth Avenue, New York, NY 10019
|
|
|
2,593,227
|
|
|
|
23.39
|
%
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTORS AND EXECUTIVE OFFICERS
|
|
|
|
|
|
|
|
|
|
Alan Lipton(1)(2)
|
|
|
4,274,629
|
|
|
|
38.56
|
%
|
|
|
|
Amerisa Kornblum(4)
|
|
|
178,571
|
|
|
|
1.6
|
%
|
|
|
|
Stanley Stern
|
|
|
4,000
|
|
|
|
*
|
|
|
|
|
Sidney Feltenstein
|
|
|
—
|
|
|
|
—
|
|
|
|
|
Steven Tishman
|
|
|
—
|
|
|
|
—
|
|
|
|
|
All directors and executive officers as a group (5 persons)
|
|
|
4,281,127
|
|
|
|
38.62
|
%
|
|
|
|
|
|
*
|
|
Denotes less than 1%.
|
|
|
|
(1)
|
|
Lily Maya Family Trust (the “Lily Trust”) is the sole member of Elao,
LLC, a Florida limited liability company. Alan Lipton is the sole
trustee of the Lily Trust and his daughter Lily Maya Lipton is the
sole lifetime beneficiary. Both the Lily Trust and Alan Lipton have
shared voting and dispositive power over the shares owned by Elao,
LLC. Alan Lipton has shared voting and dispositive over the shares
owned by the Lily Trust.
|
|
|
|
(2)
|
|
Includes 1,682 shares held by Lipton Partnership, a general
partnership in which Alan Lipton has a beneficial interest.
|
|
|
|
(3)
|
|
Represents 786,582 shares of Common Stock held by Mr. Galloway’s
Individual Retirement Account which Mr. Galloway has sole power to
vote and dispose, 47,800 shares of Common Stock held by Mr. Galloway’s
children for which he has the sole power to vote and dispose, and
1,758,845 shares of Common Stock held by Strategic Turnaround Equity
Partners, LP (Cayman) (“STEP”) for which Messrs. Galloway and Herman
have the shared power to vote and dispose. Messrs. Galloway and Herman
are managing members of Galloway Capital Management, LLC, the general
partner of STEP. Messrs. Galloway and Herman disclaims beneficial
ownership of the shares of
|
16
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|
|
|
|
|
|
Common Stock directly beneficially owned by
STEP except for: (i) indirect interests therein by virtue of being a
member of Galloway Capital Management LLC, and (ii) the indirect
interests of Mr. Galloway by virtue of his being a limited partner of
STEP.
|
|
|
|
(4)
|
|
Does not include shares held by Elao, LLC. Each of Ms. Kornblum and an
entity , the principals of which are the same principals of Relao 2,
LLC have a contingent contractual right to receive 33.3% of the
proceeds upon sale of these shares. The principals of Relao, LLC and
Relao 2, LLC are shareholders, directors and officers of Berman
Rennert Vogel & Mandler, P.A., a law firm who has and continues to
provide legal services to the Company.
|
Changes In Control
We are not aware of any arrangement that might result in a change of control in the future.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We had previously borrowed from Alan Lipton, our Chairman of the Board of Directors the net
sum of $525,000. We issued to Mr. Lipton an 8% promissory note in exchange for the funds (the
“Note”). Under the Note, $525,000 plus all interest was repayable by the Company upon the earlier
to occur of (a) January 16, 2010; or (ii) the occurrence of a change in control of the Company. Our
repayment obligation under the Note was secured by all of the Company’s assets. We used the
proceeds of the loans from Mr. Lipton for working capital purposes, including payment of our
existing liabilities. As of April 14, 2008, we were informed by Alan Lipton that he had released us
from repaying all amounts we owed to him under the Note.
On March 2, 2009 we sold 3,333,333 newly issued shares of our common stock, par value $.001,
to four investors for a gross purchase price of $50,000. An entity controlled by Alan Lipton, our
Chairman of the Board purchased 1,000,000 of these shares. There were no underwriting discounts or
commissions paid in connection with the sale of these shares. On February 4, 2008 we sold 714,284
newly issued shares of our common stock, par value $.001, to three investors for a gross purchase
price of $100,000. An entity controlled by Alan Lipton, our Chairman of the Board and Amerisa
Kornblum, our President and Chief Financial Officer each purchased 178,571 of these shares. There
were no underwriting discounts or commissions paid in connection with the sale of these shares.
We may seek to raise additional capital through the issuance of equity or debt, including
loans from related parties, to acquire sufficient liquidity to satisfy our future liabilities. Such
additional capital may not be available timely or on terms acceptable to us, if at all. Our plans
to repay our liabilities as they become due may be impacted adversely by our inability to have
sufficient liquid assets to satisfy our liabilities.
Our audit committee is charged with monitoring and reviewing issues involving potential
conflicts of interests and reviewing and approving all related party transactions. In general, for
purposes of the Company’s written policy, a related party transaction is a transaction, or a
material amendment to any such transaction, involving a related party and the Company involving
$120,000 or more. Our policy required the audit committee to review and approve related party
transactions. In reviewing and approving any related party transaction or material amendment to any
such transaction, the audit committee must satisfy itself that it has been fully informed as to the
related party’s relationship to the Company and interest in the transaction and as to the material
facts of the transaction, and must determine that the related party transaction is fair to the
Company.
Director Independence
The board of directors has determined that, with the exception of Alan Lipton, the Chairman of
our board of directors, all of the members of our board are “independent directors” as that term is
defined in the listing standards of the American Stock Exchange. Such independence definition
includes a series of objective tests, including that the director is not an employee of the company
and has not engaged in various types of business dealings with the company. In addition, as further
required by the American Stock Exchange listing standards, the board of directors has made a
subjective determination as to each independent director that no relationships exist which, in the
opinion of the board of directors,
17
would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
We retained Rachlin, LLP, to act as our independent registered public accounting firm during
our fiscal year 2009. On June 1, 2009, Rachlin, LLP, (“Rachlin”), merged with and into Marcum,
LLP, and began practicing in Florida as“MarcumRachlin, a division of Marcum, LLP”
(“MarcumRachlin“or “Rachlin”). Accordingly, effective June 1, 2009, Rachlin ceased to act as the
Company’s independent registered public accounting firm and MarcumRachlin became the Company’s
independent registered public accounting firm through the balance of our fiscal year 2009 and has
been retained as the Company’s independent registered public accounting firm for our fiscal year
2010. This change in the Company’s independent registered public accounting firm was accepted by
the Audit committee of the Company’ Board of Directors.
Audit and Non-Audit Fees
The following table sets forth fees billed to us by MarcumRachlin for services provided during
the period for the years ended December 31, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Audit Fees
|
|
$
|
25,000
|
|
|
$
|
44,000
|
|
|
Audit Related Fees
|
|
|
0
|
|
|
|
0
|
|
|
Tax Fees
|
|
|
0
|
|
|
|
0
|
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,000
|
|
|
$
|
44,000
|
|
Audit Fees.
Consists of fees billed for professional services rendered for the audit of
Odimo’s consolidated financial statements and review of the interim financial statements included
in quarterly reports and services that are normally provided by its independent registered
accounting firms in connection with statutory and regulatory filings or engagements.
Audit-Related Fees.
Odimo did not incur any additional fees under this category.
Tax Fees.
Odimo did not incur any additional fees under this category.
All Other Fees.
Odimo did not incur any additional fees under this category.
Audit Committee Pre-Approval Policies And Procedures
The Audit Committee’s policy is to pre-approve all audit, audit-related and permissible
non-audit services provided by the independent registered public accountants in order to assure
that the provision of such services does not impair the auditor’s independence. These services may
include audit services, audit-related services and other services. Pre-approval is generally
provided for up to one year and any pre-approval is detailed as to the particular service or
category of services and is generally subject to a specific budget. Management is required to
periodically report to the Audit Committee regarding the extent of services provided by the
independent registered public accountants in accordance with this pre-approval, and the fees for
the services performed to date. During fiscal year 2009, all services
were pre-approved by the Audit Committee in accordance with this policy.
18
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report.
1. The following financial statements of Odimo Incorporated and Report of MarcumRachlin
independent registered public accounting firm, are included in this report:
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|
Page
|
|
|
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F-1
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F-2
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F-3
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|
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F-4
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|
|
F-5
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|
|
|
F-6
|
2. Financial statement schedule:
None.
3. List of exhibits required by Item 601 of Regulation S-K. See part (b) below.
(b) Exhibits
.
The following exhibits are filed as a part of this report:
|
|
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|
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
2.1 (1)
|
|
Asset Purchase Agreement among registrant and Ashford.com, Inc. dated December 6, 2002
|
|
3.1 (1)
|
|
Amended and Restated Certificate of Incorporation
|
|
3.2 (1)
|
|
Amended and Restated Bylaws
|
|
4.1 (1)
|
|
Form of Specimen Stock Certificate
|
|
4.2.1 (1)
|
|
Investors’ Rights Agreement dated November 18, 1999 by and between the registrant and certain
holders of the registrant’s capital stock
|
|
4.2.2 (1)
|
|
Amended and Restated Registration Rights Agreement dated March 30, 2004 by and between the
registrant and certain holders of the registrant’s capital stock
|
|
10.1.1 (1)
|
|
Odimo Incorporated Amended and Restated Stock Incentive Plan
|
|
10.1.2 (1)
|
|
Form of Stock Option Agreement pursuant to the Odimo Incorporated Stock Incentive Plan
|
|
10.2 (1)
|
|
Amended and Restated Series C Convertible Preferred Stock Purchase Agreement dated as of March
30, 2004 between the registrant and SDG Marketing, Inc.
|
|
10.3.1 (1)
|
|
Promissory Note dated December 6, 2002 by the registrant in favor of GSI Commerce Solutions, Inc.
|
|
10.3.2 (1)
|
|
Security Agreement dated December 6, 2002 between the registrant and GSI Commerce Solutions,
Inc., as assignee
|
|
10.3.3 (1)
|
|
Patents, Trademarks, Copyrights and Licenses Security Agreement dated December 6, 2002 between
the registrant and GSI Commerce Solutions, Inc., as assignee
|
|
10.4.1 (1)
|
|
Lease Agreement dated December 14, 1999 between the registrant and MDR Fitness Corp.
|
|
10.4.2 (1)
|
|
Lease Amendment and Extension Agreement dated January 8, 2003 between the registrant and MDR
Fitness Corp.
|
|
10.5.1 (1)
|
|
Employment Agreement dated July 12, 2004 between the registrant and Alan Lipton
|
|
10.5.2 (1)
|
|
Employment Agreement dated July 12, 2004 between the registrant and Jeff Kornblum
|
|
10.5.3 (1)
|
|
Employment Agreement dated July 12, 2004 between the registrant and Amerisa Kornblum
|
|
10.5.4 (1)
|
|
Employment Agreement dated July 12, 2004 between the registrant and George Grous
|
|
10.5.5 (1)
|
|
Lock-up Agreement dated July 12, 2004, between the registrant and Alan Lipton
|
19
|
|
|
|
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
10.5.6 (1)
|
|
Lock-up Agreement dated July 12, 2004, between the registrant and Jeff Kornblum
|
|
10.5.7 (1)
|
|
Lock-up Agreement dated July 12, 2004, between the registrant and Amerisa Kornblum
|
|
10.5.8 (1)
|
|
Lock-up Agreement dated July 12, 2004, between the registrant and George Grous
|
|
10.5.9 (1)
|
|
Lock-up Agreement dated July 12, 2004, between the registrant and Michael Dell’Arciprete
|
|
10.5.1 (1)
|
|
Amended and Restated Employment Agreement dated August 27, 2004 between the registrant and Alan
Lipton
|
|
10.6 (1)
|
|
Form of Indemnification Agreement between the registrant and each of its directors and executive
officers
|
|
10.7 (1)
|
|
Supply Agreement dated March 30, 2004 between the registrant and SDG Marketing, Inc.
|
|
10.8.1 (1)
|
|
Loan and Security Agreement dated as of July 31, 2004 by and among Silicon Valley Bank, the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.8.2 (1)
|
|
Revolving Promissory Note dated as of July 31, 2004 in favor of Silicon Valley Bank, by the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.8.3 (1)
|
|
Intellectual Property Security Agreements dated as of July 31, 2004 in favor of Silicon Valley
Bank, by each of the registrant and Ashford.com, Inc.
|
|
10.8.4 (1)
|
|
Unconditional Guaranties dated as of July 31, 2004 of Softbank Capital LP, Softbank Capital
Partners LP and Softbank Capital Advisors Fund LP
|
|
10.9 (1)
|
|
Commercial Lease dated as of January 1, 2006 between the registrant and IBB Realty, LLC
|
|
10.10 (1)
|
|
First Loan Modification Agreement dated as of November 13, 2004 by and among Silicon Valley Bank,
the registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.11 (1)
|
|
First Amended and Restated Note dated as of November 13, 2004 in favor of Silicon Valley Bank by
the registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.12 (1)
|
|
Amendment and Reaffirmation of Guaranty dated as of November 13, 2004 of Softbank Capital, LP,
Softbank Capital Partners, LP and Softbank Capital Advisors Fund LP
|
|
10.13 (1)
|
|
Second Loan Modification Agreement dated as of January 7, 2005 by and among Silicon Valley Bank,
the registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.14 (1)
|
|
Second Amended and Restated Note dated as of January 7, 2005 in favor of Silicon Valley Bank, by
the registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.15 (1)
|
|
Second Amendment and Reaffirmation of Guaranty dated as of January 7, 2005 of Softbank Capital,
L.P., Softbank Capital Partners, LP and Softbank Capital Advisors Fund LP
|
|
10.16 (1)
|
|
Confirmation letter dated January 7, 2005 from Softbank Capital Partners LP, regarding financial
support.
|
|
10.17 (5)
|
|
Termination Agreement dated March 29, 2006 by and between Odimo Incorporated and SDG Marketing,
Inc.
|
|
10.18 (5)
|
|
Third Amendment to Loan and Security Agreement dated March 30, 2006, by and among Silicon Valley
Bank, Odimo Incorporated, Ashford.com, Inc. and D.I.A. Marketing, Inc.
|
|
10.19 (6)
|
|
Asset Purchase Agreement dated as of May 11, 2006 by and among Ice.com, Inc., Ice Diamond, LLC,
and Odimo Incorporated.
|
|
10.20 (6)
|
|
Transition Services Agreement dated as of this May 11, 2006, by and between Ice Diamond, LLC,
Ice.com, Inc., and Odimo Incorporated.
|
|
10.21 (6)
|
|
Separation Agreement dated May 11, 2006 by Odimo Incorporated and Alan Lipton.
|
|
10.22 (6)
|
|
Amendment No. 1 to Employment Contract dated as of May 11, 2006, by and among Odimo Incorporated
and Jeffrey Kornblum.
|
|
10.23 (7)
|
|
Modification and Settlement Agreement dated November 6, 2006 by and between IBB Realty, LLC and
Odimo Incorporated.
|
|
10.24 (8)
|
|
Asset Purchase Agreement dated as of December 1, 2006 by and among Odimo Incorporated,
Worldofwatches.com, Inc. and ILS Holdings, LLC.
|
|
10.25 (9)
|
|
Separation Agreement dated as of January 16, 2007 by and among Odimo Incorporated and Jeff
Kornblum.
|
|
10.26 (9)
|
|
Separation Agreement dated as of January 16, 2007 by and among Odimo Incorporated and George
Grous.
|
|
10.27 (9)
|
|
Termination Agreement dated as of January 15, 2007 by and among Odimo Incorporated and Amerisa
Kornblum.
|
|
10.30 (11)
|
|
8% Secured Promissory Note in the Principal Amount of $300,000
|
20
|
|
|
|
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
10.31 (11)
|
|
Amended and Restated 8% Promissory Note in the Principal Amount of $500,000
|
|
10.32 (11)
|
|
8% Demand Promissory Note in the Principal Amount of $30,000
|
|
10.33 (10)
|
|
Asset Purchase Agreement dated as of April 6, 2007 by and among Odimo Incorporated, Ashford.com,
Inc. and Luxi Group, LLC.
|
|
10.34
(12)
|
|
Amended and Restated 8% Promissory Note in the Principal Amount of $525,000
|
|
14.1 (2)
|
|
Code of Business Conduct and Ethics
|
|
16.1 (3)
|
|
Letter of Deloitte & Touche LLP dated September 2, 2005
|
|
16.2 (3)
|
|
Letter of Rachlin Cohen & Holtz LLP dated September 2, 2005
|
|
21.1 (1)
|
|
Subsidiaries of Odimo Incorporated
|
|
23.1 (4)
|
|
Consent of MarcumRachlin
|
|
31.1 (4)
|
|
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated
pursuant to the Securities Exchange Act of 1934, as amended
|
|
31.2 (4)
|
|
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated
pursuant to the Securities Exchange Act of 1934, as amended
|
|
32.1 (4)
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2 (4)
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
(1)
|
|
This exhibit was previously filed as an exhibit to the Registration
Statement on Form S-1 (File No. 333-117400) originally filed with the
Securities and Exchange Commission on July 16, 2004, as amended
thereafter, and is incorporated herein by reference.
|
|
|
|
(2)
|
|
This exhibit was previously filed as an exhibit to the Annual Report
on Form 10-K for the year ended December 31, 2004 filed with the
Securities and Exchange Commission on March 31, 2005 and is
incorporated herein by reference.
|
|
|
|
(3)
|
|
This exhibit was previously filed as an exhibit to the Form 8-K dated
August 31, 2005 filed with the Securities and Exchange Commission on
September 2, 2005 and is incorporated herein by reference.
|
|
|
|
(4)
|
|
Filed herewith.
|
|
|
|
(5)
|
|
This exhibit was previously filed as an exhibit to the Annual Report
on Form 10-K for the year ended December 31, 2005 filed with the
Securities and Exchange Commission on March 31, 2006 and is
incorporated herein by reference.
|
|
|
|
(6)
|
|
This exhibit was previously filed as an exhibit to the Form 8-K dated
May 11, 2006 filed with the Securities and Exchange Commission on May
12, 2006 and is incorporated herein by reference.
|
|
|
|
(7)
|
|
This exhibit was previously filed as and exhibit to the Quarterly
Report on form 10-Q for the period ended September 30, 2006 filed
with the Securities and Exchange Commission on November 14, 2006 and
is incorporated herein by reference.
|
|
|
|
(8)
|
|
This exhibit was previously filed as an exhibit to the Form 8-K dated
December 1, 2006 filed with the Securities and Exchange Commission on
December 4, 2006 and is incorporated herein by reference.
|
|
|
|
(9)
|
|
This exhibit was previously filed as an exhibit to the Form 8-K dated
January 11, 2007 filed with the Securities and Exchange Commission on
January 18, 2007 and is incorporated herein by reference.
|
|
|
|
(10)
|
|
This exhibit was previously filed as an exhibit to the Form 8-K dated
April 11, 2007 filed with the Securities and Exchange Commission on
April 12, 2007 and is incorporated herein by reference.
|
|
|
|
(11)
|
|
This exhibit was previously filed as an exhibit to the Annual Report
on Form 10-K for the year ended December 31, 2006 filed with the
Securities and Exchange Commission on April 2, 2007 and is
incorporated herein by reference.
|
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|
|
(12)
|
|
This exhibit was previously filed as an exhibit to the Annual Report
on Form 10-K for the year ended December 31, 2007 filed with the
Securities and Exchange Commission on March 31, 2008 and is
incorporated herein by reference.
|
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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|
ODIMO INCORPORATED
|
|
|
Dated: March 29, 2010
|
By:
|
/s/ Amerisa Kornblum
|
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|
|
Name:
|
Amerisa Kornblum
|
|
|
|
|
Title:
|
Chief Executive Officer
and Chief Financial
Officer
|
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|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated:
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Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Amerisa Kornblum
Amerisa Kornblum
|
|
Chief Executive Officer and Chief Financial
Officer (
Principal
Executive and Principal Financial and Accounting Officer
)
|
|
March 29, 2010
|
|
|
|
|
|
|
/s/
Alan Lipton
Alan Lipton
|
|
Chairman of the Board of Directors
|
|
March 29,
2010
|
|
|
|
|
|
|
/s/ Sidney Feltenstein
Sidney Feltenstein
|
|
Director
|
|
March 29, 2010
|
|
|
|
|
|
|
/s/ Stanley Stern
Stanley Stern
|
|
Director
|
|
March 29, 2010
|
|
|
|
|
|
|
/s/ Steven Tishman
Steven Tishman
|
|
Director
|
|
March 29, 2010
|
22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the
Board of Directors and Shareholders
of Odimo Incorporated
We have audited the accompanying balance sheets of Odimo Incorporated (the “Company”) as of
December 31, 2009 and 2008 and the related statements of operations, changes in stockholders’
equity (deficiency) and cash flows for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Odimo Incorporated, as of December 31, 2009 and 2008, and the
results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a
going concern. As discussed in Note 2 to the financial statements, the Company has incurred
significant recurring net losses and negative cash flows from operations and, as of December 31,
2009, reflects a significant working capital deficiency and a stockholders’ deficiency. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans regarding those matters also are described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MarcumRachlin, a division of Marcum LLP
Fort Lauderdale, Florida
March 29, 2010
F-1
Odimo, Incorporated
BALANCE SHEETS
(in thousands, except par value)
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|
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December 31,
|
|
|
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
122
|
|
|
$
|
1
|
|
|
Prepaid expense and other current assets
|
|
|
—
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
122
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
240
|
|
|
$
|
246
|
|
|
Note payable to related party
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
243
|
|
|
$
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments, Contingencies and Subsequent Events
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficiency):
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 50 million shares
authorized, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.001 par value, 300 million shares
authorized, 11,086 and 7,753 shares issued and outstanding
|
|
|
10
|
|
|
|
7
|
|
|
Additional paid-in capital
|
|
|
104,527
|
|
|
|
104,424
|
|
|
Accumulated deficit
|
|
|
(104,658
|
)
|
|
|
(104,675
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficiency)
|
|
|
(121
|
)
|
|
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
122
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-2
Odimo, Incorporated
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(17
|
)
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(17
|
)
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
17
|
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
17
|
|
|
$
|
(99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per Common Share
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
10,539
|
|
|
|
7,687
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-3
Odimo, Incorporated
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity (Deficiency)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE — December 31, 2007
|
|
|
7,039
|
|
|
$
|
7
|
|
|
$
|
103,705
|
|
|
$
|
(104,576
|
)
|
|
$
|
(864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
714
|
|
|
|
—
|
|
|
|
100
|
|
|
|
—
|
|
|
|
100
|
|
|
Forgiveness of note payable and accrued interest to
related party
|
|
|
—
|
|
|
|
—
|
|
|
|
563
|
|
|
|
—
|
|
|
|
563
|
|
|
Credit arising from services contributed by related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
—
|
|
|
|
56
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(99
|
)
|
|
|
(99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE — December 31, 2008
|
|
|
7,753
|
|
|
|
7
|
|
|
|
104,424
|
|
|
|
(104,675
|
)
|
|
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
3,333
|
|
|
|
3
|
|
|
|
47
|
|
|
|
—
|
|
|
|
50
|
|
|
Credit arising from services contributed by related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
—
|
|
|
|
56
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE — December 31, 2009
|
|
|
11,086
|
|
|
$
|
10
|
|
|
$
|
104,527
|
|
|
$
|
(104,658
|
)
|
|
$
|
(121
|
)
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-4
Odimo Incorporated
STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
17
|
|
|
$
|
(99
|
)
|
|
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Charge in lieu of compensation contributed by officer and
related party
|
|
|
56
|
|
|
|
56
|
|
|
Gain on sale of assets
|
|
|
|
|
|
|
(6
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
4
|
|
|
|
13
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(6
|
)
|
|
|
(68
|
)
|
|
Accrued liabilities
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
71
|
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of assets, net of expenses
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
—
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable to related party, net of repayments
|
|
|
|
|
|
|
13
|
|
|
Proceeds from sale of common stock
|
|
|
50
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
50
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash and Cash Equivalents
|
|
|
121
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Ending
|
|
$
|
122
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of note payable to related party
|
|
$
|
—
|
|
|
$
|
563
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-5
ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
— The Company is a non-operating public shell company. The Company is seeking suitable
candidates for a business combination with a private company. The Company previously was an online
retailer of watches, luxury goods, diamonds and jewelry through three websites, www.diamond.com,
www.ashford.com and www.worldofwatches.com. The Company’s operating results disclosed in this
Annual Report on Form 10 K are not meaningful to its future results.
Use of Estimates
— The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America (“generally accepted accounting
principles”) requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
General and Administrative Expenses
— General and administrative expenses include professional
fees, insurance, rent, and other general corporate expenses.
Income Taxes
— The Company accounts for income taxes in accordance with the provisions of SFAS No.
109,
Accounting for Income Taxes.
SFAS No. 109 requires an asset and liability approach. Under this
method, a deferred tax asset or liability is recognized with respect to all temporary differences
between the financial statement carrying amounts and the tax bases of assets and liabilities and
with respect to the benefit from utilizing tax loss carryforwards. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to the period in which
the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision
for income taxes. A valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize their benefit, or
that future deductibility is prohibited or uncertain.
Income (Loss) Per Share
— Basic loss per share is computed based on the average number of common
shares outstanding and diluted earnings per share is computed based on the average number of common
and potential common shares outstanding under the treasury stock method. The calculation of diluted
loss per share was the same as the basic loss per share for each period presented since the
inclusion of potential common stock in the computation would be antidilutive.
Recently Issued Accounting Standards
In February 2010, Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2010-09,Subsequent Events (Topic 855) Amendments to Certain Recognition
and Disclosure Requirements , which amends disclosure requirements within Subtopic 855-10. An
entity that is an SEC filer is not required to disclose the date through which subsequent events
have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the
SEC’s requirements. ASU 2010-09 is effective upon issuance. The adoption of ASU 2010-09 did not
have a material impact on the Company’s financial statements.
In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements,
which provides amendments to subtopic 820-10 that require separate disclosure of significant
transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of
separate information regarding purchases, sales, issuances and settlements for Level 3 fair value
measurements. Additionally, ASU 2010-06 provides amendments to subtopic 820-10 that clarify
existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU
2010-06 is effective for financial statements issued for interim and annual periods ending after
December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in
the rollforward of activity in Level 3 fair value measurements, which are effective for interim and
annual periods ending after December 15, 2010. The Company does not expect the adoption of ASU
2010-06 to have a material impact on its financial statements.
In December 2009, FASB issued ASU 2009-17,Consolidations (Topic 810) Improvements to Financial
Reporting by Enterprises Involved with Variable Interest Entities , which replaces the
quantitative-based risks and rewards calculation for determining which enterprise, if any, has a
controlling financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a variable interest entity
that most significantly impact the entity’s economic performance and (1) the obligation to absorb
losses of the entity or (2) the right to receive benefits from the entity. ASU 2009-17 also
F-6
ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
requires additional disclosures about an enterprise’s involvement in variable interest entities.
ASU 2009-17 is effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009. The Company does not expect the adoption of ASU 2009-17
to have a material impact on its financial statements.
In August 2009, FASB issued ASU 2009-05,Fair Value Measurements and Disclosures (Topic 820)
Measuring Liabilities at Fair Value, which provides amendments to Subtopic 820-10, Fair Value
Measurements and Disclosures-Overall, for the fair value measurement of liabilities. ASU 2009-05
clarifies that in circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value. ASU 2009-05 is
effective for the first reporting (including interim periods) beginning after issuance. The
adoption of ASU 2009-05 did not have a material impact on the Company’s financial statements.
In June 2009, FASB issued Accounting Standards Codification (“ASC”) 105, Generally Accepted
Accounting Principles, which establishes the Codification as the single source of authoritative
GAAP recognized by the FASB to be applied by nongovernmental entities. All guidance contained in
the Codification carries an equal level of authority. Following this statement, FASB will not issue
new standards in the form of statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates, which will serve only to: (1)
update the Codification; (2) provide background information about the guidance; and (3) provide the
bases for conclusions on the change(s) in the Codification. ASC 105 was effective for financial
statements issued for interim and annual periods ending after September 15, 2009. The Codification
supersedes all existing non-SEC accounting and reporting standards. The adoption of ASC 105 did not
have an impact on the Company’s financial statements.
In April 2009, FASB issued amendments to ASC 820-10,Fair Value Measurements and Disclosures,
which provides amendments to guidelines for making fair value measurements more consistent and
provides additional authoritative guidance in determining whether a market is active or inactive
and whether a transaction is distressed. The amendments are applied to all assets and liabilities
(i.e., financial and non-financial) and requires enhanced disclosures. The amendments are effective
for periods ending after June 15, 2009. The adoption of the ASC 820-10 amendments did not have an
impact on the Company’s financial statements.
In December 2007, the FASB issued ASC Topic 805, Business Combinations (“ASC 805”). ASC 805
requires an entity to measure a business acquired at fair value and to recognize goodwill
attributable to any noncontrolling interests (previously referred to as minority interests) rather
than just the portion attributable to the acquirer. ASC 805 also results in fewer exceptions to the
principle of measuring assets acquired and liabilities assumed in a business combination at fair
value. In addition, ASC 805 requires payments to third parties for consulting, legal, audit, and
similar services associated with an acquisition to be recognized as expenses when incurred rather
than capitalized as part of the business combination.
Also in December 2007, the FASB issued ASC Topic 810, Consolidation (“ASC 810”). ASC 810 requires
that accounting and reporting for minority interests be recharacterized as noncontrolling interests
and classified as a component of equity. The Company simultaneously adopted ASC 805 and ASC 810 as
of January 1, 2009, as required. These standards will have no impact on the previous acquisitions
recorded by the Company in the Company’s financial statements.
2. GOING CONCERN CONSIDERATIONS AND LIQUIDITY
The Company is a non-operating public shell company and is seeking suitable candidates for a
business combination with a private company. The Company may seek to raise additional capital
through the issuance of equity or debt, including loans from related parties, to acquire sufficient
liquidity to satisfy its future liabilities. Such additional capital may not be available timely or
on terms acceptable to the Company, if at all. The Company’s plans to repay its liabilities as they
become due may be impacted adversely by its inability to have sufficient liquid assets to satisfy
its liabilities.
The Company’s independent registered public accounting firm’s report on its financial statements
for the fiscal year ended December 31, 2009 includes an explanatory paragraph regarding the
Company’s ability to continue as a going concern. As shown in its historical financial statements,
the Company has incurred significant recurring net losses for the past several years and as of
December 31, 2009, its financial statements reflected negative working capital and a stockholders’
equity deficiency. These conditions raise substantial doubt about the Company’s ability to continue
as a going concern. Further, the registered public accounting firm’s report states that the
financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
As of December 31, 2009 the Company had borrowed from Alan Lipton, its Chairman of the Board of
Directors the sum of $3,000. The Company used the proceeds of the loans from Mr. Lipton for payment
of its existing liabilities. During the year ended December
F-7
ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
31, 2009, the Company raised an additional $50,000 from existing stockholders for working capital
purposes. In addition, during the third quarter, the Company received a refund of its franchise
taxes of approximately $112,000.
3. STOCK OPTION PLAN
The Company adopted its employee stock option plan in 1999. The Plan was amended in April 2004 and
renamed the Odimo Incorporated Amended and Restated Stock Incentive Plan (the “Plan”) and reserved
for issuance an aggregate of 559,391 shares under the Plan. The Plan is administered by the
compensation committee of the board of directors, which has discretion over who will receive
awards, the type of the awards, the number of shares awarded, and the vesting terms of the awards.
Options granted under the Plan generally vest ratably over the vesting period, which is generally 3
years. Vested options expire 2 to 10 years after vesting. Once vested, the options become
exercisable upon the occurrence of a “realization” event (
i.e.,
an IPO, merger, etc.) as defined in
the Plan. Upon either an involuntary or voluntary termination of employment, vested options are not
forfeited, and must be exercised within three months after a “realization” event. Options granted
under the Plan are generally granted at fair value on the date of the grant. The Company has
historically determined the fair value of its shares through the consideration of previous sales of
shares to third parties and independent appraisals.
There were no stock options granted to non-employees during 2009 and 2008.
The stock option transactions related to the Plan are summarized as follows (in thousands, except
weighted average exercise price) for the years ended December 31, 2009 and 2008:
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|
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|
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|
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|
|
|
|
|
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December 31, 2009
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December 31, 2008
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|
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Weighted Average
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Weighted Average
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Options
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Exercise Price
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Options
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|
Exercise Price
|
|
Outstanding at beginning of year
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|
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26
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|
|
$
|
24.48
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|
26
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$
|
24.48
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|
Granted
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—
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—
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|
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—
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|
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—
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Exercised
|
|
|
—
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|
|
—
|
|
|
|
—
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|
|
|
—
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|
|
Outstanding at December 31, 2009
|
|
|
26
|
|
|
$
|
24.48
|
|
|
|
26
|
|
|
$
|
24.48
|
|
|
Options exercisable at December 31, 2009
|
|
|
26
|
|
|
$
|
24.48
|
|
|
|
26
|
|
|
$
|
24.48
|
|
The weighted average remaining life of outstanding stock options is 2 years.
4. INCOME TAXES
A reconciliation of the statutory Federal income tax rate to the effective income tax rate for the
year ended December 31 is as follows (in thousands, except tax rates):
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2009
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|
2008
|
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
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|
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes at statutory rate
|
|
$
|
6
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|
|
|
34.0
|
%
|
|
$
|
(24
|
)
|
|
|
34.0
|
%
|
|
State income taxes, net of federal benefit
|
|
|
1
|
|
|
|
3.6
|
|
|
|
(3
|
)
|
|
|
3.6
|
|
|
Increase in taxes:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Penalties and fines
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
0.0
|
)
|
|
Meals and entertainment
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
0.0
|
|
|
Adjustment of deferred balances
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
)
|
|
|
0.0
|
|
|
Valuation allowance
|
|
|
(7
|
)
|
|
|
(37.6
|
)
|
|
|
27
|
|
|
|
(37.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company has net operating loss carryforwards of approximately $78.2 million as of December 31,
2009. The Company’s net operating loss carryforwards will expire beginning in 2019 through 2028.
Because it is not more likely than not that sufficient tax
F-8
ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Financial Statements
earnings
will be generated to utilize the net operating loss carryforwards, a
corresponding valuation allowance of approximately $29.4 million and $29.4 million was
established as of December 31, 2009, and 2008 respectively. Additionally, under the Tax Reform Act
of 1986, the amounts of, and benefits from, net operating losses may be limited in certain
circumstances, including a change in control.
Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of
net operating loss carryforwards that may be used to offset taxable income when a corporation has
undergone significant changes in its stock ownership. The Company has preliminarily internally
reviewed the applicability of the annual limitations imposed by Section 382 caused by changes that
occurred prior to, as well as, during the year ended December 31, 2007 in its stock ownership and
believe the availability of the net operating loss carryforwards is substantially limited. There
can be no assurance that the Company will be able to utilize any net operating loss carryforwards
in the future.
5. RELATED PARTY TRANSACTIONS
Note Payable to Related Party
— As of December 31, 2009, the Company had borrowed from Alan
Lipton, its Chairman of the Board of Directors the sum of $3,000 which bears interest at 4% and is
due on demand. The Company used the proceeds of the loans from Mr. Lipton for payment of its
existing liabilities.
Sale of Common Stock
—On March 3, 2009 the Company sold 3,333,333 newly issued shares of its
common stock, par value $.001, to four investors for a gross purchase price of $50,000. An entity
controlled by Alan Lipton, the Company’s Chairman of the Board, purchased 1,000,000 of these
shares. There were no underwriting discounts or commissions paid in the sale.
On February 4, 2008 the Company sold 714,284 newly issued shares of its common stock, par value
$.001, to three investors for a gross purchase price of $100,000. An entity controlled by Alan
Lipton, the Company’s Chairman of the Board, and Amerisa Kornblum, its President and Chief
Financial Officer each purchased 178,571 of these shares. There were no underwriting discounts or
commissions paid in the sale.
Services Contributed by Stockholders
— During the years ended December 31, 2009 and 2008, certain
stockholders rendered professional services to the Company. A charge in lieu of compensation for
the estimated fair value of the services rendered by the officer and the related party ($56,000)
has been charged to expense together with a credit to additional paid in capital in the
accompanying financial statements for the years ended December 31, 2009 and 2008.
6. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the financial statements were issued. No
events required disclosure.
F-9
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