<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] 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
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LIL MARC, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 84-1417774
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
830 Third Avenue, New York, New York 10022
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(Address of Principal Executive Offices) (Zip Code)
212-829-5800
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(Issuer's Telephone Number, Including Area Code)
149 East 900 South, Salt Lake City, Utah 84111
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
--- ---
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value per share, as of August 8, 2000, was 2,668,666 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
LIL MARC, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
Balance Sheets as of June 30, 2000 (Unaudited) 3
and December 31, 1999
Statements of Operations (Unaudited) for the Six Months and 4
Three Months Ended June 30, 2000 and 1999 and
from Inception through June 30, 2000
Statements of Stockholders' Equity from Inception 5
through June 30, 2000
Statements of Cash Flows (Unaudited) for the Six Months and 7
Three Months Ended June 30, 2000 and 1999 and
from Inception through June 30, 2000
Notes to Financial Statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 12
PART II. OTHER INFORMATION 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIL MARC, INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 250,000 $ 5,988
--------- ---------
Total Current Assets 250,000 5,988
--------- ---------
OTHER ASSETS
Patent (Note 2) -- 12,892
--------- ---------
Total Other Assets -- 12,892
--------- ---------
TOTAL ASSETS $ 250,000 $ 18,880
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 1,500
--------- ---------
Total Current Liabilities -- 1,500
--------- ---------
STOCKHOLDERS' EQUITY
Common stock; 5,000,000 shares authorized of $0.01
par value, 2,668,666 and 1,768,666 shares issued and
outstanding, respectively 26,686 17,686
Additional paid-in capital 292,671 51,671
Deficit accumulated during the development stage (69,357) (51,977)
--------- ---------
Total Stockholders' Equity 250,000 17,380
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 250,000 $ 18,880
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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LIL MARC, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Ended Three Months Ended April 22,
June 30, June 30, 1997 Through
------------------- ------------------ June 30,
2000 1999 2000 1999 2000
-------- --------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
SALES $ -- $ -- $ -- $ -- $ 346
COST OF SALES -- -- -- -- --
-------- ------- ------- ------- --------
GROSS MARGIN -- -- -- -- 346
-------- ------- ------- ------- --------
OPERATING EXPENSES
General and administrative 13,536 5,626 2,735 5,430 49,201
Amortization 1,433 2,865 -- 1,433 17,191
-------- ------- ------- ------- --------
Total Operating Expenses 14,969 8,491 2,735 6,863 66,392
-------- ------- ------- ------- --------
Loss from Operations (14,969) (8,491) (2,735) (6,863) (66,046)
OTHER INCOME (EXPENSE)
Loss on sale of subsidiary (2,411) -- (2,411) -- (2,411)
Interest expense -- -- -- -- (900)
-------- ------- ------- ------- --------
Total Other Income (Expense) (2,411) -- (2,411) -- (3,311)
-------- ------- ------- ------- --------
NET LOSS $(17,380) $(8,491) $(5,146) $(6,863) $(69,357)
======== ======= ======= ======= ========
NET LOSS PER SHARE $ (0.01) $ (0.01) $ (0.00) $ (0.00)
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ----------- -----------
<S> <C> <C> <C> <C>
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)
Issuance of 87,000 shares of
common stock at $0.10
per share 87,000 870 7,830 --
Net loss for the year ended
December 31, 1999 -- -- -- (21,166)
--------- --------- --------- ---------
Balance, December 31, 1999 1,768,666 $ 17,686 $ 51,671 $ (51,977)
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
--------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999 1,768,666 $ 17,686 $ 51,671 $ (51,977)
Sale of wholly-owned subsidiary,
LILM, Inc., (Note 1) (unaudited) (100,000) (1,000) 1,000 --
Common stock issued for cash
at $0.25 per share (unaudited) 1,000,000 10,000 240,000 --
Net loss for six months ended
June 30, 2000 (unaudited) -- -- -- (17,380)
---------- ---------- ---------- ----------
Balance, June 30, 2000
(unaudited) 2,668,666 $ 26,686 $ 292,671 $ (69,357)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Ended Three Months Ended April 22,
June 30, June 30, 1997 Through
--------------------------------- --------------------------------- June 30,
2000 1999 2000 1999 2000
---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(17,380) $ (8,491) $ (5,146) $(6,863) $(69,357)
Adjustments to reconcile net
loss to net cash used by operating
activities:
Amortization 1,433 2,865 -- 1,433 17,191
Loss on sale of subsidiary 2,411 -- 2,411 -- 2,411
Common stock issued for services -- -- -- -- 8,700
Changes in assets and liabilities:
Increase (decrease) in accounts
payable (1,500) 1,450 -- 1,450 --
Increase (decrease) in accrued
expenses 9,048 -- 348 -- 9,048
--------- -------- --------- --------- ---------
Net Cash Used by
Operating Activities (5,988) (4,176) (2,387) (3,980) (32,007)
--------- -------- --------- --------- ---------
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 250,000 -- 250,000 -- 316,500
--------- -------- --------- --------- ---------
Net Cash Provided by
Financing Activities 250,000 -- 250,000 -- 310,657
--------- -------- --------- --------- ---------
NET INCREASE (DECREASE)
IN CASH 244,012 (4,176) 247,613 (3,980) 250,000
CASH AT BEGINNING
OF PERIOD 5,988 11,223 2,387 11,027 --
--------- -------- --------- --------- ---------
CASH AT END OF PERIOD $ 250,000 $ 7,047 $ 250,000 $ 7,047 $ 250,000
========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Ended Three Months Ended April 22,
June 30, June 30, 1997 Through
------------------------- ------------------------ June 30,
2000 1999 2000 1999 2000
----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
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
Common stock issued for services $ -- $ -- $ -- $ -- $ 8,700
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
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.
LILM, Inc. was incorporated as a wholly-owned subsidiary of Lil Marc,
Inc. under the laws of the State of Nevada on December 30, 1999. LILM,
Inc. was organized to continue with the product development and sales
of the "Lil Marc" training urinal.
On May 19, 2000, the Board of Directors approved a proposal to change
the stated purpose of the corporation as stated in Article III of the
Articles of Incorporation to a general purpose.
On May 19, 2000, the Company exchanged all of the outstanding shares
(1,000,000 shares) of its wholly-owned subsidiary LILM, Inc. to Alewine
Limited Liability Company in exchange for 100,000 shares of the
Company's common stock. The 100,000 shares of the Company's common
stock have been canceled.
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.
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Numerator - (loss) $ (17,380) $ (8,491) $ (5,146) $ (6,863)
Denominator - weighted
average number of
shares outstanding 1,946,688 1,681,666 2,124,710 1,681,666
---------------- --------------- --------------- ----------------
Income (loss) per share $ (0.01) $ (0.01) $ (0.00) $ (0.00)
================ =============== =============== ================
</TABLE>
c. Provision for Taxes
The Company's tax basis is the same as the Company's financial
statement basis. The Company has net operating loss carryforwards of
approximately $69,000 available to offset future federal and state
income tax through 2019. The Company has not recorded a tax benefit
attributable to the carryforwards because realization of such has been
offset by a valuation allowance for the same amount.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 six months
ended June 30, 2000 and the year ended December 31, 1999 was $1,433 and
$5,730, respectively.
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------------- -----------------
(Unaudited)
<S> <C> <C>
Patent $ -- $ 28,650
Amortization -- (15,758)
---------------- -----------------
Net $ -- $ 12,892
================ =================
</TABLE>
On February 3, 2000, Lil Marc, Inc. assigned the rights of the patent
for the "Lil Marc" training urinal to its subsidiary, LILM, Inc.
The patent rights for the "Lil Marc" training urinal were sold as part
of the subsidiary, LILM, Inc. on May 19, 2000.
f. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
g. 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.
h. Revenue Recognition
A revenue recognition policy will be established when planned principal
operations commence.
i. 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.
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<PAGE>
LIL MARC, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 3 - RELATED PARTY TRANSACTIONS
In 1997, the Company had issued 400,000 shares of its common stock to
its shareholders for the assignment of the patent rights to the "Lil
Marc" training urinal.
In 1999, the Company issued 87,000 shares of its common stock at $0.10
per share for gross services valued at $8,700 to its president.
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 June 30, 2000. The Company is
seeking a merger with an existing operating company.
NOTE 5 - 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 6 - PUBLIC OFFERING
In 1997, 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 a total of $54,000.
NOTE 7 - STOCK TRANSACTIONS AND WARRANTS
On May 25, 2000, the Company sold 1,000,000 shares of its authorized
common stock at $0.25 per share for $250,000 cash. As part of the
transaction, the Company issued warrants to purchase a total of
3,000,000 shares of common stock at $0.25 per share. These warrants
expire on November 25, 2001.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS DOCUMENT INCLUDES STATEMENTS THAT MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THE COMPANY WOULD LIKE TO
CAUTION READERS REGARDING CERTAIN FORWARD-LOOKING STATEMENTS IN THIS
DOCUMENT AND IN ALL OF ITS COMMUNICATIONS TO SHAREHOLDERS AND OTHERS,
PRESS RELEASES, SECURITIES FILINGS, AND ALL OTHER COMMUNICATIONS.
STATEMENTS THAT ARE BASED ON MANAGEMENT'S PROJECTIONS, ESTIMATES AND
ASSUMPTIONS ARE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVE,"
"EXPECT," "ANTICIPATE," "INTEND," AND SIMILAR EXPRESSIONS GENERALLY
IDENTIFY FORWARD-LOOKING STATEMENTS. WHILE THE COMPANY BELIEVES IN THE
VERACITY OF ALL STATEMENTS MADE HEREIN, FORWARD-LOOKING STATEMENTS ARE
NECESSARILY BASED UPON A NUMBER OF ESTIMATES AND ASSUMPTIONS THAT,
WHILE CONSIDERED REASONABLE BY THE COMPANY, ARE INHERENTLY SUBJECT TO
SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES AND KNOWN AND UNKNOWN RISKS. MANY OF THE UNCERTAINTIES
AND CONTINGENCIES CAN AFFECT EVENTS AND THE COMPANY'S ACTUAL RESULTS
AND COULD CAUSE ITS ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY, OR ON BEHALF OF,
THE COMPANY.
The following discussion and analysis should be read in conjunction
with the financial statements and related notes thereto which are included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999 filed with the Securities and Exchange Commission.
Pursuant to a Stock Purchase Agreement dated as of May 19, 2000 (the
"Purchase Agreement") by and among ComVest Capital Partners, LLC ("ComVest") and
the Company, George I. Norman III, Laurie J. Norman, Alewine Limited Liability
Company ("Alewine"), and Linda Bryson (the latter four parties, collectively the
"Sellers"), on May 25, 2000 (the "Closing Date"), ComVest purchased 1,194,166
shares of the common stock of the Company (the "Common Stock") from the Sellers
for an aggregate purchase price of $315,000. Also pursuant to the Purchase
Agreement, ComVest purchased from the Company, for an aggregate purchase price
of $250,000, (i) 1,000,000 newly issued shares of Common Stock and (ii) a
warrant (the "Warrant") to purchase an additional 3,000,000 shares of Common
Stock. The Warrant is exercisable until November 25, 2001 at an exercise price
of $0.25 per share.
In addition, on the Closing Date, all of the officers and directors of
the Company resigned and ComVest's designees, Joseph P. Wynne and Basil
Asciutto, were elected sole directors and officers.
Subsequent to the Closing Date, pursuant to a stock sale agreement
between the Company and Alewine, the Company sold all of the issued and
outstanding capital stock of its wholly-owned subsidiary, LILM, Inc., to Alewine
in exchange for 100,000 shares of Common Stock, which 100,000 shares became
treasury stock.
As a result of such transactions, the Company has no further interest
in its former business (the development, manufacture, and marketing of the Lil
Marc training urinal). From and after consummation of those transactions, the
Company's plan of operation has been to
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<PAGE>
merge or effect a business combination with a domestic or foreign private
operating entity (a "Business Combination"). Other than activities relating to
attempting to locate such a candidate, the Company does not currently
anticipate conducting any other operations.
It is not possible at this time to predict when, if ever, the
Company will enter into a Business Combination with any such private company
or what will be the industry, operating history, revenues, future prospects
or other characteristics of any such company. As of the date hereof, the
Company is not currently engaged in negotiations concerning a Business
Combination.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had cash and cash equivalents of
$250,000 and accounts payable of $0. As the Company's current operations are
limited to seeking a Business Combination candidate, the Company's cash and
cash equivalents are expected to fund all operations until any such Business
Combination is consummated as well as all fees and expenses of any such
transaction. Although it does not currently plan to do so, the Company may in
the future raise additional funds through the sale of its securities. In
addition, the Company would receive up to $750,000 if ComVest should exercise
the Warrant in full.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 25, 2000, the Company sold to ComVest for an aggregate purchase
price of $250,000 (i) 1,000,000 shares of the Common Stock and (ii) the Warrant
to purchase 3,000,000 shares of the Common Stock. These sales were made pursuant
to the Purchase Agreement. The Company relied upon the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, in selling such
securities to ComVest.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is being filed with this Report:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter ended June 30, 2000, the Company filed the following
Reports on Form 8-K:
1. Dated May 19, 2000, reporting on a change in control of the
Company, upon the execution of the Purchase Agreement; and
2. Dated May 25, 2000, reporting on the consummation of
transactions pursuant to the Purchase Agreement.
No financial statements were filed with either of such reports.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LIL MARC, INC.
Dated: As of August 17, 2000 By: /s/ Basil Asciutto
------------------------------
Basil Asciutto, President
and a Director
(Principal Executive Officer)
Dated: As of August 17, 2000 By: /s/ Joseph P. Wynne
------------------------------
Joseph P. Wynne,
Chief Financial Officer,
Secretary, and a Director
(Principal Financial and
Accounting Officer)
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