UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010
OR
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o
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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
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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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
(Registrants 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
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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):
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 whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
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No
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As of November 10, 2010, the registrant had 11,086,575 shares of common stock outstanding.
ODIMO INCORPORATED
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
Odimo Incorporated
CONDENSED BALANCE SHEETS
(in thousands, except par value)
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September 30,
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December 31,
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2010
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2009
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(Unaudited)
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ASSETS
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Current Assets:
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Cash
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$
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83
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$
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122
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Total
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$
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83
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$
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122
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LIABILITIES AND STOCKHOLDERS DEFICIENCY
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Current Liabilities
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$
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243
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$
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243
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Commitments, Contingencies and Subsequent Events
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Stockholders Deficiency:
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Preferred stock, $0.001 par value, 50 million shares
authorized, none issued and outstanding
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Common stock, $0.001 par value, 300 million shares
authorized, 11,086 shares issued and outstanding
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10
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10
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Additional paid-in capital
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104,569
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104,527
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Accumulated deficit
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(104,739
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)
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(104,658
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Total stockholders deficiency
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(160
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(121
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Total
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$
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83
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$
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122
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See notes to unaudited condensed financial statements.
-2-
Odimo Incorporated
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2010
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2009
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2010
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2009
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Revenues
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$
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$
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$
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$
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Operating expenses
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28
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(91
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)
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81
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(37
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Total operating expenses
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28
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(91
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81
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(37
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Income (Loss) from Operations
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(28
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91
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(81
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37
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Other Income (Expense):
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Interest expense, net
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Net Income (Loss)
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$
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(28
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$
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91
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$
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(81
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$
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37
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Net Income (Loss) per Common Share
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Basic and diluted
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$
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(0.00
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$
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0.01
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$
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(0.01
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$
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0.00
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Weighted Average Number of Shares:
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Basic and diluted
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11,086
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11,086
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11,086
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10,354
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See notes to unaudited condensed financial statements.
-3-
Odimo Incorporated
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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Nine Months Ended September 30,
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2010
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2009
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Cash Flows from Operating Activities:
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Net Income (Loss)
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$
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(81
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$
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37
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Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
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Charge in lieu of compensation contributed by officer and related party
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42
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42
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Changes in operating assets and liabilities:
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Decrease in prepaid expenses and other current assets
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4
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Decrease in accounts payable
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(7
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Net cash provided by (used in) operating activities
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(39
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76
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Cash Flows from Investing Activities:
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Net cash provided by investing activities
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Cash Flows from Financing Activities:
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Proceeds from sale of common stock
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50
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Net cash provided by financing activities
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50
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Net (Decrease) Increase in Cash
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(39
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126
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Cash, Beginning
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122
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1
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Cash, Ending
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$
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83
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$
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127
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Supplemental Disclosures of Cash Flow Information:
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Cash paid during the period for:
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Interest
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$
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$
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See notes to unaudited condensed financial statements.
-4-
ODIMO INCORPORATED
CONDENSED STATEMENTS OF STOCKHOLDERS DEFICIENCY
Nine Months Ended September 30, 2010
(in thousands, except per share data)
(Unaudited)
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Additional
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Total
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Common Stock
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Paid-In
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Accumulated
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Stockholders
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Shares
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Par Value
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Capital
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Deficit
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Deficiency
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BALANCE-December 31, 2009
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11,086
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$
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10
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$
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104,527
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$
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(104,658
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$
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(121
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Credits arising from services contributed by related parties
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42
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42
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Net Loss
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(81
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(81
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BALANCE-September 30, 2010 (Unaudited)
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11,086
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$
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10
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$
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104,569
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$
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(104,739
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$
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(160
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See notes to unaudited condensed financial statements.
-5-
ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements-
The interim financial statements as of September 30, 2010,
and for the periods ended September 30, 2010 and 2009, are unaudited. However, in the opinion of
management, the interim financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present the Companys financial position as of September 30,
2010 and the results of its operations and its cash flows for the periods ended September 30, 2010
and 2009. These results are not necessarily indicative of the results expected for the year ending
December 31, 2010. The accompanying financial statements and condensed notes thereto do not
reflect all disclosures required under accounting principles generally accepted in the United
States of America. Refer to the Companys audited financial statements as of December 31, 2009,
filed with the Securities and Exchange Commission (SEC) for additional information, including
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 Companys 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 ASU 740 which 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 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.
-6-
ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)
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 Companys 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 Companys independent registered public accounting firms report on its financial statements
for the fiscal year ended December 31, 2009 includes an explanatory paragraph regarding the
Companys 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 Companys ability to continue
as a going concern. Further, the registered public accounting firms report states that the
financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
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 nine months ended September 30, 2010:
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September 30, 2010
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Weighted
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Average
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Exercise
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Options
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Price
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Outstanding at beginning of year
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26
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$
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24.48
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Granted
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Exercised
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Expired
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(26
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$
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(24.48
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Outstanding at September 30, 2010
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$
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Options exercisable at September 30, 2010
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$
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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 nine months ended September 30, 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.
-7-
ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)
5. RELATED PARTY TRANSACTIONS
Services Contributed by Stockholders
During the nine months ended September 30, 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 ($42,000)
has been charged to expense together with a credit to additional paid in capital in the
accompanying financial statements for the nine months ended September 30, 2010.
6. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the condensed financial statements were issued.
On October 29, 2010, we entered into a Share Exchange Agreement with Standard Crushed Stone
Industry Limited, a Cayman Islands company (SCSI) and its sole shareholder Republic Rock United
Industry Limited, a BVI company (Republic Rock ). On November 11, 2010, we closed the transactions under the Share Exchange Agreement and acquired from Republic Rock all of the
outstanding shares of SCSI through the issuance of 235,281,759 shares of Odimo Common Stock (the Reverse Merger). SCSI, through its
affiliated entities located and operating in the Shiyan Region of the Peoples Republic of China,
is engaged in the manufacture and distribution of cement and cement products.
On February 4, 2011 the parties rescinded the Share Exchange Agreement and voided ab initio,
the Reverse Merger (the Rescission). In January 2011, Odimo was advised by local governmental
authorities in the Hubei Province of the Peoples Republic of China (PRC) that its application
made under the Circular on Issues Relevant to Foreign Exchange Control with Respect to the
Round-trip Investment of Funds Raised by Domestic Residents Through Offshore Special Purpose
Vehicles (Circular 75) issued in October 2005 by the PRC State Administration of Foreign Exchange
(SAFE) had not been approved (the Non-Approval). As a result of the Non-Approval, Odimo is
precluded from engaging in equity financing outside of China for Hubei Jinlong Cement Company
(Hubei Jinlong), the PRC company whose business operations had become controlled by Odimo
pursuant to the Reverse Merger and accordingly Hubei Jinlong would not be able to carry out its
business plan. The parties to the Share Exchange Agreement determined that it was fair to and in
the best interests of their respective corporations and shareholders to rescind the Exchange
Agreement and unwind the Reverse Merger and the other transactions contemplated thereby as if they
never occurred, upon the terms and subject to the conditions set forth in the Rescission Agreement.
A majority of the Companys shareholders also approved the Rescission Agreement.
Pursuant to the Rescission, Odimo returned to Republic Rock all shares of Standard Crushed
acquired under the Share Exchange Agreement and all 235,281,759 shares of common stock of Odimo
issued in connection with the Reverse Merger were returned to Odimo.
As a result of the Rescission, Odimo has resumed its status as a shell company and will seek
to effect a merger, acquisition or other business combination with an operating company, including
an operating company based in China, by using a combination of capital stock, cash on hand, or
other funding sources, if available, Alan Lipton is the sole member of the Companys Board of
Directors and Amerisa Kornblum is the Companys President and Chief Financial Officer. The Reverse
Merger, as well as any action taken by the Company subsequent to the Reverse Merger, is null and
void as if it never occurred. Standard Crushed is not now and as a result of the Rescission has
never been a subsidiary of the Company and the parties are returned to their respective positions
immediately prior to the Exchange Agreement and reverse merger.
In connection with the closing of the Reverse Merger, the Company expended approximately $28,000 to
cover transfer agent, printing and accounting fees and costs. The Company used another $50,000 to cover
legal fees of Hubei Jinlong, resulting in the Company having approximately $5000 of cash on hand as of February 4, 2011. 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 Companys 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.
-8-
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Odimo Incorporateds (Odimo, the
Company, we, our, us,) Condensed 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.
Recent Development
On October 29, 2010, we entered into a Share Exchange Agreement with Standard Crushed Stone
Industry Limited, a Cayman Islands company (SCSI) and its sole shareholder Republic Rock United
Industry Limited, a BVI company (Republic Rock ). On November 11, 2010, we closed the transactions under the Share Exchange Agreement and acquired from Republic Rock all of the
outstanding shares of SCSI through the issuance of 235,281,759 shares of Odimo Common Stock (the Reverse Merger). SCSI, through its
affiliated entities located and operating in the Shiyan Region of the Peoples Republic of China,
is engaged in the manufacture and distribution of cement and cement products.
On February 4, 2011 the parties rescinded the Share Exchange Agreement and voided ab initio,
the Reverse Merger (the Rescission). In January 2011, Odimo was advised by local governmental
authorities in the Hubei Province of the Peoples Republic of China (PRC) that its application
made under the Circular on Issues Relevant to Foreign Exchange Control with Respect to the
Round-trip Investment of Funds Raised by Domestic Residents Through Offshore Special Purpose
Vehicles (Circular 75) issued in October 2005 by the PRC State Administration of Foreign Exchange
(SAFE) had not been approved (the Non-Approval). As a result of the Non-Approval, Odimo is
precluded from engaging in equity financing outside of China for Hubei Jinlong Cement Company
(Hubei Jinlong), the PRC company whose business operations had become controlled by Odimo
pursuant to the Reverse Merger and accordingly Hubei Jinlong would not be able to carry out its
business plan. The parties to the Share Exchange Agreement determined that it was fair to and in
the best interests of their respective corporations and shareholders to rescind the Exchange
Agreement and unwind the Reverse Merger and the other transactions contemplated thereby as if they
never occurred, upon the terms and subject to the conditions set forth in the Rescission Agreement.
A majority of the Companys shareholders also approved the Rescission Agreement.
Pursuant to the Rescission, Odimo returned to Republic Rock all shares of Standard Crushed
acquired under the Share Exchange Agreement and all 235,281,759 shares of common stock of Odimo
issued in connection with the Reverse Merger were returned to Odimo.
As a result of the Rescission, Odimo has resumed its status as a shell company and will seek
to effect a merger, acquisition or other business combination with an operating company, including
an operating company based in China, by using a combination of capital stock, cash on hand, or
other funding sources, if available, Alan Lipton is the sole member of the Companys Board of
Directors and Amerisa Kornblum is the Companys President and Chief Financial Officer. The Reverse
Merger, as well as any action taken by the Company subsequent to the Reverse Merger, is null and
void as if it never occurred. Standard Crushed is not now and as a result of the Rescission has
never been a subsidiary of the Company and the parties are returned to their respective positions
immediately prior to the Exchange Agreement and reverse merger.
In connection with the closing of the Reverse Merger, we expended approximately $28,000 to
cover transfer agent, printing and accounting fees and costs. We used another $50,000 to cover
legal fees of Hubei Jinlong, resulting in us having approximately $5000 of cash on hand as of February 4, 2011. 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.
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. We have reviewed very few merger candidates
to date and 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 firms 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.
-9-
These conditions raise substantial doubt about our ability to continue as a going concern.
Further, the registered public accounting firms 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 September 30, 2010 to Quarter Ended September 30, 2009
General and Administrative Expenses.
General and administrative expenses for the quarter ended
September 30, 2010 were $28,000 as compared to $21,000 for the quarter ended September 30, 2009,
before giving consideration to the $112,000 cash refund we received for Delaware State franchise
fees. We believe that while we are a non-operating shell company, our operating expenses will
include rent, accounting and other general and administrative expenses as well as costs associated
with seeking to locate and consummate a business combination.
Net Income(Loss).
Net loss for the quarter ended September 30, 2010 was $28,000 compared to
net income, including a cash refund for franchise fees of $112,000, of $91,000 for the quarter
ended September 30, 2009.
Comparison of Nine Months Ended September 30, 2010 to Nine Months Ended September 30, 2009
General and Administrative Expenses.
General and administrative expenses for the nine months
ended September 30, 2010 were $81,000 compared to $75,000, excluding a refund for franchise taxes
of $112,000 for the nine months ended September 30, 2009. We believe that while we are a
non-operating shell company, our operating expenses will include rent, accounting and other general
and administrative expenses as well as costs associated with seeking to locate and consummate a
business combination.
Net Income (Loss).
Net loss for the nine months ended September 30, 2010 was $81,000
compared to net income for the nine months ended September 30, 2009 of $37,000, which net income
included a cash refund of approximately $112,000 for franchise fees received during the third
quarter of 2009.
Liquidity and Capital Resources
As of September 30, 2010, we had cash of approximately $83,000 and total liabilities of
$243,000 compared to cash of $122,000 and total liabilities of $243,000 as of December 31, 2009.
Discussion of Cash Flows
Net cash used in operating activities for the nine months ended September 30, 2010 was $39,000
compared to net cash provided by operating activities of $76,000 for the nine months ended
September 30, 2009.
Net cash provided by financing activities for the nine months ended September 30, 2010 was $0.
Net cash provided by financing activities for the nine months ended September 30, 2009 was $50,000
from the sale of common stock.
Net cash provided by investing activities for the nine months ended September 30, 2010 and
September 30, 2009 was $0 and $0, respectively.
-10-
Liquidity Sources
Our current source of liquidity consists of cash on hand. As of September 30, 2010, we had
$83,000 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 firms 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 firms report states that
the financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
During the nine months ended September 30, 2010, we funded our operations with cash on hand.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
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, 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
-11-
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 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.
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 4. 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
-12-
ITEM 6. Exhibits
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Exhibit
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Description
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31.1
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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
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31.2
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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
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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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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ODIMO INCORPORATED
Registrant
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Date: February 9, 2011
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/s/ Amerisa Kornblum
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Amerisa Kornblum
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Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
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-13-
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