DarkPulse, Inc. - FORM 10-K

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - DarkPulse, Inc.	Financial_Report.xls
EX-31.1 - SECTION - DarkPulse, Inc.	klever_10k-ex3101.htm
EX-32.1 - CERTIFICATION - DarkPulse, Inc.	klever_10k-ex3201.htm
EX-32.2 - CERTIFICATION - DarkPulse, Inc.	klever_10k-ex3202.htm
EX-31.2 - SECTION - DarkPulse, Inc.	klever_10k-ex3102.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2014

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-18834

Klever Marketing, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware		36-3688583
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1100 East 6600 South Suite 305 Salt Lake City, UT		84121
(Address of Principal Executive Offices)		(Zip Code)

(801) 847 6444

(Registrant’s Telephone Number, including Area Code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definition of “accelerated filer” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes o No x

The aggregate market value of the registrant’s common stock owned by non-affiliates, based on the closing price of $0.04 as quoted on the OTCBB, on June 30, 2014, is $1,329,627. For purposes of this computation all officers, directors and 5% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the registrant. The number of common shares held by non-affiliates of the Registrant totaled 33,240,676.

As of March 21, 2015, there were 54,463,562 common shares issued and outstanding.

Transitional Small Business Disclosure Format (Check one): Yes o No x

Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

TABLE OF CONTENTS

Item Number and Caption		Page

PART I

Item 1.	Description of the Business	2

Item 1A.	Risk Factors and Uncertainties	3

Item 2.	Description of Property	4

Item 3.	Legal Proceedings	4

Item 4.	Mine Safety Disclosures	4

PART II

Item 5.	Market for Common Equity and Related Stockholder Matters	5

Item 6	Selected Financial Data	6

Item 7.	Management’s Discussion and Analysis	6

Item 8.	Financial Statements	7

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8

Item 9A.	Controls and Procedures	8

PART III

Item 10.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	10

Item 11.	Executive Compensation	11

Item 12.	Security Ownership of Certain Beneficial Owners and Management	12

Item 13.	Certain Relationships and Related Transactions	12

Item 14.	Principal Accountant Fees & Services	13

Item 15.	Exhibits and Reports on Form 10-K	13

Signatures		15

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K for Klever Marketing, Inc. (“Klever” or the “Company”) and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned development of the Company’s technology, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Such forward-looking statements include, among others, those statements including the words “expects”, “anticipates”, “intends”, “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section “Risk Factors.” We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this report.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These factors include among others:

Our ability to raise sufficient capital to fund the development of our technology and continue to fund operating expenses;

Our ability to get our technology to work in accordance with our technical specifications;

Our ability to attract customers to our products once they are developed;

Our ability to attract and retain the necessary personnel with the expertise needed to ensure that we can operate the Company effectively;

Actions or inactions of third-party contractors and vendors;

Our ability to successfully patent and protect our intellectual property;

The potential that our competitors will get their products to market ahead of us;

General economic conditions.

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Description of the Business”, “Risk Factors and Uncertainties”, and “Management’s Discussion and Analysis”. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

We qualify all the forward-looking statements contained in this annual report on Form 10-K by the foregoing cautionary statements.

PART I

ITEM 1. DESCRIPTION OF THE BUSINESS

General

Klever Marketing, Inc. is engaged in obtaining capital in order to file and acquire patents, to seek out and to investigate, develop, manufacture and market electronic in-store advertising, directory and coupon services which have potential for profit. The Company successfully conducted two in-store demonstrations of its shopping cart technology – the latest being in 2009 with the release of the Giving Cart and its Retailer Chime-Time Awards Programs. Subsequently, in 2010, the Company shifted its business model to mobile technology and has aggressively developed new applications using this technology.

Product Base

Following a decade of development of its shopping cart-based electronic advertising technology, which was successful in demonstrating the advantages of electronic distribution and redemption of electronic coupons and promotions, the Company realized that mobile technology had advanced to the level where Klever’s product base could be applied and considerably expanded into an entirely new product line. Accordingly, in 2010, the Company made a dramatic shift into mobile technology. Since that time the Company has made substantial progress on its mobile application development and implementation. The software programming of the consumer KleverShop 1.0 application has been completed and successfully tested in our- demonstration store. The retailer and supplier KleverDash application has completed its database and backend programming, complete with a revised graphical user interface, and successfully tested in our demonstration store.

2014 Mobile Application Development and Implementation

In 2014 the Company’s business efforts concentrated in two areas: modifying the software to meet retailer’s refined business requirements and expanding our contacts within the retail grocery industry. We completed our Wholesome Choice Market demonstration test in March 2014, and the feedback led us to conclude that to best serve our clients we needed to 1) add a loyalty program with points and 2) store branding and license our KleverShop software, allowing markets to brand the application as their own. Following further discussions with our investors, we also decided that now was the time to upgrade our software to an entirely new development platform that would be much more efficient and effective in addressing the desired enhancements.

Accordingly, we have been very busy and are excited about the software tools in our new upgrade, designated KleverShop 2.0. Our new development platform is far more efficient. Our couponing options have been greatly expanded. Our user interface has built-in flexibility to brand to individual retailer needs. And we have built in our Loyalty Program. Our KleverPoints program gives retailers the opportunity to award points for various shopping functions that lead to greater basket uplift. Points are awarded for checking in, for redeeming coupons and for total basket size.

At the same time we are also upgrading our KleverDash platform. We have envisioned a number of ways to make this tool even more useful to suppliers and retailers, with easier coupon generation, more types of coupons and expanded graphics/analytics.

Our new software platform not only has far better built-in documentation but also allows us to embed hundreds of software tests that greatly reduce the debugging process. On top of that we have purchased a Retalix POS test center to further enable us to eliminate any post-development bugs. And we are seeking certification from Retalix to be an approved 3^rd party services provider.

To expand our marketing efforts, the Company brought on a Sales and Marketing consultant with considerable retailer and supplier experience. We are pursuing two sales fronts: 1) Marketing to retail grocers in Southern California to establish a retailer base with established regional grocers, and 2) Marketing through retail grocery associations who supply support services and tools to a broad range of retail grocers. The latter opportunity appears to be very promising for Klever, and we are optimistic on the outcome. In both cases it is important to remember that retail grocers have not been known for their rapid adoption of new technologies. Klever is well aware of this tendency and is committed to persistence and “aggressive patience” in its marketing effort.

As a further step to prepare for revenue operations, in December Klever formed a Digital Coupon Redemption Division to focus on retail store application and operations using our Klever digital products (KleverShop®, KleverDash®, KleverBank®, KleverPoints – all in the KleverKloud®). This division is preparing for installation in retail stores, daily operations, accounting of digital redemptions and clearing, and technical support to these retail customers. Agreements and other supporting documentation are also being developed.

Anticipated Business Development in the Next 12 Months

In 2015, the Company’s goals are clear. Wrap up the programming and testing of KleverShop 2.0 and release it into the marketplace for revenue operations. Build the client base from bottom up by securing innovative grocers who want to take the lead in digital coupon marketing. And market our product top down from associations who provide services to multiple grocers. From there we need to be prepared for rapid growth.

ITEM 1A. RISK FACTORS AND UNCERTAINTIES

Readers should carefully consider the risks and uncertainties described below before deciding whether to invest in shares of our common stock.

Our failure to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the trading price of our common stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business.

As an enterprise engaged in the development of new technology, our business is inherently risky. Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

We need to continue as a going concern if our business is to succeed.

Our independent accountant’s report to our audited financial statements for the year ended December 31, 2014, indicates that there are a number of factors that raise substantial risks about our ability to continue as a going concern. Such factors identified in the report are our accumulated deficit since inception, our failure to attain profitable operations and our dependence upon obtaining adequate additional financing to pay our liabilities. If we are not able to continue as a going concern, investors could lose their investments.

Because of the unique difficulties and uncertainties inherent in technology development, we face a risk of business failure.

Potential investors should be aware of the difficulties normally encountered by companies developing new technology and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the development of new technology with limited personnel and financial means. These potential problems include, but are not limited to, unanticipated technical problems that extend the time and cost of product development, or unanticipated problems with the operation of our technology or that with which we are licensing that also extend the time and cost of product development.

If we do not obtain additional financing or sufficient revenues, our business will fail.

Our current operating funds are less than necessary to complete the full development and marketing of our mobile products, and we will need to obtain additional financing in order to complete our business plan. We currently have minimal operations and we are not currently generating revenue or net income.

Our business plan calls for significant expenses in connection with developing our mobile phone technology and paying our current obligations. The Company currently does not have sufficient funds to pay its obligations. As a result, the Company will require additional financing to execute its business plan through raising additional capital and/or beginning to generate revenue.

We do not currently have any firm arrangements for financing, and we can provide no assurance to investors that we will be able to find such additional financing if required. Obtaining additional financing is subject to a number of factors, including investor acceptance of our technology and current financial condition as well as general market conditions. These factors affect the timing, amount, terms or conditions of additional financing unavailable to us. And if additional financing is not arranged, the company faces the risk of going out of business. The Company’s management is currently engaged in actively pursuing multiple financing options in order to obtain the capital necessary to execute the Company’s business plan.

The most likely source of future funds presently available to us is through the additional sale of private equity capital or through a convertible debt instrument. Any sale of share capital will most likely result in dilution to existing shareholders.

There is no history upon which to base any assumption as to the likelihood we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

Because the SEC imposes additional sales practice requirements on brokers who deal in our shares that are penny stocks, some brokers may be unwilling to trade them. This means that investors may have difficulty reselling their shares and may cause the price of the shares to decline.

Our shares qualify as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell our securities in this offering or in the aftermarket. In particular, prior to selling a penny stock, broker/dealers must give the prospective customer a risk disclosure document that: contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; contains a description of the broker/dealers’ duties to the customer and of the rights and remedies available to the customer with respect to violations of such duties or other requirements of Federal securities laws; contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask prices; contains the toll free telephone number for inquiries on disciplinary actions established pursuant to section 15(A)(i); defines significant terms used in the disclosure document or in the conduct of trading in penny stocks; and contains such other information, and is in such form (including language, type size, and format), as the SEC requires by rule or regulation. Further, for sales of our securities, the broker/dealer must make a special suitability determination and receive from you a written agreement before making a sale to you. Because of the imposition of the foregoing additional sales practices, it is possible that brokers will not want to make a market in our shares. This could prevent reselling of shares and may cause the price of the shares to decline.

Technology companies face intense competition. We will have to compete with our competitors for financing and for qualified managerial and technical employees.

The technology industry is intensely competitive in all of its phases. Competition includes large established technology companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to become a leader in our industry and attract and retain qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees, our technology development and commercialization efforts may be slowed down or suspended.

We do not expect to declare or pay any dividends.

We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

Volatility of Stock Price.

Our common shares are currently publicly traded on the OTC BB exchange under the symbol KLMK. In the future, the trading price of our common shares may be subject to wide fluctuations. Trading prices of the common shares may fluctuate in response to a number of factors, many of which will be beyond our control. In addition, the stock market in general, and the market for software technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. Market and industry factors may adversely affect the market price of the common shares, regardless of our operating performance.

ITEM 2. DESCRIPTION OF PROPERTY

None

ITEM 3. LEGAL PROCEEDINGS

The Company has no current legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The stock is traded on the OTC BB exchange under the trading symbol KLMK. The Company has 250 million authorized common shares.

The following table sets forth the high and low bid of the Company’s Common Stock for each quarter within the past two years. The information below was provided from Google’s financial website and reflects the highest and lowest closing prices during each quarter.

2014:	High	Low
First Quarter	$0.08	$0.04
Second Quarter	$0.08	$0.05
Third Quarter	$0.09	$0.03
Fourth Quarter	$0.06	$0.03

2013:	High	Low
First Quarter	$0.08	$0.03
Second Quarter	$0.13	$0.03
Third Quarter	$0.12	$0.06
Fourth Quarter	$0.10	$0.04

The number of shareholders of record of the Company's common stock as of December 31, 2014 was approximately 914.

The Company has not paid any cash dividends to date and does not anticipate paying cash dividends in the foreseeable future. It is the present intention of management to utilize any available funds for the development of the Company's business.

Recent Sales of Unregistered Securities.

On April 14, 2014, the Company issued 500,000 shares of common stock at $0.05 per share to an investor resulting in cash proceeds to the Company of $25,000.

On August 21, 2014, the Company sold 100,000 shares of common stock at $0.06 per share to an investor resulting in cash proceeds to the Company of $6,000.

On October 15, 2014, the Company sold 500,000 shares of common stock at $0.05 per share to an investor resulting in cash proceeds to the Company of $25,000.

On October 20, 2014, the Company sold 250,000 shares of common stock at $0.05 per share to an investor resulting in cash proceeds to the Company of $12,500.

On November 25, 2014, the Company sold 100,000 shares of common stock at $0.05 per share to an investor resulting in cash proceeds to the Company of $5,000.

On December 12, 2014, the Company sold 300,000 shares of common stock at $0.06 per share to an investor resulting in cash proceeds to the Company of $18,000.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the Commission reports regarding initial ownership and changes in ownership. Directors, executive officers, and greater than 10% stockholders are required by the Commission to furnish the Company with copies of all Section 16(a) forms they file.

Beneficial Ownership Compliance Reporting

The Company is aware of the following share and option transactions for the reporting period ending December 31, 2014 for which neither Form 4 nor Form 5 were filed.

Name	Officer or Board Member	Number of Shares	Share Price	Option Price	Total Cost	Date	No. of Years

Mohammad AlSuliman (b)	No	110,000	$0.06		$6,600	3/3/2014
John Pinches (a)	No	500,000	$0.05		$25,000	4/14/2014
Chrispaul Obana (b)	No	37,919	$0.05		$1,896	4/15/2014
Scott Emig (a)	No	100,000	$0.06		$6,000	9/04/2014
Happy Seven Investment Co (a)	No	500,000	$0.05		$25,000	11/12/2014
King Udall (a)	No	250,000	$0.05		$12,500	11/12/2014
Greg Littleton (a)	No	100,000	$0.05		$5,000	12/04/2014
Greg Littleton (a)	No	300,000	$0.06		$18,000	12/12/2014
Yousef Abed (b)	No	100,000	$0.05		$5,000	12/30/2014

(a) Stock issued for cash

(b) Stock issued for service

ITEM 6. SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS

For the year ended December 31, 2014, the Company generated a net loss of $277,987. To date the Company has not had any revenues from operations. Since inception, the Company’s primary source of funding has come through the unregistered sales of restricted common stock, sales proceeds from selling certain non-core intangible assets and net proceeds from settling patent suits.

The Company is dependent on obtaining additional capital to complete its mobile technology deployment and makes no warranty or assurance that it will be successful in any of these endeavors. Further, there is no assurance that the Company can continue to operate without cash flows or revenues. During the past year, the Company has relied exclusively upon interim capital financing for its continuation.

Results of Operations - For the year ended December 31, 2014, the Company generated a net loss of $277,987 as compared to a net income of $521,067 for the year ended December 31, 2013 primarily through debt reducing activities. The loss incurred in 2014 is primarily due to the Company incurring operating expenses of $368,802, which was partially offset by patent infringement litigation settlements of $81,400 and debt forgiveness of $10,609. The income generated in 2013 is primarily from gains on debt forgiveness of $818,708 coupled with net proceeds from patent infringement litigation of $94,485 partially offset by ongoing operating expenses. The Company remains in the product development stage and generated no revenue in 2014 or 2013. During 2013 and 2014, the Company’s expenditures were directed at developing software for its mobile phone applications.

General and administrative expenses for the year ended December 31, 2014 decreased by $79,305 or 21.4% to $291,734 from $371,039 for the year ended December 31, 2013. The primary reason for the overall decrease in general and administrative expenses is due to decreased costs for accounting fees, stock promotion fees and outside services. Accounting fees decreased from $53,599 in 2013 to $35,228 in 2014 primarily due to lower fees for SEC reporting. Stock promotion fees decreased by $36,543 in 2014 as compared to 2013 due to the Company not hiring a third party to promote its stock in 2014 as well as receiving a $10,000 refund in 2014 from a stock promotion that took place in 2013. Outside services decreased by 34,561 in 2014 as compared to 2013 due to lower costs for third party consultants. The decreases were offset by increased costs for legal fees and depreciation and amortization. Legal fees increased by $5,199 and depreciation and amortization increased by $7,128.

During the year ended December 31, 2014, the Company recorded an impairment loss of $65,864 related to certain patents and capitalized software costs where the carrying value exceeded the estimated fair value. The Company did not record an impairment loss for the year ended December 31, 2013.

During the year ended December 31, 2014 research and development costs increased by 281.1% from $2,940 in 2013 to $11,204 in 2014. During 2014, the Company incurred more costs to develop its technology than it did in 2013 primarily due to the Company setting up a demonstration unit that they can use to show perspective customer and investors.

Other income (expense) decreased to $92,009 in 2014 compared to $896,242 in 2013. In 2014, the Company received net proceeds from settlement of patent infringement cases of $81,400 as well as $10,609 of debt forgiveness. During 2013, the Company generated a gain on debt forgiveness of $818,708, $94,485 in net proceeds from patent infringement legal settlements, partially offset by ($16,626) in interest expense and a ($325) loss on disposal of assets.

Income tax expense was $1,194 for the year ended December 31, 2014 and remained consistent with income tax expense for the year ended December 31, 2013 of $1,196. The biggest component of income tax expense in both years is the interest and penalties accrued during both years that are associated with the Company’s uncertain tax positions.

Liquidity and Capital Resources - The Company requires working capital principally to fund its proposed product development and operating expenses for which the Company has relied primarily on short-term borrowings and the issuance of restricted common stock. During the year ended December 31, 2014, the Company was able to sell 1,750,000 shares of restricted common stock for $91,500. During the year ended December 31, 2014, the Company invested $70,881 in capitalized software development, and $10,631 in its patents and trademarks for its intellectual property.

During the year ended December 31, 2014, the Company recorded $10,609 of debt forgiveness income relating to certain obligations where the statute of limitations had expired.

As of December 31, 2014, our cash position was $23,194, compared with $51,654 as of December 31, 2013. We anticipate hiring additional employees and consultants for development and the corresponding operations of the Company, but this hiring is not planned to occur prior to obtaining additional capital. The Company requires working capital principally to complete development, testing and marketing of its new mobile products and to pay for ongoing operating expenses. Management is currently in the process of looking for additional investors. Currently, 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 raise minimal additional working capital that has been required to enable the Company to continue operations. From time to time in the past, required short-term borrowings have been obtained from principal shareholders or other related entities or working capital has been obtained through the issuance of restricted common stock to fund operations in accordance with the Company’s revised business plan.

Cash flows used by operating activities – The Company used $41,948 and $148,023 for operating activities for the years ended December 31, 2014 and 2013, respectively. The decrease in cash flows used in operating activities is primarily due to a non-cash charge of $65,863 for impairment, coupled with increases in accounts payable and accrued liabilities of $111,613, partially offset by a decrease in net income of $799,054 and a decrease in debt forgiveness income of $808,099.

Cash flows used by investing activities – The Company used $81,512 of cash flows in investing activities for the year ended December 31, 2014 compared to $108,428 for the year ended December 31, 2013. During the year ended December 31, 2014, the Company incurred costs of $70,881 for capitalized software development costs, and spent $10,631 to develop related patents and trademarks. For the year ended December 31, 2013, the Company spent $1,809 to purchase computer equipment, $66,760 on software development costs, and $39,859 to obtain related patents and trademarks.

Cash flows generated from financing activities – The Company generated cash flows from financing activities of $95,000 for the year ended December 31, 2014 as compared to $305,050 for the year ended December 31, 2013. During the year ended December 31, 2014, the Company raised $91,500 through the sale of 1,750,000 shares of common stock and received $3,500 in proceeds from a related party loan. During the year ended December 31, 2013, the Company sold 2,775,000 shares of restricted common stock and 550,000 shares of free trading treasury stock for $316,500. In addition, the Company used cash net of borrowings of $11,450 to repay related party loans from its officers.

Factors That May Affect Future Results - Management’s Discussion and Analysis contains information based on management’s beliefs and forward-looking statements that involve a number of risks, uncertainties, and assumptions. There can be no assurance that actual results will not differ materially from the forward-looking statements as a result of various factors, including but not limited to the following:

The Company may not obtain the equity funding or short-term borrowings necessary to market and launch its mobile applications.

The product launch may take longer to implement than planned or may not be successful.

ITEM 8. FINANCIAL STATEMENTS

The financial statements of the Company and supplementary data are included beginning immediately following the signature page to this report. See Item 15 for a list of the financial statements and financial statement schedules included.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosures.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company, and have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15(f) and 15d-15(f), due to certain material weaknesses in our internal control over financial reporting as discussed below.

Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Due to limited resources, Management conducted an evaluation of internal controls based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The results of this evaluation determined that our internal control over financial reporting was ineffective as of December 31, 2014, due to material weaknesses. A material weakness in internal control over financial reporting is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

Management’s assessment identified the following material weaknesses in internal control over financial reporting:

	·	The small size of our Company limits our ability to achieve the desired level of separation of internal controls and financial reporting. We do have a separate CEO and CFO, to review and oversee the financial policies and procedures of the Company, which does achieve a degree of separation. However, until such time as the Company is able to hire a Controller, we do not believe we meet the full requirement for separation.

	·	We do not have a functional audit committee.

	·	We have not achieved the desired level of documentation of our internal controls and procedures. When the Company obtains sufficient funding, this documentation will be strengthened through utilizing a third party consulting firm to assist management with its internal control documentation and further help to limit the possibility of any lapse in controls occurring.

	·	We have not achieved the desired level of corporate governance to ensure that our accounting for all of our contractual and other agreements is in accordance with all of the relevant terms and conditions. Because of our limited capital resources, we sometimes formalize our agreements with certain contractors after the work is performed when additional resources become available to pay for the services.

As a result of the material weaknesses in internal control over financial reporting described above, the Company’s management has concluded that, as of December 31, 2014, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO.

To date, the Company has not been able to add any additional members to its Audit Committee due its limited financial resources. When the Company obtains sufficient funding, Management intends to add additional members to the Audit Committee and charge them with assisting the Company in addressing the material weaknesses noted above. The Company’s lack of current financial resources makes it impossible for the Company to hire the appropriate personnel needed to overcome these weaknesses and ensure that appropriate controls and separation of responsibilities of a larger organization exist. We also will continue to follow the standards for the Public Company Accounting Oversight Board (United States) for internal control over financial reporting to include procedures that:

	·	Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of the Company's assets;

	·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and

	·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

Our management determined that there were no changes made in our internal controls over financial reporting during the year ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Controls and Procedures.

Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company has taken limited steps to meet its Sarbanes-Oxley (SOX) Section 404 compliance requirements and implement procedures to assure financial reports are prepared in accordance with generally accepted accounting principles (GAAP) and therefore fairly represent the results and condition of the Company. We are not materially compliant with the Section 404 requirements due to economic constraints.

PART III

ITEM 10. DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Executive Officers and Directors

The following table sets forth the name, age, and position of each executive officer and director of the Company:

Director's Name	Age	Office	Term Expires
Paul G. Begum	74	Chairman/CEO	Future shareholder meeting

Robert A. Campbell	71	COO and CFO	Future shareholder meeting

Jerry P. Wright	62	Director	Future shareholder meeting

Paul G. Begum, Founder, age 74 returned to the Board of Directors in February, 2007. Paul currently serves as Chairman and CEO. Paul has substantial entrepreneurial experience managing and owning controlling interest in HelpUSolve, LLC which operates a number of divisions with products ranging from filtered breathing masks (EnviroAir), food service industry cup liners, script writing, screen plays and theatrical productions. Paul also brings substantial and diverse fundraising abilities and negotiating skills to the Board.

Robert A. Campbell age 72 retired from Parsons Corporation, a large engineering and program management Company, where he served as senior manager and director of program operations for projects and operations around the world. He has been responsible for the design and implementation of major software developments and installations. He has been responsible for finance and controls on multi-billion programs in the United States, Middle East and Asia. He has broad experience in both managing day-to-day project operations and a portfolio of programs. Mr. Campbell’s last formal level of education was at the Anderson School of Business at the University of California at Los Angeles where he received his M.B.A. degree in finance.

Jerry P. Wright age 62 is the CEO and President of United Potato Growers of America with a broad experience in the food production, packaged goods manufacturing and retail sales industries. Jerry has been very successful in adding sales growth and profitability to Company’s he has worked with. Jerry has demonstrated strong leadership skills along with his successful turnarounds of a number of companies and organizations. His knowledge of packaged goods manufacturing and retail sales operations bring valuable skills to Klever Marketing. Jerry has an MBA from Brigham Young University.

Changes to Executive Officers and Directors

None

Audit Committee

As of December 31, 2014, the Company did not have a functioning Audit and Compliance Committee. The Company’s management is currently reviewing the Company’s SEC filings and relying on outside experts to assist with this process.

Audit Committee Financial Expert

The Company's board of directors needs to have an “audit committee financial expert,” within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The individual needs to be capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert and meet the experience requirements specified in the SEC's definition of “audit committee financial expert.” Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as “audit committee financial experts,” and competition for these individuals is significant.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation

The following table shows the executive compensation paid for the years ended December 31, 2014 and 2013.

(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)
						Securities
Name and Principal Position	Year Ended Dec 31,	Salary	Bonus	Other Annual Compensation	Restricted Stock Award(s)	Underlying Options /SAR’s	LTIP	All Other Compensation

Paul G. Begum Chairman/CEO*	2014	$1,500	$0	$0	$0	$0	$0	$0

	2013	$54,000	$0	$0	$0	$0	$0	$0

Robert Campbell COO	2013	$0	$0	$0	$0	$0	$0	$0

	2012	$0	$0	$0	$0	$0	$0	$0

*Services provided through PSF Inc., a company owned by Mr. Begum.

Aggregate Option/SAR Exercises in the Last Fiscal Year and year End Option/SAR Values

The following table sets forth information respecting all individual grants of options and SARs made during the last completed fiscal year, 2014, to the chief executive officer, chief financial officer, and directors of the Company. As shown, no grants of options took place and no options are outstanding as of December 31, 2014.

Name	Shares Acquired on exercise		Value Realized ($)	Number of Securities Underlying Unexercised Options		Value of Unexercised in-the-money options ($) (a)
				Exercisable	Unexercisable	Exercisable	Unexercisable
Paul G. Begum		0	$0	$0	$0	$0	$0

Robert A. Campbell		0	$0	$0	$0	$0	$0

Jerry P. Wright		0	$0	$0	$0	$0	$0

(a) Executive Compensation and Benefits

The Company provides no health insurance to any full or part-time employees.

The Company has adopted a stock incentive plan for its employees, executive officers, directors, and consultants.

ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

The table below sets forth information as to each person owning of record or was known by the Company to own beneficially shares of stock that have more than 5% of the 77,770,032 (53,691,043 common plus 24,078,989 preferred) votes as of December 31, 2014. The table includes preferred stock that is convertible into common stock as well as options to acquire stock of the Company that are currently exercisable or will be within the next 60 days, and information as to the ownership of the Company's Stock by each of its directors and executive officers and by the directors and executive officers as a group. Except as otherwise indicated, all shares are owned directly, and the persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them.

Name and Address	Nature of	Shares		Percent of
of Beneficial Owners	Ownership	Owned		Common

Directors, Executive Officers & >5% Stock Owners

Paul G. Begum (through PSF Inc. and Tree of Stars, Inc.)	Direct		10,642,075
30251 Golden Lantern	Preferred		24,078,989
Suite E, PMB 411	Options/Warrants		–
Laguna Niguel, CA 92677	Total		34,721,064		44.65%

Robert A. Campbell	Direct		4,669,000
991 Rippey Sreet	Preferred		–
El Cajon, CA 92020	Options/Warrants		–
	Total		4,669,000		6.00%

Terry Warner	Direct		3,789,292
(through Mahalo, LLC and Zedeka, LLC)	Preferred		–
	Options/Warrants		–
	Total		3,789,292		4.87%

Total			43,179,356		55.52%

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Director and Officer Loans to the Company

Loans were made to the Company during 2013 by two officers in the following amounts:

From	Principal Balance as of 12/31/2013		Borrowings		Repayments		Principal Balance as of 12/31/2014

Paul G. Begum (through PSF Inc.)	$	–	$	–	$	–	$	–

Paul G. Begum (through Tree of Stars, Inc)		-		-		-		–

Robert A. Campbell		-		3,500		-		3,500

Total	$	-	$	3,500	$	-	$	3,500

ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES

Audit Fees. Consists of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission, and related other services that are normally provided by HJ & Associates in connection with statutory and regulatory filings or engagements.

The following is a summary of the fees incurred by the Company to HJ & Associates, LLC for professional services rendered for the years ended December 31, 2014 and 2013, respectively.

Service	2014		2013
Audit Fees	$	21,200	$	17,100
Audit-Related Fees		–		–
Total	$	21,200	$	17,100

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions.

The following is a summary of the fees paid by the Company to Robison, Hill & Company for professional services rendered for the years ended December 31, 2014 and 2013, respectively.

Service	2014		2013
Tax Fees	$	1,600	$	1,500

	$	1,600	$	1,500

Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Board of Directors may pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically evaluate the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

The Board of Directors pre-approved 100% of the Company’s 2014 and 2013 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2003, the effective date of the Securities and Exchange Commission’s final pre-approval rules.

ITEM 15. EXHIBITS, AND REPORTS ON FORM 10-K

(a) The following documents are filed as part of this report.

1. Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2

Balance Sheets	F-3

Statements of Operations	F-4

Statements of Stockholders’ Equity (Deficit)	F-5

Statements of Cash Flows	F-6

Notes to the Financial Statements	F-8

2. Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

3. Exhibits

The following exhibits are included as part of this report:

Exhibit Number	Title of Document

3.01	Restated Certificate of Incorporation of Klever Marketing, Inc. a Delaware corporation (1)

3.02	Certificate of Designation of Rights, Privileges and Preferences: Rights of A Class Voting Preferred Stock, Series 1, of Klever Marketing, Inc., dated February 7, 2000 (2)

3.03	Bylaws, as amended (2)

4.01	Amended Certificate of Designation of Rights, Privileges and Preferences: Rights of A Class of Voting Preferred Stock, Series 1, of Klever Marketing, Inc., Dated February 7, 2000 (3)

4.02	Certificate of Designation of Rights, Privileges and Preferences of Class B Voting Preferred Stock, of Klever Marketing, Inc., dated September 24, 2000 (3)

4.03	Certificate of Designation of Rights, Privileges and Preferences of Class C Voting Preferred Stock, of Klever Marketing, Inc., dated January 2, 2001 (3)

4.04	Certificate of Designation of Rights, Privileges and Preferences of Class D Voting Preferred Stock, of Klever Marketing, Inc., dated June 14, 2002 (5)

4.05	Amendment to the Certificates of Designation of Rights, Privileges and Preferences of Class A, B, and C Voting Preferred Stock, of Klever Marketing, Inc., dated June 12, 2002 (5)

10.01	Separation Agreement between Paul G. Begum and the Registrant, dated January 8, 2001 (2)

10.02	Stock Incentive Plan, effective June 1, 1998 (2)

10.03	Amended and Restated Promissory Note (Secured) of the Registrant payable to Presidio Investments, LLC, dated June 27, 2000, with Financing Statement and Exhibit “A” (2)

10.04	Intercreditor Agreement between Seabury Investors III, Limited Partnership, The Olson Foundation, Presidio Investments, LLC, and the Registrant dated August 27, 2001 (4)

10.05	Asset purchase agreement dated August 27, 2004 (6)

10.06	Software Development Works Agreement between Klever Marketing, Inc. and Qualzoom Inc. dated August 15, 2010 (7)

10.07	Software Development Agreement between Klever Marketing, Inc. and Briabe Media Inc. September 22, 2010 (7)

23.1	Consent of Independent Registered Public Accounting Firm

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.

101.INS	XBRL Instance Document

101.SCH	XBRL Schema Document

101.CAL	XBRL Calculation Linkbase Document

101.DEF	XBRL Definition Linkbase Document

101.LAB	XBRL Label Linkbase Document

101.PRE	XBRL Presentation Linkbase Document

__________________________

(1) Incorporated herein by reference from Registrant’s Form 10KSB, dated June 20, 1997.

(2) Incorporated herein by reference from Registrant’s Form 10KSB, dated March 29, 2001

(3) Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15, 2001.

(4) Incorporated herein by reference from Registrant’s Form 10QSB, dated May 15, 2002.

(5) Incorporated herein by reference from Registrant’s Form 10QSB, dated August 19, 2002.

(6) Incorporated herein by reference from Registrant’s Form 10QSB, dated November 19, 2004.

(7) Incorporated herein by reference from Registrant’s Form 8-K, dated November 19, 2010.

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KLEVER MARKETING, INC.

Dated: March 30, 2015	By:	/s/ Paul G. Begum
		Paul G. Begum
		Chairman and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 30th day of March 2014.

Signature		Title

/s/ Paul G. Begum		Chairman and CEO
Paul G. Begum

/s/ Robert A. Campbell		COO and CFO
Robert A. Campbell

/s/ Jerry P. Wright		Director
Jerry P. Wright

KLEVER MARKETING, INC.

Index to Financial Statements

As of December 31, 2014 and 2013

and for the Years Ended December 31, 2014 and 2013

Report of Independent Registered Public Accounting Firm	F-2

Balance Sheets	F-3

Statements of Operations	F-4

Statements of Stockholders’ Equity (Deficit)	F-5

Statements of Cash Flows	F-6

Notes to the Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Klever Marketing, Inc.

Salt Lake City, Utah

We have audited the accompanying balance sheets of Klever Marketing, Inc. as of December 31, 2014 and 2013, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Klever Marketing, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 3 to the financial statements, the Company does not generate significant revenue and has negative cash flow from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result in the outcome of this uncertainty.

/s/ HJ & Associates, LLC

HJ & Associates, LLC

Salt Lake City, Utah

March 30, 2015

F-2

KLEVER MARKETING, INC.

Balance Sheets

	December 31,			December 31,
	2014			2013
ASSETS
CURRENT ASSETS
Cash	$	23,194		$	51,654

Total Current Assets		23,194			51,654

FIXED ASSETS
Capitalized software development and licenses		451,706			422,330
Office Equipment		3,350			3,350
Less accumulated depreciation		(2,522	)		(915	)

Total Fixed Assets		452,534			424,765

OTHER ASSETS
Intangibles, net		64,699			86,898

Total Other Assets		64,699			86,898

TOTAL ASSETS	$	540,427		$	563,317

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable	$	315,180		$	304,669
Accrued liabilities		201,814			65,724
Preferred stock dividends		30,063			–
Related party notes payable		3,500			–

Total Current Liabilities		550,557			370,393

Total Liabilities		550,557			370,393

STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock - Class A ( par value $0.01; 150,000 shares authorized;132,582 and 124,531 issued and outstanding at December 31, 2014 and December 31, 2013, respectively); aggregate liquidation preference of $3,447,132.		1,326			1,245
Convertible preferred stock - Class B ( par value $0.01; 125,000 shares authorized;00,486 and 94,383 issued and outstanding at December 31, 2014 and December 31, 2013 respectively); aggregate liquidation preference of $1,708,262.		1,005			944
Convertible preferred stock - Class C ( par value $0.01; 200,000 shares authorized;176,685 and 165,955 issued and outstanding at December 31, 2014 and December 31, 2013 respectively); aggregate liquidation preference of $1,166,121.		1,767			1,660
Common stock (par value $0.01), 250,000,000 shares authorized,53,691,043 and 51,693,124 shares issued and outstanding, at December 31, 2014 and December 31, 2013, respectively.		536,910			516,931
Treasury stock, 100,000 shares at December 31, 2014 and December 31, 2013.		(1,000	)		(1,000	)
Paid in capital in excess of par value		17,935,076			17,880,371
Retained deficit		(18,485,214	)		(18,207,227	)

Total Stockholders' Equity (Deficit)		(10,130	)		192,924

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	540,427		$	563,317

See accompanying notes to financial statements.

F-3

KLEVER MARKETING, INC.

Statements of Operations

	For the Year Ended
	December 31,
	2014			2013
OPERATING EXPENSES
General and administrative	$	291,734		$	371,039
Impairment loss		65,864			–
Research and development		11,204			2,940
Total Operating Expenses		368,802			373,979

OTHER INCOME (EXPENSE)
Litigation settlements		81,400			94,485
Forgiveness of debt		10,609			818,708
Interest expense		–			(16,626	)
Loss on sale of assets		–			(325	)
Total Other Income (Expense)		92,009			896,242

NET INCOME (LOSS) BEFORE INCOME TAXES		(276,793	)		522,263
INCOME TAXES		(1,194	)		(1,196	)
NET INCOME (LOSS)	$	(277,987	)	$	521,067
BASIC INCOME (LOSS) PER COMMON SHARE	$	(0.01	)	$	0.01
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE	$	(0.01	)	$	0.01
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - BASIC		52,330,759			49,757,302
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - FULLY DILUTED		52,330,759			72,127,734

See accompanying notes to financial statements.

F-4

KLEVER MARKETING, INC.

Statements of Stockholders' Equity (Deficit)

For the Years Ended December 31, 2014 and 2013

																		Total
												Capital in						Stockholders’
	Preferred Stock				Common Stock				Treasury			Excess of			Retained			Equity
	Shares		Amount		Shares		Amount		Stock			Par Value			Deficit			(Deficit)

Balance, December 31, 2012		346,910	$	3,469		46,626,377	$	466,264	$	(1,000	)	$	16,963,780		$	(18,728,294	)	$	(1,295,781	)

Common Stock issued for accounts payable at $0.08 per share		–		–		66,747		667		–			4,672			–			5,339

Issuance of common stock to settle debt obligations and for cash ( Note 5)		–		–		1,200,000		12,000		–			48,500			–			60,500

Common Stock issued for cash at $0.05 per share		–		–		150,000		1,500		–			6,000			–			7,500

Common Stock issued for cash at $0.08 per share		–		–		1,125,000		11,250		–			78,750			–			90,000

Common Stock issued for cash at $0.10 per share		–		–		400,000		4,000		–			36,000			–			40,000

Common Stock issued for cash at $0.12 per share		–		–		1,100,000		11,000		–			121,000			–			132,000

Common Stock issued for services at $0.05 per share		–		–		125,000		1,250		–			5,000			–			6,250

Common Stock issued for services at $0.07 per share		–		–		900,000		9,000		–			54,000			–			63,000

Accrued compensation forgiven by officers		–		–		–		–		–			404,250			–			404,250

Services contributed by officer		–		–		–		–		–			81,000			–			81,000

Preferred stock issued as dividends		37,959		380		–		–		–			137,347			–			137,727

Accrual for preferred stock dividend		–		–		–		–		–			(59,928	)		–			(59,928	)

Net income		–		–		–		–		–			–			521,067			521,067

Balance, December 31, 2013		384,869	$	3,849		51,693,124	$	516,931	$	(1,000	)	$	17,880,371		$	(18,207,227	)	$	192,924

Common Stock issued for cash at $0.05 per share		–		–		1,350,000		13,500		–			54,000			–			67,500

Common Stock issued for cash at $0.06 per share		–		–		400,000		4,000		–			20,000			–			24,000

Common Stock issued for capitalized software development at $0.05 per share		–		–		137,919		1,379		–			5,517			–			6,896

Common Stock issued for capitalized software development at $0.06 per share		–		–		110,000		1,100		–			5,500			–			6,600

Preferred stock issued as dividends		24,884		249		–		–		–			68,059			–			68,308

Accrual for preferred stock dividend		–		–		–		–		–			(98,371	)		–			(98,371	)

Net loss		–		–		–		–		–			–			(277,987	)		(277,987	)

Balance, December 31, 2014		409,753	$	4,098		53,691,043	$	536,910	$	(1,000	)	$	17,935,076		$	(18,485,214	)	$	(10,130	)

See accompanying notes to financial statements.

F-5

KLEVER MARKETING, INC.

Statements of Cash Flows

	For the Year Ended
	December 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(277,987	)	$	521,067
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Stock issued for general and administrative		–			6,250
Loss on sale/disposal of assets		–			325
Impairment		65,864			–
Depreciation and amortization		23,574			16,446
Debt forgiveness		(10,609	)		(818,708	)
Services contributed by officers		–			81,000
Changes in operating assets and liabilities:
Increase in accounts payable		21,120			33,375
Increase in accrued liabilities		136,090			12,222
Net Cash Used by Operating Activities		(41,948	)		(148,023	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment		–			(1,809	)
Capitalized software development costs		(70,881	)		(66,760	)
Intellectual property development costs		(10,631	)		(39,859	)
Net Cash Used by Investing Activities		(81,512	)		(108,428	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital stock issued		91,500			316,500
Proceeds from related party loans		3,500			13,450
Repayments on related party loans		–			(24,900	)
Net Cash Provided by Financing Activities		95,000			305,050

NET INCREASE (DECREASE) IN CASH		(28,460	)		48,599
CASH AT BEGINNING OF PERIOD		51,654			3,055
CASH AT END OF PERIOD	$	23,194		$	51,654

SUPPLEMENTAL DISCLOSURES
Cash Paid For:
Interest	$	–		$	–
Income taxes	$	104		$	100

See accompanying notes to financial statements.

F-6

KLEVER MARKETING, INC.

Statements of Cash Flows (Continued)

	For the Year Ended
	December 31,
	2014		2013
Non-Cash Transactions for Investing and Financing Activities:
Common stock issued to pay accounts payable	$	–	$	11,339
Accounts payable recorded for capitalized software development costs	$	–	$	1,227
Common stock issued for capitalized software development	$	13,496	$	63,000
Common stock issued to pay accrued liabilities	$	–	$	7,500
Accrued compensation forgiven by officers	$	–	$	404,250
Issuance of common stock to settle debt obligations	$	–	$	30,000
Accrual for preferred stock dividends payable with preferred shares	$	98,371	$	59,928
Preferred stock issued to pay dividends	$	68,308	$	137,726

See accompanying notes to financial statements.

F-7

KLEVER MARKETING, INC.

Notes to the Financial Statements

NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION

Klever Marketing, Inc. (the “Company”) was created to develop, market and distribute an electronic shopping cart device for in-store advertising, promotion and media content and retail shopper services and has not commenced its planned principal operations. The Company’s activities since inception have consisted principally of developing various applications of its electronic shopping cart concept including its mobile application for smart phones which the Company is currently testing in retail supermarkets, obtaining patents and trademarks related to its technology, and raising capital. The Company’s activities are subject to significant risks and uncertainties including failing to secure additional funding needed to finalize development of the Company’s technology and to commercialize its product in a profitable manner.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements are as follows:

Accounting Method

The Company’s financial statements are prepared in accordance with US GAAP and reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of the financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company did not have any cash equivalents as of and for the years ended December 31, 2014 and 2013.

Valuation of Long-Lived Assets

Long-lived assets such as property and equipment, software, and intangible assets with definite useful lives are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable or in the period in which the held for sale criteria are met. For assets held and used, this analysis consists of comparing the asset’s carrying value to the expected future cash flows to be generated from the asset on an undiscounted basis. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. Long-lived assets are reviewed for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. The Company recorded an impairment loss of $65,864 for the year ended December 31, 2014 related to certain costs for capitalized software and patents that management for which management believes the fair value are zero. The Company did record an impairment loss for the year ended December 31, 2013.

Fixed Assets

Fixed assets consist of property and equipment and capitalized software costs and computer equipment as of December 31, 2014 and 2013.

Property and Equipment

Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows:

Computer equipment	3 years
Office furniture and fixtures	5-7 years

F-8

KLEVER MARKETING, INC.

Notes to the Financial Statements

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. Depreciation expense was $1,608 and $815 for the years ended December 31, 2014 and 2013.

Capitalized Software Development

The Company capitalizes software development costs incurred from the time technological feasibility has been obtained until the product is generally released to customers. Amortization of capitalized software begins when the products are available to customers and is done using the straight-line method over the remaining estimated economic life of the product which the Company expects to occur in FYE 2015. The Company achieved technological feasibility with regard to its mobile phone technology during the fourth quarter of 2010. As of December 31, 2014 and 2013, the Company had capitalized software development costs of $451,706 and $422,330, respectively. No amortization was recorded for the years ended December 31, 2014 and 2013.

Revenue Recognition

The Company currently has no revenues from its operations.

Concentration of Credit Risk

The Company has no significant concentrations of credit risk.

Income (Loss) Per Common Share

The computations of basic and fully diluted income (loss) per share of common stock are based on the weighted average number of common shares outstanding during the period of the financial statements, plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding during the period, or the exercise of convertible preferred stock. For the period ended December 31, 2014, common stock equivalents related to the conversion of preferred rights have been included in calculation of diluted earnings per share as shown in the table below. Common stock equivalents have not been included in the computations for the period ended December 31, 2014 because they are anti-dilutive.

F-9

KLEVER MARKETING, INC.

Notes to the Financial Statements

Following is a reconciliation of the income (loss) per share for the years ended December 31, 2014 and 2013, respectively:

	Year Ending December 31,
	2014			2013
Numerator:
Net income (loss)	$	(277,987	)	$	521,067

Denominator:
Weighted-average common shares outstanding
Basic		52,330,759			49,757,302
Conversion of preferred rights		–			22,370,432
Diluted		52,330,759			72,127,734

Income (loss) per share
Basic
Net income (loss)	$	(0.01	)	$	0.01

Diluted
Net income (loss)	$	(0.01	)	$	0.01

Intangibles

Intangible assets, consisting of patents and trademarks, are amortized on a straight-line basis over 5 years from the date the patent or trademark is issued. Intangible assets with indefinite lives are tested for impairment on an annual basis or when the facts and circumstances suggest that the carrying amount of the assets may not be recovered. At December 31, 2014, intangible assets have a cost of $96,151, accumulated amortization of $31,452, and had a net book value of $64,699. As of December 31, 2013, intangible assets had a cost of $105,273, accumulated amortization of $18,375 and had a net book value of $86,898. Amortization expense of the Company’s existing intangible assets over the remaining life of the Company’s intangible assets will be $19,232 for the years 2015 to 2016, $17,141 for 2017, $7,439 for 2018, and $1,105 for 2019.

Income Taxes

The Company accounts for income taxes pursuant to ASC 740, Income Taxes (“ASC 740”). Under this accounting standard, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Given the Company’s history of losses, the Company maintains a full valuation allowance with respect to any deferred tax assets.

ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the uncertain tax position to determine the amount to recognize in the financial statements. Our uncertain tax positions relate to certain state tax issues for which we have recorded an estimated current liability for in the accompanying financial statements at December 31, 2014 and December 31, 2013. There has been no significant change in the unrecognized tax benefit through December 31, 2014.

The Company did not have any uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2014 and 2013, the Company had $7,513 and $6,423 of accrued interest and penalties related to uncertain tax positions.

Research and Development

The Company continues to develop additional technology which facilitates the use of in-store advertising and coupon services through various technologies. As time and technology have progressed, the system being developed by the Company comprises mobile and other state of the art technology that facilitates retailers and package good companies providing "product specific" point-of-purchase advertising to its customers using proprietary software. The Company is currently developing mobile smart phone technology that will provide similar functionality to the Klever-Kart System.

F-10

KLEVER MARKETING, INC.

Notes to the Financial Statements

For the years ended December 31, 2014 and 2013, the Company incurred costs of $11,204 and $2,940 respectively, for research and development of the technology involved with developing its technologies.

Fair Value of Financial Instruments

The FASB provides the framework for measuring fair value. ASC 820-10-50, Fair Value Measurements, provides guidance that defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

In determining fair value, the Company utilizes observable market data when available, or models that incorporate observable market data. In addition to market information, the Company incorporates transaction-specific details that, in management’s judgment, market participants would take into account in measuring fair value.

In arriving at fair-value estimates, the Company utilizes the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement is characterized based upon the lowest level of input that is significant to the fair-value measurement.

The carrying amounts reported in the accompanying balance sheets as of December 31, 2014 and 2013 for cash and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and expected realization and their current market rate of interest.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date or earlier if allowed. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

Adoption of ASU 2014-10 Development Stage Entities

In June 2014, the FASB issued Accounting Standards Update (“ASU”) ASU 2014-10 Development Stage Entities. The amendments in ASU 2014-10 remove the definition of a development stage entity from Topic 915 Development Stage Entities, thereby removing the distinction between development stage entities and other reporting entities from US GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and shareholder’s equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. The Company may early adopt ASU 2014-10 for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued.

F-11

KLEVER MARKETING, INC.

Notes to the Financial Statements

The Company adopted this standard effective April 1, 2014. The Company’s financial statements have been impacted by the adoption of this ASU mainly by the removal of inception-to-date information in the Company’s statements of operations, cash flows, and stockholders’ equity.

ASU 2014-09 Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers. The amendments in ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605 Revenue Recognition, and most industry-specific guidance, and creates a Topic 606 Revenue from Contracts with Customers.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company’s current financial statements will not be affected by the adoption of ASU 2014-09 as the Company has not recognized revenues.

NOTE 3 – GOING CONCERN

As shown in the accompanying financial statements, the Company generated a net loss of $277,987 during the year ended December 31, 2014. The Company did not generate any revenue from product sales during the years ended December 31, 2014 or December 31, 2013. As of December 31, 2014, the Company’s current and total liabilities exceeded its current assets by $527,363. As of December 31, 2014, the Company had $23,194 of cash available on hand.

The Company will require additional funding during the next twelve months to finance the growth of its current operations and achieve its strategic objectives. These factors, as well as the uncertain conditions that the Company faces relative to capital raising activities, create substantial doubt as to the Company’s ability to continue as a going concern. The Company is seeking to raise additional capital principally through private placement offerings and is targeting strategic partners in an effort to finalize the development of its products and begin generating revenues. The ability of the Company to continue as a going concern is dependent upon the success of future capital offerings or alternative financing arrangements and expansion of its operations. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations through calendar year 2015. However, management cannot make any assurances that such financing will be secured.

NOTE 4 – ACCRUED LIABILITIES

Accrued liabilities consist of the following as of December 31, 2014 and 2013.

	December 31,		December 31,
	2014		2013

Compensation - officers and bookkeeper	$	163,500	$	28,500
Taxes		38,314		37,224

	$	201,814	$	65,724

F-12

KLEVER MARKETING, INC.

Notes to the Financial Statements

NOTE 5 – INCOME TAXES

The components of income tax expense are as follows for the years ended December 31, 2014 and 2013, respectively.

	December 31,
	2014		2013

Current	$	1,194	$	1,196
Deferred		–		–

Total	$	1,194	$	1,196

The Company’s deferred income tax asset and the related valuation allowance are as follows at December 31, 2014 and 2013, respectively. The deferred tax asset was calculated using a combined statutory tax rate of 37.3%.

	December 31,
	2014			2013
Deferred tax assets - current:
Accrued compensation	$	59,867		$	10,631
		59,867			10,631
Deferred tax assets - long-term:
Net operating loss carryforwards		5,120,141			5,095,725
Amortization		9,951			3,926
Total deferred income tax assets		5,189,959			5,110,282
Valuation allowance		(5,189,959	)		(5,110,282	)
Total	$	–		$	–

A reconciliation of provision (benefit) for income taxes provided at the federal statutory rate (34% for fiscal years 2014 and 2013) to actual provision for income taxes is as follows:

	December 31,
	2014			2013
Benefit (provision) for income taxes computed at federal statutory rate	$	94,110		$	(177,569	)
State income taxes, net of federal benefit		9,134			(17,235	)
NOL's utilized		–			182,773
Expiring NOL's		–			256,461
Other		(24,761	)		139,842
Valuation allowance		(79,677	)		(385,468	)
Provision for Income taxes	$	(1,194	)	$	(1,196	)
Effective tax rate		-0.43%			-0.23%

F-13

KLEVER MARKETING, INC.

Notes to the Financial Statements

As of December 31, 2014, the Company had net operating loss carry-forwards for federal income tax reporting purposes of approximately $14.6 million that may be offset against future taxable income through 2034. The Company has state net operating loss carry-forwards of $5.0 million that may be offset against future taxable income through 2027. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance that the carry-forwards will expire unused. Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.

The Company files income tax returns in the U.S. federal and Utah jurisdictions. Tax years 2011 to current remain open to examination by U.S. federal and state tax authorities.

NOTE 6 – PREFERRED STOCK

Authorized Shares

In accordance with the Company’s bylaws, the Company has authorized a total of 2,000,000 shares of preferred stock for all classes. As of December 31, 2014 and December 31, 2013, there were 409,753 and 384,869 preferred shares issued and outstanding for all classes, respectively. As of December 31, 2014, all of the Company’s outstanding preferred shares are owned by a Company that is controlled by the Company’s CEO.

Preferred Stock Dividends

As of December 31, 2014, the Company had accrued and unpaid preferred stock dividends totaling $30,063 relating to dividends for the three months ended December 31, 2014. To date all accrued dividends for preferred stock have been authorized for payment through the issuance of preferred stock based on the ratios for each class of preferred stock described below.

Class A Voting Preferred Stock

The Company has 150,000 shares of “Class A Voting Preferred Stock” (“Class A Shares”) authorized. As of December 31, 2014 and December 31, 2013, there were 132,582 and 124,531 Class A Shares outstanding, respectively. The Class A Shares are convertible into 99.035 shares of common stock. Holders of Class A Shares are entitled to receive dividends at the rate of $2.20 per share per annum, payable semi-annually. Dividends are 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. Class A Shares carry a liquidation preference of $26.00 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. Class A shares are redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time.

Class B Voting Preferred Stock

The Company has 125,000 shares of “Class B Voting Preferred Stock” (“Class B Shares”) authorized. As of December 31, 2014 and December 31, 2013, there were 100,486 and 94,383 Class B Shares outstanding, respectively. The Class B Shares are convertible into 64.754 shares of common stock. Holders of Class B Shares are entitled to receive dividends at the rate of $1.70 per share per annum, payable semi-annually. Dividends are cumulative and may be paid in cash or in kind through the distribution of .0425 Class B Shares for each outstanding Class B Share, on each dividend payment date. Class B Shares carry a liquidation preference of $17.00 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. Class B shares are redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time.

F-14

KLEVER MARKETING, INC.

Notes to the Financial Statements

Class C Voting Preferred Stock

The Company has 200,000 shares of “Class C Voting Preferred Stock” (“Class C Shares”) authorized. As of December 31, 2014 and December 31, 2013, there were 176,685 and 165,955 Class C Shares outstanding, respectively. The Class C Shares are convertible into 25.140 shares of common stock. Holders of Class C Shares are entitled to receive dividends at the rate of $0.66 per share per annum, payable semi-annually. Dividends are cumulative and may be paid in cash or in kind through the distribution of .0425 Class C Shares for each outstanding Class C Share, on each dividend payment date. Class C Shares 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. Class C shares are redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time.

NOTE 7 – COMMON STOCK

Year Ended December 31, 2014

During the year ended December 31, 2014, the Company issued 1,750,000 shares to investors for $91,500 in cash.

During the year ended December 31, 2014, the Company issued 247,919 shares of common stock valued at $13,496 to consultants for services.

Year Ended December 31, 2013

During the year ended December 31, 2013, the Company issued 1,200,000 shares of restricted common stock and a shareholder contributed 1,000,000 free trading shares into an escrow account to settle certain debt obligations and to raise $47,000 of capital. In connection with the same transaction, 450,000 shares of free trading common stock that had a value of $13,500 were issued to certain creditors to settle outstanding debt obligations totaling $549,721 and investors paid $47,000 for 550,000 free trading common shares as more fully described in Note 10.

During the year ended December 31, 2013, the Company issued 2,775,000 shares of restricted common stock for $269,500 in cash to third party investors.

During the year ended December 31, 2013, the Company issued 66,747 shares of restricted common stock to pay for $5,339 of accounts payable obligations.

During the year ended December 31, 2013, the Company issued 1,025,000 share of restricted common stock for software development services valued at $69,250.

NOTE 8 – 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 by the Board of Directors. The Plan permits the award of both qualified and non-qualified incentive stock options. The Company had no stock options outstanding as of December 31, 2014 and December 31, 2013.

F-15

KLEVER MARKETING, INC.

Notes to the Financial Statements

NOTE 9 – DEBT FORGIVENESS

2014 Debt Forgiveness

During the year ended December 31, 2014, the Company wrote off $10,609 of obligations where the statute of limitations was believed to have run. It should be noted the statute of limitations is an affirmative defense that can only be definitively determined applicable by judicial ruling. However, the Company is reasonably certain based upon review by its legal counsel that a statute of limitations defense would bar the debts deemed discharged herein by the statute.

2013 Debt Forgiveness

The Company had certain claims against it for unpaid salary and benefits due to former officers and employees that existed on the balance sheet as accrued liabilities as of December 31, 2012. During the year ended December 31, 2013, management worked to reduce the Company’s total liabilities. As a result, the Company settled certain debt obligations using stock, cash, and certain obligations where the statute of limitations was believed to have run as described below.

Debts Settled for Stock via Escrow Account

During the year ended December 31, 2013, the Company entered into an agreement with an existing shareholder, four creditors, and two investors whereby the Company contributed 1,200,000 shares of its restricted common stock, the existing shareholder contributed 1,000,000 free trading shares of the Company’s common stock, the creditors contributed the rights to $549,721 of outstanding debts owed by the Company, and two third party investors contributed $47,000 of cash into an escrow account held by the Company’s stock transfer agent. In exchange for the contributions made by each party, the existing shareholder received 1,200,000 shares of restricted common stock, the four creditors received 450,000 shares of free trading common stock valued at $13,500, the third party investors received 550,000 shares of the Company’s free trading common stock, and the Company received $47,000 in cash and settlement of $549,721 in outstanding debts resulting in a gain on Forgiveness of Debt totaling $536,221.

Debts Settled for Cash

During the year ended December 31, 2013, the Company entered into settlement agreements with three creditors whereby the Company made cash payments totaling $25,450 in exchange for full settlement of $226,432 of outstanding liabilities. The Company recorded a gain on Forgiveness of Debt totaling $200,982 in connection with these transactions.

Debts Where Statute of Limitations Has Most Likely Barred Such Claims

During the year ended December 31, 2013, the Company also wrote off $81,504 of obligations where the statute of limitations was believed to have run. It should be noted the statute of limitations is an affirmative defense that can only be definitively determined applicable by judicial ruling. However, the Company is reasonably certain based upon review by its legal counsel that a statute of limitations defense would bar the debts deemed discharged herein by the statute.

The settlement of these obligations coupled with the settlement of the obligations described above resulted in the Company recording a gain on Forgiveness of Debt totaling $818,708.

Contributed Services

During the year ended December 31, 2013, the Company’s officers agreed to forgive $404,250 of compensation related to prior years that was owed to them and contribute the value of those services to the Company. As a result, the Company recorded an addition to paid-in capital for this amount.

For the six months ended June 30, 2013, the Company’s officers agreed to not take any compensation which resulted in the Company recording $81,000 in contributed services for that period.

F-16

KLEVER MARKETING, INC.

Notes to the Financial Statements

NOTE 10 - LITIGATION AND CONTINGENT LIABILITIES

Various creditors of the Company have potential claims against the Company for unpaid invoices relating to services provided to the Company. The amount of unpaid bills over 90 days old that exist within accounts payable on the balance sheet is $239,486 and $282,422 as of December 31, 2014 and 2013, respectively.

NOTE 11 – PATENT LITIGATION SETTLEMENTS

During the year ended December 31, 2014, the Company as Plaintiff settled certain lawsuits against various defendants for infringement against patents owned by the Company resulting in the Company recording $81,400 in net proceeds from litigation settlements. The Company recorded $94,485 in net proceeds from similar litigation settlements during the year ended December 31, 2013.

NOTE 12 – RELATED PARTY TRANSACTIONS

The Company periodically receives funding from its CEO and CFO to fund operating costs of the Company. These individuals or companies they control advanced to the Company $3,500 and $13,450 during the years ended December 31, 2014 and 2013, respectively. All of the 2013 advances had been repaid as of December 31, 2013. Advances made by these individuals are reported in the Company’s Balance Sheets under the heading “Related Party Notes Payable”.

The Company’s CEO and the bookkeeper who is the wife of the CEO provide consulting services to the Company through companies controlled by the individuals. The Company accrued $162,000 for compensation for the CEO during the year ended December 31, 2014 of which $1,500 was paid. Due to the Company’s limited financial resources, the Company recorded $81,000 which represents the estimated fair value of uncompensated services contributed by the CEO during the six months ended June 30, 2013. The Company recorded $81,000 of compensation for its CEO for the six months ended December 31, 2013 of which $27,000 was paid during the period.

The bookkeeper earned $18,000 during the years ended December 31, 2014 and 2013 for services provided to the Company. $16,500 of this amount was paid during each of the years ended December 31, 2014 and December 31, 2013.

NOTE 13 – COMMITMENTS

On August 19, 2014, the Company entered into a consulting agreement with an independent sales representative to assist the Company with finding retailers and consumer packaged goods companies who will utilize the Company’s mobile phone technology. The agreement is effective from September 1, 2014 to March 31, 2015 and requires the Company to pay the consultant $3,000 per month except in December 2014. The consultant will also receive a 5% commission for all revenue that he is directly responsible for generating.

NOTE 14 – SUBSEQUENT EVENTS

On January 19, 2015, the Company sold 250,000 shares to an investor for $12,500.

On February 17, 2015, the Company sold 100,000 shares to an investor for $7,500.

On February 23 2015, the Company sold 214,286 shares to an investor for $15,000.

On March 21, 2015, the Company sold 208,233 shares to an investor for $12,500.

The Company has evaluated events subsequent to period end pursuant to the requirements of ASC 855 and has determined that there are no additional events to disclose.

F-17

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