ODMO Odimo Inc (CE)

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from                      to

Commission file number 000-51161

Odimo Incorporated

(Exact name of registrant as specified in its charter)

Delaware		22-3607813
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9858 Clint Moore Road, Boca Raton, FL		33496
(Address of principal executive offices)		(Zip Code)

(954) 993 -4703
(Registrant’s telephone number, including area code)

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 þ      No o

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 o      No o

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):

Large accelerated Filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ      No o

     As of May 13, 2010, the registrant had 11,086,575 shares of common stock outstanding.

 

 

ODIMO, INCORPORATED
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION		1
ITEM 1. Financial Statements		1
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		4
ITEM 4T. CONTROLS AND PROCEDURES		4
PART II. OTHER INFORMATION		5
ITEM 6. EXHIBITS		5
SIGNATURES		6
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Odimo, Incorporated

CONDENSED BALANCE SHEETS

(in thousands, except par value)

		March 31,				December 31,
		2010				2009
		(Unauditedd)
ASSETS
Current Assets:
Cash		$	111			$	122
Prepaid expense and other current assets			—				—
Total		$	111			$	122
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities		$	243			$	243
Commitments, Contingencies and Subsequent Events
Stockholders’ 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 11,086 shares issued and outstanding			10				10
Additional paid-in capital			104,541				104,527
Accumulated deficit			(104,683	)			(104,658	)
Total stockholders’ deficiency			(132	)			(121	)
Total		$	111			$	122

See notes to unaudited condensed financial statements.

Odimo, Incorporated

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)
(Unaudited)

		Three Months Ended March 31,
		2010				2009
Revenues		$	—			$	—
Operating expenses			25				32
Total operating expenses			25				32
Income (Loss) from Operations			(25	)			(32	)
Other Income (Expense):
Interest expense, net			—				—
Net Loss		$	(25	)		$	(32	)
Net Loss per Common Share
Basic and diluted		$	(0.00	)		$	(0.00	)
Weighted Average Number of Shares:
Basic and diluted			11,087				8,864

See notes to unaudited condensed financial statements.

Odimo, Incorporated

STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(in thousands, except per share data)
(Unaudited)

										Additional								Total
		Common Stock								Paid-In				Accumulated				Stockholders’
		Shares				Par Value				Capital				Deficit				Deficiency
BALANCE-December 31, 2009			11,086			$	10			$	104,527			$	(104,658	)		$	(121	)
Credits arising from services contributed by related parties			—				—				14				—				14
Net Loss															(25	)			(25	)
BALANCE-March 31, 2010 (Unaudited)			11,086			$	10			$	104,541			$	(104,683	)		$	(132	)

Odimo, Incorporated

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

		Three Months Ended March 31,
		2010				2009
Cash Flows from Operating Activities:
Net Loss		$	(25	)		$	(32	)
Adjustments to reconcile net loss to net cash used in operating activities:
Charge in lieu of compensation contributed by officer and related party			14				14
Changes in operating assets and liabilities:
Decrease in:
Decrease in prepaid expenses and other current assets			—				4
Increase (decrease) in:
Decrease in accounts payable			—				(1	)
Accrued liabilities			—				—
Net cash used in operating activities			(11	)			(15	)
Cash Flows from Investing Activities:
Proceeds from sale of assets, net of expenses			—				—
Net cash provided by investing activities			—				—
Cash Flows from Financing Activities:
Proceeds from notes payable to related party, net of repayments			—				—
Proceeds from sale of common stock			—				50
Net cash provided by financing activities			—				50
Net (decrease) increase in Cash and Cash Equivalents			(11	)			35
Cash and Cash Equivalents, Beginning			122				1
Cash and Cash Equivalents, Ending		$	111			$	36
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	—			$	—

See note to unaudited condensed financial statements.

ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Unaudited Condensed 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 Quarterly Report on Form 10 Q 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 Accounting Standards Codification (“ASC”) ASC 740-Income Taxes. ASC 740 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.

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 adoption of ASU 2010-06 did not have a material impact on the Company’s 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

Odimo, Incorporated
Notes to Unaudited Condensed 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.

2. GOING CONCERN CONSIDERATIONS

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.

ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Unaudited Condensed Financial Statements

3. STOCK OPTION PLAN

The stock option transactions related to the Plan are summarized as follows (in thousands, except weighted average exercise price) for the three months ended march 31, 2010:

		March 31, 2010
						Weighted
						Average
						Exercise
		Options				Price
Outstanding at beginning of year			26			$	24.48
Granted			—				—
Exercised			—				—
Outstanding at March 31, 2010			26			$	24.48
Options exercisable at March 31, 2010			26			$	24.48

4. INCOME TAXES

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 three months ended March 31, 2010 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

Services Contributed by Stockholders — During the three months ended March 31, 2010, 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 ($14,000) has been charged to expense together with a credit to additional paid in capital in the accompanying condensed financial statements for the three months ended March 31, 2010.

6. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the financial statements were issued. No events required disclosure.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following discussion should be read in conjunction with Odimo Incorporated’s (“Odimo,” the “Company,” “we,” “our,” “us,”) Condensed Consolidated Financial Statements and the related Notes contained elsewhere in this quarterly report on Form 10-Q . All statements in the following discussion that are not reports of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the factors that may affect operating results set forth herein.

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 Financial 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’ 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.

     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.

Comparison of Quarter Ended March 31, 2010 to Quarter Ended March 31, 2009

     We generated no revenue during either the quarter ended March 31, 2010 or 2009.

      General and Administrative Expenses. General and administrative expenses for the quarters ended March 31, 2010 and 2009 were $25,000 and $32,000, respectively. We believe that while we are a non-operating shell company, our operating expenses will include rent, insurance, accounting and other general and administrative expenses as well as costs associated with seeking to locate and consummate a business combination.

      Net Loss. Net loss for the quarter ended March 31, 2010 was $25,000 compared to $32,000 for the quarter ended March 31, 2009.

Liquidity and Capital Resources

     As of March 31, 2010, we had cash of approximately $111,000 and total liabilities of $243,000 compared to cash of $122,000   and total liabilities of $243,000 as of December 31, 2009.

     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.

Discussion of Cash Flows

     Net cash used in operating activities for the quarter ended March 31, 2010 was $11,000 compared to net cash used in operating activities for the quarter ended March 31, 2009 of $15,000.

     Net cash provided by financing activities in the quarter ended March 31, 2010 was $0 and $50,000 in the quarter ended March 31, 2009 from the sale of common stock.

Liquidity Sources

     Our current sources of liquidity consist of cash on hand. As of March 31, 2010, we had $111,000 of cash compared to $122,000 of cash as of December 31, 2009.

     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 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 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.

     During the first quarter ended March 31, 2010, we funded our operations primarily with cash on hand.

Off Balance Sheet Arrangements

     We do not have any off balance sheet arrangements.

Critical Accounting Policies and Estimates

     Our unaudited condensed 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 unaudited condensed 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 adoption of ASU 2010-06 did not have a material impact on the Company’s 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 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.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

     Our exposure to market risk due to changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our cash equivalents. Our risk associated with fluctuating interest rates is limited to our investments in interest rate sensitive financial instruments. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to increase the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments due to their relatively short term nature. Declines in interest rates over time will, however, reduce our interest income while increases in interest rates over time will increase our interest income.

ITEM 4T. Controls and Procedures

     As described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2009, during the course of preparing our financial statements for the year ended December 31, 2009, we identified a material weakness in connection with the evaluation of the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. Our management, comprised solely of our Chief Executive Officer (“CEO”)/Chief Financial Officer (“CFO”), has evaluated the effectiveness of our “disclosure controls and procedures” (as such items are defined in rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO/CFO has concluded that, due to the material weakness disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

     There have not been any changes in internal control over financial reporting in the period covered by this Quarterly Report on Form 10-Q which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 6. Exhibits

(a) Exhibits

Exhibit		Description
31.1		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		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		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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