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, 2011
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.)
     
     
30251 Golden Lantern
Suite E, PMB 411
Laguna Niguel, CA
 
 
 
92677-5993
(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  o    No  T
 
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 $0.03 as quoted on the OTCBB, on December 31, 2011, is $771,433. 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 25,714,441.
 
As of March 22, 2012, there were 45,716,377 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
     
 
Explanatory Note
iii
     
PART I
     
Item 1.
Description of the Business
1
     
Item 1A.
Risk Factors and Uncertainties
3
     
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
13
     
Item 14.
Principal Accountant Fees & Services
14
     
Item 15.
Exhibits and Reports on form 10-K
15
     
Signatures   18 
 
 
 
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

 

 
EXPLANATORY NOTE

On April 8, 2011, while the Company was in the final stages of preparing its 2010 10-K Report, Klever was notified that our former auditor, Chisholm, Bierwolf, Nilson & Morrill, LLC (Chisholm) was sanctioned by the Public Company Accounting Oversight Board (PCAOB).  This action occurred as a result of activities in 2006 and 2007 with other public companies.  None of these activities involved Klever Marketing in any way.  However, this sanction resulted in de-registration of Chisholm such that they were unable to issue their consent to the 2009 financial statements, which are a necessary part of our 10-K filing.  Accordingly, our prior year financial statements had to be re-audited by our current auditor, Haynie & Company before the 10-K could be filed.  The re-audit could not be performed in time to meet the 10-K filing deadline, which resulted in Klever being late with this filing.  In connection with the requirement to re-audit, on April 27, 2011, the Company submitted a written request to the SEC requesting a waiver of having to go back and re-audit the Company’s inception to date cumulative financial statements covering the period July 5, 1996 to December 31, 2008.  On May 5, 2011, the Company received a letter from the Securities and Exchange Commission (SEC) stating that the SEC would not object to our request.  As such, the Company has only had the 2009 financial statements re-audited and the Company’s cumulative inception to date financial statements are labeled as unaudited in this 10-K Report.
 
 
 
 
 
 
 
 
 
 
 
 
 


 
iii

 
 

PART I

ITEM 1.   DESCRIPTION OF THE BUSINESS

General

Klever Inc. was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, manufacture and market electronic in-store advertising, directory and coupon services which have potential for profit.  The Company has successfully conducted two in-store demonstrations of its technology – the latest being in 2009 with the release of the Giving Cart and its Retailer Chime-Time Awards Program.  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.
 
History

The Company, which began as a part of Information Resources, Inc. (“IRI”) in 1987, was incorporated as a subsidiary of IRI under the laws of the State of Delaware on December 8, 1989, and was fully distributed to stockholders of IRI in a spinoff on October 31, 1990.  At the time of the spinoff, a portion of the business and assets of the Company included a software operation in Australia, which was sold in March, 1993.  The Company (VideOCart, Inc.) filed petitions for relief under Chapter 11 bankruptcy in December 1993.  The Company was inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a reverse merger and changed its name to Klever Marketing, Inc.  During the period from July 5, 1996 to December 31, 2003, the Company was in a development stage, except for an approximate 2-month period in 2000 when the Company generated revenue from installations of their Klever-Kart system in stores.

In August 2004, the Company signed a partnership contract with Fujitsu Transaction Solutions (“Fujitsu” or “FTXS”).  Under this contract, Fujitsu committed to manufacture and develop the hardware for a cart-based, advertising and promotional device offering (the U-Scan Shopping Cart), to develop relevant and required software and applications to support the device, to act as sales lead for the solution and hardware sell-in process and to provide for technical installations, IT implementation, and support for all retail locations.  The Company and Fujitsu agreed to jointly share responsibility for marketing into Fujitsu’s current retail client base for the initial nationwide sales effort.  The Company likewise agreed to act as sales lead for the participant sell-in of advertising and promotion space to both retailers and manufacturers.

In 2007, the Company was informed by Fujitsu that they were restructuring their US management team and had reprioritized their go-to-market model, which would no longer include pursuing the joint deployment of U-Scan Shopping Carts in the US marketplace, as this was no longer part of their US business strategy. As a result, Fujitsu amicably disengaged from collaborative deployment discussions with the Company.  Fujitsu paid the Company $25,000 related to the sale of its international Patents and Patent work done by the Company on Fujitsu’s behalf.  Importantly post-Fujitsu through 2008, the Company pursued alternative deployment approaches; continued efforts to protect its Patents against potential infringement; and explored opportunities to deploy its product with interested retailers.

During 2009, The Company made a number of significant structural changes, followed by a successful rollout and demonstration of an updated product – all accompanied by continued strengthening of its patent portfolio.  The prior board of directors resigned at the end of 2008 and a new, revitalized board of directors was installed in January, 2009 with plans to develop a technically improved, significantly lower cost wireless shopping cart unit for installation with a major retailer chain.  This upgraded unit was designated the Giving Cart™ with its Retailer Chime Time ™ Rewards Program.     The Company’s founder, Paul G. Begum, was reinstated on the Board and is the current operating CEO.  Under the returning chairman’s guidance, the Company was able to focus its resources on new technology developments. Financing was obtained for an updated wireless portable shopping cart unit taking advantage of improved technologies available since the last product release.  This unit was produced at a significantly lower cost with significant software improvements that allow for rapid and efficient data updates to improve the effectiveness of advertising.

The Company achieved a rapid 6-month product development, and a pilot store was installed in August, 2009 followed by a successful 3-month product demonstration at The Market in Park City, Utah.
 
To continue to protect the Company’s patent rights, our patent attorneys filed and obtained additional trademarks, including comprehensive new “wrap around” patents.
 


 
1

 


2011 Mobile Application Development and Implementation

The Company made considerable progress on its mobile application development and implementation during 2011.  The software programming of both our KleverShop™ and KleverDash™ applications were completed to the Beta phase ready for in-store demonstration.  The Sales and Marketing effort ramped up during the year with the hiring of a Sales and Marketing Manager, who provided refinements to our marketing plan that allows us to specifically target our market penetration strategy and tactics.  Additionally, we hired a highly knowledgeable retail consultant to open doors to additional retailer contacts and assure that our message was on track with their needs.  It is important to understand that as advanced as our KleverShop™ and KleverDash™ applications are, we are fundamentally a solutions company helping our retail and supplier clients develop and implement their mobile strategies.  Residing in the KleverKloud™, our KleverDash™ product allows retailers to establish and manage digital promotion campaigns with far greater accuracy and flexibility than they are now able to achieve.  This product alone can revolutionize the way consumers, retailers and suppliers interact.  Our Sales and Marketing team launched a new website early in 2012 which highlights the features of our new products and our mobile management platform.

The KleverShop™ experience begins with the creation of the shopping list. Whether they are items scanned in the home or items identified using an electronic shopping list template or through a downloaded recipe, the consumer can easily build a shopping list. The Company believes that the Klever system will make building a shopping list efficient and fun for the consumer while simultaneously creating the first touch point for learning their preferences and needs. With the initial shopping list complete, consumers will no longer need to wade through an ocean of coupons looking for the few they want. Instead, the coupons they want and need will come to them automatically. Additionally, suppliers and retailers will have the opportunity to up sell their products and make a direct and targeted impression on the consumer which should significantly contribute to basket up lift. This business model not only will save the consumer valuable time, but the simplicity of this process which is a key differentiator for Klever Marketing, is expected to save the Consumer Packaged Goods (“CPG”) companies and retailers time and money.
 
Using GPS capabilities, consumers can identify, select and check into the grocery store of their choice. Once in the grocery store, the consumer’s mobile device will become an indispensable shopping tool. Key features that consumers will benefit from with the Klever system include receiving personalized messages and special offers, taking advantage of in-store services such as placing deli and pharmaceutical orders, and redeeming coupons at checkout. With a simple scan or on-line retrieval, the consumer will be able to receive important information about a product while being empowered to make informed buying decisions. All of these features will help make the consumer more efficient and effective during their shopping experience.

Beyond the initial product release, plans are already being made to incorporate additional features and capabilities that promise to keep Klever Marketing in the vanguard of the shopping experience. Some of these include an intuitive and intelligent shopping list that learns what a consumer wants from their historic buying habits. Tell-a-Friend options that, through blogs and social networks such as Facebook, allows a consumer to share and receive recommendations and experiences. This form of viral marketing should prove to be an extremely valuable tool for CPG companies and grocery retailers to strengthen consumer loyalty and increase store sales. Also, integrating redemption and loyalty programs at checkout promises even more convenience for consumers in addition to generating tremendous savings.

Anticipated Business Development in the Next 12 Months

2012 promises even more advances in the Company’s product implementation.  As of the printing of this report, Klever has signed a Letter of Intent with a local retailer for demonstration of the Beta product including testing and ongoing refinements to assure it meets product requirements and customer ease of use.  From here the Company will be utilizing its newly installed Customer Relationship Management (“CRM”)  system to expand its retail store and supplier marketing with the goal of launching in major market chain by mid-year.

Notable progress is being made, and the Company is optimistic about its future.  However, we must caution the reader that Klever 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.


 
2

 

 
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.
 
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, 2011, 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 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. 
 

 
3

 


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. 
 
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 by Wilson Davis & Company and reflects the highest and lowest closing prices during each quarter.

2011:
 
High
 
Low
First Quarter
 
$0.06
 
$0.03
Second Quarter
 
$0.05
 
$0.03
Third Quarter
 
$0.06
 
$0.02
Fourth Quarter
 
$0.05
 
$0.01
 
2010:
 
High
 
Low
First Quarter
 
$0.05
 
$0.03
Second Quarter
 
$0.04
 
$0.01
Third Quarter
 
$0.07
 
$0.02
Fourth Quarter
 
$0.08
 
$0.03

The number of shareholders of record of the Company's common stock as of December 31, 2011 was approximately 902.

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 January 12, 2010, 50,000 shares of common stock were returned to the Company by Robert Campbell to correct an error by the registration agent.

On August 30, 2010, the Company issued 500,000 shares of common stock to the Isaac Azar Enteminan Trust for cash of $75,000.  The shares were valued at $.15 per share.

On February 22, 2011, the Company issued 250,000 shares of common stock to Kendall Gray and Lind Garf Jt WROS for cash of $37,500.  The shares were valued at $.15 per share.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the Commission reports regarding initial ownership and changes in ownership.  Directors, executive officers, and greater than 10% stockholders are required by the Commission to furnish the Company with copies of all Section 16(a) forms they file.

 
5

 

 
Beneficial Ownership Compliance Reporting

The Company is aware of the following share and option transactions for the reporting period ending December 31, 2011 for which Form 4 or Form 5 were not filed.

Name
Officer or Board
Number of Shares
 Share Price
 Option Price
 Total Cost
Date
No. of
Years
Kendall Gray & Lind Garff  JTWROS (c)
No
250,000
$0.15
 
$37,500
2/22/2011
 
Bierwolf Morrill & Nilson PLLC (b)
No
50,000
$0.13
 
$6,730
3/11/2011
 
Jermiah Cox  (f)
No
44,000
$0.25
 
$11,000
9/28/2011
 
David Hardman  (a)
No
87,293
$0.15
 
$13,325
9/28/2011
 
Anthony Begum (d) (e)
No
300,000
$0.10
 
$30,000
9/28/2011
 
Anthony Begum (a)
No
139,000
$0.10
 
$13,900
10/6/2011
 
Anthony Begum (a)
No
161,000
$0.10
 
$16,100
10/6/2011
 
Yesco LLC (b)
No
10,000
$0.25
 
$2,500
12/30/201
 
 

(a) Stock issued in lieu of expense
(b) Stock issued in lieu of debt
(c) Stock issued for cash
(d) Stock subsequently returned
(e) Stock subsequently cancelled
(f) Stock issued for stock deposit made prior to 2011
 
ITEM 6.  SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS
 
We advise anyone relying upon this report that any statement of earnings by the Company for the calendar year ending December 31, 2011 and 2010 have been obtained partially through the reduction, adjustment or termination of various debt obligations and does not reflect revenues to the Company from operations.  For the year ended December 31, 2011, the Company’s primary source of funding came through the sale of certain non-core intangible assets.
 
The Company is dependent on obtaining additional capital or an operations partner in order 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 and during the past year has relied exclusively upon interim capital financing for its continuation.
 

 
6

 


Results of Operations - For the year ended December 31, 2011, the Company generated net income of $208,641 as compared to a net loss of $393,001 for the year ended December 31, 2010.  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 2011and the Company received net proceeds of $492,031 after paying commissions associated with the sale.  Management used the net proceeds to fund development costs associated with its mobile technology and to cover ongoing operating expenses.  The 2010 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 2011 or 2010.  During 2011, the Company’s expenditures were directed at defining and validating the Company's new direction, preparing mobile application requirements, developing the software to meet these requirements, and contacting retailers and CPG companies to confirm the marketability of the application and database.

General and administrative expenses for the year ended December 31, 2011 increased by $76,720 or 20.23% to $455,865 from $379,145 for the year ended December 31, 2010.   The primary reason for the overall increase in general and administrative expenses is due to increases in legal fees and management compensation of $12,148 and $171,000, respectively resulting primarily from increased legal costs for contract work and due to the officers of the Company accruing increased compensation. These increases were partially offset by decreases for outside services, accounting, and commissions which decreased by $45,950, $7,500, and $35,000, respectively.  During 2011, compensation for officers and bookkeeping totaled $231,000 compared to the Company recording $60,000 for contributed services which related to the estimated fair value of services provided by the Company’s CEO and COO who took no compensation during 2010.  Only $6,750 of the  2011 compensation accrued for the CEO and COO was paid in 2011.

During the year ended December 31, 2011, research and development costs decreased by 71.58% from $95,225 in 2010 to $27,063 in 2011.  During 2011, the Company incurred more costs to develop its technology than it did in 2010; however, the decrease in R&D expenses was due primarily to the Company obtaining technological feasibility with its mobile software development and capitalizing $118,620 of development costs.

Other income (expense) increased to $692,469 in 2011 from $81,810 in 2010 representing an increase of $610,659.  The increase is primarily due to the Company selling certain IP addresses that are noncore to the Company’s business and were fully amortized.  The Company received net proceeds of $492,031 from the sale of these assets.  The Company did not sell any assets during 2010.  In addition, the Company recorded a $177,000 due to the cancellation of certain agreements with a private investor and an investment banking firm which resulted in the Company receiving $9,000 in cash plus the return of 1,150,000 shares of common stock. The Company recorded $67,566 of forgiveness of debt income in connection with the Company entering into settlement agreements with one of its creditors and due to one creditor agreeing to waive all of its finance charges during 2011. In 2010, forgiveness of debt income totaled $102,422 as a result of the Company entering into settlement agreements with two of its creditors.

Liquidity and Capital Resources – The Company has not received, recorded, or consolidated revenue from ongoing operations and has relied on equity transactions, loans, and proceeds from selling non-core assets to fund development of our business plan and the costs of ongoing operations.  Management intends to raise additional funds through selling private placement offerings, targeting strategic partners in an effort to increase revenues, and expanding revenues through strategic acquisitions.

Cash used by operating activities – Cash used for operating activities totaled $175,485 for 2011 compared with $74,370 for 2010, an increase of $101,115.  The increase in 2011 for cash used by operating activities was primarily due to an increase in net income of $601,642 from a net loss of ($393,001) in 2010 to net income of $208,641 for 2011.  Non-cash expenses relating to shares issued for services totaled $28,986 in 2011 compared to $195,788 in 2010. During 2011 stock returned for services not rendered and gain on sale of assets totaled ($175,100) and ($492,031) compared to $0 for both categories in 2010.  .During 2010, services contributed by the CEO and COO totaled $60,000 compared to zero for 2011.  The Company obtained debt forgiveness of $67,566 in 2011 compared to $102,422 for 2010 as a result of negotiating reductions in amounts owed with certain creditors.  Accounts payable increased by $30,110 in 2011 compared to an increase of $126,519 for 2010.   Accrued liabilities increased by $291,440 in 2011 as compared to an increase of $14,911 for 2010.  The increase in 2011 is primarily due to increased accruals for officer compensation and interest.   At December 31, 2011, the Company had accrued $269,250 for officer compensation.  The Company’s CEO was paid $6,750 in 2011.  No other executive compensation was paid. The Company’s officers did not take any compensation in 2010 or 2009.  During 2010, the Company entered into settlement agreements with certain creditors.  Pursuant to the terms of the agreements, the Company had to pay off the amounts owed in the settlement agreements by March 2011.  If the payments were not made, the Company had to accrue interest on the total outstanding obligation owed.  The Company was not able to meet the scheduled payments in accordance with the settlement agreements.  As a result at December 31, 2011, the Company had accrued interest of $94,475 compared to $59,555 as of December 31, 2010, an increase of $34,920.


 
7

 


Cash provided (used) by investing activities – During the year ended December 31, 2011, the Company generated cash from investing activities of $359,737 compared to cash used for operating activities of ($65,550) for the year ended December 31, 2010.  In 2011, the Company generated cash from selling certain non-core IP addresses of $492,031 partially offset by capitalized software development costs of $104,720 and costs spent on obtaining patents and trademarks on its intellectual property of $27,574.  In 2010, the Company incurred $65,000 of capitalized software development costs and $550 for purchasing a new domain name.  The Company obtained technological feasibility for its software development in December 2010.   Prior to obtaining technological feasibility, the Company expensed all of its development costs as research and development expenses.

Cash (used) provided by financing activities – Cash used for financing activities for 2011 totaled ($7,450) compared to cash provided by financing activities totaled $119,950 for 2010.  During 2011, the Company received proceeds from the sale of its common stock of $37,500 and made net payments on loans made by its officers of $44,950.  During 2010, the Company received proceeds from selling common stock of $75,000 and received proceeds from loans from its officers totaling $44,950.

As of December 31, 2011, our cash position was $177,873, compared with $1,071 as of December 31, 2010.  We anticipate continuing development and marketing expenses in future periods as the Company further develops and begins testing its technologies.  We anticipate hiring additional employees for this 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 testing and market its new mobile products and to continue research and development and operating expenses for which the Company has relied on short-term borrowings and the issuance of restricted common stock.  There are no formal commitments from banks or other lending sources for lines of credit or similar short-term borrowings.  From time to time in the past, required short-term borrowings have been obtained from a principal shareholder or other related entities.

Factors That May Affect Future Results - Management’s Discussion and Analysis contains information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions.  There can be no assurance that actual results will not differ materially 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 statements disclosure.

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.


 
8

 


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, 2011, 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 four 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, plus an Audit Committee 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 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 with regard to our monitoring and ensuring compliance with key controls including regard to our authorized shares for preferred stock and in ensuring that stock certificates are issued to subscribers in a timely manner.
 
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.

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, 2011, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO.

As of December 31, 2009, the Company had a member of its Audit and Compliance Committee (“Audit Committee”) resign leaving the Company with only one person serving on its Audit Committee.  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 an additional member to the  Audit Committee and charge them with assisting the Company in addressing the material weaknesses.   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 2011 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
68
Chairman/CEO
Future shareholder meeting
       
Robert A. Campbell
67
COO and CFO
Future shareholder meeting
       
Jerry P. Wright
58
Director
Future shareholder meeting

Paul G. Begum, Founder, age 68 returned to the Board of Directors in February, 2007.  Paul currently serves as Chairman and CEO. Paul has substantial entrepreneurial experience managing and owning controlling interest in HelpUSolve, LLC which operates a number of divisions with products ranging from filtered breathing masks (EnviroAir), food service industry cup liners, script writing, screen plays and theatrical production. Paul also brings substantial and diverse fundraising abilities and negotiating skills to the Board.

Robert A. Campbell age 67 recently retired from Parsons Corporation, a large engineering and program management Company, where he served as senior manager and director of program operations for projects and operations around the world.  He has been responsible for the design and implementation of major software developments and installations.  He has been responsible for finance and controls on multi-billion programs in the United States, Middle East and Asia.  He has broad experience in both managing day-to-day project operations and a portfolio of programs.  Mr. Campbell’s last formal level of education was at the Anderson School of Business at the University of California at Los Angeles where he received his M.B.A. degree in finance.

Jerry P. Wright age 58 is former CEO and President of United Potato Growers of Idaho with a broad experience in the food production, packaged goods manufacturing and retail sales industries.  Jerry has been very successful in adding sales growth and profitability to 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, 2011, the Company had one active board committee, the Audit and Compliance Committee.  Donald Pickett, CPA serves on this committee.  The committee meets annually to determine auditors and scope of the audit, as well as to review the 10K and our audited financials.

Audit Committee Financial Expert

The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that the current member of the audit committee is financially literate and experienced in business matters, and that he is capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert.  However, the board of directors believes that the current member of the audit committee has not obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant.
 
 

 
10

 


ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation

The following table shows the executive compensation paid for the years ended December 31, 2011 and 2010.

(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
 
2011
  $6,750   $0   $0   $0   $0   $0   $0  
                                   
Robert Campbell
COO
 
2011
  $0   $0   $0   $0   $0   $0   $0  

Aggregate Option/SAR Exercises in the Last Fiscal Year and year End Option/SAR Values

The following table sets forth information respecting all individual grants of options and SARs made during the last completed fiscal year, 2011, 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, 2011.

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 63,880,409 (45,512,933 common plus 18,367,476 preferred)  votes as of December 31, 2011.  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
 
                 
Directos and Executive Officers
               
                 
Paul G. Begum (through PSF Inc.)
 
Direct
    10,450,230        
30251 Golden Latern
 
Preferred
    18,367,476        
Suite E, PMB 411
 
Options/Warrants
             
Laguna Niquel, CA 92677
 
Total
    28,817,706       45.11 %
                     
Robert A. Campbell
 
Direct
    4,741,000          
991 Rippey Sreet
 
Preferred
               
El Cajon, CA 92020
 
Options/Warrants
               
   
Total
    4,741,000       7.42 %
                     
Terry Warner
 
Direct
    4,607,262          
(through Mahalo, LLC and Zedeka, LLC)
 
Preferred
               
   
Options/Warrants
               
   
Total
    4,607,262       7.21 %
                     
Total
        38,165,968       59.74 %
 
 
 
12

 

 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Director and Officer Loans to the Company

Loans were made to the Company during 2010 by two officers in the following amounts:

From
 
Principal Balance as of 12/31/2010
   
Borrowings
   
Repayments
   
Principal Balance as of 12/31/2011
 
                         
Paul G. Begum
(through PSF Inc.)
  $ 6,500     $ 5,200     $ 11,700     $ -  
                                 
Paul G. Begum
(through Tree of Stars, Inc)
    5,000               5,000       -  
                                 
 
Robert A. Campbell
    33,450       1,000       34,450       -  
                                 
 
Total
  $ 44,950     $ 6,200     $ 51,150     $ -  
 
All of the above loans were fully repaid during 2011.

 
 
 

 
 
13

 

 
ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES

The following is a summary of the fees paid by the Company to Haynie & Company for professional services rendered for the years ended December 31, 2011 and 2010, respectively.

Service
 
2011
   
2010
Audit Fees
  $ 20,245     $ 8,500  
Audit-Related Fees
    -       -  
Tax Fees
    930       -  
All Other Fees
    -       -  
Total
  $ 21,175     $ 8,500  

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 Haynie & Company in connection with statutory and regulatory filings or engagements.

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit Committee may pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

The Audit Committee pre-approved 100% of the Company’s 2011 and 2010 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.






 
14

 

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

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

1.  Financial Statements   
                                        
   Page
   
Report of Independent Registered Public Accountants
F-3
   
Balance Sheets
 
December 31, 2011 and 2010
F-4
   
Statements of Operations
 
For the Years Ended December 31, 2011 and 2010 and for the Cumulative Period from July 5, 1996 (inception of development stage) to December 31, 2011
F-5
   
Statement of Stockholders’ Equity
 
From July 5, 1996 (inception of development stage) to December 31, 2011
F-6
   
Statements of Cash Flows
 
For the Years Ended December 31, 2011 and 2010 and for the Cumulative Period from July 5, 1996 (inception of development stage) to December 31, 2011
F-11
   
Notes to the Financial Statements
F-13

2.     Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
 

 
 
 
 
 
 
 
15

 
 
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)
   
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.

 
16

 
 
 
(b)
Reports Filed on Form 8-K

On November 19, 2010, the Company filed an 8-K announcing that the Company had entered into two material agreements with regard to the Company’s technology development.

On March 23, 2011, the Company filed an 8-K announcing that the Company had appointed new auditors.

On April 15, 2011, the Company filed an 8-K announcing that the Company would be unable to file its December 31, 2010 10-K on time.



 
 
 

 







 
17

 

 
SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
KLEVER MARKETING, INC.
 
       
Dated:  March 30, 2012
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 30th day of March 2012.
 
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  
       
 
 
 
 
 

 

 
18

 

 



KLEVER MARKETING, INC.

(A Development Stage Company)

Financial Statements

As of December 31, 2011 and 2010
and for the Years Ended December 31, 2011 and 2010 and for the Period from Inception July 5, 1996 to December 31, 2011


 












 
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-11
   
Notes to the Financial Statements
F-13








 
F-2

 


Report of Independent Registered Public Accounting Firm

The Board of Directors
Klever Marketing Inc.
Laguna Niguel, California


We have audited the accompanying balance sheets of Klever Marketing Inc. (a Development Stage Company) as of December 31,  2011 and 2010, 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Klever Marketing Inc. (a Development Stage Company) as of December 31, 2011 and 2010, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company is in the development stage, has no current source of revenue and suffered losses from operations since inception and is dependent on financing to continue operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of assets and liabilities that might result in the event the Company cannot continue in existence.

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, 2011, and accordingly, we express no opinion or any other form of assurance on them.


/s/ Haynie & Company

Salt Lake City, Utah
March  30, 2012




 
F-3

 


KLEVER MARKETING, INC.
(A Development Stage Company)
Balance Sheets
 
ASSETS
 
             
   
December 31,
 
   
2011
   
2010
 
             
CURRENT ASSETS
           
Cash
  $ 177,873     $ 1,071  
Prepaid expenses
    -       35  
                 
Total Current Assets
    177,873       1,106  
                 
FIXED ASSETS
               
Capitalized software development
    191,120       72,500  
Less accumulated depreciation
    -       -  
                 
Total Fixed Assets
    191,120       72,500  
                 
OTHER ASSETS
               
Intangibles, net
    28,124       550  
                 
Total Other Assets
    28,124       550  
                 
TOTAL ASSETS
  $ 397,117     $ 74,156  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
                 
CURRENT LIABILITIES
               
Accounts payable
  $ 455,860     $ 502,884  
Accrued liabilities
    807,788       516,348  
Preferred stock dividends
    323,968       385,144  
Related party notes payable
    -       44,950  
Notes payable
    15,000       15,000  
Stock deposits
    -       11,000  
                 
Total Current Liabilities
    1,602,616       1,475,326  
                 
Total Liabilities
    1,602,616       1,475,326  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
Convertible preferred stock - Class A (par value $0.01; 150,000 shares authorized;101,134 and 93,056 issued and outstanding at December 31, 2011 and December 31, 2010, respectively); aggregate liquidation preference of $2,629,484.
    1,011       931  
Convertible preferred stock - Class B (par value $0.01; 125,000 shares authorized;76,651 and 70,529 issued and outstanding at December 31, 2011 and December 31, 2010, respectively); aggregate liquidation preference of $1,303,067.
    767       705  
Convertible preferred stock - Class C (par value $0.01; 200,000 shares authorized; 134,774 and 124,010 issued and outstanding at December 31, 2011 and December 31, 2010, respectively); aggregate liquidation preference of $889,508.
    1,348       1,240  
Common stock (par value $0.01), 250,000,000 shares authorized, 45,512,933 and 45,921,640 shares issued and outstanding, at December 31, 2011 and December 31, 2010, respectively
    455,129       459,216  
Treasury stock, 100,000 shares at December 31, 2011 and 2010
    (1,000 )     (1,000 )
Due from related party payable in common stock
    (16,100 )     -  
Paid in capital in excess of par value
    16,601,968       16,595,001  
Retained deficit
    (3,333,785 )     (3,333,785 )
Deficit accumulated during development stage
    (14,914,837 )     (15,123,478 )
                 
Total Stockholders' Equity (Deficit)
    (1,205,499 )     (1,401,170 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  $ 397,117     $ 74,156  
 
See accompanying notes to financial statements
 
F-4

 

KLEVER MARKETING, INC.
(A Development Stage Company)
Statements of Operations
For the Years Ended December 31, 2011 and 2010
               
Unaudited
 
   
2011
   
2010
   
From Inception of Development Stage On July 5, 1996 Through December 31, 2011
 
                   
REVENUES
  $ -     $ -     $ 256,000  
                         
EXPENSES
                       
                         
Sales and marketing
    -       -       163,306  
General and administrative
    455,865       379,145       11,698,277  
Research and development
    27,063       95,225       4,770,093  
                         
Total Expenses
    482,928       474,370       16,631,676  
                         
OTHER INCOME (EXPENSE)
                       
                         
Other income
    177,000       -       685,751  
Interest income
    250       -       19,152  
Interest expense
    (44,378 )     (20,612 )     (2,690,240 )
Forgiveness of debt
    67,566       102,422       466,953  
Gain on sale of assets
    492,031       -       518,978  
Capital gain on sale of investments
    -       -       191,492  
                         
Total Other Income (Expense)
    692,469       81,810       (807,914 )
                         
NET INCOME (LOSS) BEFORE INCOME TAXES
    209,541       (392,560 )     (17,183,590 )
                         
INCOME TAXES
    900       441       2,641  
                         
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS
    208,641       (393,001 )     (17,186,231 )
                         
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING
    -       -       2,271,394  
                         
NET INCOME (LOSS)
  $ 208,641     $ (393,001 )   $ (14,914,837 )
                         
BASIC  EARNINGS PER COMMON SHARE
  $ -     $ (0.01 )        
                         
FULLY DILUTED EARNINGS PER COMMON SHARE
  $ -     $ (0.01 )        
                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
    45,150,293       44,208,928          
                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
    63,343,152       44,208,928          

 
F-5

 

KLEVER MARKETING, INC.
Statements of Stockholders' Equity (Deficit)
From Inception of the Development Stage on July 5, 1996 Through December 31, 2011
(UNAUDITED)
 
   
Preferred Stock
   
Common Stock
   
Common
Stock
to be
   
Subscription
   
Treasury
   
Paid in Capital in Excess of
   
Retained
   
Deficit Accumulated During Development
   
Total Stockholders' Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Issued
   
Receivable
   
Stock
   
Par 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.
Statements of Stockholders' Equity (Deficit) (Continued)
From Inception of the Development Stage on July 5, 1996 Through December 31, 2011
(UNAUDITED)
 
   
Preferred Stock
   
Common Stock
   
Common
Stock
to be
   
Subscription
   
Treasury
   
Paid in Capital in Excess of
   
Retained
   
Deficit Accumulated
During Development
   
Total
Stockholders' Equity
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Issued
   
Receivable
   
Stock
   
Par 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
   
-
     
-
     
-