ODMO Odimo Inc (CE)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

OR

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

For the transition period from                 to                

Commission file number 000-51161

Odimo Incorporated

(Exact name of registrant as specified in its charter)

Delaware		22-3607813
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)
9858 Clint Moore Road, Boca Raton, Fl		33496
(Address of principal executive offices)		(Zip Code)

(954) 993-4703

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    þ        No    o

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    o        No    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    þ        No    o

As of November 10, 2010, the registrant had 11,086,575 shares of common stock outstanding.

 

 

ODIMO INCORPORATED
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			2
ITEM 1.   Condensed Financial Statements			2
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk			12
ITEM 4.   Controls and Procedures			12
PART II. OTHER INFORMATION			12
ITEM 6.   Exhibits			13
SIGNATURES			13
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements

Odimo Incorporated

CONDENSED BALANCE SHEETS

(in thousands, except par value)

		September 30,				December 31,
		2010				2009
		(Unaudited)
ASSETS
Current Assets:
Cash		$	83			$	122
Total		$	83			$	122
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities		$	243			$	243
Commitments, Contingencies and Subsequent Events
Stockholders’ Deficiency:
Preferred stock, $0.001 par value, 50 million shares authorized, none issued and outstanding			—				—
Common stock, $0.001 par value, 300 million shares authorized, 11,086 shares issued and outstanding			10				10
Additional paid-in capital			104,569				104,527
Accumulated deficit			(104,739	)			(104,658	)
Total stockholders’ deficiency			(160	)			(121	)
Total		$	83			$	122

See notes to unaudited condensed financial statements.

Odimo Incorporated

CONDENSED STATEMENTS OF OPERATIONS

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Revenues		$	—			$	—			$	—			$	—
Operating expenses			28				(91	)			81				(37	)
Total operating expenses			28				(91	)			81				(37	)
Income (Loss) from Operations			(28	)			91				(81	)			37
Other Income (Expense):
Interest expense, net			—				—				—				—
Net Income (Loss)		$	(28	)		$	91			$	(81	)		$	37
Net Income (Loss) per Common Share
Basic and diluted		$	(0.00	)		$	0.01			$	(0.01	)		$	0.00
Weighted Average Number of Shares:
Basic and diluted			11,086				11,086				11,086				10,354

See notes to unaudited condensed financial statements.

Odimo Incorporated

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)
(Unaudited)

		Nine Months Ended September 30,
		2010				2009
Cash Flows from Operating Activities:
Net Income (Loss)		$	(81	)		$	37
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			42				42
Changes in operating assets and liabilities:
Decrease in prepaid expenses and other current assets			—				4
Decrease in accounts payable			—				(7	)
Net cash provided by (used in) operating activities			(39	)			76
Cash Flows from Investing Activities:
Net cash provided by investing activities			—				—
Cash Flows from Financing Activities:
Proceeds from sale of common stock			—				50
Net cash provided by financing activities			—				50
Net (Decrease) Increase in Cash			(39	)			126
Cash, Beginning			122				1
Cash, Ending		$	83			$	127
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest		$	—			$	—

See notes to unaudited condensed financial statements.

ODIMO INCORPORATED

CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
Nine Months Ended September 30, 2010
(in thousands, except per share data)
(Unaudited)

										Additional								Total
		Common Stock								Paid-In				Accumulated				Stockholders’
		Shares				Par Value				Capital				Deficit				Deficiency
BALANCE-December 31, 2009			11,086			$	10			$	104,527			$	(104,658	)		$	(121	)
Credits arising from services contributed by related parties			—				—				42				—				42
Net Loss															(81	)			(81	)
BALANCE-September 30, 2010 (Unaudited)			11,086			$	10			$	104,569			$	(104,739	)		$	(160	)

See notes to unaudited condensed financial statements.

ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Statements- The interim financial statements as of September 30, 2010, and for the periods ended September 30, 2010 and 2009, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present the Company’s financial position as of September 30, 2010 and the results of its operations and its cash flows for the periods ended September 30, 2010 and 2009. These results are not necessarily indicative of the results expected for the year ending December 31, 2010. The accompanying financial statements and condensed notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States of America. Refer to the Company’s audited financial statements as of December 31, 2009, filed with the Securities and Exchange Commission (“SEC”) for additional information, including significant accounting policies

Business — The Company is a non-operating public shell company. The Company is seeking suitable candidates for a business combination with a private company. The Company previously was an online retailer of watches, luxury goods, diamonds and jewelry through three websites, www.diamond.com, www.ashford.com and www.worldofwatches.com. The Company’s operating results disclosed in this Quarterly Report on Form 10 Q are not meaningful to its future results.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

General and Administrative Expenses — General and administrative expenses include professional fees, insurance, rent, and other general corporate expenses.

Income Taxes — The Company accounts for income taxes in accordance with the provisions of ASU 740 which requires an asset and liability approach. Under this method, a deferred tax asset or liability is recognized with respect to all temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities and with respect to the benefit from utilizing tax loss carryforwards. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefit, or that future deductibility is prohibited or uncertain.

Loss Per Share — Basic loss per share is computed based on the average number of common shares outstanding and diluted earnings per share is computed based on the average number of common and potential common shares outstanding under the treasury stock method. The calculation of diluted loss per share was the same as the basic loss per share for each period presented since the inclusion of potential common stock in the computation would be antidilutive.

Recently Issued Accounting Standards — In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, which provides amendments to subtopic 820-10 that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements for Level 3 fair value measurements. Additionally, ASU 2010-06 provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU 2010-06 is effective for financial statements issued for interim and annual periods ending after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for interim and annual periods ending after December 15, 2010. The Company does not expect the adoption of ASU 2010-06 to have a material impact on its financial statements.

ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)

2. GOING CONCERN CONSIDERATIONS

The Company is a non-operating public shell company and is seeking suitable candidates for a business combination with a private company. The Company may seek to raise additional capital through the issuance of equity or debt, including loans from related parties, to acquire sufficient liquidity to satisfy its future liabilities. Such additional capital may not be available timely or on terms acceptable to the Company, if at all. The Company’s plans to repay its liabilities as they become due may be impacted adversely by its inability to have sufficient liquid assets to satisfy its liabilities.

The Company’s independent registered public accounting firm’s report on its financial statements for the fiscal year ended December 31, 2009 includes an explanatory paragraph regarding the Company’s ability to continue as a going concern. As shown in its historical financial statements, the Company has incurred significant recurring net losses for the past several years and as of December 31, 2009, its financial statements reflected negative working capital and a stockholders’ equity deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Further, the registered public accounting firm’s report states that the financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3. STOCK OPTION PLAN

The stock option transactions related to the Plan are summarized as follows (in thousands, except weighted average exercise price) for the nine months ended September 30, 2010:

		September 30, 2010
						Weighted
						Average
						Exercise
		Options				Price
Outstanding at beginning of year			26			$	24.48
Granted			—				—
Exercised			—				—
Expired			(26	)		$	(24.48	)
Outstanding at September 30, 2010			—			$	—
Options exercisable at September 30, 2010			—			$	—

4. INCOME TAXES

Section 382 of the Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that may be used to offset taxable income when a corporation has undergone significant changes in its stock ownership. The Company has preliminarily internally reviewed the applicability of the annual limitations imposed by Section 382 caused by changes that occurred prior to, as well as, during the nine months ended September 30, 2010 in its stock ownership and believe the availability of the net operating loss carryforwards is substantially limited. There can be no assurance that the Company will be able to utilize any net operating loss carryforwards in the future.

ODIMO INCORPORATED
Notes to Condensed Financial Statements
(unaudited)

5. RELATED PARTY TRANSACTIONS

Services Contributed by Stockholders — During the nine months ended September 30, 2010, certain stockholders rendered professional services to the Company. A charge in lieu of compensation for the estimated fair value of the services rendered by the officer and the related party ($42,000) has been charged to expense together with a credit to additional paid in capital in the accompanying financial statements for the nine months ended September 30, 2010.

6. SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date the condensed financial statements were issued.

     On October 29, 2010, we entered into a Share Exchange Agreement with Standard Crushed Stone Industry Limited, a Cayman Islands company (SCSI”) and its sole shareholder Republic Rock United Industry Limited, a BVI company (“Republic Rock ”). On November 11, 2010, we closed the transactions under the Share Exchange Agreement and acquired from Republic Rock all of the outstanding shares of SCSI through the issuance of 235,281,759 shares of Odimo Common Stock (the “Reverse Merger”). SCSI, through its affiliated entities located and operating in the Shiyan Region of the 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, Odimo was advised by local governmental authorities in the Hubei Province of the People’s Republic of China (“PRC”) that its application made under the Circular on Issues Relevant to Foreign Exchange Control with Respect to the Round-trip Investment of Funds Raised by Domestic Residents Through Offshore Special Purpose Vehicles (“Circular 75”) issued in October 2005 by the PRC State Administration of Foreign Exchange (“SAFE”) had not been approved (the “Non-Approval”). As a result of the Non-Approval, Odimo is precluded from engaging in equity financing outside of China for Hubei Jinlong Cement Company (“Hubei Jinlong”), the PRC company whose business operations had become controlled by Odimo pursuant to the Reverse Merger and accordingly Hubei Jinlong would not be able to carry out its business plan. The parties to the Share Exchange Agreement determined that it was fair to and in the best interests of their respective corporations and shareholders to rescind the Exchange Agreement and unwind the Reverse Merger and the other transactions contemplated thereby as if they never occurred, upon the terms and subject to the conditions set forth in the Rescission Agreement. A majority of the Company’s shareholders also approved the Rescission Agreement.

     Pursuant to the Rescission, Odimo returned to Republic Rock all shares of Standard Crushed acquired under the Share Exchange Agreement and all 235,281,759 shares of common stock of Odimo issued in connection with the Reverse Merger were returned to Odimo.

     As a result of the Rescission, Odimo has resumed its status as a shell company and will seek to effect a merger, acquisition or other business combination with an operating company, including an operating company based in China, by using a combination of capital stock, cash on hand, or other funding sources, if available, Alan Lipton is the sole member of the Company’s Board of Directors and Amerisa Kornblum is the Company’s President and Chief Financial Officer. The Reverse Merger, as well as any action taken by the Company subsequent to the Reverse Merger, is null and void as if it never occurred. Standard Crushed is not now and as a result of the Rescission has never been a subsidiary of the Company and the parties are returned to their respective positions immediately prior to the Exchange Agreement and reverse merger.

     In connection with the closing of the Reverse Merger, the Company expended approximately $28,000 to cover transfer agent, printing and accounting fees and costs. The Company used another $50,000 to cover legal fees of Hubei Jinlong, resulting in the Company having approximately $5000 of cash on hand as of February 4, 2011. The Company may seek to raise additional capital through the issuance of equity or debt, including loans from related parties, to acquire sufficient liquidity to satisfy its future liabilities. Such additional capital may not be available timely or on terms acceptable to the Company, if at all. The 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.

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 Financial Statements and the related Notes contained elsewhere in this quarterly report on Form 10-Q . All statements in the following discussion that are not reports of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the factors that may affect operating results set forth herein.

Recent Development

     On October 29, 2010, we entered into a Share Exchange Agreement with Standard Crushed Stone Industry Limited, a Cayman Islands company (SCSI”) and its sole shareholder Republic Rock United Industry Limited, a BVI company (“Republic Rock ”). On November 11, 2010, we closed the transactions under the Share Exchange Agreement and acquired from Republic Rock all of the outstanding shares of SCSI through the issuance of 235,281,759 shares of Odimo Common Stock (the “Reverse Merger”). SCSI, through its affiliated entities located and operating in the Shiyan Region of the 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, Odimo was advised by local governmental authorities in the Hubei Province of the People’s Republic of China (“PRC”) that its application made under the Circular on Issues Relevant to Foreign Exchange Control with Respect to the Round-trip Investment of Funds Raised by Domestic Residents Through Offshore Special Purpose Vehicles (“Circular 75”) issued in October 2005 by the PRC State Administration of Foreign Exchange (“SAFE”) had not been approved (the “Non-Approval”). As a result of the Non-Approval, Odimo is precluded from engaging in equity financing outside of China for Hubei Jinlong Cement Company (“Hubei Jinlong”), the PRC company whose business operations had become controlled by Odimo pursuant to the Reverse Merger and accordingly Hubei Jinlong would not be able to carry out its business plan. The parties to the Share Exchange Agreement determined that it was fair to and in the best interests of their respective corporations and shareholders to rescind the Exchange Agreement and unwind the Reverse Merger and the other transactions contemplated thereby as if they never occurred, upon the terms and subject to the conditions set forth in the Rescission Agreement. A majority of the Company’s shareholders also approved the Rescission Agreement.

     Pursuant to the Rescission, Odimo returned to Republic Rock all shares of Standard Crushed acquired under the Share Exchange Agreement and all 235,281,759 shares of common stock of Odimo issued in connection with the Reverse Merger were returned to Odimo.

     As a result of the Rescission, Odimo has resumed its status as a shell company and will seek to effect a merger, acquisition or other business combination with an operating company, including an operating company based in China, by using a combination of capital stock, cash on hand, or other funding sources, if available, Alan Lipton is the sole member of the Company’s Board of Directors and Amerisa Kornblum is the Company’s President and Chief Financial Officer. The Reverse Merger, as well as any action taken by the Company subsequent to the Reverse Merger, is null and void as if it never occurred. Standard Crushed is not now and as a result of the Rescission has never been a subsidiary of the Company and the parties are returned to their respective positions immediately prior to the Exchange Agreement and reverse merger.

     In connection with the closing of the Reverse Merger, we expended approximately $28,000 to cover transfer agent, printing and accounting fees and costs. We used another $50,000 to cover legal fees of Hubei Jinlong, resulting in us having approximately $5000 of cash on hand as of February 4, 2011. We may seek to raise additional capital through the issuance of equity or debt, including loans from related parties, to acquire sufficient liquidity to satisfy our future liabilities. Such additional capital may not be available timely or on terms acceptable to us, if at all. Our plans to repay our liabilities as they become due may be impacted adversely by our inability to have sufficient liquid assets to satisfy our liabilities.

Non-Operating Shell Company

     We are a non operating shell corporation. We intend to effect a merger, acquisition or other business combination with an operating company by using a combination of capital stock, cash on hand, or other funding sources, if available. We intend to devote substantially all of our time to identifying potential merger or acquisition candidates. We have reviewed very few merger candidates to date and there can be no assurances that we will enter into such a transaction in the near future or on terms favorable to us, or that other funding sources will be available.

Cessation of Online Retailing Business of the Company

     Prior to May 2006, we were an online retailer of high quality diamonds and fine jewelry, current season brand name watches and luxury goods through three websites, www.diamond.com, www.worldofwatches.com and www.ashford.com. In May 2006, we sold assets related to our online diamond and jewelry business operations, including our domain name www.diamond.com. In December 2006, we sold assets related to our online watch business operations, including our domain name www.worldofwatches.com. In April 2007, we sold our domain name www.ashford.com and related intellectual property rights, product images and other intangibles.

     Other than Amerisa Kornblum, our President and Chief Financial Officer, who, commencing in 2008, serves the Company for no compensation, we have no full time employees.

Going Concern

     Our independent registered public accounting firm’s report on our financial statements for the fiscal year ended December 31, 2009 includes an explanatory paragraph regarding our ability to continue as a going concern. As shown in our historical financial statements, we have incurred significant recurring net losses and negative cash flows from operations for the past several years and as of December 31, 2009, our financial statements reflect negative working capital and a stockholders’ equity deficiency.

     These conditions raise substantial doubt about our ability to continue as a going concern. Further, the registered public accounting firm’s report states that the financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Comparison of Quarter Ended September 30, 2010 to Quarter Ended September 30, 2009

      General and Administrative Expenses. General and administrative expenses for the quarter ended September 30, 2010 were $28,000 as compared to $21,000 for the quarter ended September 30, 2009, before giving consideration to the $112,000 cash refund we received for Delaware State franchise fees. We believe that while we are a non-operating shell company, our operating expenses will include rent, accounting and other general and administrative expenses as well as costs associated with seeking to locate and consummate a business combination.

      Net Income(Loss). Net loss for the quarter ended September 30, 2010 was $28,000 compared to net income, including a cash refund for franchise fees of $112,000, of $91,000 for the quarter ended September 30, 2009.

Comparison of Nine Months Ended September 30, 2010 to Nine Months Ended September 30, 2009

      General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2010 were $81,000 compared to $75,000, excluding a refund for franchise taxes of $112,000 for the nine months ended September 30, 2009. We believe that while we are a non-operating shell company, our operating expenses will include rent, accounting and other general and administrative expenses as well as costs associated with seeking to locate and consummate a business combination.

      Net Income (Loss). Net loss for the nine months ended September 30, 2010 was $81,000 compared to net income for the nine months ended September 30, 2009 of $37,000, which net income included a cash refund of approximately $112,000 for franchise fees received during the third quarter of 2009.

Liquidity and Capital Resources

     As of September 30, 2010, we had cash of approximately $83,000 and total liabilities of $243,000 compared to cash of $122,000 and total liabilities of $243,000 as of December 31, 2009.

Discussion of Cash Flows

     Net cash used in operating activities for the nine months ended September 30, 2010 was $39,000 compared to net cash provided by operating activities of $76,000 for the nine months ended September 30, 2009.

     Net cash provided by financing activities for the nine months ended September 30, 2010 was $0. Net cash provided by financing activities for the nine months ended September 30, 2009 was $50,000 from the sale of common stock.

     Net cash provided by investing activities for the nine months ended September 30, 2010 and September 30, 2009 was $0 and $0, respectively.

Liquidity Sources

     Our current source of liquidity consists of cash on hand. As of September 30, 2010, we had $83,000 of cash compared to $122,000 of cash as of December 31, 2009.

     Until required for other purposes, our cash and cash equivalents are maintained in deposit accounts or highly liquid investments with original maturities of 90 days or less at the time of purchase.

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

     Our independent registered public accounting firm’s report on our financial statements for the fiscal year ended December 31, 2009 includes an explanatory paragraph regarding our ability to continue as a going concern. As shown in our historical financial statements, we have incurred significant recurring net losses and negative cash flows from operations for the past several years and as of December 31, 2009, our financial statements reflect negative working capital and a stockholders’ equity deficiency. These conditions raise substantial doubt about our ability to continue as a going concern. Further, the registered public accounting firm’s report states that the financial statements do not include any adjustments that might result from the outcome of this uncertainty.

     During the nine months ended September 30, 2010, we funded our operations with cash on hand.

Off Balance Sheet Arrangements

     We do not have any off balance sheet arrangements.

Critical Accounting Policies and Estimates

     Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to income taxes, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     While our significant accounting policies are described in more detail in Note 1 to our financial statements included in this report, we believe the policies discussed below are the most critical to understanding our financial position and results of operations.

Income Taxes

     We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning

strategies in assessing the need for a valuation allowance against our deferred tax assets. We have recorded a full valuation allowance against our deferred tax assets since we have determined that it is more likely than not that we may not be able to realize our deferred tax asset in the future.

Recent Accounting Developments

     In January 2010, FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, which provides amendments to subtopic 820-10 that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements and the presentation of separate information regarding purchases, sales, issuances and settlements for Level 3 fair value measurements. Additionally, ASU 2010-06 provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation and inputs and valuation techniques. ASU 2010-06 is effective for financial statements issued for interim and annual periods ending after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for interim and annual periods ending after December 15, 2010. The Company does not expect the adoption of ASU 2010-06 to have a material impact on its financial statements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

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

ITEM 4. Controls and Procedures

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

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

PART II. OTHER INFORMATION

ITEM 6. Exhibits

Exhibit		Description
31.1		Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended
31.2		Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

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