**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, 2008

 

|   | [ | ] | 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 [ ] 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 [ ] 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 [ | ] |
|--------|-----------|------|---|

 

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.                       [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

|   | Large accelerated filer | [ | ] | Accelerated filer | [ | ] |
|--------|-------------------------|---|---|-------------------|---|---|

|   | Non-accelerated filer | [ | ] | Smaller reporting company | x |
|--------|-----------------------|---|---|---------------------------|---|

|   | (Do not check if a smaller reporting company) |
|--------|-----------------------------------------------|

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes [ ] No [ X ]

 

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, 2008, the last business day of the registrant’s most recently completed second quarter, was $70,027. 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, 2008 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, 2009 was 2,583,750. |
|--------|-------------------------------------------------------------------------------------------------------------|

 

**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. | Submission of Matter to a Vote of Security Holders | 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 | 16 |
|----------|------------------------------------------------------------|----|

 

| Item 8. | Financial Statements and Supplementary Data | 16 |
|---------|---------------------------------------------|----|

 

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

|   | Financial Disclosure | 16 |
|--------|----------------------|----|

 

| Item 9A(T). | Controls and Procedures | 16 |
|-------------|-------------------------|----|

 

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

 

**PART III**

 

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

 

| Item 11. | Executive Compensation | 18 |
|----------|------------------------|----|

 

| 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 | 31 |
|--------|------------|----|

 

 

 

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**PART I**

 

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

 

**Business Development**

 

|   | *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, 2008, a total of $108.00 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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**Current Business Activities**

|   | ***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. 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.com, ZipBaby.com and Babybungalow.com. We have realized only nominal international sales.

 

In 2005, Narmin Parpia of PottyTrainingConcepts.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 world wide 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 $19.95 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 which 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 $130 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.** |
|--------------|-------------------|

 

*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, 2008, we have incurred cumulative losses of approximately $171,119. 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 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. 

 

 

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***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, that 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.                

 

|   | ***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.

 

 

 

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

 

Our three directors own in the aggregate approximately 73% 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.** | **Description of Property.** |
|-------------|------------------------------|

 

|   | We do not presently own any property. |
|--------|---------------------------------------|

 

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

 

There are no material pending legal proceedings to which the company or any subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.

 

| **Item 4.** | **Submission of Matters to a Vote of Security Holders.** |
|-------------|----------------------------------------------------------|

 

No matters were submitted to a vote of our securities holders during the fourth quarter of the fiscal year ended December 31, 2008.

 

-9-

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**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. Because of the lack of trading volume, no trading history is being presented. The last reported trade our shares was at $0.10. 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. 

 

**Penny Stock Rule**

 

Our shares are most likely 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 broker-dealer 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 a 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. |
|--------|---------|------------------------------------------|

 

A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse. 

 

 

For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive 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, a monthly statement must be sent to the client 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.

 

These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.

 

-10-

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**Rule 144**

As of March 27, 2009, there were 67 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). 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 and no                restricted shares are held by nonaffiliates. Accordingly, the balance of 700,475 shares are considered freely tradeable and may be sold, transferred or otherwise traded in the public market without restriction, unless held by an affiliate or controlling stockholder. 

 

Because all of the outstanding 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 stockholders 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.

 

**Dividends Policy**

 

We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future. 

 

-11-

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

 

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

 

| **Item 7.** | **Management’s Discussion and Analysis of Financial Condition and Results of Operations.** |
|-------------|--------------------------------------------------------------------------------------------------|

 

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

 

**Forward Looking and Cautionary Statements**

 

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or                similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United                States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

**Results of Operations**

 

|   | *For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007* |
|--------|-------------------------------------------------------------------------------------|

 

We realized revenues of $1,517 for the year ended December 31, 2008 compared to revenues of $1,693 for the year ended December 31, 2007. The decrease in sales during 2008 is attributed to a decrease in retail orders from our website from $800 in 2007 to $387 in 2008, a 51% decrease, and was offset by a 27% increase in wholesale orders from $893 in 2007 to                $1,131 in 2008. 

 

Total expenses for 2008 were $16,191 compared to $21,574 for 2007, a 25% decrease. The decrease includes a 24% decrease in administrative expenses from $20,843 in 2007 to $15,838 in 2008, primarily due to a 24% decrease in professional fees (from $10,551 in 2007 to $8,050 in 2008), including legal and accounting expenses. We also recorded a 49% decrease in                general operating related expenses in 2008, from $7,297 in 2007 to $3,699 in 2008. These decreases were partially offset by a 37% increase in rent expense (from $2,995 in 2007 to $4,110 in 2008). We realized a net loss of $14,674 for the year ended December 31, 2008 compared to a loss of $19,881 in 2007. The decrease in net loss is directly attributed to a decrease in general operating related expenses and a decrease in professional fees 2008.

 

**Liquidity and Capital Resources**

 

At December 31, 2008 and 2007, we had total assets consisting of cash and office equipment of $82 and $561, respectively. Total liabilities at December 31, 2008 and 2007 were $33,506 and $19,311 respectively. Total liabilities at December 31, 2008 consisted of an invoices in the amount of $8,750 for professional fees, 

$2800 in past due rent, $16 in royalties and a demand note in the amount of $21,940 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 immediate future to satisfy cash needs.                At December 31, 2007, we had cash on hand of $226, working capital of a negative $19,085 and total stockholders’ equity of a negative 18,750. 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. 

 

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

 

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 $21,940 has been advanced by Alewine Limited Liability Company, a                73% 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 

 

 

 

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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 us or our subsidiary at this time. We also do not have any further commitments from a director or stockholder to provide any additional funding.

 

**Plan of Operation**

 

During the next 12 months, we plan to focus on improving our website found at [http://LiLMarc[dot]comand http://Boyspottytraining[dot]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.

 

If we cannot generate or secure adequate funds during the next 12 months, we may be forced to seek alternatives such a joint venture or licensing our product. If we are unsuccessful in securing alternative sources of revenue, we may have to cease operations or sell off existing inventory at liquidating prices.

 

After paying certain costs and expenses related to ongoing administrative costs and the associated professional fees, including any residual or ongoing cost of preparing and filing our registration statement, management estimates that it will have sufficient funds to operate for the next six to twelve months. If business revenues do not provide enough funds                to continue operations, it may be necessary for us to seek additional financing. This would most likely come from current directors, although the directors are under no obligation to provide additional funding and there is no assurance outside funding will be available on acceptable terms, or at all.

 

Because we rely on others for production of our product, we do not expect to make any significant capital expenditures for new equipment or other assets during 2009. 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.

 

To achieve our goals during the next twelve months, we will require a total monthly estimated expenditure of approximately $600. 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 ($130 per month), and part time help                for packaging (estimated to be from $80 to $120 per month). Additionally, there is a monthly internet commerce cost of $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 

 

-13-

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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 $115,913 of net operating loss carryforwards as of December 31, 2008. This loss carry forward may be offset against taxable income and income taxes in future years and expires starting in the year 2021 through 2028. 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 which 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 $34,774 at December 31, 2008 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 June 2008, the Financial Accounting Standards Board (“***FASB***”) issued FASB Staff Position EITF 03-6-1, *“Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,”*(“FSP EITF                03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial 

 

Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial positionand                results of operations if adopted.

 

In May 2008, the FASB issued Statement of Financial Accounting Standards (“***SFAS***”) No. 163, *“Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”*. SFAS No. 163 clarifies how                Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on our financial position, statements of operations, or cash flows at this                time.

 

In May 2008, the FASB issued SFAS No. 162, *“The Hierarchy of Generally Accepted Accounting Principles”*. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more                authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on our financial position, statements of operations, or cash flows at this time.

 

In March 2008, the FASB, issued SFAS No. 161, *“Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133"*. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative                instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and 

 

 

 

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(c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We not yet adopted the provisions of SFAS No. 161, but does not expect it                to have a material impact on its consolidated financial position, results of operations or cash flows.

 

In December 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it                will accept a company's election to use the simplified method, regardless of whether the company sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it                would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. We currently use the simplified method for “plain vanilla” share options and warrants, and                will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on our consolidated financial position, results of operations or cash flows.

 

In December 2007, the FASB issued SFAS No. 160, *“Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51*". This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a                subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the                mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). We will adopt this Statement                beginning March 1, 2009. It is not believed that this will have an impact on our consolidated financial position, results of operations or cash flows.

 

 

In December 2007, the FASB, issued FAS No. 141 (revised 2007), *“Business Combinations’. This Statement replaces FASB Statement No. 141, Business Combinations”*, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the                acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies                prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. We will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact                on our consolidated financial position, results of operations or cash flows.

 

In February 2007, the FASB, issued SFAS No. 159, *“The Fair Value Option for Financial Assets and Liabilities — Including an Amendment of FASB Statement No. 115"*. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is                available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the                beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. We will adopt SFAS No. 159 beginning March 1, 2008 and are currently evaluating the potential impact the adoption of this pronouncement will have on our consolidated financial statements.

 

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In September 2006, the FASB issued SFAS No. 157, *“Fair Value Measurements”*. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under                other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15,                2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. We will adopt this statement March 1, 2008, and it is not believed that this will have an impact on our consolidated financial position, results of operations or cash flows.

 

| **Item 7A.** | **Quantitative and Qualitative Disclosures About 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, 2008 and 2007 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 and pursuant to                regulations promulgated by the SEC. The aforementioned financial statements are included herein under Item 15.

 

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

 

|   | This Item is not applicable. |
|--------|------------------------------|

 

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

 

|   | *Evaluation of Disclosures and Procedures* |
|--------|--------------------------------------------|

 

 

As of the end of the period covered by this annual report, our President, acting as both our chief executive officer and principal financial officer, carried out an evaluation of the effectiveness of “disclosure controls and procedures,” as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon that evaluation,                it was concluded that as of December 31, 2008, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: 

 

(i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms; and 

 

(ii) accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. 

 

*Management’s Annual Report on Internal Control Over Financial Reporting*

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting                principals. Our internal control over financial reporting includes those policies and procedures that :

 

 
|   | ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

   
|   | ● | provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures are being made only with proper authorizations of management and directors; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

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|   | ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on the financial statements. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be                prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 

 

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may                deteriorate. 

 

Management, including our President acting as both chief executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in                *Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.*Based on our assessment and those criteria, management concluded that during the period covered by this report, our internal control and procedures over financial reporting was effective as of December 31, 2008.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only                management’s report in this annual report. 

 

|   | *Changes in Internal Control over Financial Reporting* |
|--------|--------------------------------------------------------|

 

During the period covered by this report, there was no significant change in our internal controls over financial reporting or in other factors that materially affected, or is reasonably likely to materially affect, our 

 

internal controls over financial reporting.

 

| **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 | 54 | President, Chief Executive Officer and Director |
|--------|----------------------|----|-------------------------------------------------|

|   | Laurie J. Norman | 46 | Secretary / Treasurer and Director |
|--------|------------------|----|------------------------------------|

|   | Jessie Scott Bean | 53 | Director |
|--------|-------------------|----|----------|

___________________________

 

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. 

 

-17-

----

No director, officer, affiliate or promoter has, within the past five 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. Since January 1, 2008, Mr. Norman has been an officer and director                of Brain Tree International, Inc., a public company developing a patent-pending broadcast apparatus. Since January 1, 2008, Mr. Norman has been an officer and director of Brain Tree International, Inc., a public company developing a patent-pending broadcast apparatus. 

 

***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.

 

**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.

 

 

 

 

-18-

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**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, 2007 and 2008. 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 2008 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, 2007 and 2008. 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 27, 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 | 72% |
|---------------------------------------|-----------|-----|

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 | 73% |
|-------------------------------|-----------|-----|

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 2,583,750 shares of common stock outstanding on March 27, 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. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| **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.

 

None of our directors are deemed to be independent directors. We do not have a compensation, audit or nominating committee, rather those functions are carried out by the board as a whole.

 

-19-

----

| **Item 14.** | **Principal Accounting 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, 2008 and 2007, 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, 2008 and 2007, were $4, 225 for 2008 and $2,670 for 2007.

 

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

 

For the years ended December 31, 2008 and 2007, 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, 2008 and 2007, 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.

 

**PART 1V**

 

| **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 Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|--------------------------------------------------------------------------|

|   | 32.1 | Certification 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 |
|--------|----|------------------------------------------------------------------------------|

 

 

 

-20-

----

 

 

 

 

 

**LILM, Inc.**

**(A Development Stage Company)**

 

FINANCIAL STATEMENTS

 

December 31, 2008

 

-21-

----

**C O N T E N T S**

 

| Report of Independent Registered Public Accounting Firm | 23 |
|---------------------------------------------------------|----|

 

| Balance Sheets | 24 |
|----------------|----|

 

| Statements of Operations | 25 |
|--------------------------|----|

 

| Statements of Stockholders’ Equity (Deficit) | 26 |
|----------------------------------------------------|----|

 

| Statements of Cash Flows | 27 |
|--------------------------|----|

 

| Notes to the Financial Statements | 28 |
|-----------------------------------|----|

 

 

 

 

-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, 2008, and 2007 the consolidated statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2008, and 2007 and the period April 22, 1997 (date of inception of predecessor) to December                31, 2008. 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, 2008, and 2007 the results of operations, and cash flows for the years ended December 31, 2008 and 2007 and the period April 22, 1997 (date of inception of LIL Marc, INC.                (predecessor) to December 31, 2008, 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 9, 2009 

|   | /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, 2008 and 2007**             |
|                                                           |

 

|                                                  |                                              |                                  |      |       |      |        |   |        |
|-------------------------------------------------------|---------------------------------------------------|---------------------------------------|-----------|------------|-----------|-------------|--------|-------------|
|                                                  |                                              |                                  |      |       |      | **Dec 31,** |   | **Dec 31,** |
|                                                  |                                              |                                  |      |       |      | **2008**    |   | **2007**    |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              |                                  |      |       |      |        |   |        |
| **Assets**                                            |                                              |                                  |      |       |      |        |   |        |
| **Current Assests**                                   |                                              |                                  |      |       |      |        |   |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  | Cash                                              |                                  |      |       |      | $82         |   | $226        |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              | Total Current Assets                  |      |       | $82       |        | $226   |
|                                                  |                                              |                                  |      |       |      |        |   |        |
| **Office Equipment-**                                 | net of accumulated depreciation                   |                                  | -         |       | $335      |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              | Total Assests                         |      |       | $82       |        | $561   |
|                                                  |                                              |                                  |      |       |      |        |   |        |
| **Liabilities & Stockholders' Equity-deficiency** |                                              |                                  |      |       |
| **Current Liabilities**                               |                                              |                                  |      |       |      |        |   |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  | Accounts Payable                                  |                                  |      |       | $11,566   |        | $4,514 |
|                                                  | Notes Payable- Related Party                      |                                  |      | $21,940    |      | $14,797     |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              | Total Current Liabilities             |      | $33,506    |      | $19,311     |
|                                                  |                                              |                                  |      |       |      |        |   |        |
| **Stockholders' Equity**                              |                                              |                                  |      |       |      |        |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  | Common Stock                                      |                                  |      |       |      |        |   |
|                                                  | 25,000,000 shares authorized at $0.001 par value; |                                  |      |       |
|                                                  | 2,583,750 shares issued and outstanding           |                                  | $2,584    |       | $2,584    |
|                                                  | Capital in excess of par value                    |                                  |      | $135,111   |      | $135,111    |
|                                                  | Accumulated deficit during development stage      | ($171,119)                            |      | ($156,445) |
|                                                  |                                              |                                  |      |       |      |        |   |        |
|                                                  |                                              | Total Stockholders' Equity-deficiency | ($33,424) |       | ($18,750) |

|   |   |   |   |   |   |   |   |   |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|   |   |   |   |   |   |   |   |   |
|   |   |   |   |   |   | $82    |   | $561   |
|   |   |   |   |   |   |   |   |   |

 

 

 

-24-

----

 

| **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**                              |
|---------------------------------------------------------------------------------------------|
| **(Development Stage Company)**                                                             |
| **CONSOLIDATED STATEMENT OF OPERATIONS**                                                    |
| **For the Years Ended December 31, 2008 and 2007 and the Period**                           |
| **April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to December 31, 2008** |

 

|                           |                          |   |   |    | **Dec 31,** |    | **Dec 31,** |     | **Apr. 22, 1997**    |   |
|--------------------------------|-------------------------------|--------|--------|---------|-------------|---------|-------------|----------|----------------------|--------|
|                           |                          |   |   |    | **2008**    |    | **2007**    |     | **to Dec. 31, 2008** |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
| **Sales**                      |                          |   |   |    | $1,517      |    | $1,693      |     | $20,928              |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
| **Cost of Goods Sold**         |                          |   |   | -       |        | -       |        | -        |                 |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           | Gross Profit                  |   |   | $1,517  |        | $1,693  |        | $20,928  |                 |
| **Expenses**                   |                          |   |   |    |        |    |        |     |                 |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           | Administrative                |   |   | $15,838 |        | $20,843 |        | $163,263 |                 |
|                           | Royalties                     |   |   |    | $18         |    | $35         |     | $134                 |   |
|                           | Depreciation and amortization |   | $335   |    | $696        |    | $28,650     |     |
|                           |                          |   |   |    | $16,191     |    | $21,574     |     | $192,047             |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
| **Net Loss**                   |                          |   |   |    | ($14,674)   |    | ($19,881)   |     | ($171,119)           |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           |                          |   |   |    |        |    |        |     |                 |   |
| **Net Loss Per Common Share**  |                          |   |   |    |        |    |        |     |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           | Basic and dilluted            |   |   | $ -     |        | $ (.01) |        |     |                 |
|                           |                          |   |   |    |        |    |        |     |                 |   |
| **Average Outstanding Shares** |                          |   |   |    |        |    |        |     |
|                           |                          |   |   |    |        |    |        |     |                 |   |
|                           | Basic (stated in 1000's)      |   | $2,584 |    | $2,584      |    |        |     |
|                           |                          |   |   |    |        |    |        |     |                 |   |

 

 

-25-

----

 

 

| **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **(Development Stage Company)                        ** |
| **STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**                                                                                                                          |
| **For the Period December 30, 1999 (date of inception) to December 31, 2008**                                                                                                   |

 

|                                                              |   |       |       |   |       |       |       |      |                     |            |   |
|-------------------------------------------------------------------|--------|------------|------------|--------|------------|------------|------------|-----------|--------------------------|-----------------|--------|
|                                                              |   |       |       |   |       |       |       |      |                     |            |
|                                                              |   |       |       |   |       | **Common** |       |      | **Capital in Excess of** | **Accumulated** |
|                                                              |   |       |       |   | **Shares** | **Stock**  | **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 31-Dec-03                                    |   |       |       |   |       | ($6,070)   |       | ($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) |
|                                                              |   |       |       |   |       |       |       |      |                     |            |   |
|                                                              |   |       |       |   |       |       |       |      |                     |            |   |
| **Balance December 31, 2007**                                     |   |       | $2,583,750 |   | $2,584     |       | $135,111   |      | ($156,445)               |
|                                                              |   |       |       |   |       |       |       |      |                     |            |   |
| 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) |
|-------------------------------|--------|--------|------------|--------|--------|--------|----------|--------|------------|
|                          |   |   |       |   |   |   |     |   |       |   |   |

 

-26-

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| **LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)**                              |
|---------------------------------------------------------------------------------------------|
| **(Development Stage Company)**                                                             |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS**                                                   |
| **For the Years Ended December 31, 2008 and 2007 and the Period**                           |
| **April 22, 1997 (date of inception of LIL MARC, INC. (predecessor)) to December 31, 2008** |

 

|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|------------------------------------------|-----------------------------------------------------|--------|----------|--------|-----------|--------------|------------|--------------|-----------|----------------------|--------|
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     |                                                |   |     |   |      | **Dec. 31,** |       | **Dec. 31,** |      | **Apr. 22, 1997 to** |
|                                     |                                                |   |     |   |      | **2008**     |       | **2007**     |      | **Dec. 31, 2008**    |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
| **Cash Flows From**                      |                                                |   |     |   |      |         |       |         |      |                 |
| **Operating Activities**                 |                                                |   |     |   |      |         |       |         |      |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Net Loss                                            |   |     |   |      | ($14,674)    |       | ($19,881)    |      | ($171,119)           |   |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Adjustments to reconcile net loss to                |   |     |   |      |         |       |         |
|                                     | net cash provided by operating activities           |   |     |   |      |         |       |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Issuance of common stock for expenses               |   | -        |   | -         |         | $8,700     |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Depreciation and amortization                       |   |     | $335   |      | $696         |       | $28,650      |      |
|                                     | Changes in acocunts payable                         |   |     | $7,052 |      | ($292)       |       | $8,345       |      |
|                                     | Contributions to capital- expenses                  |   | -        |   | -         |         | $100       |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Net Cash Flows Used in Operations                   |   | ($7,287) |   | ($19,477) |         | ($125,324) |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
| **Cash Flows From Investing Activities** |                                                |   |     |   |      |         |       |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Purchase of patent                                  |   |     |   | -         |         | -          |         | ($28,650) |                 |
|                                     | Purchase office equipment                           |   |     | -      |      | ($194)       |       | ($2,096)     |      |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
| **Cash Flows From Financing Activities** |                                                |   |     |   |      |         |       |         |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                     | Advances from related party                         |   |     | $7,143 |      | $9,000       |       | $21,940      |      |
|                                     | Proceeds from issuance of common stock net of costs | -      |     | -      |      | $134,212     |       |
|                                     |                                                |   |     |   |      |         |       |         |      |                 |   |
|                                          |                                                     |        |          |        |           |              |            |              |           |                      |        |  |

|                                                       | Net Change in Cash                                   |                                     |   |   | ($144) |    | ($10,671) |   | $82    |   |        |  |
|------------------------------------------------------------|------------------------------------------------------|------------------------------------------|--------|--------|--------|---------|-----------|--------|--------|--------|--------|--|
|                                                       | Cash at Beginning of Period                          |                                     |   | $226   |   | $10,897 |      | -      |   |        |
|                                                       |                                                 |                                     |   |   |   |    |      |   |   |   |   |  |
|                                                       | Cash at End of Period                                |                                     |   | $82    |   | $226    |      | $82    |   |        |
|                                                       |                                                 |                                     |   |   |   |    |      |   |   |   |   |  |
| **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      |   |        |
|                                                       |                                                 |                                     |   |   |   |    |      |   |   |   |   |  |
|                                                       |                                                 |                                     |   |   |   |    |      |   |   |   |   |  |
|                                                            |                                                      |                                          |        |        |        |         |           |        |        |        |        |  |  |

 

 

 

-27-

----

 

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

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

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

|   | **December 31, 2008** |
|--------|-----------------------|

 

 

| **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 these financial statements are the combined statement 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, 2008.

 

**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, 2008, the Company had a net operating loss available for carryforward of $115,913. The income tax benefit of approximately $34,774 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 2028.

 

-28-

----

 

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

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

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

|   | **December 31, 2008** |
|--------|-----------------------|

 

 

**2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued**

 

Revenue Recognition

 

Revenue is recognized upon the completion of the sale and shipment of the training urinal products.

 

Advertising and Market Development

 

The company expenses advertising and market development costs as incurred.

 

Financial Instruments

 

The carrying amounts of financial instruments, including cash and accounts payable, are considered by management to be their estimated fair values due to their short term maturities.

 

Basic and Diluted Net Income (Loss) Per Share

 

Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then 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, 2008** |
|--------|-----------------------|

 

 

Office Equipment

 

Office equipment consists of computers and is depreciated over three years on the straight method.

 

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 73% of the outstanding common stock of the Company and have made demand, no interest, loans to the Company of $21,940.

 

**5. 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-

----

 

 

**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/GEORGEI.NORMAN,III 

|   | George I. Norman, III |
|--------|-----------------------|

|   | President and C.E.O. |
|--------|----------------------|

|   | Principal Financial Officer |
|--------|-----------------------------|

|   | Principal Accounting Officer |
|--------|------------------------------|

 

 

| Dated: | March 30, 2009 |
|--------|----------------|

 

Pursuant to the requirements of the Securities Exchange Act of 1934, 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 30, 2009 |
|--------|----------------|

| /S/     | GEORGEI.NORMAN,III________ | President, C.E.O. and Director |
|------------------------|----------------------------|--------------------------------|

|   | George I. Norman, III | Principal Financial Officer |
|--------|-----------------------|-----------------------------|

|   | Principal Accounting Officer |
|--------|------------------------------|

 

 

|   | March 30, 2009 |
|--------|----------------|

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

|   | Laurie J. Norman |  

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

 

|   | March 30 , 2009 |
|--------|-----------------|

 

| /S/    | JESSIESCOTTBEAN____________ | Director |
|-----------------------|-----------------------------|----------|

|   | Jessie Scott Bean |
|--------|-------------------|

 

 

-31-