10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012

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

For the transition period from _________________ to _________________

Commission File Number:  0-18834

Klever Marketing, Inc.

(Exact name of small business issuer as specified in its charter)

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

30251 Golden Lantern Suite E, PMB 411 Laguna Niguel, CA 92677-5993

(Address of principal executive offices)

(801) 847-6444

(Issuer’s Telephone Number)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x

Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)	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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date.  As of May 9, 2012, there were 45,901,377 shares of the issuer's $.01 par value common stock issued and outstanding.

KLEVER MARKETING, INC.

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Balance Sheets as of March 31, 2012 and December 31, 2011	3
	Condensed Statements of Operations for the three months and from inception of Development Stage on July 5, 1996 through March 31, 2012	4
	Condensed Statements of Cash Flows for the three months and from inception of Development Stage on July 5, 1996 through March 31, 2012	5
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 4.	Controls and Procedures	17
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors and Uncertainties	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Submission of Matters to Vote of Security Holders	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
Signatures		21
Exhibit Index
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.1
	Exhibit 32.2

2

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

KLEVER MARKETING, INC.

(A Development Stage Company)

Condensed Balance Sheets

(Unaudited)

	March 31			December 31,
ASSETS	2012			2011
	(Unaudited)
CURRENT ASSETS
Cash	$	110,581		$	177,873
Total Current Assets		110,581			177,873
FIXED ASSETS
Capitalized software		217,343			191,120
Office equipment		980			—
Less accumulated depreciation		(44	)		—
Total Fixed Assets		218,279			191,120
OTHER ASSETS
Intangibles, net		35,856			28,124
Total Other Assets		35,856			28,124
TOTAL ASSETS	$	364,716		$	397,117
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	467,315		$	455,860
Accrued liabilities		846,556			807,788
Preferred stock dividends		362,148			323,968
Notes payable		15,000			15,000
Stock deposits		12,500			—
Total Current Liabilities		1,703,519			1,602,616
Total Liabilities		1,703,519			1,602,616
Convertible preferred stock - Class A ( par value $0.01; 150,000 shares authorized;101,134 issued and outstanding at March 31, 2012 and December 31, 2011, respectively); aggregate liquidation preference of $2,629,484.		1,011			1,011
Convertible preferred stock - Class B ( par value $0.01; 125,000 shares authorized;76,651 issued and outstanding at March 31, 2012 and December 31, 2011, respectively); aggregate liquidation preference of $1,303,067.		767			767
Convertible preferred stock - Class C ( par value $0.01; 200,000 shares authorized;134,774  issued and outstanding at March 31, 2012 and December 31, 2011, respectively); aggregate liquidation preference of $889,508.		1,348			1,348
Common stock (par value $0.01), 250,000,000 shares authorized,45,716,377 and 45,512,933 shares issued and outstanding, respectively		457,163			455,129
Treasury stock, 100,000 shares at March 31, 2012 and December 31, 2011		(1,000	)		(1,000	)
Due from related party, payable in common stock		—			(16,100	)
Paid in capital in excess of par value		16,590,535			16,601,968
Retained deficit		(3,333,785	)		(3,333,785	)
Deficit accumulated during development stage		(15,054,842	)		(14,914,837	)
Total Stockholders' Deficit		(1,338,803	)		(1,205,499	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	364,716		$	397,117

The accompanying notes are an integral part of these financial statements.

3

KLEVER MARKETING, INC.

(A Development Stage Company)

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended,						From Inception of Development Stage On July 5, 1996 through
	March 31,						March 31,
	2012			2011			2012
REVENUES	$	—		$	—		$	256,000
EXPENSES
Sales and marketing		—			—			163,306
General and administrative		126,149			136,412			11,824,426
Research and development		1,567			3,917			4,771,660
Total Expenses		127,716			140,329			16,759,392
OTHER INCOME (EXPENSE)
Other income		—			177,000			685,751
Interest income		—			—			19,152
Interest expense		(12,289	)		(9,288	)		(2,702,529	)
Forgiveness of debt		—			—			466,953
Gain on sale of assets		—			—			518,978
Capital gain on sale of investments		—			—			191,492
Total Other Income (Expense)		(12,289	)		167,712			(820,203	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(140,005	)		27,383			(17,323,595	)
INCOME TAXES		—			—			2,641
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS		(140,005	)		27,383			(17,326,236	)
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING		—			—			2,271,394
NET INCOME (LOSS)	$	(140,005	)	$	27,383		$	(15,054,842	)
BASIC INCOME (LOSS) PER COMMON SHARE	$	(0.00	)	$	0.00
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE	$	(0.00	)	$	0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		45,432,031			45,476,036
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - FULLY DILUTED		45,432,031			62,215,836

The accompanying notes are an integral part of these financial statements.

4

KLEVER MARKETING, INC.

(A Development Stage Company)

Condensed Statements of Cash Flows

(Unaudited)

	For the Three Months Ended						From Inception of Development Stage On July 5, 1996 through
	March 31,						March 31,
	2012			2011			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(140,005	)	$	27,383		$	(15,054,842	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Stock issued for general and administrative		—			(159,000	)		1,270,556
Stock issued for research and development		—			—			62,850
Stock returned for services not rendered		—			—			(391,446	)
(Gain)/loss on sale/disposal of assets		—			—			(5,495	)
Compensation expense from stock options and warrants		10,381			—			106,163
Stock issued for interest		—			—			135,226
Stock issued for accounts payable		—			—			243,458
Deferred income		—			—			(214,000	)
Depreciation and amortization		44			—			1,912,927
Write-off bad debts		—			—			15,000
Debt forgiveness		—			—			(174,825	)
Services contributed by officers		—			—			60,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		—			—			62,281
(Increase) decrease in other assets and prepaids		—			17			89,238
Increase (decrease) in accounts payable		11,455			723			475,465
Increase (decrease) in accrued liabilities		38,768			93,527			926,145
Net Cash Used by Operating Activities		(79,357	)		(37,350	)		(10,481,299	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/sale of equipment, net		—			—			(587,801	)
Capitalized software development costs		(26,223	)		—			(195,943	)
Proceeds from sale of intangible assets		—			—			516,570
Purchase of equipment		(980	)		—			(980	)
Acquisition/sale of patents and other intangibles		(7,732	)		—			(35,306	)
Acquisition/sale of stock, net		—			—			12,375
Net Cash Used by Investing Activities	$	(34,935	)	$	—		$	(291,085	)

The accompanying notes are an integral part of these financial statements.

5

KLEVER MARKETING, INC.

(A Development Stage Company)

Condensed Statements of Cash Flows (Continued)

(Unaudited)

	For the Three Months Ended					From Inception of Development Stage On July 5, 1996 through
	March 31,					March 31,
	2012			2011		2012
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock deposit	$	12,500		$	—	$	23,500
Stock subscription received		—			—		23,000
Proceeds from capital stock issued		34,500			37,500		7,647,201
Proceeds from loans		—			—		3,473,252
Change in line-of-credit		—			—		4,837
Loan receivables		—			—		(15,000	)
Principal payments on lease obligations		—			—		(18,769	)
Cash payments on note payable		—			—		(279,730	)
Net Cash Provided by Financing Activities		47,000			37,500		10,858,291
NET INCREASE (DECREASE) IN CASH		(67,292	)		150		85,907
CASH AT BEGINNING OF PERIOD		177,873			1,071		24,674
CASH AT END OF PERIOD	$	110,581		$	1,221	$	110,581
SUPPLEMENTAL DISCLOSURES
Cash Paid For:
Interest	$	—		$	—	$	3,326
Income taxes	$	—		$	—	$	1,841
Non-Cash Transactions from Investing and Financing Activities:
Common stock returned to company to  pay related party receivable	$	16,100		$	—
Common stock issued to pay accounts payable	$	—		$	6,730
Accrual for preferred stock dividends payable with preferred shares	$	38,180		$	102,469

The accompanying notes are an integral part of these financial statements.

6

KLEVER MARKETING, INC

Notes to the Financial Statements

NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its December 31, 2011 Annual Report on Form 10-K.  Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The Company was organized under the laws of the State of Delaware in December 1989.  The Company was in the development stage from 1989 to 1991.  The Company was an operating company from 1992 to December 8, 1993 when it filed petitions for relief under Chapter 11 bankruptcy.  The Company was inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a reverse merger and changed its name to Klever Marketing, Inc. The Company has been in the development stage since the reverse merger occurred.

The Company was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, manufacture, market and distribute an electronic shopping cart for in-store advertising, promotion and media content and retail shopper services, which have potential for profit.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Earnings Per Common Share

In accordance with ASC 260, Earnings Per Share (“ASC 260”), the computations of basic and fully diluted earnings 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 periods ended March 31, 2012, common stock equivalents related to the conversion of preferred rights have not been included in calculation of diluted earnings per share because they are anti-dilutive. Common stock equivalents have been included in the computations for the periods ended March 31, 2011 as shown in the table below.  

7

KLEVER MARKETING, INC

Notes to the Financial Statements

Following is a reconciliation of the income (loss) per share for the three months ended March 31, 2012 and 2011, respectively:

	Three Months Ending March 31,
	2012			2011
Numerator:
Income (loss) before extraordinary items	$	(140,005	)	$	27,383
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(140,005	)	$	27,383
Denominator:
Weighted-average common shares outstanding
Basic		45,432,031			45,476,036
Conversion of preferred rights		—			16,739,800
Diluted		45,432,031			62,215,836
Income (loss) per share
Basic
Income (loss) before extraordinary items	$	(0.00	)	$	0.00
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(0.00	)	$	0.00
Diluted
Income (loss) before extraordinary items	$	(0.00	)	$	0.00
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(0.00	)	$	0.00

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.  The Company achieved technological feasibility with regard to its mobile phone technology during the fourth quarter of 2010. The Company had $217,343 and $191,120 of capitalized software development costs as of March 31, 2012 and December 31, 2011, respectively.

Intangibles

Intangible assets, consisting of patents and trademarks, are amortized on a straight-line basis over periods ranging from 10-14 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 March 31, 2012, intangible assets have a cost of $810,901, accumulated amortization of $775,045, and had a net book value of $35,856.  As of December 31, 2011, intangible assets had a cost of $803,169, accumulated amortization of $775,045 and had a net book value of $28,124.

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 tax position to determine the amount to recognize in the financial statements. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with measurement standards established by ASC 740. At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit through March 31, 2012.  The Company also estimates that the unrecognized tax benefit will not change significantly within the next twelve months.

8

KLEVER MARKETING, INC

Notes to the Financial Statements

The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

There are no tax positions included in the accompanying financial statements at March 31, 2012 or December 31, 2011 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

As the Company has significant net operating loss carry forwards, even if certain of the Company’s tax positions were disallowed, it is not foreseen that the Company would have to pay any taxes in the near future.  Consequently, the Company does not calculate the impact of interest or penalties on amounts that might be disallowed.

The Company files income tax returns in the U.S. federal and Utah jurisdictions.  Tax years 2008 to current remain open to examination by U.S. federal and state tax authorities.

From inception through March 31, 2012, the Company has incurred net losses and, therefore, had no tax liability.  The net deferred tax asset generated by the loss carry-forwards has been fully reserved.  The cumulative net operating loss carry-forward is approximately $17.1 million as of March 31, 2012, and will expire in the years 2015 through 2029.

Research and Development

The Company continues to develop its technology which facilitates the use of in-store advertising, product promotion and digital coupon redemption 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 to provide "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.

During the three months ended March 31, 2012 and 2011, the Company incurred costs of $1,567 and $3,917 respectively, for research and development costs associated with developing its technologies.

Fair Value of Financial Instruments

The Company has adopted ASC 820-10-50, Fair Value Measurements. This guidance 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.

The carrying amounts reported in the accompanying balance sheets as of March 31, 2012 and December 31, 2011 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. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of March 31, 2012 and December 31, 2011.

Reclassification

During the quarter ended March 31, 2011, the Company received back 1,150,000 shares of common stock valued at $168,000 and $9,000 of cash in connection with cancelling certain agreements with an investor and an investment banking firm. In the Company’s March 31, 2011 Form 10-Q, the Company recorded these transactions as reductions of “General and Administrative” expense in its Statement of Operations. Management reevaluated the classification of these transactions during their year-end audit and determined that they should be classified as “Other Income” within the Company’s Statement of Operations for the year ended December 31, 2011. As a result of the above, the Company has made a similar reclassification in the March 31, 2011 Statement of Operations presented in these financial statements to conform to the presentation of the Form 10-K Statement of Operations for the year ended December 31, 2011. Neither net income nor total equity changed as a result of this reclassification as of and for the three months ended March 31, 2011.

9

KLEVER MARKETING, INC

Notes to the Financial Statements

NOTE 3 – GOING CONCERN

As shown in the accompanying financial statements, the Company incurred a net loss of $140,005 during the three months ended March 31, 2012. The Company did not generate any revenue from product sales during the three months ended March 31, 2012 or March 31, 2011.  As of March 31, 2012, the Company’s current and total liabilities exceeded its current assets by $1,592,938.  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 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.  As of March 31, 2012, the Company had $110,581 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.  Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations for the next year. However, management cannot make any assurances that such financing will be secured.

NOTE 4 – 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 March 31, 2012 and December 31, 2011, there were 312,559 preferred shares issued and outstanding.  As of March 31, 2012, all of the Company’s outstanding preferred shares are owned by a Company that is controlled by the Company’s CEO.

In March, 2011, management realized that the preferred stock dividend that was paid in 2008 had resulted in the Company issuing more shares of Class A and Class B shares than were authorized pursuant to the Board resolution that was passed in June 2002.  On April 14, 2011 the board of directors approved an increase to the authorized number of shares of preferred stock as described below.

Preferred Stock Dividends

As of March 31, 2012, the Company had accrued and unpaid preferred stock dividends totaling $362,148 relating to dividends for the fifteen months ended March 31, 2012.

Class A Voting Preferred Stock

On February 7, 2000, the Board of Directors authorized and established “Class A Voting Preferred Stock” (“Class A Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class A Shares consisted of 125,000 shares designated as Series 1 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class A voting preferred stock to 55,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class A Voting Preferred shares to 150,000.

Initially, Class A Shares were convertible into Common Stock at an initial conversion price of $2.60 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class A preferred stock is convertible into 99.035 shares of common stock upon conversion.  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.  In addition, each holder of Class A Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class A Shareholders shall be entitled to one vote for each share of Common Stock into which such Class A Shares could then be converted, and shall have voting rights and powers equal to that of a holder of Common Stock.  The Holders of Class A Shares shall vote with the holders of Common Stock and not as a separate class.

10

KLEVER MARKETING, INC

Notes to the Financial Statements

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.

The Class A Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 1, 2002. The redemption price shall be $26.00 per share together with accrued but unpaid dividends on such shares, if any.

Class B Voting Preferred Stock

On September 24, 2000, the Board of Directors authorized and established “Class B Voting Preferred Stock” (“Class B Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class B Shares consisted of 125,000 shares designated as Series 1 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class B voting preferred stock to 42,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class B Voting Preferred shares to 125,000.

Initially, Class B Shares were convertible into Common Stock at an initial conversion price of $1.70 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class A preferred stock is convertible into 64.754 shares of common stock upon conversion.  Holders of Class B Shares are entitled to receive dividends at the rate of $1.70 per share per annum, payable semi-annually. Such dividends shall be cumulative and may be paid in cash or in kind through the distribution of .0425 Class B Shares, of the same Series for which the dividend is accrued, for each outstanding Class B Share, on each dividend payment date. In addition, each holder of Class B Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class B Shareholders shall be entitled to one vote for each share of Common Stock into which such Class B Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class B Shares shall vote with the holders of shares of Common Stock and not as a separate class.

Class B Shares shall carry a liquidation preference of $17.00 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. The Class B Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after March 24, 2004 for Series 1, and such date as determined by the Board of Directors for each additional Series.  The redemption price shall be $17.00 per share together with accrued but unpaid dividends on such shares, if any.

Class C Voting Preferred Stock

On January 2, 2001, the Board of Directors authorized and established “Class C Voting Preferred Stock” (“Class C Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class C Shares consisted of 125,000 shares designated as Series 1 shares and 125,000 shares thereof were designated as Series 2 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class C voting preferred stock to 150,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class C Voting Preferred shares to 200,000.

Initially, Class C Shares were convertible into Common Stock at an initial conversion price of $0.66 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class C preferred stock is convertible into 25.140 shares of common stock upon conversion.   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. In addition,  each holder of a Class C Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class C Shareholders shall be entitled to one vote for each share of Common Stock into which such Class C Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class C Shares shall vote with the holders of shares of Common Stock and not as a separate class.

Class C Shares shall carry a liquidation preference of $6.60 per share plus any accrued but unpaid dividends on such shares, if any, and adjusted for combinations, splits, dividends or distributions of shares of stock with respect to such shares.

11

KLEVER MARKETING, INC

Notes to the Financial Statements

The Class C Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 2, 2004 for Series 1, and such date as determined by the Board of Directors for each additional Series.  The redemption price shall be $6.60 per share together with accrued but unpaid dividends on such shares, if any.

Class D Voting Preferred Stock

On May 20, 2002, the Board of Directors authorized and established “Class D Voting Preferred Stock”  (“Class D Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class D Shares consist of 500,000 shares thereof are designated as “Class D Voting Preferred Stock” (the “Class D Shares”).

Class D Shares are convertible into Common Stock at an initial conversion price of $1.05 (subject to adjustment).

NOTE 5 – LITIGATION AND CONTINGENT LIABILITIES

The Company has certain claims against it for unpaid salary and benefits due to former officers and employees that exist on the balance sheet as accrued liabilities as of March 31, 2012 and December 31, 2011. Management is in the process of negotiating with a number of these claimants in order to reach agreements that would allow these liabilities to be settled through agreed upon cash payments as well as issuance of stock and stock options.

NOTE 6 – STOCK OPTIONS

The shareholders approved, by a majority vote, the adoption of the 1998 Stock Incentive Plan (the “Plan”).  As amended on August 11, 2003, the Plan reserves 20,000,000 shares of common stock for issuance upon the exercise of options which may be granted from time-to-time to officers, directors and certain employees and consultants of the Company or its subsidiaries.  The Plan permits the award of both qualified and non-qualified incentive stock options.  On August 18, 2003, the Company registered its “Amended Stock Incentive Plan of Klever Marketing, Inc.” on Form S-8.  The Company granted 125,000 stock options during the three months ended March 31, 2012.  The options vest immediately and have an exercise price of $0.10 per share. Of the options granted, 100,000 expire on September 22, 2012 and 25,000 expire on December 31, 2012. The Company recorded $10,381 of consulting expense during the three months ended March 31, 2012 in connection with issuing the options. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions noted below:

Assumptions
Dividend Yield	0%
Weighted average volatility	487.85%
Risk-free interest rate	0.18%
Expected Life (years)	0.59

The summary of option activity for the three months ended March, 2012 is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Balance as of December 31, 2011	—	$	—	$	—
Granted	125,000		0.10		0.59
Expired	—		—		—
Cancelled	—		—		—
Balance as of March 31, 2012	125,000	$	0.10	$	0.53

12

KLEVER MARKETING, INC

Notes to the Financial Statements

As of March 31, 2012, 125,000 options were exercisable. The weighted-average grant-date fair value of options granted during the three months ended March 31, 2012 was $0.08. There were no options granted during the three months ended March 31, 2011.

As of March 31, 2012, the intrinsic value of outstanding and vested stock options was $0.

Expected option lives and expected stock price volatility were based on historical data of the Company. The risk free interest rate was calculated using U.S. Treasury constant maturity rates similar to the expected lives of the options, as published by the Federal Reserve. The Company has no plans to declare any future dividends on our common stock.

NOTE 7 – COMMON STOCK

During the three months ended March 31, 2012, the Company sold 364,444 shares of restricted common stock at a weighted average price of $0.095 per share to individuals for $34,500.

During the three months ended March 31, 2012, the Company received back 161,000 shares of restricted common stock from the son of the Company’s CEO as full repayment or a $16,100 receivable owed to the Company. Because of the related party nature of the transaction, the receivable was classified within Stockholders’ Deficit on the December 31, 2011 balance sheet. The shares were subsequently cancelled by the Company.

During the three months ended March 31, 2011, the Company sold 250,000 shares of restricted common stock at $0.15 per share to an individual for $37,500.

During the three months ended March 31, 2011, the Company received back 1,000,000 shares of restricted common stock from an investment banking firm and $2,500 in cash as a result of cancelling their agreement with the Company. The investment bank firm had been engaged to assist the Company with finding financing sources. The Company recorded a credit to other income of $155,000 in connection with the cash received and the cancellation and retirement of the shares.

During the quarter ended March 31, 2011, the Company issued 50,000 shares to a third party to settle outstanding accounts payable obligations for services provided.

During the quarter ended March 31, 2011, the Company cancelled its agreement with a private investor. Pursuant to the terms of the cancellation, the Company received back 150,000 shares of common stock and $6,500 in cash. The Company recorded a credit to other income of $22,000 in connection with the cash received and the cancellation and retirement of the shares.

NOTE 8 – RELATED PARTY TRANSACTIONS

The Company’s CEO, CFO and the bookkeeper who is the wife of the CEO did not take any compensation for services provided to the Company during 2009 and 2010.  During the three months ended March 31, 2012, the Company accrued $45,000 in as compensation for the services provided by these individuals to the Company.  The Company paid $16,500 of the amount accrued during the quarter. During the first quarter of 2011, the Company accrued $84,240 in compensation for the services provided by these individuals to the Company.

The son of the Company's CEO provides product development services to the Company. During the quarter ended March 31, 2012, the Company recorded $11,500 in Capitalized Software Development costs related to services provided by this individual.

During the quarter ended March 31, 2012, the son of the Company’s CEO returned 161,000 restricted shares of the Company’s common stock as full satisfaction of a $16,100 receivable from the individual. The shares were valued at $0.10 per share in this transaction.

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through May 14, 2012 which is the date that the financial statements were available to be issued and found no significant subsequent events that required additional disclosure.   

13

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This 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 quarter ended March 31, 2012, has been obtained solely through the reduction, adjustment or termination of various debt obligations and does not reflect 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. 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.

Product Base

Following a decade of development of its shopping cart-based electronic advertising technology, which was highly 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 to mobile technology. Since that time the Company has made remarkable progress on its mobile application development and implementation. The software programming of our consumer KleverShop™ application has been completed and is ready for in-store demonstration. Our retailer and supplier KleverDash™ application has completed its database and backend programming and is nearly complete with its user graphical interface. We have selected Wholesome Choice markets as our demonstration store, and at the time of this report had already completed our initial in store focus group panel.

Looking ahead towards commercial operations, we have ramped up our sales and market effort with the hiring of a Marketing Manager, who has refined our marketing plan to specifically target our message, develop our market penetration strategy and identify our tactical approach. Additionally, we hired a highly knowledgeable retail consultant to open doors to additional retailer contacts and assure that our message was on track with their needs.  It is important to understand that as advanced as our KleverShop™ and KleverDash™ applications are, we are fundamentally a solutions company helping our retail and supplier clients develop and implement their mobile strategies.  Residing in the KleverKloud™, our KleverDash™ product allows retailers to establish and manage digital promotion campaigns with far greater accuracy and flexibility than they are now able to achieve.  This product alone can revolutionize the way consumers, retailers and suppliers interact.  Our Sales and Marketing team launched a new website early in 2012 which highlights the features of our new products and our mobile management platform. We have invested in a new CRM system, which is now installed and our staff is fully trained. Several market outreach and data collection programs will take place next quarter. And we have also initiated discussions with a new hire Sales Manager and plan to conclude these arrangements next quarter.

14

The KleverShop™ experience begins with the creation of the shopping list. Whether they are items scanned in the home or items identified using an electronic shopping list template or through a downloaded recipe, the consumer can easily build a shopping list. The Company believes that the Klever system will make building a shopping list efficient and fun for the consumer while simultaneously creating the first touch point for learning their preferences and needs. With the initial shopping list complete, consumers will no longer need to wade through an ocean of coupons looking for the few they want. Instead, the coupons they want and need will come to them automatically. Additionally, suppliers and retailers will have the opportunity to up sell their products and make a direct and targeted impression on the consumer which should significantly contribute to basket up lift. This business model not only will save the consumer valuable time, but the simplicity of this process which is a key differentiator for Klever Marketing, is expected to save the Consumer Packaged Goods (“CPG”) companies and retailers time and money. Over time we anticipate that the term “coupon” will disappear from our vernacular as it is based on reference to a paper coupon, and instead product promotions and a new term for “digital redemptions” will take its place.

Using GPS capabilities, consumers can identify, select and check into the grocery store of their choice. Once in the grocery store, the consumer’s mobile device will become an indispensable shopping tool. Key features that consumers will benefit from with the Klever system include receiving personalized messages and special offers, taking advantage of in-store services such as placing deli and pharmaceutical orders, and redeeming coupons at checkout. With a simple scan or on-line retrieval, the consumer will be able to receive important information about a product while being empowered to make informed buying decisions. All of these features will help make the consumer more efficient and effective during their shopping experience.

Beyond the initial product release, plans are already being made to incorporate additional features and capabilities that promise to keep Klever Marketing in the vanguard of the shopping experience. Some of these include an intuitive and intelligent shopping list that learns what a consumer wants from their historic buying habits. Tell-a-Friend options that, through blogs and social networks such as Facebook, allows a consumer to share and receive recommendations and experiences. This form of viral marketing should prove to be an extremely valuable tool for CPG companies and grocery retailers to strengthen consumer loyalty and increase store sales. Also, integrating redemption and loyalty programs at checkout promises even more convenience for consumers in addition to generating tremendous savings.

As advanced as the KleverShop™ product is, the company believes the greatest return to our shareholders will come from our KleverDash™ product. Designed to assist suppliers and retailers design, track and implement their promotional campaigns, KleverDash™ manages this entire process electronically, giving users immediate feedback on the effectiveness of their campaigns and the ability to make changes on the fly. Much greater control and accountability is achieved, the consumers purchasing preference analytics and recommendation engine we are developing will be unsurpassed, and users of our digital products can eliminate most of the fraud inherent in the current paper coupon process, which alone justifies the shift to digital promotions. In this role Klever is shifting from a promotions company to a solutions company helping major brands define and implement their mobile strategies, which should provide much greater assurance of continued Company success than reliance on a single application.

Anticipated Business Development in the Next 12 Months

The next 12 months promise even more advances in the Company’s product implementation. Following final release of the Beta product, the Company expects to launch its commercial operations first locally, then regionally and expanding nationally with major retailer and supplier chains. The marketing and sales tools and resources we are putting in place will be utilized to accommodate a potentially rapid growth. Plans have also been made for the operational needs of our growing product base, which will require expanded server hardware and support network plus additional resources to serve our customers. Accomplishing this growth will require a significant capital infusion or partnership with another Company, and efforts in this direction are at the top of the Company’s priorities. While notable progress is being made, and the Company is optimistic about its future, we must caution the reader that Klever 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.

15

Results of Operations

Three months ended March 31, 2012 compared to Three months ended March 31, 2011

For the three months ended March 31, 2012, the Company had a net loss of ($140,005) as compared to net income of $27,383 for the three months ended March 31, 2011.  The decrease in net income was primarily due to the Company generating $177,000 of other income during the three months ended March 31, 2011 due to the Company cancelling agreements with an investment banking firm and an investment firm. General and administrative costs totaled $126,149 during the first quarter of 2012 compared to $136,412 for the first quarter of 2011.  General and administrative costs declined because of a reduction in legal and professional fees of $23,892 partially offset by an increase in accounting fees of $8,299. Legal fees were down due to the Company capitalizing costs in 2012 associated with obtaining patents and trademarks for the Company coupled with lower fees for legal work associated with the Company’s re-audit of its 2009 financial statements that took place in the prior year. Accounting fees increased due to timing as the Company was forced to re-audit its 2009 financial statements due to the Company’s predecessor audit firm that audited the Company’s 2009 financial statements being deregistered by the PCAOB. The timing of the re-audit pushed a significant portion of the Company’s accounting fees from the first quarter of 2011 to the second quarter of 2011.

The Company incurred $1,567 of research and development expenses during the quarter ended March 31, 2012 as compared to $3,917 for the quarter ended March 31, 2011.  The decrease in research and development expenses is primarily the result of the Company reaching technological feasibility with its mobile phone technology and capitalizing costs incurred to complete its development.

During the quarter ended March 31, 2012, interest expense increased to $12,289 from $9,288 for the quarter ended March 31, 2011 as a result of increased debt resulting from settlement agreements the Company has with certain creditors requiring interest to be accrued because the Company was unable to pay the required obligations by the contractual deadline.

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 quarter ended March 31, 2012, the Company was able to sell 364,444 restricted shares of common stock for $34,500 as well as receive a stock deposit of $12,500 shares for an additional 125,000 shares of common stock issued subsequent to quarter end. The Company has used the proceeds from this transaction to pay certain obligations and to continue with its product development efforts. The Company invested $33,955 in its capitalized software development and patents and trademarks for its intellectual property during the quarter. Management believes that the Company will require additional funding and they are 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, 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 were ($79,357) and ($37,350) for the three months ended March 31, 2012 and 2011, respectively.  The increase in cash flows used in operating activities is primarily due to decreased profitability resulting from the Company cancelling agreements with an investment banking firm and an investment firm during the quarter ended March 31, 2011 partially offset by smaller combined increases in accounts payable and accrued liabilities for the quarter ending March 31, 2012 as compared to the quarter ended March 31, 2011.

Cash flows from investing activities totaled ($34,935) for the quarter ended March 31, 2012 as the Company incurred costs to develop its mobile phone technology and obtain patents and trademarks. Cash flows from investing activities were zero for the quarter ended March 31, 2011.

Cash flows generated from financing activities totaled $47,000 for the three months ended March 31, 2012 as compared to $37,500 for the three months ended March 31, 2011.  During the three months ended March 31, 2012, the Company sold 364,444 restricted shares of common stock to individuals for $34,500 and received a stock deposit to purchase 125,000 restricted shares of common stock for $12,500. During the three months ended March 31, 2011, the Company received proceeds from sales of common stock of $37,500.

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

16

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures  

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC.  This information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.  Our Chief Executive Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation and the requirements of the Exchange Act, our Chief Executive Officer concluded that, as of March 31, 2012, our disclosure controls and procedures needed continue to be declared as ineffective.  The small size of our company does not provide for the desired segregation of duty control functions, and we do not have the required level of documentation of our monitoring and control procedures.  The remedies for this situation are described below.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).  Management conducted an evaluation of the effectiveness of our internal control over financial reporting and determined that our internal control over financial reporting was ineffective as of March 31, 2012 due to material weaknesses.  A material weakness in internal control over financial reporting is defined by the Public Company Accounting Oversight Board’s Audit Standard No. 5 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 four 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, plus an Audit Committee 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 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 with regard to our monitoring and ensuring compliance with key controls including regard to our authorized shares for preferred stock and in ensuring that stock certificates are issued to subscribers in a timely manner.

• 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.

In light of the material weaknesses described above for the quarter ended March 31, 2012, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Management intends to further mitigate the risk of the material weaknesses going forward by utilizing external financial consulting services, in a more effective manner, prior to the review by our principal independent accounting firm to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.

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 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.

17

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

None

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 consolidated financial statements for the year ended December 31, 2011, 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, 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 no 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 complete the development of its technology and to pay its obligations.  As a result, the Company will require additional financing to execute its business plan.

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 most likely source of future funds presently available to us is through the additional sale of equity capital or through a convertible debt instrument. Any sale of share capital will 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. 

18

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 pink sheets under the symbol KLMK.PK.  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.  Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended March 31, 2012, the Company sold 364,444 of unregistered common shares to individuals resulting in the Company receiving proceeds of $34,500. These securities were sold without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(6) and/or Section 4(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not involving any public offering.  Each of the investors was an accredited investor as defined in Regulation D. Each investor represented that he, she, or it had not entered into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. Representatives of each investor were afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction.  No underwriting discounts or commissions were paid in connection with the transaction.

The proceeds were used to help fund the Company’s operations including the ongoing development of the Company’s mobile phone technology.

Item 3.  Defaults Upon Senior Securities

None.

19

Item 4.  Submission of Matters to Vote of Security Holders

None

Item 5.  Other Information

None.

Item 6.  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)
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.

20

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Klever Marketing, Inc.

(Registrant)

DATE:   May 14, 2012

By: /s/ Paul G Begum

Paul G. Begum

Chairman

(Principal Executive Officer)

By: /s/ Robert Campbell

Robert Campbell

(Principal Financial Officer)

21

EX-31.1

Exhibit 31.1

Section 302 Certifications

I, Paul G. Begum, certify that:

1. I have reviewed this quarterly report on form 10-Q of Klever Marketing, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a – 15(f) and 15d – 15(f) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer is made known to us by others, particularly during the period in which this report is being prepared;

b. Designed such disclosure control over financial reporting, or caused such internal control over financial reporting got be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the this fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small issuer’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: May 14, 2012

By: /s/ Paul G Begum

Paul G. Begum

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Section 302 Certifications

I, Robert Campbell, certify that:

1. I have reviewed this quarterly report on form 10-Q of Klever Marketing, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a – 15(f) and 15d – 15(f) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer is made known to us by others, particularly during the period in which this report is being prepared;

b. Designed such disclosure control over financial reporting, or caused such internal control over financial reporting got be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the this fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small issuer’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: May 14, 2012

By: /s/ Robert Campbell

Robert Campbell

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Klever Marketing, Inc. on Form 10-Q for the period ending March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul G. Begum Chairman and Principal Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By: /s/ Paul G Begum

Paul G. Begum

(Principal Executive Officer)

May 14, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Klever Marketing, Inc. on Form 10-Q for the period ending March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Campbell, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By: /s/ Robert Campbell

Robert Campbell

(Principal Financial Officer)

May 14, 2012

XML

NOTE 4 - PREFERRED STOCK

3 Months Ended

Mar. 31, 2012

Preferred Stock [Text Block]

NOTE 4 – 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 March 31, 2012 and December 31, 2011, there were 312,559 preferred shares issued and outstanding.  As of March 31, 2012, all of the Company’s outstanding preferred shares are owned by a Company that is controlled by the Company’s CEO.

In March, 2011, management realized that the preferred stock dividend that was paid in 2008 had resulted in the Company issuing more shares of Class A and Class B shares than were authorized pursuant to the Board resolution that was passed in June 2002.  On April 14, 2011 the board of directors approved an increase to the authorized number of shares of preferred stock as described below.

Preferred Stock Dividends

As of March 31, 2012, the Company had accrued and unpaid preferred stock dividends totaling $362,148 relating to dividends for the fifteen months ended March 31, 2012.

Class A Voting Preferred Stock

On February 7, 2000, the Board of Directors authorized and established “Class A Voting Preferred Stock” (“Class A Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class A Shares consisted of 125,000 shares designated as Series 1 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class A voting preferred stock to 55,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class A Voting Preferred shares to 150,000.

Initially, Class A Shares were convertible into Common Stock at an initial conversion price of $2.60 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class A preferred stock is convertible into 99.035 shares of common stock upon conversion.  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.  In addition, each holder of Class A Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class A Shareholders shall be entitled to one vote for each share of Common Stock into which such Class A Shares could then be converted, and shall have voting rights and powers equal to that of a holder of Common Stock.  The Holders of Class A Shares shall vote with the holders of Common Stock and not as a separate class.

Class A Shares carry a liquidation preference of $26.00 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.

The Class A Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 1, 2002. The redemption price shall be $26.00 per share together with accrued but unpaid dividends on such shares, if any.

Class B Voting Preferred Stock

On September 24, 2000, the Board of Directors authorized and established “Class B Voting Preferred Stock” (“Class B Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class B Shares consisted of 125,000 shares designated as Series 1 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class B voting preferred stock to 42,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class B Voting Preferred shares to 125,000.

Initially, Class B Shares were convertible into Common Stock at an initial conversion price of $1.70 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class A preferred stock is convertible into 64.754 shares of common stock upon conversion.  Holders of Class B Shares are entitled to receive dividends at the rate of $1.70 per share per annum, payable semi-annually. Such dividends shall be cumulative and may be paid in cash or in kind through the distribution of .0425 Class B Shares, of the same Series for which the dividend is accrued, for each outstanding Class B Share, on each dividend payment date. In addition, each holder of Class B Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class B Shareholders shall be entitled to one vote for each share of Common Stock into which such Class B Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class B Shares shall vote with the holders of shares of Common Stock and not as a separate class.

Class B Shares shall carry a liquidation preference of $17.00 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. The Class B Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after March 24, 2004 for Series 1, and such date as determined by the Board of Directors for each additional Series.  The redemption price shall be $17.00 per share together with accrued but unpaid dividends on such shares, if any.

Class C Voting Preferred Stock

On January 2, 2001, the Board of Directors authorized and established “Class C Voting Preferred Stock” (“Class C Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class C Shares consisted of 125,000 shares designated as Series 1 shares and 125,000 shares thereof were designated as Series 2 shares.  On May 20, 2002, the Board of Directors amended the number of authorized shares of Class C voting preferred stock to 150,000 shares.  On April 14, 2011, the Board of Directors increased the number of authorized Class C Voting Preferred shares to 200,000.

Initially, Class C Shares were convertible into Common Stock at an initial conversion price of $0.66 (subject to adjustment).  In November 2011, the board passed a resolution and clarified that the adjusted conversion price meant that each share of Class C preferred stock is convertible into 25.140 shares of common stock upon conversion.   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. In addition,  each holder of a Class C Shares is entitled to receive, when and as declared, a dividend equal to each dividend declared and paid on the shares of Common Stock, on a share for share basis.

Class C Shareholders shall be entitled to one vote for each share of Common Stock into which such Class C Shares could then be converted and shall have voting rights and powers equal to the voting rights and powers of a holder of shares of Common Stock. The holders of Class C Shares shall vote with the holders of shares of Common Stock and not as a separate class.

Class C Shares shall carry a liquidation preference of $6.60 per share plus any accrued but unpaid dividends on such shares, if any, and adjusted for combinations, splits, dividends or distributions of shares of stock with respect to such shares.

The Class C Shares shall be redeemable by the Company, in whole or in part, at the option of the Board of Directors of the Company, at any time and from time to time on or after July 2, 2004 for Series 1, and such date as determined by the Board of Directors for each additional Series.  The redemption price shall be $6.60 per share together with accrued but unpaid dividends on such shares, if any.

Class D Voting Preferred Stock

On May 20, 2002, the Board of Directors authorized and established “Class D Voting Preferred Stock”  (“Class D Shares”) as a class of its $.01 par value, 2,000,000 shares authorized, preferred stock.  Class D Shares consist of 500,000 shares thereof are designated as “Class D Voting Preferred Stock” (the “Class D Shares”).

Class D Shares are convertible into Common Stock at an initial conversion price of $1.05 (subject to adjustment).

XML

NOTE 3 - GOING CONCERN

3 Months Ended

Mar. 31, 2012

Going Concern Note

NOTE 3 – GOING CONCERN

As shown in the accompanying financial statements, the Company incurred a net loss of $140,005 during the three months ended March 31, 2012. The Company did not generate any revenue from product sales during the three months ended March 31, 2012 or March 31, 2011.  As of March 31, 2012, the Company’s current and total liabilities exceeded its current assets by $1,592,938.  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 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.  As of March 31, 2012, the Company had $110,581 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.  Management is actively pursuing additional sources of financing sufficient to generate enough cash flow to fund its operations for the next year. However, management cannot make any assurances that such financing will be secured.

XML

Condensed Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash	$ 110,581	$ 177,873
Total Current Assets	110,581	177,873
FIXED ASSETS
Capitalized software	217,343	191,120
Office equipment	980
Less accumulated depreciation	(44)
Total Fixed Assets	218,279	191,120
OTHER ASSETS
Intangibles, net	35,856	28,124
Total Other Assets	35,856	28,124
TOTAL ASSETS	364,716	397,117
CURRENT LIABILITIES
Accounts payable	467,315	455,860
Accrued liabilities	846,556	807,788
Preferred stock dividends	362,148	323,968
Notes payable	15,000	15,000
Stock deposits	12,500
Total Current Liabilities	1,703,519	1,602,616
Total Liabilities	1,703,519	1,602,616
Common stock (par value $0.01), 250,000,000 shares authorized,45,716,377 and 45,512,933 shares issued and outstanding, respectively	457,163	455,129
Treasury stock, 100,000 shares at March 31, 2012 and December 31, 2011	(1,000)	(1,000)
Due from related party, payable in common stock		(16,100)
Paid in capital in excess of par value	16,590,535	16,601,968
Retained deficit	(3,333,785)	(3,333,785)
Deficit accumulated during development stage	(15,054,842)	(14,914,837)
Total Stockholders' Deficit	(1,338,803)	(1,205,499)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	364,716	397,117
Preferred Class A [Member]
CURRENT LIABILITIES
Convertible preferred stock - Class	1,011	1,011
Preferred Class B [Member]
CURRENT LIABILITIES
Convertible preferred stock - Class	767	767
PreferredClassCMember
CURRENT LIABILITIES
Convertible preferred stock - Class	$ 1,348	$ 1,348

XML

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

3 Months Ended

Mar. 31, 2012

Business Description and Basis of Presentation [Text Block]

NOTE 1 – BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its December 31, 2011 Annual Report on Form 10-K.  Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The Company was organized under the laws of the State of Delaware in December 1989.  The Company was in the development stage from 1989 to 1991.  The Company was an operating company from 1992 to December 8, 1993 when it filed petitions for relief under Chapter 11 bankruptcy.  The Company was inactive until July 5, 1996 when the Company merged with Klever Kart, Inc. in a reverse merger and changed its name to Klever Marketing, Inc. The Company has been in the development stage since the reverse merger occurred.

The Company was formed for the purpose of creating a vehicle to obtain capital, to file and acquire patents, to seek out, investigate, develop, manufacture, market and distribute an electronic shopping cart for in-store advertising, promotion and media content and retail shopper services, which have potential for profit.

XML

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2012

Significant Accounting Policies [Text Block]

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Earnings Per Common Share

In accordance with ASC 260, Earnings Per Share (“ASC 260”), the computations of basic and fully diluted earnings 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 periods ended March 31, 2012, common stock equivalents related to the conversion of preferred rights have not been included in calculation of diluted earnings per share because they are anti-dilutive. Common stock equivalents have been included in the computations for the periods ended March 31, 2011 as shown in the table below.  

Following is a reconciliation of the income (loss) per share for the three months ended March 31, 2012 and 2011, respectively:

	Three Months Ending March 31,
	2012			2011
Numerator:
Income (loss) before extraordinary items	$	(140,005	)	$	27,383
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(140,005	)	$	27,383
Denominator:
Weighted-average common shares outstanding
Basic		45,432,031			45,476,036
Conversion of preferred rights		—			16,739,800
Diluted		45,432,031			62,215,836
Income (loss) per share
Basic
Income (loss) before extraordinary items	$	(0.00	)	$	0.00
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(0.00	)	$	0.00
Diluted
Income (loss) before extraordinary items	$	(0.00	)	$	0.00
Income from extraordinary items, net of tax		—			—
Net income (loss)	$	(0.00	)	$	0.00

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.  The Company achieved technological feasibility with regard to its mobile phone technology during the fourth quarter of 2010. The Company had $217,343 and $191,120 of capitalized software development costs as of March 31, 2012 and December 31, 2011, respectively.

Intangibles

Intangible assets, consisting of patents and trademarks, are amortized on a straight-line basis over periods ranging from 10-14 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 March 31, 2012, intangible assets have a cost of $810,901, accumulated amortization of $775,045, and had a net book value of $35,856.  As of December 31, 2011, intangible assets had a cost of $803,169, accumulated amortization of $775,045 and had a net book value of $28,124.

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 tax position to determine the amount to recognize in the financial statements. As a result of the implementation of ASC 740, the Company performed a review of its material tax positions in accordance with measurement standards established by ASC 740. At the adoption date of January 1, 2007, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit through March 31, 2012.  The Company also estimates that the unrecognized tax benefit will not change significantly within the next twelve months.

The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

There are no tax positions included in the accompanying financial statements at March 31, 2012 or December 31, 2011 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

As the Company has significant net operating loss carry forwards, even if certain of the Company’s tax positions were disallowed, it is not foreseen that the Company would have to pay any taxes in the near future.  Consequently, the Company does not calculate the impact of interest or penalties on amounts that might be disallowed.

The Company files income tax returns in the U.S. federal and Utah jurisdictions.  Tax years 2008 to current remain open to examination by U.S. federal and state tax authorities.

From inception through March 31, 2012, the Company has incurred net losses and, therefore, had no tax liability.  The net deferred tax asset generated by the loss carry-forwards has been fully reserved.  The cumulative net operating loss carry-forward is approximately $17.1 million as of March 31, 2012, and will expire in the years 2015 through 2029.

Research and Development

The Company continues to develop its technology which facilitates the use of in-store advertising, product promotion and digital coupon redemption 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 to provide "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.

During the three months ended March 31, 2012 and 2011, the Company incurred costs of $1,567 and $3,917 respectively, for research and development costs associated with developing its technologies.

Fair Value of Financial Instruments

The Company has adopted ASC 820-10-50, Fair Value Measurements. This guidance 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.

The carrying amounts reported in the accompanying balance sheets as of March 31, 2012 and December 31, 2011 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. The carrying value of notes payable approximates fair value because negotiated terms and conditions are consistent with current market rates as of March 31, 2012 and December 31, 2011.

Reclassification

During the quarter ended March 31, 2011, the Company received back 1,150,000 shares of common stock valued at $168,000 and $9,000 of cash in connection with cancelling certain agreements with an investor and an investment banking firm. In the Company’s March 31, 2011 Form 10-Q, the Company recorded these transactions as reductions of “General and Administrative” expense in its Statement of Operations. Management reevaluated the classification of these transactions during their year-end audit and determined that they should be classified as “Other Income” within the Company’s Statement of Operations for the year ended December 31, 2011. As a result of the above, the Company has made a similar reclassification in the March 31, 2011 Statement of Operations presented in these financial statements to conform to the presentation of the Form 10-K Statement of Operations for the year ended December 31, 2011. Neither net income nor total equity changed as a result of this reclassification as of and for the three months ended March 31, 2011.

XML

Condensed Balance Sheets (Parentheticals) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	45,716,377	45,512,933
Common stock, shares outstanding	45,716,377	45,512,933
Treasury stock shares	100,000	100,000
Preferred Class A [Member]
Convertible preferred stock - par value (in Dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock - shares authorized	150,000	150,000
Convertible preferred stock - shares issued	101,134	101,134
Convertible preferred stock - shares outstanding	101,134	101,134
Convertible preferred stock - liquidation preference (in Dollars)	$ 2,629,484	$ 2,629,484
Preferred Class B [Member]
Convertible preferred stock - par value (in Dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock - shares authorized	125,000	125,000
Convertible preferred stock - shares issued	76,651	76,651
Convertible preferred stock - shares outstanding	76,651	76,651
Convertible preferred stock - liquidation preference (in Dollars)	1,303,067	1,303,067
PreferredClassCMember
Convertible preferred stock - par value (in Dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock - shares authorized	200,000	150,000
Convertible preferred stock - shares issued	134,774	134,774
Convertible preferred stock - shares outstanding	134,774	134,774
Convertible preferred stock - liquidation preference (in Dollars)	$ 889,508	$ 889,508

XML

Document And Entity Information (USD $)	3 Months Ended
	Mar. 31, 2012	May 09, 2012	Jun. 30, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	KLEVER MARKETING INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		45,901,377
Entity Public Float			$ 1,137,292
Amendment Flag	false
Entity Central Index Key	0000866439
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

XML

Condensed Statements of Operations (USD $)	3 Months Ended		189 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
REVENUES			$ 256,000
EXPENSES
Sales and marketing			163,306
General and administrative	126,149	136,412	11,824,426
Research and development	1,567	3,917	4,771,660
Total Expenses	127,716	140,329	16,759,392
OTHER INCOME (EXPENSE)
Other income		177,000	685,751
Interest income			19,152
Interest expense	(12,289)	(9,288)	(2,702,529)
Forgiveness of debt			466,953
Gain on sale of assets			518,978
Capital gain on sale of investments			191,492
Total Other Income (Expense)	(12,289)	167,712	(820,203)
NET INCOME (LOSS) BEFORE INCOME TAXES	(140,005)	27,383	(17,323,595)
INCOME TAXES			2,641
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS	(140,005)	27,383	(17,326,236)
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING			2,271,394
NET INCOME (LOSS)	$ (140,005)	$ 27,383	$ (15,054,842)
BASIC INCOME (LOSS) PER COMMON SHARE (in Dollars per share)	$ 0.00	$ 0.00
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE (in Dollars per share)	$ 0.00	$ 0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC (in Shares)	45,432,031	45,476,036
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - FULLY DILUTED (in Shares)	45,432,031	62,215,836

XML

NOTE 7 - COMMON STOCK

3 Months Ended

Mar. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

NOTE 7 – COMMON STOCK

During the three months ended March 31, 2012, the Company sold 364,444 shares of restricted common stock at a weighted average price of $0.095 per share to individuals for $34,500.

During the three months ended March 31, 2012, the Company received back 161,000 shares of restricted common stock from the son of the Company’s CEO as full repayment or a $16,100 receivable owed to the Company. Because of the related party nature of the transaction, the receivable was classified within Stockholders’ Deficit on the December 31, 2011 balance sheet. The shares were subsequently cancelled by the Company.

During the three months ended March 31, 2011, the Company sold 250,000 shares of restricted common stock at $0.15 per share to an individual for $37,500.

During the three months ended March 31, 2011, the Company received back 1,000,000 shares of restricted common stock from an investment banking firm and $2,500 in cash as a result of cancelling their agreement with the Company. The investment bank firm had been engaged to assist the Company with finding financing sources. The Company recorded a credit to other income of $155,000 in connection with the cash received and the cancellation and retirement of the shares.

During the quarter ended March 31, 2011, the Company issued 50,000 shares to a third party to settle outstanding accounts payable obligations for services provided.

During the quarter ended March 31, 2011, the Company cancelled its agreement with a private investor. Pursuant to the terms of the cancellation, the Company received back 150,000 shares of common stock and $6,500 in cash. The Company recorded a credit to other income of $22,000 in connection with the cash received and the cancellation and retirement of the shares.

XML

NOTE 6 - STOCK OPTIONS

3 Months Ended

Mar. 31, 2012

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

NOTE 6 – STOCK OPTIONS

The shareholders approved, by a majority vote, the adoption of the 1998 Stock Incentive Plan (the “Plan”).  As amended on August 11, 2003, the Plan reserves 20,000,000 shares of common stock for issuance upon the exercise of options which may be granted from time-to-time to officers, directors and certain employees and consultants of the Company or its subsidiaries.  The Plan permits the award of both qualified and non-qualified incentive stock options.  On August 18, 2003, the Company registered its “Amended Stock Incentive Plan of Klever Marketing, Inc.” on Form S-8.  The Company granted 125,000 stock options during the three months ended March 31, 2012.  The options vest immediately and have an exercise price of $0.10 per share. Of the options granted, 100,000 expire on September 22, 2012 and 25,000 expire on December 31, 2012. The Company recorded $10,381 of consulting expense during the three months ended March 31, 2012 in connection with issuing the options. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions noted below:

Assumptions
Dividend Yield	0%
Weighted average volatility	487.85%
Risk-free interest rate	0.18%
Expected Life (years)	0.59

The summary of option activity for the three months ended March, 2012 is presented below:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Balance as of December 31, 2011	—	$	—	$	—
Granted	125,000		0.10		0.59
Expired	—		—		—
Cancelled	—		—		—
Balance as of March 31, 2012	125,000	$	0.10	$	0.53

As of March 31, 2012, 125,000 options were exercisable. The weighted-average grant-date fair value of options granted during the three months ended March 31, 2012 was $0.08. There were no options granted during the three months ended March 31, 2011.

As of March 31, 2012, the intrinsic value of outstanding and vested stock options was $0.

Expected option lives and expected stock price volatility were based on historical data of the Company. The risk free interest rate was calculated using U.S. Treasury constant maturity rates similar to the expected lives of the options, as published by the Federal Reserve. The Company has no plans to declare any future dividends on our common stock.

XML

NOTE 8 - RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2012

Related Party Transactions Disclosure [Text Block]

NOTE 8 – RELATED PARTY TRANSACTIONS

The Company’s CEO, CFO and the bookkeeper who is the wife of the CEO did not take any compensation for services provided to the Company during 2009 and 2010.  During the three months ended March 31, 2012, the Company accrued $45,000 in as compensation for the services provided by these individuals to the Company.  The Company paid $16,500 of the amount accrued during the quarter. During the first quarter of 2011, the Company accrued $84,240 in compensation for the services provided by these individuals to the Company.

The son of the Company's CEO provides product development services to the Company. During the quarter ended March 31, 2012, the Company recorded $11,500 in Capitalized Software Development costs related to services provided by this individual.

During the quarter ended March 31, 2012, the son of the Company’s CEO returned 161,000 restricted shares of the Company’s common stock as full satisfaction of a $16,100 receivable from the individual. The shares were valued at $0.10 per share in this transaction.

XML

NOTE 9 - SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2012

Subsequent Events [Text Block]

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through May 14, 2012 which is the date that the financial statements were available to be issued and found no significant subsequent events that required additional disclosure.   

XML

Condensed Statements of Cash Flows (USD $)	3 Months Ended		189 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (140,005)	$ 27,383	$ (15,054,842)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Stock issued for general and administrative		(159,000)	1,270,556
Stock issued for research and development			62,850
Stock returned for services not rendered			(391,446)
(Gain)/loss on sale/disposal of assets			(5,495)
Compensation expense from stock options and warrants	10,381		106,163
Stock issued for interest			135,226
Stock issued for accounts payable			243,458
Deferred income			(214,000)
Depreciation and amortization	44		1,912,927
Write-off bad debts			15,000
Debt forgiveness			(174,825)
Services contributed by officers			60,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			62,281
(Increase) decrease in other assets and prepaids		17	89,238
Increase (decrease) in accounts payable	11,455	723	475,465
Increase (decrease) in accrued liabilities	38,768	93,527	926,145
Net Cash Used by Operating Activities	(79,357)	(37,350)	(10,481,299)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/sale of equipment, net			(587,801)
Capitalized software development costs	(26,223)		(195,943)
Proceeds from sale of intangible assets			516,570
Purchase of equipment	(980)		(980)
Acquisition/sale of patents and other intangibles	(7,732)		(35,306)
Acquisition/sale of stock, net			12,375
Net Cash Used by Investing Activities	(34,935)		(291,085)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock deposit	12,500		23,500
Stock subscription received			23,000
Proceeds from capital stock issued	34,500	37,500	7,647,201
Proceeds from loans			3,473,252
Change in line-of-credit			4,837
Loan receivables			(15,000)
Principal payments on lease obligations			(18,769)
Cash payments on note payable			(279,730)
Net Cash Provided by Financing Activities	47,000	37,500	10,858,291
NET INCREASE (DECREASE) IN CASH	(67,292)	150	85,907
CASH AT BEGINNING OF PERIOD	177,873	1,071	24,674
CASH AT END OF PERIOD	110,581	1,221	110,581
Cash Paid For:
Interest			3,326
Income taxes			1,841
Non-Cash Transactions from Investing and Financing Activities:
Common stock returned to company to pay related party receivable	16,100
Common stock issued to pay accounts payable		6,730
Accrual for preferred stock dividends payable with preferred shares	$ 38,180	$ 102,469

XML

NOTE 5 - LITIGATION AND CONTINGENT LIABILITIES

3 Months Ended

Mar. 31, 2012

Legal Matters and Contingencies [Text Block]

NOTE 5 – LITIGATION AND CONTINGENT LIABILITIES

The Company has certain claims against it for unpaid salary and benefits due to former officers and employees that exist on the balance sheet as accrued liabilities as of March 31, 2012 and December 31, 2011. Management is in the process of negotiating with a number of these claimants in order to reach agreements that would allow these liabilities to be settled through agreed upon cash payments as well as issuance of stock and stock options.