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| LILM.OB > SEC Filings for LILM.OB > Form 10-Q on 16-Nov-2009 | All Recent SEC Filings |
16-Nov-2009
Quarterly Report
The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.
We are a development stage company with minimal cash assets and limited operations and revenue. Ongoing operating expenses, including the costs associated with the preparation and filing of our registration statement and periodic reports, have been paid for by (i) the net proceeds of $55,030 from our stock offering in 2002; and (ii) from advances from a stockholder. A total of $27,344 has been advanced by Alewine Limited Liability Company, a 73% stockholder that is managed by our President, George I. Norman, III. The debt is evidenced by a promissory note that is payable upon demand with a provision that an interest rate of 10% would be charged on any outstanding balance not paid when due.
It is anticipated that we will require approximately $20,000 over the next 12 months to fund operations and to maintain our corporate viability. On September 17, 2009 the Company commenced a private placement offering to sell 2,200,000 of its common shares, $.001 par value, at a price of $0.25 per share for a term of six months. At that time the Board has the discretion to extend the private placement for another month. After September 30, 2009 to the date of this report, the Company has sold 20,000 shares. There can be no assurance that any additional shares will be sold in the private placement.In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future. 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 it or its subsidiary at this time. We also do not have any further commitments from a director or stockholder to provide any additional funding. We are continually exploring other funding sources and considering other options for additional financing to be used in the company's operations and, more specifically, to be used in the manufacturing and marketing of the LiL Marc Training Urinal.
Results of Operations
During the third quarter ended September 30, 2009, we realized revenues of $392 compared with $446 for the third quarter ended September 30, 2008, a decrease of 12% for the 2009 period. This decrease in revenues was due to a 15% decrease in wholesale orders and a 32% decrease in retail orders.
Total expenses were $3,420 for the third quarter of 2009 compared to $4,261 for the corresponding 2008 period, a decrease of 20% for the 2009 period. Expenses during the second quarter of 2009 were primarily for administrative expenses, which decreased 20% ($840) for the third quarter. The second quarter decrease in administrative expenses was primarily attributed to a 62% decrease ($1,685) in rent and storage payments due to the timing of invoicing of monthly charges, which was offset by an increase of 97% ($364) in telephone, internet, and fax charges and an increase of 194% ($194) in printing and copying expenses.
During the nine month period ended September 30, 2009, we realized revenues of $1,756 compared with $1,077 for the nine month period ended September 30, 2008. This was an increase of 63% for the 2009 period. Revenues for both nine month periods were the result of Internet retail and wholesale orders. The increase in revenues during the first nine months of 2009 was due to a 31% decrease ($98) in retail orders and an 80% increase ($642) in wholesale orders.
Total expenses were $10,429 for the nine month period ended June 30, 2009 compared to $9,983 for the corresponding 2009 period, an increase of 4% for the 2009 period. Expenses during the 2009 nine month period were primarily for administrative expenses, which increased 8% ($772), primarily due to a 15% increase ($560) in professional fees associated with filing our Form 10-SB with the SEC. Also during this same period, we had a 51% decrease ($647) in filing fees.
The net loss for the third quarter of 2009 was $3,028 compared with a net loss of $3, 815 for the third quarter of 2008, a decrease of 21% for the 2009 period. The decrease in net loss during the third quarter of 2009 was due to a 20 % decrease ($840) in general operating expenses offset by a 12% decrease ($54) in revenues.
Liquidity and Capital Resources
At September 30, 2009, we had total assets of $0 and at December 31, 2008, total assets consisting of cash and office equipment were $82. Total liabilities at September 30, 2009 and December 31, 2008were $42,097 and $33,506, respectively. Total liabilities at September 30, 2009 consisted of $7,750 for legal fees, $535 in accounting fees, $6,456 in operating expenses consisting of rent and storage, telephone, copying and printing, $12 in royalty payments and a demand note in the amount of $27,344 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, it anticipates that we may have to rely on our 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 its cash needs. At December 31, 2008, we had cash on hand of $82, working capital of a negative $33,424 and total stockholders( equity of a negative $33,424. At September 30, 2009, we had cash on hand of $0, working capital of a negative $42,097 and total stockholders( equity of a negative $42,097.
In the opinion of management, inflation has not and will not have a material effect on the ongoing operations of the Company.
Plan of Operation
On September 17, 2009 the Company commenced a private placement offering to sell 2,200,000 of its common shares at a price of $0.25 per share for a term of six months. At that time the Board has the discretion to extend the private placement for another month. The Company intends to hire a sales agent and estimates that, if all the shares are sold, after costs of the offering and sales commission net proceeds would be approximately $495,000. As of September 30, 2009 to the date of this report, the Company has sold 20,000 shares ($5,000). There can be no assurance that any additional shares will be sold in the private placement.In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future
The purpose of the private placement is to make a major attempt to take the LiL Marc training urinal to a new level of visibility and, ultimately, to a new level of sales. The Company also plans to retire any debt, which is important for continued operations. Prior to the offering, the Company would occasionally lack immediate requisite funds and it would be necessary to rely on advances from directors and/or stockholders. The Company's goal has always been to hold expenses to a minimum and to obtain services on a contingency basis when possible. Furthermore, directors have deferred any compensation until such time as business warrants the payment of such.
Pending the outcome of the private placement, we plan to increase our inventory from a current level of a few hundred or thousand to an ongoing size of ten thousand urinals and ten thousand bases and stands. If the Company can raise only a small portion of the offering, these numbers would be adjusted accordingly to two thousand urinals, bases and stands on hand for delivery. The Company's best pricing for making a complete LiL Marc is on orders of ten thousand or more because there is a substantial reduction in manufacturing costs. Even if the Company continues to manufacture out of state, we can still ship for about $0.06 per LiL Marc to the Company for packing and fulfillment.
Pending the outcome of the private placement, the Company is considering a new look for the labeling and packaging for the product. The current packaging has a contemporary approach with a color labeling front and a black and white back, held in place with a clear plastic shrink-wrap exterior. In addition to the actual LiL Marc, we include multiple sticker inserts to assist in encouraging the potty training process. This has worked well for Internet sales and some wholesale, but may not be sufficient in larger quantities of 5,000 or 10,000 or more. The newer packaging for
The LiL Marc has had a consistent market on the Internet with very little additional advertising. Many customers are referred by earlier customers or they are repeat purchasers. Often when a purchase is made from a new section of the country, it is usually followed by multiple orders from the same geographic area. The product has had success as a gift item for grandchildren, birthdays and baby showers. While there are other products in the market place, we believe the LiL Marc is unique in that it is completely a stand alone product that does not require a water source, making it very portable. The LiL Marc has a simple functional design that caregiver and son can all relate to and it fits into any bathroom setting. Often the young boy using it considers it his own. Due to the LiL Marc's uniqueness and potential market of approximately 2,000,000 newborn males every year in the US, we believe there will continue to be a market and a captive audience because every parent and child wants to be successful at potty training.
Our current marketing strategy has been to produce a product that is available to the public through our web sites at www.LiLMarc.com or www.BoysPottyTraining.com, or through our wholesale resellers. Although our web sites place well in the search engines, we have not done other advertising. Pending the outcome of the private placement, we plan to use a portion of the proceeds from this offering to introduce the LiL Marc to the market place by reconsidering advertising venues and attending and participating at industry trade shows. We also intend to explore methods of sales and product distribution with some of the larger industry representatives. We continue to review and consider options on improving our websites. Recent improvements include simplifying the ordering process, improving the appearance and layout of the website and making changes to the website that might increase impulse purchases. We continue to focus on improving our relationships with resellers that sell the LiL Marc on their websites and on engaging new website hosts for the product.
Future sales will be the responsibility of existing management and, pending the outcome of the private placement, additional new management who can dedicate full time employment to sales and operations. While the current management team can continue with plans for the upcoming year, upon a successful offering we will use a portion of the proceeds to hire a dedicated marketing member. We intend to look for someone with a background of prior niche marketing successes along with an understanding of the potty training process for little boys. Our plan would be to employ such a person for marketing while allowing the President and others to oversee operations, manufacturing, public company requirements, and potential acquisitions.
Management continues to review its production of either additional stands or urinals. Our manufacturing is presently at two different locations in two different states by two different processes and using two different types of molds. We would like to organize all of our manufacturing at one location using the same process. This would involve making a new blow mold for the LiL Marc's base and stand to match up with the blow mold used to make the urinal. Our plan would be to use Blow Molder Products in Glen Avon, CA, the current manufacturer of the LiL Marc urinal. If we only realize lesser proceeds from this offering, we would have the different manufacturers make improvements to the existing molds and continue our current production at the two locations.
Our ancillary operations are currently housed in our corporate office with some light storage and a separate storage for inventory at another location. Pending the outcome of our private placement, we intend to consolidate these functions in a light industrial facility, large enough to receive delivery and send orders from inventory stored on site and would include a place for product and labeling development, professional space for any corporate duties and also possibly housing for a company van.
In the private placement memorandum, the Company has considered three different use of proceeds models should only a partial amount of the shares be sold in the private placement. Our working capital estimates vary significantly with respect to the number of Shares sold. Our working capital needs and priorities can change
We also intend to set aside a portion of the proceeds from the private placement to continue to stay current in our public filing requirements. Additionally, proceeds will be set aside for investor relations to keep current information available to the public and investment banking community.
Management has determined that for future products, a next generation urinal will require new molds, engineering, new labeling and new pricing. While some proceeds have been allocated from the private placement to contemplate a next generation urinal, management does not believe it can proceed along these lines unless the existing product is in a national distribution sales chain. We also intend to allocate some of the proceeds from the private placement for other products that might carry the LiL Marc logo to be marketed alongside the LiL Marc training urinal.
Currently 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, our directors will defer any compensation until such time as business warrants the payment of such.
After paying certain costs and expenses related to ongoing administrative costs and associated professional fees, including the cost of preparing and filing requisite reports with the SEC, management estimates that we will have sufficient funds to operate for the next six to twelve months. There can be no assurance that any additional shares will be sold in the private placement.If business revenues do not provide enough funds to continue operations, it may be necessary to seek additional financing. In addition,if we are unable to generate sufficient revenues, we may have to rely on funds from credit lines, directors and/or stockholders in the future. 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. 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.
Because we rely on others for production of our product, we do not anticipate making 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 or utilize any funds that may come from the private placement to acquire the equipment or assets.
Currently, we have three employees. Our President devotes approximately 20 hours per week to our business and our Secretary assists on an as-needed basis. We also have a part-time laborer for packaging and shipping product. Management believes that these employees will be adequate for the foreseeable future, or until 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.
Forward-Looking and Cautionary Statements
This report includes "forward-looking statements" that may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance and similar matters. When used in this report, the words "may,( "will,( (expect,( (anticipate,( (continue,( (estimate,( (project,( (intend( and similar expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. We caution readers that a variety of factors could cause its actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements. These risks and uncertainties, many of which are beyond our control, include:
• the ability to maintain current business and, if feasible, expand the marketing of products;
• the ability to attract and retain new individual and retail customers;
• the sufficiency of existing capital resources and the ability to raise additional capital to fund cash requirements for future operations;
• uncertainties involved in the rate of growth of business and acceptance of the Company(s product and;
• anticipated size or trends of the market segments in which we compete and the anticipated competition in those markets;
• future capital requirements and our ability to satisfy its needs; and
• general economic conditions.
Although management believes the expectations reflected in these forward-looking statements are reasonable, such expectations cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from those included within the forward-looking statements as a result of various factors. Cautionary statements in the risk factors section and elsewhere in this registration statement identify important risks and uncertainties affecting our future, which could cause actual results to differ materially from the forward-looking statements made herein.
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