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, 2010
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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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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.
Yes
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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):
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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.
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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, 2010 as reported by the OTCBB was approximately
$706,325. 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, 2011, 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, 2010
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.
ITEM 1. BUSINESS
Unless the context otherwise requires, all references in this Annual Report on Form 10-K to
the “Company”, “Odimo”, “we”, “our”, “ours”, and “us” refers to Odimo Incorporated , a Delaware
corporation.
Recent Developments
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 in exchange for 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 People’s 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, we were advised by local governmental
authorities in the Hubei Province of the People’s Republic of China (“PRC”) that our 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 Share 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.
Pursuant to the Rescission, we returned to Republic Rock all shares of Standard Crushed we
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 us.
As a result of the Rescission, Odimo 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 our Board
of Directors and Amerisa Kornblum is our 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 Share 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 $3,000 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. 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, 2010 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, 2010, 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.
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
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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
.
ITEM 1A. RISK FACTORS
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 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.
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.
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, 2010
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, 2010, 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
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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 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
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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 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 child together own approximately 38.5% of our outstanding voting stock.
Two other stockholders control an additional 34.78% of our outstanding common stock. Accordingly,
each of these stockholders 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, these stockholders may take actions that Odimo’s
other stockholders do not view as beneficial.
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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 9858 Clint Moore Road, Boca Raton, Florida, 33496 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.
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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 2010 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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.025
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.011
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Second Quarter 2009
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.025
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.015
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Third Quarter 2009
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.06
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.015
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Fourth Quarter 2009
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.08
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.016
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First Quarter 2010
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.12
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.040
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Second Quarter 2010
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.25
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.060
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Third Quarter 2010
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.24
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.115
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Fourth Quarter 2010
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.25
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.13
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The approximate number of holders of record of our common stock as of March 25, 2011 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.
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Equity Compensation Plan
The following table details our equity compensation plan as of December 31, 2010:
2010 EQUITY COMPENSATION PLAN INFORMATION
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(c)
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Number of
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securities
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remaining
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(a)
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(b)
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available
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Number of
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Weighted-
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for future
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securities to 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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0
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$
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0
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559,391
|
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
|
0
|
|
|
$
|
0
|
|
|
|
559,391
|
|
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.
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
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
8
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, 2010 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, 2010, 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, 2010 and 2009
General and Administrative Expenses.
General and administrative expenses for the years ended
December 31, 2010 and 2009 were $175,000 and $95,000, respectively. During 2010, such expenses
consisted primarily of rent, accounting and other general and administrative expenses and expenses
associated with the Reverse Merger. 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 loss for the year ended December 31, 2010 was $175,000 compared to net
income of $17,000 as of December 31, 2009, which included a cash refund for franchise fees of
$110,000.
Liquidity and Capital Resources
As of December 31, 2010, we had cash of approximately $3,000 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. 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
Net cash used in operating activities for the year ended December 31, 2010 was $119,000
compared to net cash provided by operating activities for the year ended December 31, 2009 of
$71,000 due to the cash refund received of approximately $110,000 in 2009.
Net cash provided by investing activities in the years ended December 31, 2010 and 2009 was
$0. Net cash provided by financing activities in the year ended December 31, 2010 was $0 as
compared to $50,000 of net cash provided by financing activities in the year ended December 31,
2009. Net cash provided by financing activities in 2009 was related to proceeds from sale of
common stock.
Liquidity Sources
Our current source of liquidity consists of cash on hand. As of December 31, 2010, we had
$3,000 of cash on hand.
9
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.
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.
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.
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.
Recently Issued Accounting Pronouncements
In January 2010, the FASB issued further guidance under ASC No. 820,
Fair Value Measurements
and Disclosures
(“ASC 820”). ASC 820 requires disclosures about the transfers of investments
between levels in the fair value hierarchy and disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (level 3 investments). ASC 820 is
effective for the fiscal years and interim periods beginning after December 15, 2010. The Company
will adopt the update on January 1, 2011 and expects that ASC 820 will not have a material impact
on the Company’s consolidated financial statements.
10
Recently Adopted Accounting Guidance
In January 2010, the FASB issued Accounting Standard Update (“ASU”) 2010-06 to improve
disclosures about fair value measurements. ASU 2010-6 clarifies certain existing disclosures and
requires new disclosure regarding significant transfers in and out of Level 1 and Level 2 of fair
value measurements and the reasons for the transfer. In addition, ASU 2010-06 clarifies existing
fair value disclosures about the level of disaggregation and about inputs and valuation techniques
used to measure fair value. The amendments in ASU 2010-06 were effective for fiscal years beginning
after December 15, 2009, and for interim periods within those fiscal periods. The adoption of ASU
2010-06 did not have a material impact on our disclosure about fair value measurements.
In June 2009 and December 2009, the FASB amended ASC 810 changing certain consolidation
guidance and requiring improved financial reporting by enterprises involved with variable interest
entities (“VIE”). The amendments provide guidance in determining when a reporting entity should
include the assets, liabilities, noncontrolling interest and results of activities of a VIE in its
consolidated financial statements. The amendments to ASC 810 were effective for the first annual
reporting period beginning after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. The adoption of
amendments to consolidation rules did not have any impact on our disclosures relating to our VIE
activity and our financial statements.
Accounting Guidance Not Yet Effective
In October 2009, the FASB issued ASU 2009-14 to amend ASC 605 “Revenue Recognition.” The
amendments in this update change the accounting model for revenue arrangements that include both
tangible products and software elements. The amendments in ASU 2009-14 will be effective for us
beginning January 1, 2011. We believe that ASU 2009-13 will not have a material impact on our
financial statements.
In October 2009, the FASB issued ASU 2009-13 amending ASC 605 related to revenue arrangements
with multiple deliverables. Among other things, ASU 2009-13 provides guidance for entities in
determining the accounting for multiple deliverable arrangements and establishes a hierarchy for
determining the amount of revenue to allocate to the various deliverables. The amendments in ASU
2009-13 will be effective for us beginning January 1, 2011. We believe that ASU 2009-13 will not
have a material impact on our on our financial statements.
Accounting standards that have been issued or proposed by the FASB or other standards-setting
bodies are not expected to have a material impact on the Company’s financial position, results of
operations and cash flows.
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
None.
11
ITEM 9A. 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, 2010 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, 2010. 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, 2010 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 director, their ages and present
positions with Odimo as of March 20, 2011. There are currently no committees of the Board of
Directors.
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Alan Lipton
|
|
|
60
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
Amerisa Kornblum
|
|
|
49
|
|
|
Chief Executive Officer, Chief Financial
Officer, Secretary and Treasurer
|
Alan Lipton
was our Chairman of our Board of Directors from May 2004 and a member of our Board
of Directors from November 1999 through November 11, 2010, the date of the closing of the Reverse
Merger. Mr. Lipton resumed his tenure as a director on February 4, 2011 in connection with the
Rescission of the Reverse Merger. From November 1999 through May 11, 2006, Mr. Lipton was our
Chief Executive Officer and President. 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. We believe Mr.
Lipton’s business experience, including experience in public companies qualifies him to serve on
our Board of Directors.
Amerisa Kornblum
was our Chief Financial Officer and Treasurer from November 1999, our
Secretary from November 2005 and our Chief Executive Officer and President from January 2007
through November 11, 2010, the date of the closing of the Reverse Merger. Ms. Kornblum resumed her
status as President, Chief Financial Officer, Secretary and Treasurer on February 4, 2011 in
connection with the Rescission of the Reverse Merger. Ms. Kornblum is a certified public
accountant in the State of Florida.
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 2010.
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.
ITEM 11. EXECUTIVE COMPENSATION
Except for the period from November 11, 2010 (the date of the closing of the Reverse Merger)
through February 4, 2011 (the date of the Rescission of the Reverse Merger) 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
13
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 2009 and 2010.
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, 2010.
Pension Benefits
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.
Director Compensation
We do not pay our 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 Director
Stockholders may communicate with Alan Lipton, the sole member of our Board of Directors by
sending a letter addressed to him in care of Amerisa Kornblum, our Corporate Secretary, Odimo
Incorporated, 9858 Clint Moore Road, Boca Raton, FL, in an envelope clearly marked
“Stockholder
Communication.”
Ms. Kornblum will forward such correspondence unopened to Mr. Lipton. If multiple
communications are received on a similar topic, Ms. Kornblum may, in her discretion, forward only
representative correspondence.
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 25, 2011, 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) the
Named Executive, 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.
Applicable percentage ownership in the following table is based on 11,086,575 shares of common
stock outstanding as of March 25, 2011.
14
PRINCIPAL STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
|
|
|
|
|
|
|
|
BENEFICIALLY
|
|
|
|
|
|
BENEFICIAL OWNER
|
|
OWNED
|
|
|
PERCENTAGE
|
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
ELAO, LLC (1)
c/o Alan Lipton
|
|
|
3,096,058
|
|
|
|
27.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
2,678,327
|
|
|
|
24.15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTORS AND EXECUTIVE OFFICERS
|
|
|
|
|
|
|
|
|
|
Alan Lipton (1) (2)
|
|
|
4,274,629
|
|
|
|
38.56
|
%
|
|
Amerisa Kornblum (4)
|
|
|
178,571
|
|
|
|
1.6
|
%
|
|
|
|
All directors and executive officers as a group (2 persons)
|
|
|
4,281,127
|
|
|
|
38.62
|
%
|
|
|
|
|
|
(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 816,482 shares of Common Stock held by Mr. Galloway’s Individual Retirement
Account which Mr. Galloway has sole power to vote and dispose, 61,450 shares of Common Stock
held by Mr. Galloway’s children for which he has the sole power to vote and dispose, and
1,800,395 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 disclaim beneficial ownership of the
shares of 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.
15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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 Board of Directors, which only consists of one person is charged with monitoring and
reviewing issues involving potential conflicts of interests and reviewing and approving all related
party transactions. In general under regulations promulgated by the SEC, 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. In reviewing and approving any related party
transaction or material amendment to any such transaction, the Board of Directors 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
Alan Lipton is the sole member of our Board of Directors. He is not an “independent
director” 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.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Effective December 3, 2010, MarcumRachlin, a division of Marcum LLP (“MarcumRachlin”) was
dismissed as our certifying independent accountant. The Board of Directors (“Board”) of the
Company approved such dismissal on December 3, 2010. MarcumRachlin was engaged as the Company’s
auditors for the fiscal year ended December 31, 2009.
MarcumRachlin’s report on the Registrant’s financial statements for the two years ended
December 31, 2009 did not contain any adverse opinions or disclaimers of opinion, and were not
qualified or modified as audit scope, or accounting principles, but included an explanatory
paragraph regarding the Company’s ability to continue as a going concern.
For the two years ended December 31, 2009 and through the date of their dismissal, there were
no disagreements with MarcumRachlin on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements if not resolved to the
satisfaction of MarcumRachlin would have caused it to make reference to this subject matter of the
disagreements in connection with its report, nor were there any “reportable events” as such term as
described in Item 304(a)(1)(v) of Regulation S-K.
Effective on December 3, 2010, PMB Helin Donovan, LLP (“PMBHD”), was engaged to serve as our
independent certifying accountant to audit our financial statements.
Prior to engaging PMBHD, we had not consulted PMBHD regarding the application of accounting
principles to a specified transaction, completed or proposed, the type of audit opinion that might
be rendered on our financial statements or a reportable event, nor did we consult with PMBHD
regarding any disagreements with our prior auditor on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the prior auditor, would have caused it to make a reference to
the subject matter of the disagreements in connection with its reports.
16
Audit and Non-Audit Fees
The following table sets forth fees billed to us by MarcumRachlin for services provided during
the period for the year ended December 31, 2009 and for the period from January 1, 2010 through
December 3, 2010, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
Thru Dec 3, 2010
|
|
|
Audit Fees
|
|
$
|
25,000
|
|
|
$
|
30,000
|
|
|
Audit Related Fees
|
|
|
0
|
|
|
|
0
|
|
|
Tax Fees
|
|
|
0
|
|
|
|
0
|
|
|
All Other Fees (1)
|
|
|
0
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,000
|
|
|
$
|
37,000
|
|
|
|
|
|
|
(1)
|
|
Consists of fees related to due diligence activities relating to the Reverse Merger.
|
The
following table sets forth fees billed to us by PMB Helin Donovan, LLP for services provided
from December 3, 2010 through December 31, 2010:
|
|
|
|
|
|
|
|
|
From Dec. 3 thru
Dec. 31, 2010
|
|
|
Audit Fees
|
|
$
|
2,000
|
|
|
Audit Related Fees
|
|
|
0
|
|
|
Tax Fees
|
|
|
0
|
|
|
All Other Fees
|
|
|
0
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,000
|
|
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.
Other than fees for due diligence services performed by MarcumRachlin in
connection with the Reverse Merger , Odimo did not incur any additional fees under this category.
Board Pre-Approval Policies And Procedures
We do not have an Audit Committee. The Board of Directors’ 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 Board 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 2010, all
services were pre-approved by the Board in accordance with this policy.
17
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 PMB Helin
Donavan, LLP
and MarcumRachlin, a division of Marcum LLP independent registered public accounting firm, are included in this report:
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
F-1
|
|
|
|
|
|
F-3
|
|
|
|
|
|
F-4
|
|
|
|
|
|
F-5
|
|
|
|
|
|
F-6
|
|
|
|
|
|
F-7
|
|
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:
|
|
|
|
|
Exhibit Number
|
|
Description
|
|
23.1 (1)
|
|
Consent of PMB Helin Donavan LLP
|
|
|
|
|
|
23.2 (1)
|
|
Consent of Marcum LLP
|
|
|
|
|
|
31.1 (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 (1)
|
|
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 (1)
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
32.2 (1)
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
18
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.
|
|
|
|
|
|
|
|
ODIMO INCORPORATED
|
|
|
Dated: March 30, 2011
|
By:
|
/s/ Amerisa Kornblum
|
|
|
|
|
Name:
|
Amerisa Kornblum
|
|
|
|
|
Title:
|
Chief Executive Officer
and
Chief Financial
Officer
|
|
|
|
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:
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Amerisa Kornblum
Amerisa Kornblum
|
|
Chief Executive Officer and
Chief Financial Officer
(
Principal Executive and Principal Financial and Accounting Officer
)
|
|
March 30, 2011
|
|
|
|
|
|
|
/s/ Alan Lipton
Alan Lipton
|
|
Sole Director
|
|
March 30, 2011
|
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
of Odimo Incorporated:
We have audited the accompanying balance sheet of Odimo Incorporated (the “Company”) as of December
31, 2010 and the related statements of operations, stockholders’ deficit, and cash flows for the
year then ended. Management is responsible for these financial statements. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audits 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 audit
provides 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, 2010 and the results of
its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as
a going concern. As discussed in Note 2 to the accompanying financial statements, the Company has
incurred recurring operating losses and has a negative working capital at December 31, 2010. These
factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans as to this matter are described in Note 2. The accompanying financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
/s/ PMB Helin Donovan, LLP
Spokane, WA
March 30, 2011
F-1
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 sheet of Odimo Incorporated (the “Company”) as of December
31, 2009 and the related statements of operations, changes in stockholders’ equity (deficiency) and
cash flows for the year 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 the results of
its operations and its cash flows for the year 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-2
Odimo, Incorporated
BALANCE SHEETS
(in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3
|
|
|
$
|
122
|
|
|
Total current assets
|
|
|
3
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
230
|
|
|
$
|
230
|
|
|
Accrued liabilities
|
|
|
10
|
|
|
|
10
|
|
|
Note payable, related party
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
243
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
$
|
243
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 shares issued and outstanding
|
|
|
10
|
|
|
|
10
|
|
|
Additional paid-in capital
|
|
|
104,583
|
|
|
|
104,527
|
|
|
Accumulated deficit
|
|
|
(104,833
|
)
|
|
|
(104,658
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIENCY
|
|
|
(240
|
)
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
3
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
F-3
Odimo, Incorporated
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
175
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
175
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
(175
|
)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(175
|
)
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per Common Share
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Shares:
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
11,086
|
|
|
|
10,539
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
F-4
Odimo, Incorporated
STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(175
|
)
|
|
$
|
17
|
|
|
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
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
|
4
|
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(119
|
)
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
—
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
—
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(119
|
)
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning
|
|
|
122
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Ending
|
|
$
|
3
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
F-5
Odimo, Incorporated
STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficiency
|
|
|
BALANCE-December 31, 2008
|
|
|
7,753
|
|
|
$
|
7
|
|
|
$
|
104,424
|
|
|
$
|
(104,675
|
)
|
|
$
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
|
|
|
3,333
|
|
|
|
3
|
|
|
|
47
|
|
|
|
—
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credits 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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credits arising from services contributed by related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
—
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(175
|
)
|
|
|
(175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE-December 31, 2010
|
|
|
11,086
|
|
|
$
|
10
|
|
|
$
|
104,583
|
|
|
$
|
(104,833
|
)
|
|
$
|
(240
|
)
|
|
|
|
|
See notes to financial statements.
F-6
ODIMO INCORPORATED
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 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.
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.
Stock-Based Compensation
The Company accounts for all share-based payment transactions using a fair-value based
measurement method. The Company calculates stock option-based compensation by estimating the fair
value of each option as of its date of grant using the Black-Scholes option pricing model. The
fair value of restricted stock grants is calculated based upon the closing stock price of the
Company’s Common Stock on the date of the grant. These amounts are expensed over the respective
vesting periods of each award using the straight-line attribution method. Compensation expense is
recognized only for those awards that are expected to vest, and as such, amounts have been reduced
by estimated forfeitures. The Company has historically issued stock options and vested and
nonvested stock grants to employees and outside directors whose only condition for vesting has been
continued employment or service during the related vesting or restriction period.
Recently Issued Accounting Pronouncements
In January 2010, the FASB issued further guidance under ASC No. 820,
Fair Value Measurements
and Disclosures
(“ASC 820”). ASC 820 requires disclosures about the transfers of investments
between levels in the fair value hierarchy and disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (level 3 investments). ASC 820 is
effective for the fiscal years and interim periods beginning after December 15, 2010. The Company
will adopt the update on January 1, 2011 and expects that ASC 820 will not have a material impact
on the Company’s consolidated financial statements.
Recently Adopted Accounting Guidance
In January 2010, the FASB issued Accounting Standard Update (“ASU”) 2010-06 to improve
disclosures about fair value measurements. ASU 2010-6 clarifies certain existing disclosures and
requires new disclosure regarding significant transfers in and out of Level 1 and Level 2 of fair
value measurements and the reasons for the transfer. In addition, ASU 2010-06 clarifies existing
fair
F-7
ODIMO INCORPORATED
Notes to Financial Statements
value disclosures about the level of disaggregation and about inputs and valuation techniques
used to measure fair value. The amendments in ASU 2010-06 were effective for fiscal years beginning
after December 15, 2009, and for interim periods within those fiscal periods. The adoption of ASU
2010-06 did not have a material impact on our disclosure about fair value measurements.
In June 2009 and December 2009, the FASB amended ASC 810 changing certain consolidation
guidance and requiring improved financial reporting by enterprises involved with variable interest
entities (“VIE”). The amendments provide guidance in determining when a reporting entity should
include the assets, liabilities, noncontrolling interest and results of activities of a VIE in its
consolidated financial statements. The amendments to ASC 810 were effective for the first annual
reporting period beginning after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. The adoption of
amendments to consolidation rules did not have any impact on our disclosures relating to our VIE
activity and our financial statements.
Accounting Guidance Not Yet Effective
In October 2009, the FASB issued ASU 2009-14 to amend ASC 605 “Revenue Recognition.” The
amendments in this update change the accounting model for revenue arrangements that include both
tangible products and software elements. The amendments in ASU 2009-14 will be effective for us
beginning January 1, 2011. We believe that ASU 2009-13 will not have a material impact on our
financial statements.
In October 2009, the FASB issued ASU 2009-13 amending ASC 605 related to revenue arrangements
with multiple deliverables. Among other things, ASU 2009-13 provides guidance for entities in
determining the accounting for multiple deliverable arrangements and establishes a hierarchy for
determining the amount of revenue to allocate to the various deliverables. The amendments in ASU
2009-13 will be effective for us beginning January 1, 2011. We believe that ASU 2009-13 will not
have a material impact on our on our financial statements.
Accounting standards that have been issued or proposed by the FASB or other standards-setting
bodies are not expected to have a material impact on the Company’s financial position, results of
operations and cash flows.
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, 2010 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, 2010, 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.
3. REVERSE MERGER
On October 29, 2010, the Company 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, the Company closed
the transactions under the Share Exchange Agreement and acquired from Republic Rock all of the
outstanding shares of SCSI in exchange for 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 People’s 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, the Company was advised by local
governmental authorities in the Hubei Province of the People’s
F-8
ODIMO INCORPORATED
Notes to Financial Statements
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 Share 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.
Pursuant to the Rescission, the Company returned to Republic Rock all shares of Standard
Crushed it acquired under the Share Exchange Agreement and all 235,281,759 shares of common stock
of Odimo issued in connection with the Reverse Merger was returned to the Company.
As a result of the Rescission, Odimo 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 our Board of Directors and Amerisa
Kornblum is our 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 Share
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. Odimo used another
$50,000 to cover legal fees of Hubei Jinlong, resulting in the Company having approximately $3,000
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 our future liabilities. Such additional capital may not be available timely or
on terms acceptable to it, 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.
4. 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 2010 and 2009.
The stock option transactions related to the Plan are summarized as follows (in thousands, except
weighted average exercise price) for the year ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
Options
|
|
|
Price
|
|
|
Outstanding at beginning of year
|
|
|
26
|
|
|
$
|
24.48
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
26
|
|
|
$
|
24.48
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2010
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-9
ODIMO INCORPORATED
Notes to Financial Statements
5. INCOME TAXES
A reconciliation of the changes to the statutory Federal income tax rate to the effective income tax rate for the
years ended December 31 is as follows (in thousands, except tax rates):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
Income taxes at statutory rate
|
|
$
|
(40
|
)
|
|
|
34.0
|
%
|
|
$
|
6
|
|
|
|
34.0
|
%
|
|
State income taxes, net of federal benefit
|
|
|
(6
|
)
|
|
|
3.6
|
|
|
|
1
|
|
|
|
3.6
|
|
|
Increase in taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Penalties and fines
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
(0.0
|
)
|
|
Meals and entertainment
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
0.0
|
|
|
Adjustment of deferred balances
|
|
|
—
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
0.0
|
|
|
Valuation allowance
|
|
|
46
|
|
|
|
(37.6
|
)
|
|
|
(7
|
)
|
|
|
(37.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
—
|
%
|
|
$
|
—
|
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has net operating loss carryforwards of approximately $78,200 of
December 31, 2010. The Company’s net operating loss carryforwards will expire beginning in 2019
through 2029. Because it is not more likely than not that sufficient tax earnings will be generated
to utilize the net operating loss carryforwards, a corresponding valuation allowance of
approximately $29,040 and $29,000 was established as of December 31, 2010 and 2009
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.
6. 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.
Services Contributed by Stockholders
—During the years ended December 31, 2010 and 2009, 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 and to additional paid in capital in the accompanying financial statements
for each of the years ended December 31, 2010 and 2009.
F-10
ODIMO INCORPORATED
Notes to Financial Statements
7. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date the condensed financial statements were
issued. No events required disclosure.
F-11
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