Creatd, Inc. - Quarter Report: 2008 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarter Ended March 31, 2008

 

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)

 

 

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

(Address of principal executive offices)

 

(801) 322-0253

(Registrant’s telephone number, including area code)

 

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 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                 Yes X No  

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

 

 

 

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TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART I — FINANCIAL INFORMATION

 

 

The accompanying unaudited balance sheet of LILM, Inc. at March 31, 2008 and December 31, 2007 (audited), related unaudited statements of operations, stockholders' equity (deficit) and cash flows for the three months ended March 31, 2008 and 2007 and the period April 22, 1997 (date of inception of predecessor) to March31, 2007, have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the period ended March 31, 2008, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2008 or any other subsequent period.

 

 

 

 

 

 

 

 

 

 

 

 

LILM, INC.

(A Development Stage Company)

 

FINANCIAL STATEMENTS

 

March 31, 2008 and December 31, 2007

 

 

 

 

 

 

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LILM, INC, and SUBSIDIARY and LIL MARC, INC. (predecessor)
(Development Stage Company)
CONSOLIDATED BALANCE SHEETS -unaudited
March 31, 2008 and December 31, 2007

 

					Mar. 31		Dec. 31,
					2008		2007
Assets
Current Assests
Cash					$        44		$       226
	Total Current Assets				44		226
Office Equipment -		net of accumulated depreciation			161		335
	Total Assets				$205		$561
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable					$ 4,500		$ 4,514
Accounts Payable - Related Party					17,897		14,797
	Total Current Liabilities				22,397		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					(159,887)		(156,445)
	Total Stockholders' Equity				(22,192)		(18,750)
					$ 205		$ 561

 

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

 

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LILM, INC. and SUBSIDIARY and LIL MARC, INC. (predecessor)
(Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited
For the Three Months Ended March 31, 2008 and 2007 and the
Period April 22, 1997 (date of inception of predecesor) to March 31, 2008

					March 31, 2008		March 31, 2007		April 22, 1997
									to Mar 31, 2008
Revenues					$         133		$           476		$       19,544
Expenses
	Administrative				3,400		4,832		149,508
	Royalties				1		21		117
	Depreciation and amortization				174		174		29,806
					3,575		5,027		179,431
Net Loss					-3,442		-4,551		-159,887
Net Loss Per Common Share
	Basic and dilluted				$              -		$            -
Average Outstanding Shares
	Basic (stated in 1000's)				2,584		2,584

 

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

 

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LILM, INC, and SUBSIDIARY and LIL MARC, INC. (predecessor)
(Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited
For the Three Months Ended March 31, 2008 and 2007 and the
Period April 22, 1997 (date of inception of predecessor) to March 31, 2008
 

								Mar. 31,		Mar. 31,		Apr 22, 1997 to
								2008		2007		Mar. 31, 2008
Cash Flows From
Operating Activities
	Net Loss							($3,442)		($4,551)		($159,887)
	Adjustments to reconcile net loss to
	net cash provided by operating activities
	Issuance of common stock for expenses							-		-		8,700
	Depreciation and amortization							174		174		29,656
	Changes in accounts payable							(14)		-		112
	Contributions to capital- expenses							-		-		100
	Net Cash Flows Used in Operations							(3,282)		(4,377)		(121,319)
Cash Flows From Investing Activities
	Purchase of patent							-		-		(28,650)
	Purchase office equipment							-		-		(2,096)
Cash Flows From Financing Activities
	Advances from related party							3,100		-		17,897
	Proceeds from issuance of common stock net of costs							-		-		134,212
Net Change in Cash								(182)		(4,377)		44
Cash at Beginning of Period								226		10,897		-
Cash at End of Period								$ 44		$ 6,520		$ 44
NON CASH FLOWS FROM OPERATING AND INVESTING ACTIVITIES
Issuance of 922,900 common shares for a patent- 2000												$ 11,963
Contributions to capital- expenses- 2001												100

 

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

 

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

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

March 31, 2008

 

 

The Company was incorporated under the laws of the state of Nevada on December 30, 1999 with authorized common stock of 25,000,000 shares with a par value of $.001.

 

The principal business activity of the Company is to manufacture and market the “LiL Marc” urinal used in the training of young boys.

 

During January 2005 the Company organized “LiL Marc, Inc.”, in the state of Utah, and transferred all its assets, liabilities, and operations to LiL Marc Inc. in exchange for all of the outstanding stock of LiL Marc, Inc. for the purpose of continuing the operations in the subsidiary.

 

“LiL Marc, Inc.” (predecessor) was incorporated under the laws of the state of Nevada on April 22, 1997 for the purpose of marketing and sales of the “Lil Marc” training urinal for use by young boys. The marketing and sales activity was transferred to LILM, Inc. on December 30, 1999.

 

Included in the following financial statements are the combined 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 March 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 March 31, 2008, the Company had a net operating loss available for carryforward of $107,910. The income tax benefit of approximately $ 32,000 from the carryforward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has not started full operations. The net operating loss will expire starting in 2021 through 2028.

 

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

( Development Stage Company )

NOTES TO FINANCIAL STATEMENTS (Continued)

March 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.

 

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

( Development Stage Company )

NOTES TO FINANCIAL STATEMENTS (Continued)

March 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 $17,897.

 

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.

 

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Item 2.        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-Q.

 

Results of Operations

 

We are a development stage company with minimal cash assets and limited operations and revenue. Ongoing operating expense, including the costs associated with the preparation and filing of our registration statement and periodic reports, 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 $17,897 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. 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.

 

Results of Operations

 

During the three month period ended March 31, 2008, we realized revenues of $133 compared with $476 for the three month period ended March 31, 2007. Revenues for the 2008 period were the result of Internet retail and wholesale orders, which decreased 72% for the first quarter. Revenues for the 2007 period were also from internet retail and wholesale orders. The first quarter decrease was due to a 70% decrease in retail orders and a 72 % decrease in wholesale orders.

 

Total expenses were $3,575 for the first quarter of 2008 compared to $5,027 for the corresponding period 2007 period. Expenses during the first quarter of 2008 were primarily for administrative expenses, which decreased 28% for the first quarter. The first quarter decrease was primarily attributed to an 30% decrease in general operating expenses , due to the timing of payments and varying monthly charges.

 

The net loss for the first quarter of 2008 was $3,442 compared with a net loss of $4,551 for the first quarter of 2007. The decrease in net loss is due to a 30% decrease in general operating expenses, which included a 13% ( $350) decreased in accounting fees and a 10% increase in depreciation expense and a 31% increase in royalty payments.

 

Liquidity and Capital Resources

 

At March 31, 2008 and December 31, 2007, we had total assets consisting of cash and office equipment of $205 and $561, respectively. Total liabilities at March 31, 2008 and December 31, 2007were $22,397 and $19,311 respectively. Total liabilities at March 31, 2008 consisted of $4,500 for legal fees and a demand note in the amount of $17,897 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 anticipate 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, 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 March 31, 2008, we had cash on hand of $44 working capital of a negative $22,353 and total stockholders’ equity of a negative $22,192.

 

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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

 

During the next 12 months, we plan to continue to focus on improving our website found at http://LiLMarc dot com and 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 our relationships with resellers who sell our product on their websites and on engaging new website hosts for the product. We anticipate 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, 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. If business revenues do not provide enough funds to continue operations, it may be necessary 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.

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 2008. 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 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.

 

Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-balance Sheet Arrangements

 

 

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-

 

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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:

 

 

 

 

 

 

 

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.

 

 

 

 

Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

 

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, have concluded that, as of March 31, 2008, our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the first quarter of fiscal 2008. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the first quarter of fiscal 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

 

President, C.E.O. and Director

(Principal Accounting Officer)

 

 

 

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