SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

     (Mark One)

|X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the fiscal year ended: December 31, 2001

                                       OR

[_]   TRANSITION REPORT UNDER 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.
                 (Name of small business issuer in its charter)

                Nevada                                  84-1417774
       (State or other jurisdiction of               (I.R.S. Employer
        incorporation or organization)               Identification No.)

         830 Third Avenue, New York, New York              10022
        (Address of Principal Executive Offices)         (Zip Code)

Issuer's telephone number, including area code:  (212)  829-5800

Securities registered under Section 12(b) of the Exchange Act:

Title of each class              Name of each exchange on which registered
N/A                              N/A



Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                (Title of class)


<PAGE>

     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
    ---      ---

     Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not  contained in this form,  and will not be  contained,  to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X ]

     The issuer's revenues for its most recent fiscal year are $0.

     As of March 26, 2002 the aggregate  market value of the issuer's  shares of
common stock held by non-affiliates was approximately $75,920.

     The issuer's number of shares  outstanding of Common Stock,  $.01 par value
per share, as of March 26, 2002, was 2,668,666.


<PAGE>

                                TABLE OF CONTENTS

ITEM                                                                        PAGE

PART I.........................................................................1

   ITEM 1.  DESCRIPTION OF BUSINESS............................................1
   ITEM 2.  DESCRIPTION OF PROPERTY............................................2
   ITEM 3.  LEGAL PROCEEDINGS..................................................2
   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................2

PART II........................................................................3

   ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........3
   ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..........4
   ITEM 7.  FINANCIAL STATEMENTS...............................................5
   ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE...........................................6

PART III.......................................................................7

   ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT .................7
   ITEM 10. EXECUTIVE COMPENSATION.............................................8
   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....8
   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................10
   ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................10

SIGNATURES....................................................................11


<PAGE>

                                     PART I

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.

ITEM 1. DESCRIPTION OF BUSINESS

     Lil Marc, Inc. (the "Company") was incorporated under the laws of the state
of Nevada on April 22, 1997. The Company was incorporated as a development stage
enterprise in the baby products industry to develop,  manufacture and market the
"LiL Marc", a plastic toilet  training  devise for young boys. To facilitate the
manufacturing  and marketing of the LiL Marc, on December 30, 1999,  the Company
incorporated a subsidiary under the name LILM, Inc.  pursuant to the laws of the
state of Nevada.

     Pursuant  to a stock  purchase  agreement  dated  as of May 19,  2000  (the
"Purchase Agreement") by and among the Company,  George I. Norman III, Laurie J.
Norman,  Alewine  Limited  Liability  Company  ("Alewine") and Linda Bryson (the
latter four parties,  collectively  the "Sellers") and ComVest Capital  Partners
LLC  ("ComVest"),  on May  25,  2000  (the  "Closing  Date")  ComVest  purchased
1,194,166  shares of common  stock of the Company  (the  "Common  Stock") for an
aggregate  purchase price of $315,000.  ComVest also purchased,  pursuant to the
Purchase Agreement, for an aggregate purchase price of $250,000: (i) an 18 month
warrant to purchase  3,000,000 shares of Common Stock (the "Warrant"),  and (ii)
1,000,000  newly issued shares of Common Stock.  In November  2001,  the Warrant
terminated without having been exercised.  Additionally, on the Closing Date the
former  officers  and  directors of the Company  resigned  and were  replaced by
designees  of  ComVest.  Subsequent  to the  Closing  Date and  pursuant  to the
Purchase  Agreement,  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 and
subsequently were cancelled.  As a result of such transactions,  the Company has
no further interest in its former business (the development,  manufacturing, and
marketing of the LiL Marc training urinal).


                                       1
<PAGE>

     Since the Closing Date, the Company's plan of operation has been to attempt
to merge or effect a business  combination  with a domestic  or foreign  private
operating  entity.  The Company's  management  believes that there are perceived
benefits  to  being  a  "reporting  company"  with a  class  of  publicly-traded
securities  which may be attractive to private  entities.  Other than activities
relating  to  attempting  to  locate  such a  candidate,  the  Company  does not
currently anticipate conducting any operations.

     The Company may enter into a  definitive  agreement  with a wide variety of
private businesses  without  limitation as to their industry or revenues.  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 any such business combination.

Employees

     Presently,  the  Company  has  no  full-time  or  other  employees.  It  is
anticipated that the Company's President,  Chief Financial Officer and Secretary
will not devote significant time to meet their respective duties and obligations
to the Company.

ITEM 2. DESCRIPTION OF PROPERTY

     The Company does not own or lease any plants or other property.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not subject to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth  quarter of the fiscal year  covered by this  Report,  no
matters were submitted to a vote of security holders.


                                       2
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Market Information

     The Common Stock is traded in the  over-the-counter  market and  quotations
are published on the NASD OTC Bulletin Board under the symbol "LILM", and in the
National  Quotation  Bureau,  Inc.  ("NQB") "pink  sheets" under LiL Marc,  Inc.
Quotations  on the Common  Stock set forth  below do not  constitute  a reliable
indication  of the  price  that a holder of the  Common  Stock  could  expect to
receive upon a sale of any particular quantity thereof.

     The following  table sets forth the range of high and low bid prices of the
Common Stock for each calendar  quarterly period since the first quarter 1999 as
reported  by the NASD OTC  Bulletin  Board.  Prices  reported  represent  prices
between dealers, do not include retail markups,  markdowns or commissions and do
not necessarily represent actual transactions.

     The high and low bid price  quotations for our Common Stock, as reported by
NASDAQ, are as follows for the periods indicated:

                                           High        Low
         First Quarter 2000 ...........    $.615      $.180
         Second Quarter 2000 ..........    $.938      $.375
         Third Quarter 2000 ...........    $.813      $.500
         Fourth Quarter 2000 ..........    $.562      $.312

         First Quarter 2001 ...........    $.343      $.312
         Second Quarter 2001 ..........    $.343      $.150
         Third Quarter 2001 ...........    $.390      $.150
         Fourth Quarter 2001 ..........    $.390      $.160

     As of March 26,  2002,  the  Company had issued and  outstanding  2,668,666
shares of Common Stock and there were approximately 39 shareholders of record,
which figure does not take into account those  shareholders  whose  certificates
are held in the name of broker-dealers.

     The  ability  of an  individual  shareholder  to trade  their  shares  in a
particular  state may be subject to various rules and regulations of that state.
A number of states  require that an issuer's  securities  be registered in their
state or  appropriately  exempted from  registration  before the  securities are
permitted  to  trade  in that  state.  Presently,  the  Company  has no plans to
register its securities in any particular state. Further, most likely the Common
Stock will be subject to the  provisions  of Section 15(g) and Rule 15g-9 of the
Securities  Exchange Act of 1934,  as amended  (the  "Exchange  Act"),  commonly
referred  to as the  "penny  stock"  rule.  Section  15(g)  sets  forth  certain
requirements for  transactions in penny stock and Rule 15g-9(d)(1)  incorporates
the  definition  of  penny  stock  as that  term is used in Rule  3a51-1  of the
Exchange Act.


                                       3
<PAGE>

     The Securities and Exchange Commission (the "Commission") generally defines
penny stock to be any equity  security  that has a market  price less than $5.00
per share,  subject to certain exceptions.  Rule 3a51-1 provides that any equity
security is  considered  to be a penny stock unless that security is: a reported
security (any security or class of securities  for which reports  containing the
price and volume associated with a purchase or sale of one or more round lots of
the  security  are  collected,  processed  and  made  available  pursuant  to an
effective plan filed with and approved by the Commission); registered and traded
on a  national  securities  exchange  meeting  specified  criteria  set  by  the
Commission;  authorized  for quotation on The NASDAQ Stock  Market;  issued by a
registered  investment  company;  is a put or call  option;  excluded  from  the
definition on the basis of price or the issuer's net tangible  assets or average
revenue;  or exempted from the  definition by the  Commission.  If the Company's
shares are deemed to be a penny stock,  trading in the shares will be subject to
additional sales practice  requirements on broker-dealers  who sell penny stocks
to persons other than established customers and accredited investors,  generally
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse.

     For transactions covered by these rules, broker-dealers must make a special
suitability  determination  for the  purchase of such  securities  and must have
received  the  purchaser's  written  consent  to the  transaction  prior  to the
purchase.  Additionally,  for any  transaction  involving  penny  stock,  unless
exempt,  the rules require the delivery,  prior to the first  transaction,  of a
risk  disclosure  document  relating to the penny stock market.  A broker dealer
must also disclose the  commissions  payable to both the  broker-dealer  and the
registered representative,  and current quotations for the securities.  Finally,
monthly  statements  must be sent  disclosing  recent price  information for the
penny stocks held in the account and  information on the limited market in penny
stocks. Consequently,  these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in the Company's  Common Stock and may affect the
ability of shareholders to sell their shares.

     Dividends

     The Company has not declared or paid dividends or made distributions in the
past,  and the Company does not  anticipate  that it will pay cash  dividends or
make distributions in the forseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Plan of Operation

     On the Closing Date,  ComVest  purchased  1,194,166  shares of 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) the Warrant to purchase an additional 3,000,000 shares of Common Stock.
In November 2001, the Warrant terminated without having been exercised.


                                       4
<PAGE>

     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. The 100,000 shares became treasury stock and
subsequently were cancelled.  As a result of such transactions,  the Company has
no further interest in the business of its former  subsidiary (the  development,
manufacturing, and marketing of the LiL Marc training urinal).

     Subsequent to the above  referenced  transactions,  the  Company's  plan of
operation has been to merge or effect a business  combination with a domestic or
foreign private operating entity. The Company's  management  believes that there
are  perceived  benefits  to  being  a  "reporting  company"  with  a  class  of
publicly-traded  securities which may be attractive to private  entities.  Other
than activities  relating to attempting to locate such a candidate,  the Company
does not currently anticipate conducting any operations.

     The Company may enter into a  definitive  agreement  with a wide variety of
private businesses  without  limitation as to their industry or revenues.  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 any such business combination.

     At December 31, 2001, the Company had cash and cash equivalents of $223,681
and it had no accounts payable.  As the Company's current operations are limited
to seeking a merger or business combination candidate, the Company believes that
the Company's cash and cash equivalents shall fund all operations until any such
merger or combination is consummated.

     The Company did not generate any revenues from  operations in 2001 or 2000.
General  and  administrative  expenses  increased  by 20.4%  from  2000 in 2001,
reflecting  professional  fees  paid  to the  Company's  current  attorneys  and
accountants  over 12 months in 2001 as  contrasted to seven months in 2000 ( the
Closing Date occurred in May 2000). The Company's loss from operations increased
by  13.8%  from  2000  to  2001  primarily  due  to  this  increase  in  general
administrative  expenses.  Interest  income in 2001 increased by 27.2% from 2000
because  it held the net  proceeds  of its  controlling  shareholder's  $250,000
investment for 12 months in 2001 as contrasted to seven months in 2000.  Because
the Company  realized a gain on the sale of its subsidiary in 2000 in the amount
of $21,132,  the Company  realized net income of $2,045 in 2000 as compared to a
net loss of $20,744 in 2001.

     Although it does not currently plan to do so, the Company may in the future
raise additional funds through the sale of its securities.

ITEM 7. FINANCIAL STATEMENTS

     See the financial statements annexed to this Report.


                                       5
<PAGE>
                                                  LIL MARC, INC.
                                           (A Development Stage Company)


                                               FINANCIAL STATEMENTS

                                                 DECEMBER 31, 2001


<PAGE>


                                 LIL MARC, INC.
                          (A Development Stage Company)


                                TABLE OF CONTENTS

                   YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
             PERIOD APRIL 22, 1997 (INCEPTION) TO DECEMBER 31, 2001


                                                                   Page
                                                                   ----

Independent Auditors' Report                                       1

Balance Sheet                                                      2

Statements of Operations                                           3

Statements of Stockholders' Equity                                 4

Statements of Cash Flows                                           5

Notes to Financial Statements                                      6-9


<PAGE>


                     [LETTERHEAD OF BERENSON & COMPANY LLP]

                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Lil Marc, Inc.
(A Development Stage Company)
New York, NY


We have audited the accompanying  balance sheet of Lil Marc, Inc. (a development
stage  company)  as  of  December  31,  2001,  and  the  related  statements  of
operations, stockholders' equity and cash flows for the years ended December 31,
2001 and 2000 and the period  April 22, 1997  (inception)  to December 31, 2001.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Lil Marc, Inc. as of December
31,  2001,  and the results of its  operations  and its cash flows for the years
ended  December 31, 2001 and 2000 and the period April 22, 1997  (inception)  to
December 31, 2001, in conformity with accounting  principles  generally accepted
in the United States of America.

                                        /s/ Berenson & Company LLP

New York, NY
January 24, 2002


<PAGE>


                                                                          Page 2
                                 LIL MARC, INC.
                          (A Development Stage Company)

                                  BALANCE SHEET

                                DECEMBER 31, 2001

<TABLE>
<CAPTION>

                                     ASSETS
<S>                                                                   <C>
Current assets:
   Cash and cash equivalents                                          $ 223,681
                                                                      ---------

             Total current assets                                     $ 223,681
                                                                      =========


                              STOCKHOLDERS' EQUITY

Stockholders' equity:
   Common stock, $0.01 par value; 5,000,000 shares
     authorized; 2,668,666 shares issued and outstanding              $  26,686
   Additional paid-in capital                                           267,671
   Accumulated deficit during the development stage                     (70,676)
                                                                      ---------
                                                                        223,681
                                                                      ---------
                                                                      $ 223,681
                                                                      =========
</TABLE>


    The accompanying notes are an integral part of the financial statements.


<PAGE>


                                                                          Page 3
                                 LIL MARC, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                      Period
                                                                  April 22, 1997
                                             Years ended          (inception) to
                                             December 31,           December 31,
                                         2001           2000           2001
                                     -----------    -----------    -----------
<S>                                  <C>            <C>            <C>

Sales                                $        --    $        --    $       346

Cost of sales                                 --             --             --
                                     -----------    -----------    -----------
Gross margin                                  --             --            346
                                     -----------    -----------    -----------
Operating expenses:
   General and administrative             30,085         24,996         90,746
   Amortization                               --          1,433         17,191
                                     -----------    -----------    -----------
                                          30,085         26,429        107,937
                                     -----------    -----------    -----------
Loss from operations                     (30,085)       (26,429)      (107,591)
                                     -----------    -----------    -----------
Other income (expense):
   Gain on sale of subsidiary                 --         21,132         21,132
   Interest expense                           --             --           (900)
   Interest income                         9,341          7,342         16,683
                                     -----------    -----------    -----------
                                           9,341         28,474         36,915
                                     -----------    -----------    -----------
Net income (loss)                    $   (20,744)   $     2,045    $   (70,676)
                                     ===========    ===========    ===========
Net income (loss) per common share   $      (.01)   $       .00
                                     ===========    ===========
Weighted average number of
  shares outstanding                   2,668,666      2,328,392
                                     ===========    ===========
</TABLE>


    The accompanying notes are an integral part of the financial statements.


<PAGE>


                                                                          Page 4
                                 LIL MARC, INC.
                          (A Development Stage Company)

                       STATEMENTS OF STOCKHOLDERS' EQUITY
                        YEAR ENDED DECEMBER 31, 2001 AND
             PERIOD APRIL 22, 1997 (INCEPTION) TO DECEMBER 31, 2001
<TABLE>
<CAPTION>

                                                                                 Accumulated
                                                                 Additional   deficit during the    Total
                                            Common stock          paid-in        development    stockholders'
                                         Shares       Amount      capital          stage            equity
                                       ----------    --------    ----------   ------------------  -----------
<S>                                    <C>           <C>         <C>              <C>             <C>
Balance, April 22, 1997                        --    $     --    $      --        $     --        $      --

Common stock issued for cash at
  $0.00 per share                         666,666       6,666       (1,666)             --            5,000
Issuance of shares to acquire patent
  rights recorded at predecessor
  cost of $0.00 per share                 400,000       4,000       (1,000)             --            3,000
Issuance of 540,000 shares of
  common stock at $0.10 per share         540,000       5,400       48,600              --           54,000
Stock offering costs                           --          --       (8,843)             --           (8,843)
Net loss, December 31, 1997                    --          --           --          (9,251)          (9,251)
                                       ----------    --------    ---------        --------        ---------
Balance, December 31, 1997              1,606,666      16,066       37,091          (9,251)          43,906

Issuance of 75,000 shares of
  common stock at $0.10 per share          75,000         750        6,750              --            7,500
Net loss, December 31, 1998                    --          --           --         (21,560)         (21,560)
                                       ----------    --------    ---------        --------        ---------

Balance, December 31, 1998              1,681,666      16,816       43,841         (30,811)          29,846

Issuance of 87,000 shares of
  common stock at $0.10 per share          87,000         870        7,830              --            8,700
Net loss, December 31, 1999                    --          --           --         (21,166)         (21,166)
                                       ----------    --------    ---------        --------        ---------
Balance, December 31, 1999              1,768,666      17,686       51,671         (51,977)          17,380

Cancellation of treasury stock           (100,000)     (1,000)     (24,000)             --          (25,000)
Common stock issued for cash at
  $0.25 per share                       1,000,000      10,000      240,000              --          250,000
Net income, December 31, 2000                  --          --           --           2,045            2,045
                                       ----------    --------    ---------        --------        ---------
Balance, December 31, 2000              2,668,666      26,686      267,671         (49,932)         244,425

Net loss, December 31, 2001                    --          --           --         (20,744)         (20,744)
                                       ----------    --------    ---------        --------        ---------
Balance, December 31, 2001              2,668,666    $ 26,686    $ 267,671        $(70,676)       $ 223,681
                                       ==========    ========    =========        ========        =========
</TABLE>

    The accompanying notes are an integral part of the financial statements.


<PAGE>


                                                                          Page 5
                                 LIL MARC, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                               Period
                                                                                                           April 22, 1997
                                                                                  Years ended              (inception) to
                                                                                  December 31,              December 31,
                                                                              2001            2000               2001
                                                                             -------         -------           -------
<S>                                                                        <C>              <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                                       $ (20,744)       $   2,045        $ (70,676)
   Adjustments to reconcile net income (loss) to
    net cash used by operating activities:
      Amortization                                                                --            1,433           17,191
      Gain on sale of subsidiary                                                  --          (21,132)         (21,132)
      Common stock issued for services                                            --               --            8,700
      Changes in assets and liabilities:
        Increase (decrease) in accounts payable                               (1,117)           8,317            8,700
                                                                           ---------        ---------        ---------
             Net cash used by operating activities                           (21,861)          (9,337)         (57,217)
                                                                           ---------        ---------        ---------
Cash flows used by investing activities:
   Cash included pursuant to sale of subsidiary                                   --           (1,109)          (1,109)
   Purchase of patent rights                                                      --               --          (28,650)
                                                                           ---------        ---------        ---------
             Net cash used by investing activities                                --           (1,109)         (29,759)
                                                                           ---------        ---------        ---------
Cash flows from financing activities:
   Stock offering costs                                                           --               --           (5,843)
   Common stock issued for cash                                                   --          250,000          316,500
                                                                           ---------        ---------        ---------
             Net cash provided by financing activities                            --          250,000          310,657
                                                                           ---------        ---------        ---------

Net increase (decrease) in cash and cash equivalents                         (21,861)         239,554          223,681
Cash and cash equivalents, beginning of period                               245,542            5,988               --
                                                                           ---------        ---------        ---------
Cash and cash equivalents, end of period                                   $ 223,681        $ 245,542        $ 223,681
                                                                           =========        =========        =========
Supplemental cash flow information:
   Cash paid during the period for:
      Interest                                                             $      --        $      --        $      --
      Income taxes                                                               704              100              804

Noncash financing activities:
   Patent rights and deferred interest acquired for
     common stock and assumption of note payable                           $      --        $      --        $  30,000
</TABLE>

    The accompanying notes are an integral part of the financial statements.


<PAGE>


                                                                          Page 6
                                 LIL MARC, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000


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
     Statement of Financial Accounting Standards Number 7 ("SFAS No. 7").

     LILM,  Inc. was  incorporated  as a wholly-owned  subsidiary of the Company
     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.

2.   Summary of significant accounting policies:

     a.   Principles of consolidation:

          The  financial  statements  previously  included  the  accounts  of  a
          wholly-owned  subsidiary of the Company. All significant  intercompany
          accounts and transactions have been eliminated in  consolidation.  The
          wholly-owned subsidiary was sold in May, 2000.

     b.   Net income (loss) per common share:

          The  computation  of net income  (loss)  per share of common  stock is
          based on the weighted average number of shares  outstanding during the
          period of the financial statements. Warrants have not been included in
          the computation of net income (loss) per share of common stock because
          to do so would have been antidilutive.  However,  these warrants could
          have potentially dilutive effects in the future.

     c.   Cash and cash equivalents:

          For cash flow  purposes,  the  Company  considers  all  highly  liquid
          investments  with a maturity of three months or less when purchased to
          be cash equivalents.


<PAGE>


                                                                          Page 7
                                 LIL MARC, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000


2.   Summary of significant accounting policies: (Continued)

     c.   Cash and cash equivalents: (Continued)

          The Company  maintains its cash accounts in a commercial  bank located
          in New York. The balance in the bank is insured by the Federal Deposit
          Insurance Corporation (FDIC) up to $100,000.

     d.   Patents:

          During  1997,  the  Company  purchased  the  patent for the "Lil Marc"
          training urinal. Amortization was computed on the straight-line method
          over the estimated five year life of the patent.  Amortization expense
          for the years  ended  December  31, 2001 and 2000 was $-0- and $1,433,
          respectively.

          On February 3, 2000, the Company 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 Stock Sale Agreement (note 7).

     e.   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.

     f.   Revenue recognition:

          A  revenue   recognition  policy  will  be  established  when  planned
          principal operations commence.


<PAGE>


                                                                          Page 8
                                 LIL MARC, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000


2.   Summary of significant accounting policies: (Continued)

     g.   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.

     h.   Fair value of financial instruments:

          The carrying  amounts of cash and cash  equivalents  approximate  fair
          value due to the short maturity of these instruments.

     3.   Related party transactions:

          In 1997,  the Company issued 400,000 shares of its common stock to its
          stockholders  for the  acquisition  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 to its stockholders for gross services valued at $8,700.

     4.   Income taxes:

          The total of the deferred tax asset is as follows:

                                                   2001             2000
                                                  -------          -------

                 Deferred tax asset              $ 22,000         $  8,000
                 Valuation allowance              (22,000)          (8,000)
                                                 --------         --------
                 Net deferred tax asset          $   --           $   --
                                                 ========         ========

The deferred tax asset is the book vs. tax  difference  from net operating  loss
carryforwards.

The  Company  has  available,  at  December  31,  2001,  unused  operating  loss
carryforwards of  approximately  $71,000 for federal and state tax purposes that
may be applied  against  future  taxable  income and begin to expire in December
2012.


<PAGE>


                                                                          Page 9
                                 LIL MARC, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 2001 AND 2000


     5.   Forward stock split:

          On September 4, 1997,  the  stockholders'  meeting  approved a 2-for-1
          forward  stock  split.  The forward  stock split is reflected in these
          financial statements on a retroactive basis.

     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.

     7.   Stock transactions and warrants:

          On May 25, 2000,  pursuant to a Stock Purchase Agreement dated May 19,
          2000, a new stockholder acquired a controlling interest in the Company
          by purchasing  1,194,166  shares of common stock from its stockholders
          for an aggregate purchase price of $315,000. In addition,  the Company
          sold  1,000,000  shares of its  authorized  common  stock at $0.25 per
          share to this new stockholder for $250,000 cash.

          Subsequently,  and  pursuant to a Stock Sale  Agreement  dated May 19,
          2000,  the  Company  sold  all of the  outstanding  shares  (1,000,000
          shares)  of  its  wholly-owned  subsidiary  LILM,  Inc.  to one of its
          stockholders  for 100,000 shares of that  stockholder's  common stock.
          These  100,000  shares  of the  Company's  treasury  stock  have  been
          canceled.


<PAGE>

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     Not Applicable


                                       6
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

     The directors and executive officers of the Company are as follows:

Name                   Age    Position

Keith M. Rosenbloom    33   President and Director (Principal Executive Officer)
Joseph P. Wynne        37   Chief Financial Officer,  Secretary and Director
                            (Pincipal  Financial and Accounting Officer)

     Information with respect to the foregoing  executive officers and directors
is set forth below.

     Mr.  Keith M.  Rosenbloom  was  appointed  President  and a Director of the
Company in August 2001.  Mr.  Rosenbloom  devotes no less time to the affairs of
the Company than he deems  reasonably  necessary to discharge  his duties to the
Company.  Mr.  Rosenbloom has been a Managing  Director and Director of Merchant
Banking of  Commonwealth  Associates  LP for more than the past five  years.  He
received a B.A. degree from Yale University.

     Mr.  Joseph P.  Wynne has been Chief  Financial  Officer,  Secretary  and a
Director of the Company  since May 2000.  Mr. Wynne  devotes no less time to the
affairs of the Company  than he deems  reasonably  necessary  to  discharge  his
duties to the Company.  Mr. Wynne is a Certified Public  Accountant and has been
Chief Financial  Officer and Financial  Principal of Commonwealth  Associates LP
and  ComVest  Capital  Partners,  LLC  since  October  1995.  Mr.  Wynne  joined
Commonwealth  Associates in October 1993 as the Controller.  Prior thereto, from
November  1990 to October  1993,  Mr.  Wynne was  Supervisor  for the  Corporate
Accounting  Department  of Bear  Stearns & Co.,  Inc.  and from  January 1988 to
November 1990 was Audit Supervisor at Goldstein, Golub and Kessler.

     Mr. Wynne received a Masters of Business  Administration  degree in finance
from  Leonard N. Stern  School of Business at New York  University  in 1994.  In
addditon, Mr Wynne graduated with a Bachelors of Business  Administration degree
in accounting from Hofstra University in 1987.

     The Company's Directors serve until the next annual meeting of stockholders
and until  their  successors  are  elected  and duly  qualified.  The  Company's
officers  are  elected  annually  by the  Board of  Directors  and  serve at the
discretion  of the Board of Directors.  There are no agreements  with respect to
the election of directors.

     Based solely on the Company's review of Forms 3 received by it during 2001,
and written representations from reporting persons that no Forms 5 were required
for such persons for 2001,  the Company  believes  that all filing  requirements
pursuant to Section  16(a) of the Exchange Act  applicable  to those persons who
were directors,  officers, and beneficial owners of more than ten


                                       7
<PAGE>

percent  of its  Common  Stock  during the year  ended  December  31,  2001 were
complied with on a timely basis.

ITEM 10. EXECUTIVE COMPENSATION

Compensation of Executive Officers and Directors

     None of the Company's current executive officers and directors received any
compensation from the Company during the year ended December 31, 2001.

     During the year ended December 31, 2000, but prior to the  consummation  of
the Purchase  Agreement the Company accrued salary and rental obligations in the
aggregate amount of $8,700 to its former  management and their affiliate.  Those
accrued obligations included salaries payable to George I. Norman III and Laurie
J.  Norman in the  amounts  of  $4,500  and  $1,500,  respectively,  and  rental
obligations in the amount of $2,700 payable to Alewine.  All of these salary and
rental  obligations  were assumed by the Sellers  pursuant to  provisions of the
Purchase Agreement.

     During the year ended December 31, 1999, the Company issued an aggregate of
87,000  shares of Common Stock to George I. Norman III,  Laurie J.  Norman,  and
Alewine in lieu of salary and rental payments. The shares were issued at a price
of $0.10 per share, as follows: 45,000 to George I. Norman III; 15,000 to Laurie
J. Norman; and 27,000 to Alewine.

     The Company does not currently issue a salary to its officers, directors or
employees  nor does  the  Company  have a bonus,  profit  sharing,  or  deferred
compensation  plan for the  benefit of its  employees,  officers  or  directors.
Furthermore,  the Company has not entered into an employment  agreement with any
officers or directors.  Once the Company  acquires other  business  entities its
compensation  policy may be amended in order to secure the  services  of certain
valuable executive employees.

Employment Agreements and Arrangements

     At present the Company  does not have any  employment  agreements  in place
with any director,  executive officer or employee. The Company may enter into an
agreement with certain qualified executive officers if deemed appropriate by the
Board of Directors to be in the best interests of the Company.  No agreement has
been effected as of the date hereof.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth,  as of March 26,  2002,  based upon our
records  and  information   obtained  from  the  persons  named  below,  certain
information  concerning  beneficial ownership of our shares of Common Stock with
respect to (i) each person known to own more than 5% of our  outstanding  shares
of Common Stock,  (ii) each of our executive  officers and directors,  and (iii)
all of our executive officers and directors as a group:


                                       8
<PAGE>

                                                   Amount           Approximate
                                                   and Nature       Percentage
                                                   of Beneficial    of Common
        Identity                                   Ownership        Stock Owned
        --------                                   ---------        -----------
ComVest Capital Partners, LLC (1)                   2,194,166           82.2%
Michael S. Falk (1)                                 2,194,166(2)        82.2%
Keith Rosenbloom (1)                                2,194,166(3)        82.2%
Robert Priddy (1)                                   2,194,166(4)        82.2%
Joseph P. Wynne                                     -0-                    0%
All executive officers and directors, as a group    2,194,166           82.2%
(2 persons)

(1)  The addresses for the foregoing entity and persons are:

o    ComVest Capital  Partners,  LLC,  Michael S. Falk and Keith  Rosenbloom are
     located at 830 Third Avenue, New York NY 10022

o    Robert  Priddy is located at RMC  Capital,  1640 Powers  Ferry,  Suite 125,
     Marietta, Georgia 30067

(2)  Michael S. Falk is deemed to be the  beneficial  owner of an  aggregate  of
     2,194,166  shares of Common  Stock  beneficially  owned by ComVest.  In his
     capacity  as manager  and  principal  member of  ComVest,  Mr.  Falk shares
     indirect voting and dispositive power with respect to ComVest's shares. Mr.
     Falk  disclaims  beneficial  ownership of the  securities  owned by ComVest
     other  than that  portion  corresponding  to his  proportionate  membership
     interest  in  ComVest.  Mr.  Falk  has no  direct  ownership  of  any  such
     securities.

(3)  Keith  Rosenbloom is deemed to be the  beneficial  owner of an aggregate of
     2,194,166  shares of Common  Stock  beneficially  owned by ComVest.  In his
     capacity as manager and principal member of ComVest,  Mr. Rosenbloom shares
     indirect voting and dispositive power with respect to ComVest's shares. Mr.
     Rosenbloom  disclaims  beneficial  ownership  of the  securities  owned  by
     ComVest  other  than  that  portion   corresponding  to  his  proportionate
     membership  interest in ComVest.  Mr. Rosenbloom has no direct ownership of
     any such securities.

(4)  Robert  Priddy is  deemed to be the  beneficial  owner of an  aggregate  of
     2,194,166  shares of Common  Stock  beneficially  owned by ComVest.  In his
     capacity as manager and  principal  member of ComVest,  Mr.  Priddy  shares
     indirect voting and dispositive power with respect to ComVest's shares. Mr.
     Priddy  disclaims  beneficial  ownership of the securities owned by ComVest
     other  than that  portion  corresponding  to his  proportionate  membership
     interest  in  ComVest.  Mr.  Priddy  has no  direct  ownership  of any such
     securities.


                                       9
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except for the  transactions  pursuant to the  Purchase  Agreement by which
ComVest acquired control of the Company and the compensation  arrangements  with
the Company's  former  management  and their  affiliate as described in Item 10,
"Executive  Compensation  -  Compensation  of Executive  Officers and Directors"
above,  there have been no  transactions  during the last two years, or proposed
transactions,  between the Company and any executive officer,  director, nominee
for election as director,  or shareholder  owning more than five percent (5%) of
the  Company's   outstanding  shares,  nor  any  member  of  the  abovementioned
individuals' immediate family.

     The  Company's  officers  and  directors  are  subject to the  doctrine  of
corporate  opportunities  pursuant to Chapter 78 - Private  Corporations  of the
Nevada Revised Statute only insofar as it applies to business  opportunities  in
which the Company has indicated an express interest.  If directors are presented
with business opportunities that may conflict with business interests identified
by the Company,  such  opportunities must be disclosed to the Board of Directors
and made  available to the Company.  In the event that the Board shall reject an
opportunity so presented and only in that event,  any of the Company's  officers
and directors may avail themselves of such an opportunity.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

Exhibit 2.1    Purchase  Agreement  by and among the  Company,  George I. Norman
               III, Laurie J. Norman,  Alewine Limited Liability Company,  Linda
               Bryson and ComVest Capital Partners LLC dated as of May 19, 2000,
               incorporated by reference to Exhibit 2.1 to the Company's  Annual
               Report on Form 10-KSB for the year ended December 31, 2000.

Exhibit 2.2    Stock Sale  Agreement  by and  between  the  Company  and Alewine
               Limited Liability Company dated as of May 19, 2000,  incorporated
               by reference  to Exhibit 2.2 to the  Company's  Annual  Report on
               Form 10-KSB for the year ended December 31, 2000.

Exhibit 3.1    Articles of  Incorporation,  incorporated by reference to Exhibit
               3.1 to Form 10-SB,  filed with the  Commission  on June 10, 1998,
               file Number 0-24431.

Exhibit 3.2    By-Laws,  incorporated by reference to Exhibit 3.2 to Form 10-SB,
               filed with the Commission on June 10, 1998, file Number 0-24431.

     (b)  Reports on Form 8-K.

During the last quarter of the period covered by this report the Company filed a
Current  Report on Form 8-K dated August 31, 2001  reporting the  resignation of
David Boris as President and a director of the Company and the election of Keith
M. Rosenbloom as President and a director in his place. No financial  statements
were filed with such report.


                                       10
<PAGE>

                                   SIGNATURES

     In  accordance  with Section 13 or 15(d) the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                  LIL MARC, INC.

                             By:  /s/ Keith M. Rosenbloom
                                  --------------------------------
                                  Keith M. Rosenbloom
                                  President
                                  (Principal Executive Officer)
                                  March 26, 2002

     In  accordance  with the Exchange Act, this Report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

Signature                Title                                  Date
---------                -----                                  ----

/s/Keith M. Rosenbloom   President and Director                 March 15, 2002
----------------------   (Principal Executive Officer)
Keith M. Rosenbloom

/s/Joseph P. Wynne       Chief Financial Officer,               March 15, 2002
----------------------   Secretary and Director (Principal
Joseph P. Wynne          Financial and Accounting Officer)