[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: March 31, 2003
[ ] 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: March 31, 2003 12,370,578
Transitional Small Business Disclosure Format (check one).
Yes ; No X
PART I
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANT'S REPORT
Klever Marketing, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheets of Klever Marketing,
Inc. (a development stage company) as of March 31, 2003, and the related
statements of operations and cash flows for the three months ended March 31,
2003 and 2002. 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.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the balance sheet of Klever
Marketing, Inc.(a development stage company) as of December 31, 2002, and the
related statements of operations, cash flows, and stockholders' equity for the
year then ended (not presented herein); and in our report dated April 25, 2003,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of
December 31, 2002, is fairly stated, in all material respects, in relation to
the balance sheet from which it has been derived.
3
Note 1 of the Company's audited financial statements as of December 31,
2002, and for the year then ended discloses that the Company has suffered
recurring losses from operations and has no established source of revenue at
December 31, 2002. Our auditors' report on those financial statements includes
an explanatory paragraph referring to the matter in Note 1 of those financial
statements and indicating that these matters raised substantial doubt about the
Company's ability to continue as a going concern. As indicated in Note 1 of the
Company's unaudited interim financial statements as of March 31, 2003, and for
the three months then ended, the Company has continued to suffer recurring
losses from operations and still has no established source of revenue at March
31, 2003. The accompanying interim financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Respectfully submitted
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
May 20, 2003
4
KLEVER MARKETING, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
------------------ -----------------
ASSETS 2003 2002
------------------ -----------------
Current Assets
Cash $ 15,092 $ 3,424
------------------ -----------------
Fixed Assets
Office Equipment 148,067 148,067
Phase 2 Equipment 57,750 57,750
Less Accumulated Depreciation (122,890) (120,105)
------------------ -----------------
Net Fixed Assets 82,927 85,712
------------------ -----------------
Other Assets
Patents 2,342,752 2,339,006
Less Accumulated Amortization (1,970,409) (1,915,172)
------------------ -----------------
Net Other Assets 372,343 423,834
------------------ -----------------
Total Assets $ 470,362 $ 512,970
================== =================
5
KLEVER MARKETING, INC.
(A Development Stage Company)
BALANCE SHEETS
(Continued)
March 31, December 31,
------------------- ------------------
2003 2002
------------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable, Trade $ 428,412 $ 435,928
Accrued Liabilities 1,015,338 878,142
Related Party Payables 2,573,727 2,551,298
Short-term Notes Payable 1,643 2,207
------------------- ------------------
Total Current Liabilities 4,019,120 3,867,575
------------------- ------------------
Stockholders' Equity
Preferred stock (Par Value $.01),
2,000,000 shares authorized. 168,434 shares issued
and outstanding March 31, 2003 and December 31, 2002 1,684 1,684
Common Stock (Par Value $.01),
20,000,000 shares authorized. 12,370,578 shares issued
and outstanding at March 31, 2003 and
December 31, 2002 123,706 123,706
Common Stock to be issued, 1,635,584 shares at March 31,
2003 and 768,917 at December 31, 2002 16,356 7,689
Treasury Stock, 1,000 shares at March 31, 2003 and
December 31, 2002 (1,000) (1,000)
Paid in Capital in Excess of Par Value 12,156,917 12,100,583
Retained Deficit (3,333,785) (3,333,785)
Deficit Accumulated During Development Stage (12,512,636) (12,253,482)
------------------- ------------------
Total Stockholders' Equity (3,548,758) (3,354,605)
------------------- ------------------
Total Liabilities and Stockholders' Equity $ 470,362 $ 512,970
=================== ==================
See accompanying notes and accountants' report.
6
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
From
July 5, 1996
For the Three Months Inception of
Ended March 31, Development
-------------------------------------
2003 2002 Stage
----------------- ------------------ ------------------
Revenue $ - $ - $ 256,000
----------------- ------------------ ------------------
Expenses
Sales and Marketing - - 117,546
General and Administrative 172,895 137,174 7,577,402
Research and Development - - 4,459,891
----------------- ------------------ ------------------
Total Expenses 172,895 137,174 12,154,839
----------------- ------------------ ------------------
Other Income (Expense)
Interest Income - - 18,902
Interest Expense (86,259) (68,567) (810,256)
Loss on sale of assets - - (13,235)
Capital gain on sale of investments - - 191,492
----------------- ------------------ ------------------
Total Other Income (Expense) (86,259) (68,567) (613,097)
----------------- ------------------ ------------------
Loss Before Taxes (259,154) (205,741) (12,511,936)
Income Taxes - - 700
----------------- ------------------ ------------------
Net Loss After Taxes $ (259,154) $ (205,741) $ (12,512,636)
================= ================== ==================
Weighted Average Shares Outstanding
12,970,578 12,674,807
================= ==================
Loss per Common Share $ (0.02) $ (0.02)
================= ==================
See accompanying notes and accountants' report.
7
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
From
July 5, 1996
For the Three Months Inception of
Ended March 31, Development
---------------------------------------
2003 2002 Stage
----------------- --------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (259,154) $ (205,741) $ (12,512,636)
Adjustments used to reconcile net loss to net
cash provided by (used in) operating activities:
Stock issued for general and administrative - 871,480
Stock issued for research and development - 15,000
Stock returned for services not rendered - (200,790)
Write-off of assets - - 526,718
Compensation expense from stock options - - 26,247
Stock issued for interest expense - 24,285
Stock issued for accounts payable - 25,153
Deferred income - (214,000)
Depreciation and amortization 58,021 59,366 1,545,642
(Increase) decrease in accounts receivable - - (413)
(Increase) decrease in shareholder receivable - - 37,694
(Increase) decrease in other assets & prepaids - 10,353 114,238
Increase (decrease) in accounts payable (7,516) 3,689 342,708
Increase (decrease) in accrued liabilities 137,197 76,789 973,689
----------------- ------------------ ------------------
Net cash used in operating activities (71,452) (55,544) (8,424,985)
----------------- --------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net - 8,940 (590,129)
Acquisition of patents (3,746) (2,278) (250,795)
Acquisition/Sale of stock, net - - 12,375
----------------- --------------------------------------
Net cash used by investing activities (3,746) 6,662 (828,549)
----------------- --------------------------------------
8
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Continued)
Cumulative
From
July 5, 1996
For the Three Months Inception of
Ended March 31, Development
-------------------------------------
2003 2002 2001
----------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from capital stock $ 65,000 $ - $ 6,172,927
Proceeds from shareholder loans 22,430 50,674 3,324,738
Principal payments on lease obligations (564) (1,601) (17,584)
Cash payments on notes payable - - (236,129)
----------------- ------------------ ------------------
Net Cash Provided by Financing Activities 86,866 49,073 9,243,952
----------------- ------------------ ------------------
Net Increase (Decrease) in
Cash and Cash Equivalents 11,668 191 (9,582)
Cash and Cash Equivalents at
Beginning of the Period 3,424 - 24,674
----------------- ------------------ ------------------
Cash and Cash Equivalents at
End of the Period $ 15,092 $ 191 $ 15,092
================= ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest $ - $ - $ -
Income Taxes $ - $ - $ 700
See accompanying notes and accountants' report.
9
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
This summary of accounting policies for Klever Marketing, Inc. (a
development stage company) 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 March 31, 2003 and for the
three 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 months. Operating
results for interim periods are not necessarily indicative of the results which
can be expected for full years.
The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a "going concern", which assume that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $259,000 for the three months ended March 31, 2003, net losses of
approximately $206,000 for the three months ended March 31, 2002, and net losses
of approximately $12,500,000 since the inception of the development stage on
July 5, 1996. The Company also has a liquidity problem, and requires additional
financing in order to finance its business activities on an ongoing basis. The
Company is actively pursuing alternative financing and has had discussions with
various third parties, although no firm commitments have been obtained.
The Company's future capital requirements will depend on numerous
factors including, but not limited to, continued progress in developing its
products, and market penetration.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.
10
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN (continued)
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. During the period from July 5,
1996 to December 31, 2002, the Company has been in the 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.
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.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies for Klever Marketing, Inc. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all
highly liquid debt instruments purchased with maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
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 of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
11
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
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 2002 financial
statements to conform with the 2003 presentation.
Loss per Share
The reconciliations of the numerators and denominators of the basic
loss per share computations are as follows:
Per-Share
Loss Shares Amount
For the three months ended March 31, 2003
BASIC LOSS PER SHARE
Loss available to common shareholders $ (259,154) 12,970,578 $ (0.02)
================= ================== ==================
For the three months ended March 31, 2002
BASIC LOSS PER SHARE
Loss available to common shareholders $ (205,741) 12,674,807 $ (0.02)
================= ================== ==================
Basic earnings per common share were computed by dividing net loss by
the weighted average number of shares of common stock outstanding during the
year. Diluted loss per common share for the three months ended March 31, 2003
and 2002 are not presented as it would be anti- dilutive.
12
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
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 3 - INCOME TAXES
The Company has accumulated tax losses estimated at $16,000,000
expiring in years 2007 through 2022. 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.
13
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 4 - LEASE COMMITMENT
The Company currently leases approximately 1,620 square feet of office
space from Four Cabo's Enterprises, Ltd. on a month to month basis. The lease
payments are approximately $2,042 per month.
The Company has also entered into lease agreements for the rental of
computer equipment. These leases expire between September 2003 and May 2004. The
total monthly lease payments due on the above leases is approximately $210.
During 2000, the Company entered into a financing agreement for the
purchase of a laser printer. The payments on this agreement are $312 per month
for a term of 36 months. During 2002, the remainder of the obligation on the
laser printer was paid.
The minimum future lease payments under these leases for the next five
years are:
Year Ended December 31,
-------------------------------------------
2003 $ 4,254
2004 445
2005 -
2006 -
2007 -
--------------
Total minimum future lease payments $ 4,699
==============
NOTE 5 - RESEARCH AND DEVELOPMENT
Research and development of the Klever-Kart System began with the sole
purpose of reducing thefts of shopping carts. A voice-activated alarm system was
envisioned. As time and technology progressed, the present embodiment of the
Klever-Kart System evolved into a "product specific" point-of-purchase
advertising system consisting of an easily readable electronic display that
attaches to any shopping cart, a shelf mounted message sending unit that
automatically sends featured products' ad-message to the display and a host
computer using proprietary software.
During the three months ended March 31, 2003 and 2002, the Company
expended $0 and $0, respectively for research and development of the technology
involved with its patents.
14
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS
OLSON FARMS, INC. LOANS TO THE COMPANY.
Olson Farms, Inc. made a $150,000.00 unsecured loan to the Company on
February 26, 2001. This note has a six-month term at 10% annual interest
maturing on August 26, 2001. The maker of the note may give written notice
within 10-days of maturity, to the Company, to convert the principal and
interest into common stock with a convertible price of $1.05 (10-day weighted
average from February 26, 2001 and the nine days prior).
Olson Farms made an unsecured loan to the Company on January 7, 2002
for $1,835.84. This note has an annual interest rate of 8% and matures on
January 7, 2004. An option was granted in connection with this note for 3,060
shares at a strike price of $1.00 and an expiration date of January 7, 2005.
OLSON FOUNDATION LOANS TO THE COMPANY.
Olson Foundation loaned the Company $60,000 on July 16, 2001, of which
is secured by a blanket lien on the assets of the Company. An Interest rate of
10% compounded monthly applies until January 15, 2002. Principal and all due and
unpaid interest are to be paid on January 16, 2002, or the interest rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration date
of July 16, 2006. This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder.
Olson Foundation loaned the Company $90,000 on July 30, 2001, of which
is secured by a blanket lien on the assets of the Company. An Interest rate of
10% compounded monthly applies until January 30, 2002. Principal and all due and
unpaid interest are to be paid on January 30, 2002, or the interest rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 27,273 common shares at a strike price of $0.01 and an expiration date
of July 30, 2006. This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder.
Olson Foundation made unsecured loans to the Company on May 3, 2002,
August 16, 2002, and October 29, 2002 for $7,359, $10,000, and $1,059.37,
respectively. These notes are payable within two years plus interest at 8% per
annum. In conjunction with the notes, Olson Foundation also received common
stock options for each note at a ratio of 1.667 common shares for each dollar
loaned.
15
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
ESTATE OF PETER D. OLSON.
Peter D. Olson loaned the Company $12,500, $12,500, and $3,750 on
September 1, 1998, September 17, 1998, and September 22, 1998, respectively.
These notes bear an interest rate of 10% per annum.
PRESIDIO INVESTMENTS, LLC LOAN TO THE COMPANY.
Presidio Investments, LLC has loaned the Company $1,000,000, which loan
is secured by a blanket lien on the assets of the Company. The sole trustee of
Presidio Investments, LLC is William J. Howard, trustee of the Olson Legacy
Trust, whose residual beneficiary is the Olson Foundation. The Olson Foundation
was the guarantor for funds borrowed from Northern Trust Bank which funds were
used to make the loan to the Company. This note was amended on March22, 2001
with an additional $500,000 loaned to the Company between January 1, 2001 and
March 22, 2001. An Interest rate of 8% applies until March 31, 2001 and
increases to 10% on April 1st, 2001. Principal and all due and unpaid interest
are to be paid on October 1, 2001. This note is convertible to Class C
convertible preferred shares at the option of the note holder.
OLSON LEGACY TRUST LOAN TO THE COMPANY
Olson Legacy Trust made unsecured loans to the Company on October 19,
2001 and November 15, 2001 in the amounts of $20,706 and $30,000, respectively.
The notes are payable within two years plus interest at 8% per annum. In
conjunction with the notes, Olson Foundation received common stock options for
each note at a ratio of 1.667 common shares for each dollar loaned to the
Company.
DIRECTOR LOAN TO THE COMPANY
On October 20, 1998, the Company borrowed $150,000 from Mount Olympus
Waters, Inc. at an annual interest rate of 12% and a maturity date of April 30,
1999. The Company made a payment of $50,000 on February 26, 1999.
DIRECTOR LOAN TO THE COMPANY
On February 20, 2001, the Company borrowed $50,000 from Leonard D.
Southwick, a member of the Board of Directors. This loan was repaid on February
26, 2001. The interest rate on
16
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(Continued)
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
the note was 9% and matured on March 19, 2001.
DIRECTOR AND OFFICER LOAN TO THE COMPANY
Richard J. Trout loaned the Company $396.85, $163.00 and $568.08 on
September 16, 2002, March 19, 2003, and April 28, 2003, respectively. These
notes are payable within two years plus interest at 8% per annum. In conjunction
with the notes, Mr. Trout received common stock options at a ratio of 1.667
common shares for each dollar loaned to the Company.
ARBINGER LOANS TO THE COMPANY
The loans listed below were made to the Company by The Arbinger
Institute. The Arbinger Institute is controlled by four equal partners, of which
C. Terry Warner and D. Paul Smith are each a partner.
Common
Stock
Annual Option # Option Strike
DATE Principal Interest Rate Maturity Date Shares Price
------------ ---------------------------------------------------------------------------------
10/19/01 $10,000.00 8.00% 10/19/02 16,667 $1.00
12/31/01 $6,617.04 8.00% 12/31/02 11,028 $1.00
01/30/02 $15,000.00 8.00% 01/30/04 25,000 $1.00
02/18/02 $4,000.00 8.00% 02/18/03 6,667 $1.00
07/02/02 $7,700.00 8.00% 07/02/03 12,833 $1.00
08/30/02 $200.00 8.00% 08/30/04 333 $1.00
09/18/02 $8,500.00 8.00% 09/18/04 14,167 $1.00
11/19/02 $5,500.00 8.00% 11/19/04 9,167 $1.00
04/08/03 $1,200.00 8.00% 04/08/05 2,000 $1.00
------------- --------------
Total $58,717.04 97,862
============= ==============
DIRECTOR LOANS TO THE COMPANY
C. Terry Warner made unsecured loans to the Company on September 27,
2002, August 12, 2002, April 16, 2003, May 2, 2003, May 5, 2003, and May 8, 2003
in the amounts of $15,000, $21,348, $10,000, $1,500, $800, and $19,000,
respectively. These notes are payable within two years plus interest at 8% per
annum. In conjunction with the notes, Olson Foundation received
17
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(Continued)
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
common stock options for each note at a ratio of 1.667 common shares for each
dollar loaned to the Company.
DIRECTOR AND OFFICER LOANS TO THE COMPANY
The loans listed below were made to the Company by D. Paul Smith, a member of
the Board of Directors:
Common
Stock
Annual Option # Option Strike
DATE Principal Interest Rate Maturity Date Shares Price
------------ ------------- -------------------------------------------------------------------
12/31/02 $25,000.00 8.00% 12/31/04 41,667 $1.00
02/21/03 $5,000.00 8.00% 02/21/05 8,333 $1.00
03/31/03 $15,000.00 8.00% 03/31/05 25,000 $1.00
04/10/02 $15,000.00 8.00% 04/10/03 25,000 $1.00
08/30/02 $370.23 8.00% 08/30/04 617 $1.00
11/01/02 $364.82 8.00% 11/01/04 608 $1.00
11/04/02 $15,000.00 8.00% 11/04/04 25,000 $1.00
------------- --------------
Total $75,735.05 126,225
============= ==============
THE SEABURY GROUP LOAN TO THE COMPANY
The Seabury Group loaned the Company $60,000 on July 5, 2001, of which
is secured by a blanket lien on the assets of the Company. An Interest rate of
10% compounded monthly applies until January 5, 2002. Principal and all due and
unpaid interest are to be paid on January 5, 2002, or the interest rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration date
of July 5, 2006. This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder.
The Seabury Group loaned the Company $190,000 on August 22, 2001, of
which is secured by a blanket lien on the assets of the Company. An Interest
rate of 10% compounded monthly applies until February 22, 2002. Principal and
all due and unpaid interest are to be paid on February 22, 2002, or the interest
rate increases to 15% compounded daily. Warrants were issued in conjunction with
this loan for 57,576 common shares at a strike price of $0.01 and an expiration
date
18
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
(Continued)
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
of August 22, 2006. This note is convertible to Class C convertible preferred
shares or to Class D convertible preferred shares at the option of the note
holder.
PAUL G. BEGUM
On February 1, 2000 an accrued liability owed to Paul G. Begum 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. As of July 31, 2001, the total balance on
the note receivable was $98,375. On July 31, 2001, the Company forgave the
remaining amount owed on the receivable in exchange for 100,000 shares of common
stock that were returned to the Company.
During the year ended December 31, 2001, the Company accrued additional
liabilities from a separation agreement with Paul G. Begum. The total amount of
these liabilities at March 31, 2003 is $79,020.
NOTE 7- 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
19
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 7- STOCK OPTIONS (continued)
of common stock are reserved for issuance in the form of restricted stock
grants. As of March 31, 2003, 2,938,969 options had been granted under the Plan,
and another 1,443,020 options had been granted outside of the Plan. Compensation
expense charged to operations in 2002 and 2001 is $0 and $0. The following is a
summary of transactions:
Shares Under Option
--------------------------------------
March 31, December 31,
--------------------------------------
2003 2002
------------------ ------------------
Outstanding, beginning of year 4,047,005 2,124,392
Granted during the year 360,834 2,215,113
Canceled during the year (25,850) (292,500)
Exercised during the year - -
------------------ ------------------
Outstanding, end of year (at prices
ranging from $.01 to $3.00 per share) 4,381,989 4,047,005
================== ==================
Eligible, end of year for exercise currently (at prices
ranging from $.01 to $3.00 per share) 3,548,655 3,213,672
================== ==================
NOTE 8 - PREFERRED STOCK
On February 7, 2000 the Board of Directors authorized and established
"Class A Voting Preferred Stock" ("Class A Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class A Shares consisted of
1,000,000, 125,000 shares thereof were designated as Series 1 shares. On May 20,
2002, the Board of Directors amended the number of authorized shares of Class A
voting preferred stock to 55,000 shares.
Class A Shares are convertible into Common Stock at an initial
conversion price of $2.60 (subject to adjustment).
Holders of Class A Shares shall be entitled to receive when and as
declared by the Board of Directors of the Company out of any funds at the time
legally available 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
20
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 8 - PREFERRED STOCK (continued)
outstanding Class A Share, on each dividend payment date. In addition, each
holder of Class A Shares shall be entitled to receive, when and as declared, a
dividend equal to each dividend declared and paid on the shares of Common Stock,
on a share for share basis. If there is a split or dividend on the Common Stock,
then the Class A Share dividends shall be adjusted as if a similar split or
dividend had occurred with respect to the Class A Shares.
Class A Shareholders shall be entitled to one vote for each share of
Common Stock into which such Class A Shares could then be converted, and shall
have voting rights and powers equal to that of a holder of Common Stock. The
Holders of Class A Shares shall vote with the holders of Common Stock and not as
a separate class.
Class A Shares carry a liquidation preference of $26 per share plus any
accrued but unpaid dividends on such shares, if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.
The Class A Shares shall be redeemable by the Company, in whole or in
part, at the option of the Board of Directors of the Company, at any time and
from time to time on or after July 1, 2002. The redemption price shall be $26
per share together with accrued but unpaid dividends on such shares, if any.
On September 24, 2000 the Board of Directors authorized and established
"Class B Voting Preferred Stock" ("Class B Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class B Shares consisted of
250,000, 125,000 shares thereof were designated as Series 1 shares. On May 20,
2002, the Board of Directors amended the number of authorized shares of Class B
voting preferred stock to 42,000 shares.
Class B Shares are convertible into Common Stock at an initial
conversion price of $1.70 (subject to adjustment).
Holders of Class B Shares shall be entitled to receive when and as
declared by the Board of Directors of the Corporation out of any funds at the
time legally available therefore dividends at the rate of the Original Issue
Price divided by 11.8181818 per share per annum, payable semi-annually on the
first day of January and July of each year. Such dividends shall accrue on each
such share from the date of its original issuance and shall accrue from day to
day, whether or not earned or declared. Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class B Shares,
of the same Series for which the dividend is accrued, for each
21
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 8 - PREFERRED STOCK (continued)
outstanding Class B Share, on each dividend payment date; provided, that if such
dividends in respect of any period shall not have been paid or declared and set
apart for payment for all outstanding Class B Shares by each payment date, then
until all unpaid dividends thereon shall be paid or set apart for payment to the
holders of such shares, the Corporation may not pay, declare or set apart any
dividend or other distribution on its shares of Common Stock or other shares
junior to the Class B Shares, nor may any other distributions, redemptions or
other payments be made with respect to the shares of Common Stock or other
junior shares. In addition to the foregoing, each holder of a Class B Share
shall be entitled to receive, when and as declared, a dividend equal to each
dividend declared and paid on the shares of Common Stock, on a share for share
basis, so the holders of the Class B Shares shall be entitled to participate
equally on a share for share basis with the holders of the shares of Common
Stock. If there is a share split or dividend on the Common Stock, then the Class
B Share dividends shall be adjusted as if a similar split or dividend had
occurred with respect to the Class B Shares.
Class B Shareholders shall be entitled to one vote for each share of
Common Stock into which such Class B Shares could then be converted and shall
have voting rights and powers equal to the voting rights and powers of a holder
of shares of Common Stock. The holders of Class B Shares shall vote with the
holders of shares of Common Stock and not as a separate class.
Class B Shares shall carry a liquidation preference of $17 per share
plus any accrued but unpaid dividends on such shares, if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.
The Class B Shares shall be redeemable by the Company, in whole or in
part, at the option of the Board of Directors of the Company, at any time and
from time to time on or after March 24, 2004 for Series 1, and such date as
determined by the Board of Directors for each additional Series. The redemption
price shall be $17.00 per share together with accrued but unpaid dividends on
such shares, if any.
On January 2, 2001 the Board of Directors authorized and established
"Class C Voting Preferred Stock" ("Class C Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class C Shares consisted of
500,000, 125,000 shares thereof were designated as Series 1 shares and 125,000
shares thereof were designated as Series 2 shares. On May 20, 2002, the Board of
Directors amended the number of authorized shares of Class C voting preferred
stock to 150,000 shares.
22
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 8 - PREFERRED STOCK (continued)
Class C Shares are convertible into Common Stock at an initial
conversion price of $.66 (subject to adjustment).
Holders of Class C Shares shall be entitled to receive when and as
declared by the Board of Directors of the Corporation out of any funds at the
time legally available therefore dividends at the rate of the Original Issue
Price divided by 11.8181818 per share per annum, payable semi-annually on the
first day of January and July of each year. Such dividends shall accrue on each
such share from the date of its original issuance and shall accrue from day to
day, whether or not earned or declared. Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class C Shares,
of the same Series for which the dividend is accrued, for each outstanding Class
C Share, on each dividend payment date; provided, that if such dividends in
respect of any period shall not have been paid or declared and set apart for
payment for all outstanding Class C Shares by each payment date, then until all
unpaid dividends thereon shall be paid or set apart for payment to the holders
of such shares, the Corporation may not pay, declare or set apart any dividend
or other distribution on its shares of Common Stock or other shares junior to
the Class C Shares, nor may any other distributions, redemptions or other
payments be made with respect to the shares of Common Stock or other junior
shares. In addition to the foregoing, each holder of a Class C Share shall be
entitled to receive, when and as declared, a dividend equal to each dividend
declared and paid on the shares of Common Stock, on a share for share basis, so
the holders of the Class C Shares shall be entitled to participate equally on a
share for share basis with the holders of the shares of Common Stock. If there
is a share split or dividend on the Common Stock, then the Class C Share
dividends shall be adjusted as if a similar split or dividend had occurred with
respect to the Class C Shares.
Class C Shareholders shall be entitled to one vote for each share of
Common Stock into which such Class C Shares could then be converted and shall
have voting rights and powers equal to the voting rights and powers of a holder
of shares of Common Stock. The holders of Class C Shares shall vote with the
holders of shares of Common Stock and not as a separate class.
Class C Shares shall carry a liquidation preference of $6.60 per share
plus any accrued but unpaid dividends on such shares, if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.
The Class C Shares shall be redeemable by the Company, in whole or in
part, at the option of the Board of Directors of the Company, at any time and
from time to time on or after July 2, 2004
23
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 8 - PREFERRED STOCK (continued)
for Series 1, and such date as determined by the Board of Directors for each
additional Series. The redemption price shall be $6.60 per share together with
accrued but unpaid dividends on such shares, if any.
On May 20, 2002, the Board of Directors authorized and established
"Class D Voting Preferred Stock" ("Class D Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class D Shares consist of
500,000 shares thereof are designated as "Class D Voting Preferred Stock" (the
"Class D Shares").
Class D Shares are convertible into Common Stock at an initial
conversion price of $1.05 (subject to adjustment).
Holders of Class D Shares shall be entitled to receive when and as
declared by the Board of Directors of the Corporation out of any funds at the
time legally available therefore dividends at the rate of the Original Issue
Price divided by 11.8181818 per share per annum, payable semi-annually on the
first day of January and July of each year. Such dividends shall accrue on each
such share from the date of its original issuance and shall accrue from day to
day, whether or not earned or declared. Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class D Shares
for each outstanding Class D Share, on each dividend payment date; provided,
that if such dividends in respect of any period shall not have been paid or
declared and set apart for payment for all outstanding Class D Shares by each
payment date, then until all unpaid dividends thereon shall be paid or set apart
for payment to the holders of such shares, the Corporation may not pay, declare
or set apart any dividend or other distribution on its shares of Common Stock or
other shares junior to the Class D Shares, nor may any other distributions,
redemptions or other payments be made with respect to the shares of Common Stock
or other junior shares. In addition to the foregoing, each holder of a Class D
Share shall be entitled to receive, when and as declared, a dividend equal to
each dividend declared and paid on the shares of Common Stock, on a share for
share basis, so the holders of the Class D Shares shall be entitled to
participate equally on a share for share basis with the holders of the shares of
Common Stock. If there is a share split or dividend on the Common Stock, then
the Class D Share dividends shall be adjusted as if a similar split or dividend
had occurred with respect to the Class D Shares.
Class D Shareholders shall be entitled to one vote for each share of
Common Stock into which such Class D Shares could then be converted and shall
have voting rights and powers equal to the voting rights and powers of a holder
of shares of Common Stock. The holders of Class D Shares shall vote with the
holders of shares of Common Stock and not as a separate class.
24
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(continued)
NOTE 8 - PREFERRED STOCK (continued)
Class D Shares shall carry a liquidation preference of $10.50 per share
plus any accrued but unpaid dividends on such shares, if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.
The Class D Shares shall be redeemable by the Company, in whole or in
part, at the option of the Board of Directors of the Company, at any time and
from time to time on or after May 14, 2007. The redemption price shall be $10.50
per share together with accrued but unpaid dividends on such shares, if any.
NOTE 9 - LITIGATION
On September 18, 2001, a Complaint was filed in Superior Court of the
State of California, County of San Francisco, by eiKart, L.L.C. ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart dated May 11, 2001. On December 12, 2002, a judgment in
California was made against the Company whereby the Company is required to pay
$75,804 plus daily interest of $19.25 per day after December 3, 2002. This
judgment has been included in the financial statements as part of accrued
liabilities at March 31, 2003 and December 31, 2002. This California judgment
was obtained without an active defense by the Company which the Company believes
it has. Because of this fact, the Company intends to actively oppose any
collection activity outside of California.
On October 18, 2002, a default judgment was entered against the Company
by Avnet, Inc. The total judgment was for $6,676.85 with interest on the total
judgment at 4.28% per annum until
paid. The total judgment of $6,676.85 and interest of $105.56 was paid on
February 4, 2003.
On September 6, 2002, an entry of judgment was entered against the
Company by Micropower Direct, LLC. The total judgment was for $17,167.18. This
judgment has been included in accounts payable as of December 31, 2002.
NOTE 10 - STOCK TRANSACTIONS
During January 2003, the Company received $65,000 for 866,667 shares of
common stock. As of March 31, 2003, these shares have not been issued.
25
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, 2002.
PLAN OF OPERATIONS - The Company has no current operations. The Company's plan
of operations is subject to obtaining financing. The Company's goal is to become
the leading supplier of in-store promotions and advertising technology for
grocery and other mass-merchandise retailers. To accomplish this goal, the
Company intends to expand its product offerings to include: (i) electronic
couponing to eliminate the need for and reduce the costs related to paper
coupons (including fraud, mis-redemption and mal-redemption); (ii) the
establishment of targeted Internet-type content to enhance customer loyalty;
(iii) capturing Point-of-Selection data in the aggregate for providing data
warehousing and mining services to various interested parties; (iv) certain
other in-store services. Additionally, the Company intends to expand the
Klever-Kart System's application to other retailers including superstores,
discount stores, toy stores and warehouse stores.
BUSINESS DEVELOPMENT, NEXT 12 MONTHS
As a result of the current financial condition of the Company, the plan of the
Company for the next twelve months is to obtain sufficient financing to permit
the Company to commence active business operations. Absent obtaining such
financing, the Company's plan is to continue to obtain sufficient smaller
financing to permit the Company to continue to prevent the loss or wasting of
its assets and to continue to seek such operation's financing. Currently, the
Company has sufficient liquid assets to permit current restricted operations to
continue for one month. If such smaller interim financing is not obtained, it is
likely that the Company will cease being a going concern at the end of such
period.
In the event such operational funding is obtained, then the Company has plans
during the next twelve months to: 1) develop and implement its electronic
coupons, the Klever-Kard* enhancement to existing frequent shopping programs and
electronic couponing feature, and 2) expand the Klever- Kart System's
orientation to other store formats including superstores, discount stores, toy
stores, do-it-yourself stores and warehouse stores.
Absent such financing, the Company has no plans to employ additional employees
or to purchase additional equipment. If such financing is obtained, there would
be additional employees employed and additional equipment purchased. The number
of each is dependent upon the amount of such financing.
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 limited additional working capital that has
26
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 $71,000 and $56,000 for the three
months ended March 31, 2003 and 2002, respectively.
Investing activities used cash of $4,000 for the three months ended March 31,
2003, and provided cash of $7,000 for the three months ended March 31, 2002.
Investing activities primarily represent purchases of patents relating to the
electronic in-store advertising, directory and coupon devices, and purchases or
disposal of office equipment.
Financing activities provided cash of $87,000 and $49,000 for the three months
ended March 31, 2003 and 2002, respectively. Financing activities primarily
represent sales of the Company's common and preferred stock, and loans from
shareholders.
The Company will 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.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this Quarterly Report on Form 10- QSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary to evaluate whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this Quarterly Report on Form 10-QSB, and
(ii) the financial statements, and other financial information included
in this Quarterly Report on Form 10-QSB, fairly present in all material
respects the financial condition, results of operations and cash flows
of the Company as of, and for, the periods presented in this Quarterly
Report on Form 10-QSB.
There have been no significant changes in the Company's internal controls or in
other factors since the date of the Chief Executive Officer's and Chief
Financial Officer's evaluation that could significantly affect these internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
27
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 18, 2001, a Complaint was filed in Superior Court of the
State of California, County of San Francisco, by eiKart, L.L.C. ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart dated May 11, 2001. On December 12, 2002, a judgment in
California was made against the Company whereby the Company is required to pay
$75,804 plus daily interest of $19.25 per day after December 3, 2002. This
judgment has been included in the financial statements as part of accrued
liabilities at December 31, 2002. This California judgment was obtained without
an active defense by the Company which the Company believes it has. Because of
this fact, the Company intends to actively oppose any collection activity
outside of California.
On October 18, 2002, a default judgment was entered against the Company
by Avnet, Inc. The total judgment was for $6,676.85 with interest on the total
judgment at 4.28% per annum until
paid. The total judgment of $6,676.85 and interest of $105.56 was paid on
February 4, 2003.
On September 6, 2002, an entry of judgment was entered against the
Company by Micropower Direct, LLC. The total judgment was for $17,167.18. This
judgment has been included in accounts payable as of December 31, 2002.
ITEM 2. CHANGES IN SECURITIES
During January 2003, the Company received $65,000 for 866,667 shares of
common stock. As of March 31, 2003, these shares have not been issued.
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
Exhibit
Number Title of Document
28
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)
99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
29
(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 10KSB, dated
May 15, 2002. (5) Incorporated herein by reference from Registrant's
Form 10QSB, dated August 19, 2002.
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: May 20, 2003
By: /s/ Richard J. Trout
Richard J. Trout
President & Director
By: /s/ D. Paul Smith
D. Paul Smith
C.F.O., Secretary, Treasurer, Chairman
30
I, Richard J. Trout, certify that:
1. I have reviewed this quarterly report on form 10-QSB of Klever
Marketing, Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report.
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in exchange act rules
13a-14 and 15d- 14) for the registrant and have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officers and I have
indicated in this quarterly
31
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 20, 2003
/s/ Richard J. Trout
Richard J. Trout
President and Director
(Principal Executive Officer)
32
I, D. Paul Smith, certify that:
1. I have reviewed this quarterly report on form 10-QSB of Klever
Marketing, Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report.
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in exchange act rules
13a-14 and 15d- 14) for the registrant and have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officers and I have
indicated in this quarterly
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report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 20, 2003
/s/ D. Paul Smith
D. Paul Smith
C.F.O., Secretary, Treasurer, Chairman
(Principal Financial Officer)
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