News Column

KLEVER MARKETING INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 13, 2014

The following information specifies certain forward-looking statements of management of the Company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may", "shall", "could", "expect", "estimate", "anticipate", "predict", "probable", "possible", "should", "continue", or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

We advise anyone relying upon this report that any statement of earnings by the company for the three months ended March 31, 2014 has been obtained solely through the reduction, adjustment or termination of various debt obligations and through net proceeds received in a litigation settlement and does not reflect operating revenues to the Company. The Company continues as a development stage company without revenues and with continuing substantial expenses, yielding a net loss from operations if considered apart from reduction of debt and asset sales. The Company continues to search for merger or acquisition candidates or possible entities to which it may sell or license its patent interest, but 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 and during the past year has relied exclusively upon interim capital financing for its continuation.

General



Klever Marketing, Inc. was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, 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, which it expects to market and release in the near future. The Company is currently testing its mobile technology in a pilot store in Anaheim, California.

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 remarkable progress on its mobile application development and implementation. The software programming of the consumer KleverShop® 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, which successfully tested in our demonstration store.

Progress During the three Months Ending June 30, 2014

During the quarter ending June 30, 2014, the Company pursued the marketing of its newly completed software products along with continued refinement of its Android and iPhone smartphone applications.

A number of meetings and product demonstrations were held this quarter to potentially large users of the company's applications. Interest in the Company's products remains high, particularly with the breadth of features for the consumer, retailer and suppliers. There is renewed interest in the Company's capabilities in coupon clearing, which is a potentially additional revenue source. Advances with these interested companies do not come rapidly and the company is having to exercise "patient persistence" to see these sales opportunities through to their completion.

We continue to add features to our applications to provide the complete services, focusing on additional services retailers desire to promote their in-store specials and to strengthen the KleverDash® features to add more coupon types and to plan advertising campaigns months in advance. Klever's technology continues to offer technical advantages and attractive features.

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Klever held meetings with several interested investors and discussions are continuing. Additional capital was raised during this quarter along with funds awarded from settlement of patent infringement lawsuits.

Anticipated Business Development in the Next 12 Months

During 2014, the Company will continue to move forward along several paths. We will attempt to strengthen our balance sheet by reducing our outstanding debt and seek additional capital investment. As we work with retailers, we will strive to strengthen our KleverShop® and KleverDash™ systems to improve the consumer experience and ability of suppliers to manage their promotional programs.

We are looking to expand into a regional super market chain of moderate size to demonstrate the multi-store usability of our software systems and generate revenue from operations. And we are working with large associations and supplier organizations who are interested in providing Klever's applications to their user base.

We will use this retailer base to promote our relationships with product suppliers to attempt to bring them into the fold of Klever product users. With these suppliers we will promote our KleverBank® system for coupon management and consumer redemption, which if successful, is expected to place our Company in a very attractive position. We continue to differentiate ourselves as being a full service digital marketing provider to consumers, retailers and suppliers with platforms to meet all of their promotional needs. Notable progress is being made, and the Company is moving forward. However, we must caution the reader that Klever Marketing is still a development stage company, and no revenue contracts have yet been signed. No assurance or warranty can be given that the Company will be successful in implementing the efforts described in this report.

Results of Operations



Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

For the three months ended June 30, 2014, the Company had a net loss of $26,680 compared to a net loss of $91,120 for the three months ended June 30, 2013. The reduction in net loss in the current year is primarily due to a decrease in operating expenses of $20,668 coupled with an increase of $33,000 in net proceeds from litigation settlements related to certain parties infringing upon the Company's patents. General and administrative costs were reduced from $84,808 for the three months ended June 30, 2013 to $67,950 for the three months ended June 30, 2014. The reduction in costs was primarily due to reduced costs for outside services and accounting fees of $9,675 and $5,743, respectively. Outside service fees were lower due to reduced costs for third party consultants. Accounting fees were lower primarily due to lower costs for preparing the Company's December 31, 2013 10-K and March 31, 2014 10-Q.

The Company received $33,000 in net proceeds from litigation settlements related to certain parties infringing upon the Company's patents. The Company did not have any proceeds from litigation settlements during the prior year.

The Company had debt forgiveness income of during the three months ended June 30, 2014 of $10,609 compared to $0 for the three months ended June 30, 2013.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

For the six months ended June 30, 2014, the Company had a net loss of $54,508 compared to net income of $614,594 for the six months ended June 30, 2013. The decrease in earnings in the current year is primarily due to a decrease in operating expenses of $47,908 offset by a decrease in other income of $716,898. General and administrative costs were reduced by $45,379 from $179,991 for the six months ended June 30, 2013 to $134,612 for the six months ended June 30, 2014. The reduction in costs was primarily due to reduced costs for outside services, accounting fees, and promotional expenses of $21,609, $12,083, and $22,999, respectively. Outside service fees were lower due to reduced costs for third party consultants. Accounting fees were lower primarily due to lower costs for preparing the Company's December 31, 2013 10-K and March 31, 2014 10-Q. Promotional fees were lower primarily due to the Company receiving a refund of promotional fees paid as a result of the Company terminating its agreement with a third party consulting firm.

The Company had no interest expense during the six months ended June 30, 2014 compared to $16,626 during the six months ended June 30, 2013. Interest expense in the current year was eliminated as a result of the debt settlement agreements the Company entered into during the first quarter of 2013.

The Company received $74,250 in net proceeds from litigation settlements related to certain parties infringing upon the Company's patents. The Company did not have any proceeds from litigation settlements during the prior year.

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The Company had debt forgiveness income during the six months ended June 30, 2014 of $10,609 as a result of the statute of limitations apparently expiring compared to debt forgiveness income of $818,708 for the same period in 2013. During the six months ended June 30, 2013, the Company entered into settlement agreements with certain creditors resulting in the Company making cash payments totaling $25,450 and issuing 450,000 shares of common stock valued at $13,500 to settle outstanding obligations totaling $776,153. The Company also wrote off $81,504 of obligations where the statute of limitations had apparently expired. The settlement of these obligations resulted in the Company recording a gain on Forgiveness of Debt totaling $818,708.

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 six months ended June 30, 2013, the Company entered into settlement agreements with certain creditors resulting in the Company making cash payments totaling $25,450 and issuing 450,000 shares of common stock valued at $13,500 to settle outstanding obligations totaling $776,153. The Company also wrote off $81,504 of obligations where the statute of limitations would most likely bar any claims. The settlement of these obligations resulted in the Company recording a gain on Forgiveness of Debt totaling $818,708.

During the six months ended June 30, 2013, the Company's officers agreed to forgive $404,250 of compensation 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.

Cash flows generated from operating activities during the six months ended June 30, 2014 totaled $13,495 compared to cash flows used in operations of $111,175 during the six months ended June 30, 2013. The increase in cash flows from operations is due primarily to increased depreciation and amortization of $4,317, a bigger increase in accrued liabilities of $71,480 offset by a bigger decrease in accounts payable of $23,767 and an increase resulting from $10,609 of debt forgiveness income in the current year as compared to $818,708 in the prior year. These increases in the current year as compared to the prior year were partially offset by a decrease in net income of $669,102, stock issued for general and administrative of $6,250, and contributed services of $81,000.

Cash flows used in investing activities during the six months ended June 30, 2014 were $67,329 as compared to $39,224 for the six months ended June 30, 2013. During the six months ended June 30, 2014, the Company spent $61,689 for capitalized software development and $5,640 to develop patents and trademarks. During the six months ended June 30, 2013, the Company spent $1,809 acquiring equipment, $24,000 on capitalized software development, and $13,415 developing patents and trademarks.

Cash flows generated from financing activities were $28,500 for the six months ended June 30, 2014 as compared to $279,850 for the six months ended June 30, 2013. During the six months ended June 30, 2014, the Company received $25,000 of proceeds from the sale of commons stock and $3,500 of proceeds from a related party loan. During the six months ended June 30, 2013, the Company received proceeds from sales of common stock of $276,500 and $3,350 from borrowing from related parties net of repayments made.

As of June 30, 2014, our cash position was $26,320, 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.

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.



Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.

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Source: Edgar Glimpses


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