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EX-32.2 - EXHIBIT 32.2 - DarkPulse, Inc.kmi0910kx32_2.htm
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EX-32.1 - EXHIBIT 32.1 - DarkPulse, Inc.kmi0910kx32_1.htm
EX-31.2 - EXHIBIT 31.2 - DarkPulse, Inc.kmi0910kx31_2.htm
U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-K

(Mark One)
 [X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Fiscal Year Ended:  December 31, 2009

or

 [  ]       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 incorporation or organization    (I.R.S. Employer Identification No.)
 
 
2469 E Ft Union Blvd, No. 214, 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 revenues for its most recent fiscal year.  There were no revenues for fiscal year 2009.

As of December 31, 2009, there were 43,590,130 (1 vote per share) Common and 287,595 Convertible Preferred, for a preferred (converted to common) and common share total of 43,877,725. 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 $825,000 computed at the last closing price as of December 28, 2009.  The number of common shares held by non-affiliates of the Registrant totals approximately 16,500,000 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
 
   
4
   
6
   
6
   
7
   
   
 
   
7
   
9
   
11
   
12
   
12
   
 
   
13
   
15
   
16
   
17
   
18
   
20
   
 

 
 
3

 


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 has successfully conducted two in-store demonstrations of its technology – the latest being in 2009 with the release of the Giving Cart and its Retailer Chime-Time Awards Program.  The Company is seeking to become the industry leader in Targeted Digital Media at the Shopper’s Point of Selection™ and is seeking additional capital to roll out its product in a major supermarket chain.


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 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.  Fujitsu paid the Company $25,000 related to the sale of its international Patents and Patent work done by the Company on Fujitsu’s behalf.  Importantly post-Fujitsu through 2008, the Company pursued alternative deployment approaches; continued efforts to protect the Patents against potential infringement; and explored opportunities to deploy its product with interested retailers.


 
4

 
2009 Restructure and Product Development

During 2009, The Company made a number of significant structural changes, followed by a successful rollout and demonstration of an updated product – all accompanied by continued strengthening of its patent portfolio.

The prior board of directors resigned on December 31, 2008 and a new, revitalized board of directors was installed in January, 2009, with the plan to rapidly develop a technically improved, significantly lower cost wireless shopping cart unit and expedite moving forward into production and installation with a major retailer chain.  This upgraded unit was designated the Giving Cart™ with its Retailer Chime Time ™ Rewards Program, where retailers incentivize consumers with hourly merchandise rewards announced on the shopping cart unit as a way of “giving back” during the troubled economic times.

The Company founder, Paul G. Begum, was reinstated on the Board and is the current operating CEO.  Under the returning chairman’s guidance, significant improvements to the balance sheet were achieved.  Outstanding debt was reduced from $5.8 million to less than $450 thousand.  Settlements were reached with 12 of 14 creditors.  Financing was obtained for an updated wireless portable shopping cart unit taking advantage of improved technologies available since the last product release.  This unit was produced at a significantly lower cost by taking advantage of hardware technology unavailable in the previous unit, and by programming improvements utilizing current web-based technology.  Significant software improvements in communications between the server and the unit were also achieved, allowing rapid and efficient data updates to improve the effectiveness of advertising programs – a significant source of potential future revenues.

The Company achieved a rapid 6-month product development, and the pilot store was installed in August, followed by a successful 3-month product demonstration at The Market in Park City, Utah.  The Park City demonstration was successful and achieved the technical and marketing objectives of the Company.  The units received advertising messages in the desired aisle locations, allowing Point-of-Selection™ decisions to be made.  All the recipe and store directory functions performed correctly using direct web and wifi feed-ins.  The kiosk successfully stored and delivered the units to Customers.  And the customer and store owner feedback was quite positive.  For this product release, the Company made arrangements with Time Domain to provide their location hardware and software free of cost through the demonstration period.  Their Ultra Wide Band technology performed well and was successfully integrated into the Giving Cart System.
 
During the 3rd quarter, the Company was successful in regaining qualification on the Electronic Bulletin Board (EBB).  This listing is expected to be beneficial to the Company as it seeks additional capital and growth since now institutional investors can invest and purchase stock in the Company.  Along with this move the Company has recapitalized the number of common shares from 50 million to 250 million shares in accordance with majority shareholder consent.
 
 
 
5

 
 
The Company hired a new accounting firm, Stayner Bates & Jensen P.C. CPA, to be responsible for preliminary preparation of our 10-Q and 10-K forms for delivery to Company auditors.  And an independent audit committee has been appointed to comply with Sarbanes-Oxley (SOX) regulations.  The audit committee consists of Mr. Paul Smith, CPA and Donald Pickett, CPA.  The company also executed an agreement with a Wall Street investment relations firm to provide professional relations on the Company’s financial relations.
 
To continue to protect the Company’s patent rights, our patent attorneys have filed additional trademarks and are concluding the filing for a comprehensive new “wrap around” patents.
 
The Line of Credit with Wells Fargo of $20,423 was paid in full in 2009.

 

The Company currently occupies approximately 1200 square feet of office space.  The lease terms $700 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.
 


Previous legal proceedings have been settled in full and are no longer pending.  Remaining unsettled judgments are as follows:

Mr. Art Portugal had a formal claim asserted for approximately $125,000 for alleged past due executive compensation including stock options.  Klever disputed the claim but has agreed to a settlement of $25,000.  Claimant earlier filed a formal administrative claim in California which is inactive but pending.

Mark and Pam Geiger have asserted wage claims of approximately $75,000 plus interest which the Company believes can be resolved for a lesser amount.  This claim is pending settlement.

Danny Warner has a disputed wage claim, which our attorney has been advised may no longer be active.  We are unaware of the amount of this claim.


 
6

 

 
VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of shareholders during 2009.



RELATED STOCKHOLDER MATTERS


The stock is traded on the Electronic Bulletin Board with the trading symbol KLMK.  The Company has 250 million authorized common shares.


The following table sets 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 Wilson Davis & Company and reflects the highest and lowest closing prices during each quarter.

2009:
 
High
   
Low
 
First Quarter
  $ 0.03     $ 0.01  
Second Quarter
  $ 0.13     $ 0.05  
Third Quarter
  $ 0.11       0,05  
Fourth Quarter
  $ 0.10     $ 0.02  
   
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  
   

 The number of shareholders of record of the Company's common stock as of December 31, 2009 was approximately 864.

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.
 
 
 
7

 
Recent Sales of Unregistered Securities.


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.

From April 1, thru December 1, 2009, PSF Inc. purchased 1,036,665 shares of common stock for cash of $311,000.  The shares were valued at $0.30 per share.

On December 15, 2009, Scott Affrine purchased 250,000 shares of common stock for cash of $75,000.  The shares were valued at $.30 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.



 
8

 

Beneficial Ownership Compliance Reporting

The Company is aware of the following share and option transactions for the reporting period ending December 31, 2009 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
 
                                   
Mike Holmes
 
No
    25000     $ 0.25       6,250      
12/29/09
    1  
                                           
Ray Norris
 
Board
    25,000     $ 0.30       7,500      
1/4/2010
    1  
                                           
Susan Williams1
 
No
    19,427     $ 0.30       5,828      
11/6/09
       
                                           
David Darling1
 
No
    5,000     $ 0.30       1,500      
11/16/09
       
                                           
FTDSP1
 
No
    80,734     $ 0.30       24,220      
11/13/09
       
1 Stock issued in lieu of expense

ANALYSIS OR PLAN OF OPERATIONS
 
The Company is continuing its active operations.  Requirements for Phase 2 expansion of the Giving Cart Unit have been defined to extend the interaction into the retailer’s POS and loyalty card program.  With this capability the next rollout will provide the ability recognize each customer and provide advertisements specific to their buying habits and demographics.  They will also have to ability to scan their purchases avoid rescanning during checkout should the grocer desire that feature.  During this period the Company will seek additional financing to fund Phase 2 operations, and it will be securing a major retailer to install the Giving Cart in a large number of stores.
 
We advise anyone relying upon this report that any statement of earnings by the Company for the calendar year ending 2009 have been obtained partially through the reduction, adjustment or termination of various debt obligations and does not reflect revenues to the Company from operations. The Company is dependent on obtaining additional capital or an operations partner in order to complete its Phase 2 development and 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.
 
 
 
9

 
BUSINESS DEVELOPMENT, NEXT 12 MONTHS
 
During the next twelve months, the plan of the Company is to expand into Phase 2 store operations with a goal of developing both POS and Frequent Shopper Loyalty Card capability into the Giving Cart and kiosk system.  The Company is considering several retailer opportunities in Southern California, Utah and Texas for a showcase store demonstrating the expanded product capabilities during the first half of the year.  The Company requires additional capital to achieve these goals and will be working with its investment banker and other financial investment outlets to secure this financing.  Interim financing will also be sought while major financing is being obtained.
 
At the same time the Company will seek to expand its patent protection with new patents it has been pursuing during 2009 that will wrap around its existing patents.
 
The Company believes the demand for its product and technology remains strong.  There is a high demand for advertisements while the customer is shopping in the store, and the Company is seeking to become the industry leader in “Targeted Digital Media at the Point of Selection.” Major retailers and grocers are looking for ways to remain competitive with large discount retailers by providing additional services, cost savings and technologies, and the Giving Cart system is attractive in all these areas. The services provided will expand with the introduction of Phase 2 and its POS and loyalty program interface along with the ability to order deli products, renew prescriptions and other services while the customer is shopping.
 
Results of Operations - For the year ended December 31, 2009, the Company had a net operating loss of $555,411, due to development, installation and operations expenditures of its new Giving Cart unit and ongoing administrative expenses.   The Company remains in the product development stage, and almost all of the expenditures this year were directed at developing an updated, interactive shopping cart unit, utilizing current technology.  Staff and consultants were hired to design and build the unit and to upgrade the software for delivery over the web.  Funds were also expended to install the upgraded system in the Park City test store and monitor its operations for 3 months.  True General and Administrative expenditures (administrative, rent and insurance) remained low at 4.8% ($21.016) versus 9.1% ($7,205) in 2008.  Sales and Marketing costs were 2.3% ($12,959) versus 0.8% ($675) in 2008.  Both Accounting and Legal costs were reduced in 2009 despite the expanded operations.  Accounting costs in 2009 were $18,150 versus $23,500 in 2008.  Legal costs were $9,069 versus $18,135 in 2008.  The Company officers took no salaries or payments in 2009.  Funding costs were $20,000 in 2009 versus non for 2008.  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.
 
 
 
10

 

Liquidity and Capital Resources – The Company has not received, recorded, or consolidated revenue from ongoing operations for the past two years and has relied on equity transactions and loans to fund development of our business plan.  Our auditors have expressed an opinion that these factors raise substantial doubt as to our ability to continue as a going concern.  Management intends to raise funds through private placement offerings, targeting strategic partners in an effort to increase revenues and expanding revenues through strategic acquisitions.

To fund the development, production and manufacture of an updated shopping cart unit (now designated The Giving Cart) during 2009, the company relied on equity investors who received restricted common stock in exchange for their investment.  The Company received a net total of $437,442 from financing activities in 2009 versus $20,400 in 2008.  PSF, Inc. provided 71% of this funding.  Scott Affrine provided 17% with the remaining 12% divided among smaller investors and vendors who received stock in lieu of cash.

Cash flows.  Operating activities used cash of and $417,252 for 2009 compared with $19,924 for 2008.  The increase in the use of cash is due increased development and installation expenditures.

As a result of equity financing, our consolidated cash position at December 31, 2009, was $21,041, compared with $851 as of December 31, 2008.  We anticipate continuing research and development expenses in future periods as the Company further develops its technologies.  We anticipate hiring additional employees for this development, but this hiring is not planned to occur  prior to obtaining additional capital.  The Company requires working capital principally to expand its operations into a showcase store with a major supermarket chain and to continue 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.  From time to time in the past, required short-term borrowings have been obtained from a principal shareholder or other related entities.

Factors That May Affect Future Results - Management’s Discussion and Analysis contains information based on management’s beliefs and forward-looking statements that involve 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 Company may not obtain the equity funding or short-term borrowings necessary develop Phase 2 of the Giving Cart development.
·  
the Company may not be successful in obtaining a major show case retail store in which to display its upgraded product
·  
the companies expanded technologies may take longer to implement than planned
 

 
 
11

 

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.


ON ACCOUNTING AND FINANCIAL DISCLOSURE


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 Company's Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company.  Additionally, the Board of Directors has formed an Audit Committee comprised of Paul Smith, CPA and Donald Pickett, CPA.  The committee meets annually to determine auditors and scope of the audit, as well as reviews of the 10K and all audited financials to assure the Company remains in compliance with federal regulations and best accounting practices.  However, because the Company is small with a limited number of employees and officers, they are unable to achieve the clear separation of responsibilities that a larger company achieves.  Additionally they don’t have written procedures for management oversight of controls.  The Audit Committee is addressing these issues but is in the early stages.   The Company has no reason to believe there are any accounting lapses or issues, but there clearly isn’t the separation of responsibilities of a larger organization.

The Company has also taken steps to meet its Sarbanes-Oxley (SOX) Section 404 compliance requirements and implement procedures to assure financial reports are prepared in accordance with generally accepted accounting principles (GAAP) and therefore fairly represent the results and condition of the Company.  Contacts have been made with HJ & Associates, LLC of Salt Lake City to implement a compliance program.

(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 CEO, 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 CEO 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.


 
12

 
(b) Changes in Internal Controls

Based on this evaluation as of December 31, 2009, the only change in the Company's internal controls over financial reporting or in any other areas that occurred during the fourth fiscal quarter that could potentially materially affect the Company’s internal control over financial reporting is the resignation of Ray Norris from the Board of Directors and his replacement on the Board by Jerry P. Wright.  The Company believes this change will strengthen its internal controls since Mr. Wright brings a background of successfully managing large organizations with stringent financial requirements.



CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT


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
 Paul Begum  67  Chairman/CEO  Next annual shareholder meeting
 Robert A. Campbell  66  COO and CFO  Next annual shareholder meeting
 Jerry P. Wright  57  Director  Next annual shareholder meeting
   
Paul G. Begum, Founder, age 67 returned to the Board of Directors in February, 2007.  Paul currently serves as Chairman and 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.

Robert A. Campbell age 66 recently retired from Parsons Corporation, a large engineering and program management Company, where he served as senior manager and director of program operations for projects and operations around the world.  He has been responsible for the design and implementation of major software developments and installations.  He has been responsible for finance and controls on multi-billion programs in the United States, Middle East and Asia.  He has broad experience in both managing day-to-day project operations and a portfolio of programs.  Mr. Campbell’s last formal level of education was at the Anderson School of Business at the University of California at Los Angeles where he received his M.B.A. degree in finance.
 
 
13

 

Jerry P. Wright age 57 is former CEO and President of United Potato Growers of Idaho with a broad experience in the food production, packaged goods manufacturing and retail sales industries.  Jerry has been very successful in adding sales growth and profitability to this organization and others that preceded it.  Jerry has demonstrated strong leadership skills along with his successful turnarounds of a number of companies and organizations.  His knowledge of packaged goods manufacturing and retail sales operations bring valuable skills to Klever Marketing.  Jerry has an MBA from Brigham Young University.

Changes to Executive Officers and Directors
 
 Director's   Name   Age   Office  Date of change
 William C. Bailey  72  Chairman  Resigned as of 12/31/08
 John L. Hastings III  45  Interm Pres./CEO  Resigned as of 12/31/08
 Bernadette Suckel  52  Interim COO  Resigned as of 12/31/08
 Criag Poulton  49  Director  Resigned as of 12/31/08
 Michael L. Mills  47  Director  Resigned as of 12/31/08
 Jeremiah Cox  36  CFO  Resigned as of 12/31/08
 
Audit Committee  
As of December 31, 2009, the Company had one active board committee, the Audit and Compliance Committee.  D. Paul Smith, CPA and Donald Pickett, CPA serve on this committee.  The committee meets annually to determine auditors and scope of the audit, as well as reviews of the 10K 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."
 
 
 
14

 
Summary Compensation

As shown in the following table, no executive or officer compensation was made during 2009, nor were any of these officers or directors compensated in 2007 or 2008.  Officers and directors receiving compensation from the Company prior to 2009 are no longer with the Company.
 
(a)   (b)    (c)     (d)     (e)     (f)     (g)     (h)     (i)  
 Name and Principal Position   Year Ended Dec. 31    Salary ($)     Bonus ($)     Other Annual Compensation ($)     Restricted Stock Award(s) ($)     Securities Underlying Options/SAR's (no.)     LTIP Payouts     All Other Compensation  
                                               
 Paul G. Begum   2009    $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  
                                                             
 Robert A. Campbell   2009    $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

 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, 2009, to the chief executive officer, chief financial officer, and directors of the Company.  As shown, no grants or options were exercised.

 Name  
 Shares Acquired
on exercise
     Value Realized ($)    
 Number of Securities Underlying
Unexercised Options
   
Value of Unexercised
in-the-money options ($)
 
               
Exercisable
   
Unexercisable
   
Exercisable
   
Unexercisable
 
Paul G. Begum
    0     $ 0     $ 0     $ 0     $ 0     $ 0  
                                                 
Robert A. Campbell
    0     $ 0     $ 0     $ 0     $ 0     $ 0  
 
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.

 
15

 

AND MANAGEMENT
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 43,590,130 votes as of December 31, 2009, 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 Owners    Nature of Ownership   #of Shares Owned     Percent  
                 
 Directors and Executive Officers                
                 
Paul G. Begum
   (through PSF Inc.)
 
Direct
    27,090,130        
P.O. Box 58045
 
Preferred
    0        
Salt Lake City, UT 84158
 
Options/Warrants
    0        
   
Total
    27,090,130       62.15 %
                     
Robert A. Campbell
 
Direct
    4,691,000          
7964 W. 79th Street
 
Preferred
    0          
Playa Del Rey, CA 90293
 
Options/Warrants
    0    
 
 
   
Total
    4,691,000       10.76 %
Principal Shareholders
 
                   
Terry Warner
 
Direct
    4,607,262          
(through Mahalo, LLC and Zedeka, LLC)
 
Preferred
    0          
   
Options/Warrants
    0          
   
Total
    4,607,262       10.65 %





Arbinger Loans to the Company

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.

 As of December 31, 2009 and 2008, the total amount due on these loans is $41,893 and $41,893, respectively.


Director and Officer Loans to the Company
 
There are no loans to the Company by any of the Officers or Directors.


 
 
 
16

 

      (a)     The following documents are filed as part of this report.
 
 1.    Financial Statements    Page
         
 Report of Independent Registered Public Accountants    F-3
         
Balance Sheets    
    December 31, 2009 and 2008    F-4
         
   
   
 For the Year Ended December 31, 2009 and 2008
And for the Cumulative Period from July 5, 1996 (inception of development stage)
To December 31, 2009
   F-6
         
Statement of Stockholders' Equity    
     From July 5, 1996 (inception of development stage) to December 31, 2009    F-7
         
 Statements of Cash Flows    
   
 For the Years Ended December 31, 2009 and 2008
And for the Cumulative Period from July 5, 1996 (inception of development stage)
To December 31, 2009
   F-11
         
 Notes to the Financial Statements    F-13 
         
 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, Privileges 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, Privileges 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)    
         
 31.1    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
         
 31.2    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
         
 32.1    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    
         
 32.2    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 28, 2009, the Company filed a Form 8-K under Item 7, Regulation FD Disclosure.



 
17

 


The following is a summary of the fees billed to the Company by Chisholm, Bierwolf, Nilson & Morrill, LLC for professional services rendered for the years ended December 31, 2009 and 2008

Service
 
2009
   
2008
 
                 
Audit Fees
  $ 14,300     $ 23,782  
Audit-Related Fees
    -       -  
Tax Fees
  $ 200     $ 250  
All Other Fees
    -       -  
Total
  $ 14,500     $ 24,032  

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 Chisholm, Bierwolf, Nilson & Morrill, LLC 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 may 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 2009 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.


 
18

 


 

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.
 
       
Date: March 31, 2010
By:
/s/ Paul G. Begum  
    Paul G. Begum  
    Chairman and CEO  
       

 
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 31st day of March 2009.
 
 
 Signatures       Title  
       
 /s/ Paul C. Begum    Chairman and CEO  
 Paul B. Begum      
       
 /s/ Robert Campbell    COO and CFO  
 Robert Campbell      
       
 /s/ Jerry P. Wright    Director  
 Jerry P. Wright      

  

 
19

 



 



 
 
 
 
 
 
KLEVER MARKETING, INC.
 
(A Development Stage Company)
 
Financial Statements
 
December 31, 2009 and 2008






 
 

 


 
 
 
 
 
 

 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors
Klever Marketing Inc.
Salt Lake City, Utah

We have audited the accompanying balance sheets of Klever Marketing Inc.(A Development Stage Company) as of December 31,  2009 and 2008, and the related statements of operations, stockholders deficit and cash flows for the years then ended and from inception on July 5, 1996 through December 31, 2009.  These financial statements are the responsibility of the Companys 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 audits 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 audits 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 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, 2009 and 2008, and the results of their operations, changes in stockholders’ deficit, and cash flows for the years then ended and for the cumulative period from inception on July 5, 1996 to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 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 2. 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
April 7, 2010
 
 
 
F-3

 
 
KLEVER MARKETING, INC.
 
(A Development Stage Company)
 
 
             
ASSETS
 
   
December 31,
 
   
2009
   
2008
 
             
CURRENT ASSETS
           
             
Cash and cash equivalents (Note 1)
  $ 21,041     $ 851  
                 
Total Current Assets
    21,041       851  
                 
FIXED ASSETS (Note 1)
               
                 
Office equipment
    92,964       92,964  
Less accumulated depreciation
    (92,964 )     (92,964 )
                 
Total Fixed Assets
    -       -  
                 
OTHER ASSETS
               
                 
Deferred stock offering costs (Notes 1 and 13)
    20,000       -  
Patents, net (Note 1)
    -       -  
                 
Total Other Assets
    20,000       -  
                 
TOTAL ASSETS
  $ 41,041     $ 851  
 
 
The accompanying notes are an integral part of these financial statements.
 
F-4

 

 
KLEVER MARKETING, INC.
 
(A Development Stage Company)
 
Balance Sheets (Continued)
 
             
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
             
   
December 31,
 
   
2009
   
2008
 
             
             
CURRENT LIABILITIES
           
             
Accounts payable
  $ 376,365     $ 307,308  
Accrued liabilities
    674,252       651,898  
Line-of-credit (Note 6)
    -       20,423  
Related party note payable (Note 9)
    9,000       9,000  
Notes payable (Note 10)
    45,000       45,000  
Stock deposits (Note 7)
    11,000       11,000  
                 
Total Current Liabilities
    1,115,617       1,044,629  
                 
Total Liabilities
    1,115,617       1,044,629  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
Preferred stock (par value $0.01), 2,000,000 shares authorized,
               
   287,595 shares issued and outstanding
    2,876       2,876  
Common stock (par value $0.01), 250,000,000 shares authorized,
               
    43,590,130 and 42,248,303 shares issued and outstanding,
               
    respectively
    435,901       422,483  
Subscription receivable (Note 7)
    -       (23,000 )
Treasury stock, 100,000 shares at December 31, 2009 and 2008
    (1,000 )     (1,000 )
Paid in capital in excess of par value
    16,551,909       16,063,714  
Retained deficit
    (3,333,785 )     (3,333,785 )
Deficit accumulated during development stage
    (14,730,477 )     (14,175,066 )
                 
Total Stockholders' Equity (Deficit)
    (1,074,576 )     (1,043,778 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS'
               
 EQUITY (DEFICIT)
  $ 41,041     $ 851  
 
 
 
The accompanying notes are an integral part of these financial statements.
 
F-5

 
 
KLEVER MARKETING, INC.
 
(A Development Stage Company)
 
 
For the Years Ended December 31, 2009 and 2008
 
               
From
 
               
Inception of
 
               
Development
 
               
Stage On
 
               
July 5, 1996
 
               
Through
 
               
December 31,
 
   
2009
   
2008
   
2009
 
                   
REVENUES
  $ -     $ -     $ 256,000  
                         
EXPENSES
                       
                         
Sales and marketing
    -       -       163,306  
General and administrative
    418,757       93,223       10,863,267  
Research and development (Note 4)
    118,149       -       4,647,805  
                         
Total Expenses
    536,906       93,223       15,674,378  
                         
OTHER INCOME (EXPENSE)
                       
                         
Other income
    4,908       50,000       508,751  
Interest income
    -       -       18,902  
Interest expense
    (28,250 )     (25,752 )     (2,625,250 )
Forgiveness of debt (Note 6)
    4,837       164,991       296,965  
Gain on sale of assets
    -       -       26,947  
Capital gain on sale of investments
    -       -       191,492  
                         
Total Other Income (Expense)
    (18,505 )     189,239       (1,582,193 )
                         
NET INCOME (LOSS) BEFORE INCOME TAXES
    (555,411 )     96,016       (17,000,571 )
                         
INCOME TAXES (Note 3)
    -       100       1,300  
                         
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS
    (555,411 )     95,916       (17,001,871 )
                         
EXTRAORDINARY ITEM - TROUBLED DEBT
                       
   RESTRUCTURING (Note 12)
    -       -       2,271,394  
                         
NET INCOME (LOSS)
  $ (555,411 )   $ 95,916     $ (14,730,477 )
                         
BASIC INCOME (LOSS) PER COMMON SHARE
  $ (0.01 )   $ 0.00          
                         
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE
  $ (0.01 )   $ 0.00          
                         
WEIGHTED AVERAGE NUMBER OF
                       
 COMMON SHARES OUTSTANDING - BASIC
    42,618,936       46,530,769          
                         
WEIGHTED AVERAGE NUMBER OF
                       
 COMMON SHARES OUTSTANDING - FULLY DILUTED
    42,618,936       56,339,704          
 
 

 
The accompanying notes are an integral part of these financial statements.
 
F-6

 
 
KLEVER MARKETING, INC.
 
 
From Inception of the Development Stage on July 5, 1996 Through December 31, 2009
 
                                                                   
                                                           Deficit        
                                             
Paid in
         
Accumulated
     Total  
                           
Common
               
Capital in
         
During
   
Stockholders'
 
   
Preferred Stock
   
Common Stock
   
Stock to be
   
Subscription
   
Treasury
   
Excess of
   
Retained
   
Development
   
Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Issued
   
Receivable
   
Stock
   
Par Value
   
Deficit
   
Stage
   
(Deficit)
 
                                                                   
Balance, December 31, 1995
    247,100     $ 2,471       12,210,949     $ 122,109     $ -     $ -     $ -     $ 74,022,028     $ (103,351,248 )   $ -     $ (29,204,640 )
                                                                                         
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       -       29,724,844  
                                                                                         
Shares issued for cash at $0.50-$3.00 per share
    -       -       314,287       3,143       -       -       -       507,932       -       -       511,075  
                                                                                         
Shares issued in exercise of options at $1.00-$1.25 per share
    -       -       130,000       1,300       -       -       -       136,200       -       -       137,500  
                                                                                         
Shares issued for services at $1.25 per share
    -       -       14,282       143       -       -       -       17,710       -       -       17,853  
                                                                                         
Shares issued for receivable at $1.00-$3.00 per share
    -       -       -       -       407       -       -       101,543       -       -       101,950  
                                                                                         
Shares issued to officer and employee for patents
    -       -       -       -       2,250       -       -       130,500       -       -       132,750  
                                                                                         
Net loss in the year ended December 31, 1996
    -       -       -       -       -       -       -       -       -       (831,814 )     (831,814 )
                                                                                         
Balance, December 31, 1996
    -       -       8,884,613       88,846       7,716       -       -       4,658,555       (3,333,785 )     (831,814 )     589,518  
                                                                                         
Shares issued for cash at $0.01 - $3.00 per share
    -       -       228,150       2,282       49       -       -       449,976       -       -       452,307  
                                                                                         
Shares issued to officers for loans at $0.08 - $1.82 per share
    -       -       249,444       2,494       -       -       -       74,287       -       -       76,781  
                                                                                         
Shares issues for services at $0.50 - $2.59 per share
    -       -       10,398       104       -       -       -       7,391       -       -       7,495  
                                                                                         
Share issued to officers for patents
    -       -       260,813       2,608       (2,250 )     -       -       1,892       -       -       2,250  
                                                                                         
Shares issued for cash and receivables at $1.75 - $2.00 per share
    -       -       58,286       583       (100 )     -       -       85,267       -       -       85,750  
                                                                                         
Shares issued to Videocart creditors
    -       -       97,610       976       (976 )     -               -       -       -       -  
                                                                                         
Shares issued for research and development at par
    -       -       -       -       464       -       -       -       -       -       464  
                                                                                         
Shares issued for employee compensation at $2.50 per share
    -       -       6,000       60       -       -       -       14,940       -       -       15,000  
                                                                                         
Net loss for the year ended December 31, 1997
    -       -       -       -       -       -       -       -       -       (755,594 )     (755,594 )
                                                                                         
Balance, December 31, 1997
    -       -       9,795,314       97,953       4,903       -       -       5,292,308       (3,333,785 )     (1,587,408 )     473,971  
                                                                                         
Shares issued for cash at $1.50 - $3.00 per share
                    294,059       2,941       (100 )             -       612,416                       615,257  
                                                                                         
Shares issued for services at $2.00 - $7.80 per share
    -       -       13,648       136       -       -       -       43,590       -       -       43,726  
                                                                                         
Shares issued for employee compensation at $2.19 - $3.06 per share
    -       -       4,363       44       -       -       -       9,954       -       -       9,998  
                                                                                         
Shares issued for accounts receivable at $1.50 - $2.12 per share
    -       -       129,437       1,294       -       -       -       209,671       -       -       210,965  
                                                                                         
Shares issued for 1,500 shares of Avtel stock at $3.00 per share
    -       -       4,125       41       -       -       -       12,334       -       -       12,375  
                                                                                         
Shares issued for research and development contract
    -       -       46,366       464       (464 )     -       -       -       -       -       -  
                                                                                         
Shares issued to officer for patent at $2.94 per share
    -       -       150,000       1,500       250       -       -       512,313       -       -       514,063  
                                                                                         
Shares returned at $1.58 per share
    -       -       (42,493 )     (425 )     -       -       -       (66,667 )     -       -       (67,092 )
                                                                                         
Net loss for the year ended December 31, 1998
    -       -       -       -       -       -       -       -       -       (1,496,926 )     (1,496,926 )
                                                                                         
Balance, December 31, 1998
    -     $ -       10,394,819     $ 103,948     $ 4,589     $ -     $ -     $ 6,625,919     $ (3,333,785 )   $ (3,084,334 )   $ 316,337  
 
 
 
The accompanying notes are an integral part of these financial statements.
 
F-7

 
 
KLEVER MARKETING, INC.
   
Statements of Stockholders' Equity (Deficit) (Continued)
   
From Inception of the Development Stage on July 5, 1996 Through December 31, 2009
   
     
                                                                              Deficit           
                                                           
Paid in
              Accumulated        Total   
                                   
Common
                   
Capital in
           
During
   
Stockholders'
 
   
Preferred Stock
   
Common Stock
   
Stock to be
   
Subscription
   
Treasury
   
Excess of
   
Retained
   
Development
   
Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Issued
   
Receivable
   
Stock
   
Par Value
   
Deficit
   
Stage
   
(Deficit)
 
                                                                                         
Balance, December 31, 1998
    -     $ -       10,394,819     $ 103,948     $