DarkPulse, Inc. - Annual Report: 2008 (Form 10-K)
U.S.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB
(Mark
One)
x ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
Fiscal Year Ended: December 31, 2008
or
o TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from
to
Commission
file number 0-18834
Klever
Marketing, Inc.
(Name of
small business issuer in its charter)
Delaware
36-3688583
State
or other jurisdiction
of
(I.R.S.
Employer
incorporation
or
organization
Identification No.)
2469 E Ft
Union Blvd, Cottonwood, UT 84121
Mailing
address
P.O. Box
711308, Salt Lake City, UT 84171
(Address
of principal executive offices) (zip code)
Issuer's
telephone number
(801) 847 6444
Securities
registered under Section 12(b) of the Act: NONE
Securities
registered under Section 12(g) of the Act:
Common Stock Par Value
$0.01
(Title of
class)
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90
days. Yes x No o
Check
if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. o
State
issuer's net income for its most recent fiscal
year: $95,916
As of December 31, 2008, there were
42,248,303 (1 vote per share) Common and 287,595 Convertible Preferred, for a
preferred (converted to common) and common share total of 45,124,253. All shares
have a par value of $0.01. The aggregate market value of the
Registrant's voting stock held by non-affiliates of the Registrant was
approximately $381,634 computed at the closing price as of December 31,
2008. The number of preferred and common shares held by
non-affiliates of the Registrant total 38,163,408 votes.
DOCUMENTS
INCORPORATED BY REFERENCE
If
the following documents are incorporated by reference, briefly describe them and
identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act"): NONE
Transitional
Small Business Disclosure Format (check one): Yes o ; No x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act. x Yes o No
|
TABLE
OF CONTENTS
|
|
|
Item Number and Caption
|
Page
|
|
Item 1. Description of
Business
|
1
|
|
Item 2. Description of
Property
|
2
|
|
Item 3. Legal
Proceedings
|
2
|
|
Item 4. Submission of
Matters to a Vote of Security Holders
|
3
|
|
Item 5. Market for Common
Equity and Related Stockholder Matters
|
3
|
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Item 6. Management's
Discussion and Analysis or Plan of Operations
|
6
|
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Item 7. Financial
Statements
|
7
|
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Item 8. Changes in
and Disagreements With Accountants on Accounting and
Financial
Disclosure
|
7
|
|
|
|
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Item 8A. Controls and
Procedures
|
8
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Item 9. Directors,
Executive Officers, Promoters and Control Persons;
Compliance
with Section 16(a) of the Exchange Act
|
8
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Item
10. Executive Compensation
|
11
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Item 11. Security Ownership of Certain
Beneficial Owners and Management
|
12
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Item 12. Certain Relationships and
Related Transactions
|
13
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Item 13. Exhibits and Reports on Form
8-K
|
15
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Item 14. Principal Accountant Fees
& Services
|
17
|
General
The Company was formed for the purpose
of creating a vehicle to obtain capital, to file and acquire patents, to seek
out, investigate, develop, manufacture and market electronic in-store
advertising, directory and coupon services which have potential for
profit. The Company is currently in the process of evaluating
transitional partnerships and identifying appropriate acquisition suitors, while
also assessing available options for monetizing the existing Patent Portfolio
through enhanced licensing Agreements.
History
The Company began as a part of
Information Resources, Inc. (“IRI”) in 1987, was incorporated as a subsidiary of
IRI under the laws of the State of Delaware on December 8, 1989, and was fully
distributed to stockholders of IRI in a spinoff on October 31,
1990. At the time of the spinoff a portion of the business and assets
of the Company included a software operation in Australia, which was sold in
March, 1993. The Company (VideOCart, Inc.) filed petitions for relief
under Chapter 11 bankruptcy in December 1993. The Company was
inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a
reverse merger and changed its name to Klever Marketing, Inc. During
the period from July 5, 1996 to December 31, 2003, the Company was in
a development stage, except for an approximate 2-month period in 2000 when the
Company generated revenue from installations of their Klever-Kart system in
stores.
In August 2004, the Company signed a
partnership contract with Fujitsu Transaction Solutions (FTXS). Under
this contract, Fujitsu committed to manufacture and develop the hardware for a
cart-based, advertising and promotional device offering (the U-Scan Shopping
Cart), to develop relevant and required software and applications to support
said device, to act as sales lead for the solution & hardware sell-in
process and to provide for technical installations, IT implementation, and
support for all retail locations. The Company and Fujitsu agreed to
jointly share responsibility for marketing into Fujitsu’s current retail client
base for the initial nationwide sales effort. The Company likewise
agreed to act as sales lead for the participant sell-in of advertising and
promotion space to both retailers and manufacturers.
In 2007,
the Company was informed by Fujitsu (FTXS) that they were restructuring their US
management team and had reprioritized their go-to-market model, which
unfortunately would no longer include pursuing the joint deployment of U-Scan
Shopping Carts in the US marketplace, as this was no longer part of their US
business strategy. As a result, Fujitsu amicably disengaged from collaborative
deployment discussions with the Company. However today and despite concluding US
go-to-market collaboration with Fujitsu in 2007, the Company continues to pursue
a remaining obligation by Fujitsu of $25,000 related to the sale of its
international Patents and Patent work done by the Company on Fujitsu’s behalf.
Importantly post-Fujitsu, the Company has endeavored to pursue alternative
deployment approaches; has continued efforts to protect the Patents against
potential infringement; and has continued to explore opportunities to monetize
the Patent Portfolio, which retains a meaningful duration in-market.
Proactively, and in pursuit of an exit strategy, the Company is currently
assessing potential acquisition suitors, who are best poised to take full and
timely advantage of the Company’s Patent portfolio and who would be
competitively advantaged by control over said Patents.
Inactive
Public Company
Since
January 1, 2007, the Company has functioned as an inactive public company
without productive assets, revenues, or earnings. As previously
indicated and disclosed, the business plan going forward is to attempt to seek
various possible merger or acquisition possibilities for the Company as an
inactive public company, sometimes known as a “Shell”
corporation. Operating as an inactive public company poses certain
impediments and risk factors to the Company and the shareholders, the most
significant of which are outlined below:
|
·
|
The
Company has patent assets of undetermined value and substantial
debt. It has continued operations with limited capital
contributions, these assets must be considered during the period of
business inactivity as “wasting assets” which will be expended to continue
the operation of the Company on a minimal basis and as a public reporting
company pending a subsequent acquisition, merger, or
reorganization. There can be no warranty or assurance how long
the Company can continue in its present state as a inactive public company
without further capitalization.
|
|
·
|
The
Company can make no warranty or assurance it will be successful in
obtaining a suitable merger or acquisition candidate and is pursuing such
objectives on a best efforts basis through its part-time management and
board members.
|
|
·
|
There
are imposed by SEC regulation certain restrictions and limitations upon
investors who can purchase shares in an inactive public corporation
through brokerage firms, which regulations limit the suitability of any
shares to be sold while inactive to a limited range of individuals who are
able to bear high risk investments.
|
|
·
|
The
fact that the Company shares are limited to a restricted group of buyers
and the fact that the Company must report itself as a Shell company in its
periodic reporting requirements may limit the value of the Company as a
public entity and the tradability of its shares in the
market.
|
|
·
|
There
are certain limitations and restraints upon the use of SEC Rule 144 for
the resale of restricted securities in a Shell corporation which may have
to be satisfied by various individuals holding restricted stock in the
Company.
|
|
·
|
In
the future, the SEC or various state security regulatory agencies may
impose further or additional regulations or limitations on the Company or
the tradability of its stock as a Shell
company.
|
1
The
Company currently occupies approximately 800 square feet of office
space. The lease terms are $400 per month and the term is month to
month. The office space is used as the corporate
headquarters. It is located at 2469 E Ft Union Blvd, suite 214,
Cottonwood, UT 84121.
On
October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed against the
Company in the Third Judicial District Court of Utah under the provisions of the
Utah Foreign Judgment Act, a judgment from the Superior Court of California, in
and for the County of San Francisco Jurisdiction. The judgment was in
relation to a consulting agreement between eiKart, LLC. and the Company. This
judgment was included in the financial statements as part of accrued liabilities
at December 31, 2006. In June 2007, this litigation was settled in full out-of
court by a cash payment of $10,000 and the remainder of the liability of $80,448
was included in the statement of operations as extraordinary income
On September 6, 2002, an entry of
judgment was entered against the Company by Micropower Direct,
LLC. The total judgment was for $17,167.18. During 2006,
this judgment was paid in full.
On December 12, 2005 Klever Marketing
was summoned, and a complaint was filed in the Third District Court of the State
of Utah, by Dennis Shepard, one of the partners of S&C
Medical. The complaint contested Klever Marketing’s cancellation of
an attempted deal with S&C medical in December of 2001. On
January 13, 2007, Klever Marketing answered their complaint and filed a counter
claim against S&C Medical. During 2007,this litigation was
settled out-of court, resulting in a favorable depreciation of the claim sought,
and full and complete resolution in this matter, also resulting in the return of
992,100 shares of common stock to the Company’s treasury. These
shares were subsequently cancelled.
During
2006, Arthur Portugal, a former officer of the Company, filed a formal claim
asserted for approximately $125,000 for past due executive compensation
including stock options. Mr. Portugal previously filed a formal
administrative wage claim in California which is inactive and no longer
pending. As of December 31, 2008, the Company has accrued
compensation of $96,700 for Mr. Portugal as part of his employment agreement
through June 30, 2006. The Company also has accrued notes payable of
$11,374 due to Mr. Portugal.
2
There were no matters submitted to a
vote of shareholders during 2008.
The stock is traded on the “Pink
Sheets” with the trading symbol KLMK.PK . The company has 50 million
authorized common shares.
The following table set forth the high
and low bid of the Company’s Common Stock for each quarter within the past two
years. The information below was provided by S & P Comstock and
reflects inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions:
|
2008:
|
High
|
Low
|
||||||
|
First
Quarter
|
$ | 0.05 | $ | 0.01 | ||||
|
Second
Quarter
|
$ | 0.02 | $ | 0.01 | ||||
|
Third
Quarter
|
$ | 0.01 | $ | 0.01 | ||||
|
Fourth
Quarter
|
$ | 0.01 | $ | 0.01 | ||||
|
2007:
|
High
|
Low
|
||||||
|
First
Quarter
|
$ | 0.10 | $ | 0.05 | ||||
|
Second
Quarter
|
$ | 0.07 | $ | 0.04 | ||||
|
Third
Quarter
|
$ | 0.05 | $ | 0.02 | ||||
|
Fourth
Quarter
|
$ | 0.05 | $ | 0.02 | ||||
The
number of shareholders of record of the Company's common stock as of
December 31, 2008 was approximately 864.
3
The
Company has not paid any cash dividends to date and does not anticipate paying
cash dividends in the foreseeable future. It is the present intention
of management to utilize any available funds for the development of the
Company's business.
Recent
Sales of Unregistered Securities.
During the year ended December 31,
2007, the Company issued 1,090,000 shares of common stock for cash of
$272,500. The shares were sold for $.25 per share.
In December 2007, the Company issued
450,000 shares of common stock for general and administrative expenses of
$17,500. The shares were valued at $.035 per share.
In October 2007, the Company issued
8,411,103 shares of common stock for accounts payable and debt instruments
totaling $2,102,776. The shares were valued at $.25 per
share.
On
January 15, 2008, the Company issued 44,000 shares of common stock for cash of
11,000 dollars. The shares were valued at $.25 per
share.
On
December 16, 2008, 5,170,000 shares of common stock were returned to the Company
and were cancelled.
On
December 22, 2008, the Company issued 100,000 shares of common stock for cash of
$5,000. The shares were valued at $.05 per share.
On
December 29, 2008, the Company issued 140,000 shares of common stock for cash of
$7,000. The shares were valued at $.05 per share.
On
December 31, 2008, the Company recorded a stock subscription receivable of
$23,000 for the issue of 460,000 shares of common stock. The shares
were valued at $.05 per share.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act
requires the Company’s directors, executive officers, and persons who own more
than 10% of a registered class of the Company’s equity securities, to file with
the Commission reports regarding initial ownership and changes in
ownership. Directors, executive officers, and greater than 10%
stockholders are required by the Commission to furnish the Company with copies
of all Section 16(a) forms they file.
4
Beneficial
Ownership Compliance Reporting
The
company is aware of the following share and option transactions for the
reporting period ending December 31, 2008 for which Form 4 or Form 5 were not
filed.
|
Options
|
Options
|
Term
|
|||||||||||||||||||||||||
|
Name
|
Officer
or board
|
Number
of shares
|
Share
Price
|
Total
cost
|
at
.50
|
at
1.00
|
Date
|
in
years
|
|||||||||||||||||||
|
Bill
Bailey
|
B
&O
|
40,000 | 0.25 | 10,000 | 10,000 | 10,000 |
2/1/2007
|
3 | |||||||||||||||||||
|
Bill
Bailey
|
B
&O
|
20,000 | 0.25 | 5,000 | 5,000 | 5,000 |
7/31/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
200,000 | 0.25 | 50,000 | 50,000 | 50,000 |
4/16/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
40,000 | 0.25 | 10,000 | 10,000 | 10,000 |
6/1/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
60,000 | 0.25 | 15,000 | 15,000 | 15,000 |
6/1/2007
|
||||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
120,000 | 0.25 | 30,000 | 30,000 | 30,000 |
6/28/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
20,000 | 0.25 | 5,000 | 5,000 | 5,000 |
7/24/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
20,000 | 0.25 | 5,000 | 5,000 | 5,000 |
7/26/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B
&O
|
120,000 | 0.25 | 30,000 | 30,000 | 30,000 |
12/7/2007
|
3 | |||||||||||||||||||
|
Paul
Begum
|
B
&O
|
100,000 | 0.25 | 25,000 | 25,000 | 25,000 |
2/1/2007
|
3 | |||||||||||||||||||
|
Paul
Begum
|
B
&O
|
100,000 | 0.25 | 25,000 | 25,000 | 25,000 |
2/9/2007
|
3 | |||||||||||||||||||
|
Paul
Begum
|
B
&O
|
20,000 | 0.25 | 5,000 | 5,000 | 5,000 |
7/25/2007
|
3 | |||||||||||||||||||
|
Paul
Begum
|
B
&O
|
180,000 | 0.25 | 45,000 | 45,000 | 45,000 |
9/28/2007
|
3 | |||||||||||||||||||
|
Jeremiah
Cox
|
B&O
|
44,000 | 0.25 | 11,000 | 0 | 0 |
1/15/2008
|
||||||||||||||||||||
|
Jeremiah
Cox
|
B&O
|
44,000 | 0.25 | 11,000 | 0 | 0 |
1/15/2008
|
||||||||||||||||||||
|
Paul
Begum
|
B
&O
|
100,000 | 0.05 | 5,000 | 0 | 0 |
12/22/2008
|
||||||||||||||||||||
|
Paul
Begum
|
B&O
|
140,000 | 0.05 | 7,000 | 0 | 0 |
12/29/2008
|
||||||||||||||||||||
5
The
Company will continue to operate on an inactive basis, while it attempts find an
appropriate and synergistic suitor to acquire it assets in a transaction
acceptable to its shareholders. Alternatively, the company may attempt to
renegotiate existing licensing agreements to ensure the ongoing monetization of
its Patent Portfolio. However, there is no Operational Plan to maintain any
day-to-day Operations, thus requiring only minimal financing to ensure the
payment of ongoing and nominal expenses.
We advise
anyone relying upon this report that any statement of earnings by the company
for the calendar year ending 2008 have been obtained partially through the
reduction, adjustment or termination of various debt obligations and does not in any way
reflect revenues to the company from operations. The company continues as an
inactive company without revenues and with continuing substantial expenses,
yielding a net loss from operations if considered apart from reduction of debt.
The company continues to search for merger or acquisition candidates or possible
entities to whom it may sell its patent interest, but makes no warranty or
assurance that it will be successful in any of these endeavors. Further, there
is no assurance that the company can continue to operate without cash flows or
revenues and during the past year has relied exclusively upon interim capital
financing for its continuation. Based upon these and other related factors, the
auditors for the company will necessarily have to continue to express a
reservation of the company's ability to continue as a going
concern."
BUSINESS
DEVELOPMENT, NEXT 12 MONTHS
As a
result of the current financial condition of the Company, the plan of the
Company for the next twelve months is to attempt to monetize its Patent
Portfolio through expanded licensing agreements and/or to sell minority or
majority interest in the Company, its assets and/or its Patents to a qualified
suitor through a cash and/or equity transaction. This will allow the Company to
pay off its remaining liabilities, financial and contractual obligations,
cleaning up its balance sheet in its entirety, while obtaining equity interest
(with upside potential) in a going business concern for its shareholders. In the
interim, the Company plans to continue to find sufficient smaller financing to
permit the Company to continue to prevent the loss or wasting of its assets and
to continue to seek such an appropriate synergistic suitor, fully capable of
leveraging the Company’s assets, while returning value to its shareholders.
Currently, the Company has sufficient liquid assets to permit current restricted
operations to continue for one month or until such a desired suitor is found and
a transaction is secured. If such smaller interim financing is not obtained, it
is likely that the Company will cease being a going concern at the end of such
period.
6
Results of Operations - The
Company was inactive until July 5, 1996 when the Company merged with
Klever-Kart, Inc. in a reverse merger and changed its name to Klever Marketing,
Inc. The Company remains in the development stage. For the year ended
December 31, 2008 the company had net income of $95,916, due in part to an
extraordinary gain of $164,991 as a result of restructuring
debt. For the year ended December 31, 2007, the Company had net
income of $1,563,900 due to an extraordinary gain of $2,271,394 as a result of
restructuring debt. The Company had a loss before extraordinary items
of $707,494 for the year ended December 31, 2007.
Liquidity and Capital Resources -
The Company requires working capital principally to fund its proposed
research and development and operating expenses for which the Company has relied
on short-term borrowings and the issuance of restricted common
stock. There are no formal commitments from banks or other lending
sources for lines of credit or similar short-term borrowings, but the Company
has been able to borrow minimal additional working capital that has been
required to prevent the assets from wasting away. From time to time
in the past, required short-term borrowings have been obtained from a principal
shareholder or other related entities.
Cash flows. Operating
activities used cash of approximately $19,900 and $298,000 for 2008 and 2007
respectively. The increase in the use of cash is due primarily to a
decrease in accounts receivable and accrued liabilities.
Investing activities have used cash of
approximately $0 and $0 for 2008 and 2007, respectively. Investing
activities primarily represent purchases of patents relating to the electronic
in-store advertising.
Financing activities provided cash of
approximately $20,400 and $296,000 for 2008 and 2007,
respectively. Financing activities primarily represent sales of the
Company’s restricted stock, and short term borrowings.
Factors That May Affect Future
Results - Management’s Discussion and Analysis contains information based
on management’s beliefs and forward-looking statements that involved a number of
risks, uncertainties, and assumptions. There can be no assurance that
actual results will not differ materially for the forward-looking statements as
a result of various factors, including but not limited to the
following:
The foregoing statements are based upon
management’s current assumptions.
The financial statements of the Company
and supplementary data are included beginning immediately following the
signature page to this report. See Item 13 for a list of the
financial statements and financial statement schedules included.
There are not and have not been any
disagreements between the Company and its accountants on any matter of
accounting principles, practices or financial statements disclosure. The Firm of
Robison Hill conducted the year end audit for the period ending December 31,
2007. During 2008, the Company Board of Directors appointed the firm
of Chisholm Bierwolf Nilson & Morrill, LLC to conduct the audit and to
provide additional services for the year ended December 31, 2008.
7
The Company's Chief Executive Officer
and Chief Financial
Officer
are responsible for establishing and maintaining disclosure controls and
procedures for the Company.
Our
internal controls framework is based on the criteria set forth in the Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Because of its
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.
(a) Evaluation of Disclosure Controls
and Procedures
As of the end of the period covered by
this report, the Company carried out an evaluation, under the supervision and
with the participation of the Company's management and audit committee,
including the Company's President, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to Rule
13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon the evaluation, the Company's President concluded that, as of
the end of the period covered by this report, the Company's disclosure controls
and procedures were effective in timely alerting him to material information
relating to the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.
This annual report does not include an
attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was
not subject to attestation by the Company’s registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.
(b) Changes in Internal
Controls
Based on this evaluation as of December
31, 2008, there were no changes in the Company's internal controls over
financial reporting or in any other areas that occurred during the fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Executive
Officers and Directors
The
following table sets forth the name, age, and position of each executive officer
and director of the Company:
|
Director's
Name
|
Age
|
Office
|
Term
Expires
|
||||
|
William
C. Bailey
|
72
|
Chairman
|
Status
Change, 01/09; resigned.
|
||||
|
Paul
G. Begum
|
66
|
Secretary
& Treasurer
|
Status
Change, 01/09; resigned. Appointed Chairman and CEO
|
||||
|
John
L. Hastings III
|
45
|
Interim
Pres./CEO
|
Status
Change, 01/09; resigned.
|
||||
|
Bernadette
Suckel
|
52
|
Interim
COO
|
Status
Change, 02/08 and 04/08; resigned.
|
||||
|
Craig
Poulton
|
49
|
Director
|
Status
Change, 01/09; resigned.
|
||||
|
Michael
L. Mills
|
47
|
Director
|
Status
Change, 01/09; resigned.
|
||||
|
Jeremiah
Cox
|
36
|
CFO
|
Status
Change, 01/09;
resigned.
|
||||
8
William
C. Bailey, age 72, was elected as a director of the Company in June 1994. Since July of 2005, Mr.
Bailey has been serving as Chairman of the Board. Mr. Bailey is also President and
owner of Mount Olympus Waters, Inc. and founder of Water and Power
Technologies. Mr. Bailey served on the Board of Directors for the
American Bottled Water Association and the International Bottled Water
Association from 1975 to 1996, and was the Association’s President in 1978 and
again in 1990. He received the industry’s first award of Excellence
from IWBA in 1987 and was elected to the Beverage World Water Hall of Fame in
1989. He serves as a member of the Board of Trustees for the Utah
Food Industry Associations Insurance Trust. He is a lifetime member
of the Board of Trustees for the Utah Symphony Opera, having served as Chairman
from 1999-2002. He has been a member of the Board of Directors for
KUED 1990- 1996, University of Utah Alumni Board 1990-1994, and a member of the
University of Utah’s Fine Art’s Advisory Board. He is also a member
of the Salt Lake Rotary and served as Secretary 1999-2000. He
resigned January 9, 2009 with an effective date of December 31,
2008.
Paul G. Begum, Founder, age 66 returned
to the Board of Directors in February, 2007. Paul served as Secretary
& Treasurer, having previously served in prior years as President & CEO.
Paul has substantial entrepreneurial experience managing and owning controlling
interest in HelpUSolve, LLC which operates a number of divisions with products
ranging from filtered breathing masks (EnviroAir), food service industry cup
liners, script writing, screen plays and theatrical production. Paul also brings
substantial and diverse fundraising abilities and negotiating skills to the
Board. He resigned as Secretary & Treasurer effective
January 9, 2009. On the same date he was appointed Chairman and Chief
Executive Officer of the Company.
Michael
L. Mills, age 47, was elected as a director of the Company in December
1998.
Mr. Mills
is President/CEO of Cackle Fresh Egg Farms, Inc. (an entity merged from Olson
Holdings, Inc.). Cackle Fresh Egg Farms deals primarily in the
distribution of eggs, with headquarters in Washington State. Mr.
Mills has been with the company since 1989. Mr. Mills began his
career with Deloitte & Touche in Los Angeles after graduating from the
University of Utah summa cum
laude in accounting and mathematics. He resigned January 9,
2009 with an effective date of December 31, 2008.
John L.
Hastings III, age 45, joined the Company in November 2006 as Interim
President and CEO of Klever Marketing. John brought with him more than 20
years of experience in the roles of Sales, Marketing & Brand Management,
Consultative Practice Leader and Executive General Management within Consumer
Packaged Goods, Global Information Services and Global Retail/CPG Research &
Analytics industries. As of February 2008, John was appointed Chief Sales &
Marketing Officer of RemoteMDX and has continued to serve voluntarily on a
part-time, interim capacity at the company. He resigned January 9,
2009 with an effective date of December 31, 2008.
Bernadette
Suckel, age 52, joined the Company in November 2006 as Interim Chief Operating
Officer of Klever Marketing, working on a part time basis. She brought with her
more than 25 years experience in the roles of Sales, Marketing, Business
Development and Consultative Sales Management within Global Research, Global
Information Management, Large Systems and Retail Technologies
industries. She resigned from her role as director and COO, effective
April 28, 2008.
Jeremiah
Cox, age 36, joined the Company in April 2007 and serves as the Chief Financial
Officer. Jeremiah has entrepreneurial experience in operating and managing a
substantial real estate portfolio and holdings; capital management and equity
fundraising skills; and mortgage banking and currency trading experience. He
continues to operate a number of real estate investment, land development,
property management companies and a cellular phone retailer. He resigned January
9, 2009 with an effective date of December 31, 2008.
9
Craig
Poulton, age 49, joined the company in 2006 and is the Managing Partner of
Poulton and Associates, Insurance Company. He resigned January 9, 2009 with an
effective date of December 31, 2008.
Robert
Campbell age 65, joined the Company in January 2009 and serves at the Chief
Operating Officer, Secretary Treasurer and board member. Bob is a
recently retired Project Director with Parsons Corporation – one of the world’s
largest engineering and construction companies. During his 33 years
with Parsons, Bob served in a number of key managerial and project management
positions, including such projects as San Francisco’s current $4.4 billion water
systems improvement program, Orange County’s $3.2 billion wastewater improvement
program, the Los Angeles Metro Rail and many more. He is considered
an innovator and leader in project management and project control
systems.
Ray
Norris, age 56, joined the Company in January 2009 and serves as a board
member. He is currently employed with Focus Enterprises.
|
Director's
Name
|
Age
|
Office
|
Date
of change
|
||||
|
William
C. Bailey
|
72
|
Chairman
|
Resigned
January 9, 2009
|
||||
|
Paul
G. Begum
|
66
|
Secretary
& Treasurer
|
Resigned
January 9, 2009
|
||||
|
John
L. Hastings III
|
45
|
Interim
Pres./CEO
|
Resigned
January 9, 2009
|
||||
|
Bernadette
Suckel
|
52
|
Interim
COO
|
Resigned
April 28, 2008
|
||||
|
Craig
Poulton
|
49
|
Director
|
Resigned
January 9, 2009
|
||||
|
Michael
L. Mills
|
47
|
Director
|
Resigned
January 9, 2009
|
||||
|
Jeremian
Cox
|
36
|
CFO
|
Resigned
January 9, 2009
|
||||
|
Paul
Begum
|
66
|
CEO
& Chairman
|
Installed January
9, 2009
|
||||
|
Robert
Campbell
|
65
|
COO
& Sec/Treasurer
|
Installed January
9, 2009
|
||||
|
Ray
Norris
|
60
|
Director
|
Installed January
9,
2009
|
||||
10
Audit
Committee
As of December 31, 2008, the Company
had one active board committee, the Audit and Compliance
Committee. D. Paul Smith and Michael L. Mills serve on this
committee. The committee meets annually to determine auditors and
scope of the audit, as well as reviews of the 10KSB and all audited
financials.
Audit
Committee Financial Expert
The
Company's board of directors does not have an "audit committee financial
expert," within the meaning of such phrase under applicable regulations of the
Securities and Exchange Commission, serving on its audit committee. The board of
directors believes that all members of its audit committee are financially
literate and experienced in business matters, and that one or more members of
the audit committee are capable of (i) understanding generally accepted
accounting principles ("GAAP") and financial statements, (ii) assessing the
general application of GAAP principles in connection with our accounting for
estimates, accruals and reserves, (iii) analyzing and evaluating our financial
statements, (iv) understanding our internal controls and procedures for
financial reporting; and (v) understanding audit committee functions, all of
which are attributes of an audit committee financial expert. However, the board
of directors believes that there is not any audit committee member who has
obtained these attributes through the experience specified in the SEC's
definition of "audit committee financial expert." Further, like many small
companies, it is difficult for the Company to attract and retain board members
who qualify as "audit committee financial experts," and competition for these
individuals is significant. The board believes that its current audit committee
is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."
Summary
Compensation
The following table set forth, for the
last three fiscal years, the annual and long term compensation earned by,
awarded to, or paid to the individuals who were chief executive officer and
chief operations officer at any time during the last fiscal year.
|
(a)
|
(b)
|
(c. | ) |
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
||||||||||
|
Other
|
Securities
|
||||||||||||||||||
|
Year
|
Annual
|
Restricted
|
Underlying
|
All
Other
|
|||||||||||||||
|
Ended
|
Compen-
|
Stock
|
Options/
|
LTIP
|
Compen-
|
||||||||||||||
|
Name
and
|
Dec.
|
Salary
|
Bonus
|
sation
|
Awards(s)
|
SAR's
|
Payouts
|
sation
|
|||||||||||
|
Principal
Position
|
31
|
($)
|
($)
|
($)
|
(no.)
|
($)
|
($)
|
||||||||||||
|
John
Hastings (1)
|
2008
|
$ | 22,500 | ||||||||||||||||
|
Interim
Pres/CEO
|
2007
|
$ | 128,750 | ||||||||||||||||
|
2006
|
$ | 60,000 | |||||||||||||||||
|
Bernadette
Suckel (2)
|
2008
|
$ | 6,000 | ||||||||||||||||
|
Interim
COO
|
2007
|
$ | 45,000 | ||||||||||||||||
|
2006
|
$ | 10,000 | |||||||||||||||||
(1) John Hastings joined the Company on November 16, 2006, under terms of a contract, as Interim President and Chief Executive Officer and as a member of the board. He resigned January 9, 2009 with an effective date of December 31, 2008.
(2)
Bernadette Suckel joined the Company on November 16, 2006, under terms of a
contract, as Interim Chief Operating Officer and as a member of the
board. She resigned from both positions effective April 28, 2008.
11
Aggregate
Option/SAR Exercises in the Last Fiscal Year and year End Option/SAR
Values
The following table sets forth
information respecting all individual grants of options and SARs made during the
last completed fiscal year, 2008, to the chief executive officer, chief
financial officer, and directors of the Company.
|
Name
|
Shares
Acquired on exercise
|
Value
Realized ($)
|
Number
of Securities Underlying Unexercised Options
|
Value
of Unexercised in-the-money options ($) (a)
|
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
|
William
Bailey
|
0
|
$0
|
0
|
$0
|
$0
|
$0
|
|
Jeremiah
Cox
Paul
G. Begum
|
0
0
|
$0
$0
|
0
0
|
$0
$0
|
$0
$0
|
$0
$0
|
|
(a)
|
Based
on the closing price of the Company’s Common Stock on December 31, 2008 at
$.02 per
share
|
Executive
Compensation and Benefits
The Company provides no health
insurance to any full or part-time employees.
The Company adopted a stock incentive
plan for its employees, executive officers, directors, and
consultants.
Principal
Shareholders
The table below sets forth information
as to each person owning of record or who was known by the Company to own
beneficially shares of stock that have more than 5% of the 42,277,063 votes as
of December 31, 2008, including options to acquire stock of the Company that are
currently exercisable or will be within the next 60 days, and information as to
the ownership of the Company's Stock by each of its directors and executive
officers and by the directors and executive officers as a
group. Except as otherwise indicated, all shares are owned directly,
and the persons named in the table have sole voting and investment power with
respect to shares shown as beneficially owned by them.
|
Name and Address of Beneficial Owner Directors and Principal Shareholders
|
Nature
of Ownership
|
Shares
Owned
|
Percent
|
||||
|
Directors
and Executive Officers
|
|||||||
|
Paul
G. Begum
|
Direct
|
1,496,540 | |||||
|
P.O.
Box 58045
|
Preferred
shares stated as common
|
2,875,950 | |||||
|
Salt
Lake City, UT 84158
|
Options/Warrants
|
338,800 | |||||
|
Commons
shares resulting from exercise of anti-dilution rights
|
9,808,935 | ||||||
|
Total
|
14,520,225 |
34.14%
|
|||||
12
Olson
Holdings, Inc. loans to the Company
Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Holdings. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related party. Olson
Holdings, Inc. made a $150,000 unsecured loan to the Company on February 26,
2001. This note has a six-month term at 10% annual interest maturing
on August 26, 2001. The maker of the note may give written notice
within 10-days of maturity, to the Company, to convert the principal and
interest into common stock with a convertible price of $1.05 (10-day weighted
average from February 26, 2001 and the nine days prior).
Olson Holdings made an unsecured loan
to the Company on January 7, 2002 for $1,836. This note has an annual
interest rate of 8% and matures on January 7, 2004. An option was
granted in connection with this note for 3,060 shares at a strike price of $1.00
and an expiration date of January 7, 2005.
On September 30, 2007, the principal
balance due on the loans of $151,836 was converted to 607,343 shares of common
restricted stock at $.25 per share and the accrued interest totaling $139,551
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
Olson
Foundation loans to the Company
Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Foundation. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related party. Olson Foundation
loaned the Company $60,000 on July 16, 2001, of which is secured by a blanket
lien on the assets of the Company. An interest rate of 10% compounded
monthly applies until January 15, 2002. Principal and all due and
unpaid interest are to be paid on January 16, 2002, or the interest rate
increases to 15% compounded daily. Warrants were issued in
conjunction with this loan for 18,182 common shares at a strike price of $0.01
and an expiration date of July 16, 2006. This note is convertible to Class C
convertible preferred shares or to Class D convertible preferred shares at the
option of the note holder.
Olson Foundation loaned the Company
$90,000 on July 30, 2001, of which is secured by a blanket lien on the assets of
the Company. An interest rate of 10% compounded monthly applies until
January 30, 2002. Principal and all due and unpaid interest are to be
paid on January 30, 2002, or the interest rate increases to 15% compounded
daily. Warrants were issued in conjunction with this loan for 27,273
common shares at a strike price of $0.01 and an expiration date of July 30,
2006. This note is convertible to Class C convertible preferred shares or to
Class D convertible preferred shares at the option of the note
holder.
Olson Foundation made unsecured loans
to the Company on May 3, 2002, August 16, 2002, and October 29, 2002 for $7,359,
$10,000, and $1,059, respectively. These notes are payable within two
years plus interest at 8% per annum. In conjunction with the notes, Olson
Foundation also received common stock options for each note at a ratio of 1.667
common shares for each dollar loaned.
On September 30, 2007, the principal
balance due on the loans of $168,418 was converted to 673,673 shares of common
restricted stock at $.25 per share and the accrued interest totaling $220,375
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
Presidio
Investments, LLC loan to the Company
Presidio Investments, LLC has loaned
the Company $1,000,000, which loan is secured by a blanket lien on the assets of
the Company. The sole trustee of Presidio Investments, LLC is William
J. Howard, trustee of the Olson Legacy Trust, whose residual beneficiary is the
Olson Foundation. The Olson Foundation, defined as a related
party, was the guarantor for funds borrowed from Northern Trust Bank
which funds were used to make the loan to the Company. This note was amended on
March 22, 2001 with an additional $500,000 loaned to the Company between January
1, 2001 and March 22, 2001. An Interest rate of 8% applies until
March 31, 2001 and increases to 10% on April 1, 2001. Principal and
all due and unpaid interest are to be paid on October 1, 2001. This
note is convertible to Class C convertible preferred shares at the option of the
note holder.
On September 30, 2007, the principal
balance due on the loans of $1,500,000 was converted to 6,000,000 shares of
common restricted stock at $.25 per share and the accrued interest totaling
$1,483,019 was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
On December 31, 2008, the preferred
shares held by Presidio Investments were sold to a private investment group and
Presidio Investments is no longer considered a related party.
13
The
Seabury Group Loan to the Company
The Seabury Group loaned the Company
$60,000 on July 5, 2001, of which is secured by a blanket lien on the assets of
the Company. An interest rate of 10% compounded monthly applies until
January 5, 2002. Principal and all due and unpaid interest are to be
paid on January 5, 2002, or the interest rate increases to 15% compounded
daily. Warrants were issued in conjunction with this loan for 18,182
common shares at a strike price of $0.01 and an expiration date of July 5,
2006. This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder
The Seabury Group loaned the Company
$190,000 on August 22, 2001, of which is secured by a blanket lien on the assets
of the Company. An interest rate of 10% compounded monthly applies
until February 22, 2002. Principal and all due and unpaid interest
are to be paid on February 22, 2002, or the interest rate increases to 15%
compounded daily. Warrants were issued in conjunction with this loan
for 57,576 common shares at a strike price of $0.01 and an expiration date of
August 22, 2006. This note is convertible to Class C convertible
preferred shares or to Class D convertible preferred shares at the option of the
note holder.
On September 30, 2007, the principal
balance due on the loans of $150,000 was converted to 1,000,000 shares of common
restricted stock at $.25 per share and the accrued interest totaling $348,000
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
On December 31, 2008, the preferred
shares held by Seabury Investments were sold to a private investment group and
Seabury Investments is no longer considered a related party.
Arbinger
Loans to the Company
D Paul Smith previously served on the
Board of Directors of the Company and is also an officer and shareholder in the
Arbinger Institute. Mr. Smith is no longer considered a related party since his
resignation as the board of director in 2008. The Arbinger Institute has made
$41,893 in loans to the Company. As part of a restructure process,
the accrued interest of $14,749 was converted to 58,996 shares of common
restricted shares at the rate of .25 cents per share. The
68,467 associated options have expired.
At December 31, 2008 and 2007, the
total amount due on these loans is $41,893 and $41,893,
respectively.
Director
and Officer Loans to the Company
During the year ended December 31,
2006, two former officers and directors loaned the Company
$16,500. The loans are due on demand and carry an interest rate of 8%
per annum. On September 30, 2007, $776 of interest was converted to
3,105 common restricted stock at $.25 per share. At December 31, 2008
and 2007, the total due on these loans was $17,797 and $17,797,
respectively. Due to their resignation they are no longer considered
as related parties in 2008.
14
(a) The
following documents are filed as part of this report.
|
December
31, 2008 and 2007
|
F-3
|
|
|
For
the Years Ended December 31, 2008 and 2007
|
||
|
and
for the Cumulative Period from July 5, 1996 (inception of development
stage)
|
||
|
to
December 31, 2008
|
F-4
|
|
|
From
July 5, 1996 (inception of development stage) to December 31,
2008
|
F-5
|
|
|
For
the Years Ended December 31, 2008 and 2007 and for the Cumulative
Period
|
||
|
from
July 5, 1996 (inception of development stage) to December 31,
2008
|
F-12
|
|
|
F-14
|
||
15
2. Financial
Statement Schedules
All
schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits
The
following exhibits are included as part of this report:
Exhibit
Number Title
of Document
3.01 Restated
Certificate of Incorporation of Klever Marketing, Inc. a
Delaware corporation (1)
3.02 Certificate
of Designation of Rights, Privileges and Preferences: Rights
of A Class
Voting Preferred Stock, Series 1, of Klever Marketing, Inc.,
dated February
7, 2000 (2)
3.03 Bylaws,
as amended (2)
4.01 Amended
Certificate of Designation of Rights, Privileges and
Preferences: Rights of
A Class of Voting Preferred Stock, Series 1, of Klever Marketing,
Inc., Dated
February 7, 2000 (3)
4.02 Certificate
of Designation of Rights, Privileges and Preferences of Class B
Voting Preferred
Stock, of Klever Marketing, Inc., dated September 24, 2000 (3)
4.03 Certificate
of Designation of Rights, Privileges and Preferences of Class C
Voting Preferred
Stock, of Klever Marketing, Inc., dated January 2, 2001 (3)
4.04 Certificate of
Designation of Rights, Priveleges, and Preferences of Class D Voting Preferred
Stock, of Klever Marketing, Inc., dated June 14, 2002 (5)
4.05 Amendment to the
Certificates of Designation of Rights, Priveleges and Preferences of Class A, B,
and C Voting Preferred Stock, of Klever Marketing, Inc., dated June 12, 2002
(5)
10.01 Separation
Agreement between Paul G. Begum and the Registrant Dated
January 8, 2001 (2)
10.02 Stock
Incentive Plan, effective June 1, 1998 (2)
10.03 Amended
and Restated Promissory Note (Secured) of the Registrant payable
to Presidio
Investments, LLC, dated June 27, 2000, with Financing Statement
and Exhibit
“A” (2)
10.04 Intercreditor Agreement between
Seabury Investors III, Limited Partnership, The Olson Foundation, Presidio
Investments, LLC, and the Registrant dated August 27, 2001 (4)
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
(1)
Incorporated herein by reference from Registrant’s Form 10KSB, dated June
20, 1997.
(2)
Incorporated herein by reference from Registrant’s Form 10KSB, dated March 29,
2001
(3)
Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15,
2001.
(4)
Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15,
2002.
(5) Incorporated
herein by reference from Registrant’s Form 10QSB, dated August 19,
2002
|
(b)
|
Reports Filed on Form
8-K
|
On May 3, 2007, the Company filed a
Form 8-K under Item 9, Regulation FD Disclosure.
On July 19, 2007, the Company filed a
Form 8-K under Item 7, Regulation FD Disclosure.
On November 13, 2007, the Company filed
a Form 8-K under Item 8, Other.
On July 28, 2008, the Company filed a
Form 8-K under item 8, Other.
16
The following is a summary of the fees
billed to us by Robison, Hill & Company for professional services rendered
for the years ended December 31, 2008 and 2007:
|
Service
|
2008
|
2007
|
||||||
|
Audit
Fees
|
$ | 23,782 | $ | 17,989 | ||||
|
Audit-Related
Fees
|
- | - | ||||||
|
Tax
Fees
|
250 | 250 | ||||||
|
All
Other Fees
|
- | - | ||||||
|
Total
|
$ | 24,032 | $ | 18,239 | ||||
Audit Fees. Consists of fees
billed for professional services rendered for the audits of our consolidated
financial statements, reviews of our interim consolidated financial statements
included in quarterly reports, services performed in connection with filings
with the Securities & Exchange Commission and related comfort letters and
other services that are normally provided by Robison, Hill & Company in
connection with statutory and regulatory filings or engagements.
Tax Fees. Consists of fees
billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal, state and local
tax compliance and consultation in connection with various transactions and
acquisitions.
Audit Committee Pre-Approval
of Audit and Permissible Non-Audit Services of Independent
Auditors
The Audit
Committee is to pre-approve all audit and non-audit services provided by the
independent auditors. These services may include audit services, audit-related
services, tax services and other services as allowed by law or regulation.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specifically approved amount. The independent auditors and
management are required to periodically report to the Audit Committee regarding
the extent of services provided by the independent auditors in accordance with
this pre-approval and the fees incurred to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
The Audit
Committee pre-approved 100% of the Company’s 2008 audit fees, audit-related
fees, tax fees, and all other fees to the extent the services occurred after May
6, 2003, the effective date of the Securities and Exchange Commission’s final
pre-approval rules.
17
SIGNATURES
Pursuant to the requirements of section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
| KLEVER MARKETING, INC. | |||
|
Dated:
May 14, 2009
|
By:
|
/s/ Paul G. Begum | |
| Paul G. Begum | |||
| CEO & Chairman (Principal Executive Officer) | |||
Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities
indicated on this 14th day of April 2008.
|
Signatures
|
Title
|
|
|
/S/
Paul G. Begum
|
CEO
& Chairman as of 01/09/2009
|
|
|
Paul
G. Begum
|
(Principal
Executive Officer)
|
|
|
/S/
Robert Campbell
|
COO
and Secretary Treasurer as of 01/09/2009
|
|
|
Robert
Campbell
|
||
|
/S/
Ray Norris
|
Director
|
|
|
Ray
Norris
|
18
KLEVER MARKETING, INC.
Audited Financial Statements
December 31, 2008 and 2007
/Letterhead/
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board
of Directors
Klever
Marketing Inc.
Salt Lake
City, Utah
We have
audited the accompanying balance sheet of Klever Marketing Inc. as of December
31, 2008, and the related statements of operations, stockholders’ equity and cash
flows for the year then ended. 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. The financial statements of Klever
Marketing Inc. as of December 31, 2007 were audited by other auditors whose
report dated April 14, 2008, expressed an unqualified opinion on those
statements.
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 of the Company's
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Klever Marketing Inc. as of
December 31, 2008, and the results of their operations, cash flows and changes
in stockholders’ deficit for the year then ended and for the cumulative period
from inception 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. As discussed in Note 1 to the financial
statements, the Company has no current source of revenue and suffered losses
from operations since inception and also is dependent on financing to continue
operations. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
described in note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/S/ Chisholm,
Bierwolf, Nilson & Morrill, LLC
Chisholm,
Bierwolf, Nilson & Morrill, LLC
Bountiful,
Utah
May 15,
2009
/Letterhead/
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS
Board of Directors
Klever Marketing, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance
sheet of Klever Marketing, Inc. (a development stage company) as of December 31,
2007, and the related statement of operations and cash flows for the year ended
December 31, 2007, and the statement of stockholders' equity from July 5, 1996
(inception of development stage) to December 31, 2007. 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 audits.
We conducted our audits 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 of the company's internal control over financial
reporting. Accordingly, we express no such opinion. Au audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Klever Marketing, Inc. (a development stage company), as of December
31, 2007, and the results of its operations and its cash flows for the year then
ended 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. As discussed in Note 1 to the financial statements, the Company
has suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
|
/S/
Robison Hill & Co.
|
|
|
Certified
Public Accountants
|
Salt Lake City, Utah
April 14, 2008
|
KLEVER
MARKETING, INC.
|
||||||||
|
(a
Development Stage Company)
|
||||||||
|
December
31,
|
December
31,
|
|||||||
|
ASSETS
|
2008
|
2007
|
||||||
|
Current
Assets
|
||||||||
|
Cash
|
$ | 851 | $ | 376 | ||||
|
Other
Receivable
|
- | 25,000 | ||||||
|
Total
Current Assets
|
851 | 25,376 | ||||||
|
Fixed
Assets
|
||||||||
|
Office
Equipment
|
92,964 | 92,964 | ||||||
|
Less
Accumulated Depreciation
|
(92,964 | ) | (92,964 | ) | ||||
|
Net
Fixed Assets
|
- | - | ||||||
|
Other
Assets
|
||||||||
|
Patents
|
775,045 | 775,045 | ||||||
|
Less
Accumulated Amortization
|
(775,045 | ) | (775,045 | ) | ||||
|
Net
Other Assets
|
- | - | ||||||
|
Total
Assets
|
$ | 851 | $ | 25,376 | ||||
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
Payable, Trade
|
$ | 307,308 | $ | 309,537 | ||||
|
Accrued
Liabilities
|
651,898 | 790,508 | ||||||
|
Line
of Credit
|
20,423 | 23,023 | ||||||
|
Related
Party Payables
|
9,000 | 9,000 | ||||||
|
Notes
Payable
|
45,000 | 45,000 | ||||||
|
Stock
Deposit
|
11,000 | - | ||||||
|
Total
Current Liabilities
|
1,044,629 | 1,177,068 | ||||||
|
Stockholders'
Deficit
|
||||||||
|
Preferred
stock (par value $.01), 2,000,000 shares authorized
|
||||||||
|
287,595
and 168,434 shares issued and outstanding at December 31,
2008
|
2,876 | 1,684 | ||||||
|
and
December 31, 2007, respectively
|
||||||||
|
Common
Stock (Par Value $.01), 50,000,000 shares authorized
|
||||||||
|
42,248,303
and 46,718,303 shares issued and outstanding at
|
||||||||
|
December
31, 2008 and December 31, 2007, respectively
|
422,483 | 467,183 | ||||||
|
Common
Stock to be issued, 469,752 shares at
|
||||||||
|
December
31, 2008 and December 31, 2007
|
4,698 | 4,698 | ||||||
|
Subscription
Receivable
|
(23,000 | ) | - | |||||
|
Treasury
Stock, 100,000 and 5,270,000 shares at December 31, 2008
|
||||||||
|
and
December 31, 2007, respectively
|
(1,000 | ) | (52,700 | ) | ||||
|
Paid
in Capital in Excess of Par Value
|
16,059,016 | 16,032,208 | ||||||
|
Retained
Deficit
|
(3,333,785 | ) | (3,333,785 | ) | ||||
|
Deficit
Accumulated During Development Stage
|
(14,175,066 | ) | (14,270,982 | ) | ||||
|
Total
Stockholders' Deficit
|
(1,043,778 | ) | (1,151,692 | ) | ||||
|
Total
Liabilities and Stockholders' Deficit
|
$ | 851 | $ | 25,376 | ||||
F-3
|
KLEVER MARKETING, INC.
|
||||||||||||
|
(A
Development Stage Company)
|
||||||||||||
|
From
Inception of
|
||||||||||||
|
Development
Stage
|
||||||||||||
|
For
the Years Ended
|
On
July 5, 1996
|
|||||||||||
|
December
31,
|
Through
|
|||||||||||
|
2008
|
2007
|
December
31, 2008
|
||||||||||
|
Revenue
|
$ | - | $ | - | $ | 256,000 | ||||||
|
Expenses
|
||||||||||||
|
Sales
and Marketing
|
- | - | 163,306 | |||||||||
|
General
and Administrative
|
93,223 | 549,760 | 10,444,510 | |||||||||
|
Research
and Development
|
- | - | 4,529,656 | |||||||||
|
Total
Expenses
|
93,223 | 549,760 | 15,137,472 | |||||||||
|
Other
Income (Expense)
|
||||||||||||
|
Other
Income
|
50,000 | 25,126 | 503,843 | |||||||||
|
Interest
Income
|
- | - | 18,902 | |||||||||
|
Interest
Expense
|
(25,752 | ) | (309,898 | ) | (2,597,000 | ) | ||||||
|
Forgiveness
of Debt
|
164,991 | 127,137 | 292,128 | |||||||||
|
Gain
(Loss) on Sale of Assets
|
- | - | 26,947 | |||||||||
|
Capital
Gain on Sale of Investments
|
- | - | 191,492 | |||||||||
|
Total
Other Income (Expense)
|
189,239 | (157,635 | ) | (1,563,688 | ) | |||||||
|
Income
(Loss) Before Taxes
|
96,017 | (707,395 | ) | (16,445,159 | ) | |||||||
|
Income
Taxes
|
100 | 100 | 1,300 | |||||||||
|
Net
Loss Before Extraordinary Items
|
95,917 | (707,495 | ) | (16,446,459 | ) | |||||||
|
Extraordinary
Item - troubled debt restructuring
|
- | 2,271,394 | 2,271,394 | |||||||||
|
Net
Income (Loss)
|
$ | 95,917 | $ | 1,563,899 | $ | (14,175,065 | ) | |||||
|
Loss
per Common Share
|
||||||||||||
|
Basic
|
||||||||||||
|
Income
(Loss) Before Extraordinary Item
|
$ | 0.00 | $ | (0.02 | ) | |||||||
|
Extraordinary
Item
|
- | 0.06 | ||||||||||
|
Income
(Loss) Per Share
|
0.00 | $ | 0.04 | |||||||||
|
Diluted
|
||||||||||||
|
Income
(Loss) Before Extraordinary Item
|
$ | 0.00 | $ | (0.01 | ) | |||||||
|
Extraordinary
Item
|
- | 0.05 | ||||||||||
|
Income
(Loss) Per Share
|
$ | 0.00 | $ | 0.04 | ||||||||
|
Weighted
Average Shares Outstanding
|
||||||||||||
|
Basic
|
46,530,769 | 41,193,978 | ||||||||||
|
Diluted
|
56,339,704 | 49,303,785 | ||||||||||
|
|
||||||||||||
F-4
|
KLEVER
MARKETING, INC.
|
||||||||||||||||||||||||||||||||||||||||
|
(a
Development Stage Company)
|
||||||||||||||||||||||||||||||||||||||||
|
From
Inception of
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
Development
Stage
|
||||||||||||||||||||||||||||||||||||||
|
|
|
On
July 5,
|
||||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Common
Stock
to be
|
Subscription
|
Treasury
|
Paid
in Capital in
Excess
of
|
Retained
|
1996
Through
December 31,
|
|||||||||||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Issued
|
Receivable
|
Stock
|
Par
Value
|
Deficit
|
2008
|
|||||||||||||||||||||||||||||||
|
Balance,
December 31, 1995
|
247,100 | $ | 2,471 | 12,210,949 | $ | 122,109 | $ | - | $ | - | $ | 74,022,028 | $ | (103,351,248 | ) | $ | - | |||||||||||||||||||||||
|
January
1996, shares issued
|
||||||||||||||||||||||||||||||||||||||||
|
in
connection with merger
|
(247,100 | ) | (2,471 | ) | (3,784,905 | ) | (37,849 | ) | 5,059 | (70,257,358 | ) | 100,017,463 | ||||||||||||||||||||||||||||
|
Shares
issued for cash at
|
||||||||||||||||||||||||||||||||||||||||
|
$0.50
- 3.00 per share
|
- | - | 314,287 | 3,143 | - | 507,932 | - | - | ||||||||||||||||||||||||||||||||
|
Shares
issued in exercise of
|
||||||||||||||||||||||||||||||||||||||||
|
options
at $1.00 - $1.25 per share
|
- | - | 130,000 | 1,300 | - | 136,200 | - | - | ||||||||||||||||||||||||||||||||
|
Shares
issued for services at
|
||||||||||||||||||||||||||||||||||||||||
|
$1.25
per share
|
- | - | 14,282 | 143 | - | 17,710 | - | - | ||||||||||||||||||||||||||||||||
|
Shares
issued for receivable
|
||||||||||||||||||||||||||||||||||||||||
|
at
$1.00 - 3.00 per share
|
- | - | - | - | 407 | 101,543 | - | - | ||||||||||||||||||||||||||||||||
|
Shares
issued to officer and
|
||||||||||||||||||||||||||||||||||||||||
|
employee
for patents
|
- | - | - | - | 2,250 | 130,500 | - | - | ||||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | (831,814 | ) | |||||||||||||||||||||||||||||||
|
Balance,
December 31, 1996
|
- | - | 8,884,613 | 88,846 | 7,716 | - | - | 4,658,555 | (3,333,785 | ) | (831,814 | ) | ||||||||||||||||||||||||||||
|
Shares
issued for cash at
|
||||||||||||||||||||||||||||||||||||||||
|
$0.01
- 3.00 per share
|
- | - | 228,150 | 2,282 | 49 | - | 449,976 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued to officers for
|
||||||||||||||||||||||||||||||||||||||||
|
loans
at $0.08 - 1.82 per share
|
- | - | 249,444 | 2,494 | - | - | 74,287 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for services at
|
||||||||||||||||||||||||||||||||||||||||
|
$0.50
- 2.59 per share
|
- | - | 10,398 | 104 | - | - | 7,391 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued to officers
|
||||||||||||||||||||||||||||||||||||||||
|
for
patents
|
- | - | 260,813 | 2,608 | (2,250 | ) | - | 1,892 | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued for cash and
|
||||||||||||||||||||||||||||||||||||||||
|
receivables
at $1.75 - 2.00 per
|
||||||||||||||||||||||||||||||||||||||||
|
share
|
- | - | 58,286 | 583 | (100 | ) | - | 85,267 | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued to VideOcart
|
||||||||||||||||||||||||||||||||||||||||
|
creditors
|
- | - | 97,610 | 976 | (976 | ) | - | - | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued for research &
|
||||||||||||||||||||||||||||||||||||||||
|
development
at par
|
- | - | - | - | 464 | - | - | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for employee
|
||||||||||||||||||||||||||||||||||||||||
|
compensation
at $2.50 per share
|
- | - | 6,000 | 60 | - | - | 14,940 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (755,594 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31, 1997
|
- | - | 9,795,314 | 97,953 | 4,903 | - | - | 5,292,308 | (3,333,785 | ) | (1,587,408 | ) | ||||||||||||||||||||||||||||
F-5
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$1.50 - 3.00 per share
|
294,059 | 2,941 | (100 | ) | 612,416 | - | ||||||||||||||||||||||||||||||||||
|
Shares
issued for services
|
||||||||||||||||||||||||||||||||||||||||
|
at
$2.00 - 7.80 per share
|
13,648 | 136 | - | 43,590 | - | |||||||||||||||||||||||||||||||||||
|
Shares
issued for employee
|
||||||||||||||||||||||||||||||||||||||||
|
compensation
at $2.19 - 3.06
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
4,363 | 44 | - | 9,954 | - | |||||||||||||||||||||||||||||||||||
|
Shares
issued for accounts
|
||||||||||||||||||||||||||||||||||||||||
|
receivable
at $1.50 - 2.12 per
|
||||||||||||||||||||||||||||||||||||||||
|
share
|
129,437 | 1,294 | - | 209,671 | - | |||||||||||||||||||||||||||||||||||
|
Shares
issued for 1,500 shares of
|
||||||||||||||||||||||||||||||||||||||||
|
Avtel
stock at $3.00 per share
|
4,125 | 41 | - | 12,334 | - | |||||||||||||||||||||||||||||||||||
|
Shares
issued for research
|
||||||||||||||||||||||||||||||||||||||||
|
&
development contract
|
46,366 | 464 | (464 | ) | - | - | ||||||||||||||||||||||||||||||||||
|
Shares
issued to officer for
|
||||||||||||||||||||||||||||||||||||||||
|
patent
at $2.94 per share
|
150,000 | 1,500 | 250 | 512,313 | - | |||||||||||||||||||||||||||||||||||
|
Shares
returned at $1.58 per
|
||||||||||||||||||||||||||||||||||||||||
|
share
|
(42,493 | ) | (425 | ) | - | (66,667 | ) | - | ||||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | (1,496,926 | ) | ||||||||||||||||||||||||||||||||||
|
Balance,
December 31 1998
|
- | - | 10,394,819 | 103,948 | 4,589 | - | - | 6,625,919 | (3,333,785 | ) | (3,084,334 | ) | ||||||||||||||||||||||||||||
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$1.96 - 3.00 per share
|
- | - | 701,525 | 7,015 | - | - | 1,649,949 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for employee
|
||||||||||||||||||||||||||||||||||||||||
|
compensation
at $1.95 - 2.34
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | 2,995 | 30 | - | - | 6,187 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for exercise of
|
||||||||||||||||||||||||||||||||||||||||
|
options
at $0.52 - 0.86 per share
|
- | - | 238,271 | 2,383 | - | - | 200,342 | - | - | |||||||||||||||||||||||||||||||
|
Shares
returned at $0.67-1.58
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | (62,489 | ) | (625 | ) | - | - | (107,047 | ) | - | - | ||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (1,734,623 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31,1999
|
- | - | 11,275,121 | 112,751 | 4,589 | - | - | 8,375,350 | (3,333,785 | ) | (4,818,957 | ) | ||||||||||||||||||||||||||||
F-6
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$1.07 - 2.75 per share
|
- | - | 279,742 | 2,798 | - | - | 532,754 | - | - | |||||||||||||||||||||||||||||||
|
Preferred
shares issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$17 - 26 per share
|
84,576 | 846 | - | - | - | - | 1,827,529 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for employee
|
||||||||||||||||||||||||||||||||||||||||
|
compensation
at $3.99 per share
|
- | - | 74,608 | 746 | - | - | 296,939 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for exercise of
|
||||||||||||||||||||||||||||||||||||||||
|
stock
options at $0.86 - 1.07
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | 597,778 | 5,978 | - | - | 511,931 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accounts
|
||||||||||||||||||||||||||||||||||||||||
|
payable
at $2.75 - 3.00 per share
|
- | - | 9,488 | 95 | - | - | 26,649 | - | - | |||||||||||||||||||||||||||||||
|
Paid-in
capital from treasury stock
|
||||||||||||||||||||||||||||||||||||||||
|
transaction
|
- | - | - | - | - | - | 16,180 | - | - | |||||||||||||||||||||||||||||||
|
Shares
canceled & converted to preferred
|
||||||||||||||||||||||||||||||||||||||||
|
shares
at $2.75 per share
|
- | - | (100,000 | ) | (1,000 | ) | - | - | (274,000 | ) | - | - | ||||||||||||||||||||||||||||
|
Conversion
of note payable to
|
||||||||||||||||||||||||||||||||||||||||
|
preferred
shares at $26 per share
|
9,615 | 96 | - | - | - | - | 249,904 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued that were
|
||||||||||||||||||||||||||||||||||||||||
|
paid
for in 997
|
- | - | 23,334 | 233 | (233 | ) | - | - | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued for services
|
||||||||||||||||||||||||||||||||||||||||
|
at
$0.89 per share
|
- | - | 2,697 | 27 | - | - | 2,373 | - | - | |||||||||||||||||||||||||||||||
|
Shares
returned at
|
||||||||||||||||||||||||||||||||||||||||
|
$1.73
- 2.12 per share
|
- | - | (10,000 | ) | (100 | ) | - | - | (19,150 | ) | - | - | ||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (4,066,283 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31, 2000
|
94,191 | 942 | 12,152,768 | 121,528 | 4,356 | - | - | 11,546,459 | (3,333,785 | ) | (8,885,240 | ) | ||||||||||||||||||||||||||||
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$0.82 per share
|
- | - | 4,685 | 47 | - | - | 3,795 | - | - | |||||||||||||||||||||||||||||||
|
Preferred
shares issued
|
||||||||||||||||||||||||||||||||||||||||
|
for
cash at $6.60 per share
|
6,061 | 60 | - | - | - | - | 39,940 | - | - | |||||||||||||||||||||||||||||||
|
Preferred
shares issued
|
||||||||||||||||||||||||||||||||||||||||
|
for
payment of note payable at
|
||||||||||||||||||||||||||||||||||||||||
|
$6.60
per share
|
68,182 | 682 | - | - | - | - | 449,318 | - | - | |||||||||||||||||||||||||||||||
|
Shares
canceled for nonpayment
|
- | - | (4,694 | ) | (47 | ) | - | - | (9,903 | ) | - | - | ||||||||||||||||||||||||||||
|
Shares
issued for research &
|
||||||||||||||||||||||||||||||||||||||||
|
development
expenses at $1.00
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | 15,000 | 150 | - | - | 14,850 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for general &
|
||||||||||||||||||||||||||||||||||||||||
|
administrative
expenses at $0.66
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | 507,048 | 5,070 | - | - | 329,581 | - | - | |||||||||||||||||||||||||||||||
|
Shares
returned to Company for
|
||||||||||||||||||||||||||||||||||||||||
|
accounts
receivable of $98,375
|
- | - | - | - | - | (1,000 | ) | (97,375 | ) | - | - | |||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (2,342,405 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31, 2001
|
168,434 | 1,684 | 12,674,807 | 126,748 | 4,356 | - | (1,000 | ) | 12,276,665 | (3,333,785 | ) | (11,227,645 | ) | |||||||||||||||||||||||||||
F-7
|
Shares
canceled for services
|
||||||||||||||||||||||||||||||||||||||||
|
not
rendered
|
- | - | (304,229 | ) | (3,042 | ) | - | - | (197,749 | ) | - | - | ||||||||||||||||||||||||||||
|
Cash
received for shares
|
||||||||||||||||||||||||||||||||||||||||
|
that
have not yet been issued
|
- | - | - | - | 3,333 | - | 21,667 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (1,025,837 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31, 2002
|
168,434 | 1,684 | 12,370,578 | 123,706 | 7,689 | - | (1,000 | ) | 12,100,583 | (3,333,785 | ) | (12,253,482 | ) | |||||||||||||||||||||||||||
|
Shares
issued for cash at
|
||||||||||||||||||||||||||||||||||||||||
|
$0.05
- 0.75 per share
|
- | - | 2,580,000 | 25,800 | (3,333 | ) | - | 151,033 | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued for S&C
|
||||||||||||||||||||||||||||||||||||||||
|
Medical
at $0.05 per share
|
- | - | 3,000,000 | 30,000 | - | - | 120,000 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for notes payable at
|
||||||||||||||||||||||||||||||||||||||||
|
$.04-.05
per share
|
- | - | 11,259,786 | 112,598 | - | - | 446,642 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accounts payable
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.01-.10 per share
|
- | - | 4,200,000 | 42,000 | - | - | 96,000 | - | - | |||||||||||||||||||||||||||||||
|
Shares
authorized for expense
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.03 per share - not issued
|
- | - | - | - | 9,545 | - | 19,090 | - | - | |||||||||||||||||||||||||||||||
|
Shares
authorized for payment of
|
||||||||||||||||||||||||||||||||||||||||
|
accounts
payable at $.21 per share
|
||||||||||||||||||||||||||||||||||||||||
|
share
- not issued
|
- | - | - | - | 56 | - | 1,115 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (1,361,753 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December31, 2003
|
168,434 | 1,684 | 33,410,364 | 334,104 | 13,957 | - | (1,000 | ) | 12,934,463 | (3,333,785 | ) | (13,615,235 | ) | |||||||||||||||||||||||||||
F-8
|
Shares
issued for cash at
|
||||||||||||||||||||||||||||||||||||||||
|
$.036
- .15 per share
|
- | - | 770,000 | 7,700 | - | - | 57,420 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accounts payable
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.05-.23/share
|
- | - | 391,939 | 3,919 | - | - | 27,306 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for expenses at
|
||||||||||||||||||||||||||||||||||||||||
|
$.04
- .23 per share
|
- | - | 1,910,604 | 19,106 | (9,203 | ) | - | 108,325 | - | - | ||||||||||||||||||||||||||||||
|
Authorized
shares issued
|
- | - | 5,571 | 56 | (56 | ) | - | - | - | - | ||||||||||||||||||||||||||||||
|
Shares
issued for settlement of
|
||||||||||||||||||||||||||||||||||||||||
|
liabilities
|
- | - | 152,142 | 1,521 | - | - | 36,514 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (632,293 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December31, 2004
|
168,434 | 1,684 | 36,640,620 | 366,406 | 4,698 | - | (1,000 | ) | 13,164,028 | (3,333,785 | ) | (14,247,528 | ) | |||||||||||||||||||||||||||
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.028 - .25 per share
|
- | - | 1,790,000 | 17,900 | - | - | 254,726 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for expenses at
|
||||||||||||||||||||||||||||||||||||||||
|
$.25
per share
|
- | - | 92,500 | 925 | - | - | 22,200 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (736,913 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December31, 2005
|
168,434 | 1,684 | 38,523,120 | 385,231 | 4,698 | - | (1,000 | ) | 13,440,954 | (3,333,785 | ) | (14,984,441 | ) | |||||||||||||||||||||||||||
|
Shares
issued for general and
|
||||||||||||||||||||||||||||||||||||||||
|
administrative
expenses at $.25
|
||||||||||||||||||||||||||||||||||||||||
|
per
share
|
- | - | 2,788 | 29 | - | - | 669 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for cash
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.25 per share
|
- | - | 586,000 | 5,860 | - | - | 140,640 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accounts payable
|
||||||||||||||||||||||||||||||||||||||||
|
at
$.25 per share
|
- | - | 71,956 | 719 | - | - | 17,270 | - | - | |||||||||||||||||||||||||||||||
|
Compensation
expense from
|
||||||||||||||||||||||||||||||||||||||||
|
issuance
of stock options
|
- | - | - | - | - | - | 43,653 | - | - | |||||||||||||||||||||||||||||||
|
Net
Loss
|
- | - | - | - | - | - | - | - | (850,440 | ) | ||||||||||||||||||||||||||||||
|
Balance,
December 31, 2006
|
168,434 | 1,684 | 39,183,864 | 391,839 | 4,698 | - | (1,000 | ) | 13,643,186 | (3,333,785 | ) | (15,834,881 | ) | |||||||||||||||||||||||||||
F-9
|
Shares
issued for general and
|
||||||||||||||||||||||||||||||||||||||||
|
administrative
expenses at
|
||||||||||||||||||||||||||||||||||||||||
|
$.03
- $.05 per share
|
- | - | 450,000 | 4,500 | - | - | 13000 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for cash at
|
||||||||||||||||||||||||||||||||||||||||
|
$.25
per share
|
- | - | 1,090,000 | 10,900 | - | - | 261,600 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accounts
|
||||||||||||||||||||||||||||||||||||||||
|
payable
at $.25 per share
|
- | - | 67,988 | 680 | - | - | 16,315 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for notes
|
||||||||||||||||||||||||||||||||||||||||
|
payable
at $.25 per share
|
- | - | 8,281,016 | 82,810 | - | - | 1,987,444 | - | - | |||||||||||||||||||||||||||||||
|
Shares
issued for accrued
|
||||||||||||||||||||||||||||||||||||||||
|
interest
at $.25 per share
|
- | - | 62,101 | 621 | - | - | 14,905 | |||||||||||||||||||||||||||||||||
|
Shares
returned to the treasury
|
- | - | - | - | - | (51,700 | ) | 51,700 | - | - | ||||||||||||||||||||||||||||||
|
Shares
returned to treasury and
|
||||||||||||||||||||||||||||||||||||||||
|
cancelled
|
- | - | (2,416,666 | ) | (24,167 | ) | - | - | 24,167 | - | - | |||||||||||||||||||||||||||||
|
Compensation
expense from
|
||||||||||||||||||||||||||||||||||||||||
|
issuance
of stock options
|
- | - | - | - | - | - | 19,891 | - | - | |||||||||||||||||||||||||||||||
|
Net
Income
|
- | - | - | - | - | - | - | - | 1,563,899 | |||||||||||||||||||||||||||||||
|
Balance,
December 31, 2007
|
168,434 | 1,684 | 46,718,303 | 467,183 | 4,698 | - | (52,700 | ) | 16,032,208 | (3,333,785 | ) | (14,270,982 | ) | |||||||||||||||||||||||||||
|
Additional
preferred shares
|
||||||||||||||||||||||||||||||||||||||||
|
issued
as dividends
|
119,161 | 1,192 | (1,192 | ) | ||||||||||||||||||||||||||||||||||||
|
Shares
returned to treasury and cancelled
|
(5,170,000 | ) | (51,700 | ) | 51,700 | |||||||||||||||||||||||||||||||||||
|
Subscription
Receivable
|
(23,000 | ) | ||||||||||||||||||||||||||||||||||||||
|
Shares
issued for cash at $.05 per share
|
700,000 | 7,000 | 28,000 | |||||||||||||||||||||||||||||||||||||
|
Net
Income
|
95,916 | |||||||||||||||||||||||||||||||||||||||
|
Balance,
December 31 2008
|
287,595 | $ | 2,876 | 42,248,303 | $ | 422,483 | $ | 4,698 | $ | (23,000 | ) | $ | (1,000 | ) | $ | 16,059,016 | $ | (3,333,785 | ) | $ | (14,175,066 | ) | ||||||||||||||||||
F-10
|
KLEVER
MARKETING, INC.
|
||||||||||||
|
(A
Development Stage Company)
|
||||||||||||
|
From
Inception of
|
||||||||||||
|
Development
Stage
|
||||||||||||
|
For
the Years Ended
|
On
July 5, 1996
|
|||||||||||
|
December
31,
|
Through
|
|||||||||||
|
2008
|
2007
|
December
31, 2008
|
||||||||||
|
CASH
FLOWS FROM OPERATING
|
||||||||||||
|
ACTIVITIES:
|
||||||||||||
|
Net
Income (Loss)
|
$ | 95,916 | $ | 1,563,899 | $ | (14,175,066 | ) | |||||
|
Adjustments
Used to Reconcile Net Loss to Net
|
||||||||||||
|
Cash
Provided by (Used in) Operating Activities:
|
||||||||||||
|
Stock
Issued for General and Administrative
|
- | 17,500 | 1,004,982 | |||||||||
|
Stock
Issued for Research and Development
|
- | - | 62,850 | |||||||||
|
Stock
Returned for Services not Rendered
|
- | - | (200,790 | ) | ||||||||
|
(Gain)
Loss on Sale/Disposal of Assets
|
- | - | 486,536 | |||||||||
|
Compensation
Expense from Stock Options
|
- | 19,891 | 89,791 | |||||||||
|
Stock
Issued for Interest
|
- | 15,525 | 135,226 | |||||||||
|
Stock
Issued for Accounts Payable
|
- | 16,996 | 243,458 | |||||||||
|
Deferred
Income
|
- | - | (214,000 | ) | ||||||||
|
Depreciation
and Amortization
|
- | - | 1,912,883 | |||||||||
|
Write-off
Bad Debts
|
- | - | 15,000 | |||||||||
|
(Increase)
Decrease in Accounts Receivable
|
25,000 | - | 24,587 | |||||||||
|
(Increase)
Decrease in Subscription Receivable
|
- | - | 37,694 | |||||||||
|
(Increase)
Decrease in Other Assets & Prepaids
|
- | 4,715 | 89,238 | |||||||||
|
Increase
(Decrease) in Accounts Payable
|
(2,229 | ) | (77,453 | ) | 214,104 | |||||||
|
Increase
(Decrease) in Accrued Liabilities
|
(138,612 | ) | (1,859,392 | ) | 558,672 | |||||||
|
Net
Cash Used in Operating Activities
|
(19,925 | ) | (298,319 | ) | (9,714,835 | ) | ||||||
|
CASH
FLOWS FROM INVESTING
|
||||||||||||
|
ACTIVITIES:
|
||||||||||||
|
Acquisition/Sale
of Equipment, net
|
- | - | (587,801 | ) | ||||||||
|
Acquisition/Sale
of Patents
|
- | - | 25,089 | |||||||||
|
Acquisition/Sale
of Stock, net
|
- | - | 12,375 | |||||||||
|
Net
Cash Used by Investing Activities
|
- | - | (550,337 | ) | ||||||||
|
CASH
FLOWS FROM FINANCING
|
||||||||||||
|
ACTIVITIES:
|
||||||||||||
|
Stock
Deposit
|
11,000 | - | 11,000 | |||||||||
|
Proceeds
from Capital Stock Issued
|
12,000 | 272,500 | 7,050,173 | |||||||||
|
Proceeds
from Loans
|
- | - | 3,473,252 | |||||||||
|
line
of Credit
|
(2,600 | ) | 23,023 | 20,423 | ||||||||
|
Loan
Receivables
|
- | - | (15,000 | ) | ||||||||
|
Principal
Payments on Lease Obligations
|
- | - | (18,769 | ) | ||||||||
|
Cash
Payments on Notes Payable
|
- | - | (279,730 | ) | ||||||||
|
Net
Cash Provided by Financing Activities
|
20,400 | 295,523 | 10,241,349 | |||||||||
|
Net
Increase (Decrease) in Cash and Cash
|
||||||||||||
|
Equivalents
|
475 | (2,796 | ) | (23,823 | ) | |||||||
|
Cash
and Cash Equivalents, Beginning of Year
|
376 | 3,172 | 24,674 | |||||||||
|
Cash
and Cash Equivalents, End of Year
|
$ | 851 | $ | 376 | $ | 851 | ||||||
F-11
|
KLEVER
MARKETING, INC.
|
||||||||||||
|
(A
Development Stage Company)
|
||||||||||||
|
STATEMENTS
OF CASH FLOWS
|
||||||||||||
|
(continued)
|
||||||||||||
|
From
Inception of
|
||||||||||||
|
Development
Stage
|
||||||||||||
|
For
the Years Ended
|
On
July 5, 1996
|
|||||||||||
|
December
31,
|
Through
|
|||||||||||
|
2008
|
2007
|
December
31, 2008
|
||||||||||
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||||
|
Interest
|
$ | - | $ | - | $ | - | ||||||
|
Income
Taxes
|
$ | 100 | $ | 100 | $ | 1,300 | ||||||
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
|
On
September 30, 2007, the Company issued 8,281,016 shares of common stock in
exchange for
|
||||||||||||
|
notes
payable totaling $2,070,254. As part of the agreements, accrued
interest related to these notes
|
||||||||||||
|
totaling
$2,190,946 was forgiven, and recorded as extraordinary gain at September
30, 2007.
|
||||||||||||
F-12
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 -
NATURE OF OPERATIONS AND GOING CONCERN
The accompanying financial statements
have been prepared on the basis of accounting principles applicable to a “going
concern”, which assume that the Company will continue in operation for at least
one year and will be able to realize its assets and discharge its liabilities in
the normal course of operations.
Several conditions and events cast
doubt about the Company’s ability to continue as a “going
concern”. The Company has net income of $95,916 for the year ended
December 31, 2008, due to other income of $164,991 as a result of
forgiveness of debt. For the year ended December 31, 2007, the Company had net
income of $1,563,899, due to extraordinary gain of $2,271,394 as a result of
restructuring debt. The Company had a loss before extraordinary items
of $707,494 for the year ended December 31, 2007. The Company has losses of
$14,175,066 since inception. At December 31, 2008 and 2007, the
company had working capital deficits in the amounts of $1,043,778 and $1,151,692
respectively.
The
Company has a liquidity problem and requires additional financing in order to
finance its business activities on an ongoing basis. The Company is
actively pursuing alternative financing and has had discussions with various
third parties, although no firm commitments have been obtained.
The Company’s future capital
requirements will depend on numerous factors including, but not limited to,
continued progress in developing its products, and market
penetration.
These financial statements do not
reflect adjustments that would be necessary if the Company were unable to
continue as a “going concern”. While management believes that the
actions already taken or planned, will mitigate the adverse conditions and
events which raise doubt about the validity of the “going concern” assumption
used in preparing these financial statements, there can be no assurance that
these actions will be successful.
If the Company were unable to continue
as a “going concern”, then substantial adjustments would be necessary to the
carrying values of assets, the reported amounts of its liabilities, the reported
revenues and expenses, and the balance sheet classifications used.
Organization and Basis of
Presentation
The Company was organized under the
laws of the State of Delaware in December 1989. The Company was in
the Development stage from 1989 to 1991. The Company was an operating
company from 1992 to December 8, 1993 when it filed petitions for relief under
Chapter 11 bankruptcy. The Company was inactive until July 5, 1996
when the Company merged with Klever Kart, Inc. in a reverse merger and changed
its name to Klever Marketing, Inc. The Company has been in the development stage
since this time.
F-13
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 1 - NATURE OF
OPERATIONS AND GOING CONCERN (continued)
Nature of
Business
The Company was formed for the purpose
of creating a vehicle to obtain capital, to file and acquire patents, to seek
out, investigate, develop, manufacture, market and distribute electronic
shopping cart based and in-store advertising, promotion and media content and
retail shopper services, which have potential for profit. The Company
is currently in the development stage and seeking new business
opportunities.
NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES
This summary of accounting policies for
Klever Marketing, Inc. is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Cash
Equivalents
For the purpose of reporting cash
flows, the Company considers all highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents to the extent the funds
are not being held for investment purposes.
Use of
Estimates
The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain reclassifications have been
made in the 2007 financial statements to conform with the 2008 presentation.
These reclassifications are deemed immaterial to the financial statements taken
as a whole.
F-14
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
Fair Value of Financial
Instruments
Effective
January 1, 2007, the company adopted the provisions of SFAS No. 157, Fair Value
Measurements. SFAS No. 157 provides a framework for the recognition,
valuation and measurement of fair value of balance sheet items that would equal
the price received to sell an asset or that would be paid to transfer a
liability in an orderly transaction between market participants as of the
measurement date. The carrying value of the Company's financial instruments,
including intangible assets, accounts payable and accrued liabilities at
December 31, 2008 and 2007 approximates their fair values due to the short-term
nature of these financial instruments. Management assigns no value to intangible
assets because there is no market participant interest in the purchase of these
assets or liabilities.
Earnings (Loss) Per
Share
The
computation of net earnings (loss) per share of common stock is based on the
weighted average number of shares outstanding during each period
presented. The Company utilizes the treasury stock method to
calculate diluted earnings (loss) per share, which considers potentially
issuable shares on common stock equivalents. In accordance with
SFAS No. 128, "Earnings per Share," common
stock options have a dilutive effect when the average market price of the common
stock during the period exceeds the exercise price of the
options.
Common stock
equivalents for the company derive from two sources. Options, granted
with the issue of common stock, that when exercised are converted to common
stock and the potential common stock that may result from the application of an
anti-dilutive rights clause contained in the designation of rights for preferred
shares. The preferred share right allows an anti-dilution formula to
calculate the number of common shares that the Company would be obligated to
issue should the preferred share holders elect to convert their preferred shares
to common shares.
The average
market price of the Company's common stock during the years ended December 31,
2008 and 2007 was $0.03 and $0.02, respectively. As such,
potentially issuable commons shares related to options were excluded from the
calculation of diluted loss per share for the period ended December 31, 2008 and
2007 because their effect was anti-dilutive
At December
31, 2008 and 2007, the total number of potentially dilutive common stock
equivalents is presented below:
|
2008
|
2007
|
|
|
Potential
Common stock equivalents from stock options:
|
-
|
-
|
|
Potential
Common stock equivalents from Preferred share rights:
|
9,808,935
|
8,109,807
|
F-15
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
|
Year
ended
|
||||||||
|
December
31,
|
||||||||
|
Statement
of Operations Summary Information:
|
2008
|
2007
|
||||||
| Numerator: | ||||||||
|
Income
(loss) before extraordinary items
|
$ | 95,916 | $ | (707,495 | ) | |||
|
Income
from extraordinary items, net of tax
|
- | 2,271,394 | ||||||
|
Net
income
|
$ | 95,916 | $ | 1,563,899 | ||||
|
Denominator:
|
||||||||
|
Weighted-average
common shares outstanding
|
||||||||
|
Basic
|
46,530,769 | 41,193,978 | ||||||
|
Conversion
of preferred rights
|
9,808,935 | 8,109,807 | ||||||
|
Diluted
|
56,339,704 | 49,303,785 | ||||||
|
EARNINGS (LOSS)
PER SHARE:
|
||||||||
|
Basic
|
||||||||
|
Income
(loss) before extraordinary items
|
$ | 0.00 | $ | (0.02 | ) | |||
|
Income
from extraordinary items, net of tax
|
- | 0.06 | ||||||
|
Net
income
|
$ | 0.00 | $ | 0.04 | ||||
|
Diluted
|
||||||||
|
Income
(loss) before extraordinary items
|
$ | 0.00 | $ | (0.01 | ) | |||
|
Income
from extraordinary items, net of tax
|
- | $ | 0.05 | |||||
|
Net
income
|
$ | 0.00 | $ | 0.04 | ||||
Concentration of Credit
Risk
The Company has no significant
off-balance-sheet concentrations of credit risk such as foreign exchange
contracts, options contracts or other foreign hedging arrangements. The Company
is currently under the development stage and did not generate revenues from the
operations during 2008 and 2007. As of December 31, 2008 and 2007 there were $0
accounts receivable and accordingly, no provision for allowance of doubtful
accounts was recorded.
Fixed
Assets
Fixed assets are stated at cost. Fixed
asset have been fully depreciated and have a book value of
$0. Depreciation and amortization are computed using the
straight-line method over the estimated economic useful lives of the related
assets as follows:
|
Computer
equipment
|
3
years
|
|
Office
furniture and fixtures
|
5-10
years
|
Upon sale or other disposition of
property and equipment, the cost and related accumulated depreciation or
amortization are removed from the accounts and any gain or loss is included in
the determination of income or loss.
Expenditures for maintenance and
repairs are charged to expense as incurred. Major overhauls and
betterments are capitalized and depreciated over their estimated economic useful
lives.
Depreciation expense was $0 and $0 for
the years ended December 31, 2008 and 2007, respectively.
F-16
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
Intangibles
Intangibles associated with certain
technology agreements are amortized over 10 - 14 years.
Amortization expense was $0 and $0 for
the years ended December 31, 2008 and 2007, respectively. The
intangibles are fully amortized and have a book value of $0 at December 31, 2008
and 2007.
Stock
Options
Effective January 1, 2006, the company
adopted the provisions of SFAS No. 123(R). SFAS No. 123(R) requires
employee equity awards to be accounted for under the fair value method.
Accordingly, share-based compensation is measured at grant date, based on the
fair value of the award. Prior to January 1, 2006, the company accounted for
awards granted to employees under its equity incentive plans under the intrinsic
value method prescribed by Accounting Principles Board (APB) Opinion
No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related
interpretations, and provided the required pro forma disclosures prescribed by
SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS
No. 123), as amended.
Under the modified prospective method
of adoption for SFAS No. 123(R), the compensation cost recognized by the
company beginning on January 1, 2006 includes (a) compensation cost for all
equity incentive awards granted prior to, but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in accordance
with the original provisions of SFAS No. 123, and (b) compensation
cost for all equity incentive awards granted subsequent to January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions
of SFAS No. 123(R). The company uses the straight-line attribution method
to recognize share-based compensation costs over the service period of the
award. Upon exercise, cancellation, forfeiture, or expiration of stock options,
or upon vesting or forfeiture of restricted stock units, deferred tax assets for
options and restricted stock units with multiple vesting dates are eliminated
for each vesting period on a first-in, first-out basis as if each vesting period
was a separate award. To calculate the excess tax benefits available for use in
offsetting future tax shortfalls as of the date of implementation, the company
followed the alternative transition method discussed in FASB Staff Position
No. 123(R)-3.
F-17
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF
ACCOUNTING POLICIES (continued)
During
the year ended December 31, 2008, the Company granted no stock
options. During the prior year ended December 31, 2007 the Company
granted 520,000 stock options to officers and directors, and granted 25,000
stock options to non-employees. Accordingly, stock-based compensation expense of
$19,891 was recognized in the Statement of Operations at December 31,
2007. The Black-Scholes option pricing model was used to calculate to
estimate fair value of the options granted. The following assumptions
were made: risk-free rate was between 3.15% and 4.98%; expected life of the
options was 3 years; expected volatility of stock for the three year options was
between 213.7% and 237%, respectively.
NOTE 3 - INCOME
TAXES
As of December 31, 2008, the Company
had a net operating loss carry forward for income tax reporting purposes of
approximately $17,508,849 that may be offset against future taxable income
through 2028. Current tax laws limit the amount of loss available to
be offset against future taxable income when a substantial change in ownership
occurs. Therefore, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the
financial statements, because the Company believes there is a 50% or greater
chance the carry-forwards will expire unused. Accordingly, the
potential tax benefits of the loss carry-forwards are offset by a valuation
allowance of the same amount.
|
2008
|
2007
|
|||||||
|
Net
Operating Losses
|
$ | 2,608,279 | $ | 2,622,667 | ||||
|
Valuation
Allowance
|
(2,608,279 | ) | (2,622,667 | ) | ||||
| $ | - | $ | - | |||||
The provision for income taxes differs
from the amount computed using the federal US statutory income tax rate as
follows:
|
2008
|
2007
|
|||||||
|
Provision
(Benefit) at US Statutory Rate
|
$ | (14,388 | ) | $ | (237,569 | ) | ||
|
Increase
(Decrease) in Valuation Allowance
|
14,388 | (237,569 | ) | |||||
| $ | - | $ | - | |||||
F-18
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES
(continued)
The Company evaluates its valuation
allowance requirements based on projected future operations. When
circumstances change and causes a change in management's judgment about the
recoverability of deferred tax assets, the impact of the change on the valuation
is reflected in current income.
NOTE 4 - LEASE
COMMITMENT
During the month of June, 2007, the
Company terminated a month to month lease of approximately 700 square feet of
office space from Poulton & Associates. The rent payments, under
the terms of the terminated lease were approximately $800 per
month.
During the period starting July, 2007
and ending December 2008, the Company was located in a facility of approximately
1,000 square feet, provided at no charge by a board member.
During the month of January, 2009, the
Company began a month to month lease of approximately 800 square feet of office
space from Eagle Mortgage. The rent payments, under the terms of the
lease are $400 per month.
NOTE 5 - RESEARCH AND
DEVELOPMENT
Research and development of the
Klever-Kart System began with the sole purpose of reducing thefts of shopping
carts. A voice-activated alarm system was envisioned. As
time and technology progressed, the present embodiment of the Klever-Kart System
evolved into a "product specific" point-of-purchase advertising system
consisting of an easily readable electronic display that attaches to any
shopping cart, a shelf mounted message sending unit that automatically sends
featured products' ad-message to the display and a host computer using
proprietary software.
During the year ended December 31, 2008
and 2007, the Company expended $0 and $0 respectively for research and
development of the technology involved with its patents.
F-19
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 6- RELATED PARTY
TRANSACTIONS
Olson
Holdings, Inc. loans to the Company
Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson Holdings. As of
January 9, 2009, Mr. Mills resigned as a board member with an effective date of
December 31, 2008 and is now longer considered a related
party. Olson Holdings, Inc. made a $150,000 unsecured
loan to the Company on February 26, 2001. This note has a six-month
term at 10% annual interest maturing on August 26, 2001. The maker of
the note may give written notice within 10-days of maturity, to the Company, to
convert the principal and interest into common stock with a convertible price of
$1.05 (10-day weighted average from February 26, 2001 and the nine days
prior).
Olson Holdings made an unsecured loan
to the Company on January 7, 2002 for $1,836. This note has an annual
interest rate of 8% and matures on January 7, 2004. An option was
granted in connection with this note for 3,060 shares at a strike price of $1.00
and an expiration date of January 7, 2005.
On September 30, 2007, the principal
balance due on the loans of $151,836 was converted to 607,343 shares of common
restricted stock at $.25 per share and the accrued interest totaling $139,551
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
Olson
Foundation loans to the Company
Michael Mills, a board member as of
December 31, 2008, previously served as an officer of Olson
Foundation. As of January 9, 2009, Mr. Mills resigned as a board
member with an effective date of December 31, 2008 and is no longer considered a
related party. Olson Foundation loaned the Company $60,000 on July 16, 2001, of
which is secured by a blanket lien on the assets of the Company. An
interest rate of 10% compounded monthly applies until January 15,
2002. Principal and all due and unpaid interest are to be paid on
January 16, 2002, or the interest rate increases to 15% compounded
daily. Warrants were issued in conjunction with this loan for 18,182
common shares at a strike price of $0.01 and an expiration date of July 16,
2006. This note is convertible to Class C convertible preferred shares or to
Class D convertible preferred shares at the option of the note
holder.
Olson Foundation loaned the Company
$90,000 on July 30, 2001, of which is secured by a blanket lien on the assets of
the Company. An interest rate of 10% compounded monthly applies until
January 30, 2002. Principal and all due and unpaid interest are to be
paid on January 30, 2002, or the interest rate increases to 15% compounded
daily. Warrants were issued in conjunction with this loan for 27,273
common shares at a strike price of $0.01 and an expiration date of
July 30, 2006. This note is convertible to Class C convertible preferred shares
or to Class D convertible preferred shares at the option of the note holder.
F-20
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 6- RELATED PARTY
TRANSACTIONS (continued)
Olson Foundation made unsecured loans
to the Company on May 3, 2002, August 16, 2002, and October 29, 2002 for $7,359,
$10,000, and $1,059, respectively. These notes are payable within two
years plus interest at 8% per annum. In conjunction with the notes, Olson
Foundation also received common stock options for each note at a ratio of 1.667
common shares for each dollar loaned.
On September 30, 2007, the principal
balance due on the loans of $168,418 was converted to 673,673 shares of common
restricted stock at $.25 per share and the accrued interest totaling $220,375
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
Presidio
Investments, LLC loan to the Company
Presidio InvestmentsLLC, a preferred
shareholder, has loaned the Company $1,000,000, which loan is secured by a
blanket lien on the assets of the Company. The sole trustee of
Presidio Investments, LLC is William J. Howard, trustee of the Olson Legacy
Trust, whose residual beneficiary is the Olson Foundation. The Olson
Foundation, defined as a related party, was the guarantor for funds borrowed
from Northern Trust Bank which funds were used to make the loan to the Company.
This note was amended on March 22, 2001 with an additional $500,000 loaned to
the Company between January 1, 2001 and March 22, 2001. An Interest
rate of 8% applies until March 31, 2001 and increases to 10% on April 1,
2001. Principal and all due and unpaid interest are to be paid on
October 1, 2001. This note is convertible to Class C convertible
preferred shares at the option of the note holder.
On September 30, 2007, the principal
balance due on the loans of $1,500,000 was converted to 6,000,000 shares of
common restricted stock at $.25 per share and the accrued interest totaling
$1,483,019 was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
On December 31, 2008, the preferred
shares held by Presidio Investments were sold to a private investment group and
Presidio Investments is no longer considered a related party.
F-21
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 6- RELATED PARTY
TRANSACTIONS (continued)
The Seabury Group, a preferred
shareholder, loaned the Company $190,000 on August 22, 2001, of which is secured
by a blanket lien on the assets of the Company. An interest rate of
10% compounded monthly applies until February 22, 2002. Principal and
all due and unpaid interest are to be paid on February 22, 2002, or the interest
rate increases to 15% compounded daily. Warrants were issued in
conjunction with this loan for 57,576 common shares at a strike price of $0.01
and an expiration date of August 22, 2006. This note is convertible
to Class C convertible preferred shares or to Class D convertible preferred
shares at the option of the note holder.
On September 30, 2007, the principal
balance due on the loans of $150,000 was converted to 1,000,000 shares of common
restricted stock at $.25 per share and the accrued interest totaling $348,000
was forgiven and included in extraordinary gain from troubled debt
restructuring. At December 31, 2008 and 2007, the total amount due on
these notes was $0 and $0.
On December 31, 2008, the preferred
shares held by Seabury Investments were sold to a private investment group and
Seabury Investments is no longer considered a related party.
Arbinger
Loans to the Company
D Paul Smith previously served on the
Board of Directors of the Company and is also an officer and shareholder in the
Arbinger Institute. Mr. Smith is no longer considered a related party since his
resignation as the board of director in 2008. The Arbinger Institute has made
$41,893 in loans to the Company. As part of a restructure process,
the accrued interest of $14,749 was converted to 58,996 shares of common
restricted shares at the rate of .25 cents per share. The
68,467 associated options have expired.
At December 31, 2008 and 2007, the
total amount due on these loans is $41,893 and $41,893,
respectively.
Director
and Officer Loans to the Company
During the year ended December 31,
2006, two former officers and directors loaned the Company
$16,500. The loans are due on demand and carry an interest rate of 8%
per annum. On September 30, 2007, $776 of interest was converted to
3,105 common restricted stock at $.25 per share. At December 31, 2008
and 2007, the total due on these loans was $17,797 and $17,797,
respectively. Due to their resignation they are no longer considered
as related parties in 2008.
F-22
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 7- LINE OF
CREDIT
During the year ended December 31,
2006, a former officer and director established, in his name, a credit card line
of credit and authorized the Company to use this card for Company purchases and
overdraft protection. The total line of credit is $25,000 dollars.
Under terms of the card agreement, interest is charged at 9% for purchases,
21.99% for cash advances and 21.99% for overdrafts. At December 31,
2008 and 2007, the total due on this credit card was $20,423 and $23,023,
respectively.
NOTE 8 - NOTES
PAYABLE
During 2002, the Company received loans
of $45,000 from third parties. The loans are demand loans and carry
an interest rate of 8% per annum. At December 31, 2008 and 2007, the
total amount of principal and accrued interest are presented below:
|
2008
|
2007
|
|||||||
|
Principal
|
$ | 45,000 | $ | 45,000 | ||||
|
Accrued
Interest
|
31,336 | 24,124 | ||||||
|
Total
|
$ | 76,336 | $ | 69,124 | ||||
NOTE 9 - STOCK
OPTIONS
The shareholders approved, by a
majority vote, the adoption of the 1998 Stock Incentive Plan (the
“Plan”). As amended on August 11, 2003, the Plan reserves 20,000,000
shares of common stock for issuance upon the exercise of options which may be
granted from time-to-time to officers, directors and certain employees and
consultants of the Company or its subsidiaries. The Plan permits the
award of both qualified and non-qualified incentive stock options. On
August 18, 2003, the Company registered its “Amended Stock Incentive Plan of
Klever Marketing, Inc.” on Form S-8.
As of December 31, 2008, 748,800
options were outstanding. The Company granted no options in 2008. The Company
granted 545,000 options during 2007, of which 545,000 expire in three
years. Compensation expense charged to operations for the twelve
months ended December 31, 2007 is 19,891.
The following table sets forth the
options and warrants outstanding as of December 31, 2008 and 2007.
F-23
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS
(continued)
|
Weighted
|
||||||||||||
|
Option
/
|
Average
|
Weighted
|
||||||||||
|
Warrants
|
Exercise
|
Average
|
||||||||||
|
Shares
|
Price
|
Fair
Value
|
||||||||||
|
Options
& warrants outstanding,
|
||||||||||||
|
December
31, 2006
|
5,070,388 | $ | 0.18 | $ | .03 | |||||||
|
Granted,
Exercise price more than fair value
|
545,000 | $ | 0.75 | $ | .03 | |||||||
|
Granted,
Exercise price less than fair value
|
- | - | - | |||||||||
|
Expired
|
4,820,588 | $ | .13 | $ | .03 | |||||||
|
Exercised
|
- | - | - | |||||||||
|
Options
& warrants outstanding,
|
||||||||||||
|
December
31, 2007
|
794,800 | $ | 0.75 | $ | .03 | |||||||
|
Weighted
|
||||||||||||
|
Option
/
|
Average
|
Weighted
|
||||||||||
|
Warrants
|
Exercise
|
Average
|
||||||||||
|
Shares
|
Price
|
Fair
Value
|
||||||||||
|
Options
& warrants outstanding,
|
||||||||||||
|
December
31, 2007
|
794,800 | $ | 0.75 | $ | .03 | |||||||
|
Granted,
Exercise price more than fair value
|
- | - | - | |||||||||
|
Granted,
Exercise price less than fair value
|
- | - | - | |||||||||
|
Expired
|
46,000 | $ | 0.75 | $ | .03 | |||||||
|
Exercised
|
- | - | - | |||||||||
|
Options
& warrants outstanding,
|
||||||||||||
|
December
31, 2008
|
748,800 | $ | 0.75 | $ | .03 | |||||||
F-24
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS
(continued)
|
Weighted-
|
Weighted-
|
|||||||||||||||||||||
|
Weighted-
|
Shares/
|
Average
|
Average
|
|||||||||||||||||||
|
Shares
/
|
Average
|
Warrants
|
Exercise
Price
|
Contractual
|
||||||||||||||||||
|
Exercise
|
Warrants
|
Exercise
|
Currently
|
Currently
|
Remaining
|
|||||||||||||||||
|
Price
Range
|
Outstanding
|
Price
|
Exercisable
|
Exercisable
|
Life
(months)
|
|||||||||||||||||
| 0.10 | 25,000 | 0.10 | 25,000 | 0.10 | 8 | |||||||||||||||||
| 0.50 | 391,900 | 0.50 | 391,900 | 0.50 | 14 | |||||||||||||||||
| 1.00 | 331,900 | 1.00 | 331,900 | 1.00 | 14 | |||||||||||||||||
| 748,800 | 0.71 | 748,800 | 0.71 | |||||||||||||||||||
NOTE 10 - PREFERRED
STOCK
On February 7, 2000 the Board of
Directors authorized and established “Class A Voting Preferred Stock” (“Class A
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock. Class A Shares consisted of 1,000,000, 125,000
shares thereof were designated as Series 1 shares. On May 20, 2002,
the Board of Directors amended the number of authorized shares of Class A voting
preferred stock to 55,000 shares.
Class A Shares are convertible into
Common Stock at an initial conversion price of $2.60 (subject to
adjustment).
Holders of Class A Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Company out of any funds at the time legally available therefore dividends at
the rate of $2.20 per share per annum, payable semi-annually on the first day of
January and July of each year. Such dividends shall accrue on each
such share from the date of its original issuance and shall accrue from day to
day, whether or not earned or declared. Such dividend shall be
cumulative and may be paid in cash or in kind through the distribution of .0425
Class A Shares, Series 1, for each outstanding Class A Share, on each dividend
payment date. In addition, each
holder of Class A Shares shall be entitled to receive, when and as declared, a
dividend equal to each dividend declared and paid on the shares of Common Stock,
on a share for share basis. If there is a split or dividend on the
Common Stock, then the Class A Share dividends shall be adjusted as if a similar
split or dividend had occurred with respect to the Class A Shares.
F-25
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
(continued)
Class A Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class A Shares could
then be converted, and shall have voting rights and powers equal to that of a
holder of Common Stock. The Holders of Class A Shares shall vote with
the holders of Common Stock and not as a separate class.
Class A Shares carry a liquidation
preference of $26 per share plus any accrued but unpaid dividends on such
shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
The Class A Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after July 1, 2002. The
redemption price shall be $26 per share together with accrued but unpaid
dividends on such shares, if any.
On September 24, 2000 the Board of
Directors authorized and established “Class B Voting Preferred Stock” (“Class B
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock. Class B Shares consisted of 250,000, 125,000 shares
thereof were designated as Series 1 shares. On May 20, 2002, the
Board of Directors amended the number of authorized shares of Class B voting
preferred stock to 42,000 shares.
Class B Shares
are convertible into Common Stock at an initial conversion price of $1.70
(subject to adjustment).
F-26
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
(continued)
Holders of Class B Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Corporation out of any funds at the time legally available therefore dividends
at the rate of the Original Issue Price divided by 11.8181818 per share per
annum, payable semi-annually on the first day of January and July of each
year. Such dividends shall accrue on each such share from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared. Such dividends shall be cumulative and may be paid in cash
or in kind through the distribution of .0425 Class B Shares, of the same Series
for which the dividend is accrued, for each outstanding Class B Share, on each
dividend payment date; provided, that if such dividends in respect of any period
shall not have been paid or declared and set apart for payment for all
outstanding Class B Shares by each payment date, then until all unpaid dividends
thereon shall be paid or set apart for payment to the holders of such shares,
the Corporation may not pay, declare or set apart any dividend or other
distribution on its shares of Common Stock or other shares junior to the Class B
Shares, nor may any other distributions, redemptions or other payments be made
with respect to the shares of Common Stock or other junior shares. In
addition to the foregoing, each holder of a Class B Share shall be entitled to
receive, when and as declared, a dividend equal to each dividend declared and
paid on the shares of Common Stock, on a share for share basis, so the holders
of the Class B Shares shall be entitled to participate equally on a share for
share basis with the holders of the shares of Common Stock. If there
is a share split or dividend on the Common Stock, then the Class B Share
dividends shall be adjusted as if a similar split or dividend had occurred with
respect to the Class B Shares.
Class B Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class B Shares could
then be converted and shall have voting rights and powers equal to the voting
rights and powers of a holder of shares of Common Stock. The holders of Class B
Shares shall vote with the holders of shares of Common Stock and not as a
separate class.
F-27
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
(continued)
Class B Shares shall carry a
liquidation preference of $17 per share plus any accrued but unpaid dividends on
such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
The Class B Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after March 24, 2004 for
Series 1, and such date as determined by the Board of Directors for each
additional Series. The redemption price shall be $17.00 per share
together with accrued but unpaid dividends on such shares, if any.
On January 2, 2001 the Board of
Directors authorized and established “Class C Voting Preferred Stock” (“Class C
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock. Class C Shares consisted of 500,000, 125,000 shares
thereof were designated as Series 1 shares and 125,000 shares thereof were
designated as Series 2 shares. On May 20, 2002, the Board of
Directors amended the number of authorized shares of Class C voting preferred
stock to 150,000 shares.
Class C Shares are convertible into
Common Stock at an initial conversion price of $.66 (subject to
adjustment).
Holders of Class C Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Corporation out of any funds at the time legally available therefore dividends
at the rate of the Original Issue Price divided by 11.8181818 per share per
annum, payable semi-annually on the first day of January and July of each
year. Such dividends shall accrue on each such share from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared. Such dividends shall be cumulative and may be paid in cash
or in kind through the distribution of .0425 Class C Shares, of the same Series
for which the dividend is accrued, for each outstanding Class C Share, on each
dividend payment date; provided, that if such dividends in respect of any period
shall not have been paid or declared and set apart for payment for all
outstanding Class C Shares by each payment date, then until all unpaid dividends
thereon shall be paid or set apart for payment to the holders of such shares,
the Corporation may not pay, declare or set apart any dividend or other
distribution on its shares of Common Stock or other shares junior to the Class C
Shares, nor may any other distributions, redemptions or other payments be made
with respect to the shares of Common Stock or other junior shares. In
addition to the foregoing, each holder of a Class C Share shall be entitled to
receive, when and as declared, a dividend equal to each dividend declared and
paid on the shares of Common Stock, on a share for share basis, so the holders
of the Class C Shares shall be entitled to participate equally on a share for
share basis with the holders of the shares of Common Stock. If there
is a share split or dividend on the Common Stock, then the Class C Share
dividends shall be adjusted as if a similar split or dividend had occurred with
respect to the Class C Shares.
F-28
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
(continued)
Class C Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class C Shares could
then be converted and shall have voting rights and powers equal to the voting
rights and powers of a holder of shares of Common Stock. The holders of Class C
Shares shall vote with the holders of shares of Common Stock and not as a
separate class.
Class C Shares shall carry a
liquidation preference of $6.60 per share plus any accrued but unpaid dividends
on such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
The Class C Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after July 2, 2004 for
Series 1, and such date as determined by the Board of Directors for each
additional Series. The redemption price shall be $6.60 per share
together with accrued but unpaid dividends on such shares, if any.
On May 20, 2002, the Board of Directors
authorized and established “Class D Voting Preferred Stock” (“Class D
Shares”) as a class of its $.01 par value, 2,000,000 shares authorized,
preferred stock. Class D Shares consist of 500,000 shares thereof are
designated as “Class D Voting Preferred Stock” (the “Class D
Shares”).
Class D Shares are convertible into
Common Stock at an initial conversion price of $1.05
(subject
to adjustment).
Holders of Class D Shares shall be
entitled to receive when and as declared by the Board of Directors of the
Corporation out of any funds at the time legally available therefore dividends
at the rate of the Original Issue Price divided by 11.8181818 per share per
annum, payable semi-annually on the first day of January and July of each
year. Such dividends shall accrue on each such share from the date of
its original issuance and shall accrue from day to day, whether or not earned or
declared. Such dividends shall be cumulative and may be paid in cash
or in kind through the distribution of .0425 Class D Shares for each outstanding
Class D Share, on each dividend payment date; provided, that if such dividends
in respect of any period shall not have been paid or declared and set apart for
payment for all outstanding Class D Shares by each payment date, then until all
unpaid dividends thereon shall be paid or set apart for payment to the holders
of such shares, the Corporation may not pay, declare or set apart any dividend
or other distribution on its shares of Common Stock or other shares junior to
the Class D Shares, nor may any other distributions, redemptions or other
payments be made with respect to the shares of Common Stock or other junior
shares. In addition to the foregoing, each holder of a Class D Share
shall be entitled to receive, when and as declared, a dividend equal to each
dividend declared and paid on the shares of Common Stock, on a share for share
basis, so the holders of the Class D
Shares shall be entitled to participate equally on a share for share basis with
the holders of the shares of Common Stock. If there is a share split
or dividend on the Common Stock, then the Class
D Share dividends shall be adjusted as if a similar split or dividend had
occurred with respect to the Class D Shares.
F-29
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
(continued)
Class D Shareholders shall be entitled
to one vote for each share of Common Stock into which such Class D Shares could
then be converted and shall have voting rights and powers equal to the voting
rights and powers of a holder of shares of Common Stock. The holders of Class D
Shares shall vote with the holders of shares of Common Stock and not as a
separate class.
Class D Shares shall carry a
liquidation preference of $10.50 per share plus any accrued but unpaid dividends
on such shares, if any, and adjusted for combinations, splits, dividends or
distributions of shares of stock with respect to such shares.
The Class D Shares shall be redeemable
by the Company, in whole or in part, at the option of the Board of Directors of
the Company, at any time and from time to time on or after May 14,
2007. The redemption price shall be $10.50 per share together with
accrued but unpaid dividends on such shares, if any.
NOTE 11 -
LITIGATION
On
October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC. filed against the
Company in the Third Judicial District Court of Utah. The legal
action was permitted under the provision of the Utah Foreign Judgment Act and
allowed a judgment, previously rendered against the Company by the Superior
Court of California, in and for the County of San Francisco Jurisdiction, to be
filed in the state of Utah. The judgment was in relation to a consulting
agreement between eiKart, LLC. and the Company. This judgment was included in
the financial statements as part of accrued liabilities at December 31, 2006. In
June 2007, this litigation was settled in full out-of court by a cash payment of
$10,000 and the remainder of the liability of $80,448 was included in the
statement of operations as extraordinary income for the period ending December
31, 2007.
On December 12, 2005 Klever Marketing
was summoned, and a complaint was filed in the Third District Court of the State
of Utah, by Dennis Shepard, one of the partners of S&C
Medical. The complaint contested Klever Marketing’s cancellation of
an attempted deal with S&C medical in December of 2001. On
January 13, 2006, Klever Marketing answered their complaint
and filed a counter claim against S&C Medical. During 2008, this
litigation was settled out-of court, resulting in a favorable disposition of the
claim sought, and full and complete resolution in this matter, also resulting in
the return of 992,100 shares of common stock to the Company’s
treasury. These shares were subsequently
cancelled.
F-30
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 11 – LITIGATION
(continued)
During
2006, Arthur Portugal, a former officer of the Company, filed a formal claim
asserted for approximately $125,000 for past due executive compensation
including stock options. Mr. Portugal previously filed a formal
administrative wage claim in California which is inactive and no longer
pending. As of December 31, 2008, the Company has accrued
compensation of $96,700 for Mr. Portugal as part of his employment agreement
through June 30, 2006. The Company also has accrued notes payable of
$11,374 due to Mr. Portugal.
In
addition to the claim for Arthur Portugal, there are other claims for unpaid
salary and benefits due to former officers and employees that exist on the
balance sheet as accrued liabilities, Management has either completed
or is in the process of negotiating with a number of these claimants in order to
conclude agreements that would allow these liabilities to be settled in the form
of payment by cash, stock and stock options. As of December 31, 2008,
the total amount of claims for accrued but unpaid salary and benefits is
$456,312
F-31
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 12 - STOCK
TRANSACTIONS
On
February 20, 2007, the company issued 200,000 shares of commons stock for cash
of $50,000. The shares were valued at $.25 per share.
On March 6, 2007 the company issued
40,000 shares of commons stock for cash of $10,000. The shares were valued at
$.25 per share.
On April
9, 2007, the company received 992,100 shares of common stock as the result of
litigation settlement. The shares were returned to treasury and
cancelled.
On April 16, 2007, the Company issued
200,000 shares of common stock for cash of $50,000. The shares were
valued at $.25 per share.
On June 1, 2007, the Company issued
60,000 shares of common stock for cash of $15,000. The shares were
valued at $.25 per share.
On June 1, 2007, the Company issued
40,000 shares of common stock for cash of $10,000. The shares were
valued at $.25 per share.
On June
28, 2007, the Company issued 120,000 shares of common stock for cash of
$30,000. The shares were valued at $.25 per share.
On June 30, 2007, the Company issued
34,764 shares of common stock for payment of service in the amount of
$8,691. The shares were valued at $.25 per share.
On July
24, 2007, the Company issued 20,000 shares of common stock for cash of $5,000.
The shares were valued at $.25 per share.
On July 25, 2007, the Company issued
20,000 shares of common stock for cash of $5,000. The shares were
valued at $.25 per share.
On July 26, 2007, the Company issued
20,000 shares of common stock for cash of $5,000. The shares were valued at $.25
per share.
On July 31, 2007, the Company issued
20,000 shares of common stock for cash of $5,000. The shares were
valued at $.25 per share.
On August 3, 2007, the Company issued
50,000 shares of common stock for cash of $12,500. The shares were valued at
$.25 per share.
F-32
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 12 - STOCK TRANSACTIONS
(continued)
On August 31, 2007, the Company
authorized issuance of 150,000 shares of common stock for services rendered in
the amount of $5,000. The shares were valued at $.03 per
share. At December 31, 2007, these had not been issued.
On September 28, 2007, the Company
issued 180,000 shares of common stock for cash of $45,000. The shares were
valued at $.25 per share.
On
September 30, 2007, the company issued 150,000 shares of commons stock for
services rendered in the amount of $7,500. The shares were valued at
$.05 per share. At December 31, 2007, these shares had not been
issued.
On September 30, 2007, the Company
issued the following shares of common stock: 8,281,016 shares for notes payable
of $2,070,254; 62,101 shares for accrued interest of $15,525; 33,224 shares for
accounts payable of $8,306. The shares were valued at $.25 per
share.
On
October 31, 2007, the Company authorized issuance of 150,000 shares of common
stock for services rendered in the amount of $5,000. The shares were
valued at $.03 per share. At December 31, 2007, these had not been
issued.
On December 7, 2007, 6,594,566 shares
of common stock were returned to the Company and held as treasury
stock. On the same date, 1,424,566 of these shares were
cancelled.
On December 7, 2007, the Company issued
120,000 shares of common stock for cash of $30,000. The shares were
valued at $.25 per share.
On
January 15, 2008, the Company issued 44,000 shares of common stock for cash of
11,000 dollars. The shares were valued at $.25 per share. This
transaction was recorded in 2007.
On
December 16, 2008, 5,170,000 shares of common stock were returned to the Company
and were cancelled.
On
December 22, 2008, the Company issued 100,000 shares of common stock for cash of
$5,000. The shares were valued at $.05 per share.
On
December 29, 2008, the Company issued 140,000 shares of common stock for cash of
$7,000. The shares were valued at $.05 per share.
On
December 31, 2008, the Company recorded a stock subscription receivable of
$23,000 for the issue of 460,000 shares of common stock. The shares
were valued at $.05 per share.
F-33
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 13 - LICENSE
AGREEMENT
On May 11, 2004, Media Cart, Inc.
acquired from the Company a limited exclusive license to use the Company’s
United States patent portfolio for electronic display devices specific to Media
Cart’s product design. Under the license agreement, Media Cart paid
the Company $200,000 and will pay ongoing royalties for all Media Cart products
that utilize the Company’s licensed technology.
On February 15, 2005 ModStream Digital
Messaging Products, LLC acquired from the Company limited non-exclusive
licensees to use the Company's United States patent portfolio for electronic
display devices specific to ModStreams product design. This product design is
limited to a 80 character dot-matrix LCD-type screen with limited alerts, and
does not include full motion video or product scanning. Under the
license agreement, ModStream paid the Company $150,000 and will pay ongoing
royalties for all ModStream products that utilize the specific components of the
Company's licensed technology.
NOTE 14 - SALE OF
PATENTS
On August 27, 2004, the Company sold
all of its international patents for $350,000. The international
patents comprised approximately 69% of the total patents the Company
owned. At December 31, 2008 and 2007, the Company was owed $0 and
$25,000, respectively, relating to this sale.
NOTE 15 - UNCERTAIN TAX
POSITIONS
Effective January 1, 2007, the company
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”
(“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to
be recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The adoption of the provisions of FIN 48 did
not have a material impact on the company’s condensed consolidated financial
position and results of operations. At January 1, 2007, the company had no
liability for unrecognized tax benefits and no accrual for the payment of
related interest.
F-34
KLEVER
MARKETING, INC.
(a
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
NOTE 15 - UNCERTAIN TAX
POSITIONS (continued)
Interest costs related to unrecognized
tax benefits are classified as “Interest expense, net” in the accompanying
consolidated statements of operations. Penalties, if any, would be recognized as
a component of “Selling, general and administrative expenses”. The Company
recognized $0 of interest expense related to unrecognized tax benefits for the
year ended December 31, 2008. In many cases the company’s uncertain
tax positions are related to tax years that remain subject to examination by
relevant tax authorities. With few exceptions, the company is generally no
longer subject to U.S. federal, state, local or non-U.S. income tax examinations
by tax authorities for years before 2003. The following describes the open tax
years, by major tax jurisdiction, as of December 31, 2008:
|
United
States (a)
|
2004
- Present
|
|
(a)
Includes federal as well as state or similar local jurisdictions, as
applicable.
|
F-35