NOTE 3 - RESTATEMENT

3 Months Ended

Mar. 31, 2012

Text Block [Abstract]

NOTE 3 - RESTATEMENT

NOTE 3 – RESTATEMENT

On August 9, 2012, the Board of Directors of Klever Marketing, Inc. concluded that we should restate our financial statements as of and for the quarter ended March 31, 2012 and for the period from inception of development stage on July 5, 1996 to March 31, 2012. Subsequent to filing the March 31, 2012 10-Q, management concluded that the Company was involved in an uncertain tax position that met the more-likely-than-not threshold as of March 31, 2012. Management has measured the uncertain tax position and recorded a liability to reflect the impact of the uncertain tax position in the financial statements as of and for the three months ended March 31, 2012 and for the period from inception to March 31, 2012. Management also identified an error related to the classification of compensation paid to a related party for the period from inception of development stage on July 5, 1996 to March 31, 2012.

The errors relate to management not identifying that the Company had uncertain tax positions as of March 31, 2012 that met the more-likely-than-not threshold for which the Company had not accrued liabilities. Upon discovering the error, management has measured the uncertain tax positions and recorded liabilities to reflect the impact. In addition, the Company incorrectly netted compensation paid to a related party against its gain on sale of assets resulting in the gain on sale of assets and general and administrative expenses being understated for the period from inception of development stage on July 5, 1996 to March 31, 2012.

The Company’s internal controls were not designed or operating effectively to ensure that all uncertain tax positions were identified, evaluated, and when appropriate, measured and recorded in the Company’s financial statements and that all related party transactions were accounted for and properly disclosed in the financial statements. As a result, the Company’s income tax expense, gain on sale of assets and general and administrative expense were misstated in the Statement of Operations for the period from inception of development stage on July 5, 1996 to March 31, 2012. The effect of these errors on the Statement of Operations for the aforementioned period is to decrease the Company’s net income by $30,716 and to increase the Company’s gain on sale of assets and general and administrative expenses by $131,203. For the three months ended March 31, 2012, the Company recorded $1,615 of interest and penalties associated with the uncertain tax position.

The March 31, 2012 balance sheet and the statements of operations and statements of cash flows for the three months ended March 31, 2012 and for the period from inception of development stage on July 5, 1996 to March 31, 2012 have been restated as follows:

Condensed Balance Sheet

(Unaudited)

ASSETS

	March 31, 2012
	As Previously
	Reported			Adjustments			As Restated
CURRENT ASSETS
Cash	$	110,581		$	–		$	110,581
Total Current Assets		110,581			–			110,581
FIXED ASSETS
Capitalized software		217,343			–			217,343
Office equipment		980			–			980
Less accumulated depreciation		(44	)		–			(44	)
Total Fixed Assets		218,279			–			218,279
OTHER ASSETS
Intangibles, net		35,856			–			35,856
Total Other Assets		35,856			–			35,856
TOTAL ASSETS	$	364,716		$	–		$	364,716
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable	$	467,315		$	–		$	467,315
Accrued liabilities		846,556			30,716			877,272
Preferred stock dividends		362,148			–			362,148
Notes payable		15,000			–			15,000
Stock deposits		12,500			–			12,500
Total Current Liabilities		1,703,519			30,716			1,734,235
Total Liabilities		1,703,519			30,716			1,734,235
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			–			457,163
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		–			–			–
Paid in capital in excess of par value		16,590,535			–			16,590,535
Retained deficit		(3,333,785	)		–			(3,333,785	)
Deficit accumulated during development stage		(15,054,842	)		(30,716	)		(15,085,558	)
Total Stockholders' Deficit		(1,338,803	)		(30,716	)		(1,369,519	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	364,716		$	–		$	364,716

Condensed Statements of Operations

(Unaudited)

	For the Three Months Ended March 31, 2012
	As Previously
	Reported			Adjustments			As Restated
REVENUES	$	–		$	–		$	–
EXPENSES
Sales and marketing		–			–			–
General and administrative		126,149			–			126,149
Research and development		1,567			–			1,567
Total Expenses		127,716			–			127,716
OTHER INCOME (EXPENSE)
Other income		–			–			–
Interest income		–			–			–
Interest expense		(12,289	)		–			(12,289	)
Forgiveness of debt		–			–			–
Gain on sale of assets		–			–			–
Capital gain on sale of investments		–			–			–
Total Other Income (Expense)		(12,289	)		–			(12,289	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(140,005	)		–			(140,005	)
INCOME TAXES		–			1,615			1,615
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS		(140,005	)		(1,615	)		(141,620	)
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING		–			–			–
NET INCOME (LOSS)	$	(140,005	)	$	(1,615	)	$	(141,620	)
BASIC INCOME (LOSS) PER COMMON SHARE	$	(0.00	)	$	(0.00	)	$	(0.00	)
FULLY DILUTED INCOME (LOSS) PER COMMON SHARE	$	(0.00	)	$	(0.00	)	$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		45,432,031						45,432,031
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - FULLY DILUTED		45,432,031						45,432,031

Condensed Statements of Operations

(Unaudited)

	From Inception of Development Stage on July 5, 1996 Through March 31, 2012
	As Previously
	Reported			Adjustments			As Restated
REVENUES	$	256,000		$	–		$	256,000
EXPENSES
Sales and marketing		163,306			–			163,306
General and administrative		11,824,426			131,203			11,955,629
Research and development		4,771,600			–			4,771,660
Total Expenses		16,759,392			131,203			16,890,595
OTHER INCOME (EXPENSE)
Other income		685,751			–			685,751
Interest income		19,152			–			19,152
Interest expense		(2,702,529	)		–			(2,702,529	)
Forgiveness of debt		466,953			–			466,953
Gain on sale of assets		518,978			131,203			650,181
Capital gain on sale of investments		191,492			–			191,492
Total Other Income (Expense)		(820,203	)		131,203			(689,000	)
NET INCOME (LOSS) BEFORE INCOME TAXES		(17,323,595	)		–			(17,323,595	)
INCOME TAXES		2,641			30,716			33,357
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS		(17,326,236	)		(30,716	)		(17,356,952	)
EXTRAORDINARY ITEM - TROUBLED DEBT RESTRUCTURING		2,271,394			–			2,271,394
NET INCOME (LOSS)	$	(15,054,842	)	$	(30,716	)	$	(15,085,558	)

Condensed Statement of Cash Flows

(Unaudited)

	For the Three Months Ended March 31, 2012
	As Previously
	Reported			Adjustments			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(140,005	)	$	(1,615	)	$	(141,620	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Stock issued for general and administrative		–			–			–
Stock issued for research and development		–			–			–
Stock returned for services not rendered		–			–			–
(Gain)/loss on sale/disposal of assets		–			–			–
Compensation expense from stock options and warrants		10,381			–			10,381
Stock issued for interest		–			–			–
Stock issued for accounts payable		–			–			–
Deferred income		–			–			–
Depreciation and amortization		44			–			44
Write-off bad debts		–			–			–
Debt forgiveness		–			–			–
Services contributed by officers		–			–			–
Changes in operating assets and liabilities:		–
(Increase) decrease in accounts receivable		–			–			–
(Increase) decrease in other assets and prepaids		–			–			–
Increase (decrease) in accounts payable		11,455			–			11,455
Increase (decrease) in accrued liabilities		38,768			1,615			40,383
Net Cash Used by Operating Activities		(79,357	)		–			(79,357	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/sale of equipment, net		–			–			–
Capitalized software development costs		(26,223	)		–			(26,223	)
Proceeds from sale of intangible assets		–			–			–
Purchase of equipment		(980	)		–			(980	)
Acquisition/sale of patents and other intangibles		(7,732	)		–			(7,732	)
Acquisition/sale of stock, net		–			–			–
Net Cash Used by Investing Activities	$	(34,935	)	$	–		$	(34,935	)

Condensed Statement of Cash Flows

(Unaudited)

	For the Three Months Ended March 31, 2012
	As Previously
	Reported			Adjustments		As Restated
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock deposit	$	12,500		$	–	$	12,500
Stock subscription received		–			–		–
Proceeds from capital stock issued		34,500			–		34,500
Proceeds from loans		–			–		–
Change in line-of-credit		–			–		–
Loan receivables		–			–		–
Principal payments on lease obligations		–			–		–
Cash payments on note payable		–			–		–
Net Cash Provided by Financing Activities		47,000			–		47,000
NET INCREASE (DECREASE) IN CASH		(67,292	)				(67,292	)
CASH AT BEGINNING OF PERIOD		177,873					177,873
CASH AT END OF PERIOD	$	110,581				$	110,581
SUPPLEMENTAL DISCLOSURES
Cash Paid For:
Interest	$	–				$	–
Income taxes	$	–				$	–
Non-Cash Transactions from Investing and  Financing Activities:
Common stock returned to company to  pay related party receivable	$	16,100				$	16,100
Common stock issued to pay accounts payable	$	–				$	–
Accrual for preferred stock dividends payable with preferred shares	$	16,100				$	16,100

Condensed Statement of Cash Flows

(Unaudited)

	From Inception of Development Stage
	on July 5, 1996 Through March 31, 2012
	As Previously
	Reported			Adjustments			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(15,054,842	)	$	(30,716	)	$	(15,085,558	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Stock issued for general and administrative		1,270,556			–			1,270,556
Stock issued for research and development		62,850			–			62,850
Stock returned for services not rendered		(391,446	)		–			(391,446	)
(Gain)/loss on sale/disposal of assets		(5,495	)		(131,203	)		(136,698	)
Compensation expense from stock options and warrants		106,163			–			106,163
Stock issued for interest		135,226			–			135,226
Stock issued for accounts payable		243,458			–			243,458
Deferred income		(214,000	)		–			(214,000	)
Depreciation and amortization		1,912,927			–			1,912,927
Write-off bad debts		15,000			–			15,000
Debt forgiveness		(174,825	)		–			(174,825	)
Services contributed by officers		60,000			–			60,000
Changes in operating assets and liabilities:		–
(Increase) decrease in accounts receivable		62,281			–			62,281
(Increase) decrease in other assets and prepaids		89,238			–			89,238
Increase (decrease) in accounts payable		475,465			–			475,465
Increase (decrease) in accrued liabilities		926,145			30,716			956,861
Net Cash Used by Operating Activities		(10,481,299	)		(131,203	)		(10,612,502	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/sale of equipment, net		(587,801	)		–			(587,801	)
Capitalized software development costs		(195,943	)		–			(195,943	)
Proceeds from sale of intangible assets		516,570			131,203			647,773
Purchase of equipment		(980	)		–			(980	)
Acquisition/sale of patents and other intangibles		(35,306	)		–			(35,306	)
Acquisition/sale of stock, net		12,375			–			12,375
Net Cash Used by Investing Activities	$	(291,085	)	$	131,203		$	(159,882	)

Condensed Statement of Cash Flows

(Unaudited)

	From Inception of Development Stage
	on July 5, 1996 Through March 31, 2012
	As Previously
	Reported			Adjustments		As Restated
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock deposit	$	23,500		$	–	$	23,500
Stock subscription received		23,000			–		23,000
Proceeds from capital stock issued		7,647,201			–		7,647,201
Proceeds from loans		3,473,252			–		3,473,252
Change in line-of-credit		4,837			–		4,837
Loan receivables		(15,000	)		–		(15,000	)
Principal payments on lease obligations		(18,769	)		–		(18,769	)
Cash payments on note payable		(279,730	)		–		(279,730	)
Net Cash Provided by Financing Activities		10,858,291			–		10,858,291
NET INCREASE (DECREASE) IN CASH		85,907					85,907
CASH AT BEGINNING OF PERIOD		24,674					24,674
CASH AT END OF PERIOD	$	110,581				$	110,581