CRTD 10-Q Quarterly Report Sept. 30, 2012 | Alphaminr
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CRTD 10-Q Quarter ended Sept. 30, 2012

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10-Q 1 lilm10q20120930.htm LILM, INC. FORM 10-Q SEPTEMBER 30, 2012 lilm10q20120930.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2012

[   ]   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 Identification No.)
incorporation or organization)

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 [  ]
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
ST (§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).  We do not maintain a corporate website. Yes  [  ]    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 [  ]        No  [X ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate 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 November 19, 2012
Common Stock, $0.001 par value
2,633,750


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
11
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
15
Item 4(T).
Controls and Procedures
15
PART II   —   OTHER INFORMATION
Item 1.
Legal Proceedings
16
Item 1A.
Risk Factors
16
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
16
Item 3.
Defaults Upon Senior Securities
16
Item 4.
Mine Safety Disclosures
16
Item 5.
Other Information
16
Item 6.
Exhibits
16
Signatures
17
2

PART  I   —   FINANCIAL INFORMATION

Item 1.            Financial Statements

The accompanying unaudited balance sheet of LILM, Inc. and Subsidiary and LiL Marc, Inc. (predecessor) (development stage company) as of September 30, 2012 and audited balance sheet at December 31, 2011, related unaudited statements of operations for the three months and nine months ended September 30, 2012 and 2011 and the period April 22, 1997 (date of inception of predecessor) to September 30, 2012, and related unaudited statements of cash flows for the nine months ended September 30, 2012 and 2011 and the period April 22, 1997 (date of inception of predecessor) to September 30, 2012, 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, 2012, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012 or any other subsequent period.


LILM, INC.
(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012 and December 31, 2011



3

LILM, INC. and SUBSIDIARY and LIL MARC, INC.(predecessor)
(Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Sept 30,
Dec 31,
2012
2011
Assests
Current Assests
Inventory $ 1,597 $ 2,454
Total Current Assets 1,597 2,454
Equipment-Production Mold, Net 1,105 1,360
Total Assets 2,702 3,814
Liabilities & Stockholders' Deficiency
Current Liabilities
Accounts Payable and Accrued Expenses 30,787 20,874
Note Payable- Related Party 48,691 46,153
Total Current Liabilities 79,478 67,027
Stockholders' Deficiency
Common Stock
25,000,000 shares authorized at $0.001 par value;
2,633,750 shares issued and outstanding 2,634 2,634
Capital in excess of par value 147,561 147,561
Accumulated deficit during development stage (226,971 ) (213,408 )
Total Stockholders' Deficiency (76,776 ) (63,213 )
Total Liabilities and Stockholders' Deficiency
$ 2,702 $ 3,814
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
For the Three and Nine Months Ended September 30, 2012 and 2011 and the Period
April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to September 30, 2012
(UNAUDITED)
Three Months
Nine Months
Ended
Ended
Sept 30,
Sept 30,
Sept 30,
Sept 30,
Apr 22, 1997
2012
2011
2012
2011
to Sept 30, 2012
Sales
$ 5,024 $ 5,663 $ 13,513 $ 16,647 $ 63,105
Cost of Goods Sold
(451 ) (725 ) (1,442 ) (2,151 ) (3,968 )
Gross Profit 4,573 4,938 12,071 14,496 59,137
Operating Expenses
General and administrative 8,715 5,329 23,817 20,594 254,813
Royalties 46 71 146 223 634
Depreciation and amortization 85 85 255 255 29,245
Total Operating Expenses
8,846 5,485 24,218 21,072 284,692
Income (Loss) from Operations (4,273 ) (547 ) (12,147) (6,576) (225,555)
Other (Income) Expense:
Interest Expense 486 - 1,416 - 1,416
Net Loss
$ (4,759 ) $ (547 ) $ (13,563 ) $ (6,576 ) $ (226,971 )
Net Loss Per Common Share
Basic and diluted $ - $ - $ - $ -
Weighted Average Outstanding Shares
Basic and diluted (stated in 1000's) 2,634 2,634 2,634 2,634
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
For the Nine Months Ended Sept 30, 2012 and 2011 and the Period
April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to Sept 30, 2012
(UNAUDITED)
Sept 30,
Sept 30,
Apr 22, 1997 to
2012
2011
Sept 30, 2012
Cash Flows From
Operating Activities
Net Loss $ (13,563 ) $ (6,576 ) $ (226,971 )
Adjustments to reconcile net loss to
net cash (Used in) operating activities
Contributions to capital- expenses 100
Issuance of common stock for expenses - - 8,700
Depreciation and amortization 255 255 29,245
Changes in operating assets and liabilities:
Inventory 857 242 (1,597 )
Accounts payable and accrued expenses 9,913 (11,506 ) 27,566
Net Cash Flows (Used in) Operations
(2,538 ) (17,585 ) (162,957 )
Cash Flows From Investing Activities
Purchase of patent
- - (28,650 )
Purchase of Equipment-Production Mold
- - (1,700 )
Purchase office equipment
- - (2,096 )
Net Cash Flows (Used in) Investing Activities
- - (32,446 )
Cash Flows From Financing Activities
Notes Payable from related party
2,725 23,452 64,213
Payments to related party
(187 ) (4,946 ) (15,522 )
Proceeds from the issuance of common stock
- - 146,712
Net Cash Flows provided by Financing Activities 2,538 18,506 195,403
Net Change in Cash
- 921 -
Cash at Beginning of Period
- - -
Cash at End of Period
$ - $ 921 $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
Issuance of 922,900 common shares for a patent- 2000
11,963
Contributions to capital- expenses- 2001
100
Issuance of common stock for expenses
8,700
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 CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2012
(UNAUDITED)


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 statements 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, 2012.

The accompanying unaudited balance sheet of LILM, Inc. and Subsidiary and LiL Marc, Inc. (predecessor) (development stage company) as of September 30, 2012 and related unaudited statements of operations for the three and nine months ended September 30, 2012 and 2011 and the period April 22, 1997 (date of inception of predecessor) to September 30, 2012, and related unaudited statements of cash flows for the nine months ended September 30, 2012 and 2011 and the period April 22, 1997 (date of inception of predecessor) to September 30, 2012, have been prepared in accordance with the requirements for unaudited interim periods, and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America.  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 nine month period ended September 30, 2012, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012 or any other subsequent period.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Method

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.

7
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, 2012, the Company had a net operating loss available for carryforward of $171,540. The income tax benefit of approximately $60,000 from the carryforward has been fully offset by a valuation allowance as we have determined the ability to use the future tax benefit is doubtful.  The net operating loss will expire starting in 2017.


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 income (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 the basic and diluted per share amounts are the same. As of September 30, 2012, the Company has no dilutive securities outstanding.

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

8

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.

Recent Accounting Pronouncements

The Company does not expect that the adoption of recent accounting pronouncements will have a material impact on its financial statements.
3.  INVENTORY

The product is a stand alone product made of plastic consisting of a urinal produced in California  using a blow  mold and a stand and base produced  in China with an injection mold.  All inventory is shipped to Salt Lake City, Utah, and stored in a small warehouse.  The product is sold via the Internet, is assembled at time of shipping by the Company, and is delivered to customers or to wholesale resellers using a ground courier service.  During December 2010, the Company paid a deposit of $2,990 to a China consortium for parts to be used in its training urinal product. 200 samples were delivered to the Company in January 2011 and sold to customers.  Another 2,100 were delivered to the company in February 2011 and are currently being sold to customers. Inventory is reported at the lower of cost (computed on a first-in, first-out basis) or net realizable value. All inventory on hand as of September 30,2012 has been classified as finished goods.
4.  EQUIPMENT –PRODUCTION MOLD
On August 2, 2010, the Company purchased an injection mold from a China consortium for $1,700 to produce the base and stand for the LiL Marc training urinal.  The Company has determined the mold went into service on or about January 1, 2011 and is being depreciated over a 5 year period. Depreciation expense for the 9 months ended September 30, 2012 and 2011 was $255, for each period.

5.  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 $0.25, due to the inventor, on the sale of each training urinal.
6.  SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

9
The Chief Executive Officer (CEO) and two Directors have acquired 72% of the outstanding common stock of the Company. During the nine months ended September 30, 2012, the Company received loans from the CEO and Directors in the amount of $2,725 and repaid prior loans of $187. From inception (April 22, 1997) to September 30, 2012, net loans from the CEO and Directors are $48,691, which are payable on demand.
As of January 1, 2012, the Company’s Board of Directors approved a modification of the terms of these loans to include an annual, simple interest rate of 4%. Related interest expense for the nine months ended September 30, 2012 was $1,416.

7.  COMMON STOCK

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.  On November 3, 2009 the Company sold 20,000 shares of that offering. On April 6, 2010 the Company sold 20,000 shares of that offering.  On June 29, 2010 the Company sold 10,000 shares of that offering. The Company has since closed the offering.
8. 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.

10
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 limited cash assets, operations and revenue. Ongoing operating expense, including the costs associated with the preparation and filing with the SEC of our periodic reports, have been paid for by the net proceeds from our initial stock offering in 2002, a private placement of securities and from advances from a stockholder.  A total net amount of $48,691 has been advanced by Alewine Limited Liability Company, a 72% stockholder that is managed by our President, George I. Norman, III.  The debt is evidenced by a promissory note that is payable upon demand.

It is anticipated that we will require approximately $20,000 over the next 12 months to fund operations and to maintain corporate viability.  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. There can be no assurance at this time that any potential sources of funds will be available.  We also do not have any further commitments from a director or stockholder to provide any additional funding.  During a private offering of our securities in 2009 and 2010, a total of 50,000 shares were sold for total proceeds of $12,500.  We have since closed the offering.  If we are unable to obtain necessary additional working capital, there is substantial doubt about our ability to continue as a going concern.

Results of Operations

During the three months ended September 30, 2012, we realized revenues of $5,024 compared with $5,663 for the three months ended September 30, 2011.  Revenues for the 2012 period were the result of Internet retail and wholesale orders, which decreased 11% ($639) from the same period in 2011.  Revenues for the 2011 period were also from Internet retail and wholesale orders. The 2012 third quarter decrease was due to a 38% decrease ($1,311) in wholesale orders offset by a 30% increase ($672) in retail orders.  Our cost of goods sold for the three months ended September 30, 2012 was 9% ($451) of our total sales and was a 4% decrease ($274) compared to the corresponding period in 2011.

During the nine months ended September 30, 2012, we realized revenues of $13,513 compared with $16,647 for the nine months ended September 30, 2011.  Revenues for the 2012 period were the result of Internet retail and wholesale orders, which decreased 19% ($3,134) for the nine month period.  Revenues for the 2011 period were also from Internet retail and wholesale orders. The 2012 nine month decrease was due to a 3% decrease ($187) in retail orders and a 28% decrease ($2,947) in wholesale orders.  Our cost of goods sold for the nine month period of 2012 were 11% ($1,442) of our total sales and were a 33% decrease ($709) compared to the corresponding period in the third quarter of 2011.

Total expenses were $8,846 for the three months ended September 30, 2012 compared to $5,485 for the three months ended September 30, 2011.  Expenses during the third quarter of 2012 were primarily for general and administrative expenses, which increased 64% ($3,386) for the third quarter.  The third quarter increase in general and administrative expense was primarily attributed to a 116% increase ($4,207) in general operating expenses, and a 5% increase ($45) in professional fees. The 116% increase ($4,207) in general operating expenses for the third quarter was directly attributed to a 226% increase ($1,470) in XBRL and filing fees, a 162% increase ($569) in auto expense, a 28% increase ($298) in miscellaneous office expenses and 68% increase ($777) in postage and delivery expense from the corresponding period in the third quarter of 2011.

Total expenses were $24,218 for the first nine months of 2012 compared to $21,072 for the first nine months of 2011.  Expenses during the nine month period of 2012 were primarily for general and administrative expenses, which increased 16% ($3,223) for the nine month period.  The nine month period increase in general and administrative expense was primarily attributed to a 12% increase ($433) in  XBRL and filing fees,  a 7% increase ($390) in professional fees, a 16% increase ($592) in postage and delivery, and a 227% increase ($1,922) in auto expenses from the corresponding nine month period of 2011.

11

The net loss for the three months ended September 30, 2012 was $4,759 compared with a net loss of $547 for the third quarter of 2011, an increase of $4,212 for the 2012 period.  The third quarter increase in net loss was due to an increase in general operating expenses of $4,207 (116%).

The net loss for the first nine months of 2012 was $13,563 compared with a net loss of $6,576 for the nine month period of 2011, an increase of $6,987 (106%) for the 2012 period.  The nine month increase in net loss is due to a increase in general operating expenses of $4,220 (34%), a decrease in sales of $3,134 (19%), offset by  a $709 (33%) decrease in cost of goods sold.
Liquidity and Capital Resources

At September 30, 2012, we had current assets consisting of $1,597 in inventory and other assets of $1,105 in equipment (net of depreciation). At December 31, 2011, we had current assets consisting of $2,454 in inventory, and other assets of $1,360 in equipment. Total liabilities at September 30, 2012 and December 31, 2011 were $79,478 and $67,027 respectively.  Total liabilities at September 30, 2012 consisted of $12,500 for legal fees, $5,665 for accounting fees, $2,130 for transfer agent and filer fees, $8,400 for office rent and storage, accrued interest of $1,416, royalties due of $255, miscellaneous payables of $436 offset by a $15 credit  and a demand note in the amount of $48,691 issued to a private limited liability company owned by two directors George Norman and Laurie Norman. The note is payable upon demand and bears a 4% interest rate beginning on January 1, 2012.

Because we currently have only limited revenues and cash reserves, we anticipate 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 September 30, 2012, we had cash on hand of $0, negative working capital of $77,881, and total stockholders’ deficiency of $76,776.  At December 31, 2011, we had cash on hand of $0, negative working capital of $64,573 and total stockholders’ deficiency of $63,213.

Plan of Operation

During the next 12 months, we plan to focus on improving our website found at www.LiLMarc.com and www.Boyspottytraining.com .  Anticipated improvements include simplifying the ordering process, improving the appearance and layout of the website, and making changes to the website that would increase impulse purchases.  We will also continue to focus on improving relationships with resellers that sell our product on their websites and on engaging new website hosts for the product.  Management anticipates that this can be accomplished through individual calls and e-mails to the website hosts. 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, directors will defer any compensation until such time as business warrants the payment of such.

On September 17, 2009 we 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 had the discretion and extended the private placement until December 31, 2010.     A total of 50,000 shares were sold during 2009 and 2010 for total proceeds of $12,500.  We have since closed the offering. We are exploring other options to raise additional capital. There can be no assurance that any additional shares will be sold in another 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 any additional funding is to provide the company with more marketing and operating capital.

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 wants their child to be successful at potty training.
12

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 any additional advertising. 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.

Management continues to review its production of either additional stands or urinals. Our manufacturing is presently at two different locations 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.

Our ancillary operations are currently housed in our corporate office with some light storage and a separate storage for inventory at another location

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.

After paying certain costs and expenses related to ongoing administrative costs and the associated professional fees, including any residual or ongoing cost of preparing and filing our registration statement, management estimates that it will have sufficient funds to operate for the next six to twelve months.  If business revenues do not provide enough funds to continue operations, it may be necessary for us to seek additional financing.  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.

Because we rely on others for production of our product, we do not expect to make any significant capital expenditures for new equipment or other assets during 2012.  In addition, on August 2, 2010 we purchased an injection mold from a China consortium for $510 to produce the base and stand for the LiL Marc training urinal.  The Company made another payment of $1,190 in December of 2010 to put the mold into production using a facility in China.   The mold came into use beginning in January of 2011.  The Company is still evaluating the future use of this mold.  If additional equipment does become necessary, we believe that we may have to seek outside financing to acquire the equipment or assets.

Currently, we have two main employees.  Our President devotes approximately 20 hours per week to our business and our Secretary assists on an as-needed basis.  We also sometimes schedule additional part-time laborers for packaging and shipping.  Management believes that these employees will be adequate for the foreseeable future, or until our 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.

We estimate that we will need a minimum monthly expenditure of approximately $1,000 for office costs.  This monthly cost will consist of office phone and fax (approximately $175 per month), 800 number (base of $5 plus per call charge of $0.15 per minute), office rent ($200 per month), storage rent ($130 per month), and part time help for packaging (estimated to be from $80 to $120 per month).  Additionally, there is a monthly Internet commerce cost of $100 and other varying miscellaneous expenses.

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At the beginning of 2011 we had 2 , 300 new stand and bases made by a Chinese subcontractor, Shuangwei Traffic Facilities Co. Ltd. at a total cost of $4 , 266.   During the next twelve months, management may seek an estimate from Shuangwei to produce a matching urinal for the stand and bases.  Management does not have an estimate of those costs.

Depending on continuing sales, we may need to order an additional 5,000 complete urinals, stands and bases at our current estimated cost of $6.22 each for a total cost of $31,150.  This option would involve using our subcontractor in China for the stands and bases and our manufacturer in southern California for the urinals.  This production cost will be funded from product sales or through a loan from a director(s).

Management believes that funds for the cost of operations for the next 12 months will come from current working capital, revenue generated from product sales, and possibly loans or advances from officers and directors, although no officer or director has made any such commitment.  In the event we are unable to generate or secure adequate funds to achieve the milestones set forth above, management will explore various alternatives in order to attain our goals.  This may involve seeking a joint venture with another baby product company or marketing company to manufacture and market the LiL Marc training urinal.  We may also consider licensing our product to another baby product or marketing company in exchange for a royalty.  Presently, we have no firm plan or commitment to pursue any alternative.

If we find it necessary to pursue one or more alternatives, it would most likely reduce future revenues from our own product sales and such revenues may not be enough to meet all of our obligations.  Also, if no viable alternative is available, we may have to cease operations temporarily or sell off existing inventory at liquidating prices.  There can be no assurance that we will be able to generate or secure adequate funds to accomplish our objectives during the next twelve months, nor is there any assurance that alternative pursuits will be successful in generating the necessary funds needed to continue operations.

Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future.  Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

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;
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●
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;
●
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, have concluded that, as of September 30, 2012, our disclosure controls and procedures were not effective due to a lack of adquate segregation of duties and the absence of an audit committee.

Changes in Internal Control Over Financial Reporting .  Management has evaluated whether any change in our internal control over financial reporting occurred during the third quarter of fiscal 2012. 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 third quarter of fiscal 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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.            Mine Safety Disclosures

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. and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification of C.E.O. and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 10.1 *Interactive Data File

* In accordance with Rule 406T of Regulation S-T, these XBRL (eXtensible Business Reporting Language) documents are furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

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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 19, 2012
By: /S/   George I. Norman, III
George I. Norman, III
President, C.E.O. and Director
(Principal Accounting Officer)


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