ODMO Odimo Inc (CE)

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2007
		OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission file number 000-51161

Odimo Incorporated

(Exact name of registrant as specified in its charter)

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

14051 N.W. 14th Street, Sunrise, Florida		33323
(Address of principal executive offices)		(Zip Code)

(954) 835-2233
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Securities Exchange Act of 1934).

Large accelerated filer  o		Accelerated filer  o		Non-accelerated filer  x

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

     As of November 9, 2007, the registrant had 7,038,958 shares of common stock outstanding.

 

 

ODIMO INCORPORATED
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			17
ITEM 4. CONTROLS AND PROCEDURES			17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			18
ITEM 1A. RISK FACTORS			18
ITEM 6. EXHIBITS			19
SIGNATURES			23
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 Certification of CEO
EX-32.2 Section 906 Certification of CFO

PART I. FINANCIAL INFORMATION

See notes to unaudited condensed financial statements.

See notes to unaudited condensed financial statements.

ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business — From January 1, 2007 through April 11, 2007, the Company’s online retail operations have consisted solely of earning commissions based on a percentage of gross sales made to visitors to its www.ashford.com homepage who were redirected to websites owned and operated by others.

On April 11, 2007 the Company sold to Luxi, Group, LLC certain specified assets, including all of our rights to the domain name www.ashford.com and related trademarks, copyrights, product images and other intangibles in exchange for $400,000 pursuant to the terms of an Asset Purchase Agreement and related agreements entered contemporaneous therewith. As a result of such sale, the Company is a non-operating public shell company. The Company is seeking suitable candidates for a business combination with a private company. The Company previously was an online retailer of watches, luxury goods, diamonds and jewelry through three websites, www.diamond.com, www.ashford.com and www.worldofwatches.com. The Company’s operating results disclosed in this Quarterly Report on Form 10 Q are not meaningful to its future results.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements as of September 30, 2007 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information on Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position as of September 30, 2007 and the results of operations for the three and nine months ended September 30, 2007 and 2006 and the cash flows for the nine months ended September 30, 2007 and 2006. All such adjustments are of a normal recurring nature. Intercompany balances and transactions have been eliminated in consolidation.

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. Some of the more significant estimates include the reserve for sales returns, the carrying value of inventories, goodwill and other long-lived assets, the deferred tax asset valuation reserve, and the estimated fair value of stock based compensation. Actual results could differ from those estimates.

Cash and Cash Equivalents — The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Deposits with Credit Card Processing Company — Deposits with credit card processing company consists of cash pledged as collateral to a credit card processing company.

Recently Issued Accounting Standards —In February 2007, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company expects to adopt SFAS No. 159 on January 1, 2008 and has not yet determined the impact on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under SFAS No. 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. Management believes the adoption of this pronouncement will not have a material impact on the Company’s consolidated financial statements.

In July 2006, the FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”), which is a change in accounting for income taxes. FIN 48 specifies how tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the statement of financial condition; and provides transition and interim-period guidance, among other provisions. The provisions of FIN 48 are effective as of the beginning of our first fiscal year that begins after December 15, 2006. We evaluated the impact of adopting FIN 48 on the consolidated financial statements and determined the adoption did not have a material effect on our financial condition, cash flows or results of operations.

2. GOING CONCERN CONSIDERATIONS

The Company’s independent registered public accounting firm’s report on its financial statements for the fiscal year ended December 31, 2006 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, 2006, its financial statements reflect negative working capital and a stockholders’ equity deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Further, the registered public accounting firm’s report states that the financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As of April 16, 2007 the Company had borrowed from Alan Lipton, its Chairman of the Board of Directors the sum of $530,000. The Company issued to Mr. Lipton two separate 8% promissory notes in exchange for the funds (the “Notes”). Under one of the Notes (the “First Note”), $500,000 plus all interest under the First Note was repayable by the Company upon the earlier to occur of (a) January 16, 2010; or (ii) the occurrence of a change in control of the Company. The Company’s repayment obligation under the First Note is secured by all of its assets. Under the other note, (the “Second Note”), $30,000 plus accrued interest is payable by the Company to Mr. Lipton on demand. The Company’s repayment obligation under the Second Note is unsecured. The Company used the proceeds of the loans from Mr. Lipton for working capital purposes, including payment of its existing liabilities. The Company used $30,000 of the proceeds from the sale of www.ashford.com to repay certain of the amounts owing to Mr. Lipton and as of September 30, 2007, the Company owes to Mr. Lipton the sum of $528,000, including accrued interest.

The Company is a non-operating public shell company and is seeking suitable candidates for a business combination with a private company. The Company’s repayment obligations to Mr. Lipton are secured by all of its assets. 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.

3. SALE OF ASSETS

Sale of Computer Equipment — On January 5, 2007, the Company entered into an agreement with Ice.com for the sale of certain machinery and equipment for $250,000. As a result of the sale to Ice.com, the Company recorded an impairment charge of $5.4 million related to the sale of the Company’s computers, software and equipment as of December 31, 2006.

Sale of Ashford.com URL and Certain Assets — On April 11, 2007 the Company sold to Luxi, Group, LLC certain specified assets, including all of its rights to the domain name www.ashford.com and related trademarks, copyrights, product images and other intangibles in exchange for $400,000 pursuant to the terms of an Asset Purchase Agreement and related agreements entered contemporaneous therewith. The Company terminated its agreement dated February 5, 2007 with Ice.com to host the Company’s www.ashford.com homepage and returned to Ice.com $61,000 of its $70,000 down payment. The Company recorded commissions earned for approximately $9,000 during the time period that Ice.com hosted the Company’s www.ashford.com homepage.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands) as of:

Depreciation expense amounted to approximately $10,000 and $1 million for the nine months ended September 30, 2007 and 2006, respectively.

5. STOCK OPTION PLAN

The stock option transactions related to the Plan are summarized as follows (in thousands, except weighted average exercise price) for nine months ended September 30, 2007:

6. INCOME TAXES

Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. The Company has preliminarily internally reviewed the applicability of the annual limitations imposed by Section 382 caused by changes that occurred prior to, as well as, during the nine months ended September 30, 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.

7. LEGAL PROCEEDINGS

In May 2007, the Company was served with a complaint from a former vendor alleging that the Company owes this former vendor approximately $174,000 plus interest on such amount since December 2006, for goods and services provided by this vendor to the Company, which amount has been accrued in accordance with Generally Accepted Accounting Principles. The complaint also seeks attorneys’ fees and costs. The Company intends to vigorously defend against the allegations contained in the complaint.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations . The following discussion should be read in conjunction with Odimo Incorporated’s (“Odimo,” the “Company,” “we,” “our,” “us,”) Condensed Consolidated Financial Statements and the related Notes contained elsewhere in this quarterly report on Form 10-Q. All statements in the following discussion that are not reports of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the factors that may affect operating results set forth herein.

Overview

     We are a non operating public 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.

Going Concern

     Our independent registered public accounting firm’s report on our financial statements for the fiscal year ended December 31, 2006 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 for the past several years and as of December 31, 2006, 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.

     As of November 9, 2007, we owe to Alan Lipton, our Chairman of the Board of Directors, the sum of $500,000 plus accrued interest of approximately $31,000. We are a non-operating public shell and are seeking suitable candidates for a business combination with a private company. We may seek to raise additional capital through the issuance of equity or debt, including loans from related parties, to acquire sufficient liquidity to satisfy our future liabilities. Such additional capital may not be available timely or on terms acceptable to us, if at all. Our plans to repay our liabilities as they become due may be impacted adversely by our inability to have sufficient liquid assets to satisfy our liabilities.

      Comparison of Quarter Ended September 30, 2007 to Quarter Ended September 30, 2006

      Net Sales . We generated no net sales for the quarter ended September 30, 2007 compared to $2.4 million for the quarter ended September 30, 2006.

      Gross Profit . We had no gross profit for the quarter ended September 30, 2007 compared to $222,000 for the quarter ended September 30, 2006.

      Marketing . We did not spend any amounts on marketing for the quarter ended September 30, 2007 compared to $123,000 for the quarter ended September 30, 2006.

      General and Administrative Expenses . General and administrative expenses for the quarter ended September 30, 2007 were $124,000 compared to $1.8 million for the quarter ended September 30, 2006. We believe that while we are a non-operating shell company, our operating expenses will include rent, insurance, salaries, accounting and other general and administrative expenses as well as costs associated with seeking to locate and consummate a business combination.

      Depreciation and Amortization . Depreciation and amortization expense for the quarter ended September 30, 2007 was $4,000 compared to $1.0 million for the quarter ended September 30, 2006.

      Interest Expense, Net . Interest income, for the quarter ended September 30, 2007 was $10,000 compared to interest expense of $8,000 for the quarter ended September 30, 2006.

      Net Loss . Net loss for the quarter ended September 30, 2007 was $ 138,000 as compared to net loss of $2.9 million for the quarter ended September 30, 2006.

      Comparison of Nine Months Ended September 30, 2007 to Nine Months Ended September 30, 2006

      Net Sales . Net sales for the nine months ended September 30, 2007 was $14,000, which consisted solely of commissions 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 as compared to $17.1 million for the nine months ended September 30, 2006.

      Gross Profit . We had no gross profit for the nine months ended September 30, 2007 compared to $3.5 million for the nine months ended September 30, 2006.

      Marketing . We did not spend any amounts on marketing for the nine months ended September 30, 2007 compared to $2.2 million for the nine months ended September 30, 2006.

      General and Administrative Expenses . General and administrative expenses for the nine months ended September 30, 2007 were $890,000 compared to $7.1 million for the nine months ended September 30, 2006. We believe that while we are a non-operating shell company, our operating expenses will include rent, insurance, salaries, accounting and other general and administrative expenses as well as costs associated with seeking to locate and consummate a business combination.

      Depreciation and Amortization . Depreciation and amortization expense for the nine months ended September 30, 2007 was $10,000 compared to $2.9 million for the nine months ended September 30, 2006.

      Interest Expense, Net. Interest expense, net, for the nine months ended September 30, 2007 was $28,000 compared to $17,000 for the nine months ended September 30, 2006.

      Net Loss . Net loss for the nine months ended September 30, 2007 was $490,000 as compared to a net loss of $3.1 million for the nine months ended September 30, 2006. The net loss for the nine months ended September 30, 2007 includes a $424,000 gain on the sale of the ashford.com assets. Without this $424,000 gain, our net loss for the nine months ended September 30, 2007 would have been $914,000 .The net loss for the nine months ended September 30, 2006 includes a $6.9 million gain on the sale of the diamond.com assets. Without this $6.9 million gain, our net loss for the nine months ended September 30, 2006 would have been $10.0 million.

Liquidity and Capital Resources

     During the quarter ended September 30, 2007, we funded our operations primarily with cash on hand and from borrowings from Alan Lipton.

      Discussion of Cash Flows

     Net cash used in operating activities for the nine months ended September 30, 2007 was $895,000 compared to $9.7 million for the nine months ended September 30, 2006. Included in the net cash used in operating activities for the nine months ended September 30, 2007 is a $299,000 decrease in accounts payable and a $424,000 gain on sale of assets related to the sale of the ashford.com assets. Included in the net cash used in operating activities for the nine months ended September 30, 2006 is a $5.1 million decrease in inventories partially related to the sale of the diamond.com assets offset by an $8.3 million decrease in accounts payable and accrued liabilities. In addition, in March 2006 we returned approximately $4.0 million of diamond inventory against a related party payable to SDG Marketing and delivered approximately $700,000 of diamond inventory as payment in kind to satisfy a $700,000 payable to SDG Marketing.

     Net cash provided by financing activities for the nine months ended September 30, 2007 consisted of our issuance of a note payable to an affiliated party in the amount of $258,000 , inclusive of accrued interest, offset by a payment on a note payable to related party of $30,000         .

     Net cash provided by investing activities for the nine months ended September 30, 2007 was $674,000, which consisted of our sale of computers and equipment of $250,000 and the sale of the ashford.com assets for $424,000 compared to net cash provided by investing activities for the nine months ended September 30, 2006 of $ 6.2 million. Included in net cash provided by investing activities in 2006 are net proceeds of $6.9 million resulting from the sale of the diamond.com assets.

     If and to the extent that our net income before income taxes, interest income and expense, depreciation expense, amortization expense, and other non-cash expenses (as defined in the agreement with GSI) is positive for the year 2007, we will be obligated to make a payment to GSI Commerce, Inc., the entity from which we purchased the www.ashford.com domain name in December 2002, equal to 10% of such amount for such year, up to a maximum aggregate amount of $2.0 million. To the extent that we are required to make any such payments, our cash flow will be reduced accordingly.

      Liquidity Sources

     Our current sources of liquidity consist of cash on hand. As of September 30, 2007, we had $82,000 of cash on hand compared to $75,000 of cash and cash equivalents (and $ 108,000 of restricted cash pledged as collateral to a credit card processing company) as of December 31, 2006.

     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.

Off Balance Sheet Arrangements

     We do not have any off balance sheet arrangements.

Outstanding Stock Options

     As of September 30, 2007, we had outstanding vested options to purchase approximately 27,618 shares of common stock, at a weighted average exercise price of $24.83 per share. We have no outstanding unvested options. The per share value of each share of common stock underlying the vested options, based on the difference between the weighted average exercise price per option and the estimated fair market value of the shares at the dates of the grant of the options (also referred to as intrinsic value), ranges from $0 to $16.25 per share.

Critical Accounting Policies and Estimates

     Our consolidated 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 consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006, 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 Standards

     In February 2007, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We expect to adopt SFAS No. 159 on January 1, 2008 and have not yet determined the impact on the consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under SFAS No. 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. Management believes the adoption of this pronouncement will not have a material impact on our consolidated financial statements.

     In July 2006, the FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”), which is a change in accounting for income taxes. FIN 48 specifies how tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the statement of financial condition; and provides transition and interim-period guidance, among other provisions. The provisions of FIN 48 are effective as of the beginning of our first fiscal year that begins after December 15, 2006. Management is currently evaluating the impact of the adoption of this pronouncement; however, it is not expected to have a material impact on our consolidated financial position, results of operation or cash flows. We evaluated the impact of adopting FIN 48 on the consolidated financial statements and determined the adoption did not have a material effect on our financial condition, cash flows or results of operations.

Employees

     Amerisa Kornblum, our Chief Executive Officer and Chief Financial Officer and two other administrative employees are our only employees.

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 consolidated financial statements and the related notes herein, as well as in our other public filings, before making any investment decision regarding our stock. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects would likely be materially and adversely affected. In that event, the market price of our stock could decline and you could lose all or part of your investment.

We are a non-operating shell company.

     We are a public shell company with no operations and we are seeking to effect a merger, acquisition or other business combination with an operating company by using a combination of capital stock, cash on hand, or other funding sources, if available. There can be no assurances that we will be successful in identifying acquisition candidates or that if identified we will be able to consummate a transaction on terms acceptable to us.

     While we anticipate having sufficient liquid assets to satisfy our liabilities, if we do not have sufficient liquid assets to satisfy our liabilities we will seek to raise additional capital through the issuance of equity or debt, including loans from related parties. Such additional capital may not be available timely or on terms acceptable to us, if at all. Our plans to repay our liabilities as they become due may be impacted adversely by our inability to have sufficient liquid assets to satisfy our liabilities.

We do not intend to pay dividends on our common stock, and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

     We have never declared or paid any cash dividends on our common stock and do not intend to pay dividends on our common stock for the foreseeable future. We intend to invest our future earnings, if any, to fund our growth.

Our common stock is currently quoted for trading on the Over the Counter Bulletin Board which may adversely impact the liquidity of our shares and reduce the value of an investment in our stock.

     Effective August 14, 2006, our common stock was delisted from quotation on the Nasdaq Global Market (formerly known as the Nasdaq National Market) and on the same day our common stock became quoted on the Over-The-Counter Market on the NASD Electronic Bulletin Board (OTCBB). Our common stock has historically been sporadically or “thinly traded” (meaning that the number of persons interested in purchasing our shares at or near ask prices at any given time may be relatively small or non-existent) and no assurances can be given that a broader or more active public trading market for our common stock will develop or be sustained in the future or that current trading levels will be sustained. You may be unable to sell at or near ask prices or at all if you desire to liquidate your shares. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence, there may be periods of several

days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.

Because our common stock is considered a “penny stock” any investment in our common stock is considered to be a high-risk investment and is subject to restrictions on marketability.

     Our common stock is currently traded on the Over-The-Counter Bulletin Board (“OTC Bulletin Board”) and is considered a “penny stock.” The OTC Bulletin Board is generally regarded as a less efficient trading market than the NASDAQ Market.

     The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock.

     Since our common stock is subject to the regulations applicable to penny stocks, the market liquidity for our common stock could be adversely affected because the regulations on penny stocks could limit the ability of broker-dealers to sell our common stock and thus your ability to sell our common stock in the secondary market. There is no assurance our common stock will be quoted on NASDAQ or the NYSE or listed on any exchange, even if eligible.

Our stock price has been and may continue to be volatile.

     The market price for our common stock has been and is likely to continue to be volatile. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control.

Future sales of our common stock may cause our stock price to decline.

     A small number of our current stockholders hold a substantial number of shares of our common stock. Shares held by our officers, directors and principal stockholders are considered “restricted securities” within the meaning of Rule 144 under the Securities Act and, are eligible for resale subject to the volume, manner of sale, holding period and other limitations of Rule 144.

     Sales of a substantial number of shares, or the expectation that such sale may occur, could significantly reduce the market price of our common stock. Moreover, the holders of a substantial number of our shares of common stock have rights to require us to file registration statements to permit the resale of their shares in the public market or to include their shares in registration statements that we may file for ourselves or other stockholders. We also have registered all common stock that we may issue under our

stock incentive plan. Accordingly, these shares, when registered, can be freely sold in the public market upon issuance, subject to restrictions under the securities laws. If any of these stockholders cause a large number of securities to be sold in the public market, the sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital.

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change in control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

     Our restated certificate of incorporation and restated bylaws contain provisions that may delay or prevent a change in control, discourage bids at a premium over the market price of our common stock and adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. These provisions include:

	•		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;
	•		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;
	•		No stockholder may call a special meeting of stockholders. This may make it more difficult for stockholders to take certain actions;
	•		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;
	•		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;
	•		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
	•		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.

     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, owns approximately 43.9% of our outstanding voting stock. Accordingly, Mr. Lipton will have significant influence over the management and affairs of Odimo and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of Odimo or its assets, for the foreseeable future. This concentrated control limits the ability of our other stockholders to influence corporate matters and, as a result, Mr. Lipton may take actions that Odimo’s other stockholders do not view as beneficial.

Our ability to use net operating loss carryforwards may be limited.

     Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. We have preliminarily internally 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 3. Quantitative and Qualitative Disclosures about Market Risk

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

ITEM 4. Controls and Procedures

     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 our management, including 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, management recognizes 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.

     We carried out an evaluation, under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level. Furthermore, management noted that no changes occurred during the quarter ended September 30, 2007 that materially affected, or would be reasonably likely to affect, our internal controls over financial reporting.

     Commencing 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. During the term covered by this report, Ms. Kornblum has observed that, although our operations 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, management believes that financial statements to be included in future reports will fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods and dates then presented.

ITEM 6. Exhibits

SIGNATURES

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

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