ODMO Odimo Inc (CE)

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

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

Non-Operating Shell Company

We are a non operating shell corporation. We intend to effect a merger, acquisition or other business combination with an operating company by using a combination of capital stock, cash on hand, or other funding sources, if available. We intend to devote substantially all of our time to identifying potential merger or acquisition candidates. 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.

Rescission of Reverse Merger and Cessation of Online Retailing Business of the Company

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 On February 4, 2011 the parties rescinded the Share Exchange Agreement and voided ab initio, the Reverse Merger (the “Rescission”).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.

The Reverse Merger, as well as any action taken by the Company subsequent to the Reverse Merger, is null and void. Standard Crushed is not now and as a result of the Rescission has never been a subsidiary of the Company.

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. 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.

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 employees.

Going Concern

Our independent registered public accounting firm’s report on our financial statements for the fiscal year ended December 31, 2011 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, 2011, our financial statements reflect negative working capital and a stockholders’ equity deficiency.

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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, 2012 to Quarter Ended September 30, 2011

We generated no revenue during either the quarter ended September 30, 2012 or 2011.

General and Administrative Expenses. General and administrative expenses for each of the quarters ended September 30, 2012 and 2011 were $20,000. 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 Loss. Net loss for the quarter ended September 30, 2012 was $20,000 compared to $20,000 for the quarter ended September 30, 2011.

Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

We generated no revenue for the nine months ended September 30, 2012 or 2011.

General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2012 were $74,000 compared to $69,000 for the nine months ended September 30, 2011. 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 Loss. Net loss for the nine months ended September 30, 2012 was $74,000 compared to a net income of $161,000 for the nine months ended September 30, 2011, which net income was recorded as a result of our write-off of accounts payable.

Liquidity and Capital Resources

As of September 30, 2012, we had cash of approximately $4,000 and total liabilities of $80,000 compared to cash of $9,000 and total liabilities of $53,000 as of December 31, 2011. In June 2012 we borrowed from Elao, LLC the sum of $10,000 (the “June 2012 Elao Borrowing”); in February 2012 we borrowed from Elao, LLC the sum of $10,000 (the “February 2012 Elao Borrowing”) and in May 2011 we borrowed from Elao, LLC the sum of $20,000 (the “May 2011 Elao Borrowing”). The Lily Maya Lipton Family Trust (the “Lily Trust”) is the sole member of Elao, LLC and Alan Lipton is the sole trustee of the Lily Trust and his daughter Lily Maya Lipton is the sole lifetime beneficiary. We are obligated to repay to Elao, LLC the June 2012 Elao Borrowing together with interest at 5% per annum, on the earlier to occur of (x) June 1, 2015; or (y) the date we consummate a reverse merger transaction or (z) the date we recover sufficient funds, if any, from an action we may pursue against Hubei Jinlong Cement Co. and/or their affiliates. We are obligated to repay to Elao, LLC the February 2012 Elao Borrowing together with interest at 5% per annum, on the earlier to occur of (x) May 1, 2015; or (y) the date we consummate a reverse merger transaction or (z) the date we recover sufficient funds, if any, from an action we may pursue against Hubei Jinlong Cement Co. and/or their affiliates. We are obligated to repay to Elao, LLC the May 2011 Elao Borrowing together with interest at 5% per annum, on the earlier to occur of (x) May 1, 2014; or (y) the date we consummate a reverse merger transaction. In December 2011 and February 2012, we borrowed the sum of $10,000 (the “December 2011 STEP Borrowing”) and $5,000 (the “$5,000 February 2012 STEP Borrowing”) from our shareholder, Strategic Turnaround Equity Partners, LP (Cayman) (“STEP”). We are obligated to repay to STEP the December 2011 STEP Borrowing together with interest at 5% per annum, on the earlier to occur of (x) May 1, 2014; or (y) the date we consummate a reverse merger transaction. We are obligated to repay to STEP the February 2012 STEP Borrowing together with interest at 5% per annum, on the earlier to occur of (x) May 1, 2015; or (y) the date we consummate a reverse merger transaction or (z) the date we recover sufficient funds, if any, from an action we may pursue against Hubei Jinlong Cement Co. and/or their affiliates. In November 2012 we sold $8,333 principal amount of our 5% Unsecured Convertible Promissory Notes due October 31, 2015, to each of the Lily Trust, STEP and Relao 2, LLC, each of whom is the beneficial owner of in excess of 10% of the outstanding shares of the Company’s Common Stock prior the purchase of the convertible debentures. The convertible notes are convertible, at the option of the holder, at any time at one time prior to maturity, into that number of shares of the Company’s Common Stock determined by dividing the principal balance of the convertible note by $.12, as adjusted for certain corporate actions taken by the Company.

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

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hand, or other funding sources that we reasonably believe are available. However, there can be no assurances that we will be able to consummate a merger or acquisition of an operating business on terms favorable to us, if at all, or that other funding sources will be available.

Discussion of Cash Flows

Net cash used in operating activities for the nine months ended September 30, 2012 was $30,000 compared to $21,000 for the nine months ended September 30, 2011.

We had net cash provided by financing activities of $25,000 and $20,000 for the nine months ended September 30, 2012 and September 30, 2011, respectively.

Liquidity Sources

Our current sources of liquidity consist of cash on hand. As of September 30, 2012, we had approximately $4,000 of cash compared to $9,000 of cash as of December 31, 2011.

Until required for other purposes, our cash is 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, 2011 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, 2011, 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, 2012, we funded our operations primarily with cash on hand and from the net proceeds from shareholder loans.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

Critical Accounting Policies and Estimates

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

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

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance against our deferred tax assets. We have recorded a full valuation allowance against our deferred tax assets since we have determined that it is more likely than not that we may not be able to realize our deferred tax asset in the future.

Recent Accounting Developments

There were no recently issued accounting standards which we have not yet adopted that are expected to have a material effect on our financial condition, results of operations or cash flows.

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