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1. ORGANIZATION
LILM, Inc. (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 $0.001 per share. 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 its operations in a 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, 2013.
The accompanying unaudited balance sheet of LILM, Inc and Subsidiary (development stage company) as of the September 30, 2013 and related unaudited statements of operations for the three and nine months ended September 30, 2013 and 2012, and the period April 22, 1997 (date of inception) to September 30, 2013, and related unaudited statements of cash flows for the nine months ended September 30, 2013 and 2012, and the period April 22, 1997 (date of inception) to September 30, 2013, 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, 2013, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2013 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.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and highly liquid investments with original maturities of three months or less at the date of acquisition.
Long-lived Assets
The Company reviews its long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles. To date, management has determined that no impairment of long-lived assets exists.
Revenue Recognition
Revenue is recognized upon the completion of the sale and shipment of the training urinal product. The product is sold via the internet and is delivered to customers or to wholesale resellers using a ground courier service.
Advertising and Market Development
The company expenses advertising and market development costs as incurred. The Company incurred $0 in advertising and market development costs for the nine month periods ended September 30, 2013 and 2012.
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, 2013 and 2012, there were no common stock equivalents 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 LiL Marc urinal is a standalone 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 components are shipped to The Villages, Florida, 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. Inventory is reported at the lower of cost or net realizable value. As of September 30, 2013 and 2012, all inventory was 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, using the straight-line method, over a 5 year period. Depreciation expense for the nine months ended September 30, 2013 and 2012 was $255, for each period. Equipment is carried at cost, net of depreciation.
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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 $0.25, due to the inventor, on the sale of each training urinal.
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6. STOCKHOLDERS DEFICIENCY
As of September 30, 2013, the Company had 25,000,000 common shares authorized ($.001 par value), and 7,633,750 common shares issued and outstanding.
On September 25, 2013 the Company sold 5,000,000 shares of its unregistered common stock $0.001 par at $0.32 per share for an aggregate purchase price of $1,600,000 to Kent Campbell, the Companys Chief Executive Officer.
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7. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
During the nine months ended September 30, 2013, George Norman, the Companys former Chief Executive Officer and a Director advanced the sum of $16,845 to the Company as a working capital loan, and paid $8,024 in expenses on behalf of the Company. During the nine months ended September 30, 2012, Mr. Norman advanced the sum of $2,725 to the Company as a working capital loan, and was repaid $187 for prior loans.
As of January 1, 2012, the Companys Board of Directors approved a modification of the terms of all loans by Mr. Norman and Alewine Limited Liability Company (Alewine), a company owned and controlled by Mr. Norman, to include an annual, simple interest rate of 4%. Related party interest expense for the nine months ended September 30, 2013 was $1,735.
Pursuant to the terms of a Share Purchase Agreement dated September 24, 2013 (the Share Purchase Agreement), Alewine sold 1,788,475 of its 1,863,475 shares of the Companys common stock in a private transaction to Mr. Campbell (1,466,225 shares) and Denis Espinoza (322,250 shares) .
On September 26, 2013 all amounts due by the Company to Mr. Norman and Alewine in the amount of $77,992 consisting of $74,355 principal and $3,637 in accrued interest, were repaid by the Company, as provided for in the Share Purchase Agreement.
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8. SUBSEQUENT EVENTS
Stock issuances, ordering an additional production mold, real property acquisitions, etc.
On or about October 15, 20132013-10-15, the Company sold to: (i) Sarah Campbell, its recently appointed Chief Administrative Officer, 100,000 shares of its restricted common stock for a purchase price of $0.32 per share for a total of $32,000, and (ii) Thomas G. Campbell 150,000 shares of its restricted common stock for a purchase price of $0.32 per share for a total purchase price of $48,000.
On October 16, 2013 the Company entered into a lease with an unaffiliated third party for a warehouse for a term of one year. The lease may be terminated by the Company with 30 days notice within the first 6 months of the lease term. The warehouse occupies approximately 1,250 square feet of space with a monthly rent of $960 for the first six months and $1,065 per month thereafter.
On October 21, 2013, the Company purchased all of the outstanding membership units of Ashland Holdings, LLC ("Ashland") from our CEO Kent Campbell for a purchase price of $20,000. At the time of purchase Ashland's sole asset consisted of $19,000 in cash.
On October 29, 2013, our wholly-owned subsidiary, Ashland, entered into an Agreement for the Purchase and Sale of Real Estate (the Agreement) with TD Bank pursuant to which Ashland agreed to purchase .90 acres of real estate, including an office building thereon, located in Wildwood, Florida (the Property).
The purchase price for the Property is $47,500 (the Purchase Price). Ashland paid to American Home Title Insurance, as escrow agent, a $4,750 earnest money deposit to be applied to the Purchase Price at closing. Unless otherwise extended, the closing under the Agreement is required to take place no later than 15 days after completion of the investigation period of the Property, which investigation must be completed within 30 days from the date of the Agreement.
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Accounting Method
The Company recognizes income and expenses based on the accrual method of accounting.
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Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
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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.
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Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and highly liquid investments with original maturities of three months or less at the date of acquisition.
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Long-lived Assets
The Company reviews its long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles. To date, management has determined that no impairment of long-lived assets exists.
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Revenue Recognition
Revenue is recognized upon the completion of the sale and shipment of the training urinal product. The product is sold via the internet and is delivered to customers or to wholesale resellers using a ground courier service.
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Advertising and Market Development
The company expenses advertising and market development costs as incurred. The Company incurred $0 in advertising and market development costs for the nine month periods ended September 30, 2013 and 2012.
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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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