UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
OR
[ ] 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 0-24431
LIL MARC, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1417774
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
149 East 900 South, Salt Lake City, Utah 84111
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 322-0253
Check whether the issuer (1) 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of September 30, 1998
Common Stock, $.01 par value 1,681,666
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements. . . . . . . . . . . . 1
Consolidated Balance Sheets -- September 30, 1998
and December 31, 1997. . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations -- three and
nine months ended September 30, 1998 and 1997 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows -- three and
nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements . . . . . . . 7
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes In Securities. . . . . . . . . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . 11
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 12
-i-
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended September 30, 1998, have been prepared by the Company.
LIL MARC, INC.
FINANCIAL STATEMENTS
September 30, 1998 and December 31, 1997
<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 13,948 $ 20,762
Inventory (Note 2) - -
Total Current Assets 13,948 20,762
OTHER ASSETS
Patent (Note 2) 20,055 24,352
Organization cost 106 129
Total Other Assets 20,161 24,481
!
TOTAL ASSETS $ 34,109 $ 45,243
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - $ 1,337
Total Current Liabilities - 1,337
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock; 5,000,000 shares authorized
of $0.01 par value, 1,681,666 and
1,606,666 shares issued and outstanding,
respectively 16,816 16,066
Additional paid-in capital 43,841 37,091
Deficit accumulated during the
development state (26,548) (9,251)
Total Stockholders' Equity 34,109 43,906
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 34,109 $ 45,243
<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the For the April 22,
Nine Months Ended Three Months Ended 1997 Through
September 30, September 30, September 30,
1998 1997 1998 1997 1998
SALES $ - $ - $ - $ - $ -
COST OF SALES - - - - -
GROSS MARGIN - - - - -
OPERATING EXPENSES
General and administrative 13,082 3,672 8,733 2,664 17,114
Amortization 4,215 2,879 1,440 1,800 8,534
Total Operating Expenses 17,297 6,551 10,173 4,464 25,648
Loss from Operations (17,297) (6,551) (10,173) (4,464) (25,648)
OTHER INCOME (EXPENSE)
Interest expense - (900) - (600) (900)
Total Other Income (Expense) - (900) - (600) (900)
NET LOSS $(17,297) $(7,451) $(10,173) $(5,064) $(26,548)
LOSS PER SHARE $ (0.01) $ (0.00) $ (0.01) $ (0.00)
<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
Balance at inception - $ - $ - $ -
Common stock issued for
cash at $0.00 per share 666,666 6,666 (1,666) -
Issuance of shares to acquire
patent rights recorded at
predecessor cost of $0.00 per
share 400,000 4,000 (1,000) -
Issuance of 540,000 shares of
common stock at $0.10 per share 540,000 5,400 48,600 -
Stock offering costs - - (8,843) -
Net loss from inception on
April 22, 1997 through
December 31, 1997 - - - (9,251)
Balance, December 31, 1997 1,606,666 16,066 37,091 (9,251)
Issuance of 75,000 shares of
common stock at $0.10 per
share (unaudited) 75,000 750 6,750 -
Net loss for the nine months
ended September 30, 1998
(unaudited) - - - (17,297)
Balance, September 30, 1998
(unaudited) 1,681,666 $ 16,816 $ 43,841 $ (26,548)
<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the For the April 22,
Nine Months Ended Three Months Ended 1997 Through
September 30, September 30, September 30,
1998 1997 1998 1997 1998
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $(17,297) $ (7,451) $(10,173) $ (5,064) $(26,548)
Adjustments to reconcile
net income
(loss) to net cash:
Amortization 4,215 2,879 1,440 1,800 8,534
Changes in assets and
liabilities:
(Increase) decrease
in inventory - - - - -
Increase (decrease) in
accounts payable (1,232) - (1,313) - 105
Increase in organization
cost - (1,813) - (3,121) (150)
Net Cash Provided by
Operating Activities (14,314) (6,385) (10,046) (6,385) (18,059)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of patent rights - - - - (28,650)
Net Cash Used by
Investing Activities - - - - (28,650)
CASH FLOWS FROM FINANCING
ACTIVITIES
Stock offering costs - - - - (5,843)
Common stock issued for cash 7,500 8,000 - 8,000 66,500
Net Cash Provided by
Financing Activities 7,500 8,000 - 8,000 60,657
NET INCREASE (DECREASE)
IN CASH (6,814) 1,615 (10,046) 1,615 13,948
CASH AT BEGINNING OF PERIOD 20,762 - 23,994 - -
CASH AT END OF PERIOD $ 13,948 $ 1,615 $ 13,948 $ 1,615 $ 13,948
<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the For the April 22,
Nine Months Ended Three Months Ended 1997 Through
September 30, September 30, September 30,
1998 1997 1998 1997 1998
SUPPLEMENTAL CASH FLOW
INFORMATION
CASH PAID FOR:
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
NON CASH FINANCING ACTIVITIES:
Patent rights and deferred
interest acquired for
common stock and
assumption of note payable $ - $ - $ - $ 30,000 $ 30,000
<PAGE>
LIL MARC, INC.
Notes to the Consolidated Financial Statements
September 30, 1998 and December 31, 1997
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have
been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at
September 30, 1998 and for all periods presented have been
made.
Certain information and footnote disclosures normally
included in consolidated financial statements prepared in
accordance with general accepted accounting principles have
been condensed or omitted. It is suggested that these
condensed consolidated financial statements be rad in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 1997 audited
consolidated financial statements. The results of
operations for the periods ended September 30, 1998 and
1997 are not necessarily indicative of the operating
results for the full year.
<PAGE>
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-QSB.
Overview
The Company began operations in 1997 by negotiating for and
subsequently acquiring the U.S. patent rights to the LiL Marc
Training Urinal, the trade name "LiL Marc" and the right to
manufacture the product. Although the Company has yet to realized
revenues, management anticipates sales to begin in the fourth
quarter of 1998.
The Company's current capital was provided by the sale of its
common stock in 1997 and in 1998. Management believes that cash
requirements can be satisfied with existing capital until
approximately the fourth quarter of 1998. It is anticipated that
this capital will be used to finalize development of the LiL Marc
including packaging design and preliminary marketing activities.
Management anticipates that the Company will likely require further
capital of approximately $200,000 within the next six to twelve
months in order to properly facilitate production and distribution
channels. This additional capital is expected to come from sales
of the LiL Marc, however, if initial marketing is delayed or
revenues are not adequate to satisfy its capital needs, the Company
will have to explore other alternatives for funding.
In the event outside funding is necessary, the Company will
investigate the possibility of interim financing, either debt or
equity, to provide capital. Although management has not made any
arrangements or definitive agreements, the Company would consider
private funding or the private placement of its securities and/or
a public offering. If the Company experiences a substantial delay
in marketing the LiL Marc and is unable to secure financing from
the sale of its securities or from private lenders, the
continuation of the Company as a going concern would be seriously
jeopardized.
The Company has completed most of the development of the LiL
Marc and is now concentrating on packaging and marketing.
Management does not intend to consider new products until such time
as revenues are realized from the sale of the LiL Marc and the
Company has sufficient capital to commence such a venture.
However, the Company is exploring the possibility of producing the
LiL Marc in various colors in addition to the current porcelain
white and adding plastic chrome attachments to highlight
appearance. Another variable being investigated is implementing
cartoon-like features that would slide on the neck of the Lil Marc,
attach to the side and/or the base, which would give the appearance
of a clown's head, hands and feet. The Company is also considering
the addition of complementary accessories such as (a) LiL Marc
floor mat for the user to stand on, (b) LiL Marc "sticky tabs" as
goal rewards for the user, and (c) LIL Marc dye tablets that change
color as the urinal is used. Management believes that the above
innovations could be implemented with minimal capital expenditures
and with little or no research and development. None of these
variations have been incorporated into the product as of the date
hereof. Presently the Company is concentrating on the packaging of
the LiL Marc, which will be in a shrink-wrap design.
The Company does not anticipate making any significant capital
expenditures on plant facilities or equipment. The LiL Marc and
stand will be manufactured by sub-contractors and packaged by the
Company. There are no current plans for the Company to become
engaged in the manufacturing and packaging of any of its products.
The Company currently has an inventory of approximately 3,000
LiL Marc units that were acquired from the inventor. As the
Company begins to realize sales, it intends to commence production
of approximately 5,000 additional units. The Company intends to
market the LiL Marc direct to retailers, focusing on specialty baby
store chains, some of which also have mail order programs.
Advertising, other than package layout, will be minimal initially,
and will increase as additional funds become available.
Management does not anticipate hiring additional employees
until warranted by sales of the LiL Marc and is dependent on the
Company having sufficient capital. The Company's two directors
will perform most of the duties associated with final development
of the LiL Marc and preliminary marketing. If adequate sales are
realized, the Company will consider additional employees, primarily
one or two persons with expertise in production/shipping and
marketing, and possibly an administrative assistant.
Results of Operations for the First Nine Months of 1998
The Company has not commenced marketing of the LiL Marc,
rather it is finalizing the packaging and marketing plans for the
product. The Company has not realized any revenues since
inception. For the third quarter and first nine months of 1998,
the Company had total operating expenses of $8,733 and $13,082,
respectively, primarily for general and administrative expenses.
These amounts represent increases of 228% and 256% for the third
quarter and first nine months of 1998, respectively, when compared
with the 1997 periods, due to the Company's initial start-up
operations in 1997,continuing development of its product in 1998,
and expenses associated with filing its registration statement with
the Securities and Exchange Commission. Management expects
expenses to increase significantly once the Company begins
marketing its product.
Net Operating Loss
The Company has accumulated approximately $13,400 of net
operating loss carryforwards as of April 30, 1998, which may be
offset against taxable income and income taxes in future years.
The use of these losses to reduce future income taxes will depend
on the generation of sufficient taxable income prior to the
expiration of the net operating loss carryforwards. The
carry-forwards expire in the year 2013. In the event of certain
changes in control of the Company, there will be an annual
limitation on the amount of net operating loss carryforwards which
can be used. No tax benefit has been reported in the financial
statements for the year ended December 31, 1997 or the three month
period ended September 30, 1998 because there is a 50% or greater
chance that the carryforward will not be used. Accordingly, the
potential tax benefit of the loss carryforward is offset by a
valuation allowance of the same amount.
Inflation
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company wishes to advise readers that
actual results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company to
meet its cash and working capital needs, the ability of the Company
to successfully market its product, and other risks detailed in the
Company's periodic report filings with the Securities and Exchange
Commission.
PART II
Item 1. Legal Proceedings
There are presently no other material pending legal
proceedings to which the Company or any of its subsidiaries is a
party or to which any of its property is subject and, to the best
of its knowledge, no such actions against the Company are
contemplated or threatened.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended September 30, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LIL MARC, INC.
Date: November 13, 1998 By: /S/ George I. Norman, III
GEORGE I. NORMAN III
C.E.O., C.F.O., President
and Director
Date: November 13, 1998 By /S/ Laurie J. Norman
LAURIE J. NORMAN
Secretary/Treasurer, and
Director
(Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE LIL MARC, INC. FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,948
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,948
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,109
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 16,816
<OTHER-SE> 43,841
<TOTAL-LIABILITY-AND-EQUITY> 34,109
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 13,082
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,297)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,297)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
