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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.
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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.
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.
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
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.
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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.
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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.
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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.
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6. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
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 Companys 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.
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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.
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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.
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Revenue Recognition
Revenue is recognized upon the completion of the sale and shipment of the training urinal products.
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Advertising and Market Development
The company expenses advertising and market development costs as incurred.
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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.
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Financial and Concentrations Risk
The Company does not have any concentration or related financial credit risk.
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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.
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Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiary from its inception. All significant intercompany accounts and balances have been eliminated in consolidation.
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Recent Accounting Pronouncements
The Company does not expect that the adoption of recent accounting pronouncements will
have a material impact on its financial statements.
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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.
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