**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

(Mark One)

 

|   | x | Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 |
|--------|---|--------------------------------------------------------------------------------------|

 

For the Fiscal Year Ended December 31, 2009

 

|   | o |   | 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 |
|--------|---------------------------------|------------------|

|   | incorporation or organization) | Identification No.) |
|--------|--------------------------------|---------------------|

 

**1390 South 1100 East # 204, Salt Lake City, Utah 84105-2463**

(Address of principal executive offices) (Zip Code)

 

| Registrant's telephone number, including area code: | **(801) 322-0253** |
|-----------------------------------------------------|--------------------|

 

**Securities registered pursuant to Section 12(b) of the Act:**

**None**

 

**Securities registered pursuant to Section 12(g) of the Act:**

**Common Stock, $0.001 par value**

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o  No x

 

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 1934during the preceding 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 o |   |
|--------|---------------|-----------|--------|

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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 S-T (§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).  

                                                                                                                                                Yes o       No x

 

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, 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-K or any amendment to this Form            10-K.   o

 

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 | o  |   | Accelerated filer |  o |   |
|--------|-------------------------|---------|--------|-------------------|---------|--------|

|   | Non-accelerated filer |  o |   | 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 o  No x

 

The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sales price, or the average bid and asked price on such stock, as of June 30, 2009, the last business day of the registrant’s most recently completed second quarter, was $148,055. Shares of the registrant’s common stock held by each executive            officer and director and by each entity or person that, to the registrant’s knowledge, owned 10% or more of registrant’s outstanding common stock as of June 30, 2009 have been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

 

|   | The number of shares of the registrant’s common stock outstanding as of March 26, 2010 was 2,603,750. |
|--------|-------------------------------------------------------------------------------------------------------------|

 

**DOCUMENTS INCORPORATED BY REFERENCE**

|   | A description of "Documents Incorporated by Reference" is contained in Part IV, Item 15. |
|--------|------------------------------------------------------------------------------------------|

 

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**LILM, Inc.**

 

**TABLE OF CONTENTS**

 

|   | Page |
|--------|------|

**PART I**

 

| Item 1. | Business | 3 |
|---------|----------|---|

 

| Item 1A. | Risk Factors | 7 |
|----------|--------------|---|

 

| Item 1B. | Unresolved Staff Comments | 9 |
|----------|---------------------------|---|

 

| Item 2. | Properties | 9 |
|---------|------------|---|

 

| Item 3. | Legal Proceedings | 9 |
|---------|-------------------|---|

 

| Item 4. | Reserved | 9 |
|---------|----------|---|

 

**PART II**

 

| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer |
|---------|-------------------------------------------------------------------------------------|

|   | Purchases of Equity Securities | 10 |
|--------|--------------------------------|----|

 

| Item 6. | Selected Financial Data | 11 |
|---------|-------------------------|----|

 

| Item 7. | Management's Discussion and Analysis of Financial Condition and Results |
|---------|-------------------------------------------------------------------------|

|   | of Operations | 12 |
|--------|---------------|----|

 

| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 17 |
|----------|------------------------------------------------------------|----|

 

| Item 8. | Financial Statements and Supplementary Data | 17 |
|---------|---------------------------------------------|----|

 

| Item 9. | Changes in and Disagreements with Accountants on Accounting and |
|---------|-----------------------------------------------------------------|

|   | Financial Disclosure | 17 |
|--------|----------------------|----|

 

| Item 9A(T). | Controls and Procedures | 17 |
|-------------|-------------------------|----|

 

| Item 9B | Other Information | 17 |
|---------|-------------------|----|

 

**PART III**

 

| Item 10. | Directors, Executive Officers and Corporate Governance | 17 |
|----------|--------------------------------------------------------|----|

 

| Item 11. | Executive Compensation | 19 |
|----------|------------------------|----|

 

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related |
|----------|----------------------------------------------------------------------------|

|   | Stockholder Matters | 19 |
|--------|---------------------|----|

 

| Item 13. | Certain Relationships and Related Transactions and Director Independence | 19 |
|----------|--------------------------------------------------------------------------|----|

 

| Item 14. | Principal Accounting Fees and Services | 19 |
|----------|----------------------------------------|----|

**PART IV**

 

| Item 15. | Exhibits, Financial Statement Schedules. | 20 |
|----------|------------------------------------------|----|

 

|   | Signatures | 30 |
|--------|------------|----|

 

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                                                                                                         **PART I**

 

| **Item 1.** | **Business** |
|-------------|--------------|

 

*History*

 

LILM, Inc. was organized on December 30, 1999 under the laws of the State of Nevada as a wholly owned subsidiary of LiL Marc, Inc., a Nevada corporation. On that date we acquired from LiL Marc, Inc. the U.S. patent rights to the LiL Marc "Training Urinal" a plastic toilet-training device (U.S. Patent Number 318,325, issued July 16, 1991). We also acquired the trade            name "LiL Marc" and rights to manufacture and market the product. We submitted the Patent Assignment to the United States Patent Office in Washington, D.C. and, on February 10, 2000, the assignment was recorded. 

 

We are primarily involved in the manufacture and marketing of the LiL Marc, a plastic boys toilet-training device constructed of white polyethylene plastic having the appearance of white porcelain. We also intend to explore the potential development, marketing and manufacturing of complementary baby products.

 

The LiL Marc training urinal was invented by James Curt McKiney and a patent was issued to him on July 16, 1991. Approximately 3,500 units were sold by the inventor, primarily between 1992 and 1994. In 1997, LiL Marc, Inc. (Nevada), our predecessor company, acquired the marketing and patent rights to the LiL Marc training urinal from the inventor. On December 30,            1999, LiL Marc, Inc. (Nevada) created LILM, Inc., as a wholly owned subsidiary and the patent and marketing rights to the LiL Marc were conveyed to LILM, Inc.. 

 

In June 2000, our current President, George I. Norman, III, acquired in a private transaction 100% of the 1,000,000 issued and outstanding shares of our common stock and we ceased to be a subsidiary of LiL Marc, Inc. (Nevada). Subsequently in October 2002, LiL Marc, Inc. (Nevada) acquired InkSure Technologies, Inc. and became engaged as a developer and marketer of            customized authentication systems designed to enhance the security of documents and branded products for protection from counterfeiting and diversion. Since June 2000, we have not had any connection or relationship with LiL Marc, Inc. (Nevada), now known as InkSure Technologies, Inc.

 

Since 2000, we have maintained our corporate offices in Salt Lake City, Utah and also kept an adjunct office in Las Vegas, Nevada until 2004. In December of 2004, we closed our Las Vegas office and moved all operations to Salt Lake City, Utah. In connection with this move, on December 10, 2004, we created a new Utah corporation as a wholly owned subsidiary under the            name of LiL Marc, Inc. We then transferred all of our assets to LiL Marc, Inc. (Utah) in January 2005, in exchange for all 1,500,000 shares (100% of LiL Marc(s outstanding common stock. By incorporating in Utah as LiL Marc, Inc., we consolidated our operations in one location and reduced duplicated operating expenses.

 

On February 25, 2005, we submitted a subsequent Patent Assignment to the United Sates Patent Office conveying the patent rights to our wholly owned subsidiary, LiL Marc, Inc. (Utah). In connection with the assignment of the patent, LiL Marc, Inc. (Utah) will pay to James Curt McKiney, the inventor of the LiL Marc training urinal, an ongoing royalty of $0.25 per            urinal sold, due each year on March 31 beginning in 2005. As of December 31, 2006, a total of $36.00 in royalty payments have been paid to the inventor.

 

*Stock Offering*

 

On February 21, 2002, we commenced an offering of our common stock pursuant to an exemption from registration under the Securities Act of 1933 provided by Rule 504 of Regulation D promulgated thereunder. The offering was for 1,500,000 shares of common stock at the offering price of $0.08 per share. We sold a total of 763,750 shares to 59 investors for gross proceeds            of $61,100 and filed a final Form D with the SEC in March 2003.

 

Our principal executive offices are located at 1390 South 1100 East # 204, Salt Lake City, Utah 84105-2463 and our telephone number is (801) 322-0253.

 

 

 

 

 

 

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**LiL Marc Training Urinal**

 

The LiL Marc is a simple to use plastic urinal used in the bathroom ("potty") training of young boys. The LiL Marc is constructed from high quality, recyclable, high density, white polyethylene plastic and, because of its white porcelain appearance, looks like a full-sized urinal found in public restrooms, only on a smaller scale. It is intended to assist in the            training of daytime bladder control of young boys. By using the LiL Marc, a male child can be potty-trained standing up like a little boy, instead of being trained sit-down fashion like a little girl.

 

The LiL Marc is marketed as a stand-alone unit with a removable support to stand the unit at the proper height for young boys. It can be easily transported to another room or used when traveling. The LiL Marc may also be attached to a wall or door using the mounting bracket and screws, both provided with the unit. The mounting bracket holds the unit securely and            slides off easily to empty and clean with any detergent or bathroom cleaner. The LiL Marc features a built-in pour spout that makes it easy to empty and clean. The LiL Marc is a one-time purchase and does not need any other supplies. It is designed so that young boys of all sizes can comfortably stand while facing the unit. It has a height of 24 inches and a width of just over 10 inches.

 

**Production**

 

In addition to acquiring the patent rights to the LiL Marc, we also acquired the production air mold and rotational mold used to manufacture the training unit and its stand. The molds are located at Blow Molded Products in Glen Avon, California, a specialty boutique blow mold manufacturer. By having another company manufacture the LiL Marc, we are able to produce a            quality product in mass at a competitive price. Using the air mold enables us to produce large or small orders and, during test marketing by the inventor, the air mold produced over 3,000 units with a high quality finish. We have an arrangement with Blow Mold Products whereby we will use the air mold to manufacture the wall mount and LiL Marc urinal for a specified production price. The stand is manufactured elsewhere.

 

The arrangement with Blow Molded Products consists of our submitting a purchase order and payment terms are discussed at the time of the order. All orders are FOB shipping point with shipping and delivery arranged by us. We are required to provide a production ready mold, which is currently onsite at Blow Molded Products. Each order includes the standard terms and            conditions concerning any individual order. We do not have a formal contract with Blow Molded Products other than individual purchase orders. 

 

We use a subcontractor, Rotational Molding of Utah located in Brigham City, Utah, that uses custom rotation molds to manufacture the stands. Our arrangement with Rotational Molding is that we submit a purchase order on the terms that payment is due within 30 days of completing the order. All orders are FOB shipping with shipping and delivery arranged by us. We do            not have a formal contract with Rotational Molding other than individual purchase orders for each order. 

 

Cost of production, based on a projected 5,000 LiL Marcs manufactured, is approximately $2.94 per urinal and $2.00 per stand. Due to the size and shape of the LiL Marc, packaging and shipping initially required a special order box. However, we have developed a shrink-wrap package that costs approximately $1.50 per unit. We currently assemble the product at our Salt            Lake City facility and individually shrink wraps each product using an American International Electric, Inc. shrink packaging system. This system can wrap one unit in a two-and-a-half minute time period. The product is then placed in a brown shipping box. Thus, the total manufacturing and packaging cost are approximately $6.44 per finished LiL Marc, which has a suggested retail price of $22.95. 

 

We are committed to produce our product solely in America and the product has an industry recyclable rating of 2. This rating appears as a commonly used recyclable symbol (triangular shape) with the number 2 and the word "HOPE," denoting that the product is made of a plastic resin consisting of high density polyethylene. The recycle applications are common drainage            pipe, liquid laundry detergent bottles, oil bottles, pens, benches, doghouses, recycling containers, floor tile, picnic tables, fencing, lumber, and mailbox posts.

 

We guarantee the LiL Marc Potty Trainer against defects in materials and workmanship for a period of two years from the date of purchase. If the product is found to be defective, we will replace it with a new LiL Marc and pay shipping for the replaced product. To date, there have been no claims filed or requests for replacement products.

 

 

 

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**Marketing**

 

The LiL Marc, it is marketed through our websites at www.LiLMarc[dot]comand www.BoysPottyTraining[dot]comThe LiL Marc is also represented on several other websites that specialize in the marketing of potty training products for boys, which enhances the visibility            of the product. Currently these resellers include PottyTrainingSolutions.com, PottyTrainingConcepts[dot]com, ZipBaby[dot]com and Babybungalow[dot]com. We have realized only nominal international sales.

 

In 2005, Narmin Parpia of PottyTrainingConcepts[dot]com, an Internet web reseller of our product, displayed the LiL Marc at a national trade show, but met with little success. Management believes that we need to sponsor our own display at future shows for any meaningful results. Due to the extremely high costs of participating in national trade shows, management has            no current plans to do so. Management believes that the worldwide web gives the highest degree of visibility for the LiL Marc at this time.

 

The LiL Marc inventor did perform limited test marketing in 1993, which included pricing information, product layout suggestions, and some mail order product introduction. However, we have not performed any significant test marketing in recent years. 

 

**Competition**

 

Competitive conditions in the industry are dependent on the products and marketing ability of the various companies that are selling similar potty training products. Management believes that there are currently four or five companies marketing products similar to the LiL Marc. These products range from simple colored floating targets to complex molded adaptations            that are attached to the toilet bowl. There is currently only one other free standing urinal in the marketplace, the "Peter Potty," but its retail price of $49.95 far exceeds the LiL Marc price of $22.95 and its upper water reservoir and flushing design limits its portability. We offer the only free-standing training urinal that does not require a water source, making it completely portable. Current competitors require a commode basin to attach their product, such as the "Weeman,"            or require a water source to fill the urinal flushing tank, as in the "Peter Potty."

 

Most of our competitors compete using similar methods, primarily relying on their websites and the websites of resellers to market their products. Our competitive position against these other companies varies depending on each individual competitor's advertising and marketing budgets. Management believes we can compete against these smaller companies because of our            product's portability, ease of cleaning, and no requirement for a water source. Our product is priced in the middle range of these similar products.

 

The other competition to the LiL Marc is a wide variety of standard potty trainer (potties(designed for either little boys or girls that are produced and marketed through much larger companies. These competitors have a marketing advantage over the LiL Marc because their products are usually sold in nationwide retail stores through wholesale distributors.            Additionally, these larger competitors have marketing budgets that allow them to advertise in toddler and parenting magazines and on television. We do not have a budget or the ability for national advertising and marketing and instead, must rely on our website and on the websites of resellers as well as word of mouth from customers. When compared with these larger companies, we are at a competitive disadvantage as to marketing and advertising. Management believes that our            competitive position is more advantageous against these larger companies because the LiL Marc is a stand alone urinal compared to standard trainer potties. Our product has similar pricing to most trainer potties.

 

**Research and Development**

 

Presently, we are not allocating funds for research and development activities to develop new products or technology. Management does not anticipate allocating funds for primary research in the immediate future. We intend to limit development activities to improving the existing LiL Marc product, production costs and the possible development of complimentary            accessories. Management believes that future LiL Marc accessories, once properly sourced, would be relatively inexpensive and their addition could enhance the overall experience when using the product. Accessories can also help in creating product loyalty and may also allow us to increase the suggested retail price. However, it will still be difficult for us to explore any new products and accessories until such time as revenues from the sale of the LiL Marc product have provided            sufficient capital reserves to commence such a venture. A minimum capital reserve of $5,000 would be required to explore any accessory possibilities.

 

 

 

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**Patents and Trademarks**

 

The inventor of the LiL Marc applied for and, on July 16, 1991, was granted a patent relating to the LiL Marc Training Urinal (U.S. Patent Number 318,325). The rights to the patent, the trade name LiL Marc and the right to manufacture the product were subsequently assigned by the inventor to LiL Marc, Inc. (Nevada) on November 10, 1997. LiL Marc, Inc. subsequently            assigned the patent, trade name and rights to manufacture to LILM on December 30, 1999. We submitted the Patent Assignment to the United States Patent Office and on February 10, 2000, the assignment was recorded in the Patent Office. On February 25, 2005 we submitted a subsequent Patent Assignment to the United Sates Patent Office conveying the patent rights to our wholly owned subsidiary, LiL Marc, Inc., a Utah corporation. In connection with the assignment of the patent, our            subsidiary, will pay to James Curt McKiney, the inventor of the LiL Marc training urinal, an ongoing royalty of $0.25 per urinal sold, due each year on March 31 beginning in 2005. 

 

On July 16, 2005 the design patent for the LiL Marc training urinal expired and as of this date we have not yet applied for a new patent with modifications to the LiL Marc's design. Management is evaluating the available options for making any new filing. At this time we are relying on the complex engineering in the current production molds for product protection            against any copy of the product. Management believes that a substantial investment of $100,000 or more for production, marketing and packaging would be necessary to bring a similar product to the market. However, without patent protection, current competitors and/or other businesses could duplicate the product and market the same or similar product in direct competition with the LiL Marc. Presently, we do not anticipate filing additional patent applications if new and/or improved            products are developed.

 

There can be no assurance that any future patent applications will result in patents being issued or that the existing patent, or any new patents, if issued, will afford any meaningful protection from competitors. Also, there can be no assurance that we will have the financial resources necessary to enforce any patent rights we may hold. We are not aware of any            claim that our patent may infringe, or will infringe any existing patent. However, in the event such a claim is made and we are unsuccessful against such claim, we may be required to obtain licenses to such other patents or proprietary technology in order to develop, manufacture or market our product. There can be no assurance that we will be able to obtain such licenses on commercially reasonable terms or that the patents underlying the licenses will be valid and enforceable.            

 

**Employees and Compensation**

 

We presently have one full-time employee, our President, George I. Norman III, and we anticipate that Mr. Norman will devote a minimum of 20 hours per week to company business. Laurie Norman, our Secretary/Treasurer, continues to assists Mr. Norman when needed as an office manager. We also have one part-time laborer and will continue to rely on part-time help            for office and secretarial work and labor for packaging, shipping and inventory control. We may also use the services of certain outside consultants and advisors as needed on an hourly basis. Our web design and packaging art is rendered by third parties. When we have generated sufficient revenues we will consider hiring additional employees. It is not anticipated that we will have to make significant payroll expenditures until such time as sales of the LiL Marc exceed 500 units per            month. However, there can be no assurance that we will ever achieve or exceed this level of unit sales.

 

The Board of Directors has considered an employee bonus, profit sharing or deferred compensation plan, however no such plans are anticipated to be finalized in the immediate future. We do not have any employment contract with any director or employee.

 

**Facilities**

 

Our facilities consist of a corporate general office located at 1390 South 1100 East, #204, Salt Lake City, Utah 84105, consisting of approximately 440 square feet situated in a professional office building with some additional room for product and supply storage. We are conveniently located near a FedEx Kinkos and US Post office for order fulfillment. The            facilities shared with the personal offices of our President, Mr. Norman, at a month-to-month base rate of $200 per month plus utilities and storage as needed. Mr. Norman conducts his consulting business and manages his personal investments in the same office facilities and pays an additional $250 per month towards the shared rent. Management believes that the current facilities are adequate for the immediate future. Additionally, we use storage facilities for inventory located at a            local mini warehouse facility in the Salt Lake City at a cost of $110 per month. This facility has the capacity to hold approximately 5,000 LiL Marcs.

 

 

 

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**Industry Segments**

 

No information is presented regarding industry segments. We are presently engaged in the production and marketing of a plastic boys toilet-training device and have no current plans to participate in another business or industry. Reference is made to the statements of income and financial statements included herewith.

 

| **Item 1A.** | **Risk Factors** |
|--------------|------------------|

 

**Risk Factors Related to Our Business**

 

*We are subject to certain substantial risks inherent to our business and set forth or referred to herein. Prospective investors in our securities should carefully consider, among other potential risks, the following risk factors as well as all other information set forth or referred to herein before considering an investment in our common stock. An investment in            our shares involves a high degree of risk. If any of the following events or outcomes actually occurs, operating results and financial condition would likely suffer. As a result, the trading price of our common stock could decline and an investor may lose all or part of the money they paid to purchase their shares.*

 

***We have a limited operating history and have not recorded operating profits since inception. Continuing losses may exhaust capital resources and force us to discontinue operations.***

 

We were incorporated in December 1999 as a wholly owned subsidiary of LiL Marc, Inc. (Nevada). At that time we acquired from LiL Marc, Inc. (Nevada) the U.S. patent rights to the LiL Marc (Training Urinal,( the trade name (LiL Marc( and rights to manufacture and market the product. LiL Marc, Inc.(Nevada) initially acquired the rights to the LiL Marc product in            1997and marketed the product until the rights were assigned to us in 1999. Since acquiring the product rights from LiL Marc, Inc. (Nevada), we have had a limited operating history and incurred net losses since inception. From inception through December 31, 2009, we have incurred cumulative losses of approximately $188,090. There can be no assurance that we will produce future material revenues or achieve profitability in the immediate future or at any time, or that we will operate            on a profitable basis. The potential to generate profits from our business depends on many factors, including the following:

 

|   | • | the ability to secure adequate funding to increase marketing and fund future production of our product; |
|--------|--------|---------------------------------------------------------------------------------------------------------|

 

|   | • | the size and timing of future customer orders, product delivery and customer acceptance, if required; |
|--------|--------|-------------------------------------------------------------------------------------------------------|

 

|   | • | the costs of maintaining and expanding operations; and |
|--------|--------|--------------------------------------------------------|

 

|   | • | the ability to attract and retain a qualified work force as business warrants. |
|--------|--------|--------------------------------------------------------------------------------|

 

There can be no assurance that we will be able to achieve any of the foregoing factors or realize profitability in the immediate future or at any time.

 

***In order to continue business, we may have to secure additional capital. Additional required capital may not be available at attractive terms, which would have a material negative effect on our business and operating results.***

 

In the event we need additional funds in order to continue or increase current business operations, we may not be able to secure such funding. In the past we have been dependent on funds raised in our stock offering in 2002 and the infusion of capital from directors and stockholders in order to continue our business. Currently, management estimates recurring annual            total expenses to be approximately $20,000. Management further expects that general, administrative and other operating expenses will increase substantially as we accelerate efforts to expand business and to satisfy increased reporting and stockholder communications obligations under existing securities laws. 

 

There can be no assurance that we will be able to obtain necessary funds to continue operations, or that such funds will be available on favorable terms favorable, or at all. If we borrow funds we will have to pay interest and may also have to agree to restrictions that limit operating 

 

 

 

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flexibility. In addition, our cash requirements may vary materially from those now anticipated by management. These changes may be due to the results of business expansion, potential changes in capital and debt markets, terms on which financing can be obtained, competitive factors and other factors. If adequate funds are not available, we may be required to curtail operations, which            would have a negative effect on our financial condition. 

 

***We may not be able to expand the market for our product, which could cause our business to fail.***

 

It is management(s intent to expand the market for our product, but only as ongoing business conditions warrant and, if necessary, funds are available. We presently operate in a limited geographical marketing area and via the Internet. In order to expand the area in which we operate, we must expand facilities, purchase additional equipment and retain additional            personnel. Also, there can be no assurance that if we do expand into new areas, such expansion will be successful or that the business generated form the addition of markets will warrant the expenses necessary to facilitate the expansion. If we are unable to successfully expand our marketing area and products offered, our business may not be able to grow or possibly decrease, which will have a negative impact on future operations.

 

***We have only one manufacturer of our product and, if this sole producer is no longer able to produce the units, we may be unable to find a replacement manufacturer and our business could be negatively affected.***

 

Blow Molded Products is presently the only manufacturer of our product, although the stand is subcontracted to a separate entity. If Blow Molded Products was unable to continue to produce the LiL Marc units, we would have to locate another custom blow molded manufacturing company. Although the product was previously produced by Flambeau Airmold, in Redland,            California, we are not certain whether they could currently produce the product on reasonable terms. Management is currently not aware of any other custom blow molded manufacturers that can offer the flexibility of orders as small as 100 and that is also capable of producing orders as large of 10,000. Accordingly, there can be no assurance that we could locate an alternate manufacturer to produce our product and, that if we are able to find an alternate, the production costs and            associated expenses would be on terms favorable to us. In this event, we would suffer a delay in production that could negatively affect sales and have an adverse effect on our business and financial condition.

 

***The design patent for the LiL Marc training urinal has expired which could allow competitors and other businesses to duplicate and market a similar product, which would have a negative impact on future revenues and financial condition.***

 

The design patent for the LiL Marc, our only product, expired in July 2005 and we do not anticipate filing for additional patent applications related to the product. Without patent protection, we must rely on the complex engineering in the current production molds for product protection against any copy of the product. It is possible that a competitor or other            business may duplicate the product and market the same or similar product in direct competition with the LiL Marc. This could have a severe and negative impact on future sales of the LiL Marc, which would negatively affect our financial condition.

 

***The industry in which we operate is highly competitive, which could affect results of operations and make profitability even more difficult to achieve and sustain.***

 

The baby products and related products industry is highly competitive and is marked by many competitors and potential competitors, many of which are much larger with much greater financial resources, such as Fisher(Price. Most existing and potential competitors also have larger market share and larger production capability, which may enable them to establish a            stronger competitive position than we have, in part through greater marketing opportunities. If we fail to compete effectively with these businesses or to address competitive developments quickly and effectively, we will not be able to grow our business or remain a viable entity.

 

***Our business could be adversely affected by any adverse economic developments in the baby products industry and/or the economy in general.***

 

We depend on the perceived ongoing demand for our baby products, which may be subject to trends in discretionary spending by the consumer. Therefore, future business is susceptible to downturns in the baby products industry and the economy in general. Any significant downturn in the market or in general economic conditions would likely hurt our business. 

 

 

 

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***Management will devote only minimal time to our business.***

 

Presently, our three directors have other full time obligations and will devote only such time to our business as necessary, except for our President who will devote approximately 20 hours per week. The other directors will devote only such time as may be required as a member of the Board of Directors. Thus, because of their other time commitments, management            anticipates that they will devote only a minimal amount of time to our business, at least until such time as business warrants devoting more time.

 

***Effective voting control of our company is held by its three directors.***

 

Our three directors own in the aggregate approximately 72% of our outstanding voting securities. No other person owns as much as of 10% of the outstanding shares. Accordingly, the current directors will have the ability to elect all of our directors, who in turn elect all executive officers, without regard to the votes of other stockholders.

 

***Currently there is not an active market for our common stock.***

 

Although our shares are quoted on the OTC Bulletin Board, there is not currently an active trading market for the shares. However, there can be no assurance that an active trading market will ever develop or be maintained. Any trading market for our common stock will most likely be very volatile and effected by numerous factors beyond our control. Only companies            that report their current financial information to the SEC may have their securities included on the OTC Bulletin Board. In the event that we lose this status as a "reporting issuer," any future quotation of our common stock on the OTC Bulletin Board may be jeopardized.

 

***The so called "penny stock rule" could make it cumbersome for brokers and dealers to trade in our common stock, making the market less liquid which could have a negative effect on the price of the shares .***

 

Trading in our common stock is subject to certain provisions of the Exchange Act, commonly referred to as the "penny stock" rule. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading will be subject to additional sales            practice requirements on broker-dealers. These may require a broker-dealer to: 

 

|   | • | make a special suitability determination for purchasers of the shares; |
|--------|--------|------------------------------------------------------------------------|

 

|   | • | receive the purchaser's written consent to the transaction prior to the purchase; and |
|--------|--------|---------------------------------------------------------------------------------------|

 

|   | • | deliver to a prospective purchaser of our shares prior to the first transaction, a risk disclosure document relating to the penny stock market. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

 

Consequently, penny stock rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock. Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.

 

***We have never paid a dividend and do not intend to do so in the immediate future.***

 

We has never paid cash dividends and have no plans to do so in the foreseeable future. Any future dividend policy will be determined by our Board of Directors and will depend upon a number of factors, including our financial condition and performance, cash needs and expansion plans, income tax consequences, and the restrictions that applicable laws and/or credit            arrangements may impose.

 

| **Item 1B.** | **Unresolved Staff Comments** |
|--------------|-------------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

| **Item 2.** | **Properties** |
|-------------|----------------|

 

We do not presently own any property.

 

| **Item 3.** | **Legal Proceedings** |
|-------------|-----------------------|

 

 

 

 

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There are no material pending legal proceedings to which our company, or any subsidiary thereof, is 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 4.** | **Reserved** |
|-------------|--------------|

 

|   | **PART II** |
|--------|-------------|

 

| **Item 5.** | **Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities** |
|-------------|------------------------------------------------------------------------------------------------------------------------|

 

Our common stock is currently included on the OTC Bulletin Board under the symbol (LILM), although there has not been an active trading market for the shares. Secondary trading of our shares may be subject to certain state imposed restrictions. Except for being included on the OTC Bulletin Board, there are no plans, proposals, arrangements or understandings with any            person concerning the development of a trading market in any of our securities.

 

The ability of individual stockholders 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, we have no plans to            register our securities in any particular state. Further, our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The SEC 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: registered and traded on a national securities exchange meeting specified criteria set by the SEC; authorized for            quotation on The NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or exempted from the definition by the SEC. 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), are            subject to additional sales practice requirements.

 

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 a 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 also must 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 to clients 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 our common stock and may affect the ability of stockholders to sell their shares.

 

As of March 22, 2010, there were 72 holders of record of our common stock, which does not account for stockholders whose shares may be held in a brokerage account or in other nominee name. Because there has been only a limited public trading market for our securities, no trading history is presented herein. We do not currently have outstanding any options, warrants            or other securities or instruments that are convertible into shares of our common stock. 

 

We have not filed a registration statement under the Securities Act and all of our outstanding shares of common stock were issued pursuant to exemptions under that Act. In February 2003, we completed an offering of 763,750 shares of common stock to a total of 59 investors for gross proceeds of $61,100. After deducting costs and expenses associated with the offering,            the net amount received by us was $55,030. The offering was made pursuant to an exemption from registration under the Securities Act provided by Regulation D, Rule 504 of the Securities Act. Sales were made pursuant to an Offering Memorandum and an amended Form D was filed on March 3, 2003 reporting the completion of the offering.

 

As provided by Rule 502(d) of Regulation D, securities acquired in transactions that satisfy the requirements set forth in Rule 504 are not subject to the resale limitations set forth in Rule 502(d). 

 

 

 

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Accordingly, the 763,750 shares issued pursuant to the Regulation D offering in 2003 are deemed not to be (restricted( securities, unless held by an affiliate or control person of LILM. The balance of 1,820,000 shares outstanding are considered restricted securities, unless sold or otherwise transferred pursuant to a registration statement under the Securities Act or pursuant to an            appropriate exemption from registration. Presently, all the 1,820,000 shares remain as restricted securities. 

 

Subsequent to the Regulation D offering, a director purchased 63,475 shares from two investors in the offering. These shares are deemed (control( shares and are included in our calculations for restricted shares. Thus, a total of 1,883,275 shares are considered restricted securities and are held by our affiliates or controlling stockholder. 

 

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. As of December 31, 2009 to the date of this report, we have sold 20,000 shares to one investor for gross proceeds of $5,000. These shares are deemed restricted shares are included in our calculations for            restricted shares held by non affiliates. 

 

Accordingly, we have a total of 1,903,275 shares that are considered restricted, of which 1,883,275 shares are held by directors or controlling stockholders, and 20,000 shares are held by non affiliates. The balances of 700,475 shares are considered freely tradable and may be sold, transferred or otherwise traded in the public market without restriction, unless held            by an affiliate. Because a total of 1,883,275 restricted shares have been issued and outstanding for more than one year, Rule 144 of the Securities Act is available to the holders of these shares. 

 

Rule 144 is the common means for a stockholder to resell restricted securities and for affiliates, to sell their securities, either restricted on non restricted (control) shares. Rule 144 has been amended by the SEC, effective February 15, 2008. Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for            more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:

 

•    the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or

 

|   | • | 1% of the shares then outstanding. |
|--------|--------|------------------------------------|

 

Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer.

 

A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144, *provided*only that the issuer has available current public information about itself. After a one-year holding period, a non-affiliate may make unlimited sales with no            other requirements or limitations. 

 

We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, but such sales may have a substantial depressing effect on such market price.

 

All of the 1,883,475 shares considered restricted securities and held by our three directors, are presently eligible for sale pursuant to the provisions of Rule 144, subject to the volume and other limitations set forth under Rule 144. Accordingly, assuming the conditions of Rule 144 are otherwise met, each of these individuals could sell up to 26,038 shares            per three month period.

 

**Dividend Policy**

 

We have not declared or paid cash dividends or made distributions in the past, and we do not anticipate that we will pay cash dividends or make distributions in the foreseeable future. We currently intend to retain and invest future earnings to finance operations.

 

| **Item 6.** | **Selected Financial Data** |
|-------------|-----------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

 

 

 

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| **Item 7.** | **Management's Discussion and Analysis of Financial Condition and Results of Operation** |
|-------------|------------------------------------------------------------------------------------------|

 

*The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-K.*

 

We are considered a development stage company with minimal cash assets and limited operations and revenue. Ongoing operating expense, including the costs associated with the preparation and filing of our registration statement, have been paid for by (i) the net proceeds of $55,030 (after deducting offering costs) from our stock offering in 2002; and (ii) from            advances from a stockholder. A total of $25,597 has been advanced by Alewine Limited Liability Company, a 72% stockholder that is owned by two directors, George Norman and Laurie Norman and managed by Mr. Norman, our President. The debt is evidenced by a note that is payable upon demand with a provision that an interest rate of 10% would be charged on any outstanding balance not paid when due.

 

It is anticipated that we will require approximately $20,000 over the next 12 months to fund operations and to maintain our corporate viability. If we are unable to generate sufficient revenues from sales of our product, we may have to rely on funds from credit lines, directors and/or stockholders in the future. In March 2005, our subsidiary LiL Marc, Inc. received            tentative approval for an unsecured credit line with Wells Fargo Bank in the amount of $15,000. The credit line was never used and was closed. There can be no assurance at this time that the credit line can be reopened nor do we have any other potential sources of funds available to our subsidiary or us at this time. We also do not have any further commitments from a director or stockholder to provide any additional funding.

 

**Results of Operations**

 

*For the Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008*

 

We realized revenues of $2,055 for the year ended December 31, 2009 compared to revenues of $1,517 for the year ended December 31, 2008. The increase in sales during 2009 is attributed to a 50% increase in wholesale orders from $1,131 in 2008 to $1,695 in 2009 and a decrease in retail orders from our website from $387 in 2008 to $359 in 2009. 

 

Total expenses for 2009 were $19,026 compared to $16, 191 for 2008, a 17% increase. The increase includes a 20% increase in administrative expenses from $15,838 in 2008 to $19,000 in 2009, primarily due to a 20% increase in professional fees (from $8,050 in 2008 to $9,685 in 2009), including legal and accounting expenses. We also recorded a 38% increase in general            operating related expenses in 2009, from $3,699 in 2008 to $5,095 in 2009. These increases also reflect a 3% increase in rent expense (from $4,110 in 2008 to $4,220 in 2009). We realized a net loss of $16,971 for the year ended December 31, 2009 compared to a loss of $14,674 in 2008. The increase in net loss is directly attributed to an increase in general operating related expenses and a increase in professional fees 2009.

 

**Liquidity and Capital Resources**

 

At December 31, 2009 and 2008, we had total assets consisting of cash $257 and $82, respectively. Total liabilities at December 31, 2009 and 2008 were $45,652 and $33,506 respectively. Total liabilities at December 31, 2009 consisted of an invoices in the amount of $13,760 for professional fees, $5,520 in past due rent and storage, $733 in past due telephone and            internet and $43 in royalties and a demand note in the amount of $25,597 issued to a private limited liability company owned by two directors, George Norman and Laurie Norman. The note is payable upon demand and does not bear an interest rate. If a portion of the principal is not paid when due then the note will bear an interest rate of 10% per annum. 

 

Because we currently have only minimal revenues and limited cash reserves, we may have to rely on 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 

 

 

 

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immediate future to satisfy cash needs. At December 31, 2008, we had cash on hand of $82, working capital of a negative $33,424 and total stockholders( equity of a negative 33,424. At December 31, 2009, we had cash on hand of $257, working capital of a negative $45,395 and total stockholders( equity of a negative 45,395. 

 

In the opinion of management, inflation has not and will not have a material effect on our ongoing operations.

 

**Plan of Operation**

 

During the next 12 months, we plan to focus on improving our website found at http://LiLMarc.comand http://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. Additionally, we are committed to the production of additional stands when sale of more than 500 LiL Marcs is achieved. 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 has the discretion and has extended the private placement for another month. We have unsuccessfully attempted to hire a sales agent and estimates that, if all the shares are sold,            after costs of the offering and sales commission net proceeds would be approximately $495,000. As of December 31, 2009 to the date of this report, we have sold 20,000 shares ($5,000). There can be no assurance that any additional shares will be sold in the 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 the private placement is to make a major attempt to take the LiL Marc training urinal to a new level of visibility and, ultimately, to a new level of sales. We also plan to retire any debt, which is important for continued operations. 

 

Pending a positive outcome of the private placement, we are considering a new look for the labeling and packaging for the product. The current packaging has a contemporary approach with a color labeling front and a black and white back, held in place with a clear plastic shrink-wrap exterior. In addition to the actual LiL Marc, we include multiple sticker inserts to            assist in encouraging the potty training process. This has worked well for Internet sales and some wholesale, but may not be sufficient in larger quantities of 5,000 or 10,000 or more. The newer packaging for the LiL Marc may be in a box with one or two full sheet color labeling. Part of the labeling development process will include looking at additional or new package inserts. This can be as simple as a new source of stickers or rewards charts. We have identified some new strategic            items to include in our packaging that further help distinguish our product from others and also help a caregiver and son in the potty training process. We plan to source or create and make these inserts in quantities of ten thousand to again save on the per item costs.

 

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 and child wants to be successful at potty training. 

 

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 other advertising. Pending the 

 

 

 

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outcome of the private placement, we plan to use a portion of the proceeds from this offering to introduce the LiL Marc to the market place by reconsidering advertising venues and attending and participating at industry trade shows. We also intend to explore methods of sales and product distribution with some of the larger industry representatives. 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. 

Future sales will be the responsibility of existing management and, pending the outcome of the private placement, additional new management who can dedicate full time employment to sales and operations. While the current management team can continue with plans for the upcoming year, upon a successful offering we will use a portion of the proceeds to hire a dedicated            marketing member. We intend to look for someone with a background of prior niche marketing successes along with an understanding of the potty training process for little boys. Our plan would be to employ such a person for marketing while allowing the President and others to oversee operations, manufacturing, public company requirements, and potential acquisitions. 

 

Management continues to review its production of either additional stands or urinals. Our manufacturing is presently at two different locations in two different states 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. Pending the outcome of our private placement, we intend to consolidate these functions in a light industrial facility, large enough to receive delivery and send orders from inventory stored on site and would include            a place for product and labeling development, professional space for any corporate duties and also possibly housing for a company van. 

 

In the private placement memorandum, we have considered three different uses of proceeds models should only a partial amount of the shares be sold in the private placement. Our working capital estimates vary significantly with respect to the number of Shares sold. Our working capital needs and priorities can change substantially from a decision to carry higher            inventory levels, higher more key personnel, or a strategic acquisition that might involve cash expenses and/or company stock. We are not offering any sales projections because there were too many variables at our stage of development as a start-up company to accurately project future operations.

 

We also intend to set aside a portion of the proceeds from the private placement to continue to stay current in our public filing requirements. Additionally, proceeds will be set aside for investor relations to keep current information available to the public and investment banking community.

 

Management has determined that for future products, a next generation urinal will require new molds, engineering, new labeling and new pricing. While some proceeds have been allocated from the private placement to contemplate a next generation urinal, management does not believe it can proceed along these lines unless the existing product is in a national            distribution sales chain. We also intend to allocate some of the proceeds from the private placement for other products that might carry the LiL Marc logo to be marketed alongside the LiL Marc training urinal. 

 

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.

 

 

 

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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 2010. 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 employees; our President that devotes approximately 20 hours per week to our business, our Secretary that assists on an as-needed basis and sometimes a part-time laborer 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 $550 for office costs. This monthly cost will consist of office phone and fax (approximately $52 per month), 800 number (base of $5 plus per call charge of $0.15 per minute), office rent ($200 per month), storage rent ($100 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 $65. 

 

Management also estimates that during the next six months, depending on continuing sales, we may need to order an additional 2,000 unit stands at a cost of $3.67 each, for a total cost of $7,340. These stands will take 10 weeks to produce on a rotational mold by the manufacturer, Rotational Mold of Utah. 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.

 

**Net Operating Loss**

 

We have accumulated approximately $132,659 of net operating loss carryforwards as of December 31, 2009. This loss carry forward may be offset against taxable income and income taxes in future years and expires starting in the year 2021 through 2030. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior            to the expiration of the net operating loss carryforwards. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used. This could occur in the event we are purchased, acquired by or merged with another company whereby the stockholders of the new or merging company would be issued the majority of the issued and outstanding shares and our current stockholders would hold a minority of the issued and            outstanding shares. This could result in an annual limitation on the amount of net operating loss carryforwards that could be used by the ongoing business.

 

The income tax benefit of approximately $40,000 at December 31, 2009 from the carryforwards has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since we have not started full operations.

 

**Recent Accounting Pronouncements**

 

In May 2009, the Financial Accounting Standards Board (“***FASB***”) SFAS 165 (ASC 855-10) entitled “*Subsequent Events*”. Companies are now required to disclose the date through which subsequent events have been evaluated by management.            Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 

 

 

 

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(ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) did not have a significant            effect on our financial statements as of December 31, 2009.

 

In June 2009, the FASB issued FAS 166, “*Accounting for Transfers of Financial Assets*” an amendment of FAS 140. FAS 140 is intended to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of            financial assets: the effects of a transfer on its financial position, financial performance, and cash flows: and a transferor’s continuing involvement, if any, in transferred financial assets. This statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. We do not expect the adoption of FAS 166 to have an impact on results of operations, financial condition or cash flows.

 

In June 2009, the FASB issued FAS 167, “*Amendments to FASB Interpretation No. 46(R)*”. FAS 167 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest            Entities*, as a result of the elimination of the qualifying special-purpose entity concept in FAS 166, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise’s involvement in a variable interest entity. This statement must be applied as of the beginning            of each reporting entity’s first annual reporting period that begins after November 15, 2009. We do not expect the adoption of FAS 167 to have an impact on results of operations, financial condition or cash flows.

 

In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in            the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact our results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented. As a result,            these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. We implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards. We do not expect the adoption of FAS 168 to have an impact on results of operations, financial condition or cash flows.

 

**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 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; |
|--------|--------|------------------------------------------------------------------------|

 

|        | • | 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 our 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 these needs;                          |
|        |        |                                                                                              |
|        | • | general economic conditions.                                                                 |

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|   |  |   |
|--------|--|--------|

 

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 report identify important risks and uncertainties affecting our future, which could cause actual results to differ materially from the forward-looking statements made herein.

 

 

| **Item 7A.** | **Quantitative and Qualitative Disclosures Bout Market Risk** |
|--------------|---------------------------------------------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

| **Item 8.** | **Financial Statements and Supplementary Data** |
|-------------|-------------------------------------------------|

 

Financial statements for the fiscal years ended December 31, 2009 and 2008 have been examined to the extent indicated in their reports by Madsen & Associates, CPA(s Inc., independent certified public accountants and have been prepared in accordance with accounting principles generally accepted in the United States of America. The aforementioned financial            statements are included herein starting with page F-1.

 

| **Item 9.** | **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure** |
|-------------|------------------------------------------------------------------------------------------|

 

None

 

| **Item 9A(T).** | **Controls and Procedures** |
|-----------------|-----------------------------|

 

As of the end of the period covered by this annual 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 as defined in Rules 13a-15(e) and 15d-15(e) of the            Securities Exchange Act of 1934. 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 upon the required evaluation, our chief executive officer and principal accounting officer concluded as of December 31, 2009, our disclosure controls and procedures are effective in timely alerting them to material information relating to the company required to be disclosed by us in the reports that we file or submit under the Exchange Act to be recorded,            processed, summarized and reported within the time periods specified in the SEC(s rules and forms. There have been no significant changes in our internal controls over financial reporting or in other factors that could significantly affect internal controls over financial reporting subsequent to the date we carried out our evaluation.

 

| **Item 9B.** | **Other Information** |
|--------------|-----------------------|

 

|   | Not applicable. |
|--------|-----------------|

 

**PART III**

 

| **Item 10.** | **Directors, Executive Officers and Corporate Governance** |
|--------------|------------------------------------------------------------|

 

|   | Our executive officers and directors are as follows: |
|--------|------------------------------------------------------|

 

|   | **Name** | **Age** | **Position** |
|--------|----------|---------|--------------|

|   | George I. Norman III | 55 | President, Chief Executive Officer and Director |
|--------|----------------------|----|-------------------------------------------------|

|   | Laurie J. Norman | 47 | Secretary / Treasurer and Director |
|--------|------------------|----|------------------------------------|

|   | Jessie Scott Bean | 54 | Director |
|--------|-------------------|----|----------|

 

 

 

-17-

----

___________________________

 

All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. We have not compensated directors for service on the Board of Directors or any committee thereof, but directors are entitled to be reimbursed for expenses incurred            for attendance at meetings of the Board and any committee of the Board. However, directors may defer their expenses and/or take payment in shares of our common stock. As of the date hereof, no director has accrued any expenses or compensation. Officers are appointed annually by the Board of Directors and each executive officer serves at the discretion of the Board. We do not have any standing committees. 

 

No director, officer, affiliate or promoter has, within the past ten years, filed any bankruptcy petition, been convicted in or been the subject of any pending criminal proceedings, or is any such person the subject or any order, judgment, or decree involving the violation of any state or federal securities laws.

 

Directors currently devote only such time to company affairs as needed. The time devoted could amount to as little as 1% of the time they devote to their own business affairs, or if business conditions ultimately warrant, they could possibly elect to devote their full time to our business. Presently, there are no other persons whose activities are material to our            operations.

 

Currently, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly or indirectly participate in or influence the management of our affairs. Present management openly accepts and appreciates any input or suggestions from stockholders. However, the Board of Directors is            elected by the stockholders and the stockholders have the ultimate say in who represents them on the Board. There are no agreements or understandings for any officer or director to resign at the request of another person and none of the current offers or directors are acting on behalf of, or will act at the direction of any other person.

 

|   | The business experience of each of the persons listed above during the past five years is as follows: |
|--------|-------------------------------------------------------------------------------------------------------|

 

***George I. Norman, III***has been our President and a director since December 30, 1999. He attended the University of Utah from 1973 to 1975, studying general education, accounting, business and finance. Mr. Norman returned to the University in 1979 and continued his studies in humanities, science, and finance. Mr. Norman has been            self-employed since 1979 in Salt Lake City, Utah, as a financial and marketing consultant. In his business, Mr. Norman consults with both individual and corporate clients and provides consulting services related to making general business decisions, reviewing business plans and providing recommendations for raising capital. Also, Mr. Norman provides consulting services in the area of real estate management.

 

***Laurie J. Norman***has been Secretary-Treasurer and a director since December 30, 1999. From April 22, 1997 to May 19, 2000 Mrs. Norman was Secretary-Treasurer and director of LiL Marc, Inc., a public development stage company developing child products through its wholly owned subsidiary, LILM, Inc. She graduated in 1985 from Adams            State College in Alamosa, Colorado, with a Bachelor of Science degree in biology. She studied German at the Goethe Institute in Murnau, Republic of Germany in 1990. Mrs. Norman has worked with children and adults as a ski instructor in the United States and New Zealand since 1981. Mrs. Norman has also worked in the main offices of the Alta Ski Resort near Salt Lake City, Utah and, since November 1991,teaches skiing part-time at the Resort from November to April each year. Since            January 1997, Mrs. Norman has been the Secretary/Treasurer and Assistant Manager of the Alewine Limited Liability Company. Laurie J. Norman is the wife of George I. Norman, III.

 

      ***Jessie Scott Bean***has been a director since September 30, 2001. Since July 7, 2001, he has been employed as a salesperson for time shares at Consolidated Resorts in Las Vegas, Nevada. From June 2, 2000 to June 28, 2001, Mr. Bean was a salesperson of vacation packages for Vacation Consultants            International in Las Vegas and from May 1997 to June 1, 2000, he was a licensed auction and wholesale salesperson for Donkey Motors, also in Las Vegas. From September 8, 1997 to September 1998, Mr. Bean was a salesperson of vacation packages for Global Odyssey in Pleasanton, California, and from 1996 to 1997, he was an auto salesperson for Willden Pride Dodge in Las Vegas. Mr. Bean graduated from Clark High School in Las Vegas, Nevada.

 

-18-

----

 

**Compliance With Section 16(a) of the Exchange Act**

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own greater than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. To the best of our knowledge, based solely on a review of the copies of such reports furnished            to us, all reports under Section 16(a) required to be filed by its directors, executive officers and greater than 10% beneficial owners were timely filed as of the date of this filing.

 

**Code of Ethics**

 

We currently do not have a code of ethics. During the current fiscal year, we do intend to adopt a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

 

 

| **Item 11.** | **Executive Compensation** |
|--------------|----------------------------|

 

The following discussion addresses any and all compensation awarded to, earned by or paid to our named executive officers for the fiscal years ended December 31, 2008 and 2009. We have not had a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors. Both production and marketing are the responsibility of George            Norman. We anticipate that during 2009 Mr. Norman will devote a minimum of 20 hours per week to our business. Laurie Norman, our Secretary / Treasurer, continues to assists Mr. Norman when needed as an office manager. 

 

We have not paid any salaries or other compensation to officers or directors for their service on the Board of Directors for the years ended December 31, 2008 and 2009. Further, we have not entered into an employment agreement with any officers, directors or any other persons and no such agreements are anticipated in the immediate future. It is intended that            directors will defer any compensation until such time as business operations provide sufficient cash flow to provide for salaries. As of the date hereof, no person has accrued any compensation.

 

| **Item 12.** | **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters** |
|--------------|----------------------------------------------------------------------------------------------------|

 

The following table sets forth information, to the best of our knowledge, as of March 30, 2009, with respect to each person known by us to own beneficially more than 5% of the outstanding common stock, each director and all directors and officers as a group.

 

|   | **Name and Address** | **Amount and Nature of** | **Percent** |
|--------|----------------------|--------------------------|-------------|

|   | **of Beneficial Owner** | **Beneficial Ownership** | **of Class**(1) |
|--------|-------------------------|--------------------------|-----------------|

|   | Alewine Limited Liability Company (2) | 1,863,475 | 71% |
|--------|---------------------------------------|-----------|-----|

|   | 1390 South 1100 East Ste. 204 |
|--------|-------------------------------|

|   | Salt Lake City, UT 84105 |
|--------|--------------------------|

|   | Jessie Scott Bean | 20,000 | 1% |
|--------|-------------------|--------|----|

|   | 8313 Aspenbrook |
|--------|-----------------|

|   | Las Vegas, NV 89145 |
|--------|---------------------|

|   | All directors and officers as | 1,883,475 | 72% |
|--------|-------------------------------|-----------|-----|

|   | a group (3 persons) |
|--------|---------------------|

 

|   | * | Director and/or executive officer |
|--------|---|-----------------------------------|

 

|   | Note: | Unless otherwise indicated, we have been advised that each person above has sole voting power over the shares indicated above. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------|

 

|   | (1) | Based upon 2,603,750 shares of common stock outstanding on March 22, 2009. |
|--------|-----|----------------------------------------------------------------------------|

 

(2)            Alewine Limited Liability Company is a Nevada limited liability company managed by Mr. Norman, our President, through which he manages his personal investments and conducts his self-employment consulting business in the area of real estate            management and corporate finance. Alewine Limited Liability Company is owned by George Norman and Laurie Norman, our Secretary. By resolution of its members, Mr. Norman has voting and investment control over Alewine.

 

 

 

-19-

----

 

| **Item 13.** | **Certain Relationships and Related Transactions and Director Independence.** |
|--------------|-------------------------------------------------------------------------------|

 

There have been no material transactions during the past two fiscal years between us and any officer, director, nominee for election as director, or any stockholder owning greater than five percent (5%) of our outstanding shares, nor any member of the above referenced individuals' immediate families.

 

| **Item 14.** | **Principal Accountant Fees and Services** |
|--------------|--------------------------------------------|

 

We do not have an audit committee and as a result our entire Board of Directors performs the duties of an audit committee. Our Board of Directors will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

 

 

We do not have an audit committee and as a result our entire Board of Directors performs the duties of an audit committee. Our Board will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

 

|   | *Audit Fees* |
|--------|--------------|

 

The aggregate fees billed by our independent auditors, Madsen & Associates, CPA(s Inc., for professional services rendered for the audit of our annual financial statements for the years ended December 31, 2009 and 2008, and for the review of quarterly financial statements included in our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and            September 30, 2009 and 2008, were $4,410 for 2009 and $4,500 for 2008.

 

|   | *Audit Related Fees* |
|--------|----------------------|

 

For the years ended December 31, 2009 and 2008, there were no fees billed for assurance and related services by Madsen & Associates relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above.

 

|   | *Tax Fees* |
|--------|------------|

 

      For the years ended December 31, 2009 and 2008, no fees were billed by Madsen & Associates for tax compliance, tax advice and tax planning.                

 

We do not use Madsen & Associates for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not            engage Madsen & Associates to provide compliance outsourcing services.

 

The Board of Directors has considered the nature and amount of fees billed by Madsen & Associates and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Madsen & Associates' independence.

 

| **Item 15.** | **Exhibits, Financial Statement Schedules** |
|--------------|---------------------------------------------|

 

|   | (a) | Exhibits |
|--------|-----|----------|

 

|   | Exhibit No. | Exhibit Name |
|--------|-------------|--------------|

|   | 3.1* | Articles of Incorporation (Nevada) |
|--------|------|------------------------------------|

|   | 3.2* | By-Laws of Registrant |
|--------|------|-----------------------|

|   | 4.1* | Instrument defining rights of holders (See Exhibit No. 3.1, Articles of Incorporation) |
|--------|------|----------------------------------------------------------------------------------------|

|   | 10.1** | Promissory Note |
|--------|--------|-----------------|

|   | 21.1* | Subsidiaries |
|--------|-------|--------------|

|   | 31.1 | Certification of C.E.O Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|-----------------------------------------------------------------------------------|

|   | 31.2 | Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|----------------------------------------------------------------------------------------------------------|

 

 

 

-20-

----

|   | 32.1 | Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ________________ |
|--------|------------------|

|   | * | Included as exhibit to Form 10-SB filed March 30, 2006. |
|--------|---|---------------------------------------------------------|

|   | ** | Included as Exhibit to Amendment No. 1 to Form 10-SB/A filed August 22, 2006 |
|--------|----|------------------------------------------------------------------------------|

 

 

 

-21-

----

 

 

**LILM, INC.**

**(A Development Stage Company)**

 

FINANCIAL STATEMENTS

 

December 31, 2009

 

 

 

 

 

 

 

 

 

 

-22-

----

 

 

| **MADSEN & ASSOCIATES, CPAs INC.** | 684 East Vine St, # 3 |
|----------------------------------------|-----------------------|

| **Certified Public Accountants and Business Consultants** | Murray, Utah 84107 |
|-----------------------------------------------------------|--------------------|

|   | Telephone 801-268-2632 |
|--------|------------------------|

|   | Fax 801-262-3978 |
|--------|------------------|

 

Board of Directors

LILM, INC. and Subsidiary and LIL Marc INC. (predecessor) 

Salt Lake City, Utah

 

|   | **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** |
|--------|-------------------------------------------------------------|

 

We have audited the accompanying consolidated balance sheet of LILM, INC. and Subsidiary and LIL Marc INC. (predecessor) (development stage company) at December 31, 2009, and 2008 the consolidated statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2009, and 2008 and the period April 22, 1997 (date of inception of predecessor) to December 31, 2009. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 

The company is not required to have nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness for the company’s internal control                over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure s 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of LILM, INC. and Subsidiary and LIL Marc INC. (predecessor) at December 31, 2009, and 2008 the results of operations, and cash flows for the years ended December 31, 2009 and 2008 and the period April 22, 1997 (date of inception of LIL Marc, INC. (predecessor)                to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company will need additional working capital for its planned activity and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements.                These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Salt Lake City, Utah

March 24, 2010 

/s/ Madsen & Associates, CPA(s Inc.

                                                                                                                   

 

-23-

----

 

 

**LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**

**(Development Stage Company)**

**CONSOLIDATED BALANCE SHEETS**

**For the Years Ended December 31, 2009 and 2008**

 

|                                                  |                                              |                                  |      |      |      |         |    |               |
|-------------------------------------------------------|---------------------------------------------------|---------------------------------------|-----------|-----------|-----------|--------------|---------|--------------------|
|                                                  |                                              |                                  |      |      |      | Dec 31, 2009 |    | Dec 31,  2008 |
|                                                  |                                              |                                  |      |      |      |         |    |               |
| **Assests**                                           |                                              |                                  |      |      |      |         |    |               |
| **Current Assests**                                   |                                              |                                  |      |      |      |         |    |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  | Cash                                              |                                  |      |      |      | $257         |    | $82                |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              | Total Current Assets                  |      |      | $257      |         | $82     |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
| **Liabilities & Stockholders' Equity-deficiency** |                                              |                                  |      |      |
| **Current Liabilities**                               |                                              |                                  |      |      |      |         |    |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  | Accounts Payable                                  |                                  |      |      | $20,055   |         | $11,566 |
|                                                  | Note Payable- Related Party                       |                                  |      | $25,597   |      | $21,940      |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              | Total Current Liabilities             |      | $45,652   |      | $33,506      |
|                                                  |                                              |                                  |      |      |      |         |    |               |
| **Stockholders' Equity**                              |                                              |                                  |      |      |      |         |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  | Common Stock                                      |                                  |      |      |      |         |    |
|                                                  | 25,000,000 shares authorized at $0.001 par value; |                                  |      |      |
|                                                  | 2,603,750 shares issued and outstanding           |                                  | $2,604    |      | $2,584    |
|                                                  | Capital in excess of par value                    |                                  |      | $140,091  |      | $135,111     |
|                                                  | Accumulated deficit during development stage      | ($188,090                             |      | ($171,119 |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              | Total Stockholders' Equity-deficiency | ($45,395) |      | ($33,424) |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                  |                                              |                                  |      |      |      | $257         |    | $82                |
|                                                  |                                              |                                  |      |      |      |         |    |               |
|                                                       |                                                   |                                       |           |           |           |              |         |                    |  |

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

 

-24-

----

**LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**

**(Development Stage Company)**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**For the Years Ended December 31, 2009 and 2008 and the Period**

**April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to December 31, 2009**

 

 

|                           |                          |   |   |    |       |    |       |     |                |
|--------------------------------|-------------------------------|--------|--------|---------|------------|---------|------------|----------|---------------------|
|                           |                          |   |   |    | **Dec 31** |    | **Dec 31** |     | **Apr 22, 1997**    |
|                           |                          |   |   |    | **2009**   |    | **2008**   |     | **to Dec 31, 2009** |
|                           |                          |   |   |    |       |    |       |     |                |
| **Sales**                      |                          |   |   |    | $2,055     |    | $1,517     |     | $22,983             |
|                           |                          |   |   |    |       |    |       |     |                |
| **Cost of Goods Sold**         |                          |   |   | -       |       | -       |       | -        |
|                           |                          |   |   |    |       |    |       |     |                |
|                           | Gross Profit                  |   |   | $2,055  |       | $1,517  |       | $22,983  |
| **Expenses**                   |                          |   |   |    |       |    |       |     |
|                           |                          |   |   |    |       |    |       |     |                |
|                           | Administrative                |   |   | $19,000 |       | $15,838 |       | $182,263 |
|                           | Royalties                     |   |   |    | $26        |    | $18        |     | $160                |
|                           | Depreciation and amortization |   | -      |    | $335       |    | $28,650    |
|                           |                          |   |   |    | $19,026    |    | $16,191    |     | $211,073            |
|                           |                          |   |   |    |       |    |       |     |                |
| **Net Loss**                   |                          |   |   |    | ($16,971)  |    | ($14,674)  |     | ($188,090)          |
|                           |                          |   |   |    |       |    |       |     |                |
|                           |                          |   |   |    |       |    |       |     |                |
|                           |                          |   |   |    |       |    |       |     |                |
|                           |                          |   |   |    |       |    |       |     |                |
|                           |                          |   |   |    |       |    |       |     |                |
| **Net Loss Per Common Share**  |                          |   |   |    |       |    |       |
|                           |                          |   |   |    |       |    |       |     |                |
|                           | Basic and dilluted            |   |   | $ (.01) |       | $ (.01) |       |     |
|                           |                          |   |   |    |       |    |       |     |                |
| **Average Outstanding Shares** |                          |   |   |    |       |    |       |
|                           |                          |   |   |    |       |    |       |     |                |
|                           | Basic (stated in 1000's)      |   | 2,584  |    | 2,584      |    |       |
|                           |                          |   |   |    |       |    |       |     |                |
|                                |                               |        |        |         |            |         |            |          |                     |  |

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

 

-25-

----

**LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**

**(Development Stage Company)**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)**

**For the Years Ended December 31, 2009 and 2008 and the Period**

**April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to December 31, 2009**

 

|                                        |   |      |      |    |             |   |                     |     |            |   |               |
|---------------------------------------------|--------|-----------|-----------|---------|------------------|--------|--------------------------|----------|-----------------|--------|--------------------|
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
|                                        |   |      |      |    |             |   |                     |     |            |   |
|                                        |   |      |      |    | **Common Stock** |   | **Capital in Excess of** |     | **Accumulated** |
|                                        |   |      |      |    | **Shares**       |   | **Amount**               |     | **Par Value**   |        |   **Deficit** |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
| **Balance December 30, 1999 (predecessor)** |   |      |      |    | $51,977          |   | ($51,977)                |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
| Issuance of common shares for cash and      |   |      |      |    |             |   |                     |     |
| a patent at .0129-December 30, 1999         |   | 1,000,000 |      | $1,000  |             | $12    |                     |     |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-00                                   |   |      |      |    |             |   |                     |     |            |   | ($8,867)           |
| Inssuance of common shares for cash         |   |      |      |    |             |   |                     |     |
| at .025-June 27, 2001                       |   |      |      | 800,000 |             | $800   |                     | $19,200  |            |   |
| Issuance of common shares for cash          |   |      |      |    |             |   |                     |     |
| at .025-August 31, 2001                     |   |      | 20,000    |    | $20              |   | $480                     |     |            |
| Stock offering costs                        |   |      |      |    |             |   |                     | ($375)   |            |   |
| Capital contribution- related party         |   |      |      |    |             | $100   |                     |     |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-01                                   |   |      |      |    |             |   |                     |     |            |   | ($13,537)          |
| Stock offering costs                        |   |      |      |    |             |   |                     | ($2,500) |            |   |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-02                                   |   |      |      |    |             |   |                     |     |            |   | ($13,858)          |
| Issuance of common shares for cash          |   |      |      |    |             |   |                     |     |
| at .08-February 20, 2003                    |   |      | 763,750   |    | $764             |   | $60,336                  |     |            |
| Stock offering costs                        |   |      |      |    |             |   |                     | ($6,070) |            |   |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-03                                   |   |      |      |    |             |   |                     |     |            |   | ($18,081)          |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-04                                   |   |      |      |    |             |   |                     |     |            |   | ($1,731)           |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-05                                   |   |      |      |    |             |   |                     |     |            |   | ($12,692)          |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-06                                   |   |      |      |    |             |   |                     |     |            |   | ($15,821)          |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-07                                   |   |      |      |    |             |   |                     |     |            |   | ($19,881)          |
| Net operating loss for the year ended       |   |      |      |    |             |   |                     |     |
| 31-Dec-08                                   |   |      |      |    |             |   |                     |     |            |   | ($14,674)          |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
| **Balance December 31, 2008**               |   |      | 2,583,750 |    | $2,584           |   | $135,111                 |     | ($171,119)      |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
| Issuance of common shares for cash          |   |      |      |    |             |   |                     |     |
| at Nov 03 09                                |   |      |      | 20,000  |             | $20    |                     | $4,980   |            |   |
| Net operating loss for the year             |   |      |      |    |             |   |                     |     |            |
| ended December 31, 2009                     |   |      |      |    |             |   |                     |     | ($16,971)       |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
|                                        |   |      |      |    |             |   |                     |     |            |   |               |
| **Balance December 31, 2009**               |   |      | 2,603,750 |    | $2,604           |   | $140,091                 |     | ($188,090)      |
|                                             |        |           |           |         |                  |        |                          |          |                 |        |                    |  |  |  |  |  |

 

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

 

-26-

----

**LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**

**(Development Stage Company)**

**CONSOLIDATED STATEMENT OF CASH FLOWS**

**For the Years Ended December 31, 2009 and 2008 and the Period**

**April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to December 31, 2009**

 

|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|------------------------------------------------------------|------------------------------------------------------|------------------------------------------|----------|--------|----------|------------------|------------|------------------|-----------|---------------------|
|                                                       |                                                 |                                     |     |   |     |             |       |             |      | **Apr 22, 1997 to** |
|                                                       |                                                 |                                     |     |   |     | **Dec 31, 2009** |       | **Dec 31, 2008** |      | **Dec 31, 2009**    |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
| **Cash Flows From**                                        |                                                 |                                     |     |   |     |             |       |             |      |
| **Operating Activities**                                   |                                                 |                                     |     |   |     |             |       |             |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Net Loss                                             |                                     |     |   |     | ($16,971)        |       | ($14,674)        |      | ($188,090)          |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Adjustments to reconcile net loss to                 |                                     |     |   |     |             |       |
|                                                       | net cash provided by operating activities            |                                     |     |   |     |             |       |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Issuance of common stock for expenses                |                                     | -        |   | -        |             | $8,700     |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Depreciation and amortization                        |                                     |     |   |     | $335             |       | $28,650          |
|                                                       | Changes in acocunts payable                          |                                     |     | $8,489 |     | $7,052           |       | $16,834          |
|                                                       | Contributions to capital- expenses                   |                                     | -        |   | -        |             | $100       |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Net Cash Flows Used in Operations                    |                                     | ($8,482) |   | ($7,287) |             | ($133,806) |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
| **Cash Flows From Investing Activities**                   |                                                 |                                     |     |   |     |             |       |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Purchase of patent                                   |                                     |     |   | -        |             | -          |             | ($28,650) |
|                                                       | Purchase office equipment                            |                                     |     | -      |     | -                |       | ($2,096)         |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
| **Cash Flows From Financing Activities**                   |                                                 |                                     |     |   |     |             |       |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Advances from related party                          |                                     |     | $3,657 |     | $7,143           |       | $25,597          |
|                                                       | Proceeds from issuance of common stock net of costs  | $5,000                                   |     | -      |     | $139,212         |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Net Change in Cash                                   |                                     |     |   | $175     |             | ($144)     |             | $257      |
|                                                       | Cash at Beginning of Period                          |                                     |     | $82    |     | $226             |       | -                |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Cash at End of Period                                |                                     |     | $257   |     | $82              |       | $257             |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
| **NON CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES** |                                                 |                                     |     |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                       | Issuance of 922,900 common shares for a patent- 2000 |                                     |     |   |     | $11,963          |
|                                                       |                                                 | Contributions to capital- expenses- 2001 |     |   |     |             | $100       |
|                                                       |                                                 |                                     |     |   |     |             |       |             |      |                |
|                                                            |                                                      |                                          |          |        |          |                  |            |                  |           |                     |  |  |

 

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

 

-27-

----

                                 

|   | **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)** |
|--------|----------------------------------------------------------------|

|   | **(Development Stage Company)** |
|--------|---------------------------------|

|   | **NOTES TO FINANCIAL STATEMENTS** |
|--------|-----------------------------------|

|   | **December 31, 2009** |
|--------|-----------------------|

 

| **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 December 31, 2009.

 

**2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

Accounting Methods

 

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 December 31, 2009, the Company had a net operating loss available for carryforward of $132,659. The income tax benefit of approximately $40,000 from the carryforward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has not started full operations. The net operating loss will expire starting in            2021 through 2030.

 

 

-28-

----

|   | **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)** |
|--------|----------------------------------------------------------------|

|   | **(Development Stage Company)** |
|--------|---------------------------------|

|   | **NOTES TO FINANCIAL STATEMENTS (Continued)** |
|--------|-----------------------------------------------|

|   | **December 31, 2009** |
|--------|-----------------------|

 

 

**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 incomes (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 only the basic per share amounts are shown in the report.

 

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.

 

-29-

----

|   | **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)** |
|--------|----------------------------------------------------------------|

|   | **(Development Stage Company)** |
|--------|---------------------------------|

|   | **NOTES TO FINANCIAL STATEMENTS (Continued)** |
|--------|-----------------------------------------------|

|   | **December 31, 2009** |
|--------|-----------------------|

 

 

 

Recent Accounting Pronouncements

 

The Company does not expect that the adoption of other recent accounting pronouncements will

have a material impact on its financial statements.

 

**3. 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 $.25, due to the inventor, on the sale of each training urinal. 

 

**4. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES**

 

Officer-directors have acquired 72% of the outstanding common stock of the Company and have made demand, no interest loans to the Company of $25,597.

 

**5. PRIVATE PLACEMENT**

 

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.

 

**6. 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.                       

 

 

-30-

----

|   | **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)** |
|--------|----------------------------------------------------------------|

|   | **(Development Stage Company)** |
|--------|---------------------------------|

|   | **NOTES TO FINANCIAL STATEMENTS (Continued)** |
|--------|-----------------------------------------------|

|   | **December 31, 2009** |
|--------|-----------------------|

 

 

 

**7. SUBSEQUENT EVENTS**

 

|   | Since December 31, 2009 and to the date of this report there has not been any material subsequent |
|--------|---------------------------------------------------------------------------------------------------|

|   | event to report. |
|--------|------------------|

 

-31-

----

                                                         

 

 

 

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) 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.**

 
|  | By: /s/ GEORGE I. NORMAN, III |
|--|-------------------------------|
|  | George I. Norman, III         |
|  | President and C.E.O.          |

 

 

| Dated: | March 31, 2010 |
|--------|----------------|

 

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 |
|--------|-----------|-------|------|

 

 

|   | March 31, 2010 |
|--------|----------------|

|   | /S/    | GEORGEI.NORMAN,III | President, C.E.O. and director |
|--------|-----------------------|--------------------|--------------------------------|

|   | George I. Norman, III | (Principal Accounting Officer) |
|--------|-----------------------|--------------------------------|

 

 

|   | March 31, 2010 |
|--------|----------------|

|   | /S/   | LAURIEJ.NORMAN | Secretary / Treasurer and Director |
|--------|------------|----------------|------------------------------------|

|   | Laurie J. Norman |   |
|--------|------------------|--------|

 

|   | March 31, 2010 |
|--------|----------------|

 

|   | /S/   | JESSIESCOTTBEAN | Director |
|--------|------------|-----------------|----------|

Jessie Scott Bean

-32-