[As adopted in Release No. 34-32231, April 28, 1993, 58 F.R. 26509]
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
---------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 0-18834
Klever Marketing, Inc.
(Exact name of small business issuer as
specified in its charter)
Delaware 36-3688583
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
350 West 30 South, Suite 201, Salt Lake City, Utah 84101
(Address of principal executive offices)
(801) 322-1221
Issuer's telephone number
Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: June 30, 1998 10,042,210
Transitional Small Business Disclosure Format (check one). Yes ; No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
BALANCE SHEET
(Unaudited)
June 30, December 31,
----------- -----------
ASSETS 1998 1997
- ------ ----------- -----------
Current Assets
Cash ............................. $ 39,990 $ 10,536
Shareholder Receivables .......... 8,350 27,200
----------- -----------
Total Current Assets .......... 48,340 37,736
----------- -----------
Fixed Assets
Equipment ........................ 60,555 57,549
Less Accumulated Depreciation .... (43,111) (38,469)
----------- -----------
Net Fixed Assets .............. 17,444 19,080
----------- -----------
Other Assets
Patents .......................... 1,669,079 1,646,097
Organization Costs ............... 152,662 152,662
Less Accumulated Amortization .... (1,087,876) (1,004,422)
----------- -----------
Net Other Assets .............. 733,865 794,337
----------- -----------
Total Assets .................. $ 799,649 $ 851,153
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable, Trade .......... $ 64,857 $ 97,467
Accrued Liabilities .............. 35,147 34,822
Related Party Payables ........... 57,933 15,031
Lease Obligation ................. -- 862
----------- -----------
Total Current Liabilities ..... 157,937 148,182
----------- -----------
Other Liabilities
Deferred Income .................. -- 229,000
----------- -----------
Total Other Liabilities ....... -- 229,000
----------- -----------
Total Liabilities ............. 157,937 377,182
----------- -----------
<PAGE>
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
BALANCE SHEET
(Continued)
(Unaudited)
June 30, December 31,
----------- -----------
1998 1997
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
(Continued)
Stockholders' Equity
Preferred stock (par value $.01),
2,000,000 shares authorized ...............
-0- issued and outstanding ................ $ -- $ --
Common Stock (Par Value $.01),
20,000,000 shares authorized ..............
10,042,210 shares issued and
outstanding June 30, 1998 and
9,795,314 shares issued and
outstanding December 31, 1997 ............. 100,422 97,953
Common Stock to be issued ................... 4,339 4,903
Paid in Capital in Excess of Par
Value ..................................... 5,699,515 5,292,308
Retained Deficit ............................ (3,333,785) (3,333,785)
Deficit Accumulated During the
Development Stage ......................... (1,828,779) (1,587,408)
----------- -----------
Total Stockholders' Equity ............... 641,712 473,971
----------- -----------
Total Liabilities and Stockholders' Equity $ 799,649 $ 851,153
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
STATEMENT OF LOSS
(Unaudited)
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue ............................ $ 229,000 $ -- $ 229,000 $ --
------------ ----------- ------------ -----------
Expenses
General and Administrative ....... 159,740 135,344 287,077 272,216
Research and Development ......... 64,007 70,209 184,790 48,514
------------ ----------- ------------ -----------
Total Expenses ................ 223,747 205,553 471,867 320,730
------------ ----------- ------------ -----------
Other Income (Expense)
Interest Income .................. 926 -- 926 --
Interest Expense ................. (647) (2,375) (663) (4,666)
Capital Gain on Sale of Investment 1,428 -- 1,234 --
Sale of Assets ................... -- -- -- --
------------ ----------- ------------ -----------
Total Other Income (Expense) ... 1,707 (2,375) 1,497 (4,666)
------------ ----------- ------------ -----------
Income (Loss) Before Taxes ......... 6,960 (207,928) (241,370) (325,396)
Income Taxes ....................... -- -- -- --
------------ ----------- ------------ -----------
Net Income (Loss) After Taxes ...... $ 6,960 $ (207,928) $ (241,370) $ (325,396)
============ =========== ============ ===========
Weighted Average Shares Outstanding 10,039,029 8,640,224 10,037,221 9,411,868
============ =========== ============ ===========
Loss Per Share- Basic and Diluted .. $ -- $ (.02) $ (.02) $ (.03)
============ =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months
Ended June 30,
---------------------
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ........................................ $(241,370) $(325,396)
--------- ---------
Adjustments used to reconcile net loss to net
cash provided by (used in) operating activities:
Non cash general and administrative ......... 32,988 --
Compensation Expense from
Stock Options ............................... -- --
Stock issued for Interest Expense ........... -- --
(Increase) decrease in shareholder receivable 17,600 --
Increase (decrease) in accounts payable ..... (33,070) 7,085
Increase (decrease) in accrued liabilities .. 325 1,011
Increase (decrease) in related party payables 42,902 --
Deferred income ............................. (229,000) --
Gain on Sale of Stock Investment ............ (1,234) --
Depreciation and Amortization ............... 88,105 86,199
--------- ---------
Net Adjustment .................................. (81,384) 94,295
--------- ---------
Net cash used in operating activities ........... (322,754) (231,101)
--------- ---------
<PAGE>
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
STATEMENT OF CASH FLOWS
(Continued)
For the Six Months
Ended June 30,
---------------------
1998 1997
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/sale of equipment, net ....... $ (3,006) $ --
Acquisition/sale of stock investments, net 13,609 --
Acquisition of patents ................... (22,982) (6,794)
--------- ---------
Net cash used by investing activities .... (12,379) (6,794)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Capital Stock Issued ....... 365,449 299,810
Proceeds From Loans ...................... -- 55,000
Principle Payments on Lease Obligations . (862) (1,886)
Related Party Payables ................... -- (41,006)
Shareholder Receivable ................... -- 57,017
Cash Payments on Notes Payable ........... -- (43,529)
--------- ---------
Net Cash Provided by Financing Activities 364,587 325,406
--------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents ....................... 29,454 (87,511)
Cash and Cash Equivalents at
Beginning of the Year .................. 10,536 29,452
--------- ---------
Cash and Cash Equivalents at
End of the Year ........................ $ 39,990 $ 116,963
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest ................................. $ 663 $ 4,156
Income Taxes ............................. $ -- $ --
The accompanying notes are an integral part of these financial statements.
<PAGE>
KLEVER MARKETING, INC.
(Formerly a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED June 30, 1998
(Unaudited)
1. Interim Reporting
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles and with Form 10-QSB requirements.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1998, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998.
Item 2. Management's Discussion and Analysis or Plan of Operation.
General - This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's annual report on Form 10-KSB for the year ended December 31, 1997.
Results of Operations - From December 8, 1993 to July 5, 1996 VideOcart, Inc.
was in Bankruptcy. On July 5, 1996 VideOcart, Inc. was reorganized, changed its
name to Klever Marketing, Inc. and became a development stage company. During
the period July 5, 1996 through March 31, 1998 the Company remained in the
development stage. The period ending June 30, 1998 is the first period during
which it is considered an operating company.
Liquidity and Capital Resources
The Company requires working capital principally to fund its current operations.
From time to time in the past the Company has relied on short-term borrowing and
the issuance of restricted common stock to fund current operations. There are no
formal commitments from banks or other lending sources for lines of credit or
similar short-term borrowing, but the Company has been able to borrow any
additional working capital that has been required. From time to time in the
past, required short-term borrowing have been obtained from a principal
shareholder or other related entities.
The Company generates and uses cash flows through three activities: operating,
investing, and financing. During the six months ended June 30, 1998, operating
activities used cash of $323,000 as compared to net cash used of $231,000 for
the six months ended June 30, 1997.
Cash flows used in investing activities is primarily due to the acquisition of
patents. During the six months ended June 30, 1998 and 1997, investing
activities used cash of $12,000 and $7,000, respectively.
Financing activities provided $365,000 and $325,000 for the six months ended
June 30, 1998 and 1997. The increase in cash flow from financing activities was
primarily from the sale of common stock.
<PAGE>
2 . Contingencies
On November 14, 1995, the Company entered into an agreement with Dentsu Prox,
Inc. for product movement tests in Japan resulting in $214,000 in deferred
income. On June 30, 1998 the Company determined Dentsu Prox, Inc. was in breach
of contract, therefore recognizing $214,000 in income. Dentsu Prox, Inc. has not
agreed with the Company's determination of the contractual breach.
PART II - OTHER INFORMATION
The Company may be required to supplement its available cash and other liquid
assets with proceeds from borrowing, the sale of additional securities, or other
sources. There can be no assurance that any such required additional funding
will be available or, if available, that it can be obtained on terms favorable
to the Company.
Item 1. Legal Proceedings
On or about October 1, 1990 Klever-Kart, Inc., the predecessor in interest to
the Company, entered into a Consulting Agreement with Larry Hodges ("Hodges").
Under the terms of the Consulting Agreement, Hodges was to act as a consultant
for Klever-Kart until such time as Klever0Kart received a certain level of
financing, at which time Hodges was to become the Chief Executive Officer of
Klever-Kart. As the company's consultant, Hodges was to be compensated at the
rate of $100 per hour, payable in shares of the Company's common stock at $1.00
per share. Under the Consulting Agreement, in the event of Hodges' termination
from Klever-Kart, for any reason other than for cause, he was to have received
severance pay of $50,000, provided that the company had sufficient funds at the
time of such termination. On or about February 1, 1991, Klever-Kart issued
15,000 shares of the Company's common stock to Hodges, and on or about June 4,
1991, Klever-Kart issued an additional 15,000 shares of the Company's common
stock to Hodges. On or about February 3, 1992, Hodges resigned from Klever-Kart
and terminated the Consulting Agreement.
Following an audit performed by a certified public accountant of Hodges'
contributions and time spent on behalf of Klever-Kart, Klever-Kart canceled the
second issuance of 15,000 shares after an audit revealed an overpayment of
shares to Mr. Hodges. On April 17, 1998, Hodges sued the Company in the Third
Judicial Court, Salt Lake County, State of Utah, in an action styled "Larry A.
Hodges, Plaintiff vs. Klever-Kart, Inc., a former Utah corporation, Klever
Marketing, Inc., a Utah corporation, and VideOcart, Inc., a Delaware
corporation." Hodges has alleged in the action that the Company breached the
Consulting Agreement, and has sought the reissuance of the 15,000 canceled
shares, the issuance of an additional 15,000 shares, $50,000 in severance pay,
alleged damages suffered in an amount to be proven at trial, and all of his
costs and attorney' fees (with interest) in bringing this action.
The Company has since filed a counter-suit against Hodges pursuant to the
Consulting Agreement, alleging a breach of contract. The Consulting agreement
entitled the Company to a right of first refusal with respect to the disposition
of all of the shares of the Company's common stock held by Hodges.
Notwithstanding the Company's right, Hodges sold approximately 34,000 shares in
open market transactions without having provided the Company with an opportunity
to exercise
<PAGE>
its right of first refusal on these shares of common stock. In partial
settlement of the actions, in June of 1998, a syndicate purchased 53,000 shares
from Hodges at a purchase price equal to $2.50 per share.
While the Company is confident in the merits of its action against Hodges, and
that the action brought by Hodges against the Company can be successfully
settled or litigated, there can be no assurance that either of the actions will
be determined in favor of the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Klever Marketing, Inc.
(Registrant)
DATE: August 14, 1998
------------------
By: /s/
--------------------
Paul G. Begum
Chief Executive officer & Director
(Principal financial and Accounting Officer)
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<OTHER-SE> 542
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