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EX-31.1 - CERTIFICATION - DarkPulse, Inc.klever_10k-ex3101.htm
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EX-32.1 - CERTIFICATION - DarkPulse, Inc.klever_10k-ex3201.htm
EX-31.2 - CERTIFICATION - DarkPulse, Inc.klever_10k-ex3102.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________  to  _________

 

Commission file number: 0-18834

 

Klever Marketing, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   36-3688583
(State of other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     

1100 East 6600 South

Suite 305

Salt Lake City, UT

 

 

 

84121

(Address of Principal Executive Offices)   (Zip Code)

 

(801) 847 6444

(Registrant’s Telephone Number, including Area Code)

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.01 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o    No  x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x    No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x    No  o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definition of “accelerated filer” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)

 

Large Accelerated Filer  o Accelerated Filer  o
Non-Accelerated Filer o Smaller Reporting Company x

 

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.   Yes  o    No  x

 

The aggregate market value of the registrant’s common stock owned by non-affiliates, based on the closing price of $0.10 as quoted on the OTCBB, on June 30, 2013, is $3,259,185. For purposes of this computation all officers, directors and 5% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the registrant. The number of common shares held by non-affiliates of the Registrant totaled 32,591,185.

 

As of March 13, 2014, there were 51,803,124 common shares issued and outstanding.

 

Transitional Small Business Disclosure Format (Check one):    Yes  o    No  x

Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o    No  x

 

 
 

 

TABLE OF CONTENTS

 

Item Number and Caption Page
     
  Forward-Looking Statements ii
     
PART I
     
Item 1. Description of the Business 1
     
Item 1A. Risk Factors and Uncertainties 2
     
Item 2. Description of Property 4
     
Item 3. Legal Proceedings 4
     
Item 4. Mine Safety Disclosures 4
     
PART II
     
Item 5. Market for Common Equity and Related Stockholder Matters 5
     
Item 6 Selected Financial Data 6
     
Item 7. Management’s Discussion and Analysis 6
     
Item 8. Financial Statements 8
     
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 8
     
Item 9A. Controls and Procedures 8
     
PART III
     
Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 10
     
Item 11. Executive Compensation 11
     
Item 12. Security Ownership of Certain Beneficial Owners and Management 12
     
Item 13. Certain Relationships and Related Transactions 12
     
Item 14. Principal Accountant Fees & Services 13
     
Item 15. Exhibits and Reports on Form 10-K 13
     
Signatures   15

 

 

i
 

 

FORWARD-LOOKING STATEMENTS

 

This annual report on Form 10-K for Klever Marketing, Inc. (“Klever” or the “Company”) and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned development of the Company’s technology, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Such forward-looking statements include, among others, those statements including the words “expects”, “anticipates”, “intends”, “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section “Risk Factors.” We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this report.

 

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These factors include among others: 

 

  · Our ability to raise sufficient capital to fund the development of our technology and continue to fund operating expenses;  

 

  · Our ability to get our technology to work in accordance with our technical specifications;

 

  · Our ability to attract customers to our products once they are developed;  

 

  · Our ability to attract and retain the necessary personnel with the expertise needed to ensure that we can operate the

 

  · Company effectively.  

 

  · Actions or inactions of third-party contractors and vendors;  

 

  · Our ability to successfully patent and protect our intellectual property.

 

  · The potential that our competitors will get their products to market ahead of us.

 

  · General economic conditions.

 

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Description of the Business”, “Risk Factors and Uncertainties”, and “Management’s Discussion and Analysis”. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

We qualify all the forward-looking statements contained in this annual report on Form 10-K by the foregoing cautionary statements.

 

ii
 

 

PART I

 

ITEM 1.   DESCRIPTION OF THE BUSINESS

 

General

 

Klever Marketing, Inc. was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, and market electronic in-store advertising, directory and coupon services which have potential for profit.  The Company successfully conducted two in-store demonstrations of its shopping cart technology – the latest being in 2009 with the release of the Giving Cart and its Retailer Chime-Time Awards Programs.  Subsequently, in 2010, the Company shifted its business model to mobile technology and has aggressively developed new applications using this technology, which it expects to market and release in the near future. The Company is currently testing its mobile technology in a pilot store in Anaheim, California.

 

Product Base

 

Following a decade of development of its shopping cart-based electronic advertising technology, which was successful in demonstrating the advantages of electronic distribution and redemption of electronic coupons and promotions, the Company realized that mobile technology had advanced to the level where Klever’s product base could be applied and considerably expanded into an entirely new product line. Accordingly, in 2010, the Company made a dramatic shift into mobile technology. Since that time the Company has made remarkable progress on its mobile application development and implementation. The software programming of the consumer KleverShop® application has been completed and successfully tested in our- demonstration store. The retailer and supplier KleverDash® application has completed its database and backend programming, complete with an revised graphical user interface, and successfully tested in our demonstration store.

 

Brief History of Klever's Mobile Operations

 

At the end of 2010 the Company hired an independent consultant to review the prospect of shifting Klever's shopping cart software system to mobile operations. The consultant's study determined not only the timing as being now but also the feasibility of greatly expanding the Company's software capability with mobile applications and the benefits of coupling of our products with new social network marketing technology. The first half of 2011 was spent defining the new mobile shopping system requirements and patentable processes. During the second half of the year, a contract was signed for mobile application development and work began. During 2012, the KleverShop, KleverDash and backend KleverKloud systems were developed by Qualzoom, a US company with US trained staff working overseas. During 2012, the software systems were successfully developed and tested in a retail store at yearend. During 2012, the software systems were successfully developed. Testing was conducted in our demonstration retail store at yearend and drew repeated interest and high appeal from our potential retail customers and consuming public.

 

The software development was successful enough that Klever realized further enhancements could be added to make it even more valuable and greater focus could be placed on the screen graphics and ease of use. Accordingly, the company undertook additional software development in 2013.

 

2013 Mobile Application Development and Implementation

 

The Company's 2013 software development has been very successful. At the beginning of the year, as the Company took an expanded look at the potential of a total digital solution, it became clear that further software development could result in a significant separation from our competitors who were starting to release other grocery applications. The Company saw that other solutions were being quickly released on the market without really solving the need to interact with a store's POS system and efficiently select, redeem and clear coupons. In fact many solutions on the market today still require printing of digital coupons, which to us offers no consumer advantage over current practices, and other users were taking pictures of existing coupons which raise the issue of authenticity. The Company still saw a limited ability among the competition to properly transact coupons.

 

Accordingly, with some concern from stockholders who wanted us to rollout the product now, we undertook additional development efforts and a refreshed and simplified look of the actual KleverShop consumer application - all the while protecting the Company with additional patent claims. Having looked at other partially developed applications and knowing the importance of first impressions with new software, the Company was well aware of the risks of rolling out its software too soon. The Company proceeded to develop a unique and patent protected method of interacting with the Store's POS without adding built- in software to their processes. This "Hook and Tender" process as we call it, allows consumers to obtain a unique, bar code that consolidates their selected coupons, to scan their mobile phone at checkout and quickly tap into the POS to redeem the coupon savings, print out the normal receipt now showing the consumer's savings from Klever, and prepare a daily, auditable transaction report identifying each coupon or promotion redeemed, the redemption value and revenues to Klever. The Company has tested this process extensively and we are confident of its reliability, accuracy and retail/consumer appeal. This is a major asset for Klever. The Company's software functions now with Retalix ISS45 software which is in use in about 14,000 markets. Our software is transferable to other POS software with some additional, minimal application programming, which has not yet been undertaken. That will be done after the current software is operational and revenues are flowing to the Company.

 

1
 

 

During 2013, as a result of arrangements made by management, the Company had access to a demonstration store for the entire year to test each of the software developments against the current hardware and software. In September the Company also conducted a focus group with users recruited from the store's consumers' and carefully noted the features that are attractive and working well and those that could be improved. At this stage the Company was transitioning from developmental programming, which now worked proficiently, to operational refinements for ease of use by consumers and retailers. Methods were found to eliminate steps, improve navigation and other detailed features.

 

Following implementation of the changes made from the Focus Group, in November the Company again recruited additional users at the store to test the refinements, and at this stage found that few improvements were needed. The Company continued its transformation from a development company to an operational company, addressing the operational issues of conducting promotional transactions and marketing the products. The demonstration store check-out staff were trained in the use of the KleverShop application. The patented Chime-Time Awards program was executed successfully with many options available to store management. The KleverDash retailer promotion tracking program, that allows retailers suppliers to view the real-time redemption of coupons and other promotions, was successfully utilized. The KelverBank deposit and redemption center for developing and operating coupon redemption programs was expanded and successfully utilized. The accounting processes were developed along with the contract forms for use with pending retail customers. The Company also prepared the necessary documentation of its software applications.

 

The Company's KleverShop™ and KleverDash™ software, utilizing the KleverBank® and operating in the KleverKloud®, now allows retailers and suppliers to establish and manage digital promotion campaigns with far greater accuracy and flexibility than current technology provides. These products can revolutionize the way consumers, retailers and suppliers interact by offering many specialized or time-sensitive promotions not currently available. Much more information can be given to consumers. Retailers and suppliers have much greater control. And the speed and reliability of transactions and their clearing is greatly accelerated.

 

Anticipated Business Development in the Next 12 Months

 

During 2014, the Company intends to move forward along several paths. We will continue to strengthen our balance sheet, and reduce our outstanding debt and seek additional capital investment. Additionally, we will be working with an investment relations company to strengthen public awareness of our Company's investment potential. We will strengthen our KleverShop® and KleverDash™ systems to improve the consumer experience and ability of suppliers to manage their promotional programs. We are looking to expand into a regional super market chain of moderate size to test the multi-store usability of our software systems, and by late fall we are targeting to land a major supermarket chain. By that time we expect to have promotional relationships with numerous product suppliers. We will begin heavily promoting our KleverBank® system for promotions management and consumer redemption, which, if successful, should place our Company in an advantageous position. We, of course aren't the only Company developing digital solutions for coupon management. There are several applications on the market now; but in our opinion these have limited capability. We expect to differentiate ourselves by being a full service digital marketing provider to consumers, retailers and suppliers with platforms to meet all of their promotional needs. Notable progress is being made, and the Company is moving forward to an exciting future. However, we must caution the reader that Klever Marketing is still a development stage company, and no revenue contracts have yet been signed. No assurance or warranty can be given that the Company will be successful in implementing the efforts described in this report.

 

ITEM 1A.   RISK FACTORS AND UNCERTAINTIES

  

Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.

 

Our failure to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.

 

As an enterprise engaged in the development of new technology, our business is inherently risky.  Our common shares are considered speculative during the development of our new business operations.  Prospective investors should consider carefully the risk factors set out below.

 

2
 

 

We need to continue as a going concern if our business is to succeed.  

 

Our independent accountant’s report to our audited consolidated financial statements for the year ended December 31, 2013, indicates that there are a number of factors that raise substantial risks about our ability to continue as a going concern.  Such factors identified in the report are our accumulated deficit since inception, our failure to attain profitable operations and our dependence upon obtaining adequate additional financing to pay our liabilities.  If we are not able to continue as a going concern, investors could lose their investments.

 

Because of the unique difficulties and uncertainties inherent in technology development, we face a risk of business failure.

 

Potential investors should be aware of the difficulties normally encountered by companies developing new technology and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the development of new technology with limited personnel and financial means.  These potential problems include, but are not limited to, unanticipated technical problems that extend the time and cost of product development, or unanticipated problems with the operation of our technology or that with which we are licensing that also extend the time and cost of product development.

 

If we do not obtain additional financing, our business will fail.

 

Our current operating funds are less than necessary to complete the full development and marketing of our mobile products, and we will need to obtain additional financing in order to complete our business plan.   We currently have minimal operations and no income.  

 

Our business plan calls for significant expenses in connection with developing our mobile phone technology and paying our current obligations.  The Company currently does not have sufficient funds to complete the development of its technology and to pay its obligations.  As a result, the Company will require additional financing to execute its business plan.

 

We do not currently have any firm arrangements for financing, and we can provide no assurance to investors that we will be able to find such additional financing if required. Obtaining additional financing is subject to a number of factors, including investor acceptance of our technology and current financial condition as well as general market conditions.  These factors affect the timing, amount, terms or conditions of additional financing unavailable to us.  And if additional financing is not arranged, the company faces the risk of going out of business.

 

The most likely source of future funds presently available to us is through the additional sale of private equity capital or through a convertible debt instrument. Any sale of share capital will result in dilution to existing shareholders.   

 

There is no history upon which to base any assumption as to the likelihood we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail. 

 

Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that investors may have difficulty reselling their shares and may cause the price of the shares to decline.

 

Our shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket.  In particular, prior to selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that: contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the broker/dealers’ duties to the customer and of the rights and remedies available to the customer with respect to violations of such duties or other requirements of Federal securities laws; contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask prices; contains the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i); defines significant terms used in the disclosure document or in the conduct of trading in penny stocks; and contains such other information, and is in such form (including language, type size, and format), as the SEC requires by rule or regulation. Further, for sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement before making a sale to you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent reselling of shares and may cause the price of the shares to decline. 

 

3
 

 

Technology companies face intense competition.  We will have to compete with our competitors for financing and for qualified managerial and technical employees.

 

The technology industry is intensely competitive in all of its phases. Competition includes large established technology companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to become a leader in our industry and attract and retain qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our technology development and commercialization efforts may be slowed down or suspended.

 

We do not expect to declare or pay any dividends.

 

We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

 

Volatility of Stock Price.

 

Our common shares are currently publicly traded on the OTC BB exchange under the symbol KLMK.  In the future, the trading price of our common shares may be subject to wide fluctuations.  Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our control.  In addition, the stock market in general, and the market for software technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies.  Market and industry factors may adversely affect the market price of the common shares, regardless of our operating performance.

 

ITEM 2.   DESCRIPTION OF PROPERTY

 

None

 

ITEM 3.   LEGAL PROCEEDINGS

 

The Company has no current legal proceedings.

 

ITEM 4.   MINE SAFETY DISCLOSURES

 

Not applicable.

 

4
 

 

PART II

 

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

The stock is traded on the OTC BB exchange under 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 from Google’s financial website and reflects the highest and lowest closing prices during each quarter.

 

2013:   High   Low
First Quarter   $0.08   $0.03
Second Quarter   $0.13   $0.03
Third Quarter   $0.12   $0.06
Fourth Quarter   $0.10   $0.04
 
2012:   High   Low
First Quarter   $0.21   $0.02
Second Quarter   $0.16   $0.09
Third Quarter   $0.10   $0.04
Fourth Quarter   $0.08   $0.02

 

The number of shareholders of record of the Company's common stock as of December 31, 2013 was approximately 911.

 

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.

 

On March 18, 2013, the Company issued 150,000 shares of common stock at $0.05 per share to an investor resulting in cash proceeds to the Company of $7,500.

 

On April 15, 2013, the Company sold 1,125,000 shares of common stock at $0.08 per share to an investor resulting in cash proceeds to the Company of $90,000.

 

On June 14, 2013, the Company sold 1,000,000 shares of common stock at $0.12 per share to an investor resulting in cash proceeds to the Company of $120,000.

 

On June 18, 2013, the Company sold 100,000 shares of common stock at $0.12 per share to an investor resulting in cash proceeds to the Company of $12,000.

 

On August 16, 2013, the Company sold 200,000 shares of common stock at $0.10 per share to an investor resulting in cash proceeds to the Company of $20,000.

 

On August 16, 2013, the Company sold 200,000 shares of common stock at $0.10 per share to an investor resulting in cash proceeds to the Company of $20,000.

 

5
 

 

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.

 

Beneficial Ownership Compliance Reporting

 

The Company is aware of the following share and option transactions for the reporting period ending December 31, 2013 for which neither Form 4 nor Form 5 were filed.

 

Name Officer or Board Member Number of Shares Share Price Option Price Total Cost Date

No. of

Years

               
DBH Consulting (b) No 51,622 $0.08   $4,130 1/2/2013  
Tom Ness (b) No 15,125 $0.08   $1,210 1/2/2013  
DBH Consulting (b) No 125,000 $0.05   $6,250 2/21/2013  
John Hastings (a) No 150,000 $0.05   $7,500 3/18/2013  
Douglas Hill (a) No 1,125,000 $0.08   $90,000 4/15/2013  
John III Pinches (a) No 1,000,000 $0.12   $120,000 6/14/2013  
John Pinches (a) No 100,000 $0.12   $12,000 6/17/2013  
Nargis Menon (a) No 200,000 $0.10   $20,000 8/16/2013  
Terence Savas (a) No 200,000 $0.10   $20,000 8/16/2013  
Mohammad AlSuliman (b) No 435,000 $0.10   $43,500 9/30/2013  
Yousef Abed (b) No 465,000 $0.10   $46,500 9/30/2013  

 

(a) Stock issued for cash

(b) Stock issued for service

 

ITEM 6.   SELECTED FINANCIAL DATA

 

Not required for smaller reporting companies.

 

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS

 

For the year ended December 31, 2013, the Company net operating income of $521,067. To date the Company has not had any revenues from operations. Since inception, the Company’s primary source of funding has come through the unregistered sales of restricted common stock, sales proceeds from selling certain non-core intangible assets and net proceeds from settling patent suits.

 

The Company is dependent on obtaining additional capital to complete its mobile technology deployment 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. During the past year, the Company has relied exclusively upon interim capital financing for its continuation.

 

Results of Operations - For the year ended December 31, 2013, the Company generated a net operating income of $521,067 as compared to a net loss of $450,571 for the year ended December 31, 2012.  The income generated in 2013 is primarily from gains on debt forgiveness of $818,708 coupled with net proceeds from patent infringement litigation of $94,485 partially offset by ongoing operating expenses. The 2012 net loss is primarily the result of expenditures on development of the Company’s mobile applications and ongoing administrative expenses.   The Company remains in the product development stage and generated no revenue in 2013 or 2012.  During 2012 and 2013, the Company’s expenditures were directed at developing software for its mobile phone applications. During the summer of 2013, the Company completed a successful test of its KleverShop® application.

 

In May 2011, the Company entered into an agreement to sell the rights to certain IP addresses that were noncore to the Company’s business and were fully amortized.  The sale closed during September 2011 and the Company received proceeds of $623,234 after paying commissions associated with the sale.  Management used the proceeds to fund development costs associated with its mobile technology and to cover ongoing operating expenses.  

 

General and administrative expenses for the year ended December 31, 2013 decreased by $17,003 or 4.4% to $371,039 from $388,042 for the year ended December 31, 2012.   The primary reason for the overall decrease in general and administrative expenses is due to decreased costs for stock promotion, amortization, and outside services. Stock promotion costs increased from $2,500 in 2012 to $24,738 in 2013 as the Company tried various programs to increase investor awareness of its stock and product development progress. Amortization costs increased to $15,631 in 2013 compared to $3,051 in 2012 as a result of the Company’s increased amortization associated with the Company’s patents and trademarks. These increases were offset by a $4,377 reduction in travel costs, a $4,543 decrease in accounting fees, a $14,420 decrease in expenses for stock options, and a $13,162 decrease in outside services for the year ended December 31, 2013 as compared to 2012.

 

6
 

 

During the year ended December 31, 2013 research and development costs decreased by 62.5% from $7,833 in 2012 to $2,940 in 2013.  During 2013, the Company incurred less costs to develop its technology than it did in 2012; however, the decrease in R&D expenses was due primarily to the Company obtaining technological feasibility with its mobile software development and capitalizing $130,987 as compared to $100,223 of development costs for the year ended December 31, 2012.

 

Other income (expense) increased to $896,242 in 2013 from ($48,368) in 2012 representing an increase of $944,610.  In 2012, other income (expense) consisted of interest expense. During 2013, the Company generated a gain on debt forgiveness of $818,708, $94,485 in net proceeds from patent infringement legal settlements, partially offset by ($16,626) in interest expense and a ($325) loss on disposal of assets.

 

Income tax expense decreased to $1,196 for the year ended December 31, 2013 compared to $6,328 for the year ended December 31, 2012 primarily due to management recording a liability of $29,101 during the fourth quarter of 2011 relating to the Company’s uncertain tax positions. Approximately $5,328 of the 2012 income tax expense related to interest and penalties are being accrued but not paid in connection with the Company’s uncertain tax positions. Tax expense in 2013 included $1,096 in interest and penalties associated with the Company’s uncertain tax positions.

 

Liquidity and Capital Resources - The Company requires working capital principally to fund its proposed product development and operating expenses for which the Company has relied primarily on short-term borrowings and the issuance of restricted common stock.  During the year ended December 31, 2013, the Company was able to sell 2,775,000 shares of restricted common stock and 550,000 shares of free trading treasury stock for $316,500. During the year ended December 31, 2013, the Company invested $1,809 in computer equipment, $66,760 in capitalized software development, and $39,859 in its patents and trademarks for its intellectual property.

 

During the year ended December 31, 2013, the Company entered into settlement agreements with certain creditors resulting in the Company making cash payments totaling $25,450 and issuing 450,000 shares of common stock valued at $13,500 to settle outstanding obligations totaling $776,153. The Company also wrote off $81,504 of obligations where the statute of limitations had expired. The settlement of these obligations resulted in the Company recording a gain on Forgiveness of Debt totaling $818,708.

 

During the year ended December 31, 2013, the Company’s officers agreed to forgive $404,250 of compensation that was owed to them and contribute the value of those services to the Company. As a result, the Company recorded an addition to paid-in capital for this amount.

 

As of December 31, 2013, our cash position was $51,654, compared with $3,055 as of December 31, 2012.  We anticipate hiring additional employees and consultants for development and the corresponding operations of the Company, but this hiring is not planned to occur prior to obtaining additional capital. The Company requires working capital principally to complete development, testing and marketing of its new mobile products and to pay for ongoing operating expenses. Management is currently in the process of looking for additional investors.  Currently, 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 raise minimal additional working capital that has been required to enable the Company to continue operations.  From time to time in the past, required short-term borrowings have been obtained from principal shareholders or other related entities or working capital has been obtained through the issuance of restricted common stock to fund operations in accordance with the Company’s revised business plan.

     

Cash flows used by operating activities – The Company used $148,023 and $168,364 for operating activities for the years ended December 31, 2013 and 2012, respectively.  The increase in cash flows used in operating activities is primarily due to a decrease in debt forgiveness of $818,708, partially offset by an increase in net income of $971,638 coupled with year over year increases in depreciation and amortization of $13,076, and services contributed by officers of $81,000, accounts payable of 36,354 and accrued liabilities of $175,666.

 

Cash flows used by investing activities – The Company used $108,428 of cash flows in investing activities for the year ended December 31, 2013 compared to $139,904 for the year ended December 31, 2012. During the year ended December 31, 2013, the Company incurred costs of $1,809 to purchase computer equipment, $66,760 for capitalized software development costs, and spent $39,859 to develop related patents and trademarks. For the year ended December 31, 2012, the Company spent $2,084 to purchase computer equipment, $100,223 on software development costs, and $37,597 to obtain related patents and trademarks.

 

Cash flows generated from financing activities – The Company generated cash flows from financing activities of $305,050 for the year ended December 31, 2013 as compared to $133,450 for the year ended December 31, 2012.  During the year ended December 31, 2013, the Company sold 2,775,000 shares of restricted common stock and 550,000 shares of free trading treasury stock for $316,500. In addition, the Company used cash net of borrowings of $11,450 to repay related party loans from its officers. During the year ended December 31, 2012, the Company sold 839,444 restricted shares of common stock to individuals for $122,000 and received $11,450 from related party borrowings.

 

7
 

 

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 from 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 to market and launch its mobile applications.

 

  · The product launch may take longer to implement than planned or may not be successful.

 

ITEM 8.   FINANCIAL STATEMENTS

 

The financial statements of the Company and supplementary data are included beginning immediately following the signature page to this report.  See Item 15 for a list of the financial statements and financial statement schedules included.

 

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 statement disclosures.

 

On February 25, 2013, the Company filed an 8-K announcing the appointment of the new auditors, HJ & Associates, LLC.

 

ITEM 9A.  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

The Company's Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company, and have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15(f) and 15d-15(f), due to certain material weaknesses in our internal control over financial reporting as discussed below.

 

Internal Control Over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company.  Due to limited resources, Management conducted an evaluation of internal controls based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The results of this evaluation determined that our internal control over financial reporting was ineffective as of December 31, 2013, due to material weaknesses.  A material weakness in internal control over financial reporting is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.  A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

 

Management’s assessment identified the following material weaknesses in internal control over financial reporting:

 

  · The small size of our Company limits our ability to achieve the desired level of separation of internal controls and financial reporting.  We do have a separate CEO and CFO, to review and oversee the financial policies and procedures of the Company, which does achieve a degree of separation.  However, until such time as the Company is able to hire a Controller, we do not believe we meet the full requirement for separation.
  · We do not have a functional audit committee.
  · We have not achieved the desired level of documentation of our internal controls and procedures.  When the Company obtains sufficient funding, this documentation will be strengthened through utilizing a third party consulting firm to assist management with its internal control documentation and further help to limit the possibility of any lapse in controls occurring.
  · We have not achieved the desired level of corporate governance to ensure that our accounting for all of our contractual and other agreements is in accordance with all of the relevant terms and conditions.  Because of our limited capital resources, we sometimes formalize our agreements with certain contractors after the work is performed when additional resources become available to pay for the services.

 

8
 

 

As a result of the material weaknesses in internal control over financial reporting described above, the Company’s management has concluded that, as of December 31, 2013, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO.

 

To date, the Company has not been able to add any additional members to its Audit Committee due its limited financial resources. When the Company obtains sufficient funding, Management intends to add additional members to the Audit Committee and charge them with assisting the Company in addressing the material weaknesses noted above.   The Company’s lack of current financial resources makes it impossible for the Company to hire the appropriate personnel needed to overcome these weaknesses and ensure that appropriate controls and separation of responsibilities of a larger organization exist.  We also will continue to follow the standards for the Public Company Accounting Oversight Board (United States) for internal control over financial reporting to include procedures that:

 

  o Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of the Company's assets;
  o Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
  o Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

 

Our management determined that there were no changes made in our internal controls over financial reporting during the fiscal year 2013 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

 

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 rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

 

 

 

 

 

 

 

 

 

 

 

9
 

 

PART III

 

ITEM 10.   DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND 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 G. Begum 73 Chairman/CEO Future shareholder meeting
       
Robert A. Campbell 71 COO and CFO Future shareholder meeting
       
Jerry P. Wright 61 Director Future shareholder meeting

 

Paul G. Begum, Founder, age 73 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 productions. Paul also brings substantial and diverse fundraising abilities and negotiating skills to the Board.

 

Robert A. Campbell age 71 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.

 

Jerry P. Wright age 61 is the CEO and President of United Potato Growers of America 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 Company’s he has worked with.  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

 

None

 

Audit Committee  

 

As of December 31, 2013, the Company did not have a functioning Audit and Compliance Committee.  The Company’s management is currently reviewing the Company’s SEC filings and relying on outside experts to assist with this process.

 

Audit Committee Financial Expert

 

The Company's board of directors needs to 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 individual needs to be 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 and meet the experience requirements 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.

 

10
 

 

ITEM 11.   EXECUTIVE COMPENSATION

 

Summary Compensation

 

The following table shows the executive compensation paid for the years ended December 31, 2013 and 2012.

 

(a)   (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)  
                        Securities          

 

Name and

Principal Position

 

Year

Ended

Dec 31,

  Salary   Bonus  

Other

Annual

Compensation

 

Restricted

Stock

Award(s)

 

Underlying

Options

/SAR’s

  LTIP  

All Other

Compensation

 
                                   
Paul G. Begum Chairman/CEO*   2013   $54,000   $0   $0   $0   $0   $0   $0  
                                   
    2012   $27,000   $0   $0   $0   $0   $0   $0  
                                   
Robert Campbell COO   2013   $0   $0   $0   $0   $0   $0   $0  
                                   
    2012   $0   $0   $0   $0   $0   $0   $0  

 

*Services provided through PSF Inc., a company owned by Mr. Begum.

 

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, 2013, to the chief executive officer, chief financial officer, and directors of the Company.  As shown, no grants of options took place and no options are outstanding as of December 31, 2013.

 

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  
Paul G. Begum     0     $0     $0     $0     $0     $0  
                                       
Robert A. Campbell     0     $0     $0     $0     $0     $0  
                                       
Jerry P. Wright     0     $0     $0     $0     $0     $0  

 

 

(a) Executive Compensation and Benefits

 

The Company provides no health insurance to any full or part-time employees.

 

The Company has adopted a stock incentive plan for its employees, executive officers, directors, and consultants.

 

11
 

 

ITEM 12.   SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

 

Principal Shareholders

 

The table below sets forth information as to each person owning of record or was known by the Company to own beneficially shares of stock that have more than 5% of the 73, 848,851 (51,693,124 common plus 22,155,727 preferred) votes as of December 31, 2013.  The table includes preferred stock that is convertible into common stock as well as 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   Nature of   Shares     Percent of  
of Beneficial Owners   Ownership   Owned     Common  
                 
Directors, Executive Officers & >5% Stock Owners                
                 
Paul G. Begum (through PSF Inc. and Tree of Stars, Inc.)   Direct     10,642,075        
30251 Golden Lantern   Preferred     22,616,711        
Suite E, PMB 411   Options/Warrants            
Laguna Niguel, CA 92677   Total     33,258,786       44.76%
                     
Robert A. Campbell   Direct     4,669,000          
991 Rippey Sreet   Preferred              
El Cajon, CA 92020   Options/Warrants              
    Total     4,669,000       6.28%
                     
Terry Warner   Direct     3,789,292          
(through Mahalo, LLC and Zedeka, LLC)   Preferred              
    Options/Warrants              
    Total     3,789,292       5.10%
                     
Total         41,717,078       56.14%

 

 

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Director and Officer Loans to the Company

 

Loans were made to the Company during 2013 by two officers in the following amounts:

 

From   Principal
Balance as of 12/31/2012
    Borrowings     Repayments     Principal
Balance as of 12/31/2013
 
                                 
Paul G. Begum
(through PSF Inc.)
  $     $     $     $  
                                 
Paul G. Begum
(through Tree of Stars, Inc)
    3,000       7,100       10,100        
                                 
Robert A. Campbell     8,450       6,350       14,800        
                                 
Total   $ 11,450     $ 13,450     $ 24,900     $  

 

12
 

 

ITEM 14.   PRINCIPAL ACCOUNTANT FEES & SERVICES

 

Audit Fees. Consists of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission, and related other services that are normally provided by HJ & Associates in connection with statutory and regulatory filings or engagements.

 

The following is a summary of the fees paid by the Company to HJ & Associates, LLC for professional services rendered for the years ended December 31, 2013 and 2012, respectively.

 

Service  2013   2012 
Audit Fees  $17,100   $5,000 
Audit-Related Fees        
Total  $17,100   $5,000 

 

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.

 

The following is a summary of the fees paid by the Company to Robison, Hill & Company for professional services rendered for the years ended December 31, 2013.

 

Service  2013   2012 
Tax  Fees  $1,500   $1,000 
           
   $1,500   $1,000 

 

Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Board of Directors 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 evaluate the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

 

The Board of Directors pre-approved 100% of the Company’s 2013 and 2012 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.

 

ITEM 15.   EXHIBITS, AND REPORTS ON FORM 10-K

 

(a)  The following documents are filed as part of this report.

 

1.     Financial Statements   

 

   Page
   
Reports of Independent Registered Public Accountants F-3
   
Balance Sheets  
December 31, 2013 and 2012 F-5
   
Statements of Operations  
For the Years Ended December 31, 2013 and 2012 and for the Cumulative Period from July 5, 1996 (inception of development stage) to December 31, 2013 F-6
   
Statement of Stockholders’ Equity  
From July 5, 1996 (inception of development stage) to December 31, 2013 F-7
   
Statements of Cash Flows  
For the Years Ended December 31, 2013 and 2012 and for the Cumulative Period from July 5, 1996 (inception of development stage) to December 31, 2013 F-13
   
Notes to the Financial Statements F-14

 

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)
   
10.05 Asset purchase agreement dated August 27, 2004 (6)
   
10.06 Software Development Works Agreement between Klever Marketing, Inc. and Qualzoom Inc. dated August 15, 2010 (7)
   
10.07  Software Development Agreement between Klever Marketing, Inc. and Briabe Media Inc. September 22, 2010 (7)
   
23.1 Consent of Independent Registered Public Accounting Firm
   
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.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Schema Document
   
101.CAL XBRL Calculation Linkbase Document
   
101.DEF XBRL Definition Linkbase Document
   
101.LAB XBRL Label Linkbase Document
   
101.PRE XBRL Presentation Linkbase Document

__________________________

(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.

(6) Incorporated herein by reference from Registrant’s Form 10QSB, dated November 19, 2004.

(7) Incorporated herein by reference from Registrant’s Form 8-K, dated November 19, 2010.

 

14
 

 

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:  March 17, 2014 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 17th day of March 2014.

 

Signature   Title    
         
/s/ Paul G. Begum   Chairman and CEO    
Paul G. Begum        
         
/s/ Robert A. Campbell   COO and CFO    
Robert A. Campbell        
         
/s/ Jerry P. Wright     Director    
Jerry P. Wright          

 

 

 

 

 

 

 

 

 

 

 

 

 

15
 

 

KLEVER MARKETING, INC.

 

(A Development Stage Company)

 

Financial Statements

 

As of December 31, 2013 and 2012

and for the Years Ended December 31, 2013 and 2012

and for the Period from Inception July 5, 1996 to December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-1
 

 

C O N T E N T S

 

 

 

Report of Independent Registered Public Accounting Firm F-3
   
Balance Sheets F-4
   
Statements of Operations F-5
   
Statements of Stockholders’ Equity (Deficit) F-6
   
Statements of Cash Flows F-13
   
Notes to the Financial Statements F-14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-2
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
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, 2013 and 2012 and the related statements of operations, stockholders' equity (deficit), and cash flows for the years 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 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 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, 2013 and 2012 and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 3 to the financial statements, the Company does not generate significant revenue and has negative cash flow from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result in the outcome of this uncertainty.

 

We were not engaged to audit, and we did not audit, the related statements of operations, stockholders’ equity (deficit) and cash flows from inception (July 5, 1996) through December 31, 2013, and accordingly, we express no opinion or any other form of assurance on them.

 

 

/s/ HJ & Associates, LLC

 

HJ & Associates, LLC
Salt Lake City, Utah
March 17, 2014

 

 

 

 

 

 

F-3
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Balance Sheets

 

   December 31, 
   2013   2012 
ASSETS
CURRENT ASSETS          
Cash  $51,654   $3,055 
           
Total Current Assets   51,654    3,055 
           
FIXED ASSETS          
Capitalized software development and licenses   422,330    291,343 
Office Equipment   3,350    2,084 
Less accumulated depreciation   (915)   (319)
           
Total Fixed Assets   424,765    293,108 
           
OTHER ASSETS          
Intangibles, net   86,898    62,670 
           
Total Other Assets   86,898    62,670 
           
TOTAL ASSETS  $563,317   $358,833 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
           
CURRENT LIABILITIES          
Accounts payable  $304,669   $525,589 
Accrued liabilities   65,724    1,024,777 
Preferred stock dividends       77,798 
Related party notes payable       11,450 
Notes payable       15,000 
           
Total Current Liabilities   370,393    1,654,614 
           
Total Liabilities   370,393    1,654,614 
           
STOCKHOLDERS' EQUITY (DEFICIT)          
Convertible preferred stock - Class A ( par value $0.01; 150,000 shares authorized; 124,531 and 112,249 issued and outstanding at December 31, 2013 and December 31, 2012, respectively); aggregate liquidation preference of $3,171,818.   1,245    1,122 
Convertible preferred stock - Class B ( par value $0.01; 125,000 shares authorized; 94,383 and 85,075 issued and outstanding at December 31, 2013 and December 31, 2012 respectively); aggregate liquidation preference of $1,571,803.   944    851 
Convertible preferred stock - Class C ( par value $0.01; 200,000 shares authorized; 165,955 and 149,586 issued and outstanding at December 31, 2013 and December 31, 2012 respectively); aggregate liquidation preference of $1,072,975.   1,660    1,496 
Common stock (par value $0.01), 250,000,000 shares authorized, 51,693,124 and 46,626,377 shares issued and outstanding, at December 31, 2013 and December 31, 2012, respectively.   516,931    466,264 
Treasury stock, 100,000 shares at December 31, 2013 and December 31, 2012.   (1,000)   (1,000)
Paid in capital in excess of par value   17,880,371    16,963,780 
Retained deficit   (3,333,785)   (3,333,785)
Deficit accumulated during development stage   (14,873,442)   (15,394,509)
           
Total Stockholders' Equity (Deficit)   192,924    (1,295,781)
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)  $563,317   $358,833 

 

See accompanying notes to financial statements.

 

F-4
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Operations

For the Years Ended December 31, 2013 and 2012

 

       Unaudited 
   For the Year Ended   From Inception of Development Stage On July 5, 1996 Through 
   December 31,   December 31, 
   2013   2012   2013 
             
REVENUES  $   $   $256,000 
                
EXPENSES               
                
Sales and marketing           163,306 
General and administrative   371,039    388,042    12,588,561 
Research and development   2,940    7,833    4,780,866 
                
Total Expenses   373,979    395,875    17,532,733 
                
OTHER INCOME (EXPENSE)               
                
Other income   94,485        780,236 
Interest income           19,152 
Interest expense   (16,626)   (48,368)   (2,755,234)
Forgiveness of debt   818,708        1,285,661 
Gain (loss) on sale of assets   (325)       649,856 
Litigation settlement             
Capital gain on sale of investments           191,492 
                
Total Other Income (Expense)   896,242    (48,368)   171,163 
                
NET INCOME (LOSS) BEFORE INCOME TAXES   522,263    (444,243)   (17,105,570)
                
INCOME TAXES   (1,196)   (6,328)   (39,266)
                
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS   521,067    (450,571)   (17,144,836)
                
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING           2,271,394 
                
NET INCOME (LOSS)  $521,067   $(450,571)  $(14,873,442)
                
BASIC EARNINGS PER COMMON SHARE  $0.01   $(0.01)     
                
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE  $0.01   $(0.01)     
                
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC   49,757,302    46,043,507      
                
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - FULLY DILUTED   72,127,734    46,043,507      

 

See accompanying notes to financial statements.

 

F-5
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained     Deficit
Accumulated
During
Development
    Total Stockholders’
Equity
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
Balance, December 31, 1995 (Unaudited)     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 (Unaudited)     -       -       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 (Unaudited)     -     $ -       10,394,819     $ 103,948     $ 4,589     $ -     $ -     $ 6,625,919     $ (3,333,785 )   $ (3,084,334 )   $ 316,337  

 

See accompanying notes to financial statements.

 

F-6
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained     Deficit
Accumulated
During
Development
    Total Stockholders’
Equity
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
                                                                                         
Balance, December 31, 1998 (Unaudited)     -     $ -       10,394,819     $ 103,948     $ 4,589     $ -     $ -     $ 6,625,919     $ (3,333,785 )   $ (3,084,334 )   $ 316,337  
Shares issued for cash at $1.96 - $3.00 per share     -       -       701,525       7,015       -       -       -       1,649,949       -       -       1,656,964  
Shares issued for employee compensation at $1.95 - $2.34 per share     -       -       2,995       30       -       -       -       6,187       -       -       6,217  
Shares issued for exercise of options at $0.52 - $0.86 per share     -       -       238,271       2,383       -       -       -       200,342       -       -       202,725  
Shares returned at $0.67 - $1.58 per share     -       -       (62,489 )     (625 )     -       -       -       (107,047 )     -       -       (107,672 )
Net loss for the year ended December 31, 1999     -       -       -       -       -       -       -       -       -       (1,734,623 )     (1,734,623 )
Balance, December 31, 1999 (Unaudited)     -       -       11,275,121       112,751       4,589       -       -       8,375,350       (3,333,785 )     (4,818,957 )     339,948  
Shares issued for cash at $1.07 - $2.75 per share     -       -       279,742       2,798       -       -       -       532,754       -       -       535,552  
Preferred shares issued for cash at $17-$26 per share     84,576       846       -       -       -       -       -       1,827,529       -       -       1,828,375  
Shares issued for employee compensation at $3.99 per share     -       -       74,608       746       -       -       -       296,939       -       -       297,685  
Shares issued for exercise of stock options at $0.86 - $1.07 per share     -       -       597,778       5,978       -       -       -       511,931       -       -       517,909  
Shares issued for accounts payable at $2.75 - $3.00 per share     -       -       9,488       95       -       -       -       26,649       -       -       26,744  
Paid-in capital from treasury stock transaction     -       -       -       -       -       -       -       16,180       -       -       16,180  
Shares canceled and converted to preferred shares at $2.75 per share     -       -       (100,000 )     (1,000 )     -       -       -       (274,000 )     -       -       (275,000 )
Conversion of note payable to preferred shares at $26 per share     9,615       96       -       -       -       -       -       249,904       -       -       250,000  
Shares issued that were paid for in 1997     -       -       23,334       233       (233 )     -       -       -       -       -       -  
Shares issued for services at $0.89 per share     -       -       2,697       27       -       -       -       2,373       -       -       2,400  
Shares returned at $1.73 - $2.12 per share     -       -       (10,000 )     (100 )     -       -       -       (19,150 )     -       -       (19,250 )
Net loss for the year ended December 31, 2000     -       -       -       -       -       -       -       -       -       (4,066,283 )     (4,066,283 )
Balance, December 31, 2000 (Unaudited)     94,191       942       12,152,768       121,528       4,356       -       -       11,546,459       (3,333,785 )     (8,885,240 )     (545,740 )
Shares issued for cash at $0.82 per share     -       -       4,685       47       -       -       -       3,795       -       -       3,842  
Preferred shares issued for cash at $6.60 per share     6,061       60       -       -       -       -       -       39,940       -       -       40,000  
Preferred shares issued for payment of note payable at $6.60 per share     68,182       682       -       -       -       -       -       449,318       -       -       450,000  
Shares canceled for nonpayment     -       -       (4,694 )     (47 )     -       -       -       (9,903 )     -       -       (9,950 )
Shares issued for research and development expenses at $1.00 per share     -       -       15,000       150       -       -       -       14,850       -       -       15,000  
Shares issued for general and administrative expenses at $0.66 per share     -       -       507,048       5,070       -       -       -       329,581       -       -       334,651  
Shares returned to Company for accounts receivable of $98,375     -       -       -       -               -       (1,000 )     (97,375 )     -       -       (98,375 )
Net loss for the year ended December 31, 2001     -       -       -       -       -       -       -       -       -       (2,342,405 )     (2,342,405 )
Balance, December 31, 2001 (Unaudited)     168,434     $ 1,684       12,674,807     $ 126,748     $ 4,356     $ -     $ (1,000 )   $ 12,276,665     $ (3,333,785 )   $ (11,227,645 )   $ (2,152,977 )

 

See accompanying notes to financial statements.

 

F-7
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained     Deficit
Accumulated
During
Development
    Total Stockholders’
Equity
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
                                                                                         
Balance, December 31, 2001 (Unaudited)     168,434     $ 1,684       12,674,807     $ 126,748     $ 4,356     $ -     $ (1,000 )   $ 12,276,665     $ (3,333,785 )   $ (11,227,645 )   $ (2,152,977 )
Shares canceled for services not rendered     -       -       (304,229 )     (3,042 )     -       -       -       (197,749 )     -       -       (200,791 )
Cash received for shares that have not yet been issued     -       -       -       -       3,333       -       -       21,667       -       -       25,000  
Net loss for the year ended December 31, 2002     -       -       -       -       -       -       -       -       -       (1,025,837 )     (1,025,837 )
Balance, December 31, 2002 (Unaudited)     168,434       1,684       12,370,578       123,706       7,689       -       (1,000 )     12,100,583       (3,333,785 )     (12,253,482 )     (3,354,605 )
Shares issued for cash at $0.05 - $0.75 per share     -       -       2,580,000       25,800       (3,333 )     -       -       151,033       -       -       173,500  
Shares issued to S&C Medical at $0.05 per share     -       -       3,000,000       30,000       -       -       -       120,000       -       -       150,000  
Shares issued for notes payable at $0.04 - $0.05 per share     -       -       11,259,786       112,598       -       -       -       446,642       -       -       559,240  
Shares issued for accounts payable at $0.01 - $0.10 per share     -       -       4,200,000       42,000       -       -       -       96,000       -       -       138,000  
Shares authorized for expense at $0.03 per share - not issued     -       -       -       -       9,545       -       -       19,090       -       -       28,635  
Shares authorized for payment of accounts payable at $0.21 per share - not issued     -       -       -       -       56       -       -       1,115       -       -       1,171  
Net loss for the year ended December 31, 2003     -       -       -       -       -       -       -       -       -       (1,361,753 )     (1,361,753 )
Balance, December 31, 2003 (Unaudited)     168,434       1,684       33,410,364       334,104       13,957       -       (1,000 )     12,934,463       (3,333,785 )     (13,615,235 )     (3,665,812 )
Shares issued for cash at $0.036-$0.15 per share     -       -       770,000       7,700       -       -       -       57,420       -       -       65,120  
Shares issued for accounts payable at $0.05-$0.23 per share     -       -       391,939       3,919       -       -       -       27,306       -       -       31,225  
Shares issued for expenses at $0.04-$0.23 per share     -       -       1,910,604       19,106       (9,203 )     -       -       108,325       -       -       118,228  
Authorized shares issued     -       -       5,571       56       (56 )     -       -       -       -       -       -  
Shares issued for settlement of liabilities     -       -       152,142       1,521       -       -       -       36,514       -       -       38,035  
Net loss for the year ended December 31, 2004     -       -       -       -       -       -       -       -       -       (632,293 )     (632,293 )
Balance of December 31, 2004 (Unaudited)     168,484       1,684       36,640,620       366,406       4,698       -       (1,000 )     13,164,028       (3,333,785 )     (14,247,528 )     (4,045,497 )
Shares issued for cash at $0.028-$0.25 per share     -       -       1,790,000       17,900       -       -       -       254,726       -       -       272,626  
Shares issued for expenses at $0.25 per share     -       -       92,500       925       -       -       -       22,200       -       -       23,125  
Net loss for the year ended December 31, 2005     -       -       -       -       -       -       -       -       -       (736,913 )     (736,913 )
Balance, December 31, 2005 (Unaudited)     168,434       1,684       38,523,120       385,231       4,698       -       (1,000 )     13,440,954       (3,333,785 )     (14,984,441 )     (4,486,659 )
Shares issued for general and administrative expenses at $0.25 per share     -       -       2,788       29       -       -       -       669       -       -       698  
Shares issued for cash at $0.25 per share     -       -       586,000       5,860       -       -       -       140,640       -       -       146,500  
Shares issued for accounts payable at $0.25 per share     -       -       71,956       719       -       -       -       17,270       -       -       17,989  
Compensation expense from issuance of stock options     -       -       -       -       -       -       -       43,653       -       -       43,653  
Net loss for the year ended December 31, 2006     -       -       -       -       -       -       -       -       -       (850,440 )     (850,440 )
Balance, December 31, 2006 (Unaudited)     168,434     $ 1,684       39,183,864     $ 391,839     $ 4,698     $ -     $ (1,000 )   $ 13,643,186     $ (3,333,785 )   $ (15,834,881 )   $ (5,128,259 )

 

See accompanying notes to financial statements.

 

F-8
 

 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained     Deficit
Accumulated
During
Development
    Total Stockholders’
Equity
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
                                                                                         
Balance, December 31, 2006 (Unaudited)     168,434     $ 1,684       39,183,864     $ 391,839     $ 4,698     $ -     $ (1,000 )   $ 13,643,186     $ (3,333,785 )   $ (15,834,881 )   $ (5,128,259 )
Shares issued for general and administrative expenses at $0.03-$0.05 per share     -       -       450,000       4,500       -       -       -       13,000       -       -       17,500  
Shares issued for cash at $0.25 per share     -       -       1,090,000       10,900       -       -       -       261,600       -       -       272,500  
Shares issued for accounts payable at $0.25 per share     -       -       67,988       680       -       -       -       16,315       -       -       16,995  
Shares issued for notes payable at $0.25 per share     -       -       8,281,016       82,810       -       -       -       1,987,444       -       -       2,070,254  
Shares issued for accrued interest at $0.25 per share     -       -       62,101       621       -       -       -       14,905       -       -       15,526  
Shares returned to treasury and cancelled     -       -       (2,416,666 )     (24,167 )     -       -       -       24,167       -       -       -  
Compensation expense from issuance of stock options     -       -       -       -       -       -       -       19,891       -       -       19,891  
Net income for the year ended, December 31, 2007     -       -       -       -       -       -       -       -       -       1,563,898       1,563,898  
Balance, December 31, 2007 (Unaudited)     168,434       1,684       46,718,303       467,183       4,698       -       (1,000 )     15,980,508       (3,333,785 )     (14,270,983 )     (1,151,695 )
Preferred stock issued as dividends     119,161       1,192       -       -       -       -       -       (1,192 )     -       -       -  
Stock cancellation     -       -       (5,170,000 )     (51,700 )     -       -       -       51,700       -       -       -  
Shares issued for cash at $0.05 per share     -       -       700,000       7,000       -       (23,000 )     -       28,000       -       -       12,000  
Authorized shares issued     -       -       -       -       (4,698 )     -       -       4,698       -       -       -  
Net income for the year ending December 31, 2008     -       -       -       -       -       -       -       -       -       95,917       95,917  
Balance, December 31, 2008 (Unaudited)     287,595       2,876       42,248,303       422,483       -       (23,000 )     (1,000 )     16,063,714       (3,333,785 )     (14,175,066 )     (1,043,778 )
Cash received from shares issued in prior year     -       -       -       -       -       23,000       -       -       -       -       23,000  
Common stock issued for cash at $0.30 per share     -       -       1,500,093       15,001       -       -       -       435,027       -       -       450,028  
Common stock issued for services at $0.25 per share     -       -       150,000       1,500       -       -       -       36,000       -       -       37,500  
Stock cancellation (Note 6)     -       -       (400,000 )     (4,000 )     -       -       -       (11,556 )     -       -       (15,556 )
Common stock issued in lieu of debt at $0.30 per share     -       -       80,734       807       -       -       -       23,413       -       -       24,220  
Common stock issued in for services at $0.30 per share     -       -       11,000       110       -       -       -       3,190       -       -       3,300  
Compensation expense from issuance of stock options     -       -       -       -       -       -       -       2,121       -       -       2,121  
Net loss for the year ending December 31, 2009     -       -       -       -       -       -       -       -       -       (555,411 )     (555,411 )
Balance, December 31, 2009     287,595     $ 2,876       43,590,130     $ 435,901     $ -     $ -     $ (1,000 )   $ 16,551,909     $ (3,333,785 )   $ (14,730,477 )   $ (1,074,576 )
Cash received from shares issued in prior year     -       -       -       -       -               -       -       -       -       -  
Common stock issued for cash at $0.15 per share     -       -       500,000       5,000       -       -       -       70,000       -       -       75,000  
Common stock issued for services at $0.06 per share to a perspective lender                     150,000       1,500                               7,500                       9,000  
Common stock issued for services at $0.15 per share     -       -       1,150,000       11,500       -       -       -       161,000       -       -       172,500  
Common stock issued for services at $0.20 per share     -       -       33,938       339       -       -       -       6,449       -       -       6,788  
Common stock issued for services at $0.25 per share     -       -       60,000       600       -       -       -       14,400       -       -       15,000  
Common stock issued in lieu of debt at $0.25 per share     -       -       437,572       4,376       -       -       -       105,017       -       -       109,393  
Services contributed by officers     -       -               -       -       -       -       60,000       -       -       60,000  
Accrual for preferred stock dividend                                                             (385,144 )                     (385,144 )
Issuance of warrants for services     -       -       -       -       -       -       -       3,870       -       -       3,870  
Net Profit for the year ending December 31, 2010     -       -       -       -       -       -       -       -       -       (393,001 )     (393,001 )
Balance, December 31, 2010     287,595     $ 2,876       45,921,640     $ 459,216     $ -     $ -     $ (1,000 )   $ 16,595,001     $ (3,333,785 )   $ (15,123,478 )   $ (1,401,170 )

 

See accompanying notes to financial statements.

 

F-9
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained      Deficit
Accumulated
During
Development 
    Total Stockholders’
Equity 
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
                                                                                         
Balance, December 31, 2010     287,595     $ 2,876       45,921,640     $ 459,216     $ -     $ -     $ (1,000 )   $ 16,595,001     $ (3,333,785 )   $ (15,123,478 )   $ (1,401,170 )
Common stock issued for cash at $0.15 per share     -       -       250,000       2,500       -               -       35,000       -       -       37,500  
Stock cancellation     -       -       (1,150,000 )     (11,500 )     -       -       -       (147,500 )     -       -       (159,000 )
Common stock issued for accounts payable at $0.1346 per share     -       -       50,000       500       -       -       -       6,230       -       -       6,730  
Common stock issued for stock deposit at $0.25 per share     -       -       44,000       440       -       -       -       10,560       -       -       11,000  
Common stock issued for accounts payable at $0.20 per share     -       -       1,688       17       -       -       -       321       -       -       338  
Common stock issued for services at $0.20 per share     -       -       938       9       -       -       -       178       -       -       187  
Common stock issued for services at $0.15 per share     -       -       84,667       847       -       -       -       11,852       -       -       12,699  
Common stock issued for services at $0.10 per share     -       -       300,000       3,000       -       -       -       27,000       -       -       30,000  
Common stock issued for accounts payable at $0.25 per share     -       -       10,000       100       -       -       -       2,400       -       -       2,500  
Preferred stock issued as dividends     24,964       250       -       -       -       -       -       384,894       -       -       385,144  
Accrual for preferred stock dividend     -       -       -       -       -       -       -       (323,968 )     -       -       (323,968 )
Due from related party payable in common stock     -       -       -       -       -       (16,100 )     -               -       -       (16,100 )

Net income for the year ending December 31,

2011 (Restated)

    -       -       -       -       -       -       -       -       -       179,540       179,540  
Balance, December 31, 2011 (Restated)     312,559     $ 3,126       45,512,933     $ 455,129     $ -     $ (16,100 )   $ (1,000 )   $ 16,601,968     $ (3,333,785 )   $ (14,943,938 )   $ (1,234,600 )

 

See accompanying notes to financial statements.

 

F-10
 

 KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

 (UNAUDITED)

 

    Preferred Stock     Common Stock     Common Stock to be     Subscription     Treasury     Paid in Capital in Excess of Par     Retained      Deficit
Accumulated
During
Development 
    Total Stockholders’
Equity 
 
    Shares     Amount     Shares     Amount     Issued     Receivable     Stock     Value     Deficit     Stage     (Deficit)  
                                                                                         
Balance, December 31, 2011     312,559     $ 3,126       45,512,933     $ 455,129     $     $ (16,100 )   $ (1,000 )   $ 16,601,968     $ (3,333,785 )   $ (14,943,938 )   $ (1,234,600 )
                                                                                         
Common stock returned and cancelled to satisfy related party receivable                 (161,000 )     (1,610 )           16,100             (14,490 )                  
                                                                                         
Common stock issued for cash at $0.09 per share                 194,444       1,944                         15,556                   17,500  
                                                                                         
Common stock issued for cash at $0.10 per share                 920,000       9,201                         82,049                   91,250  
                                                                                         
Common stock issued for services at $0.1133 per share                 60,000       600                         6,200                   6,800  
                                                                                         
Common stock issued for cash at $0.125 per share                 100,000       1,000                         11,500                   12,500  
                                                                                         
Common stock option issued for cash                                               750                   750  
                                                                                         
Issuance of stock options                                               14,420                   14,420  
                                                                                         
Accrual for preferred stock dividend                                               (115,978 )                 (115,978 )
                                                                                         
Preferred stock issued as dividends     34,351       343                                     361,805                   362,148  
                                                                                         
Net loss for year ended December 31, 2012                                                           (450,571 )     (450,571 )
                                                                                         
Balance, December 31, 2012     346,910     $ 3,469       46,626,377     $ 466,264     $     $     $ (1,000 )   $ 16,963,780     $ (3,333,785 )   $ (15,394,509 )   $ (1,295,781 )

 

See accompanying notes to financial statements. 

F-11
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Stockholders' Equity (Deficit) (Continued)

From Inception of the Development Stage on July 5, 1996 Through December 31, 2013

(UNAUDITED)

 

   Preferred Stock   Common Stock   Treasury  

Capital in

Excess of

   Retained  

Deficit

Accumulated

During Development

  

Total

Stockholders'

Equity
 
   Shares   Amount   Shares   Amount   Stock   Par Value   Deficit   Stage   (Deficit) 
                                     
Balance, December 31, 2012   346,910   $3,469    46,626,377   $466,264   $(1,000)  $16,963,780   $(3,333,785)  $(15,394,509)   (1,295,781)
                                              
Common Stock issued for accounts payable at $0.08 per share           66,747    667        4,672            5,339 
                                              
Issuance of common stock to settle debt obligations and for cash (Note 5)           1,200,000    12,000        48,500            60,500 
                                              
Common Stock issued for cash at $0.05 per share           150,000    1,500        6,000            7,500 
                                              
Common Stock issued for cash at $0.08 per share           1,125,000    11,250        78,750            90,000 
                                              
Common Stock issued for cash at $0.10 per share           400,000    4,000        36,000            40,000 
                                              
Common Stock issued for cash at $0.12 per share           1,100,000    11,000        121,000            132,000 
                                              
Common Stock issued for services at $0.05 per share           125,000    1,250        5,000            6,250 
                                              
Common Stock issued for services at $0.07 per share           900,000    9,000        54,000            63,000 
                                              
Accrued compensation forgiven by officers                       404,250            404,250 
                                              
Services contributed by officer                       81,000            81,000 
                                              
Preferred stock issued as dividends   37,959    380                137,347            137,727 
                                              
Accrual for preferred stock dividend                       (59,928)           (59,928)
                                              
Net income                               521,067    521,067 
                                              
Balance, December 31, 2013   384,869   $3,849    51,693,124   $516,931   $(1,000)  $17,880,371   $(3,333,785)  $(14,873,442)  $192,924 

See accompanying notes to financial statements.

 

F-12
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Cash Flows

 

       Unaudited 
  

For the Years Ended

December 31,

   From Inception of Development Stage On July 5, 1996 Through December 31, 
   2013   2012   2013 
             
CASH FLOWS FROM OPERATING ACTIVITIES:               
                
Net income (loss)  $521,067   $(450,571)  $(14,873,442)
Adjustments to reconcile net loss to net cash used by operating activities:               
Stock issued for general and administrative   6,250    6,800    1,283,606 
Stock issued for research and development           62,850 
Stock returned for services not rendered           (391,446)
(Gain) loss on sale/disposal of assets   325        (5,170)
Compensation expense from stock options and warrants       14,420    110,202 
Stock issued for interest           135,226 
Stock issued for accounts payable           243,458 
Deferred income           (214,000)
Depreciation and amortization   16,446    3,370    1,932,699 
Write-off bad debts           15,000 
Debt forgiveness   (818,708)       (993,533)
Services contributed by officers   81,000        141,000 
Changes in operating assets and liabilities:               
Decrease (increase) in due from related parties           62,281 
(Increase) decrease in other assets and prepaids           89,238 
Increase (decrease) in accounts payable   33,375    69,729    567,114 
Increase (decrease) in accrued liabilities   12,222    187,888    1,116,588 
                
Net Cash Used by Operating Activities   (148,023)   (168,364)   (10,718,329)
                
CASH FLOWS FROM INVESTING ACTIVITIES:               
                
Acquisition of equipment   (1,809)   (2,084)   (591,694)
Capitalized software development costs   (66,760)   (100,223)   (336,703)
Proceeds from sale of intangibles           516,570 
Intellectual property development costs   (39,859)   (37,597)   (105,030)
Sale of stock           12,375 
                
Net Cash Used by Investing Activities  $(108,428)  $(139,904)  $(504,482)

 

See accompanying notes to financial statements.

 

F-13
 

 

KLEVER MARKETING, INC.

(A Development Stage Company)

Statements of Cash Flows (Continued)

 

       Unaudited 
  

For the Years Ended

December 31,

   From Inception of Development Stage On July 5, 1996 Through December 31, 
   2013   2012   2013 
            
CASH FLOWS FROM FINANCING ACTIVITIES:               
                
Stock deposit  $   $   $11,000 
Stock subscription received           23,000 
Proceeds from capital stock issued   316,500    122,000    8,051,201 
Proceeds from loans           3,518,202 
Proceeds from related party loans   13,450    11,450    24,900 
Repayments on related party loans   (24,900)       (69,850)
Change in line-of-credit           4,837 
Loan receivables           (15,000)
Principal payments on lease obligations           (18,769)
Cash payments on note payable           (279,730)
                
Net Cash Provided by Financing Activities   305,050    133,450    11,249,791 
                
NET INCREASE (DECREASE) IN CASH   48,599    (174,818)   26,980 
                
CASH AT BEGINNING OF PERIOD   3,055    177,873    24,674 
                
CASH AT END OF PERIOD  $51,654   $3,055   $51,654 
                
SUPPLEMENTAL DISCLOSURES               
                
Cash Paid For:               
                
Interest  $   $   $3,326 
                
Income taxes  $100   $100   $2,041 
                
Non-Cash Transactions for Investing and Financing Activities:               
                
Common stock issued to pay accounts payable  $11,339   $      
                
Accounts payable recorded for capitalized software development costs  $1,227   $      
                
Common stock issued for capitalized software development  $63,000   $      
                
Common stock issued to pay accrued liabilities  $7,500   $      
                
Accrued compensation forgiven by officers  $404,250   $