##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K
 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 ý
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2006Oro
    
    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 Number)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)
 Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share
  ̈ ý
   ̈ ý
 ý  ̈
  ̈
  Large accelerated filer  ̈
    
    Accelerated filer  ̈
    
    Non-accelerated filer ý
  ̈ x
   DOCUMENTS INCORPORATED BY REFERENCE
 None




---



##### 



ODIMO INCORPORATED
 FORM 10-K  ANNUAL REPORT
For the Fiscal Year Ended December 31, 2006
 TABLE OF CONTENTS
  
 PagePART I
    
    
    1FORWARD-LOOKING STATEMENTS
    
    
    1ITEM 1. BUSINESS
    
    
    1Item 1A. Risk factors
    
    
    2Item 1B. Unresolved Staff Comments
    
    
    6Item 2. Properties
    
    
    6Item 3. Legal Proceedings
    
    
    6Item 4. Submission of Matters to a Vote of Security Holders
    
    
    6PART II
    
    
    7Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    7Item 6. Selected Financial Data.
    
    
    9Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    10Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 8. Financial Statements and Supplementary Data
    
    
    20Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
    
    
    20Item 9A. Controls and Procedures
    
    
    21Item 9B. Other Information
    
    
    21PART III
    
    
    21Item 10. Directors and Executive Officers of the Registrant
    
    
    21Item 11. Executive Compensation
    
    
    23Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    26Item 13. Certain Relationships and Related Transactions
    
    
    28Item 14. Principal Accounting Fees and Services
    
    
    29PART IV
    
    
    30Item 15. Exhibits and Financial Statement Schedules
    
    
    30SIGNATURES
    
    
    33EX-10.30 Secured Promissory NoteEX-10.31 Amended & Restated Promissory NoteEX-10.32 Demand Promissory NoteEX-23.1 Consent of Deloitte & Touche LLPEX-23.2 Consent of Rachlin Cohen & Holtz LLPEX-31.1 Section 302 Certification of the CEOEX-31.2 Section 302 Certification of the CFOEX-32.1 Section 906 Certification of the CEOEX-32.2 Section 906 Certification of the CFO




---



##### Table of Contents



PART I
 
 FORWARD-LOOKING STATEMENTS
 This report contains various forward-looking statements regarding our business, financial
condition, results of operations and future plans and projects. Forward-looking statements discuss
matters that are not historical facts and can be identified by the use of words such as believes,
expects, anticipates, intends, estimates, projects, can, could, may, will,
would or similar expressions. In this report, for example, we make forward-looking statements
regarding, among other things, our expectations about our ability to continue as a going concern.
 Although these forward-looking statements reflect the good faith judgment of our management,
such statements can only be based upon facts and factors currently known to us. Forward-looking
statements are inherently subject to risks and uncertainties, many of which are beyond our control.
As a result, our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth below under
the caption Risk Factors. For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You
should not unduly rely on these forward-looking statements, which speak only as of the date on
which they were made. They give our expectations regarding the future but are not guarantees. We
undertake no obligation to update publicly or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, unless required by law.
 
 ITEM 1. BUSINESS
 Background
  Future Plans




---



##### Table of Contents



Going Concern
   Employees
  Available Information
 www.odimo.com
 
 ITEM 1A. RISK FACTORS
 Some of the statements in this report and in particular, statements found in Managements
Discussion and Analysis of Financial Condition and Results of Operations, that are not historical
in nature may constitute forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are often identified by the words will, should,
anticipate, believe, expect, intend, estimate, hope, or similar expressions. These
statements reflect managements current views with respect to future events and are subject to
risks and uncertainties. There are important factors that could cause actual results to differ
materially from those in forward-looking statements, many of which are beyond our control. These
factors, risks and uncertainties include, but are not limited to, the factors described below.
 Our actual results, performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements, and accordingly, we can give no assurances
that any of the
 2




---



##### Table of Contents



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.
 Except for our arrangement with a third party to host our www.ashford.com website, we are a
non-operating shell company.
   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.
  Legal claims against us could be costly and result in substantial liabilities or the loss of
significant rights.
  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.
  3




---



##### Table of Contents



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 stock price has been and may continue to be volatile.
  Future sales of our common stock may cause our stock price to decline.
  4




---



##### Table of Contents



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 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.
  5




---



##### Table of Contents



A significant portion of our voting power is concentrated and, as a result, our other stockholders
ability to influence corporate matters may be limited.
  Our ability to use net operating loss carryforwards may be limited.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
 th
 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  6




---



##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
  High
    
    
    LowFirst Quarter 2005 (from February 15, 2005)
    
    
    8.96
    
    
    
    6.10Second Quarter 2005
    
    
    6.75
    
    
    
    3.76Third Quarter 2005
    
    
    5.50
    
    
    
    1.45Fourth Quarter 2005
    
    
    2.18
    
    
    
    1.26First Quarter 2006
    
    
    2.05
    
    
    
    1.25Second Quarter 2006
    
    
    1.67
    
    
    
    1.16Third Quarter 2006 (through August 13, 2006)
    
    
    1.24
    
    
    
    0.69Third Quarter 2006 (from August 14, 2006)
    
    
    0.75
    
    
    
    0.20Fourth Quarter 2006
    
    
    0.24
    
    
    
    0.06First Quarter 2007 (through March 6, 2007)
    
    
    0.16
    
    
    
    0.08
  Dividend Policy
  Equity Compensation Plan
  7




---



##### Table of Contents



2006 EQUITY COMPENSATION PLAN INFORMATION
 (a)
    
    
    (b)
    
    
    (c)Number ofsecuritiesremaining availableNumber of
    
    
    
    
    
    
    for future issuancesecurities to be
    
    
    
    
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensation planexercise of
    
    
    exercise price of
    
    
    (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inPlan Category
    
    and rights*
    
    
    and rights
    
    

column (a))Equity compensation
plans approved by
security holders
    
    
    131,525
    
    
    $
    12.26
    
    
    
    427,866Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    131,525
    
    
    $
    12.26
    
    
    
    427,866
 
 *
    
    Includes options to acquire 100,460 shares held by Jeff Kornblum, Amerisa Kornblum and
George Grous, which were cancelled as of January 15, 2007. Recent Sales of Unregistered Securities
  Repurchases of Equity Securities
  8




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA.
  Year Ended December 31,Consolidated Statement of Operations Data:
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except per share data)Net sales
    
    $
    18,984
    
    
    $
    51,841
    
    
    $
    52,244
    
    
    $
    41,694
    
    
    $
    27,520Cost of sales
    
    
    15,854
    
    
    
    39,310
    
    
    
    37,141
    
    
    
    29,945
    
    
    
    19,932Gross profit
    
    
    3,130
    
    
    
    12,531
    
    
    
    15,103
    
    
    
    11,749
    
    
    
    7,588Operating expenses:Fulfillment
    
    
    1,414
    
    
    
    3,620
    
    
    
    3,516
    
    
    
    2,589
    
    
    
    1,830Marketing
    
    
    2,160
    
    
    
    7,625
    
    
    
    6,629
    
    
    
    3,709
    
    
    
    2,179General and administrative(1)
    
    
    9,566
    
    
    
    11,343
    
    
    
    14,140
    
    
    
    8,463
    
    
    
    7,240Depreciation and amortization
    
    
    3,598
    
    
    
    3,576
    
    
    
    2,749
    
    
    
    3,024
    
    
    
    2,529Goodwill impairment charge
    
    
    
    
    
    
    9,792
    
    
    
    
    
    
    
    
    
    
    
    Impairment of long-lived assets
    
    
    5,385
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    22,123
    
    
    
    35,956
    
    
    
    27,034
    
    
    
    17,785
    
    
    
    13,778Loss from operations
    
    
    (18,993
    )
    
    
    (23,425
    )
    
    
    (11,931
    )
    
    
    (6,036
    )
    
    
    (6,190
    )Gain on sale of assets
    
    
    7,185Interest (expense) income, net
    
    
    (16
    )
    
    
    (66
    )
    
    
    (585
    )
    
    
    (1,107
    )
    
    
    1Net loss
    
    
    (11,824
    )
    
    
    (23,491
    )
    
    
    (12,516
    )
    
    
    (7,143
    )
    
    
    (6,189
    )Dividends to preferred stockholders(2)
    
    
    
    
    
    
    (832
    )
    
    
    (15,378
    )
    
    
    (4,519
    )
    
    
    (4,047
    )Net loss attributable to common stockholders
    
    $
    (11,824
    )
    
    $
    (24,323
    )
    
    $
    (27,894
    )
    
    $
    (11,662
    )
    
    $
    (10,236
    )Net loss per common share:Basic and diluted
    
    $
    (1.65
    )
    
    $
    (3.86
    )
    
    $
    (44.35
    )
    
    $
    (18.54
    )
    
    $
    (16.30
    )Weighted average common shares outstanding:Basic and diluted
    
    
    7,155
    
    
    
    6,302
    
    
    
    629
    
    
    
    629
    
    
    
    628Pro forma net loss per common share attributable
to common stockholders(3) :Basic and diluted
    
    
    
    
    
    
    
    
    
    $
    (5.50
    )Pro forma
weighted average common shares
outstanding(3):Basic and diluted
    
    
    
    
    
    
    
    
    
    
    4,037
 As of December 31,Consolidated Balance Sheet Data:
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands)Cash and cash equivalents
    
    $
    75
    
    
    $
    3,831
    
    
    $
    1,663
    
    
    $
    5,135
    
    
    $
    6,501Total assets
    
    
    598
    
    
    
    24,730
    
    
    
    40,510
    
    
    
    30,631
    
    
    
    30,966Bank credit facility
    
    
    
    
    
    
    
    
    
    
    9,282
    
    
    
    
    
    
    
    Stockholder notes (including current maturities)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,426
    
    
    
    6,154Note payable to related party
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    1,074
    
    
    
    13,382
    
    
    
    29,305
    
    
    
    17,723
    
    
    
    11,853Total stockholders equity (deficiency)
    
    
    (476
    )
    
    
    11,348
    
    
    
    11,205
    
    
    
    12,908
    
    
    
    19,113
 
 (1)
    
    Includes non-cash stock-based compensation of $0, $0, $4.7 million, $2,000, and $39,000
during the years ended December 31, 2006, 2005, 2004, 2003 and 2002, respectively.(2)
    
    For the years ended December 31, 2006, 2005, 2004, 2003 and 2002 dividends to preferred
stockholders includes approximately $0, $832,000, $5.7 million, $4.5 million, and $4.0 million
of cumulative but undeclared dividends on our convertible preferred stock. During the year
ended December 31, 2004, dividends to preferred stockholders also included approximately $9.7
million of deemed dividends related to the issuance of Series C preferred stock to existing
stockholders. This amount represents the excess of the estimated fair value of the Series C
preferred stock over the consideration received by the Company. 9




---



##### Table of Contents



(3)
    
    The pro forma net loss per share assumes that all shares of convertible preferred stock
outstanding as of December 31, 2004 were converted into approximately 3,154,000 shares of
common stock on January 1, 2004 and all warrants to purchase shares of convertible preferred
stock outstanding as of December 31, 2004 were exercised and converted into approximately
254,000 shares of common stock as of January 1, 2004. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 The following discussion contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set forth previously
under the caption Risk Factors. This Managements Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with our consolidated financial statements
and related notes included elsewhere in this report.
 Overview
   Basis of Presentation
      10




---



##### Table of Contents



Results of Operations
  Year Ended December 31,2006
    
    
    % of Net Sales
    
    
    2005
    
    
    % of Net Sales
    
    
    2004
    
    
    % of Net Sales(in thousands, except percentage data)Net sales
    
    $
    18,984
    
    
    
    100.0
    %
    
    $
    51,841
    
    
    
    100.0
    %
    
    $
    52,244
    
    
    
    100.0
    %Cost of sales
    
    
    15,854
    
    
    
    83.5
    
    
    
    39,310
    
    
    
    75.8
    
    
    
    37,141
    
    
    
    71.1Gross profit
    
    
    3,130
    
    
    
    16.5
    
    
    
    12,531
    
    
    
    24.2
    
    
    
    15,103
    
    
    
    28.9Operating expenses:Fulfillment
    
    
    1,414
    
    
    
    7.4
    
    
    
    3,620
    
    
    
    7.0
    
    
    
    3,516
    
    
    
    6.7Marketing
    
    
    2,160
    
    
    
    11.4
    
    
    
    7,625
    
    
    
    14.7
    
    
    
    6,629
    
    
    
    12.7General and administrative(1)
    
    
    9,566
    
    
    
    50.5
    
    
    
    11,343
    
    
    
    21.8
    
    
    
    14,140
    
    
    
    27.1Depreciation and amortization
    
    
    3,598
    
    
    
    19.0
    
    
    
    3,576
    
    
    
    6.9
    
    
    
    2,749
    
    
    
    5.3Impairment of long-lived assets and
goodwill
    
    
    5,385
    
    
    
    28.4
    
    
    
    9,792
    
    
    
    18.9
    
    
    
    
    
    
    
    Total operating expenses
    
    
    22,123
    
    
    
    116.5
    
    
    
    35,956
    
    
    
    69.3
    
    
    
    27,034
    
    
    
    52.3Loss from operations
    
    
    (18,993
    )
    
    
    (100.0
    )
    
    
    (23,425
    )
    
    
    (45.2
    )
    
    
    (11,931
    )
    
    
    (22.8
    )Gain on sale of assets
    
    
    7,185
    
    
    
    37.8Interest income (expense), net
    
    
    (16
    )
    
    
    (0.1
    )
    
    
    (66
    )
    
    
    (0.1
    )
    
    
    (585
    )
    
    
    (1.1
    )Net loss
    
    $
    (11,824
    )
    
    
    62.4
    %
    
    $
    (23,491
    )
    
    
    (45.3
    )%
    
    $
    (12,516
    )
    
    
    (24.0
    )%
 
 (1)
    
    Includes non-cash stock-based compensation of $0, $0, and $4.7 million during the years ended
December 31, 2006, 2005 and 2004, respectively. Comparison of Year Ended December 31, 2006 to Year Ended December 31, 2005
 Net Sales.
 Gross Profit.
 Fulfillment.
 11




---



##### Table of Contents



Marketing.
 General and Administrative.
 Depreciation and Amortization.
 Goodwill Impairment.
 Impairment of Long-Lived Assets
 Gain on Sale of Assets
 Interest Expense, Net.
 Net Loss.
 Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004
 Net Sales.
  12




---



##### Table of Contents



Gross Profit. www.ashford.com
 Fulfillment.
 Marketing.
 General and Administrative.
  Depreciation and Amortization.
 Goodwill Impairment.
 Interest Expense, Net.
 13




---



##### Table of Contents



Net Loss.
 Quarterly Operations Data
   Three Months EndedDec 31, 2006
    
    
    Sep 30, 2006
    
    
    Jun 30, 2006
    
    
    Mar 31, 2006
    
    
    Dec 31, 2005
    
    
    Sep 30, 2005
    
    
    Jun 30, 2005
    
    
    Mar 31, 2005(in thousands)(unaudited)Net sales
    
    $
    1,847
    
    
    $
    2,382
    
    
    $
    4,368
    
    
    $
    10,387
    
    
    $
    18,474
    
    
    $
    9,132
    
    
    $
    11,451
    
    
    $
    12,784Cost of sales
    
    
    2,241
    
    
    
    2,160
    
    
    
    3,288
    
    
    
    8,165
    
    
    
    14,050
    
    
    
    7,091
    
    
    
    8,638
    
    
    
    9,532Gross profit (loss)
    
    
    (394
    )
    
    
    222
    
    
    
    1,080
    
    
    
    2,223
    
    
    
    4,424
    
    
    
    2,041
    
    
    
    2,813
    
    
    
    3,252Operating expenses:Fulfillment
    
    
    151
    
    
    
    194
    
    
    
    311
    
    
    
    758
    
    
    
    1,347
    
    
    
    580
    
    
    
    805
    
    
    
    888Marketing
    
    
    (75
    )
    
    
    123
    
    
    
    570
    
    
    
    1,541
    
    
    
    2,968
    
    
    
    1,092
    
    
    
    1,847
    
    
    
    1,718General and administrative(1)
    
    
    2,475
    
    
    
    1,812
    
    
    
    2,421
    
    
    
    2,859
    
    
    
    3,337
    
    
    
    2,954
    
    
    
    2,586
    
    
    
    2,467Depreciation and amortization
    
    
    679
    
    
    
    1,019
    
    
    
    1,021
    
    
    
    878
    
    
    
    910
    
    
    
    956
    
    
    
    858
    
    
    
    852Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,792
    
    
    
    
    
    
    
    
    
    
    
    Impairment of long lived assets
    
    
    5,385
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    8,615
    
    
    
    3,149
    
    
    
    4,323
    
    
    
    6,037
    
    
    
    18,354
    
    
    
    5,582
    
    
    
    6,096
    
    
    
    5,925Loss from operations
    
    
    (9,009
    )
    
    
    (2,927
    )
    
    
    (3,243
    )
    
    
    (3,814
    )
    
    
    (13,930
    )
    
    
    (3,541
    )
    
    
    (3,283
    )
    
    
    (2,673
    )Gain (loss) on sale of assets
    
    
    281
    
    
    
    
    
    
    
    6,904Interest income (expense), net
    
    
    
    
    
    
    8
    
    
    
    (14
    )
    
    
    (10
    )
    
    
    (24
    )
    
    
    10
    
    
    
    25
    
    
    
    (76
    )Net loss
    
    $
    (8,728
    )
    
    $
    (2,919
    )
    
    $
    3,647
    
    
    $
    (3,824
    )
    
    $
    (13,954
    )
    
    $
    (3,531
    )
    
    $
    (3,258
    )
    
    $
    (2,749
    )
 14




---



##### Table of Contents



Three Months EndedDec 31, 2006
    
    
    Sep 30, 2006
    
    
    Jun 30, 2006
    
    
    Mar 31, 2006
    
    
    Dec 31, 2005
    
    
    Sep 30, 2005
    
    
    Jun 30, 2005
    
    
    Mar 31, 2005(unaudited)Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    121.3
    
    
    
    90.7
    
    
    
    75.3
    
    
    
    78.6
    
    
    
    76.1
    
    
    
    77.7
    
    
    
    75.4
    
    
    
    74.6Gross profit
    
    
    (21.3
    )
    
    
    9.3
    
    
    
    24.7
    
    
    
    21.4
    
    
    
    23.9
    
    
    
    22.3
    
    
    
    24.6
    
    
    
    25.4Operating expenses:Fulfillment
    
    
    8.1
    
    
    
    8.2
    
    
    
    7.1
    
    
    
    7.3
    
    
    
    7.3
    
    
    
    6.4
    
    
    
    7.0
    
    
    
    6.9Marketing
    
    
    (4.0
    )
    
    
    5.2
    
    
    
    13.0
    
    
    
    14.8
    
    
    
    16.1
    
    
    
    12.0
    
    
    
    16.1
    
    
    
    13.4General and administrative
    
    
    135.1
    
    
    
    76.1
    
    
    
    55.4
    
    
    
    27.5
    
    
    
    18.1
    
    
    
    32.3
    
    
    
    22.6
    
    
    
    19.3Depreciation and amortization
    
    
    36.8
    
    
    
    42.8
    
    
    
    23.4
    
    
    
    8.5
    
    
    
    4.9
    
    
    
    10.5
    
    
    
    7.5
    
    
    
    6.7Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53.0
    
    
    
    
    
    
    
    
    
    
    
    Impairment of long-lived
assets
    
    
    291.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    466.4
    
    
    
    132.2
    
    
    
    98.9
    
    
    
    58.1
    
    
    
    99.4
    
    
    
    61.1
    
    
    
    53.2
    
    
    
    46.3Loss from operations
    
    
    (487.6
    )
    
    
    (122.9
    )
    
    
    74.2
    
    
    
    (36.7
    )
    
    
    (75.4
    )
    
    
    (38.8
    )
    
    
    (28.7
    )
    
    
    (20.9
    )Gain (loss) on sale of assets
    
    
    (0.15
    )
    
    
    
    
    
    
    158.7Interest income (expense), net
    
    
    
    
    
    
    0.3
    
    
    
    (0.3
    )
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    (0.6
    )Net loss
    
    
    (473.5
    )%
    
    
    (122.6
    )%
    
    
    83.5
    %
    
    
    (36.8
    )%
    
    
    (75.5
    )%
    
    
    (38.7
    )%
    
    
    (28.4
    )%
    
    
    (21.5
    )%
 Liquidity and Capital Resources
  Discussion of Cash Flows
     15




---



##### Table of Contents



Liquidity Sources
     Contractual Obligations
  Payments Due by PeriodLess thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years(in thousands)Note Payable to Alan Lipton*
    
    $
    300
    
    
    
    
    
    
    
    
    
    
    $
    300
 
 *
    
    As of December 31, 2006, Alan Lipton loaned to us the sum of $300,000, which amount was
increased as of February 16, 2007 to $400,000, further increased to $500,000 on March 1, 2007 and
further increased to $530,000 on March 21, 2007. We 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 is 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. Our repayment obligation under the First Note is secured by all of the Companys assets.
Under the other note, (the Second Note), $30,000 plus accrued interest is payable by the Company
to Mr. Lipton on demand. Our repayment obligation under the Second Note is unsecured. We
used the proceeds of the loan from Mr. Lipton for working capital purposes, including payment of
our existing liabilities. 16




---



##### Table of Contents



Off Balance Sheet Arrangements
  Outstanding Stock Options
    Critical Accounting Policies and Estimates
   Revenue Recognition
  17




---



##### Table of Contents



Inventories
  Goodwill and Other Long-Lived Assets
 Goodwill and Other Intangible Assets
 Accounting for the Impairment or Disposal
of Long-Lived Assets
 Income Taxes
  Stock-Based Compensation
  18




---



##### Table of Contents



Recently Issued Accounting Standards
    19




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
      20




---



##### Table of Contents



ITEM 9A. CONTROLS AND PROCEDURES
     
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    PositionAlan Lipton
    
    
    56
    
    
    Chairman of the Board, Class III DirectorAmerisa Kornblum
    
    
    45
    
    
    Chief Executive Officer, Chief Financial Officer,
Secretary and TreasurerSidney Feltenstein(1)
    
    
    66
    
    
    Class III DirectorStanley Stern(2)
    
    
    49
    
    
    Class I DirectorSteven Tishman(3)
    
    
    50
    
    
    Class II Director
 
 (1)
    
    Member of the Audit Committee, the Compensation Committee and the Nominating Committee. 21




---



##### Table of Contents



(2)
    
    Member of the Compensation Committee and Nominating Committee(3)
    
    Member of the Audit Committee. Alan Lipton
 Amerisa Kornblum
 Sidney Feltenstein
 Stanley Stern
 Steven Tishman
 22




---



##### Table of Contents



Compensation Committee Interlocks and Insider Participation
  Director Compensation
  Communications with Directors
 Stockholder Communication.
 
 ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION AND ANALYSIS
 Compensation Philosophy and Objectives
  SUMMARY COMPENSATION TABLE
  23




---



##### Table of Contents



ANNUAL COMPENSATION
    
    
    LONG TERMCOMPENSATIONSecuritiesOther Annual
    
    
    Underlying
    
    
    ALL OTHERName and Principal Position
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Compensation(1)
    
    
    Options/SARs #(2)
    
    
    COMPENSATION
    
    
    TotalAlan Lipton (1)
    
    
    2006
    
    
    $
    159,336
    
    
    $
    0
    
    
    $
    19,574
    
    
    
    0
    
    
    
    
    
    
    $
    178,910Chief Executive Officer
    
    
    2005
    
    
    
    385,000
    
    
    
    0
    
    
    
    26,745
    
    
    
    0
    
    
    
    
    
    
    
    411,745and President from November
    
    
    2004
    
    
    
    366,750
    (3)
    
    
    0
    
    
    
    25,948
    
    
    
    154,400
    
    
    
    

    
    
    
    392,6981999 through May 11, 2006Jeff Kornblum
    
    
    2006
    
    
    
    241,812
    
    
    
    0
    
    
    
    24,917
    
    
    
    0
    
    
    
    
    
    
    
    266,729Chief Operating Officer from
    
    
    2005
    
    
    
    199,859
    
    
    
    
    
    
    
    23,008
    
    
    
    0
    
    
    
    
    
    
    
    222,867November 1999 through January 15,
2007, Chief Executive
Officer and
    
    
    2004
    
    
    
    196,923
    
    
    
    70,000
    
    
    
    25,994
    
    
    
    58,400
    
    
    
    
    
    
    
    292,917President from May 11, 2006 through
January 15, 2007Amerisa Kornblum
    
    
    2006
    
    
    
    212,019
    
    
    
    0
    
    
    
    18,673
    
    
    
    0
    
    
    
    
    
    
    
    230,692Chief Financial Officer
    
    
    2005
    
    
    
    175,000
    
    
    
    0
    
    
    
    18,536
    
    
    
    0
    
    
    
    
    
    
    
    193,536and
Treasurer since November
1999, Secretary since
    
    
    2004
    
    
    
    170,962
    
    
    
    60,000
    
    
    
    21,362
    
    
    
    23,040
    
    
    
    
    
    
    
    252,324November
2005 and Chief ExecutiveOfficer
since January 15, 2007George Grous
    
    
    2006
    
    
    
    172,564
    
    
    
    0
    
    
    
    28,648
    
    
    
    0
    
    
    
    
    
    
    
    201,212Chief Technology Officer from
    
    
    2005
    
    
    
    149,859
    
    
    
    0
    
    
    
    25,201
    
    
    
    0
    
    
    
    
    
    
    
    175,060January 2000 through
    
    
    2004
    
    
    
    149,615
    
    
    
    63,000
    
    
    
    28,647
    
    
    
    19,200
    
    
    
    
    
    
    
    241,262January 15, 2007
 
 (1)
    
    Includes lease payments, insurance and maintenance expenses for one automobile and medical insurance
premiums.(2)
    
    Options granted to purchase shares of our Common Stock.(3)
    
    Includes $100,000 paid to Mey-Al Corporation, an entity owned and controlled by Alan Lipton, in 2004. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
  Number of SecuritiesUnderlying Unexercised
    
    
    Value of UnexercisedAcquired
    
    
    Value
    
    
    Options At
    
    
    In-The-Money Options AtOn
    
    
    Realized
    
    
    Fiscal Year-End (#)
    
    
    Fiscal Year-End ($)(1)Named Executive Officers
    
    Exercise(#)
    
    
    ($)
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Exercisable
    
    
    UnexercisableJeff Kornblum
    
    
    0
    
    
    
    N/A
    
    
    
    58,400
    
    
    
    0
    
    
    
    0
    
    
    
    0Amerisa Kornblum
    
    
    0
    
    
    
    N/A
    
    
    
    23,040
    
    
    
    0
    
    
    
    0
    
    
    
    0George Grous
    
    
    0
    
    
    
    N/A
    
    
    
    19,200
    
    
    
    0
    
    
    
    0
    
    
    
    0Alan Lipton
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 
 (1)
    
    The market price per share at the close of trading on the Nasdaq
National Market on December 29, 2006 was $        xxx            per share. 24




---



##### Table of Contents



Employment Agreements with Executive Officer
  Report of the Compensation Committee
  Introduction
  Compensation Programs
 Base Salary.
 Bonuses.
 Stock Options and Restricted Stock Awards.
 Compensation for the Chief Executive Officer
  25




---



##### Table of Contents



Compensation Limitations
    
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Stock Ownership of Certain Beneficial Owners and Management
    26




---



##### Table of Contents



PRINCIPAL STOCKHOLDERS
 SharesBeneficiallyBeneficial Owner
    
    Owned
    
    
    Percentage5% STOCKHOLDERSELAO, LLC
    
    
    2,908,242
    
    
    
    41.32
    %c/o Odimo Incorporated14051 NW 14th Street, Sunrise, FL 33323Lily Maya Lipton Family Trust (1)
    
    
    2,908,242
    
    
    
    41.32
    %c/o Odimo Incorporatedc/o Alan Lipton, Trustee14051 NW 14th Street, Sunrise, FL 33323Austin W. Marxe(2)
    
    
    537,756
    
    
    
    7.64
    %527 Madison Avenue, Suite 2600, New York, NY 10022David M. Greenhouse(2)
    
    
    537,756
    
    
    
    7.64
    %527 Madison Avenue, Suite 2600, New York, NY 10022Rima Management, LLC(3)
    
    
    436,619
    
    
    
    6.20
    %Richard Mashaal110 East 55th Street, Suite 1600, New York, NY 10022Bruce Galloway
    
    
    820,344
    
    
    
    11.65
    %c/o Galloway Capital Management, LLC720 Fifth Avenue, New York, NY 10019DIRECTORS AND EXECUTIVE OFFICERSAlan Lipton(1)(4)
    
    
    2,909,924
    
    
    
    41.34
    %14051 NW 14th Street, Sunrise, FL 33323Jeff Kornblum
    
    
    
    
    
    
    14051 NW 14th Street, Sunrise, FL 33323Amerisa Kornblum
    
    
    
    
    
    
    14051 NW 14th Street, Sunrise, FL 33323George Grous
    
    
    
    
    
    
    14051 NW 14th Street, Sunrise, FL 33323Stanley Sternc/o Odimo Incorporated14051 NW 14th Street, Sunrise, FL 333234,000
    
    
    
    *Sidney Feltenstein1717 Elm Hill Pike, Suite 1A, Nashville, TN 37210
    
    
    2,498
    
    
    
    *Steven Tishman
    
    
    
    
    
    
    c/o Rothschild Inc.1251 Avenue of the Americas, New York, NY 10020All directors and executive officers as a group (5 persons)
    
    
    2,916,422
    
    
    
    41.43
    %
 
 *
    
    Denotes less than 1%.(1)
    
    Lily Maya Family Trust (the Lily Trust) is the sole member of Elao, LLC, a Florida limited
liability company. Alan Lipton is the sole trustee of the Lily Trust and his minor daughter Lily
Maya Lipton is the sole lifetime beneficiary. Both the Lily Trust and Alan Lipton have shared
voting and dispositive power with respect to these shares.(2)
    
    Messrs. Marxe and Greenhouse have shared voting and investment power over 119,042 shares of Common
Stock owned by Special Situations Cayman Fund, L.P., 33,737 shares of Common Stock owned by Special
Situations Fund III, L.P. and 384,977 shares of Common Stock owned by Special Situations Fund III
QP, L.P. Messrs. Marxe and Greenhouse are the controlling principals of AWM Investment Company, Inc.
(AWM), the general partner of and investment adviser to Special Situations Cayman Fund, L.P. AWM
also serves as the general partner of MGP Advisers Limited Partnership, the general partner of and
investment adviser to Special Situations Fund III, L.P. and general partner of Special Situations
Fund III QP, L.P.(3)
    
    Rima Management, LLC and Richard Mashaal have shared voting and dispositive power over these shares. 27




---



##### Table of Contents



(4)
    
    Includes 1,682 shares held by Lipton Partnership, a general partnership in which Alan Lipton has a
beneficial interest. Section 16(a) Beneficial Ownership Reporting Compliance
 www.odimo.com Investor
Relations  SEC Filings
 Changes In Control
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
   Payment for Use of Jet Aircraft
  General
  28




---



##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 Audit and Non-Audit Fees
  2006
    
    
    2005Audit Fees
    
    $
    216,215
    
    
    $
    168,600Audit Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0Total
    
    $
    216,215
    
    
    $
    168,600
  2005Audit and Audit Related Fees
    
    $
    58,390Tax Fees
    
    
    0All Other Fees
    
    
    0Total
    
    $
    58,390
 Audit Fees.
 Audit-Related Fees.
 Tax Fees.
 All Other Fees.
 Audit Committee Pre-Approval Policies And Procedures
  29




---



##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 ( a )Documents filed as part of this report.
 1.
    
    The following financial statements of Odimo Incorporated and Reports of Rachlin Cohen &
Holtz LLP and Deloitte & Touche LLP, independent registered public accounting firms, are
included in this report:
 PageReports of Independent Registered Public Accounting Firms
    
    
    F-2Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Operations
    
    
    F-5Consolidated Statements of Stockholders Equity
    
    
    F-6Consolidated Statements of Cash Flows
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
 2.
    
    Financial statement schedule:Schedule II  Valuation and Qualifying AccountsSchedules not filed herewith are either not applicable, the required information is not
material, or the required information is set forth in the consolidated financial statements
or footnotes thereto.3.
    
    List of exhibits required by Item 601 of Regulation S-K. See part (b) below.
 (b) Exhibits.The following exhibits are filed as a part of this report:
 Exhibit Number
    
    Description2.1(1)
    
    Asset Purchase Agreement among registrant and Ashford.com, Inc. dated December 6, 20023.1(1)
    
    Amended and Restated Certificate of Incorporation3.2(1)
    
    Amended and Restated Bylaws4.1(1)
    
    Form of Specimen Stock Certificate4.2.1(1)
    
    Investors Rights Agreement dated November 18, 1999 by and between the registrant and certain holders of
the registrants capital stock4.2.2(1)
    
    Amended and Restated Registration Rights Agreement dated March 30, 2004 by and between the registrant
and certain holders of the registrants capital stock10.1.1(1)
    
    Odimo Incorporated Amended and Restated Stock Incentive Plan10.1.2(1)
    
    Form of Stock Option Agreement pursuant to the Odimo Incorporated Stock Incentive Plan10.2(1)
    
    Amended and Restated Series C Convertible Preferred Stock Purchase Agreement dated as of March 30, 2004
between the registrant and SDG Marketing, Inc.10.3.1(1)
    
    Promissory Note dated December 6, 2002 by the registrant in favor of GSI Commerce Solutions, Inc.10.3.2(1)
    
    Security Agreement dated December 6, 2002 between the registrant and GSI Commerce Solutions, Inc., as
assignee10.3.3(1)
    
    Patents, Trademarks, Copyrights and Licenses Security Agreement dated December 6, 2002 between the
registrant and GSI Commerce Solutions, Inc., as assignee10.4.1(1)
    
    Lease Agreement dated December 14, 1999 between the registrant and MDR Fitness Corp.10.4.2(1)
    
    Lease Amendment and Extension Agreement dated January 8, 2003 between the registrant and MDR Fitness
Corp.
 30




---



##### Table of Contents



Exhibit Number
    
    Description10.5.1(1)
    
    Employment Agreement dated July 12, 2004 between the registrant and Alan Lipton10.5.2(1)
    
    Employment Agreement dated July 12, 2004 between the registrant and Jeff Kornblum10.5.3(1)
    
    Employment Agreement dated July 12, 2004 between the registrant and Amerisa Kornblum10.5.4(1)
    
    Employment Agreement dated July 12, 2004 between the registrant and George Grous10.5.5(1)
    
    Lock-up Agreement dated July 12, 2004, between the registrant and Alan Lipton10.5.6(1)
    
    Lock-up Agreement dated July 12, 2004, between the registrant and Jeff Kornblum10.5.7(1)
    
    Lock-up Agreement dated July 12, 2004, between the registrant and Amerisa Kornblum10.5.8(1)
    
    Lock-up Agreement dated July 12, 2004, between the registrant and George Grous10.5.9(1)
    
    Lock-up Agreement dated July 12, 2004, between the registrant and Michael DellArciprete10.5.10(1)
    
    Amended and Restated Employment Agreement dated August 27, 2004 between the registrant and Alan Lipton10.6(1)
    
    Form of Indemnification Agreement between the registrant and each of its directors and executive officers10.7(1)
    
    Supply Agreement dated March 30, 2004 between the registrant and SDG Marketing, Inc.10.8.1(1)
    
    Loan and Security Agreement dated as of July 31, 2004 by and among Silicon Valley Bank, the registrant
and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.8.2(1)
    
    Revolving Promissory Note dated as of July 31, 2004 in favor of Silicon Valley Bank, by the registrant
and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.8.3(1)
    
    Intellectual Property Security Agreements dated as of July 31, 2004 in favor of Silicon Valley Bank, by
each of the registrant and Ashford.com, Inc.10.8.4(1)
    
    Unconditional Guaranties dated as of July 31, 2004 of Softbank Capital LP, Softbank Capital Partners LP
and Softbank Capital Advisors Fund LP10.9(1)
    
    Commercial Lease dated as of January 1, 2006 between the registrant and IBB Realty, LLC10.10(1)
    
    First Loan Modification Agreement dated as of November 13, 2004 by and among Silicon Valley Bank, the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.11(1)
    
    First Amended and Restated Note dated as of November 13, 2004 in favor of Silicon Valley Bank by the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.12(1)
    
    Amendment and Reaffirmation of Guaranty dated as of November 13, 2004 of Softbank Capital, LP, Softbank
Capital Partners, LP and Softbank Capital Advisors Fund LP10.13(1)
    
    Second Loan Modification Agreement dated as of January 7, 2005 by and among Silicon Valley Bank, the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.14(1)
    
    Second Amended and Restated Note dated as of January 7, 2005 in favor of Silicon Valley Bank, by the
registrant and its subsidiaries Ashford.com, Inc. and D.I.A. Marketing, Inc.10.15(1)
    
    Second Amendment and Reaffirmation of Guaranty dated as of January 7, 2005 of Softbank Capital, L.P.,
Softbank Capital Partners, LP and Softbank Capital Advisors Fund LP10.16(1)
    
    Confirmation letter dated January 7, 2005 from Softbank Capital Partners LP, regarding financial support.10.17(5)
    
    Termination Agreement dated March 29, 2006 by and between Odimo Incorporated and SDG Marketing, Inc.10.18(5)
    
    Third Amendment to Loan and Security Agreement dated March 30, 2006, by and among Silicon Valley Bank,
Odimo Incorporated, Ashford.com, Inc. and D.I.A. Marketing, Inc.10.19(6)
    
    Asset Purchase Agreement dated as of May 11, 2006 by and among Ice.com, Inc., Ice Diamond, LLC, and
Odimo Incorporated.10.20(6)
    
    Transition Services Agreement dated as of this May 11, 2006, by and between Ice Diamond, LLC, Ice.com,
Inc., and Odimo Incorporated.10.21(6)
    
    Separation Agreement dated May 11, 2006 by Odimo Incorporated and Alan Lipton.10.22(6)
    
    Amendment No. 1 to Employment Contract dated as of May 11, 2006, by and among Odimo Incorporated and
Jeffrey Kornblum.10.23(7)
    
    Modification and Settlement Agreement dated November 6, 2006 by and between IBB Realty, LLC and Odimo
Incorporated.10.24(8)
    
    Asset Purchase Agreement dated as of December 1, 2006 by and among Odimo Incorporated,
Worldofwatches.com, Inc. and ILS Holdings, LLC.10.25(9)
    
    Separation Agreement dated as of January 16, 2007 by and among Odimo Incorporated and Jeff Kornblum.10.26(9)
    
    Separation Agreement dated as of January 16, 2007 by and among Odimo Incorporated and George Grous.10.27(9)
    
    Termination Agreement dated as of January 15, 2007 by and among Odimo Incorporated and Amerisa Kornblum.10.30(4)
    
    8% Secured Promissory Note in the Principal Amount of $300,00010.31(4)
    
    Amended and Restated 8% Promissory Note in the Principal Amount of $500,00010.32(4)
    
    8% Demand Promissory Note in the Principal Amount of $30,00014.1(2)
    
    Code of Business Conduct and Ethics16.1(3)
    
    Letter of Deloitte & Touche LLP dated September 2, 2005
 31




---



##### Table of Contents



Exhibit Number
    
    Description16.2 (3)
    
    Letter of Rachlin Cohen & Holtz LLP dated September 2, 200521.1(1)
    
    Subsidiaries of Odimo Incorporated23.1(4)
    
    Consent of Deloitte & Touche LLP23.2(4)
    
    Consent of Rachlin Cohen & Holtz LLP31.1(4)
    
    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 amended31.2(4)
    
    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 amended32.1(4)
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2(4)
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    This exhibit was previously filed as an exhibit to the Registration Statement on Form S-1 (File No. 333-117400) originally filed with
the Securities and Exchange Commission on July 16, 2004, as amended thereafter, and is incorporated herein by reference.(2)
    
    This exhibit was previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2004 filed with the
Securities and Exchange Commission on March 31, 2005 and is incorporated herein by reference.(3)
    
    This exhibit was previously filed as an exhibit to the Form 8-K dated August 31, 2005 filed with the Securities and Exchange
Commission on September 2, 2005 and is incorporated herein by reference.(4)
    
    Filed herewith.(5)
    
    This exhibit was previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2005 filed with the
Securities and Exchange Commission on March 31, 2006 and is incorporated herein by reference.(6)
    
    This exhibit was previously filed as an exhibit to the Form 8-K dated May 11, 2006 filed with the Securities and Exchange Commission
on May 12, 2006 and is incorporated herein by reference.(7)
    
    This exhibit was previously filed as and exhibit to the Quarterly Report on form 10-Q for the period ended September 30, 2006 filed
with the Securities and Exchange Commission on November 14, 2006 and is incorporated herein by reference.(8)
    
    This exhibit was previously filed as an exhibit to the Form 8-K dated December 1, 2006 filed with the Securities and Exchange
Commission on December 4, 2006 and is incorporated herein by reference.(9)
    
    This exhibit was previously filed as an exhibit to the Form 8-K dated January 11, 2007 filed with the Securities and Exchange
Commission on January 18, 2007 and is incorporated herein by reference. 32




---



##### Table of Contents



SIGNATURES
  ODIMO INCORPORATEDDated: April 2, 2007
    By:
    /s/ Amerisa KornblumName:
    Amerisa KornblumTitle:
    Chief Executive Officer and Chief
Financial Officer  Name
    
    Title
    
    Date/s/ Amerisa Kornblum

Amerisa Kornblum
    
    Chief Executive Officer and Chief
Financial Officer (Principal
Executive and Principal Financial
and Accounting Officer)
    
    April 2, 2007/s/ Alan Lipton

Alan Lipton
    
    Chairman of the Board of Directors
    
    April 2, 2007/s/ Sidney Feltenstein

Sidney Feltenstein
    
    Director
    
    April 2, 2007/s/ Stanley Stern

Stanley Stern
    
    Director
    
    April 2, 2007/s/ Steven Tishman

Steven Tishman
    
    Director
    
    April 2, 2007
 33




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageFinancial Statements:Reports of Independent Registered Public Accounting Firms
    
    F-2Consolidated Balance Sheets at December 31, 2006 and 2005
    
    F-4Consolidated Statements of Operations for each of the three years in the period ended December 31, 2006
    
    F-5Consolidated Statements of Stockholders Equity for each of the three years in the period ended December 31, 2006
    
    F-6Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2006
    
    F-7Notes to Consolidated Financial Statements
    
    F-8Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    
    F-25
  F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     RACHLIN COHEN & HOLTZ LLP
 
 F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 
 F-3




---



##### Table of Contents



ODIMO, INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS(in thousands, except par value)
 December 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    75
    
    
    $
    3,831Deposits with credit card processing company
    
    
    108
    
    
    
    755Escrow deposit
    
    
    30
    
    
    
    Accounts receivable
    
    
    
    
    
    
    308Inventories
    
    
    
    
    
    
    10,244Prepaid expense and other current assets
    
    
    67
    
    
    
    657Total current assets
    
    
    280
    
    
    
    15,795Property and Equipment, Net
    
    
    294
    
    
    
    6,927Intangible and Other Assets, Net
    
    
    24
    
    
    
    2,008Total
    
    $
    598
    
    
    $
    24,730LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY)Current Liabilities:Accounts payable
    
    $
    728
    
    
    $
    7,883Accounts payable to related parties
    
    
    
    
    
    
    3,329Accrued liabilities
    
    
    46
    
    
    
    2,170Total liabilities
    
    
    774
    
    
    
    13,382Note Payable to Related Party
    
    
    300
    
    
    
    Commitments, Contingencies and Subsequent EventsStockholders Equity (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, 7,039 and 7,162 shares issued and outstanding
    
    
    7
    
    
    
    7Additional paid-in capital
    
    
    103,705
    
    
    
    103,705Accumulated deficit
    
    
    (104,188
    )
    
    
    (92,364
    )Total stockholders equity (deficiency)
    
    
    (476
    )
    
    
    11,348Total
    
    $
    598
    
    
    $
    24,730
  F-4




---



##### Table of Contents



ODIMO, INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except per share data)
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Net Sales
    
    $
    18,984
    
    
    $
    51,841
    
    
    $
    52,244Cost of Sales
    
    
    15,854
    
    
    
    39,310
    
    
    
    37,141Gross Margin
    
    
    3,130
    
    
    
    12,531
    
    
    
    15,103Operating Expenses:Fulfillment
    
    
    1,414
    
    
    
    3,620
    
    
    
    3,516Marketing
    
    
    2,160
    
    
    
    7,625
    
    
    
    6,629General and administrative
    
    
    9,566
    
    
    
    11,343
    
    
    
    14,140Depreciation and amortization
    
    
    3,598
    
    
    
    3,576
    
    
    
    2,749Impairment of long-lived assets
    
    
    5,385
    
    
    
    
    
    
    
    Goodwill impairment charge
    
    
    
    
    
    
    9,792
    
    
    
    Total operating expenses
    
    
    22,123
    
    
    
    35,956
    
    
    
    27,034Loss from Operations
    
    
    (18,993
    )
    
    
    (23,425
    )
    
    
    (11,931
    )Other Income (Expense):Gain on sale of assets
    
    
    7,185
    
    
    
    
    
    
    
    Interest expense, net
    
    
    (16
    )
    
    
    (66
    )
    
    
    (585
    )Other income (expense)
    
    
    7,169
    
    
    
    (66
    )
    
    
    (585
    )Net Loss
    
    
    (11,824
    )
    
    
    (23,491
    )
    
    
    (12,516
    )Dividends to Preferred Stockholders
    
    
    
    
    
    
    (832
    )
    
    
    (15,378
    )Net Loss Attributable to Common Stockholders
    
    $
    (11,824
    )
    
    $
    (24,323
    )
    
    $
    (27,894
    )Net Loss per Common Share Attributable
to Common Stockholders:Basic and diluted
    
    $
    (1.65
    )
    
    $
    (3.86
    )
    
    $
    (44.35
    )Weighted Average Number of Shares:Basic and diluted
    
    
    7,155
    
    
    
    6,302
    
    
    
    629
  F-5




---



##### Table of Contents



ODIMO, INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)(in thousands, except per share data)
 Additional
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Stockholders'Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Equity (Deficiency)BALANCEDecember 31, 2003
    
    
    1,796
    
    
    $
    2
    
    
    
    629
    
    
    $
    1
    
    
    $
    69,262
    
    
    $
    (56,357
    )
    
    $
    12,908Issuance of stock options to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,689
    
    
    
    
    
    
    
    4,689Issuance of convertible preferred stock
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,030
    
    
    
    
    
    
    
    7,030Issuance of convertible preferred stock and warrants
in connection with exchange of debt
    
    
    305
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    8,785
    
    
    
    
    
    
    
    8,786Dividends to preferred stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,692
    )
    
    
    
    
    
    
    (9,692
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,516
    )
    
    
    (12,516
    )BALANCEDecember 31, 2004
    
    
    2,370
    
    
    
    3
    
    
    
    629
    
    
    
    1
    
    
    
    80,074
    
    
    
    (68,873
    )
    
    
    11,205Issuance of common stock in public offering, net of
offering costs
    
    
    
    
    
    
    
    
    
    
    3,125
    
    
    
    3
    
    
    
    22,282
    
    
    
    
    
    
    
    22,285Conversion of preferred stock to common stock
    
    
    (2,370
    )
    
    
    (3
    )
    
    
    3,154
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from exercise of warrants
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    1,349
    
    
    
    
    
    
    
    1,349Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,491
    )
    
    
    (23,491
    )BALANCEDecember 31, 2005
    
    
    
    
    
    
    
    
    
    
    7,163
    
    
    
    7
    
    
    
    103,705
    
    
    
    (92,364
    )
    
    
    11,348Forfeiture of common stock
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,824
    )
    
    
    (11,824
    )BALANCEDecember 31, 2006
    
    
    
    
    
    $
    
    
    
    
    7,039
    
    
    $
    7
    
    
    $
    103,705
    
    
    $
    (104,188
    )
    
    $
    (476
    )
  F-6




---



##### Table of Contents



ODIMO, INCORPORATED AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash Flows from Operating Activities:Net loss
    
    $
    (11,824
    )
    
    $
    (23,491
    )
    
    $
    (12,516
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    3,598
    
    
    
    3,576
    
    
    
    2,749Goodwill impairment charge
    
    
    
    
    
    
    9,792
    
    
    
    Gain on sale of assets
    
    
    (7,185
    )
    
    
    
    
    
    
    (3
    )Impairment of long-lived assets
    
    
    5,385
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    4,689Provision for bad debts
    
    
    432
    
    
    
    153
    
    
    
    Amortization of supply agreement
    
    
    206
    
    
    
    144
    
    
    
    84Amortization of discount on stockholder notes
    
    
    
    
    
    
    
    
    
    
    174Changes in operating assets and liabilities:(Increase) decrease in:Deposits with credit card processing company
    
    
    646
    
    
    
    58
    
    
    
    (168
    )Escrow deposit
    
    
    (30
    )
    
    
    
    
    
    
    Accounts receivable
    
    
    (124
    )
    
    
    16
    
    
    
    (104
    )Inventories
    
    
    6,915
    
    
    
    4,077
    
    
    
    (8,315
    )Deposits with vendors
    
    
    
    
    
    
    660
    
    
    
    (434
    )Prepaid expenses and other current assets
    
    
    589
    
    
    
    304
    
    
    
    (192
    )Other assets
    
    
    134
    
    
    
    
    
    
    
    (2,625
    )Increase (decrease) in:Accounts payable
    
    
    (7,154
    )
    
    
    (2,950
    )
    
    
    2,909Accounts payable to related parties
    
    
    
    
    
    
    (2,362
    )
    
    
    4,636Accrued liabilities
    
    
    (2,124
    )
    
    
    (1,327
    )
    
    
    180Net cash used in operating activities
    
    
    (10,536
    )
    
    
    (11,350
    )
    
    
    (8,936
    )Cash Flows from Investing Activities:Proceeds from sale of assets, net of expenses
    
    
    7,185
    
    
    
    
    
    
    
    Purchase of property and equipment
    
    
    (705
    )
    
    
    (3,387
    )
    
    
    (3,698
    )Net cash provided by (used in) investing activities
    
    
    6,480
    
    
    
    (3,387
    )
    
    
    (3,698
    )Cash Flows from Financing Activities:Proceeds from note payable to related party
    
    
    300
    
    
    
    
    
    
    
    Payments on stockholder notes
    
    
    
    
    
    
    
    
    
    
    (2,870
    )Net repayments under bank credit facility
    
    
    
    
    
    
    (9,282
    )
    
    
    9,282Proceeds from issuance of preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    2,750Proceeds from exercise of warrants
    
    
    
    
    
    
    1,349
    
    
    
    Proceeds from issuance of common stock, net of expenses
    
    
    
    
    
    
    24,838
    
    
    
    Net cash provided by financing activities
    
    
    300
    
    
    
    16,905
    
    
    
    9,162Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (3,756
    )
    
    
    2,168
    
    
    
    (3,472
    )Cash and Cash Equivalents, Beginning
    
    
    3,831
    
    
    
    1,663
    
    
    
    5,135Cash and Cash Equivalents, Ending
    
    $
    75
    
    
    $
    3,831
    
    
    $
    1,663Supplemental Disclosures of Cash Flow Information:Cash paid during the year for:Interest
    
    $
    28
    
    
    $
    101
    
    
    $
    372Supplemental Schedule of Non-Cash Investing and Financing Activities:Exchange of
stockholder notes (including accrued interest of $211) for convertible preferred stock and warrants
    
    $
    
    
    
    $
    
    
    
    $
    2,996Fair value of supply agreement
    
    $
    
    
    
    $
    
    
    
    $
    433Offering costs recorded as other assets during 2004 reclassified and
netted against IPO
proceeds during 2005
    
    $
    
    
    
    $
    2,556
    
    
    $
    
  F-7




---



##### Table of Contents



ODIMO INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business www.ashford.com
 Basis of Presentation
 Use of Estimates
 Concentration of Risk
  Other Risks
 Cash and Cash Equivalents
 Accounts Receivable
 F-8




---



##### Table of Contents





Inventories


Property and Equipment


Software and Website Development Costs Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use Accounting for Web Site Development Costs


Long-Lived Assets


Goodwill


Goodwill and Other Intangible Assets


Intangible Assets


Warranty Costs


Fair Value of Financial Instruments


Revenue Recognition F-9




---



##### Table of Contents





Reporting Revenue Gross as a Principal versus Net as an Agent,




Cost of Sales


Fulfillment Expenses


Marketing Expenses


General and Administrative Expenses


Stock-Based Compensation Accounting for Stock Issued to Employees Accounting for Certain
Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25


Accounting for Stock-Based Compensation Share-Based Payment




F-10



---



##### Table of Contents





Year Ended December 31,2005
    
    
    2004Net loss attributable to common stockholders, as reported
    
    $
    (24,323
    )
    
    $
    (27,894
    )Add: Stock-based compensation expense, as reported
    
    
    
    
    
    
    4,689Deduct: Stock-based employee compensation expense determined
under fair-value-based method
    
    
    (14
    )
    
    
    (5,615
    )Pro forma net loss
    
    $
    (24,337
    )
    
    $
    (28,820
    )Net loss per share:Basic and diluted  as reported
    
    $
    (3.86
    )
    
    $
    (44.35
    )Basic and diluted  pro forma
    
    $
    (3.87
    )
    
    $
    (45.82
    )




Year Ended December 31,2004Dividend yields
    
    
    0
    %Volatility
    
    
    70
    %Risk-free interest rate
    
    
    3.69
    %Expected life (years)
    
    
    5


Income Taxes Accounting for Income Taxes.


Loss Per Share






Segments


Stock
Splits F-11




---



##### Table of Contents







New Accounting Pronouncements


Fair Value Measurements




Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109


Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140


2. GOING CONCERN CONSIDERATIONS






F-12



---



##### Table of Contents



3. ASSET PURCHASE
 www.ashford.com e.g., www.ashford.com
    4. SALE OF ASSETS
 Sale of Diamond.com URL and Certain Assets
  F-13




---



##### Table of Contents













Sale of Worldofwatches.com URL and Certain Assets www.worldofwatches.com


5. INVENTORIES




December 31,2006
    
    
    2005Diamonds
    
    $
    
    
    
    $
    4,148Fine jewelry
    
    
    
    
    
    
    2,422Watches
    
    
    
    
    
    
    2,592Luxury goods
    
    
    
    
    
    
    1,082Total inventories
    
    $
    
    
    
    $
    10,244


6. PROPERTY AND EQUIPMENT




EstimatedUseful Lives
    
    
    December 31,(in Years)
    
    
    2006
    
    
    2005Computers, software and equipment
    
    
    3
    
    
    $
    315
    
    
    $
    12,846Leasehold improvements
    
    
    4
    
    
    
    
    
    
    
    1,196Furniture and fixtures
    
    
    5
    
    
    
    
    
    
    
    596Automobiles
    
    
    4
    
    
    
    
    
    
    
    43315
    
    
    
    14,681Less: accumulated depreciation
    
    
    
    
    
    
    (21
    )
    
    
    (8,516
    )294
    
    
    
    6,165Software development in process
    
    
    
    
    
    
    
    
    
    
    762Property and equipment  net
    
    
    
    
    
    $
    294
    
    
    $
    6,927




F-14




---



##### Table of Contents







7. GOODWILL




Balance as of December 31, 2004
    
    $
    9,792Impairment loss
    
    
    (9,792
    )Balance as of December 31, 2005
    
    $
    




8. INTANGIBLE AND OTHER ASSETS




December 31,2006
    
    
    2005Marketing-related:www.diamond.comdomain name
    
    $
    
    
    
    $
    2,137www.ashford.comdomain name
    
    
    7,186
    
    
    
    7,186Affinity phone number
    
    
    
    
    
    
    288Inventory-related:2004 Supply Agreement
    
    
    
    
    
    
    4337,186
    
    
    
    10,044Less: accumulated amortization
    
    
    (7,186
    )
    
    
    (8,192
    )Intangiblesnet
    
    
    
    
    
    
    1,852Other assets
    
    
    24
    
    
    
    156Total
    
    $
    24
    
    
    $
    2,008




www.diamond.com




9. BANK CREDIT FACILITY






F-15



---



##### Table of Contents



10. NOTE PAYABLE TO RELATED PARTY
   11. STOCKHOLDER NOTES
     
 12. INCOME TAXES
  2006
    
    
    2005
    
    
    2004Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    RateIncome taxes at statutory rate
    
    $
    (4,020
    )
    
    $
    34.0
    %
    
    $
    (7,987
    )
    
    
    34.0
    %
    
    
    (4,255
    )
    
    
    34.0
    %State income taxes, net of federal benefit
    
    
    (406
    )
    
    
    3.4
    
    
    
    (466
    )
    
    
    2.0
    
    
    
    (454
    )
    
    
    3.6Increase in taxes:Penalties and fines
    
    
    2
    
    
    
    0.0
    
    
    
    3
    
    
    
    0.0
    
    
    
    1
    
    
    
    0.0Meals and entertainment
    
    
    5
    
    
    
    0.0
    
    
    
    14
    
    
    
    (0.1
    )
    
    
    29
    
    
    
    (0.2
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    (12.7
    )Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    3,329
    
    
    
    (14.2
    )
    
    
    
    
    
    
    0.0Intangible amortization
    
    
    210
    
    
    
    (1.8
    )
    
    
    277
    
    
    
    (1.2
    )
    
    
    
    
    
    
    Adjustment of beginning deferred balance
    
    
    
    
    
    
    
    
    
    
    760
    
    
    
    (3.2
    )
    
    
    258
    
    
    
    (2.1
    )Other
    
    
    12
    
    
    
    (0.1
    )
    
    
    (3
    )
    
    
    0.0
    
    
    
    199
    
    
    
    (1.6
    )Valuation allowance
    
    
    4,197
    
    
    
    (35.5
    )
    
    
    4,073
    
    
    
    (17.3
    )
    
    
    2,628
    
    
    
    (21.0
    )$
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
 F-16




---



##### Table of Contents







December 31,2006
    
    
    2005Deferred tax assets (liabilities):Noncurrent:Net operating loss carryforwards
    
    $
    27,961
    
    
    $
    24,198Property and equipment
    
    
    (16
    )
    
    
    (834
    )Intangible assets
    
    
    1,233
    
    
    
    1,617Gross deferred tax assets
    
    
    29,178
    
    
    
    24,981Valuation allowance
    
    
    (29,178
    )
    
    
    (24,981
    )Net deferred tax assets
    
    $
    
    
    
    $
    




13. COMMITMENTS AND CONTINGENCIES


Leases




Litigation


th F-17




---



##### Table of Contents









Employment Agreements








14. CONVERTIBLE PREFERRED STOCK






Series A
    
    
    Series B
    
    
    Series C
    
    
    Series DShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    AmountBalance, December 31, 2003
    
    
    186
    
    
    $
    6,678
    
    
    
    514
    
    
    $
    36,251
    
    
    
    472
    
    
    $
    14,692
    
    
    
    624
    
    
    $
    1,757Issuance of Series C (see Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    574
    
    
    
    15,027
    
    
    
    
    
    
    
    Balance, December 31, 2004
    
    
    186
    
    
    
    6,678
    
    
    
    514
    
    
    
    36,251
    
    
    
    1,046
    
    
    
    29,719
    
    
    
    624
    
    
    
    1,757Conversion of preferred stock to common stock
    
    
    (186
    )
    
    
    (6,678
    )
    
    
    (514
    )
    
    
    (36,251
    )
    
    
    (1,046
    )
    
    
    (29,719
    )
    
    
    (624
    )
    
    
    (1,757
    )Balance, December 31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    


F-18



---



##### Table of Contents



Conversion and Dividend Features
   Liquidation Preferences
 
    
    Holders of Series D preferred stock are entitled to receive, prior and in preference to
any distribution of any of the assets of the Company to the other stockholders including
holders of any other series of convertible preferred stock, by reason of their ownership
thereof, in cash, an amount per share equal to (a) if the valuation of the Company in
connection with a liquidation event is $70 million or less, then 10% of such valuation
amount, plus any accrued but unpaid dividends, or (b) if the valuation amount is more than
$70 million, then $7 million plus 20% of the valuation amount in excess of $70 million, plus
any accrued but unpaid dividends. If the assets are insufficient to permit payment of the
Series D liquidation amount in full to all holders of Series D, the assets will be
distributed ratably to the holders of Series D in proportion to the amount each such holder
would otherwise be entitled to receive.
    
    After payment of the Series D liquidation amount to the holders of Series D to the extent
there are additional assets available for distribution to stockholders, the holders of
Series C are entitled to receive, prior and in preference to any distribution of any of the
assets of the Company to the holders of Series A, Series B and common stockholders, by
reason of their ownership thereof, in cash, an amount per share equal to two times the
original Series C issue price, plus any accrued but unpaid dividends. If the assets are
insufficient to permit payment of the Series C liquidation amount in full to all holders of
Series C, the assets will be distributed ratably to the holders of Series C in proportion to
the amount each such holder would otherwise be entitled to receive.
    
    After payment of the Series C liquidation amount to the holders of Series C to the extent
there are additional assets available for distribution to stockholders, the holders of
Series B are entitled to receive, prior and in preference to any distribution of any of the
assets of the Company to the holders of Series A and common stockholders, by reason of their
ownership thereof, in cash, an amount per share equal to the original Series B issue price,
plus any accrued but unpaid dividends. If the assets are insufficient to permit payment of
the Series B liquidation amount in full to all holders of Series B, the assets will be
distributed ratably to the holders of Series B in proportion to the amount each such holder
would otherwise be entitled to receive.
    
    After payment of the Series B liquidation amount to the holders of Series B to the extent
there are additional assets available for distribution to stockholders, the holders of
Series A are entitled to receive, prior and in preference to any distribution of any of the
assets of the Company to the common stockholders, by reason of their ownership thereof, in
cash, an amount per share equal to the original Series A issue price, plus any accrued but
unpaid dividends.
 Preferred Stock Warrants
 F-19




---



##### Table of Contents



Series C
    
    
    Series DNumber of
    
    
    Exercise
    
    
    Number of
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Warrants
    
    
    PriceWarrants outstanding  December 31, 2004
    
    
    147
    
    
    $
    9.00
    
    
    
    107
    
    
    $
    0.25
  Dividend rate
    
    
    8.00
    %Expected volatility
    
    
    70.00
    %Risk-free interest rate
    
    
    3.93
    %Contract lives (in years)
    
    
    10
  15. STOCK OPTION PLAN
 i.e.,
  F-20




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedOptions
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Options
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    Exercise(thousands)
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    (thousands)
    
    
    PriceOutstanding at beginning of year
    
    
    404
    
    
    $
    9.90
    
    
    
    446
    
    
    $
    10.75
    
    
    
    184
    
    
    $
    16.25Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    290
    
    
    
    8.75Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (273
    )
    
    
    8.50
    
    
    
    (42
    )
    
    
    21.47
    
    
    
    (28
    )
    
    
    24.75Outstanding at end of year
    
    
    131
    
    
    $
    12.26
    
    
    
    404
    
    
    $
    9.90
    
    
    
    446
    
    
    $
    10.75
  WeightedAverageExercise
    
    
    
    
    
    Contractual
    
    
    Exercise
    
    
    Options
    
    
    ExercisePrices
    
    Options
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price(in thousands)$7.25  $12.50
    
    
    122
    
    
    
    6
    
    
    $
    8.53
    
    
    
    122
    
    
    $
    8.53$34.25
    
    
    1
    
    
    
    5
    
    
    
    34.25
    
    
    
    1
    
    
    
    34.25$37.75  $38.00
    
    
    1
    
    
    
    6
    
    
    
    38.00
    
    
    
    1
    
    
    
    38.00$70.50
    
    
    7
    
    
    
    8
    
    
    
    70.50
    
    
    
    1
    
    
    
    70.50131
    
    
    
    6
    
    
    $
    12.26
    
    
    
    131
    
    
    $
    12.26
 16. RELATED PARTY TRANSACTIONS
 Diamond and Jewelry Purchases and Sales
 Supply Agreement
  F-21




---



##### Table of Contents



Stock Purchase and Supply Agreement
   Other Inventory Purchases www.worldofwatches.com
 Use of Jet Aircraft
 17. INITIAL PUBLIC OFFERING
  F-22




---



##### Table of Contents



18. SUBSEQUENT EVENTS
 www.ashford.com www.ashford.com www.ashford.com
 www.ashford.com
 19. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  Quarter EndedMar. 31,
    
    
    Jun. 30,
    
    
    Sept. 30,
    
    
    Dec. 31,
    
    
    Mar. 31,
    
    
    Jun. 30,
    
    
    Sept. 30,
    
    
    Dec. 31,2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2005
    
    
    2005(in thousands)(unaudited)Net sales
    
    $
    10,387
    
    
    $
    4,368
    
    
    $
    2,382
    
    
    $
    1,847
    
    
    $
    12,784
    
    
    $
    11,451
    
    
    $
    9,132
    
    
    $
    18,474Gross profit (loss)
    
    
    2,223
    
    
    
    1,080
    
    
    
    222
    
    
    
    (395
    )
    
    
    3,252
    
    
    
    2,813
    
    
    
    2,041
    
    
    
    4,424Loss from operations (1)(2)
    
    
    (3,814
    )
    
    
    (3,243
    )
    
    
    (2,927
    )
    
    
    (9,009
    )
    
    
    (2,673
    )
    
    
    (3,283
    )
    
    
    (3,541
    )
    
    
    (13,928
    )Net loss (1)(2)
    
    $
    (3,824
    )
    
    $
    3,647
    
    
    $
    (2,919
    )
    
    $
    (8,728
    )
    
    $
    (2,749
    )
    
    $
    (3,258
    )
    
    $
    (3,531
    )
    
    $
    (13,953
    )Net loss attributable to common
stockholders
    
    $
    (3,824
    )
    
    $
    3,647
    
    
    $
    (2,919
    )
    
    $
    (8,728
    )
    
    $
    (3,581
    )
    
    $
    (3,258
    )
    
    $
    (3,531
    )
    
    $
    (13,953
    )Net loss per share, basic and diluted
    
    $
    (0.53
    )
    
    $
    0.51
    
    
    $
    (0.41
    )
    
    $
    (1.22
    )
    
    $
    (0.97
    )
    
    $
    (0.46
    )
    
    $
    (0.50
    )
    
    $
    (1.95
    )
 
 (1)
    
    During the fourth quarter of 2005, the Company recorded an impairment charge of $9,792
related to its goodwill.(2)
    
    During the second quarter of 2006, the Company recorded a gain on sale of assets of $6.9
million related to the sale of www.diamond.com. During the fourth quarter of 2006, the Company
recorded a gain on sale of assets of approximately $.3 million related to the sale of
www.worldofwatches.com and certain assets, and an impairment charge of $5.4 million related to the
Companys property and equipment. F-23




---



##### Table of Contents



ODIMO INCORPORATED AND SUBSIDIARIES
 SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
 Charged toRevenue,Beginning
    
    
    Costs or
    
    
    
    
    
    
    BalanceDescription
    
    of Period
    
    
    Expenses
    
    
    Deductions(1)
    
    
    at End ofReserve deducted from asset to which it applies:Year Ended December 31, 2006 Reserve for deferred income tax assets
    
    $
    24,981
    
    
    $
    4,197
    
    
    $
    
    
    
    $
    29,178Year Ended December 31, 2005 Reserve for deferred income tax assets
    
    $
    20,908
    
    
    $
    4,073
    
    
    $
    
    
    
    $
    24,981Year Ended December 31, 2004 Reserve for deferred income tax assets
    
    $
    18,295
    
    
    $
    2,613
    
    
    $
    
    
    
    $
    20,908Reserves recorded as accrued liabilities:Year Ended December 31, 2006 Reserve for sales returns
    
    $
    269
    
    
    $
    1,913
    
    
    $
    2,182
    
    
    $
    Reserve for warranty costs
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    15Year Ended December 31, 2005 Reserve for sales returns
    
    $
    333
    
    
    $
    7,368
    
    
    $
    7,432
    
    
    $
    269Reserve for warranty costs
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    15Year Ended December 31, 2004 Reserve for sales returns
    
    $
    355
    
    
    $
    7,491
    
    
    $
    7,513
    
    
    $
    333Reserve for warranty costs
    
    $
    15
    
    
    $
    
    
    
    $
    
    
    
    $
    15
 
 (1)
    
    Consists of actual sales returns in each period. F-24