-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L0khIfGC8iTlBLvwzsdjo3l9MloampXWkfSFpPCDgJwo97MADfR6xTqR0QhcGtbZ dn5pD2tX3pCQWDH043S+fg== /in/edgar/work/20000821/0000939802-00-000086/0000939802-00-000086.txt : 20000922 0000939802-00-000086.hdr.sgml : 20000922 ACCESSION NUMBER: 0000939802-00-000086 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000821 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KLEVER MARKETING INC CENTRAL INDEX KEY: 0000866439 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 363688583 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-18730 FILM NUMBER: 706436 BUSINESS ADDRESS: STREET 1: 350 WEST 300 SOUTH SUITE 201 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 BUSINESS PHONE: 8013221221 MAIL ADDRESS: STREET 1: 350 WEWT SOUTH SUITE 201 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 FORMER COMPANY: FORMER CONFORMED NAME: VIDEOCART INC DATE OF NAME CHANGE: 19930328 10KSB 1 0001.txt [As adopted in Release No. 34-32231, April 28, 1993, 58 F.R. 26509] U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2000 ---------------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to ------------- -------------- Commission file number 0-18834 ------------------------------- Klever Marketing, Inc. ------------------------------------------------ (Exact name of small business issuer as specified in its charter) Delaware 36-3688583 - -------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 350 West 300 South, Suite 201, Salt Lake City, Utah 84101 (Address of principal executive offices) (801) 322-1221 ---------------------------- Issuer's telephone number (Former name, former address and former fiscal year, if changed since last report.) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date: June 30, 2000 12,062,348 --------------------------- Transitional Small Business Disclosure Format (check one). Yes ; No X ---- --- PART I Item 1. Financial Statements INDEPENDENT ACCOUNTANT'S REPORT Klever Marketing, Inc. We have reviewed the accompanying balance sheets of Klever Marketing, Inc. as of June 30, 2000 and December 31, 1999, and the related statements of operations for the three and six months, and cash flows for the six month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statement taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. Respectfully submitted /s/ ROBISON, HILL & CO. Certified Public Accountants Salt Lake City, Utah August 10, 2000 3 KLEVER MARKETING, INC. BALANCE SHEETS June 30, December 31, ----------- ----------- ASSETS ................................ 2000 1999 ----------- ----------- Current Assets Cash ................................ $ (173) $ 203,232 Shareholder Receivables ............. 155,235 34,892 Prepaid Expenses .................... -- -- ----------- ----------- Total Current Assets ............. 155,062 238,124 ----------- ----------- Fixed Assets Office Equipment .................... 155,082 77,279 Phase 2 Equipment ................... 1,202,646 445,330 Less Accumulated Depreciation ....... (66,168) (56,798) ----------- ----------- Net Fixed Assets ................. 1,291,560 465,811 ----------- ----------- Other Assets Patents ............................. 2,221,748 2,212,850 Less Accumulated Amortization ....... (1,370,525) (1,266,201) ----------- ----------- Net Other Assets ................. 851,223 946,649 ----------- ----------- Total Assets ..................... $ 2,297,845 $ 1,650,584 =========== =========== 4 KLEVER MARKETING, INC. BALANCE SHEETS (Continued)
June 30, December 31, ------------ ----------- 2000 1999 ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable, Trade .............................$ 256,759 $ 401,708 Accrued Liabilities ................................. 145,704 458,563 Related Party Payables .............................. 663,750 191,250 Short-term Notes Payable ............................ 10,881 259,115 ------------ ----------- Total Current Liabilities ........................ 1,077,094 1,310,636 ------------ ----------- Total Liabilities ................................ 1,077,094 1,310,636 ------------ ----------- Stockholders' Equity Preferred stock (Par Value $.01), 2,000,000 shares authorized. 53,014 shares issued and outstanding June 30, 2000 and -0- issued and outstanding December 31, 1999 .....................$ 530 $ -- Paid in Capital in Excess of Par Value .............. 1,377,845 -- Common Stock (Par Value $.01), 20,000,000 shares authorized. 12,062,348 shares issued and outstanding June 30, 2000 and 11,275,121 shares issued and outstanding December 31, 1999 ................................. 120,623 112,751 Common Stock to be issued ........................... 4,356 4,589 Paid in Capital in Excess of Par Value .............. 9,357,817 8,375,350 Retained Deficit .................................... (9,640,370) (8,152,742) ------------ ----------- Total Paid-In Capital & Retained Earnings ........ 1,220,801 339,948 Treasury Stock (Par Value $.01), 5,000 shares June 30, 2000 and -0- shares December 31, 1999 at par value .................... (50) -- ------------ ----------- Total Stockholders' Equity ....................... 1,220,751 339,948 ------------ ----------- Total Liabilities and Stockholders' Equity .......$ 2,297,845 $ 1,650,584 ============ ===========
See accompanying notes and accountants' report. 5 KLEVER MARKETING, INC. STATEMENTS OF OPERATIONS
For the Three Months For the Six Months Ended June 30, Ended June 30, --------------------------- --------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Revenue ........................ $ -- $ -- $ -- $ -- ------------ ------------ ------------ ------------ Expenses General and Administrative ... 362,820 248,255 1,489,499 480,820 Research and Development ..... 41,026 111,894 170,896 218,484 ------------ ------------ ------------ ------------ Total Expenses ............ 403,846 360,149 1,660,395 699,304 ------------ ------------ ------------ ------------ Other Income (Expense) Interest Income .............. 89 58 191 539 Interest Expense ............. (14,409) (8,069) (21,543) (15,010) Gain/Loss .................... -- -- 193,677 -- Sale of Investments .......... -- -- -- -- ------------ ------------ ------------ ------------ Total Other Income (Expense) (14,320) (8,011) 172,325 (14,471) ------------ ------------ ------------ ------------ Loss Before Taxes .............. (418,166) (368,160) (1,488,070) (713,775) Income Taxes ................... -- -- -- -- ------------ ------------ ------------ ------------ Net Loss After Taxes ........... $ (418,166) $ (368,160) $ (1,488,070) $ (713,775) ============ ============ ============ ============ Weighted Average Shares Outstanding .................... 12,587,172 10,671,294 12,514,735 10,725,557 ============ ============ ============ ============ Loss per Common Share .......... $ (0.03) $ (0.03) $ (0.12) $ (0.07) ============ ============ ============ ============
See accompanying notes and accountants' report. 6 KLEVER MARKETING, INC. STATEMENT OF CASH FLOWS For the Six Months Ended June 30, ------------------------ 2000 1999 ------------ ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss ............................................. $(1,488,070) $(713,775) Adjustments used to reconcile net loss to net cash provided by (used in) operating activities: Non cash general and administrative .................................... 604,283 6,218 (Increase) decrease in: shareholder receivable ........................... (120,343) 108,271 prepaid expense .................................. -- -- Increase (decrease) in: accounts payable .................................. (126,014) (363,664) accrued liabilities ............................... (293,392) (4,778) deferred income ................................... -- -- lease obligation .................................. 1,766 15,404 related party payables ............................ 472,500 (75,250) Loss on Extraordinary Item ........................... -- -- Sale of Investments .................................. -- -- Depreciation and Amortization ........................ 114,115 110,984 ------------ ---------- Net cash used in operating activities ........................................ $ (835,155) $(916,590) ------------ ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of equipment ............................. $ (835,098) $ (21,816) Non cash equipment ................................... 13,809 -- Acquisition of patents ............................... (8,898) (3,288) ------------ ---------- Net cash used by investing activities ........................................ $ (830,187) $ (25,104) ------------ ---------- 7 KLEVER MARKETING, INC STATEMENT OF CASH FLOWS (Continued) For the Six Months Ended June 30, -------------------------- 2000 1999 ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Capital Stock ........ $ 1,750,339 $ 913,490 Principle Payments on Lease Obligations ..................... -- (1,688) Non Cash Capital Stock ............. (288,402) -- ----------- --------- Net Cash Provided by Financing Activities ........... $ 1,461,937 $ 911,802 ----------- --------- Net Increase (Decrease) in Cash and Cash Equivalents ...... (203,405) (29,892) Cash and Cash Equivalents at Beginning of the Period ......... 203,232 45,371 ----------- --------- Cash and Cash Equivalents at End of the Period ............... $ (173) $15,479 =========== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest ........................... $ 21,543 $ 15,010 Income Taxes ....................... $ -- $ -- See accompanying notes and accountants' report. 8 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 -------------------------------------- NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES This summary of accounting policies for Klever Marketing, Inc. is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. The unaudited financial statements as of June 30, 2000 and for the six months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three and six months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years. Organization and Basis of Presentation The Company was organized under the laws of the State of Delaware in December 1989. The Company was in the Development stage from 1989 to 1991. The Company was an operating company from 1992 to December 8, 1993 when it filed petitions for relief under Chapter 11 bankruptcy. The Company was inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a reverse merger and changed its name to Klever Marketing, Inc. The company was in the development stage until June 30, 1998. Nature of Business The Company was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, manufacture and market electronic in-store advertising, directory and coupon services which have potential for profit. The Company is currently in the process of the commercialization of the patented process it has acquired. Cash Equivalents For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 9 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES(continued): - -------------------------------------------------------------------- of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made in the 1998 financial statements to conform with the 1999 presentation. Loss per Share The reconciliations of the numerators and denominators of the basic earnings per share computations are as follows: Per-Share Loss Shares Amount For the three months ended June 30, 2000 Basic Earnings per Share Income available to common shareholders $ (418,166) 12,587,172 $ (0.03) ============ =========== ========== For the six months ended June 30, 2000 Basic Earnings per Share Income available to common shareholders $ (1,488,070) 12,514,735 $ (0.12) ============ =========== ========== For the three months ended June 30, 1999 Basic Earnings per Share Income available to common shareholders $ (368,160) 10,671,294 $ (0.03) ============ =========== ========== For the six months ended June 30, 1999 Basic Earnings per Share Income available to common shareholders $ (713,775) 10,725,557 $ (0.03) ============ =========== ========== 10 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES(continued): - -------------------------------------------------------------------- Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share for the six months ended June 30, 2000 and 1999 are not presented as it would be anti-dilutive. Fixed Assets Fixed assets are stated at cost. Depreciation and amortization are computed using the straight- line method over the estimated economic useful lives of the related assets as follows: Computer equipment 3 years Office furniture and fixtures 5-10 years Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss. Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives. Intangibles Intangibles associated with certain technology agreements are amortized over 10 -14 years. NOTE 2 - INCOME TAXES The Company has accumulated tax losses estimated at $8,000,000 expiring in years 2007 through 2014. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. The amount of net operating loss carryforward available to offset future taxable income may be limited if there is a substantial change in ownership. NOTE 3 - LEASE COMMITMENT The Company's lease commitments for office space with Tree of Stars, Inc./P.D.O. consist of two leases with payments of $26,743 and $10,496 per year. Both lease commitments expired 11 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 3 - LEASE COMMITMENT (continued): December 31, 1998 and have continued on a month to month basis since that time. NOTE 4 - RESEARCH AND DEVELOPMENT Research and development of the Klever-Kart System began with the sole purpose of reducing thefts of shopping carts. A voice-activated alarm system was envisioned. As time and technology progressed, the present embodiment of the Klever-Kart System evolved into a "product specific" point-of-purchase advertising system consisting of an easily readable electronic display that attaches to any shopping cart, a shelf mounted message sending unit that automatically sends featured products' ad-message to the display and a host computer using proprietary software. During the six months ended June 30, 2000 and 1999, the Company expended $170,896 and $218,484, respectively for research and development of the technology involved with its patents. On February 1, 1997 the Company entered into an agreement with ETC and Digital Radio Communications Corp. ("DRCC")where by the Company exchanged electronic components for a promissory note of $97,093 together with interest at eight percent calculated on the basis of the actual number of days elapsed but computed on a 360 day year. The principal balance, together with interest thereon will be amortized over 18 monthly installments, commencing on the day the "cost reduction and manufacturing" ("Commercial Service Agreement") contract is executed and the first payment is made by the Company to ETC/DRCC and continuing on the last day of each month thereafter until paid in full. On February 13, 1998 the Company entered into the Commercial Service Agreement (see above) with World Wireless Communications ("WWC") where WWC agrees to provide consulting and engineering services related to the development of a wireless shopping data display system. WWC may also offer alternative approaches to design, construct and performance of the product. The Company is required to pay a $10,000 deposit in connection with the agreement, retained by WWC, which will be credited during final billing received from WWC. The Company has agreed to provide WWC a bonus of $2,000 if the project is completed by March 31, 1998. If the project duration is beyond April 15, 1998, WWC will be required to pay the Company a penalty of $2,000. On February 13, 1998 the Company entered into a settlement agreement with WWC (formerly Electronic Technology Corp.) pursuant to which the company paid $30,000 and issued 46,364 shares of common stock to WWC in satisfaction of any and all claims in connection with the September 26, 12 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 4 - RESEARCH AND DEVELOPMENT (continued): 1994 contract. The agreement also provides for 10,000 shares of WWC restricted common stock in exchange for a promissory note in the amount of $97,093. On March 29, 2000 the Company entered into a settlement agreement with WWC pursuant to which WWC is to transfer 7,000 common shares of the Company's stock back to the Company by April 14, 2000 in satisfaction of any and all claims in connection with the Klever Kart project. NOTE 5- RELATED PARTY TRANSACTIONS During 1998 various shareholders loaned the Company $347,100. The notes are payable within one year plus interest at 10% and 12% per annum. During 1999 and the six months ended June 30, 2000 principle payments of $155,850 and $62,500 were paid toward these loans. During the six months ended June 30, 2000, various shareholders loaned the Company $535,000. The notes are payable within one year plus interest at 12% per annum. The total balance due as of June 30, 2000 is $663,750. On February 1, 2000 an accrued liability in the amount of $306,666.64 was converted to common shares by exercise of options for the purchase of 579,585 shares at $.86 per share and a note receivable in the amount of $191,776.46. The note is payable in thirty-six equal installments with interest at the rate of eight percent. The note is collateralized by 100,000 shares of the Company's common shares. NOTE 6- STOCK OPTIONS The shareholders approved, by a majority vote, the adoption of the 1998 Stock Incentive Plan (the "Plan"). Under the Plan, 3,500,000 shares of common stock are reserved for issuance upon the exercise of options which may be granted from time-to-time to officers, directors and certain employees and consultants of the Company or its subsidiaries. The Plan permits the award of both qualified and non-qualified incentive stock options. Under the Plan, an additional 500,000 shares of common stock are reserved for issuance in the form of restricted stock grants. As of December 31, 1998, no options had been granted under the Plan. Compensation expense charged to operations in 1999 and 1998 is $24,010 and $11,247. Compensation expense charged to operations for the six months ending June 30,2000 is $297,686. The following is a summary of transactions: 13 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 6- STOCK OPTIONS (continued):
Shares Under Option ----------------------- June 30, December 31, ----------------------- 2000 1999 ---------- ---------- Outstanding, beginning of year ........................ 2,898,059 1,675,355 Granted during the year ............................... 485,172 1,284,641 Canceled during the year .............................. (125,392) -- Exercised during the year ............................. (92,801) (61,937) ---------- ---------- Outstanding, end of year (at prices ranging from $.86 to $3.61 per share) ................. 3,165,038 2,898,059 ========== ========== Eligible, end of year for exercise currently (at prices ranging from $.86 to $3.61 per share) ................. 3,165,038 2,898,059 ========== ==========
NOTE 7 - CONTINGENCIES On May 24, 1996, in consideration of the assignment in September 1993 to the company, certain technologies and patents relating to the electronic couponing ("Electronic Coupon Patent") by Mr. Paul G. Begum, President/CEO and Mr. Mark Geiger, V.P. Operations, the Board of Directors agreed to pay Mr. Begum and Mr. Geiger 200,000 and 25,000 shares, respectively at a price of $.01 per share for the electronic coupon patent. $132,750 was capitalized in 1996 as patents. The shares are valued at $.60 per share as this was the value the Company's stock was selling for when the assignment was made in September 1993. As additional consideration for the Electronic Coupon Patent, the Board of Directors has agreed to pay PSF, Inc.(as Mr. Begum's assign) and Mr. Geiger $50,000 and $10,000, respectively upon receipt by the Company of $2,000,000 in equity funding and when the Company has the necessary financing to conduct its operations. On February 25, 1997 Mr. Begum and Mr. Geiger received 200,000 and 25,000 shares respectively. On December 22, 1997 pursuant to the merger, Mr. Begum and Mr. Geiger received an additional 31,834 and 3,979 shares respectively. As of June 30, 2000 the Company has fulfilled its obligation to Mr. Begum and Mr. Geiger, respectively. NOTE 8 - PREFERRED STOCK On February 7, 2000 the Board of Directors authorized and established "Class A Voting 14 KLEVER MARKETING, INC. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 8 - PREFERRED STOCK (continued): Preferred Stock Series 1. " ("Class A Shares") as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock. Class A Shares consist of 1,000,000 shares, 125,000 shares thereof are designated as Series 1 shares. Class A Shares are convertible into Common Stock at an initial conversion price of $2.60 (subject to adjustment). Holders of Class A Shares shall be entitled to receive when and as declared by the Board of Directors of the Company out of any funds at the time legally available therefor dividends at the rate of $2.20 per share per annum, payable semi-annually on the first day of January and July of each year. Such dividends shall accrue on each such share from the date of its original issuance and shall accrue from day to day, whether or not earned or declared. Such dividend shall be cumulative and may be paid in cash or in kind through the distribution of .0425 Class A Shares, Series 1, for each outstanding Class A Share, on each dividend payment date. In addition, each holder of Class A Shares shall be entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis. If there is a split or dividend on the Common Stock, then the Class A Shares dividends shall be adjusted as if a similar split or dividend had occurred with respect to the Class A Shares. Class A Shareholders shall be entitled to one vote for each share of Common Stock into which such Class A Shares could then be converted, and shall have voting rights and powers equal to that of a holder of Common Stock. The Holders of Class A Shares shall vote with the holders of Common Stock and not as a separate class. Class A Shares carry a liquidation preference of $26 per share plus any accrued but unpaid dividends on such shares, if any, and adjusted for combinations, splits, dividends or distributions of shares of stock with respect to such shares. The Class A Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 1, 2002. The redemption price shall be $26 per share together with accrued but unpaid dividends on such shares, if any. NOTE 9 - SUBSEQUENT EVENTS On July 27, 2000 the Company sold 10,786 shares of common stock for $1.07 per share. 15 KLEVER MARKETING, INC NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Continued) NOTE 9 - SUBSEQUENT EVENTS (continued): On July 24, 2000, the Company entered into a one year employment agreement with Corey Hamilton which sets forth the terms and conditions of his employment as President of the Company. Mr. Hamilton will receive a base salary of $150,000 per year, and will also be granted 100,000 shares of common stock, which will vest quarterly over twelve months. 16 Item 2. Management's Discussion and Analysis or Plan of Operation. General - This discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's annual report on Form 10-KSB for the year ended December 31, 2000. Plan of Operations - The Company was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate develop, manufacture and market electronic in-store advertising, directory and electronic coupon services which have potential for profit. The Company is currently in the process of the commercialization of the patented system, Klever-Kart(R). The commercialization process is divided into five phases as follows: Phase I: System Development and Product Movement Test. The product movement test was completed during third quarter 1997. The test took place in a Smith's Food and Drug store located in Salt Lake City, Utah. Information Resources, Inc., an independent company, audited the results of the test which concluded an average 46.8% incremental product movement. Phase II: Cost Reduction & Enhancement. In January 1998, the Company commenced development of the Phase II functional specification that encompassed cost reductions and system enhancements. Improvements on the Klever-Kart(R) system included: a significantly smaller and more sleek design in the appearance and size of the display unit; smaller trigger units with improved sensitivity, more durable plastics, and improved sound fidelity. Upon completion of the Phase II functional specification, the Company began phase II engineering design and development. In September 1999, the Company began parts procurement and other manufacturing processes. 17 Phase III: Installation of Stores. In December 1999, the Company plans to commence installation of the Klever-Kart(R) units in Ralph's Grocery Company stores in Southern California. Phase IV: Electronic Coupon Integration. Definition of the Electronic Coupon system is scheduled to commence during fourth quarter 1999. This process consists of working with retailers and point-of-sale transaction processing system manufacturers to ensure the appropriate degree of interface and integration necessary to implement the Electronic Coupon system. Because the Klever-Kart(R) system was designed with the eventual implementation of Electronic Coupons in mind, the Company does not expect significant hardware modifications will be necessary. The Electronic Coupon system design and initial manufacture is scheduled for completion during the year 2000, followed by a minimum three month in-store test of system operation. Phase V: Future Development. The Klever-KardTM frequent shopper program enhancement is scheduled for introduction in 2000. This dynamic micro-marketing capability will be added to the Klever-Kart(R) system, allowing targeted promotions to individual customers according to demographics and personal buying history. In order to satisfy its cash requirements, the company will have to raise additional funds through the sale of restricted stock, joint ventures or short term borrowings.. Liquidity and Capital Resources - The Company requires working capital principally to fund its current research and development and operating expenses for which the Company has relied on short- term borrowings and the issuance of restricted common stock. There are no formal commitments from banks or other lending sources for lines of credit or similar short-term borrowings, but the Company has been able to borrow any additional working capital that has been required. From time to time in the past, required short-term borrowings have been obtained from a principal shareholder or other related entities. Cash flows. Operating activities used cash of $ 835,000 and $ 917,000 for the six months ended June 30, 2000 and 1999, respectively. Investing activities have used cash of $ 830,000 and $ 25,000 for the six months ended June 30, 2000 and 1999, respectively. Investing activities primarily represent purchases of patents relating to the electronic in-store advertising, directory and coupon devices, and purchases of office equipment. Financing activities provided cash of $ 1,462,000 and $912,000 for the six months ended June 30, 2000 and 1999, respectively. Financing activities primarily represent sales of the Company's common 18 and preferred stock. The Company may be required to supplement its available cash and other liquid assets with proceeds from borrowing, the sale of additional securities, or other sources. There can be no assurance that any such required additional funding will be available or, if available, that it can be obtained on terms favorable to the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities The Company sold 143,270 shares of common stock during the three months ended June 30, 2000 to individuals for $ .86 to $3.99 per share. The Company also sold 5,769 shares of preferred stock during the three months ended June 30, 2000 to other companies for $26 per share. The stock was not sold through an underwriter and was not sold through a public offer. These sales are exempt under Regulation D Rule 506 of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K The following exhibits are included as part of this report: Exhibit Number Title of Document 3.01 ARTICLES OF INCORPORATION OF KLEVER MARKETING, INC. A DELAWARE CORPORATION(1) 3.02 BYLAWS(1) 10.01 EMPLOYMENT AGREEMENT FOR GERARD C. COELSCH(1) 10.02 EMPLOYMENT AGREEMENT FOR COREY HAMILTON 23.01 CONSENT OF ACCOUNTANTS(1) 27.1 FINANCIAL DATA SCHEDULE (1) Incorporated by Reference (b) No reports on Form 8-K were filed. 19 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Klever Marketing, Inc. ----------------------- (Registrant) DATE: August 21, 2000 ---------------------- By: /s/ Paul G. Begum Paul G. Begum Chief Executive Officer & Director (Principal financial and Accounting Officer) 20 EX-10.02 2 0002.txt EMPLOYMENT AGREEMENT - COREY HAMILTON EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, made as of this 26th day of June, 1998, by and between KLEVER MARKETING, INC., a Delaware corporation (the "Employer"), and GERARD C. COELSCH ("Employee"); W I T N E S S E T H WHEREAS, the Employer conducts business from its principal office located at 350 West 300 South, Suite 201, Salt Lake City, Utah; and WHEREAS, the Employer desires to engage Employee as its President and Chief Operating Officer upon the terms and conditions set forth herein, and Employee desires to become so engaged; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants, terms and agreements hereinafter set forth, the parties hereto agree as follows: 1 . EMPLOYMENT. The Employer hereby employs Employee, and Employee hereby accepts such employment, upon the terms and subject to the conditions set forth in this Agreement. 2. Term. ' The initial term of employment shall begin on July .6, 1998, and shall end on July .8, 1999 (the "First Contract Year"); provided, however, that if the Employer obtains (i) a binding commitment to raise capital, or does in fact raise capital, in an amount of at least Five Million Dollars ($5,000,000), through a private or public offering, or (ii) the Board of Directors approves any other funding method (e.g. a joint venture, etc.), during the First Contract Year, the term of this employment contract shall be automatically extended for a two (2) year period (the "Extension Period"). The Extension Period shall commence on the date that the Employer first obtains such binding commitment for capital or first raises such capital, whichever occurs first, or the date the Board of Directors approves such other funding method, provided such funding transaction is ultimately consummated. The Extension Period shall not be extended by any unexpired portion of the First Contract Year. For example, if the Extension Period commences on December 22, 1998, the initial term of employment hereunder shall last through December 21, 2000. Employee's term of employment hereunder shall be automatically renewed for additional one-year terms unless, at least sixty (60) days prior to the expiration of the current term, either party to this Agreement provides written notice to the other party hereto that such party is terminating the employment of Employee effective as of the end of the current term. The foregoing provisions of this section 2 notwithstanding, the employment of Employee may be sooner terminated at any time in accordance with the other provisions of this Agreement. 3. POSITION, DUTIES AND LOYALTY. Employee shall assume the office of President and Chief Operating 0fficer of Employer. Employee shall report directly to Employer' and Employee shall faithfully and industriously perform all duties in accordance with the instructions of Employer. Employee shall owe the Employer his highest loyalty and Employee will use his best efforts to promote the interests of Employer. 4. COMPENSATION: BASE SALARY. In consideration of the faithful performance of his duties, Employer agrees to pay Employee an annual base salary of Two Hundred Thousand Dollars ($200,000.00). Unless Employer and Employee mutually agree in writing to adjust Employee's annual base salary for any succeeding contract period, Employer shall continue to pay Employee the same annual base salary paid during the immediately preceding contract year. The annual base salary shall be payable on a twenty-four (24) period payroll cycle, and all compensation hereunder shall be subject to the customary withholding tax and other employment taxes as required with respect to compensation paid by a corporation to an employee. Until this agreement is terminated, Employer shall continue to pay the base salary to Employee notwithstanding Employee's absence due to illness or injury; provided, however, such obligation shall expire after Employee is absent from work for a period of three (3) continuous months. Employee represents to Employer that as of the date of execution of this Agreement, Employee is not aware of any serious medical condition which could be reasonably expected to hinder or impair Employee with respect to the performance of his duties hereunder. 5. COMPENSATION: CASH PERFORMANCE BONUS. In addition to the base salary and any other compensation payable to Employee under this Agreement, Employer shall pay Employee a cash performance bonus as set forth in this Section 5. At the end of each fiscal year of Employer, Employer shall pay a cash bonus to Employee based on the following formula: Current Base Salary x Plan Fraction. The Plan Fraction is 25% plus .555 times the Excess Percentage. The Excess Percentage is the percentage by which the actual revenue of the Employer for the fiscal year, divided by the revenue set forth in the Employer's business plan duly adopted by the Employer's board of directors for such fiscal year, exceeds 55%. If such actual revenue divided by such plan revenue is less than 55%, then the Plan Fraction shall equal zero. In no event shall the Plan Fraction exceed fifty percent (50%) notwithstanding the fact that actual revenue exceeds plan revenue. Examples. Assume the Current Base Salary is $200,000, and the plan revenue is $ 1,000,000. If the actual revenue is $700,000, then the bonus is: $200,000 x (25% + (70%-55%)x.555)) = $66,650 If the actual revenue is $1,000,000, then the bonus is: $200,000 x (25% + (100%-55%)x.555)) = $99,950 If the actual revenue is $550,000, then the bonus is: $200,000 x (25% + (55%-55%)x.555)) = $50,000 If the actual revenue is $1,500,000, then the bonus is: $200,000 x 50%, or $100,000 If the actual revenue is $500,000, then the bonus is: $200,000 x 0%, or nothing. 6. EXPENSES. During the term of Employee's employment, the Employer shall promptly reimburse Employee for all properly documented, reasonable expenses incurred by Employee in the performance of his services and duties hereunder to the extent such expenses are in accordance with the policies of Employer, or Employer approved of such expenses in advance. In addition, Employer shall pay or reimburse Employee for the following expenses: a) Moving Expense. Employer shall pay for all reasonable moving expenses incurred in order for Employee to move his family, household belongings and automobiles from Jacksonville, Florida, to the Salt Lake City area; provided, however, that all such reimbursements or payments by Employer shall not exceed Fifteen Thousand Dollars ($15,000.00) except to the extent Employer agrees to make a reasonable accommodation for any overage. b) Rent Payments. During the first twelve months of this contract, Employer shall directly make payments for Employee's rent and utility expenses with respect to Employee's housing and living costs; provided, however, that all such payments by Employer shall not exceed Eighteen Thousand Dollars ($18,000.00). c) Travel Allowance. During each of the first two months of this contract, Employer shall reimburse Employee for two round-trip air fares from Jacksonville, Florida to Salt Lake City, Utah; provided, however, that such reimbursement shall not exceed the cost of tickets which are purchased at least 14 days in advance, with a Saturday night STAYOVER. Employee shall properly document the foregoing expenses in accordance with the policies of Employer. As necessary, Employer shall report all payments and reimbursements hereunder as required under applicable tax laws. 7. VACATION. After the first twelve (12) month period of employment, Employee shall be entitled to two weeks (2) weeks' paid vacation. After the second twelve (12) month period of employment, Employee shall be entitled to three (3) weeks' paid vacation. After the third twelve (12) month period of employment, Employee shall be entitled to three (3) weeks' paid vacation. After the fourth twelve month employment, and after each succeeding twelve month period of Employee shall be entitled to four (4) weeks' paid vacation. Employer and Employee shall mutually agree upon any planned absence from work in advance to the extent reasonably possible. Unless previously approved by the Employer's chief executive officer, any unused, accrued vacation benefits shall expire at the end of the applicable twelve month period and shall not carry over to any succeeding twelve month period. 8. FRINGE BENEFITS. Employee shall be entitled to participate in or receive benefits under all of the Employer's benefit plans and other fringe benefit arrangements, if any. Except for the stock option rights set forth in Section 9 below, the Employer, however, has complete discretion to determine the type and amount of benefits, if any, that it shall provide to its employees, including any applicable vesting schedules and the variation of benefits among different employees or groups of employees. Except as the parties may otherwise agree, nothing paid to or on behalf of Employee under any fringe benefit plan or arrangement shall be deemed to be in lieu of compensation to Employee as outlined in Sections 4 and 5 above, or any other provision of this agreement. The foregoing notwithstanding, during the term of Employee's employment hereunder, the Employer in any case agrees to provide standard medical and dental insurance coverage to Employee and Employee's dependents under a policy that waives any pre-existing conditions, with coverage to begin no later than July 1, 1998. 9. STOCK OPTIONS. Employer represents to Employee that the board of directors and shareholders of Employer have duly adopted the " Klever Marketing, Inc. 1998 Stock Incentive Plan" (the "Plan"), which provides for the grant of "incentive stock options" (intended to qualify under ss.422 of the Internal Revenue Code) and it nonqualified options" with respect to the stock of Employer. Employer hereby agrees to grant Employee certain options under the Plan as more fully described herein as a material inducement to Employee for executing and delivering this employment - 4 - agreement. Employer agrees that the grant of options pursuant to this Agreement constitute a substantial and material part of the compensation payable to Employee under this agreement, and that such compensation is addition to the compensation payable to Employee under Sections 4 and 5 above, or any other provisions of this Agreement. The grant of options described herein shall be further documented in a separate instrument, and the options set forth in such separate instrument shall be a counterpart to the applicable provisions of this Agreement, and shall not be construed to double the Shares subject to such option(s) from 400,000 or 500,000 to 800,000 or 1,000,000. Nothing herein shall preclude the grant of options in addition to those described herein by the Employer in its absolute discretion. A) GRANT OF OPTION. Employer hereby agrees to grant Employee on July 6, 1998, an option (the "Option") to purchase Four Hundred Thousand (400,000) shares of the common stock of Employer, $.01 par value (the "Shares"). In addition, if the Employer obtains a binding commitment to raise capital, or does in fact raise capital, in an amount of at least Five Million Dollars ($5,000,000), through a private or public offering, then Employer agrees to grant Employee an additional option (the "Additional Option") as follows: (i) if the price per Share in such private or public offering is at least $4.00 per Share, the Additional Option shall be for Fifty Thousand (50,000) Shares (for an aggregate of 450,000 Shares subject to the Option and Additional Option); and (ii) if the price per Share in such private or public offering is at least $4.50 per Share, an additional Fifty Thousand (50,000) Shares shall be subject to the Additional Option (for an aggregate of 500,000 Shares subject to the Option and Additional Option). Employer shall immediately grant the Additional Option to Employee as of the date the right to the Additional Option arises. B) VESTING OF EXERCISE RIGHTS. Employer hereby agrees that the Option shall vest, and provide Employee with rights of exercise, as follows: Employee may first exercise the Option to purchase the first One Hundred Thousand (100,000) Shares beginning on July 6, 1998. Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on October 6, 1998 (for an outstanding total of 125,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on January 6, 1999 (for an outstanding total of 150,000 Shares). - 5 - Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on April 6, 1999 (for an outstanding total of 175,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,ODO) Shares, beginning on July 6, 1999 (for an outstanding total of 200,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on October 6, 1999 (for an outstanding total of 225,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on January 6, 2000 (for an outstanding total of 250,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on April 6, 2000 (for an outstanding total of 275,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on July 6, 2000 (for an outstanding total of 300,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on October 6, 2000 (for an outstanding total of 325,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on January 6, 2001 (for an outstanding total of 350,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on April 6, 2001 (for an outstanding total of 375,000 Shares). Employee may first exercise the Option to purchase an additional Twenty Five Thousand (25,000) Shares, beginning on July 6, 2001 (for an outstanding total of 400,000 Shares). Employer hereby agrees that the Additional Option shall vest, and provide Employee with rights of exercise, as follows: - 6 - Employee may exercise the Additional Option to purchase twenty-five percent (25%) of the Shares subject to the Additional Option beginning on the date the Additional Option arises. Employee may exercise the Additional Option to purchase an additional twenty-five percent (25%) of the Shares subject to the Additional Option beginning on the later of June 22, 1999 or the date the Additional Option arises (for an aggregate of fifty percent of the Shares subject to the Additional Option). Employee may exercise the Additional Option to purchase an additional twenty-five percent (25%) of the Shares subject to the Additional Option beginning on the later of June 22, 2000 or the date the Additional Option arises (for an aggregate of seventy-five percent of the Shares subject to the Additional Option). Employee may exercise the Additional Option to purchase an additional twenty-five percent (25%) of the Shares subject to the Additional Option beginning on the later of June 22, 2001 or the date the Additional Option arises (for an aggregate of one hundred percent of the Shares subject to the Additional Option). The foregoing notwithstanding: (i) in the event of a "Transaction of the Employer (as defined in the Plan), or, (ii) in the event of as in the event the employment of Employee is terminated for any reason other than Cause (as hereinafter defined) or other than Employee's voluntary decision to leave the employ of Employer, then in any such case all outstanding options (i.e. all rights of purchase under the Option and the Additional Option, if any), shall immediately vest and Employee (or the representatives of Employee) shall have the immediate and continuing right (in accordance with the other terms hereof) to purchase all of the Shares subject to such options. C) RESTRICTIONS ON STOCK. The option agreement may provide that any Shares purchased by Employee pursuant to the Option or Additional Option are subject to a right of first refusal by the Employer for a period not to exceed three (3) years after Employee first purchases such Shares. Such right of refusal shall state that if Employee desires to sell all or a part of the Shares, then Employee shall first offer to sell such Shares to Employer at the same price and on the same terms and conditions as the proposed sale. Employee shall deliver to Employer a complete and accurate written statement of the terms and conditions of - 7 the proposed sale, and shall either (i) identify a confirmed buyer who is ready, willing and able to purchase Employee's shares, or (ii) state that Employee has arranged to sell such Shares publicly through a broker. If Employer desires to purchase such Shares of Employee, then Employer shall notify Employee of such decision in writing within three (3) full business days after the receipt by Employer of the aforesaid written statement. The parties shall then complete such sale and purchase of the subject Shares within fifteen (15) days following the receipt by Employee of such written notice of purchase by Employer (but only if such notice is timely). If Employer does not notify Employee of its decision to purchase the Shares within said three (3) day period, or provides Employee with written notice that Employer does not elect to purchase such Shares, then Employee may sell such Shares, but only pursuant to the terms and conditions of the proposed sale previously communicated to Employer, and only within the thirty (30) day period following the expiration of the three (3) day Employer decision period. Any such right of refusal shall further provide that notwithstanding the foregoing, no rights of first refusal of any nature shall exist with respect to any of the Shares if the stock of Employer (of the same class) has previously been the subject of a completed public offering. D) CHARACTER OF OPTIONS. Employer agrees that all options granted to Employee as specified herein shall, to the maximum extent permissible under applicable law, be "Incentive Stock Options" as defined in the Plan which qualify under ss.422 of the Internal Revenue Code. E)STRIKE PRICE. Employer agrees that the purchase price of the Shares subject to the Option shall be the average of the mean closing "bid" and "ask" price for such stock for the five trading days previous to the date of grant, or July 6, 1998. Employer agrees that the Price of the Shares subject to the Additional Option shall be the average of the mean closing "bid" and "ask" price for such stock for the five trading days previous to the date of grant F) TERM OF OPTIONS. Employer agrees that the term of the options granted hereunder shall be five (5) years from the date of grant, unless such option sooner expires in accordance with the following: (I) DEATH OR DISABILITY. In the event the employment of Employee terminates as the result of death or Disability (as hereinafter defined), Employee or his representatives may exercise all outstanding vested options - 8 - for a period of one (1) year after the date Employee's employment terminates. (ii) Cause. In the event the Employer elects to terminate the employment of Employee for Cause, as hereinafter defined, all options which have not yet vested shall expire as of the date of such termination; provided, however, that the Employee may exercise all outstanding vested options for a period of ninety (90) days after the date Employee's employment terminates. (III) OTHER REASONS. In the event the employment of Employee terminates for any reason other than death, Disability, Cause or retirement, all outstanding options shall immediately vest and Employee or his representatives may exercise all of the granted options for a period of ninety (90) days after the date Employee's employment terminates; provided, however, that if Employee unilaterally and voluntarily terminates his employment hereunder (other than for retirement at normal retirement age as set forth in the Plan), then all outstanding options which have not vested shall expire, and Employee or his representatives may exercise all of the theretofore vested options for a period of ninety (90) days after the date Employee's employment terminates. G) ADJUSTMENT OF SHARES. Employer agrees that all options granted to Employee shall contain adequate provisions to protect against any change in the outstanding stock of Employer through any stock dividend or split, reorganization, recapitalization, merger, consolidation or other similar form of corporate transaction which affects the capital structure of Employer, so that the number and type of Shares subject to such option are appropriately adjusted by the Board of Directors to reflect such change. the event of any TRANSACTION WHICH (as defined in the Plan) or the liquidation of the Employer or the sale of substantially all of the assets of the Employer, such options shall provide that: (i) outstanding options shall remain in effect in accordance with their terms; (ii) outstanding options shall be converted into options to purchase securities issued by the surviving or acquiring company; or (iii) the Board of Directors shall provide a 30 day period prior to the consummation of such transaction during which all outstanding options vest and may be exercised whereby such exercise is contingent upon and concurrent with the actual consummation of the transaction. - 9 - H) COMPENSATION ADJUSTMENT. Employer agrees that all options granted to Employee shall contain a provision to reimburse Employee, and Employer hereby agrees to reimburse Employee, against the effect of "golden parachute taxes" as follows: Compensation Adjustment. The Company shall pay to the Participant an amount equal to the excise tax under Internal Revenue Code Section 4999 (as amended), if any, incurred by Participant by reason of any excess parachute payment under this Agreement as a result of the acceleration of option vesting hereunder because of a Change of Control as defined herein. In addition, the Company shall pay the Participant an amount equal to all excise taxes and federal, state and local income taxes incurred by the Participant as -6. a result of any payment made Attached to this Agreement as Exhibit [_] I " is an example. of the computation of such payments. Such payments shall be made no later than the date the Participant is required to pay the excise tax under Code Section 4999 or is required to remit amounts for withholding applicable to such excise tax. All determinations of amounts required to be paid under this paragraph 12 shall be made by the Company's independent accounting firm which shall provide detailed supporting calculations to the Company and the Participant. In computing taxes, the accounting firm shall use the highest marginal federal, state and local income tax rates applicable to the Participant. An example of the foregoing calculation is attached hereto as Exhibit "A." 10. TERMINATION. In addition to the termination of Employee's employment upon expiration of the current term, the employment of Employee may sooner terminate as follows: A) DEATH OF EMPLOYEE. The employment of Employee hereunder shall terminate immediately upon his death. B) DISABILITY OF EMPLOYEE. The Employer may terminate the employment of Employee hereunder if the Employee has suffered a Disability (as hereinafter defined) for a period of at least three (3) continuous months. The term "Disability" shall mean the inability of the Employee to perform his normal duties and functions by reason of a physical or mental condition. - 10 - C) EARLY TERMINATION FOR CAUSE. Any provision in this Agreement to the contrary notwithstanding, Employer shall have the option to terminate Employee's employment hereunder for Cause immediately and at any time. "Cause" as used herein shall mean the following: (i) Employee engages in any business that is competitive with that of the Employer while an employee; (ii) Employee commits any material act of dishonesty, including but not necessarily limited to theft or embezzlement of funds or property of the Employer, or perpetrating a fraud on or affecting the Employer; (iii) Employee engages in any gross negligence or willful misconduct with respect to his duties and responsibilities as an employee or Employee acts in any other way that has a direct, substantial and adverse effect on the Employer's reputation, including but not limited to willful or grossly negligent disregard for the Employer's obligation to comply with laws, regulations and the like applicable to Employer, its properties, assets or business; (iv) Employee's conviction of a felony; (v) Employee repeatedly fails to follow the instructions or directions of the Board of Directors as set forth in duly adopted resolutions of such Board; or (vi) Employee repeatedly fails to follow the instructions or directions of the Chief Executive Officer, provided such instructions or directions do not contravene any applicable laws or governmental regulations, any policies or resolutions of the Board of Directors, or sound business practice or policy (as determined by the Board of Directors). 11. COMPENSATION UPON TERMINATION. If the employment of Employee is terminated for any reason, Employer shall owe Employee all base salary as set forth in Section 4 of this Agreement which has accrued through the date of such termination, all fringe benefits which have accrued through the date of such termination, if any, and all properly incurred expenses which have not yet been reimbursed. If the employment of Employee is terminated for any reason other than cause, Employer shall owe Employee a pro rated portion of the cash performance bonus as set forth in Section 5, based on the number of calendar months in the current fiscal year, including the full calendar month which includes the date of termination. For purposes of calculating such bonus, revenues through the end of the calendar month during which termination occurred shall be annualized. If the employment of Employee is terminated for any reason other than death, disability, cause or Employee's voluntary decision to terminate his employment hereunder, then Employee, in addition to the foregoing, shall be entitled to all base salary from the date of termination through the end of the then current term of employment. For example, if the current employment term is two years, and such termination occured in the sixth month thereof, the remaining 18 months of base salary shall be payable to Employee. In addition, Employee shall be entitled to exercise stock options in accordance with the provisions of Section 9 above. - 11 - 12. Notices. All notices, consents, approvals or other communications which are required to be made in writing hereunder shall be deemed to have been duly given, made or served upon delivery if delivered in person or by overnight courier, or upon the first to occur of actual receipt or the third business day after mailing, if mailed by registered or certified mail, first class postage prepaid, receipt requested, to the parties at the following address: If to Employer: Klever Marketing, Inc. 350 West 300 South, Suite 201 Salt Lake City, Utah 84101 Attention: Paul G. Begum With a copy to: Parsons Behle & Latimer Utah Center One 201 South Main Street, Suite 1800 Salt Lake City, Utah 84145-0898 Attention: J. Gordon Hansen If to Employee: Gerard Coelsch 1305 Biggin Church Road S. Jacksonville, Florida 32224-7686 With a copy to: Korn & Zehmer P.A. 6620 Southpoint Drive South Suite 200 Jacksonville, Florida 32216 Attention: John Zehmer Notice of a change in address shall be made in writing as provided herein, and effective only upon actual receipt. 13. ENTIRE AGREEMENT. This Agreement embodies the entire Agreement between Employer and Employee, and there are no agreements, representations or warranties, oral or written, between Employer and Employee other than those set forth or provided for in this Agreement. This Agreement may not be modified or changed, in whole or part, except by a supplemental agreement signed by the Employer and Employee. 14. ASSIGNMENT, RIGHTS AND OBLIGATIONS OF SUCCESSORS. This Agreement is personal in its nature and neither of the parties hereto shall assign or transfer this Agreement or any rights or obligations hereunder. The foregoing shall not be construed to prohibit Employer from engaging in any reorganization, recapitalization, - 12 - merger, consolidation, exchange of shares, sale of substantially all of the assets, or other similar types of corporate transactions. 15. DISPUTES. a) The provisions of this paragraph 15 shall be the sole and exclusive remedy for any default under or breach by any party of any term or provision of this Agreement, and no claim may be brought under this Agreement except in accordance with and pursuant to the terms of this paragraph 15. In the event there is a dispute under this Agreement, the parties shall meet with one another and diligently attempt to resolve their disagreements. If they are unable to do so, then upon the request of any party to the dispute, they will mediate the dispute, utilizing an impartial mediator pursuant to the rules of the American Arbitration Association ("AAA") or any other reputable organization that sponsors mediation upon which the parties shall mutually agree. If, after thirty (30) days, the mediation is not successful, then any party to the dispute may institute an arbitration proceeding in accordance with this paragraph 15 to resolve the dispute, but only if such party makes a written demand to do so within twelve 0 2) months of the date the above-ref erenced thirty day mediation period expires. b) If negotiations and mediation are unsuccessful and a party makes a timely written demand for arbitration, the arbitration shall occur before a single arbitrator in Salt Lake City, Utah, in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA") and chosen by the AAA. Such rules notwithstanding, the arbitrator shall be an attorney at law who has experience in employment law issues. The arbitrator shall base his decision on applicable principles of law and equity, taking into account all relevant statutes, case law and other relevant legal authority. The parties agree that the interpretation, legal effect and enforcement OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF UTAH. UPON THE REQUEST OF ANY PARTY, the arbitrator will include in his award findings of fact and conclusions of law upon which the award is based. The arbitrator may grant such legal or equitable relief as he deems appropriate, including money damages, specific performance and injunctive relief. c) Questions of whether a dispute is subject to arbitration shall also be decided by the arbitrator. Within ten (10) days after the appointment of the arbitrator, each party to the dispute shall present to the arbitrator a written statement of the issues in dispute. Within five (5) days thereafter, the arbitrator shall give notice to the parties of a - 13 - [GRAPHIC OMITTED] preliminary hearing to discuss the issues and discuss timetables for discovery, which hearing shall be held as soon as reasonably possible. Each party shall be entitled to perform discovery in accordance with the applicable rules of civil procedure for civil actions in the state courts located in the State of Utah. The arbitrator shall set reasonable time periods for the taking of discovery, with the goal of expediting and completing such process in a timely and prompt fashion. The final arbitration hearing shall occur within forty-five (45) days after the closing of all discovery, but in no event more than one-hundred eighty (180) days after the date of the preliminary hearing. d) Any party may request and obtain from a court of competent jurisdiction provisional or ancillary remedies for relief, such as an injunction, but the institution of a judicial proceeding will not constitute a waiver of the right of a party to submit a dispute to arbitration. A court of competent jurisdiction may enter a judgment upon an arbitration award. Subject to the award of the arbitrators, each party shall pay an equal share of the arbitrator's fees, except that the arbitrators shall have the power to determine and award all expenses (but not including attorneys' fees) to the prevailing party. The parties shall maintain all matters relative to the arbitration, including the result thereof, as confidential. 16. HEADINGS; REFERENCES TO SECTIONS. The headings of the sections, paragraphs and subparagraphs of this Agreement are solely for convenience and reference and shall not limit or otherwise affect the meaning of any of the terms or provisions of this Agreement. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but which together constitute one and the same instrument. 18. SEVERABILITY. In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be judicially declared to be invalid, illegal, unenforceable or void in any respect, such declaration shall not have the effect of invalidating or voiding the remainder of this Agreement and the parties hereto hereby agree that the part or parts of this Agreement so held to be invalid, illegal, unenforceable or void will be deemed to have been stricken herefrom and the remaining provisions of this Agreement will have the same force and effect as if such part had never been included herein. 19. DELAY OR OMISSION. No delay or omission of a party to exercise any right, power or remedy under this Agreement or accruing upon any default hereunder shall - 14 - exhaust or impair any such right, power or remedy, or shall be construed to waive any such default or to constitute acquiescence therein. Every right, power and remedy of a party hereunder may be exercised from time to time and as often as may be deemed expedient by such party. 20. Waiver of Breach. No waiver of any default hereunder shall extend to or affect any subsequent default or another default then existing or impair any rights, powers or remedies consequent thereon. 21. CUMULATIVE RIGHTS. No right or remedy conferred upon or reserved to any party herein is intended to be exclusive of any other right or remedy available to such party at law, in equity or otherwise. Each and every right and remedy is cumulative. 22. SURVIVAL. Except as otherwise specifically provided herein, the representations, warranties and other undertakings of the Employer and Employee contained herein, which are to be observed or performed subsequent to the termination of Employee's employment or the termination of this Agreement, shall survive such termination. 23. CONSTRUCTION OF AGREEMENT. The parties agree that in the event any court or other tribunal construes or interprets any provision hereof, that such court or other tribunal shall not strictly construe any such provision or any ambiguity therein in favor [THE REST OF THIS PAGE IS INTENTIONALLY BLANK] - 5 - of or against either party hereto based upon any rule that one party has drafted such provision or that one party has superior bargaining power or knowledge. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 26 th day of June, 1998. EMPLOYER: KLEVER MARKETING, INC. Witness Witness . Witness 'Witness COELSCH\COELEA.4 By: Chief Executive Off EMPLOYEE: CC. COELSCH - 16 - EXHIBIT A COMPUTATION OF COMPENSATION ADJUSTMENT TO EMPLOYEE 1. Excess Parachute Payment Subject to Excise Tax $50,000 2. Excise Tax on Item 1 @ 20% $10,000 3. Total Additional Payments Due $22,292* 4. Verification of Payments Due a) Excise Tax on new $22,292 @ 20% $4,458 b) State Income Tax on $22,292 @ 6% 1,338 c) Federal Income Tax on $22,292: (i) Additional Income $22,292 (ii) State Tax Deduction ( 1,338) (iii) Net Additional Income $20.954 (iv) Federal Income Tax @ 31 % 6,496 d) Total Taxes on Payments Due $12,292 e) Net Amount Available to Optionee to pay excise tax (see no. 2 above) $10,000 f) Total Amount Paid to Employee $22,292 The formula used to compute the amounts due to Employee is to divide the excise tax amount on the excess parachute payment by a percentage equal to 100% less the sum of the excise tax percentage plus the federal and state income tax percentage less a percentage determined by multiplying the federal tax percentage times the state tax percentage (if applicable). Thus, in the example above, the following percentages would be subtracted from 100 %: 1 ) Excise Tax Percentage 20% 2) State Tax Percentage 6% 3) Federal Tax Percentage 31% Total 75% Less 31 % times 6% 1.86% 55.14% The resulting percentage of 44.86% is divided into 10,000 = $22,292 -17 - [GRAPHIC OMITTED] RIDER "A" TO EMPLOYMENT AGREEMENT There shall be no adjustment in the Exercise Price, and no adjustment in the number of Shares which may be received by the Employee upon exercise of the Option, as a result of the sale or issuance by the Employer of additional shares of its capital stock to a third party for a consideration that is greater or less then the purchase price of the Option. For example, (i) if the Employer were to issue additional shares of common stock through a stock divided at the rate of two shares for each issued and outstanding share of common stock, then the Exercise Price shall be decreased by 2/3's and the number of shares subject to the Option shall be increased by three times; and (ii) if the Employer were to sell 10,000 shares of common stock to XYZ Company for $20,000 (i.e., $2 per share), and the Exercise Price hereunder is $4.00 per share, there shall be no adjustment hereunder. EX-27 3 0003.txt FDS 06/30/00
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF KLEVER MARKETING, INC. AS OF JUNE 30,2000 AND THE RELATED STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE THREE AND SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-2000 JUN-30-2000 0 0 155 0 0 155 1358 66 2298 1077 0 0 1 121 1099 2298 0 0 0 0 1660 0 21 (1488) 0 (1488) 0 0 0 (1488) (.12) (.12)
-----END PRIVACY-ENHANCED MESSAGE-----