10-Q 1 lilm-10q093009.htm LILM 10Q 093009

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

 

THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the Quarter Ended September 30, 2009

 

 

or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

 

SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from

to

 

 

Commission File Number 000-51872

 

 

LILM, INC.

 

(Exact name of registrant as specified in its charter)

 

 

Nevada

87-0645394

 

(State or other jurisdiction of

(I.R.S. Employer

 

incorporation or organization)

Identification No.)

 

 

1390 South 1100 East # 204, Salt Lake City, Utah 84105-2463

 

(Address of principal executive offices)

 

 

(801) 322-0253

 

(Registrant's telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                     Yes o No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company

 

 

Large accelerated filer

[

]

Accelerated filer

[

]

 

Non-accelerated filer

[

]

Smaller reporting company

x

 

(Do not check if a smaller reporting company)

 

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

 

 

Class

Outstanding as of November 11, 2009

 

 

Common Stock, $.001 par value

2,583,750

 

Transitional Small Business Disclosure Format (Check one):

Yes [

]

No [ X ]

 

 

        TABLE OF CONTENTS

 

Heading

Page

 

 

PART I

—

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

3

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results

 

of Operations

10

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

14

 

Item 4(T).

Controls and Procedures

14

 

 

 

PART II

—

OTHER INFORMATION

 

Item 1.

Legal Proceedings

15

 

Item 1A.

Risk Factors

15

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

15

 

Item 3.

Defaults Upon Senior Securities

15

 

Item 4.

Submission of Matters to a Vote of Securities Holders

15

 

Item 5.

Other Information

15

 

Item 6.

Exhibits

15

 

 

Signatures

16

 

 

 

-2-

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

The accompanying unaudited balance sheets of LILM, Inc., and Subsidiary and LiL Marc, Inc. (predecessor) (development stage company) as of September 30, 2009 and December 31, 2008, related unaudited statements of income and cash flows for the three and nine months ended September 30, 2009 and 2008and the period April 22, 1997 (date of inception of predecessor) to September 30, 2009, have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the period ended September 30, 2009, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2009 or any other subsequent period.

 

 

 

 

 

 

LILM, INC.

(A Development Stage Company)

 

FINANCIAL STATEMENTS

 

September 30, 2009 and December 31, 2008

 

 

 

-3-

 

LILM, INC, and SUBSIDIARY and LIL MARC, INC. (predecessor)

(Development Stage Company)

CONSOLIDATED BALANCE SHEETS -unaudited

September 30, 2009 and December 31, 2008

 

 

 

 

 

 

 

 

Sept 30,

 

Dec. 31,

 

 

 

 

 

 

2009

 

2008

Assests

 

 

 

 

 

 

 

 

Current Assests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

 

-

 

$         82

 

 

 

 

 

 

 

 

 

 

Cash

 

 

 

 

-

 

$         82

 

 

 

 

 

 

 

 

 

 

 

Total Current Assets

 

 

-

 

82

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

-

 

$       82

 

 

 

 

 

 

 

 

 

Liabilities & Stockholders' Equity

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

 

 

 

$   14,753

 

$ 11,566

 

Note Payable- Related Party

 

 

27,344

 

21,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

42,097

 

33,506

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

25,000,000 shares authorized at $0.001 par value;

 

 

 

 

2,583,750 shares issued and outstanding

 

2,584

 

2,584

 

Capital in excess of par value

 

 

135,111

 

35,111

 

Accumulated deficit during development stage

(179,792)

 

(171,119)

 

 

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

(42,097)

 

(33,424)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$             -

 

$         82

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

-4-

 

LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)

(Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS - unaudited

For the Three and Nine Months Ended September 30, 2009 and 2008 and the

Period April 22, 1997 (date of inception of predecesor) to September 30, 2009


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

Nine Months

 

 

 

 

 

 

 

Sept 30

Sept 30

 

Sept 30

Sept 30

 

April 22, 1997

 

 

 

 

 

2009

2008

 

2009

2008

 

to Sept 30, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

$392

$446

 

$1,756

$1,077

 

$22,684

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

 

 

-

-

 

-

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

$392

$446

 

$1,756

$1,077

 

$22,684

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Administrative

 

 

3,415

4,255

 

10,407

9,635

 

173,670

 

Royalties

 

 

 

5

6

 

22

13

 

156

 

Depreciation and amortization

 

-

-

-

335

 

28,650

 

 

 

 

 

3,420

4,261

 

10,429

9,983

 

202,476

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

 

 

($3,028)

($3,815)

 

($8,673)

($8,906)

 

($179,792)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilluted

 

 

 

$         -

$          -

 

$         -

$         -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Outstanding Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (stated in 1000's)

 

2,584

2,584

 

2,584

2,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

 

-5-

 

 

LILM, INC, and SUBSIDIARY and LIL MARC, INC. (predecessor)

(Development Stage Company)

CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited

For the Nine Months Ended September 30, 2009 and 2008 and the

Period April 22, 1997 (date of inception of predecessor) to September 30, 2009


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sept 30,

 

Sept 30,

 

Apr 22, 1997 to

 

 

 

 

 

 

 

2009

 

2008

 

Sept 30, 2009

Cash Flows From

 

 

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

 

 

($8,673)

 

($8,906)

 

($179,792)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to

 

 

 

 

 

 

 

 

net cash provided by operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for expenses

 

 

-

 

-

 

8,700

 

Depreciation and amortization

 

 

 

-

 

335

 

28,650

 

Changes in accounts payable

 

 

 

3,187

 

2,198

 

11,532

 

Contributions to capital- expenses

 

 

-

 

-

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flows Used in Operations

 

 

(5,486)

 

(6,373)

 

(130,810)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of patent

 

 

 

 

-

 

-

 

(28,650)

 

Purchase office equipment

 

 

 

-

 

-

 

(2,096)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advances from related party

 

 

 

5,404

 

6,206

 

27,344

 

Proceeds from issuance of common stock net of costs

-

 

-

 

134,212

 

 

 

 

 

 

 

 

 

 

 

 

Net Change in Cash

 

 

 

 

 

(82)

 

(167)

 

-

Cash at Beginning of Period

 

 

 

 

82

 

226

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Cash at End of Period

 

 

 

 

-

 

$ 59

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 922,900 common shares for a patent- 2000

 

 

 

 

 

$ 11,963

Contributions to capital- expenses- 2001

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

 

 

-6-

 

 

                                        LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)

 

(Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

 

September 30, 2009

 

 

1.

ORGANIZATION

 

The Company was incorporated under the laws of the state of Nevada on December 30, 1999 with authorized common stock of 25,000,000 shares with a par value of $.001.

 

The principal business activity of the Company is to manufacture and market the (LiL Marc( urinal used in the training of young boys.

 

During January 2005 the Company organized (LiL Marc, Inc.(, in the state of Utah, and transferred all its assets, liabilities, and operations to LiL Marc Inc. in exchange for all of the outstanding stock of LiL Marc, Inc. for the purpose of continuing the operations in the subsidiary.

 

(LiL Marc, Inc.( (predecessor) was incorporated under the laws of the state of Nevada on April 22, 1997 for the purpose of marketing and sales of the (Lil Marc( training urinal for use by young boys. The marketing and sales activity was transferred to LILM, Inc. on December 30, 1999.

 

Included in the following financial statements are the combined statement of operations of LIL Marc, Inc. (predecessor) for the period April 22, 1997 to December 30, 1999 and LILM, Inc., and its subsidiary, for the period December 30, 1999 to September 30, 2009.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Methods

 

The Company recognizes income and expenses based on the accrual method of accounting.

 

Dividend Policy

 

The Company has not yet adopted a policy regarding payment of dividends.

 

Income Taxes

 

The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.

 

On September 30, 2009, the Company had a net operating loss available for carryforward of $124,586. The income tax benefit of approximately $37,376 from the carryforward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has not started full operations. The net operating loss will expire starting in 2021 through 2030.

 

 

 

-7-

 

 

LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)

 

(Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS (Continued)

 

September 30, 2009

 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

 

Revenue Recognition

 

Revenue is recognized upon the completion of the sale and shipment of the training urinal products.

 

Advertising and Market Development

 

The company expenses advertising and market development costs as incurred.

 

Financial Instruments

 

The carrying amounts of financial instruments, including cash and accounts payable, are considered by management to be their estimated fair values due to their short term maturities.

 

Basic and Diluted Net Income (Loss) Per Share

 

Basic net incomes (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then only the basic per share amounts are shown in the report.

 

Financial and Concentrations Risk

 

The Company does not have any concentration or related financial credit risk.

 

Estimates and Assumptions

 

Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its subsidiary from its inception. All significant intercompany accounts and balances have been eliminated in consolidation.

 

 

 

-8-

 

 

LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)

 

(Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS (Continued)

 

September 30, 2009

 

 

 

Recent Accounting Pronouncements

 

The Company does not expect that the adoption of other recent accounting pronouncements will

have a material impact on its financial statements.

 

3. PATENT

 

The Company acquired a patent, from a related party, for the (LiL Marc( training urinal and was recorded at the predecessor cost, less amortization. The patent was issued on July 16, 1991 and has been fully amortized.

 

The terms of the acquisition of the patent includes a royalty of $.25, due to the inventor, on the sale of each training urinal.

 

4. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

 

Officer-directors have acquired 73% of the outstanding common stock of the Company and have made demand, no interest, loans to the Company of $27,344.

 

5. PRIVATE PLACEMENT

 

On September 17, 2009 the Company commenced a private placement offering of 2,200,000 of its common shares $.001 par value at a price of $0.25 per share. After September 30, 2009 to the date of this report the Company has sold 20,000 shares of that offering.

 

6. GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have sufficient working capital for its planned activity, and to service its debt, which raises substantial doubt about its ability to continue as a going concern.

 

Continuation of the Company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through short term loans from an officer-director, and additional equity investment, which will enable the Company to continue operations for the coming year.

 

 

 

 

-9-

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.

 

We are a development stage company with minimal cash assets and limited operations and revenue. Ongoing operating expenses, including the costs associated with the preparation and filing of our registration statement and periodic reports, have been paid for by (i) the net proceeds of $55,030 from our stock offering in 2002; and (ii) from advances from a stockholder. A total of $27,344 has been advanced by Alewine Limited Liability Company, a 73% stockholder that is managed by our President, George I. Norman, III. The debt is evidenced by a promissory note that is payable upon demand with a provision that an interest rate of 10% would be charged on any outstanding balance not paid when due.

 

It is anticipated that we will require approximately $20,000 over the next 12 months to fund operations and to maintain our corporate viability. On September 17, 2009 the Company commenced a private placement offering to sell 2,200,000 of its common shares, $.001 par value, at a price of $0.25 per share for a term of six months. At that time the Board has the discretion to extend the private placement for another month. After September 30, 2009 to the date of this report, the Company has sold 20,000 shares. There can be no assurance that any additional shares will be sold in the private placement.In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future. In March 2005, our subsidiary, LiL Marc, Inc., received tentative approval for an unsecured credit line with Wells Fargo Bank in the amount of $15,000. The credit line was never used and was closed. There can be no assurance at this time that the credit line can be reopened, nor do we have any other potential sources of funds available to it or its subsidiary at this time. We also do not have any further commitments from a director or stockholder to provide any additional funding. We are continually exploring other funding sources and considering other options for additional financing to be used in the company’s operations and, more specifically, to be used in the manufacturing and marketing of the LiL Marc Training Urinal.

 

Results of Operations

 

During the third quarter ended September 30, 2009, we realized revenues of $392 compared with $446 for the third quarter ended September 30, 2008, a decrease of 12% for the 2009 period. This decrease in revenues was due to a 15% decrease in wholesale orders and a 32% decrease in retail orders.

 

Total expenses were $3,420 for the third quarter of 2009 compared to $4,261 for the corresponding 2008 period, a decrease of 20% for the 2009 period. Expenses during the second quarter of 2009 were primarily for administrative expenses, which decreased 20% ($840) for the third quarter. The second quarter decrease in administrative expenses was primarily attributed to a 62% decrease ($1,685) in rent and storage payments due to the timing of invoicing of monthly charges, which was offset by an increase of 97% ($364) in telephone, internet, and fax charges and an increase of 194% ($194) in printing and copying expenses.

 

During the nine month period ended September 30, 2009, we realized revenues of $1,756 compared with $1,077 for the nine month period ended September 30, 2008. This was an increase of 63% for the 2009 period. Revenues for both nine month periods were the result of Internet retail and wholesale orders. The increase in revenues during the first nine months of 2009 was due to a 31% decrease ($98) in retail orders and an 80% increase ($642) in wholesale orders.

 

Total expenses were $10,429 for the nine month period ended June 30, 2009 compared to $9,983 for the corresponding 2009 period, an increase of 4% for the 2009 period. Expenses during the 2009 nine month period were primarily for administrative expenses, which increased 8% ($772), primarily due to a 15% increase ($560) in professional fees associated with filing our Form 10-SB with the SEC. Also during this same period, we had a 51% decrease ($647) in filing fees.

 

The net loss for the third quarter of 2009 was $3,028 compared with a net loss of $3, 815 for the third quarter of 2008, a decrease of 21% for the 2009 period. The decrease in net loss during the third quarter of 2009 was due to a 20 % decrease ($840) in general operating expenses offset by a 12% decrease ($54) in revenues.

 

 

The net loss for the first nine months of 2009 was $8,673 compared with a net loss of $8,906 for the first nine months of 2008, a decrease of 3% for the 2009 period. The decreased net loss during the first nine months of 2009 was due to a 63% increase ($679) in sales, a 335% decrease ($335) in depreciation expenses, offset by an increase of 7% ($772) in administrative expense.

 

Liquidity and Capital Resources

 

At September 30, 2009, we had total assets of $0 and at December 31, 2008, total assets consisting of cash and office equipment were $82. Total liabilities at September 30, 2009 and December 31, 2008were $42,097 and $33,506, respectively. Total liabilities at September 30, 2009 consisted of $7,750 for legal fees, $535 in accounting fees, $6,456 in operating expenses consisting of rent and storage, telephone, copying and printing, $12 in royalty payments and a demand note in the amount of $27,344 issued to a private limited liability company owned by two directors, George Norman and Laurie Norman . The note is payable upon demand and does not bear an interest rate. If a portion of the principal is not paid when due then the note will bear an interest rate of 10% per annum.

 

Because we currently have only minimal revenues and limited cash reserves, it anticipates that we may have to rely on our directors and stockholders to pay expenses until such time as we realize adequate revenues from the production and sales of our baby product. There is no assurance that we will be able to generate adequate revenues in the immediate future to satisfy its cash needs. At December 31, 2008, we had cash on hand of $82, working capital of a negative $33,424 and total stockholders( equity of a negative $33,424. At September 30, 2009, we had cash on hand of $0, working capital of a negative $42,097 and total stockholders( equity of a negative $42,097.

 

In the opinion of management, inflation has not and will not have a material effect on the ongoing operations of the Company.

 

Plan of Operation

 

On September 17, 2009 the Company commenced a private placement offering to sell 2,200,000 of its common shares at a price of $0.25 per share for a term of six months. At that time the Board has the discretion to extend the private placement for another month. The Company intends to hire a sales agent and estimates that, if all the shares are sold, after costs of the offering and sales commission net proceeds would be approximately $495,000. As of September 30, 2009 to the date of this report, the Company has sold 20,000 shares ($5,000). There can be no assurance that any additional shares will be sold in the private placement.In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future

 

The purpose of the private placement is to make a major attempt to take the LiL Marc training urinal to a new level of visibility and, ultimately, to a new level of sales. The Company also plans to retire any debt, which is important for continued operations. Prior to the offering, the Company would occasionally lack immediate requisite funds and it would be necessary to rely on advances from directors and/or stockholders. The Company’s goal has always been to hold expenses to a minimum and to obtain services on a contingency basis when possible. Furthermore, directors have deferred any compensation until such time as business warrants the payment of such.

 

Pending the outcome of the private placement, we plan to increase our inventory from a current level of a few hundred or thousand to an ongoing size of ten thousand urinals and ten thousand bases and stands. If the Company can raise only a small portion of the offering, these numbers would be adjusted accordingly to two thousand urinals, bases and stands on hand for delivery. The Company’s best pricing for making a complete LiL Marc is on orders of ten thousand or more because there is a substantial reduction in manufacturing costs. Even if the Company continues to manufacture out of state, we can still ship for about $0.06 per LiL Marc to the Company for packing and fulfillment.

 

Pending the outcome of the private placement, the Company is considering a new look for the labeling and packaging for the product. The current packaging has a contemporary approach with a color labeling front and a black and white back, held in place with a clear plastic shrink-wrap exterior. In addition to the actual LiL Marc, we include multiple sticker inserts to assist in encouraging the potty training process. This has worked well for Internet sales and some wholesale, but may not be sufficient in larger quantities of 5,000 or 10,000 or more. The newer packaging for

 

 

 

the LiL Marc may be in a box with one or two full sheet color labeling. Part of the labeling development process will include looking at additional or new package inserts. This can be as simple as a new source of stickers or rewards charts. We have identified some new strategic items to include in our packaging that further help distinguish our product from others and also help a caregiver and son in the potty training process. We plan to source or create and make these inserts in quantities of ten thousand to again save on the per item costs.

 

The LiL Marc has had a consistent market on the Internet with very little additional advertising. Many customers are referred by earlier customers or they are repeat purchasers. Often when a purchase is made from a new section of the country, it is usually followed by multiple orders from the same geographic area. The product has had success as a gift item for grandchildren, birthdays and baby showers. While there are other products in the market place, we believe the LiL Marc is unique in that it is completely a stand alone product that does not require a water source, making it very portable. The LiL Marc has a simple functional design that caregiver and son can all relate to and it fits into any bathroom setting. Often the young boy using it considers it his own. Due to the LiL Marc’s uniqueness and potential market of approximately 2,000,000 newborn males every year in the US, we believe there will continue to be a market and a captive audience because every parent and child wants to be successful at potty training.

 

Our current marketing strategy has been to produce a product that is available to the public through our web sites at www.LiLMarc.com or www.BoysPottyTraining.com, or through our wholesale resellers. Although our web sites place well in the search engines, we have not done other advertising. Pending the outcome of the private placement, we plan to use a portion of the proceeds from this offering to introduce the LiL Marc to the market place by reconsidering advertising venues and attending and participating at industry trade shows. We also intend to explore methods of sales and product distribution with some of the larger industry representatives. We continue to review and consider options on improving our websites. Recent improvements include simplifying the ordering process, improving the appearance and layout of the website and making changes to the website that might increase impulse purchases. We continue to focus on improving our relationships with resellers that sell the LiL Marc on their websites and on engaging new website hosts for the product.

 

Future sales will be the responsibility of existing management and, pending the outcome of the private placement, additional new management who can dedicate full time employment to sales and operations. While the current management team can continue with plans for the upcoming year, upon a successful offering we will use a portion of the proceeds to hire a dedicated marketing member. We intend to look for someone with a background of prior niche marketing successes along with an understanding of the potty training process for little boys. Our plan would be to employ such a person for marketing while allowing the President and others to oversee operations, manufacturing, public company requirements, and potential acquisitions.

 

Management continues to review its production of either additional stands or urinals. Our manufacturing is presently at two different locations in two different states by two different processes and using two different types of molds. We would like to organize all of our manufacturing at one location using the same process. This would involve making a new blow mold for the LiL Marc’s base and stand to match up with the blow mold used to make the urinal. Our plan would be to use Blow Molder Products in Glen Avon, CA, the current manufacturer of the LiL Marc urinal. If we only realize lesser proceeds from this offering, we would have the different manufacturers make improvements to the existing molds and continue our current production at the two locations.

 

Our ancillary operations are currently housed in our corporate office with some light storage and a separate storage for inventory at another location. Pending the outcome of our private placement, we intend to consolidate these functions in a light industrial facility, large enough to receive delivery and send orders from inventory stored on site and would include a place for product and labeling development, professional space for any corporate duties and also possibly housing for a company van.

 

In the private placement memorandum, the Company has considered three different use of proceeds models should only a partial amount of the shares be sold in the private placement. Our working capital estimates vary significantly with respect to the number of Shares sold. Our working capital needs and priorities can change

 

 

 

substantially from a decision to carry higher inventory levels, higher more key personnel, or a strategic acquisition that might involve cash expenses and/or company stock. We do not offer any sales projections because there are too many variables at our stage of development as a start-up company to accurately project future operations.

 

We also intend to set aside a portion of the proceeds from the private placement to continue to stay current in our public filing requirements. Additionally, proceeds will be set aside for investor relations to keep current information available to the public and investment banking community.

 

Management has determined that for future products, a next generation urinal will require new molds, engineering, new labeling and new pricing. While some proceeds have been allocated from the private placement to contemplate a next generation urinal, management does not believe it can proceed along these lines unless the existing product is in a national distribution sales chain. We also intend to allocate some of the proceeds from the private placement for other products that might carry the LiL Marc logo to be marketed alongside the LiL Marc training urinal.

 

Currently because we lack immediate requisite funds, it may be necessary to rely on advances from directors and/or stockholders, although we have no firm commitment from anyone to advance future funds. Management intends to hold expenses to a minimum and to obtain services on a contingency basis when possible. Further, our directors will defer any compensation until such time as business warrants the payment of such.

 

After paying certain costs and expenses related to ongoing administrative costs and associated professional fees, including the cost of preparing and filing requisite reports with the SEC, management estimates that we will have sufficient funds to operate for the next six to twelve months. There can be no assurance that any additional shares will be sold in the private placement.If business revenues do not provide enough funds to continue operations, it may be necessary to seek additional financing. In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future. This would most likely come from current directors, although the directors are under no obligation to provide additional funding and there is no assurance outside funding will be available on acceptable terms, or at all. If we cannot generate or secure adequate funds during the next 12 months, we may be forced to seek alternatives such a joint venture or licensing our product. If we are unsuccessful in securing alternative sources of revenue, we may have to cease operations or sell off existing inventory at liquidating prices.

 

Because we rely on others for production of our product, we do not anticipate making any significant capital expenditures for new equipment or other assets during 2009. If additional equipment does become necessary, we believe that we may have to seek outside financing or utilize any funds that may come from the private placement to acquire the equipment or assets.

 

Currently, we have three employees. Our President devotes approximately 20 hours per week to our business and our Secretary assists on an as-needed basis. We also have a part-time laborer for packaging and shipping product. Management believes that these employees will be adequate for the foreseeable future, or until production reaches a level to justify additional employees. Further, we believe that in the event increased business necessitates additional employees, we will be able to pay the added expenses of these employees from increased revenues.

 

Forward-Looking and Cautionary Statements

 

This report includes "forward-looking statements" that may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance and similar matters. When used in this report, the words "may,( "will,( (expect,( (anticipate,( (continue,( (estimate,( (project,( (intend( and similar expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. We caution readers that a variety of factors could cause its actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements. These risks and uncertainties, many of which are beyond our control, include:

 

 

•

the ability to maintain current business and, if feasible, expand the marketing of products;

 

 

 

 

 

•

the ability to attract and retain new individual and retail customers;

 

 

•

the sufficiency of existing capital resources and the ability to raise additional capital to fund cash requirements for future operations;

 

 

•

uncertainties involved in the rate of growth of business and acceptance of the Company(s product and;

 

 

•

anticipated size or trends of the market segments in which we compete and the anticipated competition in those markets;

 

 

•

future capital requirements and our ability to satisfy its needs; and

 

 

•

general economic conditions.

 

Although management believes the expectations reflected in these forward-looking statements are reasonable, such expectations cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from those included within the forward-looking statements as a result of various factors. Cautionary statements in the risk factors section and elsewhere in this registration statement identify important risks and uncertainties affecting our future, which could cause actual results to differ materially from the forward-looking statements made herein.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

 

This item is not required for a smaller reporting company.

 

Item 4(T).

Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

 

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, concluded that, as of September 30, 2009, our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the first quarter of fiscal 2009. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the first quarter of fiscal 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

 

Item 1A.

Risk Factors.

 

 

This item is not required for a smaller reporting company.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

This Item is not applicable.

 

Item 3.

Defaults Upon Senior Securities.

 

This Item is not applicable.

 

Item 4.

Submission of Matters to a Vote of Security Holders.

 

This Item is not applicable.

 

Item 5.

Other Information.

 

This Item is not applicable.

 

Item 6.

Exhibits.

 

 

Exhibit 31.1

Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

Exhibit 31.2

Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

Exhibit 32.1

Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

Exhibit 32.2

Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

                                                                                           SIGNATURES

 

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

 

LILM, INC.

 

 

Date: November 16, 2009

By: /S/

GEORGE I. NORMAN, III

 

George I. Norman, III

 

President, C.E.O. and Director

 

(Principal Accounting Officer)