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, 1999
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, 1999
Common Stock, $.01 par value 1,681,666
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . 3
Balance Sheets -- September 30, 1999 and
December 31, 1998. . . . . . . . . . . . . . . . . 4
Statements of Operations -- three and nine months
ended September 30, 1999 and 1998 . . . . . . . . . . . 5
Statements of Stockholders' Equity . . . . . . . . . . . 6
Statements of Cash Flows -- three and nine months ended
September 30, 1999 and 1998 . . . . . . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 16
Item 2. Changes In Securities and Use of Proceeds. . . . . . . . 16
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . 16
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 18
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended September 30, 1999, have been prepared by the Company.
LIL MARC, INC.
FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
LIL MARC, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, December 31,
1999 1998
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 6,762 $ 11,224
Total Current Assets 6,762 11,224
OTHER ASSETS
Patent (Note 2) 14,324 18,622
Total Other Assets 14,324 18,622
TOTAL ASSETS $ 21,086 $ 29,846
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 150 $ -
Accounts payable - related party (Note 9) 5,800 -
Total Current Liabilities 5,950 -
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock; 5,000,000 shares authorized
of $0.01 par value, 1,681,666 shares
issued and outstanding 16,816 16,816
Additional paid-in capital 43,841 43,841
Deficit accumulated during the
development stage (45,521) (30,811)
Total Stockholders' Equity 15,136 29,846
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 21,086 $ 29,846
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,
1999 1998 1999 1998 1999
SALES $ 60 $ - $ 60 $ - $ 60
COST OF SALES - - - - -
GROSS MARGIN 60 - 60 - 60
OPERATING EXPENSES
General and administrative 10,472 13,082 4,846 3,765 30,206
Amortization 4,298 4,215 1,433 1,350 14,475
Total Operating Expenses 14,770 17,297 6,279 5,115 44,681
Loss from Operations (14,710) (17,297) (6,219) (5,115) (44,621)
OTHER INCOME (EXPENSE)
Interest expense - - - - (900)
Total Other Income (Expense) - - - - (900)
NET LOSS $(14,710) $(17,297) $(6,219) $(5,115) $(45,521)
LOSS PER SHARE $ (0.01) $ (0.01) $ (0.00) $ (0.00)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 1,681,666 1,656,665 1,681,666 1,681,666
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 75,000 750 6,750 -
Net loss for the year ended
December 31, 1998 - - - (21,560)
Balance, December 31, 1998 1,681,666 16,816 43,841 (30,811)
Net loss for the nine months
ended September 30, 1999
(unaudited) - - - (14,710)
Balance, September 30, 1999
(unaudited) 1,681,666 $ 16,816 $ 43,841 $ (45,521)
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,
1999 1998 1999 1998 1999
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(14,710) $(17,297) $(6,219) $ (5,115) $(45,520)
Adjustments to reconcile net
(loss) to net cash:
Amortization 4,298 4,215 1,433 1,350 14,475
Changes in assets and liabilities:
Increase (decrease) in accounts
payable 5,950 (1,232) 4,500 105 5,950
Increase in organization cost - - - - (150)
Net Cash Used by
Operating Activities (4,462) (14,314) (286) (3,660) (25,245)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of patent rights - - - - (25,650)
Net Cash Used by
Investing Activities - - - - (25,650)
CASH FLOWS FROM
FINANCING ACTIVITIES
Stock offering costs - - - - (8,843)
Common stock issued for cash - 7,500 - 7,500 66,500
Net Cash Provided by
Financing Activities - 7,500 - 7,500 57,657
NET INCREASE (DECREASE)
IN CASH (4,462) (6,814) (286) 3,840 6,762
CASH AT BEGINNING
OF PERIOD 11,224 20,762 7,048 10,108 -
CASH AT END OF PERIOD $ 6,762 $13,948 $6,762 $13,948 $ 6,762
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,
1999 1998 1999 1998 1999
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
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Lil Marc, Inc. (a development stage company) (The Company)
was incorporated under the laws of the State of Nevada on
April 22, 1997. The Company was organized to engage in the
marketing of the "Lil Marc" training urinal. The Company is
considered a development stage company as defined in SFAS
No. 7.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
calendar year end.
b. Basic Loss Per Share
The computation of basic loss per share of common stock is
based on the weighted average number of shares outstanding
during the period of the financial statements.
c. Provision for Taxes
At September 30, 1999, the Company has not accrued income
taxes because it has net operating loss carryovers of
approximately $45,000 which expires in 2014.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
e. Patents
The Company purchased the patent for the "Lil Marc" training
urinal. Amortization is computed on the straight line
method over the estimated life of the patent of 5 years.
Amortization expense for the nine months ended September 30,
1999 and the year ended December 31, 1998 was $4,298 and
$5,730, respectively.
September 30, December 31,
1999 1998
(Unaudited)
Patent $ 28,650 $ 28,650
Amortization (14,326) (10,028)
Net $ 14,324 $ 18,622
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Sales
The Company expects to generate revenue from sales of its
products throughout the United States.
h. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
i. Revenue Recognition
Revenue is recognized upon delivery of the "Lil Marc"
training urinals.
j. Inventory
The Company's inventory of "Lil Marc" training urinals has
been recorded at predecessor cost of $ -0-.
k. Stock Offering Costs
Costs incurred in connection with the Company's stock
offering have been capitalized and were charged to the
proceeds of the offering upon its completion.
l. Unaudited Financial Statements
The accompanying unaudited financial statements include all
of the adjustments which, in the opinion of management, are
necessary for a fair presentation. Such adjustments are of
a normal, recurring nature.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has issued 400,000 shares of its common stock to
its shareholders for the assignment of the patent rights to
the "Lil Marc" training urinal.
NOTE 4 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of assets
and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its
inception on April 22, 1997 through September 30, 1999. The
Company plans to significantly increase sales of its urinal
training products. The officers of the Company have
committed to covering its operating expenses in the interim.
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1999 and December 31, 1998
NOTE 5 - COMMITMENTS AND CONTINGENCIES - ROYALTY PAYABLE
The Company has agreed to pay a royalty of $0.25, for each
training urinal sold, to the inventor of the "Lil Marc"
product.
NOTE 6 - FORWARD STOCK SPLIT
On September 4, 1997, the shareholders' meeting approved a
2-for-1 forward stock split. The forward stock split is
reflected in these financial statements on a retroactive
basis.
NOTE 7 - PUBLIC OFFERING
The Company offered to the public 1,000,000 shares of its
authorized common stock at $0.10 per share. The costs of
the offering of $8,843 have been charged to the proceeds of
the offering. 540,000 shares were issued for $54,000 cash.
NOTE 8 - PRIVATE PLACEMENT
In 1998, the Company issued 75,000 shares of its common
stock at $0.10 per share for gross proceeds of $7,500 cash.
NOTE 9 - ACCOUNTS PAYABLE - RELATED PARTY
Effective June 1, 1999 the Company resolved to accrue a
payable of $450 per month to the Company's president for
office rent and $750 and $250 per month as compensation to
the Company's president and secretary-treasurer,
respectively. The accrued expenses will be paid in cash or
shares of the Company's common stock.
Item 2. Management's Discussion and Analysis or Plan
of Operations
The following information should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in
this Form 10-QSB.
Plan of Operations
LiL Marc, Inc. (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. The Company has realized only
nominal revenues since inception. Management anticipates that
meaningful sales could commence in the first quarter of 2000.
The Company's current capital was provided by the sale of its
common stock in 1997 and in 1998. Management believes that the
Company's cash requirements can be satisfied with existing capital
through approximately the end of 1999. 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
approximately $20,000 in additional capital within the next six to
twelve months in order to properly facilitate production and
distribution channels. This additional capital is expected to come
from anticipated sales of the LiL Marc product, 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.
The Company may have to seek interim financing, either debt or
equity, to provide additional capital. Presently, the Company has
no arrangements or definitive agreements for possible future
funding. 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. There can be no assurance
that such funding will be available to the Company in the future
or, if available, the funds will be accessible on terms
satisfactory to the Company.
The Company has completed most of the development of the LiL
Marc and is currently concentrating on packaging and marketing.
Management does not intend to consider any new products until such
time as revenues are realized from the sale of the LiL Marc and the
Company has sufficient capital to commence a new venture. However,
the Company is exploring the possibility of developing variations
of the standard LiL Marc product. One possibility is 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.
In June 1999, the Board of Director approved the payment of
office rent of $450 per month for the Company's facilities that are
shared with its President. The President has agreed to accrue all
rents payable until such time as the Company begins to realize
revenues. Payment of any accrued amount may be made in either cash
or in shares of the Company's common stock. The Board also
approved payment to its President and Secretary/Treasurer of
monthly compensation of $750 and $250, respectively, which amounts
will also be accrued until the Company realizes revenues. Payment
of the accrued amounts may also be made in either cash or Company
shares.
The Board of Directors has also determined that it will
explore, at least preliminarily, the possibility of acquiring or
merging with other operating businesses or entities. Any such
activities will be in addition to and not in lieu of the further
development of the LiL Marc product. Because the Company's common
stock is publicly traded, management believes the Company
represents a valuable asset to other private businesses that are
looking for a vehicle to become public. Management further
believes that if an opportunity presents itself for the Company to
merge with or acquire an operating business, it would be in the
best interest of the Company and its shareholders to explore such
opportunities. Presently, the Company has not identified any
potential business opportunities nor has it entered into any
arrangements or agreements with any such businesses.
Results of Operations
During the three month period ending September 30, 1999
("third quarter of 1999"), the Company realized its initial
revenues of $60. General and administrative expenses for the third
quarter and first nine months of 1999 were $4,846 and $10,472,
respectively, compared to $3,765 and $13,082 for the comparable
1998 periods. Expenses for the first nine months of 1998 were
higher due to legal and accounting costs associated with its
initial public offering and filing of its initial registration
statement with the Securities and Exchange Commission.
Amortization expenses were stable for the 1999 period compared to
the 1998 periods. Management believes that expenses will remain
relatively constant until it begins full marketing of the LiL Marc
product. The net loss for the third quarter and first nine months
of 1999 were $6,219 and $14,710, respectively, compared with $5,115
and $17,297 for the 1998 periods.
Liquidity and Capital Resources
Working capital at September 30, 1999 was $15,136 compared to
$11,224 at December 31, 1998. During the first nine months of 1999,
cash decreased to $6,762 from $11,224 at December 31, 1998. For
the third quarter of 1999 the Company's operating activities used
$286 in cash compared to $3,660 cash used for the comparable 1998
period. This result was due primarily to the increase in accounts
payable to two directors for accrued rent and compensation. Net
cash used by operating activities for the first nine months of 1999
was $4,462 compared to $14,314 for the comparable 1998 period.
This decrease is also attributed to the increase in accounts
payable and the decrease in the net loss.
As of September 30, 1999, the Company had total assets of
$21,086 and total stockholders' equity of $15,136. In comparison,
as of December 31, 1998, the Company had total assets of $29,846
and total stockholders' equity of $29,846.
Net Operating Loss
The Company had a net operating loss carryforwards of
approximately $45,000 at September 30, 1999 compared to $30,000 as
of December 31, 1998. Net operating loss carryforwards 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 2014. 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, 1998 or the nine month
period ended September 30, 1999 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.
Year 2000
Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the
applicable year. In such case, programs that have time-sensitive
logic may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations or system
failures.
The Company has completed its assessment of the Year 2000
issue and believes that any costs of addressing the issue will not
have a material adverse impact on the Company's financial position.
The Company believes that its existing accounting computer systems
and software will not need to be upgraded to mitigate the Year 2000
issues. The Company has not incurred any costs associated with its
assessment of the Year 2000 problem. In the event that Year 2000
issues impact the Company's accounting operations and other
operations aided by its computer system, the Company believes, as
part of a contingency plan, that it has access to adequate
personnel or consultants to perform those functions manually until
such time that any Year 2000 issues are resolved.
The Company believes that third parties with whom it has
material relationships will not materially be affected by the Year
2000 issues as those third parties are relatively small entities
which do not rely heavily on information technology ("IT") systems
and non-IT systems for their operations. However, if the Company
and third parties upon which it relies are unable to address any
Year 2000 issues in a timely manner, it could result in a material
financial risk to the Company, including loss of revenue and
substantial unanticipated costs. Accordingly, the Company plans to
devote all resources required to resolve any significant Year 2000
issues in a timely manner.
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 and Use of Proceeds
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, 1999.
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 15, 1999 By: /S/ George I. Norman, III
GEORGE I. NORMAN III
C.E.O., C.F.O., President
and Director
Date: November 15, 1999 By /S/ Laurie J. Norman
LAURIE J. NORMAN
Secretary/Treasurer, and
Director
(Principal Accounting
Officer)
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<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE LIL MARC, INC.
FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<OTHER-SE> 43,841
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