INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
PRELIMINARY INFORMATION STATEMENT
DATE: APRIL 9, 2004
KLEVER MARKETING, INC.
350 WEST 300 SOUTH, SUITE 201
SALT LAKE CITY, UTAH 84101
PAYMENT OF FILING FEE: NO FEE REQUIRED
INFORMATION STATEMENT
CONCERNING AMENDMENT OF CERTIFICATE OF INCORPORATION
GENERAL
The following is information given by KLEVER MARKETING, INC., a Delaware
corporation (the "Company"), to its shareholders prior to seeking the consent of
the shareholders pursuant to Section 228(a) of the Delaware General Corporation
Law to amendment of the Company's Certificate of Incorporation to increase the
number of authorized shares.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
VOTING RIGHTS AND OUTSTANDING SHARES
As of March 26, 2004, there were outstanding 35,351,267 common shares and
convertible preferred stock that have the right convert into 10,236,652 common
shares. Thus, there were as of such date a total of 45,587,919 common and common
equivalent shares. Holders of common stock are entitled to one vote for each
such share so held of record. Holders of preferred stock are entitled to one
vote for each share of common stock into which such preferred stock is
convertible. Each share of preferred stock is convertible into a formula
determined number of common stock, which formula is dependant upon the price
that the Company sold or issued common stock. This formula prevents the
preferred Stock from dilution. Stockholders of record at the close of business
on the Record Date are entitled to vote on the proposal to amend the Certificate
of Incorporation. A written consent signed by the holders of a majority of the
total number of shares issued and outstanding on the Record Date will constitute
approval by the Stockholders of the proposed amendment. Abstentions and "broker
non-votes" (which occur if a broker or other nominee does not have discretionary
authority and has not received voting instructions from the beneficial owner
with respect to the particular item) are counted for purposes of determining
whether or not a majority of the share of Stock entitled to vote has signed
written consents in favor of the amendment of the Certificate of Incorporation.
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PROPOSAL TO AMEND TO CERTIFICATE OF INCORPORATION
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On March 30, 2004 the Board of Directors considered, and approved for
recommendation to the stockholders an amendment to the Certificate of
Incorporation. The Certificate of Incorporation, as currently in force, provides
that the Company is authorized to issue up to 50,000,000 shares of common stock,
par value $.01 per share. The proposed amendment provides for an increase in the
number of shares of common stock the Company would be authorized to issue in the
future, from 50,000,000 shares to 175,000,000 shares. This increase is needed to
provide sufficient authorized common stock for the current and future needs of
the Company.
The Board of Director's recommendation was based upon two reasons. First,
additional authorized shares are needed to be held in reserve in the event the
already existing options, warrants, convertible debt and convertible preferred
stock are exercised resulting in the issuance of additional shares of common
stock (collectively "Prospective Stock Rights"). Currently there are 35,351,267
shares of common stock issued and outstanding. The number of shares of common
stock that could result from the Prospective Stock Rights is 28,722,872 shares.
Given the currently authorized 50,000,000 shares, there would be an
over-issuance of 14,074,139 shares if all of the Prospective Stock Rights were
to be exercised. Thus, an increase in authorized common stock is needed to
provide for the possible exercise of these Prospective Stock Rights.
The approval of the proposed amendment would, in essence, be a defacto approval
of these Prospective Stock Rights since but for this increase in authorized
shares, these Prospective Stock Rights may not be funded. This factor should be
considered in determining whether or not to approve the proposed amendment.
The following is a summary of the Prospective Stock Rights that if exercised
would result in the potential over-issuance.
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TYPE OF STOCK INTEREST OWNERS NO. OF COMMON SHARES
---------------------------------------- ----------------------------------------------- -------------------------------------
Preferred stock's original conversion The owners of the preferred stock (see the 1,684,340
right below table)
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Preferred stock's additional The owners of the preferred stock (see the 8,552,312
conversion right due to anti-dilution below table)
rights
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The owners of the preferred stock (see below 530,645
Preferred stock's accrued dividends table)
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Convertible debt Debt holders (see below table) 10,952,814
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Options & Warrants Most of the debt holders were also given 7,002,761
options and options were also given as
employment incentive to management (see below
table)
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TOTAL 28,722,872
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As indicated above, some of the Prospective Stock Rights result from the
preferred stock's anti-dilution conversion clause that is based upon the last
lowest common stock issuance price. This formula has caused the number of common
conversion shares to grow as the common issuance price has decreased. This
current potential over-issuance would increase if the Company issued additional
common stocks for a price less than what it has done in the past. Because of the
planned equity funding discussed below, the Company recognized that the issue
price of the common stock may need to be decreased from the last issue price.
Thus, in addition to the approximately 27,000,000 current potential over
issuance, the Company should have some additional common shares to cover this
potential. As discussed below, the Company has no firm plans on the form of the
equity funding or upon the price for the equity funding. Thus, the precise
number of additional common stock to cover the anti-dilution formula conversion
shares is not known. The Company desires to have on hand an additional
13,000,000 for this potential additional anti-dilution shares. Thus, there would
be about 40,000,000 shares for the current and future Prospective Stock Rights.
The second reason for the proposed amendment is to provide sufficient common
shares to generate needed operating funds. The Company is in the process of
seeking additional equity capital investments to satisfy the Company's short
term and long term financing needs. Currently, the Company has no source for
operating funds or funds to complete its research, development and deployment so
that it can commence full-scale operations. The Company plans on obtaining this
needed financing through equity investment. Although the Company is in
discussion with a couple different potential investors, it has not yet secured
this funding and does not currently have specific plans or arrangements for when
or what form that either of these financing will occur. The Company is
considering several different equity investors as well as several different
forms that this equity investment may take. The Company is considering raising
about $600,000 for current operations through equity investment or debt with a
convertible equity right. It is anticipated that this will require the issuance
or potential issuance of about 10,000,000 common shares. The Company believes
that to complete its research, development and commencement of operations that
an additional infusion of $6,000,000 to $9,000,000 is needed. It is anticipated
that this would require the issuance of about 75,000,000 shares. Thus, a total
of 85,000,000 shares are needed for current and future operations.
One of the options that the Company is considering with respect to this
long-term equity financing is to enter into an agreement for the sale of common
shares each month to a single investor over the next approximately four-eight
months. This equity funding would require the registration of the shares being
purchased by the investor with the Securities and Exchange Commission. This
would permit this purchaser/investor to sell part or all of the purchased shares
to the public. The Company is also considering investors that would not require
a registration with the Securities and Exchange Commission of the newly issued
shares.
In summary, the proposed amendment to the Certificate of Incorporation is for
the purpose of increasing the number of authorized common shares from 50,000,000
to 175,000,000. Approximately 40,000,000 of these additional 125,000,000 shares
will be held in reserve for the Prospective Stock Rights, with the balance,
85,000,000 for current operations and for long-term financing for research,
development and deployment.
The Company recognizes that this large increase in the number of authorized
shares could be viewed as an anti-takeover action. The Company does not,
however, have any knowledge of any specific effort to accumulate the Company's
securities or to obtain control of the Company and it is not the Company's
intention to use such additional authorized shares for any type of anti-takeover
purpose. However, the potential for such is present and should be considered in
determining whether or not to approve the proposed amendment. For your
information, neither the Company's certificate of incorporation nor its by-laws
presently contain any provisions having an anti-takeover effect, nor does the
Company intend to propose any anti-takeover measures in future proxy
solicitations, adopt any anti-takeover provision, or enter into any other
arrangements that may have material anti-takeover consequences.
CONSENT REQUIRED FOR APPROVAL. The written consent of a majority of the shares
of the issued and outstanding Stock entitled to vote is required to approve the
proposal to amend the Certificate of Incorporation.
SECURITY OWNERSHIP
The following table sets forth, as of March 26, 2004, certain information
regarding the ownership of the Company's common stock and common equivalent
stock by the indicated shareholders.
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KLEVER MARKETING PRINCIPAL SHAREHOLDERS & OFFICERS/DIRECTORS
4/9/04
Preferred Options & Additional
Shares Warrant Shares Shares as a
Outstanding Issued Unpaid Dividend Result of the
Common Shares (Common Convertible Shares Preferred
TOP HOLDERS Issued Equiv.) Debt Shares Reset Price
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Olson Foundation & Affiliated Entities 4,078,656 951,170 9,418,228 0 290,333 4,030,895
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Paul Begum & Affiliated 3,158,807 15,380 0 237,000 5581 144,046
Entities
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Seabury Entities 0 717,790 1,435,666 412,936 234,731 4,377,371
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Primavera 3,252,771 0 0 0 0 0
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Arbinger 3,490,756 0 42,511 194,353 0 0
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DIRECTORS, OFFICERS & EMPLOYEES
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Bailey & Affiliated Entities 3,244,914 0 0 520,000 0 0
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D. Paul Smith 168,612 0 2,599 1,261,225 0 0
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Michael L. Mills 23,182 0 0 512,000 0 0
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Richard J. Trout 65,645 0 0 1,028,278 0 0
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William J. Dupre 400,000 0 0 200,000 0 0
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C. Terry Warner 27,500 0 0 612,747 0 0
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Danny Warner 0 0 0 200,000 0 0
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Other Employees 811,805 0 0 350,000 0 0
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Other Existing Shareholders 16,628,620 0 53,810 1,474,222 0 0
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TOTAL # SHARES 35,351,267 1,684,340 10,952,814 7,002,761 530,645 8,552,312
By Order of the Board of Directors
/s/D. Paul Smith
Corporate Secretary
Salt Lake City, Utah