U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 2003
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
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Commission file number 0-18834
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Klever Marketing, Inc.
(Name of small business issuer in its charter)
Delaware 36-3688583
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
350 West 300 South, Suite 201, Salt Lake City, Utah 84101
(Address of principal executive offices) (zip code)
Issuer's telephone number (801) 322-1221
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Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock Par Value $0.01
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Total pages: 28
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Exhibit Index Page: 23
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Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0
---
As of March 26, 2004, there were 35,351,267 (1 vote per share) Common,
5,493,727 Class A, 2,789,956 Class B, and 1,952,969 Class C Convertible
Preferred, for a preferred and common share total of 45,587,919 votes. All
shares have a par value of $0.01. The aggregate market value of the Registrant's
voting stock held by non-affiliates of the Registrant was approximately
$4,027,644 computed at the closing price as of March 26, 2004. The number of
preferred and common shares held by non-affiliates of the Registrant total
28,768,892 votes.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE
Transitional Small Business Disclosure Format (check one): Yes ; No X
2
TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business 4
Item 2. Description of Property 4
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis or Plan of Operations 7
Item 7. Financial Statements 8
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 9
Item 10. Executive Compensation 12
Item 11. Security Ownership of Certain Beneficial Owners and Management 14
Item 12. Certain Relationships and Related Transactions 18
Item 13. Exhibits and Reports on Form 8-K 23
Item 14. Controls and Procedures 25
Item 15. Principal Accountant Fees & Services 26
3
PART I
ITEM 1 DESCRIPTION OF BUSINESS
General
The Company was formed for the purpose of creating a vehicle to obtain
capital, to file and acquire patents, to seek out, investigate, develop,
manufacture and market electronic in-store advertising, directory and coupon
services which have potential for profit. The Company is currently in the
process of the development of the patented process, Klever-Kart(R).
History
The Company began as a part of Information Resources, Inc. ("IRI") in
1987, was incorporated as a subsidiary of IRI under the laws of the State of
Delaware on December 8, 1989, and was fully distributed to stockholders of IRI
in a spinoff on October 31, 1990. At the time of the spinoff a portion of the
business and assets of the Company included a software operation in Australia,
which was sold in March, 1993. The Company (VideOCart, Inc.) filed petitions for
relief under Chapter 11 bankruptcy in December 1993. The Company was inactive
until July 5, 1996 when the Company merged with Klever Kart, Inc. in a reverse
merger and changed its name to Klever Marketing, Inc. During the period from
July 5, 1996 to December 31, 2003, the Company 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.
In February 2004, the Company signed an exclusive partnership contract
with Fujitsu Transaction Solutions (Fujitsu). Under this contract, Fujitsu will
manufacture the hardware of Klever-Kart System and provide the technical
installations, IT implementation, and support for all retail locations. The
Company and Fujitsu will jointly share responsibility for marketing into
Fujitsu's current retail client base for the initial nationwide sales effort.
The Company will be responsible for providing the Klever-Kart software
technology and upgrades, as well as advertising and promotion space sales to
both retailers and manufacturers. The Company needs to raise funds to perform
its obligations under the Fujitsu agreement.
ITEM 2 DESCRIPTION OF PROPERTY
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 office space is used as the
Corporate headquarters. It is located at 350 West 300 South, Suite 203, Salt
Lake City, Utah.
4
ITEM 3 LEGAL PROCEEDINGS
On October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed
against the Company in the Third Judicial District Court of Utah under the
provisions of the Utah Foreign Judgment Act a judgment from the Superior Court
of California, in and for the County of San Francisco Jurisdiction. The
judgement is in relation to a consulting agreement between eiKart, LLC. and the
Company. Pursuant to the judgment Information Statement, also filed on October
27, 2003, the amount of the above judgment is $81,124. The relief sought is
collection from the Company in Utah of the amount of said judgment. The Company
has filed an action to dismiss said Utah judgment on the grounds that the
Superior Court of California did not have jurisdiction over the Company when the
original judgment was granted. This judgment has been included in the financial
statements as part of accrued liabilities at December 31, 2003 and 2002.
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. The
judgment was in relation to parts purchased by the Company. This judgment has
been included in accounts payable as of December 31, 2003.
A Confession of Judgment Statement of Klever Marketing, Inc. dated
November 28, 2003 was filed in the amount of $16,135.81 in favor of Boult Wade
Tennant. The judgment was in relation to legal matters regarding the Company's
intellectual property. This amount has been included in accounts payable as of
December 31, 2003.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during 2003.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The stock is traded on the OTC Bulletin Board with the trading symbol
KLMK.
5
The following table set 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 S & P Comstock and reflects inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions:
2003: High Low
First Quarter $ 0.09 $ 0.05
Second Quarter $ 0.09 $ 0.01
Third Quarter $ 0.15 $ 0.04
Fourth Quarter $ 0.65 $ 0.11
2002: High Low
First Quarter $ 0.65 $ 0.10
Second Quarter $ 0.65 $ 0.25
Third Quarter $ 0.35 $ 0.06
Fourth Quarter $ 0.12 $ 0.04
The number of shareholders of record of the Company's common stock as
of March 26, 2004 was approximately 825.
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 all available funds for the development of
the Company's business.
Recent Sales of Unregistered Securities.
The Company issued 21,039,786 shares of common stock during 2003. Also
during 2003, the Company had authorized the issuance of an additional 960,073
common shares. As of December 31, 2003, these shares had not been issued due to
insufficient funds to process. The stock was not sold through an underwriter and
was not sold through a public offer. These sales are exempt under Regulation D
Rule 506 of the Securities Act of 1933. (See Item &. Financial Statements,
Statement of Stockholders' Equity, pages F - 7 through F - 9)
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.
To the best of the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ending December 31, 2003,
the Company believes that all reporting persons
6
complied with all Section 16(a) filing requirements, except that: Olson
Foundation missed one filing for two transactions and a Form 5; Olsen Legacy
Trust missed a Form 5 filing; Presidio missed one filing for one transaction,
and missed a Form 5; Michael L. Mills missed one filing for four transactions
and filed a late Form 5; C. Terry Warner missed twenty filings for twenty-three
transactions and a late Form 5; D. Paul Smith missed twenty-one filings for
twenty-one transactions and a late Form 5; William J. Dupre missed two filings
for three transactions and a late Form 5; William C. Bailey missed two filings
for six transactions and a late Form 5; Richard J. Trout missed six filings for
ten transactions and a late Form 5; and Seabury missed a Form 5.
ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
Plan of Operation - 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 work jointly with Fujitsu Transactions
Solutions to: 1) develop and implement electronic couponing, and the Klever-Kard
enhancement to existing frequent shopping programs; 2) install two beta stores;
3) begin production of the next generation Klever-Kart with full color display,
audio, video, and scanning capabilities; 4) commence general installations; and
5) expand the Klever-Kart System's orientation to other store formats including
superstores, discount stores, toy stores, do-it- yourself stores and warehouse
stores.
7
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.
Results of Operations - The Company was inactive until July 5, 1996 when the
Company merged with Klever-Kart, Inc. in a reverse merger and changed its name
to Klever Marketing, Inc. The Company is in the development stage. For the years
ended December 31, 2003 and 2002, the Company had net losses of $1,361,639 and
$1,025,837, respectively. This increase in the loss is primarily due to a
write-off of assets.
Liquidity and Capital Resources - The Company requires working capital
principally to fund its proposed 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 minimal additional working capital that has been
required to prevent the assets from wasting away. 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 $262,000 and $210,000 for
2003 and 2002 respectively. The increase in the use of cash is due primarily to
an increase in expenses.
Investing activities have used cash of $19,000 and $23,000 for 2003 and
2002, respectively. Investing activities primarily represent purchases of Phase
III equipment, patents relating to the electronic in-store advertising,
directory and coupon devices, and purchases of office equipment.
Financing activities provided cash of $279,000 and $236,000 for 2003
and 2002, respectively. Financing activities primarily represent sales of the
Company's restricted stock, and short term borrowings.
Factors That May Affect Future Results - Management's Discussion and Analysis
contains information based on management's beliefs and forward-looking
statements that involved a number of risks, uncertainties, and assumptions.
There can be no assurance that actual results will not differ materially for the
forward-looking statements as a result of various factors, including but not
limited to the following:
The foregoing statements are based upon management's current
assumptions.
ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning
8
immediately following the signature page to this report. See Item 13 for a list
of the financial statements and financial statement schedules included.
ITEM 8 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.
PART III
ITEM 9 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
William J. Dupre 50 COO/President Next annual shareholder meeting
D. Paul Smith 57 Exec Vice-President/
CFO/Secretary/
Treasurer/Chairman Next annual shareholder meeting
Daniel L. Warner 31 Exec Vice-President-
Business Development Next annual shareholder meeting
Richard J. Trout 47 Director Next annual shareholder meeting
William C. Bailey 69 Director Next annual shareholder meeting
Michael L. Mills 41 Director Next annual shareholder meeting
C. Terry Warner 67 Director Next annual shareholder meeting
William J. Dupre, age 50, joined the Company as Chief Operating Officer
and Executive Vice-President in November 2002. Mr. Dupre was appointed President
and COO in December 2003. Mr. Dupre joins the Company with over fifteen years of
proven executive level retail product development and in-store marketing
experience including four years at Smart Media/SnapShopper,
9
four years at VideOcart, and seven years at Information Resources (IRI). During
his tenure at IRI, Mr. Dupre successfully developed and launched various retail
and consumer products to market, negotiated participation in IRI's Qscan program
in over 25,000 retail stores representing 70 of the top 100 grocery chains in
the United States and contributed to the growth of chain specific consumer
packaged goods manufacturer revenues. Mr. Dupre also has participated in venture
capital fund raising at several start-up companies. Mr. Dupre will lead the
Company in the execution of its strategic initiatives as it sets to deploy its
proprietary in-store media known as Klever-Kart(R), which provides retailers and
consumer goods companies one-on-one communications with shoppers by utilizing
its LCD display mounted on the handle of shopping carts.
D. Paul Smith, age 57, became Chairman of the Board in January 2001,
and CFO, Vice- President, and Secretary in October 2001, and has served as
director of the Company since November 2000. Mr. Smith has been an ongoing
financial advisor to the Company for the past seven years and has played an
active part in the development of the Company's business plan. Mr. Smith is
Chief Financial Officer for the Arbinger Institute. On November 18, 2002, Mr.
Smith resigned his position as Vice-President when William J. Dupre assumed the
role of Executive Vice- President. Upon Mr. Dupre's appointment to President/COO
in December 2003, Mr. Smith reassumed the role of Executive Vice-President, in
addition to his other positions.
Daniel L. Warner, age 31, joined the Company as Executive
Vice-President of Business Development in February 2004. Mr. Warner comes to the
Company with over seven years of experience in operations, strategy, and
business development. Prior to joining the Company, Mr. Warner worked as
Vice-President of Operations and Sales for PerfectPerfect.MD., an internet-based
medical software firm, General Manager of Operations for Meyer & Leichty, a
design and advertising firm, as well as Director of Business Development for
Freeport.com, an internet-based permission marketing company. Mr. Warner also
served as a strategy consultant for Monitor Company, working with clients such
as Coca-Cola, Navistar, Union Bank of California, and several other Fortune 500
companies, covering a wide range of industries.
Richard J. Trout, age 47, served as interim CFO of the Company from
June 16, 2000 to October 1, 2001, and President from October 1, 2001 until
December 3, 2003. Mr. Trout has served as a director since September 25, 2000.
Mr. Trout came to the Company with a strong financial background working for
Western Financial Bank in California as a Vice-President for 12 years, as well
as a position at Olson Farms, Inc. as Executive Vice-President, CFO and director
for approximately four years until late 2003.
William C. Bailey, age 69, was elected as a director of the Company in
June 1994. Mr. Bailey is President and owner of Mount Olympus Waters, Inc. and
founder of Water and Power Technologies. Mr. Bailey served on the Board of
Directors for the American Bottled Water Association and the International
Bottled Water Association from 1975 to 1996, and was the Association's President
in 1978 and again in 1990. He received the industry's first award of Excellence
from IWBA in 1987 and was elected to the Beverage World Water Hall of Fame in
1989. He serves as a member of the Board of Trustees for the Utah Food Industry
Associations Insurance Trust. He is a lifetime member of the Board of Trustees
for the Utah Symphony Opera, having
10
served as Chairman from 1999-2002. He has been a member of the Board of
Directors for KUED 1990- 1996, University of Utah Alumni Board 1990-1994, and a
member of the University of Utah's Fine Art's Advisory Board. He is also a
member of the Salt Lake Rotary and served as Secretary 1999-2000.
Michael L. Mills, age 41, was elected as a director of the Company in
December 1998. Mr. Mills is President/CEO of Olson Holdings, Inc. (formerly
known as Olson Farms, Inc.). Olson Holdings, Inc. is a diversified agricultural
and real estate holding company with operations throughout the western United
States, dealing primarily in the distribution of eggs, with headquarters in
Riverside, California. Mr. Mills has been with that company since 1989. Mr.
Mills began his career with Deloitte & Touche in Los Angeles after graduating
from the University of Utah summa cum laude in accounting and mathematics.
C. Terry Warner, Ph.D., age 67, became a member of the Company's Board
in September 2001. Mr. Warner is a longtime shareholder in the Company. Mr.
Warner is the founder of The Arbinger Institute. He received his Ph.D. in
philosophy from Yale University, and has been a senior member of Linacre
College, Oxford University. He taught at the university level for over thirty
years and has been Dean of the College of General Studies at Brigham Young
University. Mr. Warner has served as a consultant and advisor to executives and
managers of about fifty companies, and has served on boards in the steel,
petrochemical, thrift, and health care industries.
Audit Committee
As of December 31, 2003, the Company had one active board committee,
the Audit and Compliance Committee. D. Paul Smith, Michael L. Mills and Richard
J. Trout are on this committee. The committee meets annually to determine
auditors and scope of the audit, as well as reviews of the 10KSB and all audited
financials.
Audit Committee Financial Expert
The Company's board of directors does not have an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission, serving on its audit
committee. The board of directors believes that all members of its audit
committee are financially literate and experienced in business matters, and that
one or more members of the audit committee are capable of (i) understanding
generally accepted accounting principles ("GAAP") and financial statements, (ii)
assessing the general application of GAAP principles in connection with our
accounting for estimates, accruals and reserves, (iii) analyzing and evaluating
our financial statements, (iv) understanding our internal controls and
procedures for financial reporting; and (v) understanding audit committee
functions, all of which are attributes of an audit committee financial expert.
However, the board of directors believes that there is not any audit committee
member who has obtained these attributes through the experience specified in the
SEC's definition of "audit committee financial expert." Further, like many small
companies, it is difficult for the Company to attract and retain board members
who qualify as "audit committee
11
financial experts," and competition for these individuals is significant. The
board believes that its current audit committee is able to fulfill its role
under SEC regulations despite not having a designated "audit committee financial
expert."
ITEM 10 EXECUTIVE COMPENSATION
Summary Compensation
The following table set forth, for the last three fiscal years, the
annual and long term compensation earned by, awarded to, or paid to the
individuals who were chief executive officer and chief operations officer at any
time during the last fiscal year.
Long Term Compensation
Annual Compensation Awards Payouts
--------------------- -------- -------------
ards ts
------ ---
(a) (b) (c) (d) (e) (f) (g) (h) (i)
---- --- --- --- --- --- --- --- ---
Other Securities
Year Annual Restricted Underlying All Other
Ended Compen- Stock Options/ LTIP Compen-
Name and Dec. Salary Bonus sation Award(s) SAR's Payouts sation
Principal Position 31 ($)(1) ($) ($) ($) (no.) ($) ($)
-------------------------------------------------------------------------------------------------------------------
Corey A. Hamilton 2003 - - - - - - -
Former President/ 2002 - - - - - - -
Former CEO 2001 112,500 (1) - - - 400,000(3) - -
Richard J. Trout 2003 - (2) - - - 1,027,616 - -
Former President 2002 - - - - 100,661(7) - -
2001 - (2) - - - 125,000(6) - -
D. Paul Smith 2003 - - - - 1,168,333 - -
Chairman/CFO/ 2002 - - - - 192,892(7) - -
Sec/Treasurer 2001 - (5) - - - 100,000(6) - -
Exec Vice-President
William J. Dupre 2003 50,000 (4) - - - 400,000 - -
President/COO 2002 12,500 (4) - - - 400,000(8) - -
2001 - - - - - - -
- - - - - - -
David D. Singer 2003 - (9) - - - - - -
Interim CEO 2002 - - - - - - -
2001 - - - - - - -
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(1) Corey A. Hamilton resigned from the Company as President and CEO
effective September 30, 2001.
(2) Richard J. Trout was named President in October 2001. Mr. Trout
resigned as President on December 3, 2003.
(3) As of December 31, 2002, all stock options granted to Corey A. Hamilton
have expired.
(4) William J. Dupre joined the Company in November 2002 as Chief Operating
Officer and Executive Vice-President. Mr. Dupre's options vest
quarterly with the initial vest beginning on day 1 of employment. On
December 3, 2003, Mr. Dupre was named President of the Company.
(5) D. Paul Smith joined the Company in October 2001 as Chief Financial
Officer, Vice-President, Corporate Secretary, and Treasurer. Mr. Smith
resigned as Vice-President when William J. Dupre assumed that position
in November 2002.
(6) Options canceled on September 9, 2003.
(7) 100,000 options canceled on September 9, 2003.
(8) 200,000 options canceled on September 9, 2003, and 200,000 options
authorized to convert to 200,000 shares of common stock. As of March
16, 2004, these 200,000 shares have not been issued.
(9) David D. Singer was named Interim CEO on December 8, 2003. Mr. Singer
resigned this position on February 5, 2004. Mr. Singer took a total of
$3,500 as an advance towards any future earned compensation.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information respecting all individual
grants of options and SARs made during the last completed fiscal year to the
chief executive officer and chief financial officer of the Company.
Name Number of % of Total Exercise Expiration Potential Realizable
Securities Option Price ($) Date Value at assumed
Underlying Granted to annual rates of
Common Employees stock price
Stock appreciation for
Options option term ($)
Granted 5% 10%
--------------------------------------------------------------------------------------------- ------------- -------------
Richard J. Trout 272 .0001% 1.00 03/19/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
Richard J. Trout 947 .0003% 1.00 04/28/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
Richard J. Trout 1397 .0005% 1.00 07/18/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
Richard J. Trout 525,000 17.82% .06 09/09/2007 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
Richard J. Trout 500,000 16.97% .06 09/12/2007 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 8,333 .003% 1.00 02/21/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 25,000 .008% 1.00 03/31/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 12,500 .004% 1.00 07/18/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 8,333 .003% 1.00 08/18/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 4,167 .001% 1.00 10/08/2006 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 510,000 17.31% .06 09/09/2007 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
D. Paul Smith 600,000 20.37% .06 09/12/2007 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
William J. Dupre 400,000 13.58% .06 09/09/2007 0 0
-------------------------- ---------------- --------------- --------------- ---------------- ------------- -------------
Aggregate Option/SAR Exercises in the Last Fiscal Year and year End Option/SAR
Values
13
The following table sets forth information respecting all individual
grants of options and SARs made during the last completed fiscal year to the
chief executive officer, chief financial officer, and directors of the Company.
At Fiscal Year End
Name Shares Value Number of Securities Value of Unexercised in-
Acquired on Realized Underlying Unexercised the-money options ($) (a)
exercise ($) Options
Exercisable Unexercisable Exercisable Unexercisable
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
Richard J. Trout 0 $0 1,027,616 - $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
Michael L. Mills 0 $0 512,000 - $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
D. Paul Smith 0 $0 1,168,333 - $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
William C. Bailey 0 $0 520,000 - $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
C. Terry Warner 0 $0 552,167 - $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
William J. Dupre 0 $0 200,000 200,000 $0 $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
(a) Based on the closing price of the Company's Common Stock on March 26,
2004 at $.14 per share
Executive Compensation and Benefits
The Company provides to three of its full time employees, including the
Chief Operating Officer, health insurance and miscellaneous other benefits.
The Company adopted a stock incentive plan for its employees, executive
officers, directors, and consultants.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
Principal Shareholders
The table below sets forth information as to each person owning of
record or who was known by the Company to own beneficially shares of stock that
have more than 5% of the 45,587,919 votes as of March 26, 2004, including
options to acquire stock of the Company that are currently exercisable or will
be within the next 60 days, and information as to the ownership of the Company's
Stock by each of its directors and executive officers and by the directors and
executive officers as a group. Except as otherwise indicated, all shares are
owned directly, and the persons named in the
14
table have sole voting and investment power with respect to shares shown as
beneficially owned by them.
# of
Name and Address Nature of Shares
of Beneficial Owners Ownership Owned Percent
Directors
Principal Shareholders
Paul G. Begum Direct (2) 3,158,807
P.O. Box 58045 Preferred Shares (2) 159,426
Salt Lake City, UT 84158 Options/Warrants 237,000
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Total 3,555,233 7.76%
========= =======
Olson Foundation Direct (1) 2,835,130
2220 Eastridge Ave Preferred Shares (1) 4,982,065
Suite B Options/Warrants (1) 735,722
Riverside, CA 92507 Convertible Debt (1) 9,384,260
-----------
Total 17,937,177 32.20%
========== =======
C. Terry Warner Direct (3) 2,526,574
1278 Locust Lane Options (3) 661,335
Provo, UT 84604 Convertible Debt (3) 10,597
------------
Total 3,198,506 6.91%
========== =======
Presidio Investments LLC Direct (4) 1,266,708
3200 North Central Ave Preferred Shares (4) 438,422
Suite 1560 Options/Warrants (4) 84,510
Phoenix, AZ 85012 Convertible Debt (1)(4) 8,521,821
---------
Total 10,311,461 19.03%
========== =======
Olson Legacy Trust Direct (4) 1,266,708
3200 North Central Ave Preferred Shares (4) 438,422
Suite 1560 Options/Warrants (1)(4) 84,510
Phoenix, AZ 85012 Convertible Debt (4) 8,521,821
---------
Total 10,311,461 19.03%
========== =======
Olson Holdings Direct (1) 759,765
2220 Eastridge Ave. Preferred Shares (1) 3,786,370
Suite B Options/Warrants (1) 3,060
------------
Riverside, CA 92507 Total 4,549,195 9.98%
========== =======
15
Seabury Investors III Preferred Shares 5,095,161
540 Madison Avenue Warrants 412,936
New York, NY 10022 Convertible Debt (5) 1,427,618
---------
Total 6,935,715 14.62%
========= =======
Primavera Direct 3,252,771 7.14%
=======
1278 Locust Lane
Provo, UT 84604
Arbinger Direct 3,490,756
Gateway Park Tower Options/Warrants 97,176
563 W 500 S Convertible Debt 42,386
-----------
Suite 200 Total 3,630,318 7.94%
========== =======
Woods Cross, UT 84010
William Bailey Direct 3,244,914
3889 E. Brockbank Dr. Options/Warrants 520,000
----------
Salt Lake City, UT 84124 Total 3,764,914 8.17%
========= =======
D. Paul Smith Direct (6) 1,041,301
747 W. Sheringham Ct. Options/Warrants (6) 1,309,813
Farmington, UT 84025 Convertible Debt (6) 13,188
-----------
Total 2,364,302 5.04%
========= =======
Directors and Executive Officers
William Bailey Direct 3,244,914
3889 E. Brockbank Dr. Options/Warrants 520,000
----------
Salt Lake City, UT 84124 Total 3,764,914 8.17%
========= =======
C. Terry Warner Direct (3) 2,526,574
1278 Locust Lane Options (3) 661,335
Provo, UT 84604 Convertible Debt (3) 10,597
------------
Total 3,198,506 6.91%
========== =======
D. Paul Smith Direct (6) 1,041,301
747 W. Sheringham Ct. Options/Warrants (6) 1,309,813
Farmington, UT 84025 Convertible Debt (6) 13,188
-----------
Total 2,364,302 5.04%
========= =======
16
All Executive Officers and
Directors as a Group (7
persons) Direct 5,703,622
Options/Warrants 3,670,091
Convertible Debt 13,188
-----------
Total 9,386,901 20.27%
========= ======
(1) Michael Mills is president of Olson Holdings, Inc., executor of the
Estate of Peter Dean Olson, trustee of the Olson Foundation, he has
voting and investment control but disclaims any pecuniary interest. For
The Olson Foundation, Mr. Mills is one of four trustees and does not
have voting or investment power because of a majority-vote rule
relation to the Foundation. The Olson ownership includes 759,765 Shares
held by Olson Holdings, 1,123,603 Shares held by the Olson Foundation,
928,580 Shares held by the Estate of Peter D. Olson, and 23,182 Shares
held by Mr. Mills. The Olson ownership also includes Preferred Stock
that, as of March 26, 2004, would convert 4,982,065 votes held by
Presidio (438,421 votes), Olson Holdings (3,786,370 votes) and Olson
Foundation (757,274 votes). Ownership includes an option covering 3,060
Shares held by Olson Holdings, warrants covering 136,152 Shares held by
Olson Foundation, options covering 84,510 Shares held by Olson Legacy
Trust, and options covering 512,000 Shares held by Mr. Mills.
Convertible debt held by Olson Foundation and affiliates in the amount
of 9,384,260 shares may also be converted as of March 26, 2004 into
862,439 Shares held by Olson Foundation and 8,521,821 shares held by
Presidio.
(2) Mr. Begum's ownership includes 31,834 Shares held in a brokerage
account and 77,142 shares held privately by Mr. Begum; 115,878 shares
which are held in a brokerage account and 2,427,089 shares held by Tree
of Stars, Inc., a corporation of which Mr. Begum is a director, officer
and principal shareholder; 94,914 shares which are in a brokerage
account, and 411,950 shares held by PSF, Inc., a private company of
which Mr. Begum is President and principal shareholder. Mr. Begum's
ownership also includes Class A Convertible Preferred Shares that would
convert to 159,426 Shares as of March 26, 2004.
(3) Mr. Warner's ownership includes 12,500 Shares held by C. Terry Warner;
1,626,385 Shares held by Primavera, Ltd., a limited partnership of
which Mr. Warner is a passive member owning one (1) percent and Susan
Warner, his spouse, who owns forty-nine (49) percent; 15,000 shares by
Susan Warner, his spouse and 872,689 shares held by the Arbinger
Institute, a private corporation of which Mr. Warner is a director and
twenty-five (25) percent shareholder; options covering 661,335 shares
and convertible debt held by Mr. Warner that may be converted into
10,597 shares as of March 26, 2004.
(4) Presidio Investments, of which William J. Howard is the single member,
and Olson Legacy Trust, of which William J. Howard is the sole trustee,
ownership includes 94,858 Shares held by Presidio Investments LLC.;
438,422 Shares should the Class A Convertible Preferred Shares held by
Presidio Investments LLC. be converted as of March 26, 2004; Olson
Legacy
17
Trust, of which William J. Howard is the sole trustee, option covering
84,510 Shares; and 1,171,850 common shares held by Olson Legacy Trust,
of which William J. Howard is the sole trustee. In addition to the
total Presidio and Olson Legacy Trust ownership, convertible debt held
by Presidio Investments may be converted into 8,521,821 Shares as of
March 26, 2004.
(5) In addition to the total Seabury ownership, convertible debt held by
Seabury Investors III, Limited Partnership could be converted into
1,427,618 Shares as of March 26, 2004.
(6) Mr. Smith's ownership includes 168,612 shares held by D. Paul Smith;
872,689 shares held by the Arbinger Institute, a private corporation of
which Mr. Smith is a director, officer and twenty-five (25) percent
shareholder; options covering 1,309,813 shares and convertible debt
held by Mr. Smith that may be converted into 13,188 shares as of March
26, 2004.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Olson Holdings, Inc. loans to the Company
Olson Holdings, 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. As of December 31, 2003, the loan is in default and
continues to accrue interest at an annual rate of 10%. 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 Holdings 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. As of December 31, 2003, the loan is in
default and continues to accrue interest at an annual rate of 15%. 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.
18
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. As of December 31, 2003, the loan is in
default and continues to accrue interest at an annual rate of 15%. 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.
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. On September 11, 2003, the
outstanding loan of $28,750 and accrued interest of $17,679 were converted to
928,580 shares of common stock valued at $.05 per share.
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 March 22, 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 1, 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. As of December 31, 2003, the
loan is in default and continues to accrue interest at an annual rate of 10%.
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. On September 11, 2003, the outstanding loan of $50,706 and accrued
19
interest of $7,887 were converted to 1,171,850 shares of common stock valued at
$.05 per share.
Director Loan to the Company
On October 20, 1998, the Company borrowed $150,000 from William C.
Bailey 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. On September 11,
2003, the remaining loan balance of $100,000 and accrued interest of $50,006
were converted to 3,000,113 shares of common stock valued at $.05 per share.
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. During the
three months ended September 30, 2003, Mr. Trout loaned the Company an
additional $839. 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.
On September 11, 2003, the outstanding loan balance of $1,967 and accrued
interest of $65 were converted to 40,645 shares of common stock valued at $.05
per share.
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. As of December 31, 2003, the loan is in
default and continues to accrue interest at an annual rate of 15%. 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. As of December 31, 2003, the loan is in
default and continues to accrue interest at an annual rate of 15%. Warrants were
issued in conjunction with this loan for 57,576 common shares at a strike price
of $0.01 and an expiration date 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.
Arbinger Loans to the Company
The loans listed below were made to the Company by The Arbinger
Institute. The Arbinger
20
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
07/30/03 $15,000.00 8.00% 07/30/05 25,000 $1.00
------------- --------------
Total $73,717.04 122,862
============= ==============
On September 11, 2003, the outstanding loan of $73,717 and accrued
interest of $7,137 were converted to 1,617,074 shares of common stock valued at
$.05 per share.
The loans listed below were made to the Company by The Arbinger
Institute after September 11, 2003. In conjunction with these notes, The
Arbinger Institute received stock options as shown in the table below.
Common
Stock
Annual Option # Option Strike
Date Principal Interest Rate Maturity Date Shares Price
------------ ---------------------------------------------------------------------------------
09/12/03 $10,040.00 8.00% 09/12/05 16,733 $1.00
09/17/03 $471.73 8.00% 09/17/05 786 $1.00
09/25/03 $4,500.00 8.00% 09/25/05 7,500 $1.00
09/26/03 $80.95 8.00% 09/26/05 135 $1.00
10/01/03 $79.00 8.00% 10/01/05 132 $1.00
11/01/03 $79.00 8.00% 11/01/05 132 $1.00
11/26/03 $10,000.00 8.00% 11/26/05 16,667 $1.00
12/02/03 $79.00 8.00% 12/02/05 132 $1.00
12/15/03 $13,000.00 8.00% 12/15/05 21,667 $1.00
12/24/03 $2,750.00 8.00% 12/24/05 4,583 $1.00
------------- --------------
Total $41,079.68 68,467
============= ==============
The Arbinger Institute has also made additional loans to the Company to
pay for storage space. The total amount of these loans is $1,595 plus accrued
interest of $113. These loans were
21
converted to common stock on September 11, 2003. As of March 16, 2004, the stock
has not been issued due to administrative reasons.
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, Mr. Warner received common stock options
for each note at a ratio of 1.667 common shares for each dollar loaned to the
Company. On September 11, 2003, the outstanding loan of $67,648 and accrued
interest of $3,992 were converted to 1,432,791 shares of common stock valued at
$.05 per share.
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
07/18/03 $7,500.00 8.00% 07/18/05 12,500 $1.00
08/18/03 $5,000.00 8.00% 08/18/05 8,333 $1.00
------------- --------------
Total $88,235.05 147,058
============= ==============
On September 11, 2003, the outstanding loan $88,235 and accrued
interest of $5,215 were converted to 1,868,997 shares of common stock valued at
$.05 per share.
On October 8, 2003, Mr. Smith loaned the Company $2,500. This note is
payable within two years plus interest at 8% per annum. In conjunction with the
note, Mr. Smith received a common stock option at a ratio of 1.667 common shares
for each dollar loaned to the Company. The option has a strike price of $1.00
and a 3-year expiration date.
Paul G. Begum
On February 1, 2000 an accrued liability owed to Paul G. Begum in the
amount of
22
$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. During 2003, the
Company paid $27,899 towards these liabilities. The total amount of these
liabilities remaining at December 31, 2003 is $38,035.
In February 2004, the remaining liabilities $38,035 due to Mr. Begum
were settled in exchange for 152,142 shares of the Company's free-trading common
stock valued at $.25 per share.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements Page
Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Balance Sheets
December 31, 2003, and 2002................................................F-2
Statements of Loss
For the Years Ended December 31, 2003, and 2002............................F-4
Statement of Stockholders' Equity
For the Years Ended December 31, 2003, and 2002............................F-5
Statements of Cash Flows
For the Years Ended December 31, 2003, and 2002...........................F-25
Notes to Financial Statements
December 31, 2003, and 2002...............................................F-27
2. Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits
The following exhibits are included as part of this
report:
Exhibit
23
Number Title of Document
3.01 Restated Certificate of Incorporation of Klever Marketing, Inc. a
Delaware corporation (1)
3.02 Certificate of Designation of Rights, Privileges and Preferences:
Rights of A Class Voting Preferred Stock, Series 1, of Klever
Marketing, Inc., dated February 7, 2000 (2)
3.03 Bylaws, as amended (2)
4.01 Amended Certificate of Designation of Rights, Privileges and
Preferences: Rights of A Class of Voting Preferred Stock, Series 1, of
Klever Marketing, Inc., Dated February 7, 2000 (3)
4.02 Certificate of Designation of Rights, Privileges and Preferences of
Class B Voting Preferred Stock, of Klever Marketing, Inc., dated
September 24, 2000 (3)
4.03 Certificate of Designation of Rights, Privileges and Preferences of
Class C Voting Preferred Stock, of Klever Marketing, Inc., dated
January 2, 2001 (3)
4.04 Certificate of Designation of Rights, Privileges and Preferences of
Class D Voting Preferred Stock, of Klever Marketing, Inc., dated June
14, 2002 (5)
4.05 Amendment to the Certificates of Designation of Rights, Privileges and
Preferences of Class A, B, and C Voting Preferred Stock, of Klever
Marketing, Inc., dated June 12, 2002 (5)
10.01 Separation Agreement between Paul G. Begum and the Registrant Dated
January 8, 2001 (2)
10.02 Stock Incentive Plan, effective June 1, 1998 (2)
10.03 Amended and Restated Promissory Note (Secured) of the Registrant
payable to Presidio Investments, LLC, dated June 27, 2000, with
Financing Statement and Exhibit "A" (2)
10.04 Intercreditor Agreement between Seabury Investors III, Limited
Partnership, The Olson Foundation, Presidio Investments, LLC, and the
Registrant dated August 27, 2001 (4)
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
24
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated herein by reference from Registrant's Form 10KSB,
dated June 20, 1997. (2) Incorporated herein by reference from
Registrant's Form 10KSB, dated March 29,
2001
(3) Incorporated herein by reference from Registrant's Form 10QSB,
dated May 15, 2001. (4) Incorporated herein by reference from
Registrant's Form 10QSB, dated May 15, 2002. (5) Incorporated herein by
reference from Registrant's Form 10QSB, dated August 19,
2002.
(b) Reports Filed on Form 8-K
On December 3, 2003, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure. The 8-K reported that without authorization the Stock
Alert Notification Report was faxed to a select group of recipients that
included false information about the Company.
On December 3, 2003, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing the appointment of William J. Dupre as the
Company's President, replacing Richard J. Trout. The 8-K also announced that D.
Paul Smith would assume the additional role of Executive Vice President.
On December 8, 2003, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing the termination of the acquisition of S&C
Medical.
On December 8, 2003, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing the appointment of David D. Singer as
Interim Chief Executive Officer.
On January 30, 2004, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing a Strategic Alliance and Joint Development
Agreement with Fujitsu Transaction Solutions, Inc.
On February 4, 2004, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing the issuance of a press release announcing
an agreement with Fujitsu Transaction Solutions, Inc.
On February 5, 2004, the Company filed a Form 8-K under Item 9,
Regulation FD Disclosure, announcing the resignation of David D. Singer as the
Company's Interim Chief Executive Officer, and the appointment of Danny Warner
as Chief Operating Officer.
25
ITEM 14. 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 annual report on Form 10- KSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this annual report on Form 10-KSB 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 annual
report on Form 10-KSB, and
(ii) the financial statements, and other financial information
included in this annual report on Form 10-KSB, 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 annual report on Form 10-KSB.
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 regards to significant
deficiencies and material weaknesses.
ITEM 15. PRINCIPAL ACCOUNTANT FEES & SERVICES
The following is a summary of the fees billed to us by Robison, Hill &
Company for professional services rendered for the years ended December 31, 2003
and 2002:
Service 2003 2002
------------------------------ ------------------ ------------------
Audit Fees $ 23,364 $ 16,500
Audit-Related Fees - -
Tax Fees 287 250
All Other Fees - -
------------------ ------------------
Total $ 23,651 $ 16,750
================== ==================
Audit Fees. Consists of fees billed for professional services rendered for the
audits of our consolidated financial statements, reviews of our interim
consolidated financial statements included in quarterly reports, services
performed in connection with filings with the Securities & Exchange Commission
and related comfort letters and other services that are normally provided by
Robison, Hill & Company in connection with statutory and regulatory filings or
engagements.
26
Tax Fees. Consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding
federal, state and local tax compliance and consultation in connection with
various transactions and acquisitions.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee, is to 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 2003 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.
27
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: April 16, 2004 By /S/ William J. Dupre
------------------------------------
William J. Dupre
President, COO
(Principal Executive Officer)
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 16th day of April 2004.
Signatures Title
/S/ William J. Dupre
----------------------------------
William J. Dupre President, COO
(Principal Executive Officer)
/S/ D. Paul Smith
----------------------------------
D. Paul Smith C.F.O.,
Secretary, Treasurer,
Chairman and Executive
Vice-President (Principal
Financial Officer)
/S/ Michael L. Mills
----------------------------------
Michael L. Mills Director
/S/ C. Terry Warner
----------------------------------
C. Terry Warner Director
/S/ Richard J. Trout
----------------------------------
Richard J. Trout Director
28
KLEVER MARKETING, INC.
(A Development Stage Company)
-:-
FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
TABLE OF CONTENTS
Page
Independent Auditor's Report....................................................................................F-1
Balance Sheets
December 31, 2003 and 2002...................................................................................F-2
Statements of Operations
For the Years Ended December 31, 2003 and 2002
And for the Cumulative Period from July 5, 1996 (inception of development stage)
To December 31, 2003.........................................................................................F-4
Statement of Stockholders' Equity
From July 5, 1996 (inception of development stage) to December 31, 2003 .....................................F-5
Statements of Cash Flows
For the Years Ended December 31, 2003 and 2002
And for the Cumulative Period from July 5, 1996 (inception of development stage)
To December 31, 2003........................................................................................F-25
Notes to the Financial Statements
December 31, 2003 and 2002..................................................................................F-27
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Klever Marketing, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Klever Marketing,
Inc. (a development stage company) as of December 31, 2003 and 2002, and the
related statements of operations and cash flows for the years ended December 31,
2003, and the cumulative period from July 5, 1996 (inception of development
stage) to December 31, 2003, and the statement of stockholders' equity from July
5, 1996 (inception of development stage) to December 31, 2003. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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, 2003 and 2002, and the
results of its operations and its cash flows for the two 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 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The 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
April 12, 2004
F - 1
KLEVER MARKETING, INC.
(a Development Stage Company)
BALANCE SHEET
December 31,
--------------------------------------
ASSETS 2003 2002
------
------------------ ------------------
Current Assets
Cash $ 1,916 $ 3,424
Prepaid Expense 2,512 -
------------------ ------------------
Total Current Assets 4,428 3,424
------------------ ------------------
Fixed Assets
Office Equipment 105,727 148,067
Phase 2 Equipment - 57,750
Less Accumulated Depreciation (98,913) (120,105)
------------------ ------------------
Net Fixed Assets 6,814 85,712
------------------ ------------------
Other Assets
Patents 2,358,342 2,339,006
Less Accumulated Amortization (2,137,679) (1,915,172)
------------------ ------------------
Net Other Assets 220,663 423,834
------------------ ------------------
Total Assets $ 231,905 $ 512,970
================== ==================
F - 2
KLEVER MARKETING, INC.
(a Development Stage Company)
BALANCE SHEET
(Continued)
December 31,
--------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2003 2002
------------------------------------
------------------ ------------------
Current Liabilities
Accounts Payable, Trade $ 446,855 $ 435,928
Accrued Liabilities 1,247,524 878,142
Related Party Payables 2,172,880 2,476,298
Notes Payable 45,000 75,000
Short-term Notes Payable 458 2,207
------------------ ------------------
Total Current Liabilities 3,912,717 3,867,575
------------------ ------------------
Stockholders' Equity
Preferred stock (par value $.01), 2,000,000 shares authorized 168,434
issued and outstanding December 31, 2003
and December 31, 2002 1,684 1,684
Common Stock (Par Value $.01), 20,000,000 shares
authorized 33,410,364 shares issued and outstanding
at December 31, 2003 and 12,370,578 shares issued
and outstanding at December 31, 2002 334,104 123,706
Common Stock to be issued, 1,395,657 shares at
December 31, 2003 and 768,917 shares at
December 31, 2002 13,957 7,689
Treasury Stock, 1,000 shares at December 31, 2003
and December 31, 2002 (1,000) (1,000)
Paid in Capital in Excess of Par Value 12,934,463 12,100,583
Shareholder Receivable (15,000) -
Retained Deficit (3,333,785) (3,333,785)
Deficit Accumulated During Development Stage (13,615,235) (12,253,482)
------------------ ------------------
Total Stockholders' Equity (3,680,812) (3,354,605)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 231,905 $ 512,970
================== ==================
The accompanying notes are an integral part of these financial statements
F - 3
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF OPERATIONS
Cumulative
From
July 5, 1996
For the Year Ended Inception of
December 31, Development
--------------------------------------
2003 2002 Stage
------------------ ------------------ ------------------
Revenue $ - $ - $ 256,000
------------------ ------------------ ------------------
Expenses
Sales and marketing - - 117,546
General and administrative 849,098 627,287 8,253,605
Research and development - - 4,459,891
------------------ ------------------ ------------------
Total Expenses 849,098 627,287 12,831,042
------------------ ------------------ ------------------
Other income (expense)
Interest income - 100 18,902
Interest expense (291,599) (394,452) (1,015,596)
Loss on disposal of assets (220,956) (4,098) (234,191)
Capital gain on sale of investments - - 191,492
------------------ ------------------ ------------------
Total Other Income (Expense) (512,555) (398,450) (1,039,393)
------------------ ------------------ ------------------
Income (Loss) Before Taxes (1,361,653) (1,025,737) (13,614,435)
Income Taxes 100 100 800
------------------ ------------------ ------------------
Net Income (Loss) After Taxes $ (1,361,753) $ (1,025,837) $ (13,615,235)
================== ================== ==================
Weighted Average Shares
Outstanding 19,420,052 12,563,951
================== ==================
Loss Per Share $ (0.07) $ (0.08)
================== ==================
The accompanying notes are an integral part of these financial statements.
F - 4
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1995 .... 247,100 $ 2,471 12,210,949 $ 122,109 $ -- $ -- $74,022,028
January 1996 shares issued
in connection with merger . (247,100) (2,471) (3,784,905) (37,849) -- 5,059 (70,257,358)
January 1996 shares issued
to individuals for cash at
$2.50 - 3.00 per share ... -- -- 3,500 35 -- -- 7,965
March 1996 shares issued
to an individual and a
company for cash at
$2.00 - 3.00 per share .... -- -- 21,240 212 -- -- 43,267
April 1996 shares issued to
individuals for cash at
$0.50 - 2.04 per share .... -- -- 63,000 630 -- -- 73,370
May 1996 shares issued to
individuals for cash at
$3.00 per share ........... -- -- 9,000 90 -- -- 26,910
May 1996 shares issued to
individuals for legal
services at $3.00 per share -- -- 1,463 15 -- -- 4,374
June 1996 shares issued to a
company in exercise of an
option at $1.00 per share . -- -- 100,000 1,000 -- -- 99,000
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
Balance December 31, 1995 .... $(103,351,248) $ --
January 1996 shares issued
in connection with merger . 100,017,463 --
January 1996 shares issued
to individuals for cash at
$2.50 - 3.00 per share ... -- --
March 1996 shares issued
to an individual and a
company for cash at
$2.00 - 3.00 per share .... -- --
April 1996 shares issued to
individuals for cash at
$0.50 - 2.04 per share .... -- --
May 1996 shares issued to
individuals for cash at
$3.00 per share ........... -- --
May 1996 shares issued to
individuals for legal
services at $3.00 per share -- --
June 1996 shares issued to a
company in exercise of an
option at $1.00 per share . -- --
F - 5
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
June 1996 shares issued to a
related company for cash at
$1.25 per share ........... -- -- 30,000 300 -- -- 37,200
June 1996 shares issued to an
individual for cash at $3.00
per share ................. -- -- 5,000 50 -- -- 14,950
November 15, 1996 shares
issued to individuals for
cash at $1.29-2.59 per share -- -- 40,569 406 -- -- 67,094
November 27, 1996 shares
issued to officer for cash at
$2.94 per share ........... -- -- 2,891 29 -- -- 8,470
December 13, 1996 shares
issued to individuals for
cash and receivables at
$1.00-3.00 per share ...... -- -- 107,624 1,076 -- -- 187,132
December 13, 1996 shares
issued to a company for
services at $1.25 per share -- -- 14,282 143 -- -- 17,710
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
June 1996 shares issued to a
related company for cash at
$1.25 per share ........... -- --
June 1996 shares issued to an
individual for cash at $3.0
per share ................. -- --
November 15, 1996 shares
issued to individuals for
cash at $1.29-2.59 per shar -- --
November 27, 1996 shares
issued to officer for cash
$2.94 per share ........... -- --
December 13, 1996 shares
issued to individuals for
cash and receivables at
$1.00-3.00 per share ...... -- --
December 13, 1996 shares
issued to a company for
services at $1.25 per share -- --
F - 6
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
December 19, 1996 shares
issued to individual in
exercise of option at
$1.25 per share ........... -- -- 30,000 300 -- -- 37,200
December 19, 1996 shares
issued to individual for
cash at $1.25 per share ... -- -- 30,000 300 -- -- 37,200
December 31, 1996 shares
issued to individual for
receivable at $1.00-3.00
per share ................. -- -- -- -- -- 407 101,543
December 31, 1996 shares
issued to officer and
employee for patents ...... -- -- -- -- -- 2,250 130,500
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1996 .... -- -- 8,884,613 88,846 -- 7,716 4,658,555
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
December 19, 1996 shares
issued to individual in
exercise of option at
$1.25 per share ........... -- --
December 19, 1996 shares
issued to individual for
cash at $1.25 per share ... -- --
December 31, 1996 shares
issued to individual for
receivable at $1.00-3.00
per share ................. -- --
December 31, 1996 shares
issued to officer and
employee for patents ...... -- --
Net Loss ..................... -- (831,814)
----------- -----------
Balance December 31, 1996 .... (3,333,785) (831,814)
F - 7
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
January 1997 shares issued
to individuals for cash at
par ....................... -- -- 1 -- -- -- --
January 1997 shares issued
to an officer as payment on
loan at $1.82 per share ... -- -- 6,000 60 -- -- 10,843
February 1997 shares issued
to officers for patent .... -- -- 260,813 2,608 -- (2,250) 1,892
February 1997 shares issued
to individuals for cash at
$1.00-1.25 per share ...... -- -- 58,979 590 -- (282) 37,941
February 1997 shares issued
to officers for payment on
loan at $0.08 per share ... -- -- 190,000 1,900 -- -- 12,350
April 1997 shares issued to
individuals for cash at
$3.00 per share ........... -- -- 20,795 208 -- (50) 44,842
May 1997 shares issued to an
individual and an officer for
cash at $1.75-3.00 per share -- -- 64,375 644 -- -- 118,263
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
January 1997 shares issued
to individuals for cash at
par ....................... -- --
January 1997 shares issued
to an officer as payment on
loan at $1.82 per share ... -- --
February 1997 shares issued
to officers for patent .... -- --
February 1997 shares issued
to individuals for cash at
$1.00-1.25 per share ...... -- --
February 1997 shares issued
to officers for payment on
loan at $0.08 per share ... -- --
April 1997 shares issued to
individuals for cash at
$3.00 per share ........... -- --
May 1997 shares issued to an
individual and an officer f
cash at $1.75-3.00 per shar -- --
F - 8
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
May 1997 shares issued to
individuals for services at
$2.59 per share ........... -- -- 732 7 -- -- 1,888
June 1997 shares issued to
individuals for cash at
$1.75-3.00 per share ...... -- -- 15,000 150 -- 100 70,000
July 1997 shares issued to
employees and individuals
for cash and receivables at
$1.75-2.00 per share ...... -- -- 58,286 583 -- (100) 85,267
August 1997 shares issued
to individuals for cash at
$2.75-3.00 per share ...... -- -- 10,000 100 -- -- 27,900
October 1997 shares issued to
an individual for cash at
$3.00 per share ........... -- -- 4,000 40 -- -- 11,960
October 1997 shares issued to
VideOcart creditors ....... -- -- 97,610 976 -- (976) --
November 1997 shares issued
to individuals for services
at $0.95 per share ........ -- -- 1,666 17 -- -- 1,558
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
May 1997 shares issued to
individuals for services at
$2.59 per share ........... -- --
June 1997 shares issued to
individuals for cash at
$1.75-3.00 per share ...... -- --
July 1997 shares issued to
employees and individuals
for cash and receivables at
$1.75-2.00 per share ...... -- --
August 1997 shares issued
to individuals for cash at
$2.75-3.00 per share ...... -- --
October 1997 shares issued to
an individual for cash at
$3.00 per share ........... -- --
October 1997 shares issued to
VideOcart creditors ....... -- --
November 1997 shares issued
to individuals for services
at $0.95 per share ........ -- --
F - 9
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
December 1997 shares issued
to individual for cash at
$1.50-2.00 per share ...... -- -- 55,000 550 -- 281 139,070
December 1997 shares issued
to officers for loan payment
at $0.86-1.02 per share ... -- -- 53,444 534 -- -- 51,094
December 1997 shares issued
to a company for services
at $0.50 per share ........ -- -- 8,000 80 -- -- 3,945
December 1997 shares issued
to a company for research
and development at par .... -- -- -- -- -- 464 --
December 1997 shares issued
for employee compensation
at $2.50 per share ........ -- -- 6,000 60 -- -- 14,940
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 .... -- -- 9,795,314 97,953 -- 4,903 5,292,308
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
December 1997 shares issued
to individual for cash at
$1.50-2.00 per share ...... -- --
December 1997 shares issued
to officers for loan paymen
at $0.86-1.02 per share ... -- --
December 1997 shares issued
to a company for services
at $0.50 per share ........ -- --
December 1997 shares issued
to a company for research
and development at par .... -- --
December 1997 shares issued
for employee compensation
at $2.50 per share ........ -- --
Net Loss ..................... -- (755,594)
----------- -----------
Balance December 31, 1997 .... (3,333,785) (1,587,408)
F - 10
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
January 1998 shares issued to
individuals for cash at
$1.50 per share ........... -- -- 86,666 867 -- (100) 114,232
January 1998 shares issued
for 1,500 shares of Avtel
stock at $3.00 per share .. -- -- 4,125 41 -- -- 12,334
January 1998 shares issued to
companies for services at
$2.82-7.80 per share ...... -- -- 2,930 29 -- -- 13,848
February 1998 shares issued
to company for research
and development contract .. -- -- 46,366 464 -- (464) --
February 1998 shares issued
to individual for cash at
$2.50 per share ........... -- -- 100,000 1,000 -- -- 249,000
April 1998 shares issued to
employee for compensation
at $2.63 per share ........ -- -- 1,426 14 -- -- 3,736
April 1998 shares issued to
company for legal services
at $3.00 per share ........ -- -- 1,620 16 -- -- 4,844
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
January 1998 shares issued to
individuals for cash at
$1.50 per share ........... -- --
January 1998 shares issued
for 1,500 shares of Avtel
stock at $3.00 per share .. -- --
January 1998 shares issued to
companies for services at
$2.82-7.80 per share ...... -- --
February 1998 shares issued
to company for research
and development contract .. -- --
February 1998 shares issued
to individual for cash at
$2.50 per share ........... -- --
April 1998 shares issued to
employee for compensation
at $2.63 per share ........ -- --
April 1998 shares issued to
company for legal services
at $3.00 per share ........ -- --
F - 11
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
June 1998 shares issued to
individual for consulting
services at $2.79 per share -- -- 3,763 38 -- -- 10,462
June 1998 reduction of stock
price on employee's stock . -- -- -- -- -- -- (1,250)
July 1998 shares issued to
officer for patent purchase
at $2.94 per share ........ -- -- 150,000 1,500 -- 250 512,313
July 1998 shares issued for
accounts receivable at
$1.50 per share ........... -- -- 25,000 250 -- -- 37,250
July 1998 shares issued to
employee for compensation
at $3.06 per share ........ -- -- 1,225 12 -- -- 3,736
July 1998 shares issued to
individuals for cash at
$2.50-3.00 per share ...... -- -- 33,000 330 -- -- 89,670
September 1998 shares
issued to company for
accounts receivable ....... -- -- 86,937 870 -- -- 136,396
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
June 1998 shares issued to
individual for consulting
services at $2.79 per share -- --
June 1998 reduction of stock
price on employee's stock . -- --
July 1998 shares issued to
officer for patent purchase
at $2.94 per share ........ -- --
July 1998 shares issued for
accounts receivable at
$1.50 per share ........... -- --
July 1998 shares issued to
employee for compensation
at $3.06 per share ........ -- --
July 1998 shares issued to
individuals for cash at
$2.50-3.00 per share ...... -- --
September 1998 shares
issued to company for
accounts receivable ....... -- --
F - 12
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
September 1998 shares
issued to individuals for
cash at $2.00-2.25 per share -- -- 30,900 309 -- -- 62,341
September 1998 shares
issued to individual for
consulting services at
$3.00 per share ........... -- -- 3,818 38 -- -- 11,416
September 1998 shares
issued to individuals for
accounts receivable at
$2.00 per share ........... -- -- 7,500 75 -- -- 14,925
October 1998 shares issued
to individuals for cash at
$2.00 per share ........... -- -- 1,000 10 -- -- 1,990
October 1998 shares issued to
employees for accounts
receivable $2.12 per share -- -- 10,000 100 -- -- 21,100
October 1998 shares issued to
company for legal services
at $2.00 per share ........ -- -- 1,517 15 -- -- 3,020
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
September 1998 shares
issued to individuals for
cash at $2.00-2.25 per shar -- --
September 1998 shares
issued to individual for
consulting services at
$3.00 per share ........... -- --
September 1998 shares
issued to individuals for
accounts receivable at
$2.00 per share ........... -- --
October 1998 shares issued
to individuals for cash at
$2.00 per share ........... -- --
October 1998 shares issued to
employees for accounts
receivable $2.12 per share -- --
October 1998 shares issued to
company for legal services
at $2.00 per share ........ -- --
F - 13
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
December 1998 shares
returned at $1.58 per share -- -- (42,493) (425) -- -- (66,667)
December 1998 shares issued
to individuals for cash at
$2.25 per share ........... -- -- 42,493 425 -- -- 95,183
December 1998 shares issued
for employee compensation
at $2.19 per share ........ -- -- 1,712 17 -- -- 3,732
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 .... -- -- 10,394,819 103,948 -- 4,589 6,625,919
January 1999 shares returned
at $0.67-1.58 per share ... -- -- (62,489) (624) -- -- (107,047)
January & February 1999
shares issued to individuals
for cash at $2.00 per share -- -- 112,500 1,125 -- -- 223,875
January & February 1999
shares issued to individuals
for cash at $2.25 per share -- -- 224,444 2,244 -- -- 502,755
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
December 1998 shares
returned at $1.58 per share -- --
December 1998 shares issued
to individuals for cash at
$2.25 per share ........... -- --
December 1998 shares issued
for employee compensation
at $2.19 per share ........ -- --
Net Loss ..................... -- (1,496,926)
----------- -----------
Balance December 31, 1998 .... (3,333,785) (3,084,334)
January 1999 shares returned
at $0.67-1.58 per share ... -- --
January & February 1999
shares issued to individual
for cash at $2.00 per share -- --
January & February 1999
shares issued to individual
for cash at $2.25 per share -- --
F - 14
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
January 1999 shares issued
for employee compensation
at $2.34 per share ........ -- -- 1,328 13 -- -- 3,094
April & June 1999 shares
issued to individuals for
cash at $2.25-2.50 per share -- -- 40,689 407 -- -- 91,344
April 1999 shares issued to
employee for compensation
at $1.95 per share ........ -- -- 1,667 17 -- -- 3,093
June 1999 shares issued for
exercise of option at $0.86
per share ................. -- -- 231,834 2,318 -- -- 197,059
July 1999 shares issued to
individuals for cash at
$2.25 per share ........... -- -- 72,500 725 -- -- 162,400
July & August 1999 shares
issued to individuals for
cash at $2.50 per share ... -- -- 78,500 785 -- -- 195,465
July 1999 shares issued to
employee for cash at
$1.96 per share ........... -- -- 1,285 13 -- -- 2,506
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
January 1999 shares issued
for employee compensation
at $2.34 per share ........ -- --
April & June 1999 shares
issued to individuals for
cash at $2.25-2.50 per shar -- --
April 1999 shares issued to
employee for compensation
at $1.95 per share ........ -- --
June 1999 shares issued for
exercise of option at $0.86
per share ................. -- --
July 1999 shares issued to
individuals for cash at
$2.25 per share ........... -- --
July & August 1999 shares
issued to individuals for
cash at $2.50 per share ... -- --
July 1999 shares issued to
employee for cash at
$1.96 per share ........... -- --
F - 15
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
August 1999 shares issued to
individuals for cash at
$3.00 per share ........... -- -- 5,607 56 -- -- 16,764
September 1999 shares
issued to individual for
exercise of option at
$0.52 per share ........... -- -- 6,437 64 -- -- 3,283
September 1999 shares
issued to individual for
cash at $2.75 per share ... -- -- 6,000 60 -- -- 16,440
October & November 1999
shares issued to individuals
for cash at $2.75 per share -- -- 160,000 1,600 -- -- 438,400
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1999 .... -- -- 11,275,121 112,751 -- 4,589 8,375,350
January 2000 shares issued to
company for cash at
$2.75 per share ........... -- -- 27,273 273 -- -- 74,727
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
August 1999 shares issued to
individuals for cash at
$3.00 per share ........... -- --
September 1999 shares
issued to individual for
exercise of option at
$0.52 per share ........... -- --
September 1999 shares
issued to individual for
cash at $2.75 per share ... -- --
October & November 1999
shares issued to individual
for cash at $2.75 per share -- --
Net Loss ..................... -- (1,734,623)
----------- -----------
Balance December 31, 1999 .... (3,333,785) (4,818,957)
January 2000 shares issued to
company for cash at
$2.75 per share ........... -- --
F - 16
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
February 2000 shares issued
for employee compensation
at $3.99 per share ........ -- -- 74,608 746 -- -- 296,939
February 2000 exercise of
stock option for cash and
note receivable at $0.86
per share ................. -- -- 579,585 5,796 -- -- 492,646
February 2000 shares issued
to individual for cash at
$1.07 per share ........... -- -- 28,979 290 -- -- 30,718
February 2000 shares
canceled and converted to
preferred shares at $2.75
per share ................. -- -- (100,000) (1,000) -- -- (274,000)
January & February 2000
shares issued to companies
for cash at $26 per share . 5,769 57 -- -- -- -- 149,943
February 2000 shares
converted from common
shares at $26 per share ... 10,576 106 -- -- -- -- 274,894
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
February 2000 shares issued
for employee compensation
at $3.99 per share ........ -- --
February 2000 exercise of
stock option for cash and
note receivable at $0.86
per share ................. -- --
February 2000 shares issued
to individual for cash at
$1.07 per share ........... -- --
February 2000 shares
canceled and converted to
preferred shares at $2.75
per share ................. -- --
January & February 2000
shares issued to companies
for cash at $26 per share . -- --
February 2000 shares
converted from common
shares at $26 per share ... -- --
F - 17
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
February 2000 conversion of
note payable to preferred
shares at $26 per share ... 9,615 96 -- -- -- -- 249,904
February 2000 shares issued
to company for cash at
$26 per share ............. 21,285 213 -- -- -- -- 553,162
March 2000 shares issued to
company for accounts
payable at $3.00 per share -- -- 2,603 26 -- -- 7,783
March 2000 shares issued to
individual for cash at $2.75
per share ................. -- -- 10,909 109 -- -- 29,891
April 2000 exercise of stock
option by individual for
cash at $1.07 per share ... -- -- 18,193 182 -- -- 19,285
April 2000 shares issued to
company for cash at $2.50
per share ................. -- -- 40,312 403 -- -- 100,377
May 2000 shares issued to
company for cash at $2.75
per share ................. -- -- 54,546 546 -- -- 149,455
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
February 2000 conversion of
note payable to preferred
shares at $26 per share ... -- --
February 2000 shares issued
to company for cash at
$26 per share ............. -- --
March 2000 shares issued to
company for accounts
payable at $3.00 per share -- --
March 2000 shares issued to
individual for cash at $2.7
per share ................. -- --
April 2000 exercise of stock
option by individual for
cash at $1.07 per share ... -- --
April 2000 shares issued to
company for cash at $2.50
per share ................. -- --
May 2000 shares issued to
company for cash at $2.75
per share ................. -- --
F - 18
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
May 2000 shares issued to
companies for accounts
payable at $2.75 per share -- -- 6,885 69 -- -- 18,866
May 2000 paid-in capital
from treasury stock
transaction ............... -- -- -- -- -- -- 5,980
May 2000 shares issued to
individual that were paid
for in 1997 ............... -- -- 23,334 233 -- (233) --
May 2000 shares issued to
company for cash at $26
per share ................. 5,769 58 -- -- -- -- 149,942
July 2000 shares issued to
individuals for cash at
$1.07 per share ........... -- -- 68,744 687 -- -- 72,869
July 2000 paid-in capital
from treasury stock
transaction ............... -- -- -- -- -- -- 10,200
September 2000 stock issued
to company for cash at
$17 per share ............. 41,177 412 -- -- -- -- 699,588
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
May 2000 shares issued to
companies for accounts
payable at $2.75 per share -- --
May 2000 paid-in capital
from treasury stock
transaction ............... -- --
May 2000 shares issued to
individual that were paid
for in 1997 ............... -- --
May 2000 shares issued to
company for cash at $26
per share ................. -- --
July 2000 shares issued to
individuals for cash at
$1.07 per share ........... -- --
July 2000 paid-in capital
from treasury stock
transaction ............... -- --
September 2000 stock issued
to company for cash at
$17 per share ............. -- --
F - 19
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
November & December 2000
shares issued to individuals
for cash at $1.50-1.56 per
share ..................... -- -- 48,979 490 -- -- 74,717
December 2000 shares issued
to individual for legal
services at $0.89 per share -- -- 2,697 27 -- -- 2,373
December 2000 shares
returned at $1.73-2.12
per share ................. -- -- (10,000) (100) -- -- (19,150)
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 2000 .... 94,191 942 12,152,768 121,528 -- 4,356 11,546,459
January 2001 shares issued
for payment of note payable
at $6.60 per share ........ 37,879 379 -- -- -- -- 249,621
January 2001 shares canceled
for nonpayment ............ -- -- (4,694) (47) -- -- (9,903)
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
November & December 2000
shares issued to individual
for cash at $1.50-1.56 per
share ..................... -- --
December 2000 shares issued
to individual for legal
services at $0.89 per share -- --
December 2000 shares
returned at $1.73-2.12
per share ................. -- --
Net Loss ..................... -- (4,066,283)
----------- -----------
Balance December 31, 2000 .... (3,333,785) (8,885,240)
January 2001 shares issued
for payment of note payable
at $6.60 per share ........ -- --
January 2001 shares canceled
for nonpayment ............ -- --
F - 20
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
March 2001 shares issued for
payment of note payable at
$6.60 per share ........... 6,061 60 -- -- -- -- 39,940
March 2001 shares issued for
research and development
expenses at $1.00 per share -- -- 15,000 150 -- -- 14,850
May 2001 shares issued to
company for cash at $6.60
per share ................. 30,303 303 -- -- -- -- 199,697
June 2001 shares issued to
company for cash at $0.82
per share ................. -- -- 1,219 12 -- -- 988
August 2001 shares issued to
company for cash at $0.82
per share ................. -- -- 3,466 35 -- -- 2,807
August 2001 shares issued
for general and
administrative expenses at
$0.66 per share ........... -- -- 507,048 5,070 -- -- 329,581
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
March 2001 shares issued for
payment of note payable at
$6.60 per share ........... -- --
March 2001 shares issued for
research and development
expenses at $1.00 per share -- --
May 2001 shares issued to
company for cash at $6.60
per share ................. -- --
June 2001 shares issued to
company for cash at $0.82
per share ................. -- --
August 2001 shares issued to
company for cash at $0.82
per share ................. -- --
August 2001 shares issued
for general and
administrative expenses at
$0.66 per share ........... -- --
F - 21
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
September 2001 shares
returned to Company for
accounts receivable of
$ 98,375 -- -- -- -- (1,000) -- (97,375)
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 2001 .... 168,434 1,684 12,674,807 126,748 (1,000) 4,356 12,276,665
August 2002 shares canceled
for services not rendered . -- -- (304,229) (3,042) -- -- (197,749)
November 2002 cash
received for shares that
have not yet been issued .. -- -- -- -- -- 3,333 21,667
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 2002 .... 168,434 1,684 12,370,578 123,706 (1,000) 7,689 12,100,583
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
September 2001 shares
returned to Company for
accounts receivable of
$98,375 -- --
Net Loss ..................... -- (2,342,405)
----------- -----------
Balance December 31, 2001 .... (3,333,785) (11,227,645)
August 2002 shares canceled
for services not rendered . -- --
November 2002 cash
received for shares that
have not yet been issued .. -- --
Net Loss ..................... -- (1,025,837)
----------- -----------
Balance December 31, 2002 .... (3,333,785) (12,253,482)
F - 22
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
April 2003 shares issued for
cash at $.075 per share ... -- -- 333,333 3,333 -- (3,333) --
April 2003 shares issued for
cash at $.075 per share ... -- -- 866,667 8,667 -- -- 56,333
September 2003 shares
issued for S&C Medical
at $.05 per share ......... -- -- 3,000,000 30,000 -- -- 120,000
September 2003 shares
issued for notes payable
at $.04-.05 per share ...... -- -- 11,259,786 112,598 -- -- 446,642
September 2003 shares
issued for accounts payable
at $.01-.10 per share ..... -- -- 4,200,000 42,000 -- -- 96,000
September 2003 shares
authorized for expenses at
$.03 per share - not issued -- -- -- -- -- 9,545 19,090
September 2003 shares
issued for cash at $.05-.20
per share ................. -- -- 1,370,000 13,700 -- -- 92,300
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
April 2003 shares issued for
cash at $.075 per share ... -- --
April 2003 shares issued for
cash at $.075 per share ... -- --
September 2003 shares
issued for S&C Medical
at $.05 per share ......... -- --
September 2003 shares
issued for notes payable
at $.04-.05 per share ...... -- --
September 2003 shares
issued for accounts payable
at $.01-.10 per share ..... -- --
September 2003 shares
authorized for expenses at
$.03 per share - not issued -- --
September 2003 shares
issued for cash at $.05-.20
per share ................. -- --
F - 23
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(continued)
Common Paid in
Stock Capital in
Preferred Stock Common Stock Treasury to be Excess of
-------------------------- --------------------------
Shares Amount Shares Amount Stock Issued Par Value
----------- ----------- ----------- ----------- ----------- ----------- -----------
November 2003 shares
issued for cash at $.25
per share ................. -- -- 10,000 100 -- -- 2,400
December 2003 shares
authorized for payment of
accounts payable at $.21
per share - not issued .... -- -- -- -- -- 56 1,115
Net Loss ..................... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 2003 .... 168,434 $ 1,684 33,410,364 $ 334,104 $ (1,000) $ 13,957 $12,934,463
=========== =========== =========== =========== =========== =========== ===========
Deficit
Accumulated
From
July 5, 1996
Inception of
Retained Development
Deficit Stage
----------- -----------
November 2003 shares
issued for cash at $.25
per share ................. -- --
December 2003 shares
authorized for payment of
accounts payable at $.21
per share - not issued .... -- --
Net Loss ..................... -- (1,361,753)
----------- -----------
Balance December 31, 2003 .... $(3,333,785) $(13,615,235)
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 24
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative
From
July 5, 1996
For the Year ended Inception of
December 31, Development
-------------------------------------
2003 2002 Stage
----------------- ------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (1,361,753) $ (1,025,837) $ (13,615,235)
Adjustments used to reconcile net loss to net
cash provided by (used in) operating activities:
Stock issued for general and administrative 28,635 - 900,115
Stock issued for research and development - - 15,000
Stock returned for services not rendered - (200,790) (200,790)
Write-off of assets 220,956 - 747,674
Compensation expense from stock options - - 26,247
Stock issued for interest expense 95,416 - 119,701
Stock issued for accounts payable 146,970 - 172,123
Deferred income - - (214,000)
Depreciation and amortization 230,448 239,245 1,718,069
(Increase) decrease in accounts receivable - - (413)
(Increase) decrease in shareholder receivable - 7,964 37,694
(Increase) decrease in other assets & prepaids (2,512) 226,272 111,726
Increase (decrease) in accounts payable 10,927 14,983 361,151
Increase (decrease) in accrued liabilities 369,383 528,228 1,205,875
----------------- ------------------ ------------------
Net Cash Used in Operating Activities (261,530) (209,935) (8,615,063)
----------------- ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net - 13,038 (590,129)
Acquisition of patents (19,336) (35,626) (266,385)
Acquisition/Sale of stock, net - - 12,375
----------------- ------------------ ------------------
Net Cash Used by Investing Activities (19,336) (22,588) (844,139)
----------------- ------------------ ------------------
F - 25
KLEVER MARKETING, INC.
(a Development Stage Company)
STATEMENT OF CASH FLOWS
(continued)
Cumulative
From
July 5, 1996
For the Year ended Inception of
December 31, Development
-------------------------------------
2003 2002 Stage
----------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds capital stock issued 173,500 25,000 6,281,427
Proceeds from loans 150,506 228,634 3,452,814
Shareholder Receivables (15,000) - (15,000)
Principal payments on lease obligations (1,749) (8,867) (18,769)
Cash payments on related party payables (27,899) (8,820) (264,028)
----------------- ------------------ ------------------
Net Cash Provided by Financing Activities 279,358 235,947 9,436,444
----------------- ------------------ ------------------
Net Increase (Decrease) in Cash and Cash
Equivalents (1,508) 3,424 (22,758)
Cash and Cash Equivalents at Beginning of the
Year 3,424 - 24,674
----------------- ------------------ ------------------
Cash and Cash Equivalents at End of the Year $ 1,916 $ 3,424 $ 1,916
================= ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest $ - $ - $ -
Income Taxes $ 100 $ 100 $ 800
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
o During August 2002, 304,229 shares of common stock were canceled for
services that were never rendered.
o During September 2003, 3,000,000 shares of common stock were issued to
acquire 80% of S&C Medical. The Company is in the process of cancelling
these shares.
o During September 2003, 11,259,786 shares of common stock were issued for notes
payable. o During September 2003, 4,200,000 shares of common stock were issued
for accounts
payable.
o During September 2003, 954,502 shares of common stock were authorized
to be issued for general and administrative expenses.
o During December 2003, 5,571 shares of common stock were issued for accounts
payable.
The accompanying notes are an integral part of these financial statements.
F - 26
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
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 $1,362,000 for the year ended December 31, 2003 and losses of
approximately $1,026,000 for the year ended December 31, 2002, 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.
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.
F - 27
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN (continued)
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
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
earnings per share computations are as follows:
F - 28
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
Per-Share
Loss Shares Amount
For the year ended December 31, 2003
Basic Loss per Share
Loss available to common shareholders $ (1,361,753) 19,420,052 $ (0.07)
================= ================== ==================
For the year ended December 31, 2002
Basic Loss per Share
Loss available to common shareholders $ (1,025,837) 12,563,951 $ (0.08)
================= ================== ==================
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 years ended December 31, 2003 and
2002 are not presented as it would be anti-dilutive.
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.
F - 29
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
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 $17,000,000
expiring in years 2007 through 2023. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. The amount of net operating loss carryforward available to
offset future taxable income may be limited if there is a substantial change in
ownership.
NOTE 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 lease expires in May 2004. The total monthly lease
payments due on the above leases is approximately $90.
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.
In August 2000, the Company entered into a lease agreement for the
rental of a postage meter. The lease expires in August 2006. The monthly lease
payments due on the above lease is approximately $110.
F - 30
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 4 - LEASE COMMITMENT (continued)
The minimum future lease payments under these leases for the next five
years are:
Year Ended December 31,
-------------------------------------------
2004 $ 1,770
2005 1,320
2006 880
2007 -
2008 -
--------------
Total minimum future lease payments $ 3,970
==============
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 years ended December 31, 2003 and 2002, the Company expended
$0 and $0, respectively for research and development of the technology involved
with its patents.
NOTE 6- RELATED PARTY TRANSACTIONS
Olson Holdings, Inc. loans to the Company
Olson Holdings, 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 Holdings 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.
F - 31
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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.
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. On September 11, 2003, the
outstanding loan of $28,750 and accrued interest of $17,679 were converted to
928,580 shares of common stock valued at $.05 per share.
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
F - 32
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
which funds were used to make the loan to the Company. This note was amended on
March 22, 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 1, 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. On September 11, 2003, the outstanding loan of $50,706 and accrued
interest of $7,887 were converted to 1,171,850 shares of common stock valued at
$.05 per share.
Director Loan to the Company
On October 20, 1998, the Company borrowed $150,000 from William C.
Bailey 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. On September 11,
2003, the remaining loan balance of $100,000 and accrued interest of $50,006
were converted to 3,000,113 shares of common stock valued at $.05 per share.
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. During the
three months ended September 30, 2003, Mr. Trout loaned the Company an
additional $839. 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.
On September 11, 2003, the outstanding loan balance of $1,967 and accrued
interest of $65 were converted to 40,645 shares of common stock valued at $.05
per share.
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
F - 33
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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 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.
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
07/30/03 $15,000.00 8.00% 07/30/05 25,000 $1.00
------------- --------------
Total $73,717.04 122,862
============= ==============
F - 34
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
On September 11, 2003, the outstanding loan of $73,717 and accrued
interest of $7,137 were converted to 1,617,074 shares of common stock valued at
$.05 per share.
The loans listed below were made to the Company by The Arbinger
Institute after September 11, 2003.
Common
Stock
Annual Option # Option Strike
Date Principal Interest Rate Maturity Date Shares Price
------------ ---------------------------------------------------------------------------------
09/12/03 $10,040.00 8.00% 09/12/05 16,733 $1.00
09/17/03 $471.73 8.00% 09/17/05 786 $1.00
09/25/03 $4,500.00 8.00% 09/25/05 7,500 $1.00
09/26/03 $80.95 8.00% 09/26/05 135 $1.00
10/01/03 $79.00 8.00% 10/01/05 132 $1.00
11/01/03 $79.00 8.00% 11/01/05 132 $1.00
11/26/03 $10,000.00 8.00% 11/26/05 16,667 $1.00
12/02/03 $79.00 8.00% 12/02/05 132 $1.00
12/15/03 $13,000.00 8.00% 12/15/05 21,667 $1.00
12/24/03 $2,750.00 8.00% 12/24/05 4,583 $1.00
------------- --------------
Total $41,079.68 68,467
============= ==============
The Arbinger Institute has also made additional loans to the Company to
pay for storage space. The total amount of these loans is $1,595 plus accrued
interest of $113. These loans were converted to common stock on September 11,
2003. As of March 16, 2004, the stock has not been issued due to administrative
reasons.
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, Mr. Warner received common stock options
for each note at a ratio of 1.667 common shares for each dollar loaned to the
Company. On September 11, 2003, the outstanding loan of $67,648 and accrued
interest of $3,992 were converted to 1,432,791 shares of common stock valued at
$.05 per share.
F - 35
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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
07/18/03 $7,500.00 8.00% 07/18/05 12,500 $1.00
08/18/03 $5,000.00 8.00% 08/18/05 8,333 $1.00
------------- --------------
Total $88,235.05 147,058
============= ==============
On September 11, 2003, the outstanding loan $88,235 and accrued
interest of $5,215 were converted to 1,868,997 shares of common stock valued at
$.05 per share.
On October 8, 2003, Mr. Smith loaned the Company $2,500. This note is
payable within two years plus interest at 8% per annum. In conjunction with the
note, Mr. Smith received a common stock option at a ratio of 1.667 common shares
for each dollar loaned to the Company. The option has a strike price of $1.00
and a 3-year expiration date.
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.
F - 36
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
During the year ended December 31, 2001, the Company accrued additional
liabilities from a separation agreement with Paul G. Begum. During 2003, the
Company paid $27,899 towards these liabilities. The total amount of these
liabilities remaining at December 31, 2003 is $38,035.
In February 2004, the remaining liabilities $38,035 due to Mr. Begum
were settled in exchange for 152,142 shares of the Company's free-trading common
stock valued at $.25 per share.
NOTE 7- STOCK OPTIONS
The shareholders approved, by a majority vote, the adoption of the 1998
Stock Incentive Plan (the "Plan"). As amended on August 11, 2003, the Plan
reserves 20,000,000 shares of common stock 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.
On August 18, 2003, the Company registered its "Amended Stock Incentive Plan of
Klever Marketing, Inc." on Form S-8.
As of December 31, 2003, 5,204,249 options had been granted under the
Plan, and another 1,878,380 options had been granted outside of the Plan.
Compensation expense charged to operations in 2003 and 2002 is $0 and $0. The
following is a summary of transactions:
Shares Under Option
--------------------------------------
December 31,
--------------------------------------
2003 2002
------------------ ------------------
Outstanding, beginning of year 4,047,005 2,124,392
Granted during the year 5,057,126 2,215,113
Canceled during the year (2,021,502) (292,500)
Exercised during the year - -
------------------ ------------------
Outstanding, end of year (at prices
ranging from $.01 to $3.00 per share) 7,082,629 4,047,005
================== ==================
Eligible, end of year for exercise currently (at prices
ranging from $.01 to $3.00 per share) 6,882,629 3,213,672
================== ==================
F - 37
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
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 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.
F - 38
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
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 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.
F - 39
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
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.
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.
F - 40
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
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 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
F - 41
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
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.
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 October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed
against the Company in the Third Judicial District Court of Utah under the
provisions of the Utah Foreign Judgement Act a judgement from the Superior Court
of California, in and for the County of San Francisco Jurisdiction. Pursuant to
the Judgement Information Statement, also filed on October 27, 2003, the amount
of the above judgement is $81,124. The relief sought is collection from the
Company in Utah of the amount of said judgement. The Company has filed an action
to dismiss said Utah judgement on the grounds that the Superior Court of
California did not have jurisdiction over the Company when the original
judgement was granted. This judgment has been included in the financial
statements as part of accrued liabilities at December 31, 2003 and 2002.
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, 2003.
A Confession of Judgement Statement of Klever Marketing, Inc. dated
November 28, 2003 was filed in the amount of $16,135.81 in favor of Boult Wade
Tennant. This amount has been included in accounts payable as of December 31,
2003.
F - 42
KLEVER MARKETING, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
(Continued)
NOTE 10 - STOCK TRANSACTIONS
During January 2003, the Company received $65,000 for 866,667 shares of
common stock. These shares were issued during the three months ended June 30,
2003.
On September 8, 2003, the Company issued 3,200,000 shares of common
stock valued at $.04 per share for $128,000 of accounts payable.
On September 11, 2003, the Company converted $544,239 of notes payable,
accrued interest, and accounts payable to 10,884,786 shares of common stock
valued at $.05 per share.
On September 8, 2003, the Company converted $15,000 of notes payable to
375,000 shares of common stock valued at $.04 per share.
On September 11, 2003, the Company authorized issuance of 954,502
shares of common stock for payment of expenses of $28,635. As of December 31,
2003 these shares have not been issued.
On September 25, 2003, the Company issued 1,000,000 shares of common
stock valued at $.10 per share for $100,000 of accounts payable.
On October 10, 2003, the Company received $56,000 for 1,120,000 shares
of common stock.
On October 22, 2003, the Company received $50,000 for 250,000 shares of
common stock.
On November 12, 2003, the Company received $2,500 for 10,000 shares of
common stock.
On December 29, 2003, the Company authorized issuance of 5,571 shares
of common stock for payment of $1,170 in accounts payable. As of December 31,
2003, these shares have not been issued.
NOTE 11 - PURCHASE AGREEMENT
On July 29, 2003, the Company entered into an agreement to purchase 80%
of the issued and outstanding shares of S&C Medical, Inc. (S&C). The Company
agreed to issue 3,000,000 restricted shares of the Company's common voting stock
to acquire the S&C shares. The Company also sent S&C $15,000 in cash. As of
December 31, 2003, the Company cancelled the agreement. The 3,000,000 shares
have not yet been returned to the Company. The Company is in the process of
cancelling these shares. The $15,000 has been recorded as a shareholder
receivable.
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