[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
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
specified in its charter)
Delaware 36-3688583
--------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
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350 West 300 South, Suite 201, Salt Lake City, Utah 84101
(Address of principal executive offices)
(801) 322-1221
Issuer's telephone number
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ----- 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: September 30, 2004 36,407,620
PART I
ITEM 1. FINANCIAL STATEMENTS
KLEVER MARKETING, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
September 30, December 31,
2004 2003
------------------ -----------------
ASSETS
Current Assets
Cash $ 220,880 $ 1,916
Prepaid Expense 750 2,512
Othe r Receivables 26,097 -
------------------ -----------------
Total Current Assets 247,727 4,428
------------------ -----------------
Fixed Assets
Office Equipment 93,410 105,727
Less Accumulated Depreciation (90,983) (98,913)
------------------ -----------------
Net Fixed Assets 2,427 6,814
------------------ -----------------
Other Assets
Patents 737,631 2,358,342
Less Accumulated Amortization (712,393) (2,137,679)
------------------ -----------------
Net Other Assets 25,238 220,663
------------------ -----------------
Total Assets $ 275,392 $ 231,905
================== =================
|
KLEVER MARKETING, INC.
(A Development Stage Company)
BALANCE SHEETS
(Continued)
(Unaudited)
September 30, December 31,
2004 2003
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable, Trade $ 430,315 $ 446,855
Accrued Liabilities 1,603,706 1,247,524
Related Party Payables 2,126,739 2,172,880
Notes Payable 45,000 45,000
Short-term Notes Payable 458 458
------------------ ------------------
Total Current Liabilities 4,206,218 3,912,717
------------------ ------------------
Stockholders' Equity
Preferred stock (Par Value $.01),
2,000,000 shares authorized. 168,434 shares issued and
outstanding at September 30, 2004 and December 31, 2003 1,684 1,684
Common Stock (Par Value $.01),
50,000,000 shares authorized. 36,407,620 shares issued
and outstanding at September 30, 2004 and 33,410,364 at
December 31, 2003 364,076 334,104
Common Stock to be issued, 478,752 shares at
September 30, 2004 and 1,395,657 shares at
December 31, 2003 4,698 13,957
Treasury Stock, 1,000 shares at September 30, 2004 and
December 31, 2003 (1,000) (1,000)
Paid in Capital in Excess of Par Value 13,154,708 12,934,463
Shareholder Receivable (15,000) (15,000)
Retained Deficit (3,333,785) (3,333,785)
Deficit Accumulated During Development Stage (14,106,207) (13,615,235)
------------------ ------------------
Total Stockholders' Equity (3,930,826) (3,680,812)
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 275,392 $ 231,905
================== ==================
|
See accompanying notes.
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Cumulative
From
(Unaudited) (Unaudited) July 5, 1996
For the Three Months For the Nine Months Inception of
Ended September 30, Ended September 30, Development
-------------------------- --------------------------
2004 2003 2004 2003 Stage
----------- ----------- ----------- ----------- -----------
Revenue $ -- $ -- $ -- $ -- $ 256,000
----------- ----------- ----------- ----------- -----------
Expenses
Sales and Marketing -- -- -- -- 117,546
General and Administrative 153,101 418,418 567,868 768,119 8,821,473
Research and Development 48,563 -- 93,127 -- 4,553,018
----------- ----------- ----------- ----------- -----------
Total Expenses 201,664 418,418 660,995 768,119 13,492,037
----------- ----------- ----------- ----------- -----------
Other Income (Expense)
Other Income 585 -- 234,987 -- 234,987
Interest Income -- -- -- -- 18,902
Interest Expense (48,620) (24,248) (326,210) (196,443) (1,341,806)
Gain (Loss) on sale of assets 261,046 -- 261,246 -- 27,055
Capital gain on sale of investments -- -- -- -- 191,492
----------- ----------- ----------- ----------- -----------
Total Other Income (Expense) 213,011 (24,248) 170,023 (196,443) (869,370)
----------- ----------- ----------- ----------- -----------
Loss Before Taxes 11,347 (442,666) (490,972) (964,562) (14,105,407)
Income Taxes -- -- -- -- 800
----------- ----------- ----------- ----------- -----------
Net Loss After Taxes $ 11,347 $ (442,666) $ (490,972) $ (964,562) $(14,106,207)
=========== =========== =========== =========== ===========
Loss per Common Share $ -- $ (0.03) $ (0.01) $ (0.07)
=========== =========== =========== ===========
|
See accompanying notes.
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Cumulative
From
(Unaudited) July 5, 1996
For the Nine Months Inception of
Ended September 30, Development
-------------------------------------
2004 2003 Stage
----------------- ------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (490,972) $ (964,562) $ (14,106,207)
Adjustments used to reconcile net loss to net
cash provided by (used in) operating activities:
Stock issued for general and administrative 63,545 28,635 963,660
Stock issued for research and development 47,850 - 62,850
Stock returned for services not rendered - - (200,790)
(Gain)/Loss on sale/disposal of assets (261,246) - 486,428
Compensation expense from stock options - - 26,247
Stock issued for interest expense - 95,416 119,701
Stock issued for accounts payable 24,700 235,800 196,823
Deferred income - - (214,000)
Depreciation and amortization 129,877 174,101 1,847,946
(Increase) decrease in accounts receivable - - (413)
(Increase) decrease in shareholder receivable - - 37,694
(Increase) decrease in other assets & prepaids (24,335) - 87,391
Increase (decrease) in accounts payable (16,540) 10,338 344,611
Increase (decrease) in accrued liabilities 358,410 265,199 1,564,285
----------------- ------------------ ------------------
Net cash used in operating activities (168,711) (155,073) (8,783,774)
----------------- ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net 2,293 - (587,836)
Acquisition/Sale of patents, net 328,888 (15,966) 62,503
Acquisition/Sale of stock, net - - 12,375
----------------- ------------------ ------------------
Net cash used by investing activities 331,181 (15,966) (512,958)
----------------- ------------------ ------------------
|
KLEVER MARKETING, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
Cumulative
From
(Unaudited) July 5, 1996
For the Nine Months Inception of
Ended September 30, Development
-------------------------------------
2004 2003 Stage
----------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from capital stock $ 65,120 $ 65,000 $ 6,346,547
Proceeds from shareholder loans 2,374 119,415 3,455,188
Principal payments on lease obligations - (1,572) (18,769)
Loan Receivable - (15,000) (15,000)
Cash payments on notes payable (11,000) - (275,028)
----------------- ------------------ ------------------
Net Cash Provided by Financing Activities 56,494 167,843 9,492,938
----------------- ------------------ ------------------
Net Increase (Decrease) in
Cash and Cash Equivalents 218,964 (3,196) 196,206
Cash and Cash Equivalents at
Beginning of the Period 1,916 3,424 24,674
----------------- ------------------ ------------------
Cash and Cash Equivalents at
End of the Period $ 220,880 $ 228 $ 220,880
================= ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest $ - $ - $ -
Income Taxes $ - $ - $ 800
|
See accompanying notes.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN
The unaudited financial statements as of September 30, 2004 and for the three and nine months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three and nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.
The accompanying financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Several conditions and events cast doubt about the Company's ability to continue as a "going concern". The Company has incurred net losses of approximately $491,000 for the nine months ended September 30, 2004 and losses of approximately $965,000 for the nine months ended September 30, 2003, and net losses of approximately $17,000,000 since the inception. The Company also has a liquidity problem, and requires additional financing in order to finance its business activities on an ongoing basis. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.
The Company's future capital requirements will depend on numerous factors including, but not limited to, continued progress in developing its products, and market penetration.
These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a "going concern". While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the "going concern" assumption used in preparing these financial statements, there can be no assurance that these actions will be successful.
If the Company were unable to continue as a "going concern", then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used.
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. Since July 5, 1996
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN (continued)
the Company has been in the development stage, except for an approximate 2-month period in 2000 when the Company generated revenue from installations of their Klever-Kart system in stores.
Nature of Business
The Company was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, manufacture and market electronic in-store advertising, directory and coupon services which have potential for profit. The Company is currently in the process of the commercialization of the patented process it has acquired.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies for Klever Marketing, Inc. is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 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 2003 financial statements to conform with the 2004 presentation.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic earnings per share computations are as follows:
Per-Share
Loss Shares Amount
For the three months ended September 30, 2004
BASIC LOSS PER SHARE
Loss available to common shareholders $ 11,347 34,980,523 $ -
================= ================== ==================
For the three months ended September 30, 2003
BASIC LOSS PER SHARE
Loss available to common shareholders $ (442,666) 14,529,545 $ (0.03)
================= ================== ==================
For the nine months ended September 30, 2004
BASIC LOSS PER SHARE
Loss available to common shareholders $ (490,972) 34,359,643 $ (0.01)
================= ================== ==================
For the nine months ended September 30, 2003
BASIC LOSS PER SHARE
Loss available to common shareholders $ (964,562) 13,514,441 $ (0.07)
================= ================== ==================
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Basic earnings per common share were computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share for the three and nine months ended September 30, 2004 and 2003 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:
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
Computer equipment 3 years Office furniture and fixtures 5-10 years
Upon sale or other disposition of property and equipment, the cost and related accumulated depreciation or amortization are removed from the accounts and any gain or loss is included in the determination of income or loss.
Expenditures for maintenance and repairs are charged to expense as incurred. Major overhauls and betterments are capitalized and depreciated over their estimated economic useful lives.
Intangibles
Intangibles associated with certain technology agreements are amortized over 10 -14 years.
NOTE 3 - INCOME TAXES
The Company has accumulated tax losses estimated at $17,000,000 expiring in years 2007 through 2024. 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 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. This lease was abandoned as of September 30, 2004.
On October 1, 2004, the Company began leasing approximately 144 square feet of office space from Four Cabo's Enterprises, Ltd. on a month to month basis. The lease payments are approximately $125 per month.
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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(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
==============
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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 nine months ended September 30, 2004 and 2003, the Company expended $93,127 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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(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 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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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 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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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
============= ==============
|
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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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
11/26/03 $10,000.00 8.00% 11/26/05 16,667 $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 $40,842.68 68,071
============= ==============
|
The Arbinger Institute has also made additional loans to the Company to pay for storage space. The total amount of these loans is $1,835 plus accrued interest of $199. 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.
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:
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 6- RELATED PARTY TRANSACTIONS (continued)
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.
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.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
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 September 30, 2004, 6,962,761 options were outstanding. Compensation expense charged to operations in 2004 and 2003 is $0 and $0. The following is a summary of transactions:
Shares Under Option
--------------------------------------
September 30, December 31,
2004 2003
------------------ ------------------
Outstanding, beginning of year 7,082,629 4,047,005
Granted during the year 200,132 5,057,126
Canceled during the year (320,000) (2,021,502)
Exercised during the year - -
------------------ ------------------
Outstanding, end of year (at prices
ranging from $.01 to $2.77 per share) 6,962,761 7,082,629
================== ==================
Eligible, end of year for exercise currently (at prices
ranging from $.01 to $2.77 per share) 6,862,761 6,882,629
================== ==================
|
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
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
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.
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
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
outstanding Class B Shares by each payment date, then until all unpaid dividends thereon shall be paid or set apart for payment to the holders of such shares, the Corporation may not pay, declare or set apart any dividend or other distribution on its shares of Common Stock or other shares junior to the Class B Shares, nor may any other distributions, redemptions or other payments be made with respect to the shares of Common Stock or other junior shares. In addition to the foregoing, each holder of a Class B Share shall be entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis, so the holders of the Class B Shares shall be entitled to participate equally on a share for share basis with the holders of the shares of Common Stock. If there is a share split or dividend on the Common Stock, then the Class B Share dividends shall be adjusted as if a similar split or dividend had occurred with respect to the Class B Shares.
Class B Shareholders shall be entitled to one vote for each share of Common Stock into which such Class B Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class B Shares shall vote with the holders of shares of Common Stock and not as a separate class.
Class B Shares shall carry a liquidation preference of $17 per share plus any accrued but unpaid dividends on such shares, if any, and adjusted for combinations, splits, dividends or distributions of shares of stock with respect to such shares.
The Class B Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after March 24, 2004 for Series 1, and such date as determined by the Board of Directors for each additional Series. The redemption price shall be $17.00 per share together with accrued but unpaid dividends on such shares, if any.
On January 2, 2001 the Board of Directors authorized and established "Class C Voting Preferred Stock" ("Class C Shares") as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock. Class C Shares consisted of 500,000, 125,000 shares thereof were designated as Series 1 shares and 125,000 shares thereof were designated as Series 2 shares. On May 20, 2002, the Board of Directors amended the number of authorized shares of Class C voting preferred stock to 150,000 shares.
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
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
on the first day of January and July of each year. Such dividends shall accrue on each such share from the date of its original issuance and shall accrue from day to day, whether or not earned or declared. Such dividends shall be cumulative and may be paid in cash or in kind through the distribution of .0425 Class C Shares, of the same Series for which the dividend is accrued, for each outstanding Class C Share, on each dividend payment date; provided, that if such dividends in respect of any period shall not have been paid or declared and set apart for payment for all outstanding Class C Shares by each payment date, then until all unpaid dividends thereon shall be paid or set apart for payment to the holders of such shares, the Corporation may not pay, declare or set apart any dividend or other distribution on its shares of Common Stock or other shares junior to the Class C Shares, nor may any other distributions, redemptions or other payments be made with respect to the shares of Common Stock or other junior shares. In addition to the foregoing, each holder of a Class C Share shall be entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis, so the holders of the Class C Shares shall be entitled to participate equally on a share for share basis with the holders of the shares of Common Stock. If there is a share split or dividend on the Common Stock, then the Class C Share dividends shall be adjusted as if a similar split or dividend had occurred with respect to the Class C Shares.
Class C Shareholders shall be entitled to one vote for each share of Common Stock into which such Class C Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class C Shares shall vote with the holders of shares of Common Stock and not as a separate class.
Class C Shares shall carry a liquidation preference of $6.60 per share plus any accrued but unpaid dividends on such shares, if any, and adjusted for combinations, splits, dividends or distributions of shares of stock with respect to such shares.
The Class C Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 2, 2004 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).
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 8 - PREFERRED STOCK (continued)
Holders of Class D Shares shall be entitled to receive when and as declared by the Board of Directors of the Corporation out of any funds at the time legally available therefore dividends at the rate of the Original Issue Price divided by 11.8181818 per share per annum, payable semi-annually on the first day of January and July of each year. Such dividends shall accrue on each such share from the date of its original issuance and shall accrue from day to day, whether or not earned or declared. Such dividends shall be cumulative and may be paid in cash or in kind through the distribution of .0425 Class D Shares for each outstanding Class D Share, on each dividend payment date; provided, that if such dividends in respect of any period shall not have been paid or declared and set apart for payment for all outstanding Class D Shares by each payment date, then until all unpaid dividends thereon shall be paid or set apart for payment to the holders of such shares, the Corporation may not pay, declare or set apart any dividend or other distribution on its shares of Common Stock or other shares junior to the Class D Shares, nor may any other distributions, redemptions or other payments be made with respect to the shares of Common Stock or other junior shares. In addition to the foregoing, each holder of a Class D Share shall be entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis, so the holders of the Class D Shares shall be entitled to participate equally on a share for share basis with the holders of the shares of Common Stock. If there is a share split or dividend on the Common Stock, then the Class D Share dividends shall be adjusted as if a similar split or dividend had occurred with respect to the Class D Shares.
Class D Shareholders shall be entitled to one vote for each share of Common Stock into which such Class D Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class D Shares shall vote with the holders of shares of Common Stock and not as a separate class.
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
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9 - LITIGATION (continued)
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. On May 7, 2004, the Company paid $16,135.81 to settle this judgment.
NOTE 10 - STOCK TRANSACTIONS
On January 7, 2004, the Company issued 19,000 shares of common stock for payment of accounts payable of $3,800.
On January 23, 2004, the Company issued 50,000 shares of common stock for $7,000 in cash.
On January 27, 2004, the Company issued 7,046 shares of common stock for payment of accounts payable of $1,550.
On February 2, 2004, the Company issued 6,739 shares of common stock for payment of accounts payable of $1,550.
On February 6, 2004, the Company issued 200,000 shares of common stock for $28,000 in cash.
On February 9, 2004, the Company issued 152,142 shares of common stock for settlement of shareholder payables of $38,036.
On February 10, 2004, the Company issued 100,000 shares of common stock for $15,000 in cash.
On February 19, 2004, the Company issued 24,435 shares of common stock for payment of accounts payable of $5,125.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 10 - STOCK TRANSACTIONS (continued)
On February 20, 2004, the Company issued 200,000 shares of common stock for general and administrative expenses of $46,000.
On February 27, 2004, the Company issued 20,588 shares of common stock for payment of accounts payable of $3,500.
On March 17, 2004, the Company issued 7,619 shares of common stock for payment of accounts payable of $1,600.
On March 25, 2004, the Company issued 8,214 shares of common stock for payment of accounts payable of $1,150.
On May 5, 2004, the Company issued 14,375 shares of common stock for payment of accounts payable of $1,150.
On May 17, 2004, the Company issued 55,358 shares of common stock for payment of accounts payable of $3,875.
On June 14, 2004, the Company issued 20,000 shares of common stock for payment of accounts payable of $1,400.
On July 15, 2004, the Company issued 200,000 shares of common stock for cash of $7,200.
On July 27, 2004, the Company issued 20,000 shares of common stock for cash of $720.
On August 27, 2004, the Company issued 100,000 shares of common stock for cash of $3,600.
On September 1, 2004, the Company issued 1,154,502 shares of common stock at $.04 per share for general and administrative expenses of $23,090.
On September 8, 2004, the Company issued 100,000 shares of common stock for cash of $3,600.
On September 23, 2004, the Company issued 531,667 shares of common stock at $.09 per share for consulting expense of $47,850.
KLEVER MARKETING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
NOTE 12 - LICENSE AGREEMENT
On May 11, 2004, Media Cart, Inc. acquired from the Company a limited exclusive license to use the Company's patent portfolio for electronic display devices specific to Media Cart's product design. Under the license agreement, Media Cart paid the Company $200,000 and will pay ongoing royalties for all Media Cart products that utilize the Company's licensed technology.
NOTE 13 - SALE OF PATENTS
On August 27, 2004, the Company sold all of its international patents for $350,000. The international patents comprised approximately 69% of the total patents the Company owned.
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, 2003.
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.
Absent such financing, the Company has no plans to employ additional employees or to purchase additional equipment. If such financing is obtained, there would be additional employees employed and additional equipment purchased. The number of each is dependent upon the amount of such financing.
LIQUIDITY AND CAPITAL RESOURCES - The Company requires working capital principally to fund its current research and development and operating expenses for which the Company has relied on short-term borrowings and the issuance of restricted common stock. There are no formal commitments from banks or other lending sources for lines of credit or similar short-term borrowings, but the Company has been able to borrow limited additional working capital that has been required. From time to time in the past, required short-term borrowings have been obtained from a principal shareholder or other related entities.
Cash flows. Operating activities used cash of approximately $169,000 and $155,000 for the nine months ended September 30, 2004 and 2003, respectively.
Investing activities provided cash of approximately $331,000 for the nine months ended September 30, 2004, and used cash of approximately $16,000 for the nine months ended September 30, 2003, respectively. Investing activities primarily represent purchases or disposal of patents relating to the electronic in-store advertising, directory and coupon devices, and purchases or disposal of office equipment.
Financing activities provided cash of approximately $56,000 and $168,000 for the nine months ended September 30, 2004 and 2003, respectively. Financing activities primarily represent sales of the Company's common and preferred stock, and loans from shareholders.
The Company will be required to supplement its available cash and other liquid assets with proceeds from borrowing, the sale of additional securities, or other sources. There can be no assurance that any such required additional funding will be available or, if available, that it can be obtained on terms favorable to the Company.
ITEM 3. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this Quarterly Report on Form 10- QSB, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary to evaluate whether:
(i) this Quarterly Report on Form 10-QSB contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report on Form 10-QSB, and
(ii) the financial statements, and other financial information included in this Quarterly Report on Form 10-QSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Quarterly Report on Form 10-QSB.
There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
ITEM 1. 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 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. On May 7, 2004, the Company paid $16,135.81 to settle this judgment.
ITEM 2. CHANGES IN SECURITIES
On July 15, 2004, the Company issued 200,000 shares of common stock for cash of $7,200.
On July 27, 2004, the Company issued 20,000 shares of common stock for cash of $720.
On August 27, 2004, the Company issued 100,000 shares of common stock for cash of $3,600.
On September 1, 2004, the Company issued 1,154,502 shares of common stock at $.04 per share for general and administrative expenses of $23,090.
On September 8, 2004, the Company issued 100,000 shares of common stock for cash of $3,600.
On September 23, 2004, the Company issued 531,667 shares of common stock at $.09 per share for consulting expense of $47,850.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Title of Document
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)
28
|
4.03 Certificate of Designation of Rights, Privileges and Preferences of
Class C Voting Preferred Stock, of Klever Marketing, Inc., dated
January 2, 2001 (3)
4.04 Certificate of Designation of Rights, Privileges and Preferences of
Class D Voting Preferred Stock, of Klever Marketing, Inc., dated June
14, 2002 (5)
4.05 Amendment to the Certificates of Designation of Rights, Privileges and
Preferences of Class A, B, and C Voting Preferred Stock, of Klever
Marketing, Inc., dated June 12, 2002 (5)
10.01 Separation Agreement between Paul G. Begum and the Registrant Dated
January 8, 2001 (2)
10.02 Stock Incentive Plan, effective June 1, 1998 (2)
10.03 Amended and Restated Promissory Note (Secured) of the Registrant
payable to Presidio Investments, LLC, dated June 27, 2000, with
Financing Statement and Exhibit "A" (2)
10.04 Intercreditor Agreement between Seabury Investors III, Limited
Partnership, The Olson Foundation, Presidio Investments, LLC, and the
Registrant dated August 27, 2001 (4)
10.05 Asset Purchase Agreement by and between Fujitsu Transaction Solutions,
Inc. and the Registrant, dated August 27, 2004
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(1) Incorporated herein by reference from Registrant's Form 10KSB,
dated June 20, 1997. (2) Incorporated herein by reference from
Registrant's Form 10KSB, dated March 29, 2001. (3) Incorporated herein
by reference from Registrant's Form 10QSB, dated May 15, 2001. (4)
Incorporated herein by reference from Registrant's Form 10KSB, dated
May 15, 2002. (5) Incorporated herein by reference from Registrant's
Form 10QSB, dated August 19, 2002.
|
(b) Reports on Form 8-K filed.
On September 2, 2004, the Company filed on Form 8-K under Item 9, Regulation FD Disclosure.
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: November 19, 2004
By: /s/ William J. Dupre
-------------------------------
|
William J. Dupre
President & COO
By: /s/ D. Paul Smith
---------------------------------
D. Paul Smith
C.F.O., Secretary, Treasurer, Chairman, Executive Vice-President
|
ASSET PURCHASE AGREEMENT
by and between
FUJITSU TRANSACTION SOLUTIONS INC.
and
KLEVER MARKETING, INC.
Dated August 27, 2004
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 27, 2004 (this "Agreement") by and among Fujitsu Transaction Solutions Inc., a Delaware corporation (the "Buyer"), and Klever Marketing, Inc., a Delaware corporation (the "Seller") (the Buyer and the Seller each hereinafter individually referred to as a "Party" and collectively as the "Parties").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer, certain assets and properties of the Seller, as more particularly described herein; and
WHEREAS, the Buyer does not intend to assume any liabilities of the Seller of any nature whatsoever, whether related to the Transferred Assets (as hereafter defined) or otherwise; and
WHEREAS, the Parties entered into that certain Strategic Alliance and Joint Development Agreement effective as of January 30, 2004 ("Existing Agreement"); and
WHEREAS, the Parties wish to supersede and replace the Existing Agreement with this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, and for other good and valuable consideration (the receipt and adequacy of which is hereby acknowledged), and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I.
PURCHASE AND SALE OF TRANSFERRED ASSETS
AND EXCLUSION OF LIABILITIES
Section 1.1. Purchase and Sale of Transferred Assets. Upon the terms and subject to the conditions of this Agreement, at the Closing the Seller shall sell, transfer, convey, assign and deliver free and clear of any Encumbrance, to the Buyer, and the Buyer shall purchase, acquire and accept from the Seller on the Closing Date, all of the Seller's right, title and interest in and to:
(a) The following rights to Seller's Intellectual Property:
(i) all right, title, and interest in and to the software as described on Schedule 1.1(a)(i) (the "Software") and all right, title, and interest in and to all intellectual property embodied therein subject, however to the reservation of the exclusive license and right to use and sublicense the Software in the United States as provided for in Section 2.3, below;
(ii) all non-United States rights related directly or indirectly to the patents of the Seller that are listed on Schedule 1.1(a)(ii), and all non-United States rights related directly or indirectly to patents and/or applications for patents that Seller owns or has a right to own, together with all renewals, continuations, divisions, reissues, reexaminations or extensions of any of the above, and to technical disclosures and draft patent applications related to any of the above (hereinafter " non-US Patent" or "non-US Patents"), and to all claims against third parties for infringement of the non-US Patents, including the right to sue for and collect past damages (except for the immunity of suit described in Section 2.5 below, neither "non-U.S. Patent" nor "non-U.S. Patents" includes any rights with respect to United States patents, patent applications or any renewals, continuations, divisions, reissues, reexaminations or extensions thereof); and
(iii) the right to use, sublicense and practice all trade secret,
confidential information, and know-how related to the Software and the
patents of the Seller that are listed on Schedule 1.1(a)(ii), and all
rights related directly or indirectly to patents and/or applications
for patents that Seller owns or has a right to own, together with all
renewals, continuations, divisions, reissues, reexaminations or
extensions of any of the above, only to the extent necessary for Buyer
to fully enjoy and exploit the ownership interest granted in Section
1.1(a) (i) and (ii) above. Said right to use, sublicense and practice
shall be exclusive to Buyer outside of the United States and Seller
shall have no such right to use, sublicense or practice outside of the
United States.
(b) All royalties which would otherwise accrue to Seller on and after the Closing Date deriving from the non-U.S. Patents. For the avoidance of doubt, such royalties shall include those royalties which would accrue as a result of use, practice and sales outside of the United States under that certain License Agreement between Seller and Media Cart, Inc. with an effective date of April 20, 2004 ("Media Cart License").
The assets set forth in this Section 1.1 shall be collectively referred to herein as the "Transferred Assets", provided, however, that Seller retains all United States rights, title and interest in and to the United States patents of the Seller, including but not limited to those that are listed on Schedule 1.1(a)(ii), to all United States applications for patents, all renewals, continuations, divisions, reissues, reexaminations or extensions thereof, all rights to draft United States patent applications related to the above and/or the non-U.S. Patents,, to all claims against third parties for infringement of these patents, including the right to sue for and collect past damages, all of Seller's right to the use, sublicense, and practice in the United States of Seller's trade secret, confidential information, and know-how and the right to use and sublicense the Software in the United States, as provided for below. Anything herein to the contrary not withstanding, the Transferred Assets are subject to the rights granted by Seller to Media Cart with respect to the "nose" of the shopping cart as provided in the Media Cart License.
Section 1.2. Excluded Liabilities.
(a) It is expressly agreed and understood that the Buyer shall not assume or be bound by any liabilities of the Seller or of its business, of any kind or nature, known, unknown, accrued, absolute, contingent, recorded or unrecorded or otherwise, whether now existing or hereafter arising. This Agreement does not enlarge any rights of third parties under any arrangements or understandings with the Buyer or the Seller or any of their respective affiliates or subsidiaries, as applicable.
Section 1.3. Purchase Price.
(a) Subject to the other provisions of this Agreement, the purchase price for the Transferred Assets is $350,000.00 and shall be payable by wire transfer in accordance with Seller's instructions in U.S. Dollars as set forth below:
(i) $100,000.00 shall be paid to Seller upon the execution of this Agreement;
(ii) $225,000.00 shall be paid to Seller on the Closing Date;
(iii) $25,000.00 shall be paid to Seller upon Buyer's receipt of written evidence reasonably satisfactory to Buyer that all of the executed Assignments described in Section 1.4(a) have been filed, recorded, or otherwise given effect in the appropriate patent office in the applicable countries.
(b) Buyer shall pay to Seller a royalty in the amount of two percent (2%) on all net revenue (i.e., exclusive of tariffs, duties, and all Taxes other than income tax) directly related to the sale of the iKart System hardware and/or software licenses in those countries where a non-U.S. Patent (as covered by this Agreement) is issued and in effect at the time of the sale corresponding to the applicable revenue or could have been issued and in effect if Buyer had timely, fully and diligently prosecuted such non-U.S. Patent (it being expressly acknowledged that the term "prosecuted" shall not mean "submitted a new application for"). For purposes of this Agreement, a "sale" shall be deemed to occur when Buyer recognizes the revenue from a given sale, lease or license of iKart System hardware and/or software license(s), in accordance with Buyer's standard accounting practices and policies. Said royalties shall be calculated on a quarterly calendar basis (the "Royalty Period"), shall be payable no later than fifteen (15) days after the termination of the preceding Royalty Period, and shall be accompanied by a royalty report showing relevant revenue by country. Buyer shall each quarter report to Seller the calculation of the royalty. Seller shall have a right to audit Buyer's books and records, but only to extent required to verify the Buyer's calculation of such royalty and shall have a right to have Buyer pay for such audit if the audit result in the royalty for any Royalty Period being incorrect by more than 5%, provided, however, that Seller shall give Buyer reasonable notice of its intent to perform any such audit, and any such audit shall take place during normal business hours.
Section 1.4. Items to be Delivered at the Closing by the Seller. At the closing of the purchase and sale provided for in this Agreement (the "Closing"), the Seller shall deliver or cause to be delivered to the Buyer:
(a) An executed Assignment for each of the non-U.S. Patents and patent applications listed in Schedule 1.1(a). The
Seller shall be responsible for ensuring that each such
Assignment conforms to the requirements of each applicable
country and for the recording of the executed assignment
in each applicable country;
(b) All copies of the source code, including current and
previous versions, and all documentation for the Software;
(c) All documentation describing any and all trade secrets,
confidential information, and know-how related to the
Software and non-U.S. Patents;
(d) An Assignment of the right to receive royalties under the
non U.S. Patents and any associated right to audit under
each license or other written agreement providing for
same, including, but not limited to, Sections 4 and 5 of
that certain License Agreement between Seller and Media
Cart, Inc. with an effective date of April 20, 2004 (and
for the avoidance of doubt, any such Assignment shall not
include a delegation of any of Seller's duties or
obligations);
(e) A signed letter from Seller to Media Cart, Inc., notifying
Media Cart, Inc. of the Assignment described in Section
1.4(d) and directing Media Cart, Inc. to pay to Buyer any
and all royalties arising out of the Media Cart License on
and after the Closing Date deriving from the non-U.S.
Patents.
(f) Written documentation from any and all third parties who
have or may have a security interest in some or all of the
Transferred Assets, that evidences to Buyer's reasonable
satisfaction that said third parties have released any
such security interest in the Transferred Assets effective
as of or before the Closing Date.
Section 1.5. Items to be Delivered at the Closing by the Buyer. At the Closing,
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the Buyer shall deliver:
(a) $225,000.00 in good and immediately available funds to be paid to Seller.
Section 1.6. Closing and Closing Date. The parties shall make every reasonable effort to complete the transactions herein contemplated (the "Closing") on or before September 30 (the "Closing Date").
ARTICLE II.
OTHER TERMS AND CONDITIONS
Section 2.1. Joint Development Project.
(a) The Parties acknowledge that, under the Existing
Agreement, they have commenced development of a new
version of Seller's Klever Kart in-store marketing system,
comprising Buyer's hardware platform (formerly, "Smart
Cart Hardware", now known as "iKart Hardware") and the
Software, ported to a Windows environment, all as more
particularly described in Schedule 2.1(a) hereto (said
Smart Cart Hardware and Software formerly being
collectively known as, "Smart Cart", hereinafter referred
to as the "iKart System"). The Parties' respective
development responsibilities under the Existing Agreement
were as indicated in Schedule 2.1(a).
Section 2.2. Software Development.
(a) The Parties acknowledge that Seller has performed some
Software development activities under the Existing
Agreement, but that the Software development effort (i.e.,
the porting of the Software to a Windows environment) has
not been completed as contemplated by the Existing
Agreement. As of the Closing Date, Buyer shall undertake
the completion of porting the Software to a Windows
environment as contemplated by the Existing Agreement,
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specifically, Items 1, 2, and 3 of "Seller's Responsibility" as described in Schedule 2.1(a). Any further modifications, enhancements, upgrades, or
development of the Software shall be at Buyer's sole
discretion.
(b) In support of such undertaking, Buyer shall make a
reasonable offer of employment to Seller's Senior Vice
President of Technology, Mark Geiger, and Seller shall
cooperate to facilitate the transition of his employment
from Seller to Buyer, which the parties intend shall take
effect on or promptly after the Closing Date. In addition,
Seller shall provide reasonable assistance and cooperation
as reasonably requested by Buyer to facilitate the
transition of development activities from Seller to Buyer,
including, but not limited to, the cooperation related to
the engagement by Buyer of any independent contractors who
were assigned by Seller to the Software development
project.
(c) As of the Closing Date, Seller shall be released from any
further obligation to perform the development,
procurement, and integration tasks listed under "Seller
Responsibility" on Schedule 2.1(a).
Section 2.3. License Grant.
(a) Effective as of the Closing Date, Buyer hereby grants to
Seller an exclusive, royalty free, license within the United
States to use, sublicense and distribute in executable form to
customers, the Software as completed by Buyer as contemplated
in this Agreement, but only in conjunction with the sale of
Buyer's hardware platform. Said license shall be
non-transferable, except that, with Buyer's prior written
consent, which consent may be withheld in Buyer's sole
discretion, Seller may transfer or assign said license in
conjunction with Seller's sale of the totality of its business
or sale of substantially all the assets of its business. In
light of Seller's involvement in the development of the
Software, said license is without warranty of any kind, and
does not include any obligation on Buyer's part to indemnify
Seller against third party claims of infringement regarding
the Software. Maintenance and support of such Software is not
included under this Agreement, but the Parties agree to use
their best efforts to negotiate and execute in good faith a
separate written maintenance and support agreement whereby
Buyer would perform such services.
(b) Within thirty (30) days after the completion of development of
the Software as described in Section 2.2(a) or Buyer
determines not to complete the Software, Buyer shall deliver
to Seller a copy of the source code for such Software. Subject
to the confidentiality obligations set forth in Section 6.2,
and subject to Buyer's review and approval, which shall not be
unreasonably withheld, Seller shall have the right to fix,
debug, modify, update, enhance and create derivative works of
the source code of the Software to the extent required to
enable Seller to perform its responsibilities in connection
with store level advertising and promotion programs for the
iKart System. The source code shall be without warranty of any
kind and should Seller make any changes or modifications to
the source code, Buyer shall be under no obligation to provide
support for the Software. Buyer shall be entitled to a copy of
and own any derivative works of the Software created by
Seller, but said derivative works shall be subject to the
exclusive license granted to Seller herein. The parties intend
for this Section 2.3(b) to be an interim arrangement and that,
once executed, the maintenance and support agreement described
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in Section 2.3(a) above shall supersede and replace this
Section 2.3(b). Buyer shall also deliver to Seller a copy of
the source code for such Software, as it is then completed, in
the event Buyer determines not to complete the Software, but
such delivery of the source code to Seller shall be in full
and final settlement of any claim that Seller may have against
Buyer arising out of Buyer's determination not to complete the
Software. Seller will then have the right to complete the
Software for use in the iKart System. In such case, Buyer
shall have no rights to or in any of the code that is written
by Seller to complete the Software.
Section 2.4. Marketing and Sales.
(a) In the United States, the Parties agree to participate in
joint marketing and sales efforts of the iKart Hardware and
Software with respect to mutually agreed initiatives
including, but not limited to, attendance at and support of
trade shows, industry seminars, development of brochures and
literature, proposal development, and presentations to
prospects. Each Party agrees to make no changes to the other
Party's existing marketing insignia such as company logo style
or color. In particular:
(i) The Parties agree to jointly develop a marketing and launch
strategy; market the iKart System to large tier retailers and
grocery chains; and provide public briefing forums. (ii) Buyer
shall have the sole and exclusive right and responsibility of
marketing and selling the iKart Hardware to customers, with
the assistance of Seller as necessary. Proceeds from such
sales will belong exclusively to Buyer.
(iii) Seller shall have the sole and exclusive right and
responsibility of marketing and licensing the iKart Software
portion of the iKart System, as well as the store level
advertising and promotion programs for the iKart System to
customers, with the assistance of Buyer as necessary. Proceeds
from such sales will belong exclusively to Seller.
(b) Publicity and Press Releases in the U.S.: The Parties may by
mutual consent agree to issue a joint press release describing
the collaboration of the Parties. In addition, each of Seller
and Buyer may, with the prior written approval of the other
party, which approval shall not be unreasonably withheld or
delayed: (1) identify the other as a strategic partner; (2)
hyperlink from an appropriate area within its web site to the
other's home page; (3) display the other Party's logo on the
its web site (in accordance with such Party's guidelines for
the use of such mark); (4)use the other Party's name (but not
commit for the other Party) in connection with proposals to
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prospective customers; and (5) to refer to the other Party in print or electronic form for marketing or reference purposes. The Parties shall also consult regularly during the term of the Agreement and issue, as and when appropriate, such further press releases and/or other publicity materials as may be appropriate. The contents of the any press releases issued by the Parties shall be subject to the prior written approval of each Party, which approval shall not be unreasonably withheld or delayed.
(c) Outside the U.S.: The Parties agree that the scope and extent of marketing and sales activities outside of the U.S. will be dependent on the commercial viability of the iKart System in non-U.S. markets, taking into account general market conditions, product support availability, as well as the feasibility of modifications and developments that may be necessitated by customer and foreign requirements. The scope and extent of marketing and sales activities outside of the U.S. shall therefore be at Buyer's sole discretion.
Section 2.5. Immunity from Suit.
(a) As of the Closing Date, Seller hereby grants Buyer a
worldwide, present, perpetual and fully prepaid immunity
from suit for infringement of Seller's Intellectual
Property provided such claim of infringement relates to
Buyer's exercise of its rights and interests as herein
described.
Section 2.6. Right of First Refusal.
(a) Seller agrees that it will not sell or otherwise transfer
its rights in Seller's U.S. Patents to a third party
without first offering to sell or transfer such rights to
Buyer in accordance with the following provisions:
(i) Seller shall deliver a written notice to Buyer stating the
name and address of the proposed bona-fide transferee, a
description of the U.S. Patents proposed to be
transferred, and the price and terms of payment.
(ii) Within sixty (60) days after receipt of the written
notice, Buyer shall have the first right to purchase the
applicable rights in the applicable U.S. Patents upon the
same price and terms of payment designated in said written
notice.
(iii) If Buyer elects not to purchase said rights in the U.S.
Patents designated in the written notice, then Seller may
transfer the rights in said U.S. Patents to the proposed
transferee, provided the transfer is completed within
ninety (90) days after the expiration of Buyer's right to
purchase, and further provided the transfer is made at a
price and terms no less favorable to the buyer than those
designated in the written notice.
(b) Any sale or transfer of rights in Seller's U.S. Patents to
a third party shall be subject to, and have no affect on,
Buyer's ownership interest in the Software, and to the
immunity from suit, granted to Buyer in this Agreement.
Section 2.7. Non-Competition.
(a) For a period of time commencing on the Closing Date and
ending two (2) years after the last date that royalties
(as described in Section 1.3(a) above) may be payable by
Buyer to Seller under this Agreement, Seller agrees that
it shall not itself, nor assist any third party to, offer,
promote, market, develop, supply, sell, or re-sell any
product that is competitive with the iKart System unless
Buyer has elected not to pursue sales or further
development of the iKart System.
(b) Buyer agrees that, for as long as Seller remains a viable
business, Buyer will not promote any company other than
Seller that provides store level advertising and promotion
programs for the iKart System to customers.
Section 2.8. Superseding Agreement
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(a) Effective as of the Closing Date, this Agreement shall supersede and replace the Existing Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to and for the benefit of the Buyer:
Section 3.1. Authority; Binding Obligation.
(a) The Seller has the requisite authority and power to enter into, execute and deliver this Agreement and each agreement, certificate document and instrument to be executed and delivered by the Seller pursuant to this Agreement (the "Seller Documents") and to perform its obligations hereunder and thereunder. The execution, delivery and performance by the Seller of this Agreement and each Seller Document have been duly authorized by all necessary corporate or other action of the Seller. This Agreement and each Seller Document has been, or will be, as applicable, duly executed and delivered by the Seller and constitutes, or will constitute upon delivery and execution, as applicable, a valid and binding obligation of the Seller enforceable against it in accordance with its terms.
Section 3.2. No Conflict; Required Consents.
(a) Except as set forth in Schedule 3.2, neither the execution, delivery or performance of this Agreement or the Seller Documents nor the consummation by the Seller of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws of the Seller, (b) result in or require the creation or imposition of, or result in the acceleration of, any indebtedness or Encumbrance of any nature upon, or with respect to, the Seller or any of the Transferred Assets, or (c) conflict with or result in any breach of any provision of any other agreement to which Seller is a party
Section 3.3. No Subsidiaries. The Seller does not own, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity that owns any of the Transferred Assets or any interest therein, nor is the Seller, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity that owns any of the Transferred Assets or any interest therein.
Section 3.4. Title to Transferred Assets. The Seller has good, valid and marketable title to all of the Transferred Assets, free and clear of Encumbrance.
Section 3.5. Absence of Undisclosed Liability. To the best of Seller's knowledge after due inquiry, there are no liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) relating to the Seller, or any subsidiary or affiliate of the Seller which could reasonably be expected to have a material adverse effect on the performance and fulfillment of this Agreement.
Section 3.6. Litigation. To the best of Seller knowledge after due inquiry, there is no claim, counterclaim, action, suit, order, proceeding or investigation pending or, to Seller's knowledge after due inquiry, threatened against, probable of assertion against or affecting the Seller with respect to the Transferred Assets or relating to the transactions contemplated hereby or by the Seller Documents, to the best of Seller's knowledge after due inquiry, is there any reasonable basis for any such claim, action, suit, proceeding or governmental, administrative or regulatory investigation. The Seller is not directly subject to or materially affected by any order, judgment, decree or ruling of any Governmental Entity with respect to the Transferred Assets. The Seller (or any subsidiary or affiliate of the Seller) has not received any written opinion or memorandum of legal advice from legal counsel to the effect that it is exposed to any liability which may be materially adverse to the Transferred Assets. The Seller (or any subsidiary or affiliate of the Seller) is not engaged in any legal action to recover monies due it or for damages sustained by it with respect to the Transferred Assets. Any claim, counterclaim, action, suit, order, proceeding or, to the Seller's knowledge after due inquiry, investigation against the Seller (or any subsidiary or affiliate of the Seller) with respect to the Transferred Assets that is pending or was commenced within the past two (2) years has been disclosed in writing to Buyer.
Section 3.7. Patents.
(a) The Seller has not received any written notice that any of the rights of the Seller in the non-U.S. Patents have been declared unenforceable or otherwise invalid by any Governmental Entity except as provided on Schedule 3.7. The Seller has taken all action reasonably necessary to maintain and protect its rights in and to each non-U.S. Patent.
(b) No non-U.S. Patent is subject to any outstanding injunction, judgment, order, decree, ruling or charge. No action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Seller's knowledge after due inquiry, threatened which challenges the legality, validity, enforceability or ownership of, or any of the Seller's right to use, any of the non-U.S. Patents.
Section 3.8. Copies of Documents. The Seller has made available for inspection and copying by the Buyer and its counsel complete and correct copies of all documents referred to in the Schedules to this Article III.
Section 3.9. Disclosure. None of the representations or warranties of the Seller contained in this Agreement, the Seller Documents, or in any other certificate, exhibit or schedule delivered by the Seller pursuant to this Agreement contain any untrue statement of a material fact, or omit to state a material fact necessary in order to prevent such representations and warranties from being misleading in light of the circumstances under which they were made.
Section 3.10 Broker Fees. No broker or finder is entitled to any brokerage fees, commission or finders' fee in connection with the consummation by the Seller of the transactions contemplated by this Agreement or any Seller Document.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby makes the following representations and warranties to and for the benefit of the Seller:
Section 4.1. Authority; Binding Obligation. The Buyer has the requisite authority and power to enter into, execute and deliver this Agreement and each agreement, document and instrument to be executed and delivered by the Buyer pursuant to this Agreement (the "Buyer Documents") and to perform its obligations hereunder and thereunder. The execution, delivery and performance by the Buyer of this Agreement and the Buyer Documents have been duly authorized by all necessary corporate or other action of the Buyer. This Agreement and the Buyer Documents have been, or will be, as applicable, duly executed and delivered by the Buyer and constitutes, or will constitute upon execution, as applicable, valid and binding obligations of the Buyer, enforceable against it in accordance with their terms.
Section 4.2. No Conflict; Required Consents. Except as set forth in Schedule 4.2, neither the execution, delivery or performance of this Agreement or the Buyer Documents nor the consummation by the Buyer of the transactions contemplated hereby or thereby will conflict with or result in any breach of any provision of the Charter or Bylaws of the Buyer.
Section 4.3. Broker Fees. No broker or finder is entitled to any brokerage fees, commission or finders' fee in connection with the consummation by the Buyer of the transactions contemplated by this Agreement or any other agreement contemplated hereby.
ARTICLE V.
COVENANTS
Section 5.1. Consummation of Agreement. Each Party shall use its best efforts to perform and fulfill all conditions and obligations on its part to be performed and fulfilled under this Agreement, to the end that the transactions contemplated by this Agreement shall be fully carried out. Until the Closing or the termination of this Agreement, except as mutually agreed in writing by the Parties, the Seller or any of its respective subsidiaries or affiliates or any of its officers, directors, employees, agents or representatives shall, directly or indirectly, solicit, encourage, initiate or induce the making of any inquiries or proposals for the acquisition of any of the Transferred Assets, or furnish information to, or engage in negotiations relating to the foregoing or otherwise cooperate in any way with, or accept any proposal relating to the foregoing from, any Person or group other than the Buyer, and the Seller shall restrict any such subsidiary, affiliate, officer, director, agent and representative from doing any of the foregoing.
Section 5.2. Ordinary Course of Business. Until the Closing or, if sooner, the termination of this Agreement, the Seller shall conduct its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted.
Section 5.3. Supplements to Schedules. Prior to the Closing, the Parties will supplement or amend the Schedules hereto with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of the Schedules made pursuant to this Section 5.3 shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the other Party specifically agrees thereto in writing.
ARTICLE VI.
RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
Section 6.1. Survival of Representations and Warranties. Each representation and warranty contained herein or in any Seller Document or Buyer Document shall survive the execution and delivery of this Agreement. If written notice of a claim has been given prior to the expiration of the applicable representation or warranty, then such claim shall survive the expiration of the relevant representation or warranty until the final resolution of such claim.
Section 6.2. Confidentiality Obligations. The Parties agree that, after the Closing has been consummated, the Parties and its subsidiaries and affiliates, and its officers, directors, employees, agents and representatives (collectively, the "Representatives") will hold in strict confidence, and will not distribute or make available, any confidential or proprietary data or information that is used in connection with or related to the Transferred Assets or any confidential or proprietary data or information provided by or otherwise obtained from the other Party concerning the business and/or operations of the other Party , except:
(a) information which, as of the date hereof, is published or
otherwise generally available to the public;
(b) information which after the date hereof becomes available
to the public other than through an act or omission of the
receiving Party, the Parent or any Seller Representative
which is in violation of the provisions hereof;
(c) information rightfully acquired from a third party which
did not obtain such information under a pledge of
confidentiality;
(d) information which is developed by the receiving Party
independently of the relationship established by this
Agreement; or
(e) information which is compelled to be disclosed by legal
process, in which case the receiving Party shall notify
the disclosing Party as soon as practicable after it
becomes aware of such requirement, and shall cooperate
with the disclosing Party in obtaining a protective order.
Section 6.3. Compliance. Each Party shall use its best efforts to take or
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cause to be taken, all action and do or cause to be done all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, the Seller Documents and the Buyer Documents, including, without limitation, to obtain all consents, approvals and authorization of third parties, and to make all filings with and give all notices to third parties which may be necessary or required to be obtained by it in order to effectuate the transactions contemplated hereby and thereby and to otherwise comply and fulfill such Party's obligations hereunder and thereunder.
Section 6.4. Further Assurances.
(a) Each Party shall, from time to time on being reasonably
required to do so by the other Party, now or at any time
in the future, do or procure the doing of all such acts
and/or execute or procure the execution of all such
documents in a form reasonably satisfactory to the other
Party as the other Party may reasonably consider necessary
for giving full effect to this Agreement, the Seller
Documents and the Buyer Documents and securing to the
other Party the full benefit of the rights, powers and
remedies conferred upon the other Party hereunder and
thereunder.
(b) The Seller shall promptly transfer or deliver to the Buyer
any of the Transferred Assets or proceeds thereof
delivered to, or retained or received by, the Seller after
the Closing Date.
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ARTICLE VII.
TERMINATION
Section 7.1. Right to Terminate. This Agreement may be terminated:
(a) by either Party upon sixty (60) days written notice to the
other party in the event of a breach of any material
provision hereof by the other Party, but only if the
breaching party fails to cure such breach of any material
provision hereof within the sixty (60) notice period;
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the non-breaching Party retains and may assert against the breaching Party all legal and equitable rights and remedies that it may have with respect to a breach or default by the breaching Party;
(b) by either the Buyer or the Seller if the Closing shall not
have occurred by September 30, 2004; provided, however,
that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Closing Date to occur on or before such date;
(c) by the Seller if the Buyer (i) breaches its material
representations and warranties, (ii) fails to comply with
any of its covenants or agreements contained herein; or
(d) by the Buyer if the Seller (i) breaches its material
representations and warranties, (ii) fails to comply with
any of its covenants or agreements contained herein.
Any such termination after the Closing, shall not affect
any rights that have already accrued, or affect or
eliminate Buyer's obligation to pay the royalty provided
for in Section 1.3(b) or Seller's license to continue to
use the Software provided for Section 2.3(a).
Section 7.2. In the event of termination by Buyer prior to the Closing, the
$100,000.00 payment described in Section 1.3(a)(i) shall be
promptly refunded by Seller. In the event of termination by Seller,
$50,000.00 of the $100,000.00 payment shall be retained by Seller
as liquidated damages, which are hereby deemed reasonable and final
settlement of any claim for monetary damages by Seller arising out
of this Agreement, and the remaining $50,000.00 shall be promptly
refunded by Seller.
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ARTICLE VIII.
INDEMNIFICATION
Section 8.1. Indemnification of the Seller. The Buyer shall, from and after the Closing, defend and promptly indemnify and hold harmless the Seller, and their respective subsidiaries and affiliates, and their respective officers, directors, employees, agents and representatives (collectively, the "Seller Indemnified Parties") from, against, for, and in respect of and pay any and all Losses, suffered or incurred by any such party by reason of (a) any breach of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement or any Buyer Documents.
Section 8.2. Indemnification of the Buyer. The Seller shall, from and after the Closing, defend, indemnify, and hold harmless the Buyer and its subsidiaries and affiliates and their respective officers, directors, employees, agents and representatives (collectively, the "Buyer Indemnified Parties") from, against, for and in respect of and pay any and all Losses suffered, sustained, incurred or required to be paid by any such party by reason of (a) any breach of any representation, warranty, covenant or agreement of the Seller contained in this Agreement or in any Seller Document or Parent Document, and (b) (b) any and all obligations and liabilities of the Seller, except as expressly assumed by the Buyer under this Agreement.
Section 8.3. Indemnification Procedure.
(a) An indemnified party shall provide written notice to each indemnifying party of any claim of such indemnified party for indemnification under this Agreement promptly and within thirty (30) days after the date on which such indemnified party has actual knowledge of the existence of such claim. Such notice shall specify the nature of such claim in reasonable detail and the indemnifying parties shall be given reasonable access to any documents or properties within the control of the indemnified party as may be useful in the investigation of the basis for such claim. The failure to so promptly notify the indemnifying parties shall constitute a waiver of such claim.
(b) In the event any indemnified party seeks indemnification hereunder based upon a claim asserted by a third party (a "Third Party Claim"), the indemnifying parties shall have the right (without prejudice to the right of any indemnified party to participate at its expense through counsel of its own choosing) to defend or prosecute the Third Party Claim at its expense and through counsel of its own choosing if it gives written notice of its intention to do so and acknowledges its liability pursuant to the indemnity obligations stated herein no later than thirty (30) days following notice thereof by an indemnified party; provided, however, that, if the indemnified party shall have reasonably concluded that separate counsel is required because, upon the advice of counsel to the indemnified party, a conflict of interest would exist under applicable federal, state, or local ethical laws governing the conduct of attorneys (other than solely by reason of the fact that the indemnified party is a party seeking indemnification pursuant to this Agreement), the indemnified party shall have the right to select separate counsel (but not more than one law firm together with local counsel, if necessary) to participate in the defense of such action on its behalf, at the sole expense of the indemnifying party. If the indemnifying party does not so choose to defend or prosecute any Third Party Claim for which any indemnified party would be entitled to indemnification hereunder, then the indemnified party shall be entitled to recover from the indemnifying party all of the reasonable attorney's fees and other costs and expenses of litigation of any nature whatsoever incurred in the defense of such claim
(c) The indemnifying party and the indemnified party shall fully cooperate in furnishing all evidence and testimony and in any other manner, which the other may reasonably request, and shall in all other respects have an obligation of good faith dealing, one to the other, so as not to unreasonably expose the other to undue risk of loss.
ARTICLE IX.
MISCELLANEOUS
Section 9.1. Fees and Expenses. Except as otherwise provided in this Agreement, each Party will bear its own direct expenses incurred in connection with the negotiation and preparation of this Agreement and the Seller Documents and Buyer Documents, as the case may be, and the consummation and performance of the transactions contemplated hereunder and thereunder. Except as otherwise provided in this Agreement, in the event that a dispute should arise between the parties to this Agreement, the prevailing party shall be entitled to reimbursement of its reasonable attorneys' fees and expenses (including court costs).
Section 9.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered personally or sent by facsimile transmission, overnight courier, or certified, registered or express mail, postage prepaid. Any such notice shall be deemed given when so delivered personally or sent by facsimile transmission (provided that a confirmation copy is sent by overnight courier), one (1) day after deposit with an overnight courier, or if mailed, five (5) days after the date of deposit in the United States mails, as follows:
To the Buyer: Fujitsu Transaction Solutions Inc.
2801 Network Blvd.
Frisco, Texas 75034
Attn: Legal Department
FAX: 972-963-2644
With a copy to: Fujitsu Transaction Solutions Inc.
401 Hackensack Ave.
Hackensack, New Jersey 07601
Attn: General Counsel
FAX: 201-489-3704
To the Seller: Klever Marketing, Inc
P.O. Box 2935
Salt Lake City, UT 84110
Attn: Legal Department
Fax: 801.322.1230
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With a copy to: Fabian & Clendenin
215 South State Stree, 12th Floor
Salt Lake City, UT 84111
Attn: Jay Bell
Fax: 801.532.3370
|
Any notice given hereunder may be given on behalf of any Party by its counsel or other authorized representatives. The address of any Party may be changed on notice to the other Party duly served in accordance with the foregoing provisions.
Section 9.3. Governing Law; Forum; Process. This Agreement shall be construed in accordance with, and governed by, the laws of the State of New York as applied to contracts made and to be performed entirely in the State of New York without regard to principles of conflicts of law.
Section 9.4. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto and the Seller Documents and Buyer Documents herewith, are intended to embody the complete, final and exclusive agreement among the Parties with respect to the purchase of the Transferred Assets and the related transactions and are intended to supersede all previous negotiations, commitments and writings agreements and representations, written or oral, with respect thereto and may not be contracted by evidence of any such prior or contemporaneous agreement, understanding or representations, whether written of oral.
Section 9.5. Assignability; Binding Effect. This Agreement may not be assigned by the Seller. The Buyer may, in its discretion, transfer and assign this Agreement to a parent, subsidiary, joint venture, affiliate, or other related entity or to a successor of the Buyer by merger or sale of assets. This Agreement and the rights, covenants, conditions and obligations of the respective parties hereto and any instrument or agreement executed pursuant hereto shall be binding upon and enforceable by, and shall inure to the benefit of, the Parties and their respective successors and permitted assigns.
Section 9.6. Execution in Counterparts. For the convenience of the Parties
and to facilitate execution, this Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one (1) and the same
document. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one (1) counterpart
evidencing execution by each Party. Delivery of a facsimile version
of one (1) or more signatures to this Agreement shall be deemed
adequate delivery for purposes of this Agreement.
Section 9.7. Amendments. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by each Party, or in the case of a waiver, the Party waiving compliance; provided, however, that no such waiver shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits a waiver or consent by or on behalf of any Party, such waiver or consent shall be given in writing.
Section 9.8. Severability. In the event that any one or more of the provisions contained in this Agreement, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained in this Agreement shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Parties shall be enforceable to the fullest extent permitted by law.
Section 9.9. Section Headings. The Section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.
Section 9.10. Gender and Tenure. Where the context or construction requires, all words applied in the plural shall be deemed to have been used in the singular, and vice versa; the masculine shall include the feminine and neuter, and vice versa; and the present tense shall include the past and future tense and vice versa.
Section 9.11. Third-Party Rights. Nothing in this Agreement, whether express or implied, is intended to confer rights or remedies under or by reason of this Agreement on any Persons other than the Parties, each Seller Indemnified Party and each Buyer Indemnified Party and their respective successors and permitted assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any party to this Agreement, nor shall any provisions give any third Persons any right of subrogations over or action against any Party.
Section 9.12. Construction. The language in all parts of this Agreement shall in all cases be construed simply, accurately to its fair meaning, and not strictly for our against any of the Parties, without limitation, there shall be no presumption against any Party on the ground that such Party was responsible for drafting this Agreement or any part thereof, and any rule of law, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived.
Section 9.13. Disclosure.
(a) The Parties agree not to issue any announcement, press
release, public statement or other information (either written
or oral) to the press or any third Person with respect to this
Agreement, the Seller Documents or the Buyer Documents, or the
transactions contemplated hereby or thereby, without obtaining
the prior written approval of the other Parties (which
approval shall not be unreasonably withheld); provided,
however, that nothing contained herein shall prevent any
Party, at any time, from furnishing any required information
to any Governmental Entity or from issuing any announcement,
press release, public statement or other information to the
press or any third Person with respect to this Agreement, the
Seller Documents or the Buyer Documents, or the transactions
contemplated hereby or thereby, if required by law, rule or
regulation, including applicable stock exchange regulation
(provided that the other Parties shall be furnished with an
advance copy of any such announcement, press release, public
statement or other information).
(b) The Seller, the Parent and the Buyer each undertake to provide
all such information known to it or which on reasonable
inquiry ought to be known to it as may reasonably be required
by the Buyer, the Parent or the Seller for the purpose of
complying with the requirements of law, rule or regulation.
Section 9.14. Definitions.
(a) As used herein, the "Closing" shall have the meaning set
forth in Section 1.6.
(b) As used herein, the "Closing Date" shall have the meaning
set forth in Section 1.6.
(c) As used herein, "Encumbrance" shall mean any lien,
encumbrance, option, pledge, security interest, charge,
restriction or other adverse claim or right whatsoever.
(d) As used herein, "Governmental Entity" shall mean the
government of the United States of America, any other
nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or
pertaining to government.
(e) As used herein, "Intellectual Property" shall mean all works
protectable by copyright, trademark, patent and trade secret
laws or by any other statutory protection obtained or
obtainable, and any confidential information (as defined in
Section 6.2) of a party that meets the foregoing criteria,
including without limitation, any literary works, pictorial,
graphic and sculptural works, architectural works, works of
visual art, and any other work that may be the subject matter
of copyright protection; advertising and marketing concepts;
information; data; formulae; designs; models; drawings;
computer programs, including all documentation, related
listings, design specifications, and flowcharts, trade
secrets, and any inventions including all methods, processes,
business or otherwise; machines, manufactures and compositions
of matter and any other invention that may be the subject
matter of patent protection; and all statutory protection
obtained or obtainable thereon.
(f) As used herein, "Person" shall mean any natural person, sole
proprietorship, entity, corporation, company, association
joint venture, joint stock company, partnership, trust,
organization, individual (including personal representatives,
executors and heirs of a deceased individual), nation, state
government (including agencies, branches, departments,
bureaus, boards, divisions and instrumentalities thereof),
trustee, receiver or liquidator.
(g) As used herein, "Tax" and "Taxes" shall mean any and all
taxes, charges, fees, levies or other assessments, including,
without limitation, all net income, gross income, gross
receipts, premium, sales, use, ad Valero, transfer, franchise,
profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other
taxes, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties (including
penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax by
any authority, whether federal, state, or local or domestic or
foreign.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their respective names by their respective officers duly authorized, as of the date first written above.
KLEVER MARKETING, INC.
By:_______________________________
Name:
Title:
FUJITSU TRANSACTION SOLUTIONS INC.
By:_______________________________
Name:
Title:
SCHEDULE 1.1(a)(i)
SOFTWARE
SOFTWARE MODULES:
1. STORE MANAGEMENT INTEGRATION PROGRAM
Store Management--Centralize all data respective to a store Ad Manager
-- Distributes advertisements Store Content Controller--View store
content and configurations Reports--Reporting tool to generate store
status reports
Accounting--Track CPG marketing activity and generate billing
information based on store reports Electronic Coupons--Support
electronic coupon distribution Cart Tracking--Track carts in the store
by the unique identification code on each trigger and each display unit
2. STORE CONTROLLER INTERFACE PROGRAM (SCIP)
Connect to Internet--Manage In Store Processor information required to connect to Internet Receive Updates--Connects to the HQ Server and compares internal file versions to HQ file versions and creates update list Apply Updates--Schedules file updates on smart displays via wireless access Store Directory Changes--Allows store associates to change directory information in the event of errors
3. HEADQUARTERS SERVER (KSERV)
Interfaceapplication between the Store Controller I/F Program and the Marketing Database. Handles requests from SCIP for data. Internet Socket Server--Handles requests from SCIP for information from HQ server Generate Database Queries--Queries HQ Server for answers to SCIP requests FTP--File Transfer Server for SCIP
4. IKART CART COMMUNICATIONS (KARTKOM)
Interface Program between SCIP and Smart Displays Reads files versions
on Smart Display and updates as necessary Updates and Processes
requests from Smart Displays
Transmits RF header "Heart Beat" so that displays that just become
active can receive latest updates from controller Collects system
status from iKart (Battery Status, Inactive Status, Last Operational
Status)
5. CART APPLICATION PROGRAM
Controls all user interface functions (button presses) Controls advertisement display (animation and sounds) Monitors motion and resets the awake timer Captures trigger and system data for SCIP
6. PERSONAL SHOPPER MODULE SOFTWARE INTERFACE TO CART APPLICATION PROGRAM
SCHEDULE 1.1(a)(ii)
PATENTS
KLEVER MARKETING, INC.
Patent Report by Invention Printed: 8/20/2004 Page 1
COUNTRY REFERENCE# FILED SERIAL# ISSUED PATENT# STATUS ACCEPTABLE
ASSIGNMENT
AUTOMATED SHOPPING CART HANDLE
UNITED STATES 12257.28 6/12/1993 08/090,285 1/23/2001 6,177,880 ISSUED N/A
SHOPPING CART DISPLAY SYSTEM
ARGENTINA 12257.13 9/20/1988 311,976 4/30/1993 242,676 ISSUED Yes
BRAZIL 12257.14 5/22/1989 8807216-9 PENDING Yes
CANADA 12257.9 9/21/1988 578,071 5/5/1992 1,300,235 ISSUED Yes
CANADA 12257.10 12/2/1991 616,243 9/28/1993 1,322,577 ISSUED Yes
CANADA 12257.11 10/16/1992 616,514 6/21/1994 1,330,367 ISSUED Yes
DENMARK 12257.19 5/19/1989 2460/89 PENDING Yes
EUROPEAN PATENT 12257.8 88908639.3 0335931 ISSUED
JAPAN 12257.12 507947/1988 2/6/1998 2743340 ISSUED Yes
UNITED STATES 12257.6 9/21/1987 07/099,288 11/27/1990 4,973,952 ISSUED N/A
UNITED STATES 12257.22 7/13/1989 07/435,500 3/15/1994 5,295,064 ISSUED N/A
UNITED STATES 12257.24 4/12/1993 08/045,826 2/15/1994 5,287,266 ISSUED N/A
WIPO 12257.7 9/21/1998 PCT/US88/03259 NAT PHASE
SHOPPING CART HANDLE
UNITED STATES 12257.44 1/16/1992 07/821,600 11/23/1993 D3,416,91 ISSUED N/A
DEVICE FOR PROVIDING ADVERTISING TO SHOPPERS
UNITED STATES 12257.29 11/1/1990 07/608,167 PENDING N/A
INSTANT ELECTRONIC COUPON VERIFICATION SYSTEM
CANADA 12257.37 /20/1994 2,117,716 9/14/1999 2,117,716 ISSUED Yes
GERMANY 12257.38 /20/1994 44 33 569.5-33 PENDING Yes
UNITED KINGDOM 12257.39 9/20/1994 9419156.6 9/20/1994 2282253 ISSUED Yes
JAPAN 12257.40 9/20/1994 250179/1994 10/31/1997 2712139 ISSUED Yes
TAIWAN 12257.42 9/22/1994 83108755 PENDING
UNITED STATES 12257.36 9/20/1993 08/123,192 5/30/1995 5,420,606 ISSUED N/A
SHOPPERS COMMUNICATION SYSTEM AND PROCESSES RELATING THERETO
UNITED STATES 12257.34 11/6/1989 07/432,599 PENDING N/A
MOBILE ADVERTISING DEVICE WITH ELECTRONIC TRANSMISSION CAPABILITIES
UNITED STATES 12257.45 11/21/1995 08/561,432 12/30/1997 5,703,564 ISSUED N/A
TRIGGER UNIT FOR SHOPPING CART DISPLAY
UNITED STATES 12257.46 5/5/1998 09/073,001 1/11/2000 6,012,244 ISSUED N/A
SHOPPERS COMMUNICATION SYSTEM AND PROCESSES RELATING THERETO
CANADA 12257.33 12/15/1992 616,550 11/1/1994 1,332,848 ISSUED Yes
CANADA 12257.32 10/7/1988 579,653 5/4/1993 1,317,347 ISSUED Yes
UNITED STATES 12257.31 10/14/1987 07/108,437 11/21/1989 4,882,724 ISSUED N/A
LINE BUSTING
UNITED STATES 12257.1 PROPOSED
TAIWAN PATENT (TITLE UNKNOWN)
Taiwan 12257.50 n/a NI-109525 ISSUED
SHOPPERS COMMUNICATION SYSTEM AND PROCESSES RELATING THERETO
UNITED STATES 12257.47 n/a 5/13/1997 5,630,068 ISSUED N/A
AUTOMATED SHOPPING CART HANDLE
UNITED STATES 12257.48 n/a 11/27/2001 6,323,753 ISSUED N/A
METHOD AND APPARATUS FOR CONTROLLING THE CHARGING OF A SECONDARY BATTERY USING THE PRIMARY DIFFERENTIAL OF THE BATTERY VOLTAGE
UNITED STATES 12257.49 n/a 12/30/1997 5,703,465 ISSUED N/A
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SCHEDULE 2.1(a)
IKART DESCRIPTION AND RESPONSIBILITIES UNDER EXISTING AGREEMENT
IKART SOLUTION DESCRIPTION
The description contained in this Schedule 2.1(a) was the Parties' estimate, as of the date of execution of the Existing Agreement, of the configuration of the iKart and remains subject to change to accommodate market conditions or customer requirements.
BUYER RESPONSIBILITY
HARDWARE MODULES: Buyer will bear the cost and responsibility of designing, developing, and manufacturing the following hardware modules, mechanical design, enclosures, plastics, molds, tooling, models, etc.
1. SMART DISPLAY
The Smart Display is a cart-mounted device that is fixed to the center of the handle of a shopping cart. It is based on the following components:
ITEMS DESCRIPTION
------------------------------ ------------------------------------------------------------------------------
PROCESSOR Intel PXA255 or better (400MHz Clock speed or Better)
------------------------------ ------------------------------------------------------------------------------
OPERATING SYSTEM Windows CE.NET 4.2 minimum
------------------------------ ------------------------------------------------------------------------------
MEMORY 64MB SDRAM upgradeable to 128MB, 32MB ROM; 32 MB Fixed Storage
------------------------------ ------------------------------------------------------------------------------
DISPLAY 6.4" Color TFT LCD Panel, with low-power backlight
------------------------------ ------------------------------------------------------------------------------
AUDIO SYSTEM AC-97 Codec
------------------------------ ------------------------------------------------------------------------------
IR RECEIVER 38KHz/940nm
------------------------------ ------------------------------------------------------------------------------
KEYBOARD 4 Navigation buttons (up, down, select, back)
------------------------------ ------------------------------------------------------------------------------
BATTERY Internal Lithium-ion button battery for back up
------------------------------ ------------------------------------------------------------------------------
POWER External sealed lead acid
------------------------------ ------------------------------------------------------------------------------
I/O 1 RS232 serial port
------------------------------ ------------------------------------------------------------------------------
PHYSICAL SPEC TBD
------------------------------ ------------------------------------------------------------------------------
ENVIRONMENTAL Operating Temperature 0 o to
110o F Storage Temperature -4
o to 130 o F Operating
Humidity 20%~95%
------------------------------ ------------------------------------------------------------------------------
APPROBATION FCC; cUL, UL, CSA
------------------------------ ------------------------------------------------------------------------------
RF 802.11b with WEP, 802.1x; WPA (TKIP)
------------------------------ ------------------------------------------------------------------------------
SCANNER 2d Scanner Module - CCD
------------------------------ ------------------------------------------------------------------------------
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The Smart Display is the key interface to the customer and is permanently mounted to the shopping cart.
2. MOUNTING HARDWARE AND BATTERY CASE
The mounting hardware includes a lockable battery box with mounting hardware, power cable connecting the battery to the smart display, cradle and bracket system to mount the iKart to the handle of the shopping cart. This module includes all hardware to physically connect the Smart display and battery to the shopping cart. The battery case is mounted to the bottom of the main basket and is connected to the smart display via a stainless steel flexible cable (much like a pay phone cable). The battery box has a locked door and houses the battery cartridge containing a sealed lead acid battery(s) (capacity to be determined) with a carry handle allowing batteries to be swapped easily.
3. BATTERY CHARGING STATION
The battery charging station is a smart charging solution for charging sealed lead acid batteries. Each store will be capable of simultaneously charging batteries to power at least 100 iKarts. The charging station is lockable and has indicator LEDs for each charging position including: Green - Fully Charged and Red--Charging. The cabinet housing of the charging station also includes a large capacity charger adapter with a standard 110 V power cord and is mounted on wheels so that the retailer can position and re-position the unit where necessary in the store.
4. INFRA-RED TRANSMITTERS
The Infrared transmitters are 38KHz/940nm devices that are housed in an enclosure that includes a clamping device that can be easily connected to all major brands of in store shelves. These are powered by a PIC chip and include two (2) D Cell Alkaline Batteries to provide power to them. There is also an I/F for store associates to use a TV remote device to change the address of the transmitter. These devices trigger location based marketing, and informational messages to shoppers, and facilitate cart tracking. The transmitter housing also incorporates a blinking LED and shelf sign.
5. RESPONSIBLE WITH SELLER FOR DEVELOPING POS INTERFACE.
6. RESPONSIBLE FOR OTHER HARDWARE FEATURES, INCLUDING BUT NOT LIMITED TO FIRMWARE/DRIVERS FOR HARDWARE OPERATION, DEEMED NECESSARY BY CUSTOMER REQUIREMENTS OR MARKET CONDITIONS TO SUCCESSFULLY IMPLEMENT THE IKART PRODUCT.
7. RESPONSIBLE FOR ALL UPDATES TO HARDWARE, FIRMWARE, AND DRIVERS FOR ALL IKART HARDWARE.
SELLER RESPONSIBILITY
SOFTWARE MODULES: Seller will bear the cost and responsibility of developing, or procuring and integrating, the following software modules as part of the Software.
1. STORE MANAGEMENT INTEGRATION PROGRAM
Store Management--Centralize all data respective to a store Ad Manager
-- Distributes advertisements Store Content Controller--View store
content and configurations Reports--Reporting tool to generate store
status reports
Accounting--Track CPG marketing activity and generate billing
information based on store reports Electronic Coupons--Support
electronic coupon distribution Cart Tracking--Track carts in the store
by the unique identification code on each trigger and each display unit
2. STORE CONTROLLER INTERFACE PROGRAM (SCIP)
Connect to Internet--Manage In Store Processor information required to connect to Internet Receive Updates--Connects to the HQ Server and compares internal file versions to HQ file versions and creates update list Apply Updates--Schedules file updates on smart displays via wireless access Store Directory Changes--Allows store associates to change directory information in the event of errors
3. HEADQUARTERS SERVER (KSERV)
Interfaceapplication between the Store Controller I/F Program and the Marketing Database. Handles requests from SCIP for data. Internet Socket Server--Handles requests from SCIP for information from HQ server Generate Database Queries--Queries HQ Server for answers to SCIP requests FTP--File Transfer Server for SCIP
4. IKART CART COMMUNICATIONS (KARTKOM)
Interface Program between SCIP and Smart Displays Reads files versions
on Smart Display and updates as necessary Updates and Processes
requests from Smart Displays
Transmits RF header "Heart Beat" so that displays that just become
active can receive latest updates from controller Collects system
status from iKart (Battery Status, Inactive Status, Last Operational
Status)
5. CART APPLICATION PROGRAM
Controls all user interface functions (button presses) Controls advertisement display (animation and sounds) Monitors motion and resets the awake timer Captures trigger and system data for SCIP
6. PERSONAL SHOPPER MODULE SOFTWARE INTERFACE TO CART APPLICATION PROGRAM
7. RESPONSIBLE FOR UPGRADING SOFTWARE IDENTIFIED IN 1 THRU 6 OF SELLER'S RESPONSIBILITIES
8. RESPONSIBLE WITH BUYER FOR DEVELOPING POS INTERFACE
9. OTHER SOFTWARE FEATURES DEEMED NECESSARY BY CUSTOMER REQUIREMENTS OR MARKET CONDITIONS TO SUCCESSFULLY IMPLEMENT THE IKART .
EXHIBIT 31.1
SECTION 302 CERTIFICATIONS
I, William J. Dupre, certify that:
1. I have reviewed this quarterly report on form 10-QSB of Klever Marketing, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-15(e) and 15d-15(e) for the small business issuer and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and
c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2004 /s/ William J. Dupre William J. Dupre President and COO (Principal Executive Officer) |
EXHIBIT 31.2
SECTION 302 CERTIFICATIONS
I, D. Paul Smith, certify that:
1. I have reviewed this quarterly report on form 10-QSB of Klever Marketing, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report.
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange act rules 13a-15(e) and 15d-15(e) for the small business issuer and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report on such evaluation; and
c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2004 /s/ D. Paul Smith -------------------------------------------------- D. Paul Smith C.F.O., Secretary, Treasurer, Chairman, Executive Vice-President (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Klever Marketing, Inc. on Form 10-QSB for the period ending September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William J. Dupre, President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ William J. Dupre William J. Dupre President and COO (Principal Executive Officer) November 19, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Klever Marketing, Inc. on
Form 10-QSB for the period ending September 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, D. Paul
Smith, C.F.O./Treasurer/Secretary of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ D. Paul Smith -------------------------------------------------- D. Paul Smith C.F.O., Secretary, Treasurer, Chairman, Executive Vice-President (Principal Financial Officer) November 19, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.