U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


(MARK ONE)
          [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                    FOR FISCAL YEAR ENDED: DECEMBER 31, 2004

                                       OR

 [  ]       TRANSITION REPORT UNDER 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.
                 (Name of small business issuer in its charter)

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


            350 West 300 South, Suite 201, Salt Lake City, Utah 84101
               (Address of principal executive offices) (zip code)


Issuer's telephone number                               (801) 322-1221
                                                       ---------------


Securities registered under Section 12(b) of the Act: NONE Securities registered
under Section 12(g) of the Act:

                          Common Stock Par Value $0.01
                                (Title of class)




<PAGE>



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

     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-B is not  contained in this form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]

     State issuer's revenues for its most recent fiscal year.        $0
                                                                     ---


         As of January 31, 2005 there were 36,740,613 (1 vote per share) Common,
1,086,705  Class A, 551,876 Class B, and 742,430 Class C Convertible  Preferred,
for a preferred and common share total of 39,121,624 votes All shares have a par
value of $0.01. The aggregate market value of the Registrant's voting stock held
by non- affiliates of the Registrant was  approximately  $1,002,432  computed at
the closing  price as of January 31, 2005.  The number of  preferred  and common
shares held by non-affiliates of the Registrants totals 20,048,638 votes.


                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following  documents  are  incorporated  by  reference,  briefly
describe them and identify the part of the Form 10-KSB  (e.g.,  Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders;  (2) any proxy or information  statement;  and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
NONE

         Transitional  Small Business  Disclosure Format (check one): Yes ; No X















                                        2

<PAGE>





                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

Item Number and Caption                                                                                       Page
PART I

<S>         <C>                                                                                               <C>
Item 1.     Description of Business                                                                               4

Item 2.     Description of Property                                                                               4

Item 3.     Legal Proceedings                                                                                     5

Item 4.     Submission of Matters to a Vote of Security Holders                                                   5


PART II

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

Item 6.     Management's Discussion and Analysis or Plan of Operations                                            7

Item 7.      Financial Statements                                                                                 8

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

Item 8A.    Controls and Procedures                                                                               9

PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act                                                 9

Item 10.   Executive Compensation                                                                                12

Item 11.   Security Ownership of Certain Beneficial Owners and Management                                        13

Item 12.   Certain Relationships and Related Transactions                                                        16

Item 13.   Exhibits and Reports on Form 8-K                                                                      21

Item 14.   Principal Accountant Fees & Services                                                                  23

</TABLE>



                                       3
<PAGE>

                                     PART I



                         ITEM 1 DESCRIPTION OF BUSINESS


GENERAL

         The  Company was formed for the purpose of creating a vehicle to obtain
capital,  to file  and  acquire  patents,  to seek  out,  investigate,  develop,
manufacture and market  electronic  in-store  advertising,  directory and coupon
services  which have  potential  for  profit.  The Company is  currently  in the
process of the development of the patented process, Klever-Kart(R).

HISTORY

         The Company began as a part of Information  Resources,  Inc. ("IRI") in
1987,  was  incorporated  as a subsidiary  of IRI under the laws of the State of
Delaware on December 8, 1989, and was fully  distributed to  stockholders of IRI
in a spinoff on October  31,  1990.  At the time of the spinoff a portion of the
business and assets of the Company  included a software  operation in Australia,
which was sold in March, 1993. The Company (VideOCart, Inc.) filed petitions for
relief under Chapter 11 bankruptcy  in December  1993.  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.  During the period from
July 5, 1996 to December  31,  2003,  the  Company  has been in the  development
stage,  except  for an  approximate  2-month  period  in 2000  when the  Company
generated revenue from installations of their Klever-Kart system in stores.

         In February 2004, the Company signed an exclusive  partnership contract
with Fujitsu Transaction Solutions (Fujitsu).  Under this contract, Fujitsu will
manufacture  the  hardware  of  Klever-Kart  System and  provide  the  technical
installations,  IT  implementation,  and support for all retail  locations.  The
Company and  Fujitsu  will  jointly  share  responsibility  for  marketing  into
Fujitsu's  current retail client base for the initial  nationwide  sales effort.
The Company will be  responsible  for providing the  advertising  and promotions
space sales to both retailers and manufactures.



                         ITEM 2 DESCRIPTION OF PROPERTY


         The Company  currently leases  approximately  144 square feet of office
space from Four Cabo's  Enterprises,  Ltd. on a month to month basis.  The lease
payments  are  approximately  $125 per month.  The  office  space is used as the
Corporate  headquarters.  It is located at 350 West 300 South,  Suite 203,  Salt
Lake City, Utah.


                                       4
<PAGE>





                            ITEM 3 LEGAL PROCEEDINGS


         On October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed
against  the  Company  in the Third  Judicial  District  Court of Utah under the
provisions of the Utah Foreign  Judgment Act a judgment from the Superior  Court
of  California,  in and  for  the  County  of San  Francisco  Jurisdiction.  The
judgement is in relation to a consulting  agreement between eiKart, LLC. and the
Company.  Pursuant to the judgment Information Statement,  also filed on October
27,  2003,  the amount of the above  judgment is $81,124.  The relief  sought is
collection from the Company in Utah of the amount of said judgment.  The Company
has filed an action  to  dismiss  said Utah  judgment  on the  grounds  that the
Superior Court of California did not have jurisdiction over the Company when the
original judgment was granted.

         On  September  6, 2002,  an entry of judgment  was entered  against the
Company by Micropower  Direct,  LLC. The total judgment was for $17,167.18.  The
judgment was in relation to parts purchased by the Company.

         A Confession  of Judgment  Statement of Klever  Marketing,  Inc.  dated
November 28, 2003 was filed in the amount of  $16,135.81  in favor of Boult Wade
Tennant.  The judgment was in relation to legal matters  regarding the Company's
intellectual  property.  On May 7, 2004,  ,the Company paid $16,135.81 to settle
this judgment.



                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


         There were no matters submitted to a vote of shareholders during 2004.


                                     PART II



                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


         The stock is traded on the OTC Bulletin  Board with the trading  symbol
KLMK.

         The  following  table set  forth the high and low bid of the  Company's
Common Stock for each quarter within the past two years.  The information  below
was provided by S & P Comstock and


                                       5
<PAGE>




reflects  inter-dealer prices,  without retail mark-up,  mark-down or commission
and may not represent actual transactions:


                 2004:                  HIGH                 LOW
First Quarter                        $         0.29      $         0.12
Second Quarter                       $         0.15      $         0.04
Third Quarter                        $         0.12      $         0.04
Fourth Quarter                       $         0.12      $         0.03

                 2003:                  HIGH                 LOW
First Quarter                        $         0.09      $         0.05
Second Quarter                       $         0.09      $         0.01
Third Quarter                        $         0.15      $         0.04
Fourth Quarter                       $         0.65      $         0.11

          The number of shareholders of record of the Company's  common stock as
of April 1, 2005 was approximately 853.

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

RECENT SALES OF UNREGISTERED SECURITIES.

         The Company  issued  3,230,256  shares of common stock during 2004. The
stock was not sold  through  an  underwriter  and was not sold  through a public
offer.  These sales are exempt under Regulation D Rule 506 of the Securities Act
of 1933. (See Item &. Financial  Statements,  Statement of Stockholders' Equity,
pages F - 7 through F - 9)

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

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

         To the best of the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ending December 31, 2004,
the Company believes that all reporting  persons complied with all Section 16(a)
filing  requirements,  except that;  Olsen Foundation filed a late Form 5, Olsen
Legacy Trust missed a Form 5 filing,  Presidio  missed a Form 5 filing,  Michael
Mills  filed a late Form 5, C. Terry  Warner  filed a late Form 5, D. Paul Smith
filed a late Form 5,  William  J. Dupre  filed a late Form 5 William  C.  Bailey
filed a late Form 5, Paul G. Begum filed a late Form 5.




                                       6
<PAGE>




                       ITEM 6 MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS


PLAN OF OPERATION - The Company has no current operations. The Company's plan of
operations is subject to obtaining  financing.  The Company's  goal is to become
the leading  supplier of in-store  promotions  and  advertising  technology  for
grocery and other  mass-merchandise  retailers.  To  accomplish  this goal,  the
Company  intends to expand its  product  offerings  to include:  (i)  electronic
couponing  to  eliminate  the need for and  reduce  the costs  related  to paper
coupons  (including  fraud,   mis-redemption  and   mal-redemption);   (ii)  the
establishment of targeted  Internet-type  content to enhance  customer  loyalty;
(iii)  capturing  Point-of-Selection  data in the aggregate  for providing  data
warehousing  and mining  services to various  interested  parties;  (iv) certain
other  in-store  services.  Additionally,  the  Company  intends  to expand  the
Klever-Kart  system,  now being sold under the Fujitsu  internal  brand,  U-SCAN
Shopper,  to  other  retail  outlets  including  superstores,  discount  toy and
warehouse stores.

BUSINESS DEVELOPMENT, NEXT 12 MONTHS

As a result of the current financial  condition of the Company,  the plan of the
Company for the next twelve months is to obtain  sufficient  financing to permit
the  Company to commence  active  business  operations.  Absent  obtaining  such
financing,  the  Company's  plan is to  continue  to obtain  sufficient  smaller
financing  to permit the  Company to  continue to prevent the loss or wasting of
its assets and to continue to seek such operation's  financing.  Currently,  the
Company has sufficient liquid assets to permit current restricted  operations to
continue for one month. If such smaller interim financing is not obtained, it is
likely  that the  Company  will cease  being a going  concern at the end of such
period.

In the event such  operational  funding is obtained,  then the Company  plans to
work with Fujitsu  Transaction  Solutions  to: 1) sign up two pilot store retail
chains to test the U-SCAN  Shopper  system for an initial  60-90 days;  2) begin
expanding the installed  base within the pilot store  retailer to  approximately
200  store  in the  fourth  quarter  of  2005;  3)  Develop  additional  revenue
generating products including electronic  couponing;  4) Continue defense of the
Klever patent portfolio where violations are evident.

Absent such financing,  the Company has no plans to employ additional  employees
or to purchase additional equipment. If such financing is obtained,  there would
be additional employees employed and additional equipment purchased.  The number
of each is dependent upon the amount of such financing.

RESULTS OF  OPERATIONS  - 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 is in the development stage. For the years
ended  December  31, 2004 and 2003,  the Company had net losses of $632,293  and
$1,361,639,  respectively.  This  decrease  in the  loss is  primarily  due to a
decrease in operations.


                                       7
<PAGE>




LIQUIDITY  AND  CAPITAL   RESOURCES  -  The  Company  requires  working  capital
principally to fund its proposed research and development and operating expenses
for which the Company has relied on  short-term  borrowings  and the issuance of
restricted  common stock.  There are no formal  commitments  from banks or other
lending sources for lines of credit or similar  short-term  borrowings,  but the
Company has been able to borrow minimal additional working capital that has been
required to prevent the assets from wasting away. From time to time in the past,
required short- term borrowings have been obtained from a principal  shareholder
or other related entities.

         Cash flows. Operating activities used cash of $349,000 and $262,000 for
2004 and 2003 respectively.  The increase in the use of cash is due primarily to
an increase in payments of accounts payable.

         Investing  activities have provided cash of $314,000 for 2004, and used
cash of $19,000 for 2003,  respectively.  For 2004,  the cash provided is due to
the sale of some of the  Company's  patents.  For 2003,  the cash  used  relates
primarily to the purchase of patents.

         Financing activities provided cash of $56,000 and $279,000 for 2004 and
2003,  respectively.  Financing  activities  primarily  represent  sales  of the
Company's restricted stock, and short term borrowings.

FACTORS THAT MAY AFFECT FUTURE  RESULTS -  Management's  Discussion and Analysis
contains   information  based  on  management's   beliefs  and   forward-looking
statements  that  involved a number of risks,  uncertainties,  and  assumptions.
There can be no assurance that actual results will not differ materially for the
forward-looking  statements  as a result of various  factors,  including but not
limited to the following:

         The  foregoing   statements   are  based  upon   management's   current
assumptions.



                           ITEM 7 FINANCIAL STATEMENTS


         The  financial  statements  of the Company and  supplementary  data are
included beginning  immediately preceding the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.



              ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE


         There are not and have not been any  disagreements  between the Company
and its accountants


                                       8
<PAGE>



on any  matter of  accounting  principles,  practices  or  financial  statements
disclosure.



                         ITEM 8A CONTROLS AND PROCEDURES


         The Company's Chief Executive  Officer and Chief Financial  Officer are
responsible for establishing and maintaining  disclosure controls and procedures
for the Company.

         (a) Evaluation of Disclosure Controls and Procedures

         As of the end of the period covered by this report, the Company carried
         out an evaluation,  under the supervision and with the participation of
         the Company's  management,  including the Company's  President,  of the
         effectiveness  of the design and operation of the Company's  disclosure
         controls and  procedures  pursuant to Rule 13a-15 under the  Securities
         Exchange Act of 1934, as amended (the "Exchange  Act").  Based upon the
         evaluation,  the Company's  President  concluded that, as of the end of
         the period,  the  Company's  disclosure  controls and  procedures  were
         effective in timely  alerting him to material  information  relating to
         the Company  required  to be  included in the reports  that the Company
         files and submits pursuant to the Exchange Act.

         (b) Changes in Internal Controls

         Based  on his  evaluation  as of  December  31,  2004,  there  were  no
significant  changes in the Company's internal controls over financial reporting
or in any other areas that could  significantly  affect the  Company's  internal
controls  subsequent  to the date of his most recent  evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.

                                    PART III


               ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
                CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF
                                THE EXCHANGE ACT


EXECUTIVE OFFICERS AND DIRECTORS

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

DIRECTOR'S   NAME       AGE      OFFICE          TERM EXPIRES

William J. Dupre         51      COO/
                                 President       Next annual shareholder meeting


                                       9
<PAGE>



D. Paul  Smith           58      Exec  Vice-President/
                                 CFO/Secretary/
                                 Treasurer/Chairman      Next annual shareholder
                                                         meeting
Daniel L. Warner         32      Exec Vice-President-
                                 Business Development    Next annual shareholder
                                                         meeting
Richard J. Trout*        48      Director        Next annual shareholder meeting
William C. Bailey        70      Director        Next annual shareholder meeting
Michael L. Mills         42      Director        Next annual shareholder meeting
C. Terry Warner          68      Director        Next annual shareholder meeting

* Richard J. Trout resigned as director effective July 2, 2004.

         William J. Dupre, age 51, joined the Company as Chief Operating Officer
and Executive Vice-President in November 2002. Mr. Dupre was appointed President
and COO in December 2003. Mr. Dupre joins the Company with over fifteen years of
proven  executive  level  retail  product  development  and  in-store  marketing
experience  including  four  years at  Smart  Media/SnapShopper,  four  years at
VideOcart,  and seven years at Information Resources (IRI). During his tenure at
IRI, Mr. Dupre  successfully  developed and launched various retail and consumer
products to market,  negotiated  participation  in IRI's  Qscan  program in over
25,000 retail stores representing 70 of the top 100 grocery chains in the United
States and contributed to the growth of chain specific  consumer  packaged goods
manufacturer  revenues.  Mr. Dupre also has participated in venture capital fund
raising at several  start-up  companies.  Mr. Dupre will lead the Company in the
execution  of its  strategic  initiatives  as it sets to deploy its  proprietary
in-store media known as  Klever-Kart(R),  which provides  retailers and consumer
goods  companies  one-on-one  communications  with shoppers by utilizing its LCD
display mounted on the handle of shopping carts.

         D. Paul Smith,  age 58,  became  Chairman of the Board in January 2001,
and CFO,  Vice-  President,  and  Secretary in October  2001,  and has served as
director of the  Company  since  November  2000.  Mr.  Smith has been an ongoing
financial  advisor to the  Company  for the past  seven  years and has played an
active part in the  development  of the Company's  business  plan.  Mr. Smith is
Chief Financial  Officer for the Arbinger  Institute.  On November 18, 2002, Mr.
Smith resigned his position as Vice-President  when William J. Dupre assumed the
role of Executive Vice- President. Upon Mr. Dupre's appointment to President/COO
in December 2003, Mr. Smith reassumed the role of Executive  Vice-President,  in
addition to his other positions.

         Daniel  L.   Warner,   age  32,   joined  the   Company  as   Executive
Vice-President of Business Development in February 2004. Mr. Warner comes to the
Company  with over  seven  years of  experience  in  operations,  strategy,  and
business  development.  Prior to  joining  the  Company,  Mr.  Warner  worked as
Vice-President of Operations and Sales for PerfectPerfect.MD., an internet-based
medical  software firm,  General  Manager of Operations  for Meyer & Leichty,  a
design and  advertising  firm, as well as Director of Business  Development  for
Freeport.com,  an internet-based  permission  marketing company. Mr. Warner also
served as a strategy  consultant for Monitor Company,  working with clients such
as Coca-Cola,  Navistar, Union Bank of California, and several other Fortune 500
companies, covering a wide range of industries.



                                       10
<PAGE>



         William C. Bailey,  age 70, was elected as a director of the Company in
June 1994. Mr. Bailey is President and owner of Mount Olympus  Waters,  Inc. and
founder  of Water  and Power  Technologies.  Mr.  Bailey  served on the Board of
Directors  for the American  Bottled  Water  Association  and the  International
Bottled Water Association from 1975 to 1996, and was the Association's President
in 1978 and again in 1990. He received the industry's  first award of Excellence
from IWBA in 1987 and was  elected to the  Beverage  World Water Hall of Fame in
1989.  He serves as a member of the Board of Trustees for the Utah Food Industry
Associations  Insurance  Trust. He is a lifetime member of the Board of Trustees
for the Utah Symphony Opera,  having served as Chairman from  1999-2002.  He has
been a member of the Board of Directors for KUED 1990- 1996,  University of Utah
Alumni  Board  1990-1994,  and a member of the  University  of Utah's Fine Art's
Advisory  Board.  He is also a member  of the Salt  Lake  Rotary  and  served as
Secretary 1999-2000.

         Michael L.  Mills,  age 42, was elected as a director of the Company in
December 1998. Mr. Mills is  President/CEO  of Olson  Holdings,  Inc.  (formerly
known as Olson Farms, Inc.). Olson Holdings, Inc. is a diversified  agricultural
and real estate holding  company with  operations  throughout the western United
States,  dealing  primarily in the  distribution of eggs,  with  headquarters in
Riverside,  California.  Mr.  Mills has been with that company  since 1989.  Mr.
Mills began his career with  Deloitte & Touche in Los Angeles  after  graduating
from the University of Utah SUMMA CUM LAUDE in accounting and mathematics.

         C. Terry Warner,  Ph.D., age 68, became a member of the Company's Board
in September  2001.  Mr. Warner is a longtime  shareholder  in the Company.  Mr.
Warner is the  founder of The  Arbinger  Institute.  He  received  his Ph.D.  in
philosophy  from  Yale  University,  and has been a  senior  member  of  Linacre
College,  Oxford  University.  He taught at the university level for over thirty
years and has been Dean of the  College  of General  Studies  at  Brigham  Young
University.  Mr. Warner has served as a consultant and advisor to executives and
managers  of about  fifty  companies,  and has  served on  boards in the  steel,
petrochemical, thrift, and health care industries.

AUDIT COMMITTEE

         As of December  31, 2004,  the Company had one active board  committee,
the Audit and  Compliance  Committee.  D. Paul Smith and Michael L. Mills are on
this committee.  The committee meets annually to determine auditors and scope of
the audit, as well as reviews of the 10KSB and all audited financials.

AUDIT COMMITTEE FINANCIAL EXPERT

         The  Company's  board of  directors  does not have an "audit  committee
financial   expert,"  within  the  meaning  of  such  phrase  under   applicable
regulations  of the  Securities  and Exchange  Commission,  serving on its audit
committee.  The  board of  directors  believes  that all  members  of its  audit
committee are financially literate and experienced in business matters, and that
one or more  members of the audit  committee  are  capable of (i)  understanding
generally accepted accounting


                                       11
<PAGE>



principles  ("GAAP")  and  financial  statements,  (ii)  assessing  the  general
application of GAAP  principles in connection with our accounting for estimates,
accruals and reserves,  (iii) analyzing and evaluating our financial statements,
(iv) understanding our internal controls and procedures for financial reporting;
and (v) understanding audit committee functions,  all of which are attributes of
an audit committee  financial expert.  However,  the board of directors believes
that there is not any audit committee  member who has obtained these  attributes
through the  experience  specified in the SEC's  definition of "audit  committee
financial expert." Further,  like many small companies,  it is difficult for the
Company to attract and retain  board  members  who  qualify as "audit  committee
financial  experts," and competition for these  individuals is significant.  The
board  believes  that its current  audit  committee  is able to fulfill its role
under SEC regulations despite not having a designated "audit committee financial
expert."



                         ITEM 10 EXECUTIVE COMPENSATION


SUMMARY COMPENSATION

         The following  table set forth,  for the last three fiscal  years,  the
annual  and  long  term  compensation  earned  by,  awarded  to,  or paid to the
individuals who were chief executive officer and chief operations officer at any
time during the last fiscal year.

<TABLE>
<CAPTION>
                                                                                  Long Term Compensation
                                                                        -------------------------------------------
                                           Annual Compensation                  Awards                Payouts
                                          ---------------------         ----------------------   ------------------
            (a)              (b)      (c)           (d)        (e)         (f)        (g)          (h)      (i)
                                                              Other                Securities
                            Year                             Annual     Restricted Underlying            All Other
                            Ended                            Compen-      Stock     Options/       LTIP   Compen-
         Name and           Dec.     Salary        Bonus     sation     Award(s)     SAR's       Payouts   sation
    Principal Position       31      ($)(1)         ($)        ($)         ($)       (no.)         ($)      ($)
-------------------------------------------------------------------------------------------------------------------

<S>                         <C>      <C>           <C>       <C>        <C>        <C>           <C>      <C>
Richard J. Trout            2004            -             -          -          -             -         -         -
                                            -             -          -          -             -         -         -
Former President
                            2003            -  (1)        -          -          -     1,027,616(4)      -         -
                            2002            -  (1)        -          -          -       100,661(3)      -         -

D. Paul Smith               2004            -             -          -          -             -         -         -
Chairman/CFO/               2003            -             -          -          -     1,168,333         -         -
Sec/Treasurer               2002            -             -          -          -       192,892(4)      -         -
Exec Vice-President

William J. Dupre            2004      122,250             -          -          -             -         -         -
President/COO               2003       50,000  (2)        -          -          -       400,000         -         -
                            2002       12,500  (2)        -          -          -       400,000(5)      -         -
</TABLE>


                                       12
<PAGE>

(1)      Richard  J.  Trout was named  President  in  October  2001.  Mr.  Trout
         resigned as President on December 3, 2003.
(2)      William J. Dupre joined the Company in November 2002 as Chief Operating
         Officer  and  Executive   Vice-President.   Mr.  Dupre's  options  vest
         quarterly with the initial vest  beginning on day 1 of  employment.  On
         December 3, 2003, Mr. Dupre was named President of the Company.
(3)      Options canceled on September 9, 2003.
(4)      100,000 options canceled on September 9, 2003.
(5)      200,000  options  canceled on  September 9, 2003,  and 200,000  options
         authorized to convert to 200,000  shares of common  stock.  As of March
         16, 2004, these 200,000 shares have not been issued.

Executive Compensation and Benefits

         The Company provides to three of its full time employees, including the
Chief Operating Officer, health insurance and miscellaneous other benefits.

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




                 ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


PRINCIPAL SHAREHOLDERS

         The table  below sets forth  information  as to each  person  owning of
record or who was known by the Company to own beneficially  shares of stock that
have more than 5% of the  39,121,624  votes as of January  31,  2005,  including
options to acquire stock of the Company that are currently  exercisable  or will
be within the next 60 days, and information as to the ownership of the Company's
Stock by each of its directors  and executive  officers and by the directors and
executive  officers as a group.  Except as otherwise  indicated,  all shares are
owned  directly,  and the  persons  named in the  table  have  sole  voting  and
investment power with respect to shares shown as beneficially owned by them.
<TABLE>
<CAPTION>

                                                                                                  # OF
NAME AND ADDRESS                     NATURE OF                           SHARES
OF BENEFICIAL OWNERS                 OWNERSHIP                         OWNED                   PERCENT
DIRECTORS

PRINCIPAL SHAREHOLDERS

<S>                                  <C>                              <C>                      <C>
Paul G. Begum                            Direct (2)                       3,158,807
P.O. Box 58045                           Preferred Shares (2)                  31,536
Salt Lake City, UT 84158                 Options/Warrants                    237,000
                                                                          ----------
                                            Total                         3,427,343                8.71%
                                                                          =========              =======
</TABLE>


                                       13
<PAGE>


<TABLE>
<CAPTION>

<S>                                  <C>                              <C>                      <C>
Olson Foundation                         Direct (1)                       4,101,838
2220 Eastridge Ave                       Preferred Shares (1)             1,196,253
Suite B                                  Options/Warrants (1)                648,152
Riverside, CA 92507                      Convertible Debt (1)             4,161,267
                                                                        -----------
                                            Total                       10,107,510                23.01%
                                                                        ==========               =======

C. Terry Warner                          Direct (3)                       2,526,574
1278 Locust Lane                         Options (3)                         646,494
Provo, UT 84604                          Convertible Debt (3)                  11,493
                                                                         ------------
                                            Total                         3,184,561                8.01%
                                                                         ==========              =======

Presidio Investments LLC                 Direct (4)                       1,266,708
3200 North Central Ave                   Preferred Shares (4)                  86,723
Suite 1560                               Convertible Debt (1)(4)          3,559,089
                                                                          ---------
Phoenix, AZ 85012                           Total                         4,912,521               11.51%
                                                                        ===========              =======

Olson Legacy Trust                       Direct (4)                       1,266,708
3200 North Central Ave                   Preferred Shares (4)                  86,723
Suite 1560                               Convertible Debt (4)             3,559,089
                                                                          ---------
Phoenix, AZ 85012                               Total                     4,912,521               11.51%
                                                                        ===========              =======


Olson Holdings                           Direct (1)                          759,765
2220 Eastridge Ave.                      Preferred Shares (1)                930,664

Suite B                                  Convertible Debt (1)                219,339
                                                                          ----------
Riverside, CA 92507                         Total                          1,909,768               4.85%
                                                                          ==========             =======


Seabury Investors III                    Preferred Shares                 1,153,216
540 Madison Avenue                       Options/Warrants                    106,061
New York, NY 10022                       Convertible Debt (5)                633,700
                                                                          ----------
                                            Total                         1,892,977                4.75%
                                                                          =========              =======

Primavera                                Direct                           3,252,771                8.31%
                                                                                                 =======
1278 Locust Lane
Provo, UT 84604

Arbinger                                 Direct                           3,490,756
Gateway Park Tower                       Options/Warrants                      67,495
563 W 500 S                              Convertible Debt                      45,971
                                                                          -----------
Suite 200                                   Total                          3,604,222               9.19%
                                                                          ==========             =======
Woods Cross, UT 84010
</TABLE>



                                       14
<PAGE>

<TABLE>
<CAPTION>

<S>                                  <C>                              <C>                      <C>
William Bailey                           Direct                           3,244,914
3889 E. Brockbank Dr.                    Options/Warrants                    520,000
                                                                          ----------

Salt Lake City, UT 84124                    Total                         3,764,914                9.50%
                                                                          =========              =======


D. Paul Smith                            Direct (6)                       1,041,301
747 W. Sheringham Ct.                    Options/Warrants (6)             1,269,973
Farmington, UT 84025                     Convertible Debt (6)                  14,303
                                                                          -----------
                                            Total                         2,325,557                5.76%
                                                                          =========              =======

DIRECTORS AND EXECUTIVE OFFICERS

William Bailey                           Direct                           3,244,914
3889 E. Brockbank Dr.                    Options/Warrants                    520,000
                                                                          ----------
Salt Lake City, UT 84124                    Total                         3,764,914                9.50%
                                                                          =========              =======

C. Terry Warner                          Direct (3)                       2,526,574
1278 Locust Lane                         Options (3)                         646,494
Provo, UT 84604                          Convertible Debt (3)                  11,493
                                                                         ------------
                                            Total                         3,184,561                8.01%
                                                                         ==========              =======

D. Paul Smith                            Direct (6)                       1,041,301
747 W. Sheringham Ct.                    Options/Warrants (6)             1,269,973
Farmington, UT 84025                     Convertible Debt (6)                  14,303
                                                                          -----------
                                            Total                         2,325,557                5.76%
                                                                          =========              =======

ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (7
PERSONS)                                 Direct                           5,703,622
                                         Options/Warrants                 3,670,091
                                         Convertible Debt                      13,188
                                                                          -----------
                                            Total                         9,386,901              20.07%
                                                                          =========              ======
</TABLE>

(1) Michael Mills is president of Olson Holdings,  Inc.,  executor of the Estate
of Peter  Dean  Olson,  trustee  of the  Olson  Foundation,  he has  voting  and
investment  control  but  disclaims  any  pecuniary  interest.   For  The  Olson
Foundation,  Mr.  Mills is one of four  trustees  and does  not have  voting  or
investment power because of a majority-vote rule relation to the Foundation. The
Olson ownership includes 759,765 Shares held by Olson Holdings, 1,123,603 Shares
held by the Olson  Foundation,  928,580  Shares  held by the  Estate of Peter D.
Olson,  1,266,708 Shares held by Presidio,  and 23,182 Shares held by Mr. Mills.
The Olson  ownership  also includes  Preferred  Stock that, as of April 1, 2005,
would convert 1,196,253 votes held by Presidio (86,723 votes), Olson Holdings


                                       15
<PAGE>



(930,664  votes)  and  Olson  Foundation  (178,866  votes).  Ownership  includes
warrants covering 136,152 Shares held by Olson Foundation,  options, and options
covering  512,000  Shares  held by Mr.  Mills.  Convertible  debt  held by Olson
Foundation  and  affiliates  in the  amount  of  4,161,267  shares  may  also be
converted  as of April 1, 2005 into  382,839  Shares  held by Olson  Foundation,
219,339 Shares held by Olsen Holdings and 3,559,089 shares held by Presidio.

(2) Mr. Begum's ownership includes 31,834 Shares held in a brokerage account and
77,142 shares held  privately by Mr. Begum;  115,878  shares which are held in a
brokerage  account  and  2,427,089  shares  held  by  Tree  of  Stars,  Inc.,  a
corporation of which Mr. Begum is a director, officer and principal shareholder;
94,914 shares which are in a brokerage account,  and 411,950 shares held by PSF,
Inc.,  a  private  company  of  which  Mr.  Begum  is  President  and  principal
shareholder.  Mr. Begum's ownership also includes Class A Convertible  Preferred
Shares that would convert to 159,426 Shares as of April 1, 2005


(3) Mr.  Warner's  ownership  includes  12,500  Shares held by C. Terry  Warner;
1,626,385  Shares held by Primavera,  Ltd., a limited  partnership  of which Mr.
Warner is a passive member owning one (1) percent and Susan Warner,  his spouse,
who owns forty-nine (49) percent;  15,000 shares by Susan Warner, his spouse and
872,689 shares held by the Arbinger  Institute,  a private  corporation of which
Mr.  Warner is a director  and  twenty-five  (25) percent  shareholder;  options
covering  612,742  shares  under  Terry  Warner and 33,748  under  Arbinger  and
convertible debt held by Arbinger that may be converted into 11,493 shares as of
April 1, 2005.

(4) Presidio  Investments,  of which William J. Howard is the single member, and
Olson Legacy Trust,  of which  William J. Howard is the sole trustee,  ownership
includes 94,858 Shares held by Presidio  Investments  LLC.; 86,723 Shares should
the Class A Convertible  Preferred  Shares held by Presidio  Investments LLC. be
converted as of April 1, 2005; Olson Legacy Trust, of which William J. Howard is
the sole  trustee,  1,171,850  common  shares held by Olson  Legacy  Trust,.  In
addition to the total  Presidio and Olson Legacy  Trust  ownership,  convertible
debt held by Presidio  Investments may be converted into 3,559,089  Shares as of
April 1, 2005.

(5) In addition to the total Seabury ownership, convertible debt held by Seabury
Investors III, Limited  Partnership could be converted into 633,700 Shares as of
April 1, 2005.

(6) Mr. Smith's ownership includes 168,612 shares held by D. Paul Smith; 872,689
shares held by the Arbinger Institute,  a private corporation of which Mr. Smith
is a director,  officer  and  twenty-  five (25)  percent  shareholder;  options
covering 1,236,225 shares and 33,748 Options held under Arbinger and convertible
debt held by Mr.  Smith that may be  converted  into 2,810 shares as of April 1,
2005.



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS




                                       16
<PAGE>



OLSON HOLDINGS, INC. LOANS TO THE COMPANY

    Olson  Holdings,  Inc. made a $150,000.00  unsecured  loan to the Company on
February  26,  2001.  This  note has a  six-month  term at 10%  annual  interest
maturing  on August  26,  2001.  The maker of the note may give  written  notice
within  10-days of  maturity,  to the  Company,  to convert  the  principal  and
interest  into common stock with a convertible  price of $1.05 (10-day  weighted
average from February 26, 2001 and the nine days prior).

    Olson  Holdings made an unsecured loan to the Company on January 7, 2002 for
$1,835.84. This note has an annual interest rate of 8% and matures on January 7,
2004. An option was granted in  connection  with this note for 3,060 shares at a
strike price of $1.00 and an expiration date of January 7, 2005.

OLSON FOUNDATION LOANS TO THE COMPANY

         Olson Foundation  loaned the Company $60,000 on July 16, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies until January 15, 2002. Principal and all due and
unpaid  interest  are to be paid on  January  16,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration  date
of July 16, 2006.  This note is  convertible  to Class C  convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder.

         Olson Foundation  loaned the Company $90,000 on July 30, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies until January 30, 2002. Principal and all due and
unpaid  interest  are to be paid on  January  30,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 27,273 common shares at a strike price of $0.01 and an expiration  date
of July 30, 2006.  This note is  convertible  to Class C  convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder.

         Olson  Foundation  made unsecured  loans to the Company on May 3, 2002,
August 16,  2002,  and  October 29, 2002 for  $7,359,  $10,000,  and  $1,059.37,
respectively.  These notes are payable  within two years plus interest at 8% per
annum.  In conjunction  with the notes,  Olson  Foundation  also received common
stock  options for each note at a ratio of 1.667  common  shares for each dollar
loaned.

ESTATE OF PETER D. OLSON

         Peter D.  Olson  loaned the  Company  $12,500,  $12,500,  and $3,750 on
September 1, 1998,  September 17, 1998,  and  September 22, 1998,  respectively.
These notes bear an interest rate of 10% per annum.  On September 11, 2003,  the
outstanding  loan of $28,750 and accrued  interest of $17,679 were  converted to
928,580 shares of common stock valued at $.05 per share.


                                       17
<PAGE>



PRESIDIO INVESTMENTS, LLC LOAN TO THE COMPANY

         Presidio Investments, LLC has loaned the Company $1,000,000, which loan
is secured by a blanket lien on the assets of the  Company.  The sole trustee of
Presidio  Investments,  LLC is William J.  Howard,  trustee of the Olson  Legacy
Trust, whose residual beneficiary is the Olson Foundation.  The Olson Foundation
was the guarantor for funds  borrowed from Northern  Trust Bank which funds were
used to make the loan to the  Company.  This note was  amended on March 22, 2001
with an additional  $500,000  loaned to the Company  between January 1, 2001 and
March 22,  2001.  An  Interest  rate of 8%  applies  until  March  31,  2001 and
increases to 10% on April 1, 2001. Principal and all due and unpaid interest are
to be paid on October 1, 2001.  This note is  convertible to Class C convertible
preferred shares at the option of the note holder.

OLSON LEGACY TRUST LOAN TO THE COMPANY

         Olson Legacy Trust made  unsecured  loans to the Company on October 19,
2001 and November 15, 2001 in the amounts of $20,706 and $30,000,  respectively.
The notes are  payable  within  two years  plus  interest  at 8% per  annum.  In
conjunction with the notes,  Olson Foundation  received common stock options for
each  note at a ratio of 1.667  common  shares  for each  dollar  loaned  to the
Company.  On September  11, 2003,  the  outstanding  loan of $50,706 and accrued
interest of $7,887 were converted to 1,171,850  shares of common stock valued at
$.05 per share.

DIRECTOR LOAN TO THE COMPANY

         On October 20,  1998,  the Company  borrowed  $150,000  from William C.
Bailey at an annual  interest rate of 12% and a maturity date of April 30, 1999.
The Company  made a payment of $50,000 on February 26,  1999.  On September  11,
2003,  the  remaining  loan balance of $100,000 and accrued  interest of $50,006
were converted to 3,000,113 shares of common stock valued at $.05 per share.

DIRECTOR AND OFFICER LOAN TO THE COMPANY

         Richard J. Trout  loaned the  Company  $396.85,  $163.00 and $568.08 on
September 16, 2002, March 19, 2003, and April 28, 2003, respectively. During the
three  months  ended  September  30,  2003,  Mr.  Trout  loaned  the  Company an
additional  $839.  These notes are payable  within two years plus interest at 8%
per annum.  In  conjunction  with the notes,  Mr.  Trout  received  common stock
options at a ratio of 1.667 common shares for each dollar loaned to the Company.
On  September  11,  2003,  the  outstanding  loan  balance of $1,967 and accrued
interest of $65 were  converted to 40,645  shares of common stock valued at $.05
per share.

THE SEABURY GROUP LOAN TO THE COMPANY

         The Seabury Group loaned the Company  $60,000 on July 5, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies


                                       18
<PAGE>



until January 5, 2002.  Principal and all due and unpaid interest are to be paid
on January 5, 2002,  or the interest  rate  increases to 15%  compounded  daily.
Warrants were issued in conjunction with this loan for 18,182 common shares at a
strike  price of $0.01  and an  expiration  date of July 5,  2006.  This note is
convertible  to Class C convertible  preferred  shares or to Class D convertible
preferred shares at the option of the note holder.

         The Seabury  Group loaned the Company  $190,000 on August 22, 2001,  of
which is secured by a blanket  lien on the assets of the  Company.  An  interest
rate of 10% compounded  monthly  applies until February 22, 2002.  Principal and
all due and unpaid interest are to be paid on February 22, 2002, or the interest
rate increases to 15% compounded daily. Warrants were issued in conjunction with
this loan for 57,576  common shares at a strike price of $0.01 and an expiration
date of  August  22,  2006.  This  note is  convertible  to Class C  convertible
preferred shares or to Class D convertible preferred shares at the option of the
note holder.

ARBINGER LOANS TO THE COMPANY

         The  loans  listed  below  were  made to the  Company  by The  Arbinger
Institute. The Arbinger Institute is controlled by four equal partners, of which
C. Terry Warner and D. Paul Smith are each a partner.

<TABLE>
<CAPTION>
                                                                  Common
                                                                   Stock
                                Annual           Maturity         Option      Option Strike
    DATE       Principal    Interest Rate          Date          # Shares          Price
------------ ---------------------------------------------------------------------------------
<S>          <C>             <C>                <C>                 <C>         <C>
  10/19/01      $10,000.00      8.00%            10/19/02             16,667      $1.00
  12/31/01       $6,617.04      8.00%            12/31/02             11,028      $1.00
  01/30/02      $15,000.00      8.00%            01/30/04             25,000      $1.00
  02/18/02       $4,000.00      8.00%            02/18/03              6,667      $1.00
  07/02/02       $7,700.00      8.00%            07/02/03             12,833      $1.00
  08/30/02         $200.00      8.00%            08/30/04                333      $1.00
  09/18/02       $8,500.00      8.00%            09/18/04             14,167      $1.00
  11/19/02       $5,500.00      8.00%            11/19/04              9,167      $1.00
  04/08/03       $1,200.00      8.00%            04/08/05              2,000      $1.00
  07/30/03      $15,000.00      8.00%            07/30/05             25,000      $1.00
             -------------                                    --------------
   Total        $73,717.04                                           122,862
             =============                                    ==============
</TABLE>

         On September  11,  2003,  the  outstanding  loan of $73,717 and accrued
interest of $7,137 were converted to 1,617,074  shares of common stock valued at
$.05 per share.

         The  loans  listed  below  were  made to the  Company  by The  Arbinger
Institute after September 11, 2003.


                                       19
<PAGE>

<TABLE>
<CAPTION>

                                                                  Common
                                                                   Stock
                                Annual           Maturity         Option      Option Strike
    DATE       Principal    Interest Rate          Date          # Shares          Price
------------ ---------------------------------------------------------------------------------
<S>          <C>             <C>              <C>                 <C>         <C>
  09/12/03      $10,040.00      8.00%            09/12/05             16,733      $1.00
  09/17/03         $471.73      8.00%            09/17/05                786      $1.00
  09/25/03       $4,500.00      8.00%            09/25/05              7,500      $1.00
  09/26/03          $80.95      8.00%            09/26/05                135      $1.00
  10/01/03          $79.00      8.00%            10/01/05                132      $1.00
  11/01/03          $79.00      8.00%            11/01/05                132      $1.00
  11/26/03      $10,000.00      8.00%            11/26/05             16,667      $1.00
  12/02/03          $79.00      8.00%            12/02/05                132      $1.00
  12/15/03      $13,000.00      8.00%            12/15/05             21,667      $1.00
  12/24/03       $2,750.00      8.00%            12/24/05              4,583      $1.00
             -------------                                    --------------
   Total        $41,079.68                                            68,467
             =============                                    ==============
</TABLE>

         The Arbinger Institute has also made additional loans to the Company to
pay for storage  space.  The total  amount of these loans is $1,595 plus accrued
interest of $113.  These loans were  converted to common stock on September  11,
2003.  As  of  January  31,  2005,   the  stock  has  not  been  issued  due  to
administrative reasons.

DIRECTOR LOANS TO THE COMPANY

         C. Terry Warner made  unsecured  loans to the Company on September  27,
2002, August 12, 2002, April 16, 2003, May 2, 2003, May 5, 2003, and May 8, 2003
in the  amounts  of  $15,000,  $21,348,  $10,000,  $1,500,  $800,  and  $19,000,
respectively.  These notes are payable  within two years plus interest at 8% per
annum. In conjunction  with the notes,  Mr. Warner received common stock options
for each note at a ratio of 1.667  common  shares for each dollar  loaned to the
Company.  On September  11, 2003,  the  outstanding  loan of $67,648 and accrued
interest of $3,992 were converted to 1,432,791  shares of common stock valued at
$.05 per share.

DIRECTOR AND OFFICER LOANS TO THE COMPANY

         The loans  listed  below were made to the Company by D. Paul  Smith,  a
member of the Board of Directors:

<TABLE>
<CAPTION>
                                                                  Common
                                                                   Stock
                                Annual           Maturity         Option      Option Strike
    DATE       Principal     Interest Rate         Date          # Shares          Price
------------ ------------- -------------------------------------------------------------------
<S>          <C>              <C>             <C>                 <C>         <C>
  12/31/02      $25,000.00       8.00%           12/31/04             41,667      $1.00
  02/21/03       $5,000.00       8.00%           02/21/05              8,333      $1.00
  03/31/03      $15,000.00       8.00%           03/31/05             25,000      $1.00
  04/10/02      $15,000.00       8.00%           04/10/03             25,000      $1.00
  08/30/02         $370.23       8.00%           08/30/04                617      $1.00
  11/01/02         $364.82       8.00%           11/01/04                608      $1.00
  11/04/02      $15,000.00       8.00%           11/04/04             25,000      $1.00
  07/18/03       $7,500.00       8.00%           07/18/05             12,500      $1.00
  08/18/03       $5,000.00       8.00%           08/18/05              8,333      $1.00
             -------------                                    --------------
   Total        $88,235.05                                           147,058
             =============                                    ==============
</TABLE>

         On  September  11,  2003,  the  outstanding  loan  $88,235  and accrued
interest of $5,215 were


                                       20
<PAGE>



converted to 1,868,997 shares of common stock valued at $.05 per share.

         On October 8, 2003, Mr. Smith loaned the Company  $2,500.  This note is
payable within two years plus interest at 8% per annum. In conjunction  with the
note, Mr. Smith received a common stock option at a ratio of 1.667 common shares
for each dollar  loaned to the  Company.  The option has a strike price of $1.00
and a 3-year expiration date.

PAUL G. BEGUM

         On February 1, 2000, an accrued  liability owed to Paul G. Begum in the
amount of $306,666.64  was converted to common shares by exercise of options for
the purchase of 579,585  shares at $.86 per share and a note  receivable  in the
amount of $191,776.46. The note is payable in thirty-six equal installments with
interest at the rate of eight  percent.  The note is  collateralized  by 100,000
shares of the Company's common shares. As of July 31, 2001, the total balance on
the note  receivable  was  $98,375.  On July 31, 2001,  the Company  forgave the
remaining amount owed on the receivable in exchange for 100,000 shares of common
stock that were returned to the Company.

         During the year ended December 31, 2001, the Company accrued additional
liabilities  from a separation  agreement  with Paul G. Begum.  During 2003, the
Company  paid  $27,899  towards  these  liabilities.  The total  amount of these
liabilities remaining at December 31, 2003 is $38,035.

         In February  2004, the remaining  liabilities  $38,035 due to Mr. Begum
were settled in exchange for 152,142 shares of the Company's free-trading common
stock valued at $.25 per share.



                   ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K


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

1. FINANCIAL STATEMENTS PAGE

Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Balance Sheets
  December 31, 2004, and 2003................................................F-2
Statements of Loss
  For the Years Ended December 31, 2004, and 2003............................F-4
Statement of Stockholders' Equity
  For the Years Ended December 31, 2004, and 2003............................F-5
Statements of Cash Flows
  For the Years Ended December 31, 2004, and 2003...........................F-13
Notes to Financial Statements
  December 31, 2004, and 2003...............................................F-15



                                       21
<PAGE>



2.     FINANCIAL STATEMENT SCHEDULES

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

3.     EXHIBITS
                        The  following  exhibits  are  included  as part of this
report:
Exhibit
Number           Title of Document

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

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

3.03     Bylaws, as amended (2)

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

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

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

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

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

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

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

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


                                       22
<PAGE>



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)

31.1     Certification  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002.

31.2     Certification  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002.

32.1     Certification  Pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
         2002.

32.2     Certification  Pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
         2002.

         (1)  Incorporated  herein by reference  from  Registrant's  Form 10KSB,
         dated  June  20,  1997.  (2)  Incorporated  herein  by  reference  from
         Registrant's Form 10KSB, dated March 29,
                2001
         (3)  Incorporated  herein by reference  from  Registrant's  Form 10QSB,
         dated  May  15,  2001.  (4)  Incorporated   herein  by  reference  from
         Registrant's Form 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.

     (b) REPORTS FILED ON FORM 8-K

         None.



                  ITEM 14. PRINCIPAL ACCOUNTANT FEES & SERVICES


         The following is a summary of the fees billed to us by Robison,  Hill &
Company for professional services rendered for the years ended December 31, 2004
and 2003:


           Service                      2004                   2003
------------------------------   ------------------     ------------------
Audit Fees                       $           20,375     $           23,364
Audit-Related Fees                                -                      -
Tax Fees                                        150                    287
All Other Fees                                    -                      -
                                 ------------------     ------------------
Total                            $           20,525     $           23,651
                                 ==================     ==================

AUDIT FEES.  Consists of fees billed for professional  services rendered for the
audits  of  our  consolidated  financial  statements,  reviews  of  our  interim
consolidated  financial  statements  included  in  quarterly  reports,  services
performed in connection  with filings with the Securities & Exchange  Commission
and related  comfort  letters and other  services that are normally  provided by
Robison,  Hill & Company in connection with statutory and regulatory  filings or
engagements.


                                       23
<PAGE>




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

Audit  Committee  Pre-Approval of Audit and  Permissible  Non-Audit  Services of
Independent Auditors

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

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


























                                       24
<PAGE>












                             KLEVER MARKETING, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                       -:-

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2004 AND 2003




<PAGE>






                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page

<S>                                                                                                            <C>
Independent Auditor's Report....................................................................................F-1

Balance Sheets
   December 31, 2004 and 2003...................................................................................F-2

Statements of Operations
   For the Years Ended December 31, 2004 and 2003
   And for the Cumulative Period from July 5, 1996 (inception of development stage)
   To December 31, 2004.........................................................................................F-4

Statement of Stockholders' Equity
   From July 5, 1996 (inception of development stage) to December 31, 2004 .....................................F-5

Statements of Cash Flows
   For the Years Ended December 31, 2004 and 2003
   And for the Cumulative Period from July 5, 1996 (inception of development stage)
   To December 31, 2004........................................................................................F-13

Notes to the Financial Statements
   December 31, 2004 and 2003..................................................................................F-15
</TABLE>


<PAGE>




                          INDEPENDENT AUDITOR'S REPORT

Board of Directors
Klever Marketing, Inc.
(A Development Stage Company)
Salt Lake City, Utah

         We have audited the  accompanying  balance sheets of Klever  Marketing,
Inc. (a  development  stage  company) as of December 31, 2004 and 2003,  and the
related statements of operations and cash flows for the two years ended December
31, 2004, and the cumulative  period from July 5, 1996 (inception of development
stage) to December 31, 2004, and the statement of stockholders' equity from July
5, 1996 (inception of development  stage) to December 31, 2004.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance  with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material  respects,  the financial  position of Klever Marketing,
Inc. (a development  stage  company),  as of December 31, 2004 and 2003, and the
results  of its  operations  and its cash  flows for the two years then ended in
conformity with accounting principles generally accepted in the United States of
America.

         The accompanying  financial statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital  deficiency that raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 1. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

                                                   Respectfully submitted,


                                                   /s/ Robison, Hill & Co.
                                                   Certified Public Accountants
Salt Lake City, Utah
April 14, 2005

                                      F - 1

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                             --------------------------------------
ASSETS                                                                              2004                2003
------
                                                                             ------------------  ------------------
Current Assets
<S>                                                                          <C>                 <C>
     Cash                                                                    $           23,174  $            1,916
     Prepaid Expense                                                                        750               2,512
     Other Receivable                                                                    25,865                   -
                                                                             ------------------  ------------------
          Total Current Assets                                                           49,789               4,428
                                                                             ------------------  ------------------

Fixed Assets
     Office Equipment                                                                    92,964             105,727
     Less Accumulated Depreciation                                                      (89,319)            (98,913)
                                                                             ------------------  ------------------
          Net Fixed Assets                                                                3,645               6,814
                                                                             ------------------  ------------------

Other Assets
     Patents                                                                            755,089           2,358,342
     Less Accumulated Amortization                                                     (727,938)         (2,137,679)
                                                                             ------------------  ------------------
          Net Other Assets                                                               27,151             220,663
                                                                             ------------------  ------------------

          Total Assets                                                       $           80,585  $          231,905
                                                                             ==================  ==================

</TABLE>
















                                      F - 2

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                                 BALANCE SHEETS
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                             --------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                2004                2003
------------------------------------
                                                                             ------------------  ------------------
Current Liabilities
<S>                                                                          <C>                 <C>
     Accounts Payable, Trade                                                 $          343,765  $          446,855
     Accrued Liabilities                                                              1,624,295           1,247,524
     Related Party Payables                                                           2,127,564           2,172,880
     Notes Payable                                                                       45,000              45,000
     Short-term Notes Payable                                                               458                 458
                                                                             ------------------  ------------------

          Total Current Liabilities                                                   4,141,082           3,912,717
                                                                             ------------------  ------------------

Stockholders' Equity
     Preferred stock (par  value  $.01),  2,000,000  shares  authorized  168,434
          issued and outstanding December 31, 2004
          and December 31, 2003                                                           1,684               1,684
     Common Stock (Par Value $.01), 20,000,000 shares
          authorized 36,640,620 shares issued and outstanding
          at December 31, 2004 and 33,410,364 shares issued
          and outstanding at December 31, 2003                                          366,406             334,104
     Common Stock to be issued, 469,752 shares at
          December 31, 2004 and 1,395,657 shares at
          December 31, 2003                                                               4,698              13,957
     Treasury Stock, 1,000 shares at December 31, 2004
          and December 31, 2003                                                          (1,000)             (1,000)
     Paid in Capital in Excess of Par Value                                          13,164,028          12,934,463
     Shareholder Receivable                                                             (15,000)            (15,000)
     Retained Deficit                                                                (3,333,785)         (3,333,785)
     Deficit Accumulated During Development Stage                                   (14,247,528)        (13,615,235)
                                                                             ------------------  ------------------

          Total Stockholders' Equity                                                 (4,060,497)         (3,680,812)
                                                                             ------------------  ------------------

          Total Liabilities and Stockholders' Equity                         $           80,585  $          231,905
                                                                             ==================  ==================
</TABLE>




    The accompanying notes are an integral part of these financial statements

                                      F - 3

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                    Cumulative
                                                                                                       From
                                                                                                   July 5, 1996
                                                                  For the Year Ended               Inception of
                                                                     December 31,                  Development
                                                        --------------------------------------
                                                               2004                2003               Stage
                                                        ------------------  ------------------  ------------------

<S>                                                     <C>                 <C>                 <C>
Revenue                                                 $                -  $                -  $          256,000
                                                        ------------------  ------------------  ------------------

Expenses
  Sales and marketing                                                    -                   -             117,546
  General and administrative                                       686,776             849,098           8,940,381
  Research and development                                          69,765                   -           4,529,656
                                                        ------------------  ------------------  ------------------

     Total Expenses                                                756,541             849,098          13,587,583
                                                        ------------------  ------------------  ------------------

Other income (expense)
  Other income                                                     278,635                   -             278,635
  Interest income                                                        -                   -              18,902
  Interest expense                                                (415,425)           (291,599)         (1,431,021)
  Gain (Loss) on disposal of assets                                261,138            (220,956)             26,947
  Capital gain on sale of investments                                    -                   -             191,492
                                                        ------------------  ------------------  ------------------

     Total Other Income (Expense)                                  124,348            (512,555)           (915,045)
                                                        ------------------  ------------------  ------------------

Income (Loss) Before Taxes                                        (632,193)         (1,361,653)        (14,246,628)

Income Taxes                                                           100                 100                 900
                                                        ------------------  ------------------  ------------------

Net Income (Loss) After Taxes                           $         (632,293) $       (1,361,753) $      (14,247,528)
                                                        ==================  ==================  ==================

Weighted Average Shares
  Outstanding                                                   34,899,606          19,420,052
                                                        ==================  ==================
Loss Per Share                                          $           (0.02)  $           (0.07)
                                                        ==================  ==================
</TABLE>


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

                                      F - 4

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Balance December 31, 1995       247,100   $  2,471   12,210,949   $  122,109   $  --    $  --    $74,022,028  $(103,351,248) $ --
January 1996 shares issued
   in connection with merger   (247,100)    (2,471)  (3,784,905)     (37,849)     --      5,059  (70,257,358) 100,017,463      --

Shares issued for cash at
   $0.50 - 3.00  per share         --         --        314,287        3,143      --       --       507,932       --           --

Shares issued in exercise of
   options at $1.00 - $1.25
   per share                       --         --        130,000        1,300      --       --       136,200       --           --

Shares issued for services at
   $1.25 per share                 --         --         14,282          143      --       --        17,710       --           --

Shares issued for receivable
   at $1.00 - 3.00 per share       --         --           --           --        --        407     101,543       --           --

Shares issued to officer and
   employee for patents            --         --           --           --        --      2,250     130,500       --           --

Net Loss                           --         --           --           --        --       --          --         --       (831,814)
                               --------   --------   ----------   ----------   -------  -------  ----------   --------   ----------

Balance December 31, 1996          --         --      8,884,613       88,846      --      7,716   4,658,555   (3,333,785)  (831,814)
</TABLE>


                                     F - 5
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares issued for cash at
   $0.01 - 3.00 per share           --    $   --       228,150  $    2,282  $   --    $     49   $  449,976  $   --     $     --
Shares issued to officers for
   loans at $0.08 - 1.82
   per share                        --        --       249,444       2,494      --        --         74,287      --           --
Shares issued for services at
   $0.50 - 2.59 per share           --        --        10,398         104      --        --          7,391      --           --
Shares issued to officers for
   patents                          --        --       260,813       2,608      --      (2,250)       1,892      --           --
Shares issued for cash and
   receivables at $1.75 - 2.00
   per share                        --        --        58,286         583      --        (100)      85,267      --           --
Shares issued to VideOcart
   creditors                        --        --        97,610         976      --        (976)        --        --           --
Shares issued for research &
   development at par               --        --          --          --        --         464         --        --           --
Shares issued for employee
   compensation at $2.50
   per share                        --        --         6,000          60      --        --         14,940      --           --
Net Loss                            --        --          --          --        --        --           --        --       (755,594)
                                --------  --------  ----------  ----------  --------  --------   ----------  --------   ----------

Balance December 31, 1997           --        --     9,795,314      97,953      --       4,903    5,292,308  (3,333,785)(1,587,408)
</TABLE>



                                     F - 6
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)

<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares issued for cash at
   $1.50 - 3.00 per share          --    $    --      294,059   $   2,941   $    --    $    (100)  $ 612,416        --         --
Shares issued for services at
   $2.00 - 7.80 per share          --         --       13,648         136        --         --        43,590        --         --
Shares issued for employee
   compensation at $2.19 -
   3.06 per share                  --         --        4,363          44        --         --         9,954        --         --
Shares issued for accounts
   receivable at $1.50 - 2.12
   per share                       --         --      129,437       1,294        --         --       209,671        --         --
Shares issued for 1,500
   shares of Avtel stock at
   $3.00 per share                 --         --        4,125          41        --         --        12,334        --         --
Shares issued for research &
   development contract            --         --       46,366         464        --         (464)       --          --         --
Shares issued to officer for
   patent at $2.94 per share       --         --      150,000       1,500        --          250     512,313        --         --
Shares returned at $1.58
   per share                       --         --      (42,493)       (425)       --         --       (66,667)       --         --
Net Loss                           --         --         --          --          --         --          --          --   (1,496,926)
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------

Balance December 31, 1998          --          --  10,394,819     103,948        --        4,589   6,625,919  (3,333,785)(3,084,334)

</TABLE>


                                     F - 7
<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares issued for cash at
   $1.96 - 3.00 per share          --    $   --       701,525   $    7,015   $   --    $   --    $1,649,949   $   --     $     --
Shares issued for employee
   compensation at $1.95 -
   2.34 per share                  --        --         2,995           30       --        --         6,187       --           --
Shares issued for exercise of
   options at $0.52 - .86
   per share                       --        --       238,271        2,383       --        --       200,342       --           --
Shares returned at $0.67-1.58
   per share                       --        --       (62,489)        (625)      --        --      (107,047)      --           --
Net Loss                           --        --          --           --         --        --          --         --     (1,734,623)
                               --------  --------  ----------   ----------   --------  --------  ----------   --------   ----------

Balance December 31, 1999          --        --    11,275,121      112,751       --       4,589   8,375,350   (3,333,785)(4,818,957)

Shares issued for cash at
   $1.07 - 2.75 per share          --        --       279,742        2,798       --        --       532,754       --           --
Preferred shares issued for
   cash at $17 - 26 per share    84,576       846        --           --         --        --     1,827,529       --           --
Shares issued for employee
   compensation at $3.99
   per share                       --        --        74,608          746       --        --       296,939       --           --
</TABLE>



                                     F - 8
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares issued for exercise of
   stock options at $0.86 -
   1.07 per share                 --     $   --       597,778   $    5,978   $   --    $   --     $  511,931   $   --     $     --
Shares issued for accounts
   payable at $2.75 - 3.00
   per share                      --         --         9,488           95       --        --         26,649       --           --
Paid-in capital from treasury
   stock transaction              --         --          --           --         --        --         16,180       --           --
Shares canceled & converted
   to preferred shares at
   $2.75 per share                --         --      (100,000)      (1,000)      --        --       (274,000)      --           --
Conversion of note payable


   to preferred shares at
   $26 per share                 9,615         96        --           --         --        --        249,904       --           --
Shares issued that were paid
   for in 1997                    --         --        23,334          233       --        (233)        --         --           --
Shares issued for services at
   $0.89 per share                --         --         2,697           27       --        --          2,373       --           --
Shares returned at $1.73 -
   2.12 per share                 --         --       (10,000)        (100)      --        --        (19,150)      --           --
Net Loss                          --         --          --           --         --        --           --         --    (4,066,283)
                              --------   --------  ----------   ----------   --------  --------   ----------   --------   ----------

Balance December 31, 2000       94,191        942  12,152,768      121,528       --       4,356   11,546,459  (3,333,785)(8,885,240)
</TABLE>


                                      F - 9

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares issued for cash at
   $0.82 per share                 --    $   --         4,685   $       47   $   --     $   --    $    3,795   $   --     $     --
Preferred shares issued for
   cash at $6.60 per share        6,061        60        --           --         --         --        39,940       --           --
Preferred shares issued for
   payment of note payable
   at $6.60 per share            68,182       682        --           --         --         --       449,318       --           --
Shares canceled for
   nonpayment                      --        --        (4,694)         (47)      --         --        (9,903)      --           --
Shares issued for research &
   development expenses at
   $1.00 per share                 --        --        15,000          150       --         --        14,850       --           --
Shares issued for general &
   administrative expenses at
   $0.66 per share                 --        --       507,048        5,070       --         --       329,581       --           --
Shares returned to Company
   for accounts receivable of
$                      98,375      --        --          --           --       (1,000)      --       (97,375)      --           --
Net Loss                           --        --          --           --         --         --          --         --    (2,342,405)
                               --------  --------  ----------   ----------   --------   --------  ----------   --------   ----------

Balance December 31, 2001       168,434     1,684  12,674,807      126,748     (1,000)     4,356  12,276,665 (3,333,785)(11,227,645)
</TABLE>




                                     F - 10

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Shares canceled for services
   not rendered                    --    $  --      (304,229)  $   (3,042)  $   --     $   --     $ (197,749)  $   --     $     --
Cash received for shares that
   have not yet been issued        --       --          --           --         --        3,333       21,667       --           --
Net Loss                           --       --          --           --         --         --           --         --    (1,025,837)
                                -------  -------  ----------   ----------   --------   --------   ----------   --------   ----------

Balance December 31, 2002       168,434    1,684  12,370,578      123,706     (1,000)     7,689   12,100,583 (3,333,785)(12,253,482)

Shares issued for cash at
   $0.05 - 0.75 per share          --       --     2,580,000       25,800       --       (3,333)     151,033       --           --
Shares issued for S&C
   Medical at $0.05 per share      --       --     3,000,000       30,000       --         --        120,000       --           --
Shares issued for notes
   payable at $.04-.05/share       --       --    11,259,786      112,598       --         --        446,642       --           --
Shares issued for accounts
   payable at $.01-.10/share       --       --     4,200,000       42,000       --         --         96,000       --           --
Shares authorized for expense
   at $.03 per share - not
   issued                          --       --          --           --         --        9,545       19,090       --           --
Shares authorized for
   payment of accounts
   payable at $.21 per share -
   not issued                      --       --          --           --         --           56        1,115       --           --
</TABLE>



                                     F - 11
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)


<TABLE>
<CAPTION>

                                                                                                                           Deficit
                                                                                                                         Accumulated
                                                                                                                           From
                                                                                       Common     Paid in               July 5, 1996
                                                                                        Stock    Capital in             Inception of
                                 Preferred Stock        Common Stock         Treasury   to be     Excess of    Retained  Development
                               -------------------  ---------------------
                                Shares    Amount     Shares       Amount      Stock     Issued     Par Value    Deficit      Stage
                               --------  ---------  ---------   ---------   ---------  ---------   ---------   ---------  ---------
<S>                            <C>       <C>        <C>         <C>         <C>        <C>         <C>         <C>        <C>
Net Loss                          --    $   --          --    $     --    $   --     $   --     $     --    $   --     $(1,361,753)
                              --------  --------  ----------  ----------  --------   --------   ----------  --------   ----------

Balance December 31, 2003      168,434     1,684  33,410,364     334,104    (1,000)    13,957   12,934,463  (3,333,785)(13,615,235)

Shares issued for cash at         --
   $.036 - .15 per share          --        --       770,000       7,700      --         --         57,420      --           --
Shares issued for accounts
   payable at $.05-.23/share      --        --       391,939       3,919      --         --         27,306      --           --
Shares issued for expenses
   at $.04 - .23 per share        --        --     1,910,604      19,106      --       (9,203)     108,325      --           --
Authorized shares issued          --        --         5,571          56      --          (56)        --        --           --
Shares issued for
   settlement of liabilities      --        --       152,142       1,521      --         --         36,514      --           --
Net Loss                          --        --          --          --        --         --           --        --       (632,293)
                              --------  --------  ----------  ----------  --------   --------   ----------  --------   ----------

Balance December 31, 2004    168,434  $  1,684  36,640,620  $  366,406  $ (1,000)  $  4,698   $13,164,028 $(3,333,785) $(14,247,528)
                            ========  ========  ==========  ==========  ========   ========   =======+===  =====++===  ===++=======
</TABLE>





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


                                     F - 12

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                     Cumulative
                                                                                                        From
                                                                                                    July 5, 1996
                                                                   For the Year ended               Inception of
                                                                      December 31,                  Development
                                                          -------------------------------------
                                                                2004                2003               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Net Loss                                                  $        (632,293) $       (1,361,753) $      (14,247,528)
Adjustments used to reconcile net loss to net
   cash provided by (used in) operating activities:
     Stock issued for general and administrative                     63,545              28,635             963,660
     Stock issued for research and development                       47,850                   -              62,850
     Stock returned for services not rendered                             -                   -            (200,790)
     (Gain) loss on sale/disposal of assets                        (261,138)            220,956             486,536
     Compensation expense from stock options                              -                   -              26,247
     Stock issued for interest expense                                    -              95,416             119,701
     Stock issued for accounts payable                               36,350             146,970             208,473
     Deferred income                                                      -                   -            (214,000)
     Depreciation and amortization                                  144,062             230,448           1,862,131
     (Increase) decrease in accounts receivable                           -                   -                (413)
     (Increase) decrease in shareholder receivable                        -                   -              37,694
     (Increase) decrease in other assets & prepaids                 (24,103)             (2,512)             87,623
     Increase (decrease) in accounts payable                       (103,090)             10,927             258,061
     Increase (decrease) in accrued liabilities                     379,823             369,383           1,585,698
                                                          -----------------  ------------------  ------------------
Net Cash Used in Operating Activities                              (348,994)           (261,530)         (8,964,057)
                                                          -----------------  ------------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net                                    2,328                   -            (587,801)
Acquisition/Sale of patents                                         311,430             (19,336)             45,045
Acquisition/Sale of stock, net                                            -                   -              12,375
                                                          -----------------  ------------------  ------------------
Net Cash Used by Investing Activities                               313,758             (19,336)           (530,381)
                                                          -----------------  ------------------  ------------------
</TABLE>







                                     F - 13

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                             STATEMENT OF CASH FLOWS
                                   (continued)

<TABLE>
<CAPTION>

                                                                                                     Cumulative
                                                                                                        From
                                                                                                    July 5, 1996
                                                                   For the Year ended               Inception of
                                                                      December 31,                  Development
                                                          -------------------------------------
                                                                2004                2003               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Proceeds capital stock issued                                        65,120             173,500           6,346,547
Proceeds from loans                                                   2,374             150,506           3,455,188
Loan receivables                                                          -             (15,000)            (15,000)
Principal payments on lease obligations                                   -              (1,749)            (18,769)
Cash payments on notes payable                                      (11,000)            (27,899)           (275,028)
                                                          -----------------  ------------------  ------------------
Net Cash Provided by Financing Activities                            56,494             279,358           9,492,938
                                                          -----------------  ------------------  ------------------

Net Increase (Decrease) in Cash and Cash
          Equivalents                                                21,258              (1,508)             (1,500)
Cash and Cash Equivalents at Beginning of the
          Year                                                        1,916               3,424              24,674
                                                          -----------------  ------------------  ------------------
Cash and Cash Equivalents at End of the Year              $          23,174  $            1,916  $23,174
                                                          =================  ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest                                                  $               -  $                -  $                -
Income Taxes                                              $             100  $              100  $              900
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During  September 2003,  3,000,000 shares of common stock were issued to acquire
80% of S&C Medical. The Company is in the process of cancelling these shares.

During September 2003,  11,259,786  shares of common stock were issued for notes
payable.









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

                                     F - 14

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

         The accompanying  financial  statements have been prepared on the basis
of accounting principles applicable to a "going concern",  which assume that the
Company  will  continue in  operation  for at least one year and will be able to
realize  its assets  and  discharge  its  liabilities  in the  normal  course of
operations.

         Several conditions and events cast doubt about the Company's ability to
continue  as  a  "going  concern".  The  Company  has  incurred  net  losses  of
approximately  $632,000  for  the  year  ended  December  31,  2004,  losses  of
approximately  $1,362,000  for the year ended  December  31,  2003 and losses of
approximately  $17,581,000 since inception.  The Company has a liquidity problem
and requires additional financing in order to finance its business activities on
an ongoing basis. The Company is actively pursuing alternative financing and has
had discussions  with various third parties,  although no firm  commitments have
been obtained.

         The  Company's  future  capital  requirements  will  depend on numerous
factors  including,  but not limited to,  continued  progress in developing  its
products, and market penetration.

         These  financial  statements do not reflect  adjustments  that would be
necessary  if the Company  were unable to continue as a "going  concern".  While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial  statements,  there can be
no assurance that these actions will be successful.

         If the  Company  were unable to  continue  as a "going  concern",  then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.

Organization and Basis of Presentation

         The  Company was  organized  under the laws of the State of Delaware in
December 1989. The Company was in the  Development  stage from 1989 to 1991. The
Company  was an  operating  company  from 1992 to December 8, 1993 when it filed
petitions for relief under Chapter 11 bankruptcy. The Company was inactive until
July 5, 1996 when the Company merged with Klever Kart,  Inc. in a reverse merger
and changed its name to Klever  Marketing,  Inc.  During the period from July 5,
1996 to December 31, 2002, the Company has been in the development stage, except
for an  approximate  2-month period in 2000 when the Company  generated  revenue
from installations of their Klever-Kart system in stores.




                                     F - 15

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN (continued)

Nature of Business

         The  Company was formed for the purpose of creating a vehicle to obtain
capital,  to file  and  acquire  patents,  to seek  out,  investigate,  develop,
manufacture and market  electronic  in-store  advertising,  directory and coupon
services  which have  potential  for  profit.  The Company is  currently  in the
process of the commercialization of the patented process it has acquired.

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES

         This  summary of  accounting  policies  for Klever  Marketing,  Inc. is
presented to assist in understanding  the Company's  financial  statements.  The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.

Cash Equivalents

         For the purpose of  reporting  cash flows,  the Company  considers  all
highly liquid debt  instruments  purchased with maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.

Pervasiveness of Estimates

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

Reclassifications

         Certain   reclassifications  have  been  made  in  the  2003  financial
statements to conform with the 2004 presentation.

Loss per Share

         The  reconciliations  of the numerators and  denominators  of the basic
earnings per share computations are as follows:



                                     F - 16

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

<TABLE>
<CAPTION>
                                                                                     Per-Share
                                                Loss               Shares              Amount

                                                    For the year ended December 31, 2004
BASIC LOSS PER SHARE
<S>                                       <C>                        <C>         <C>
Loss available to common shareholders     $        (632,293)         34,899,606  $           (0.02)
                                          =================  ==================  ==================


                                                    For the year ended December 31, 2003
BASIC LOSS PER SHARE
Loss available to common shareholders     $      (1,361,753)         19,420,052  $           (0.07)
                                          =================  ==================  ==================
</TABLE>

         Basic  earnings per common share were  computed by dividing net loss by
the weighted  average  number of shares of common stock  outstanding  during the
year.  Diluted loss per common  share for the years ended  December 31, 2004 and
2003 are not  presented as it would be  anti-dilutive.  At December 31, 2004 and
2003,  the total number of potentially  dilutive  common stock  equivalents  was
9,242,589 and 17,319,281, respectively.

Concentration of Credit Risk

         The  Company has no  significant  off-balance-sheet  concentrations  of
credit  risk such as foreign  exchange  contracts,  options  contracts  or other
foreign hedging arrangements.

Fixed Assets

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

         Computer equipment                          3 years
         Office furniture and fixtures               5-10 years

         Upon sale or other disposition of property and equipment,  the cost and
related  accumulated  depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.

         Expenditures  for  maintenance  and  repairs  are charged to expense as
incurred.  Major overhauls and betterments are capitalized and depreciated  over
their estimated economic useful lives.

         Depreciation expense was $1,785 and $7,941 for the years ended December
31, 2004 and 2003, respectively.

                                     F - 17

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

Intangibles

         Intangibles associated with certain technology agreements are amortized
over 10 -14 years.

         Amortization  expense was  $142,277  and  $222,507  for the years ended
December 31, 2004 and 2003, respectively.

NOTE 3 - INCOME TAXES

         The  Company  has  accumulated  tax  losses  estimated  at  $17,500,000
expiring in years 2007 through  2024.  Current tax laws limit the amount of loss
available to be offset against  future taxable income when a substantial  change
in ownership occurs. The amount of net operating loss carryforward  available to
offset future taxable income may be limited if there is a substantial  change in
ownership.

NOTE 4 - LEASE COMMITMENT

         The Company leased approximately 1,620 square feet of office space from
Four Cabo's Enterprises, Ltd. on a month to month basis. The lease payments were
approximately  $2,042 per month.  This lease was  abandoned as of September  30,
2004.

         On October 1, 2004, the Company began leasing  approximately 144 square
feet of office  space from Four  Cabo's  Enterprises,  Ltd.  on a month to month
basis. The lease payments are approximately $125 per month.

         In August  2000,  the Company  entered into a lease  agreement  for the
rental of a postage  meter.  The lease expires in August 2006. The monthly lease
payments due on the above lease is approximately $110.

         The minimum  future lease payments under these leases for the next five
years are:


Year Ended December 31,
-------------------------------------------
         2005                                             $        1,320
         2006                                                        880
         2007                                                          -
         2008                                                          -
         2009                                                          -
                                                          --------------
         Total minimum future lease payments              $        2,200
                                                          ==============



                                     F - 18

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 5 - RESEARCH AND DEVELOPMENT

         Research and development of the Klever-Kart  System began with the sole
purpose of reducing thefts of shopping carts. A voice-activated alarm system was
envisioned.  As time and technology  progressed,  the present  embodiment of the
Klever-Kart   System  evolved  into  a  "product   specific"   point-of-purchase
advertising  system  consisting of an easily  readable  electronic  display that
attaches  to any  shopping  cart,  a shelf  mounted  message  sending  unit that
automatically  sends  featured  products'  ad-message  to the display and a host
computer using proprietary software.

         During the years ended December 31, 2004 and 2003, the Company expended
$69,765 and $0,  respectively  for research and  development  of the  technology
involved with its patents.

NOTE 6- RELATED PARTY TRANSACTIONS

OLSON HOLDINGS, INC. LOANS TO THE COMPANY

         Olson Holdings,  Inc. made a $150,000.00  unsecured loan to the Company
on February  26,  2001.  This note has a six-month  term at 10% annual  interest
maturing  on August  26,  2001.  The maker of the note may give  written  notice
within  10-days of  maturity,  to the  Company,  to convert  the  principal  and
interest  into common stock with a convertible  price of $1.05 (10-day  weighted
average from  February 26, 2001 and the nine days prior).  At December 31, 2004,
the total amount due on this note was $224,290.

         Olson Holdings made an unsecured loan to the Company on January 7, 2002
for  $1,835.84.  This  note has an annual  interest  rate of 8% and  matures  on
January 7, 2004.  An option was granted in  connection  with this note for 3,060
shares at a strike price of $1.00 and an expiration  date of January 7, 2005. At
December 31, 2004, the total amount due on this note was $2,310.

OLSON FOUNDATION LOANS TO THE COMPANY

         Olson Foundation  loaned the Company $60,000 on July 16, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies until January 15, 2002. Principal and all due and
unpaid  interest  are to be paid on  January  16,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration  date
of July 16, 2006.  This note is  convertible  to Class C  convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder. At December 31, 2004, the total amount due on this note was $97,205.





                                     F - 19

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

         Olson Foundation  loaned the Company $90,000 on July 30, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies until January 30, 2002. Principal and all due and
unpaid  interest  are to be paid on  January  30,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 27,273 common shares at a strike price of $0.01 and an expiration  date
of July 30, 2006.  This note is  convertible  to Class C  convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder. At December 31, 2004, the total amount due on this note was $144,987.

         Olson  Foundation  made unsecured  loans to the Company on May 3, 2002,
August 16,  2002,  and  October 29, 2002 for  $7,359,  $10,000,  and  $1,059.37,
respectively.  These notes are payable  within two years plus interest at 8% per
annum.  In conjunction  with the notes,  Olson  Foundation  also received common
stock  options for each note at a ratio of 1.667  common  shares for each dollar
loaned. At December 31, 2004, the total amount due on these loans was $22,296.

ESTATE OF PETER D. OLSON

         Peter D.  Olson  loaned the  Company  $12,500,  $12,500,  and $3,750 on
September 1, 1998,  September 17, 1998,  and  September 22, 1998,  respectively.
These notes bear an interest rate of 10% per annum.  On September 11, 2003,  the
outstanding  loan of $28,750 and accrued  interest of $17,679 were  converted to
928,580  shares of common stock valued at $.05 per share.  At December 31, 2004,
the total amount due on these loans was $0.

PRESIDIO INVESTMENTS, LLC LOAN TO THE COMPANY

         Presidio Investments, LLC has loaned the Company $1,000,000, which loan
is secured by a blanket lien on the assets of the  Company.  The sole trustee of
Presidio  Investments,  LLC is William J.  Howard,  trustee of the Olson  Legacy
Trust, whose residual beneficiary is the Olson Foundation.  The Olson Foundation
was the guarantor for funds  borrowed from Northern  Trust Bank which funds were
used to make the loan to the  Company.  This note was  amended on March 22, 2001
with an additional  $500,000  loaned to the Company  between January 1, 2001 and
March 22,  2001.  An  Interest  rate of 8%  applies  until  March  31,  2001 and
increases to 10% on April 1, 2001. Principal and all due and unpaid interest are
to be paid on October 1, 2001.  This note is  convertible to Class C convertible
preferred  shares at the option of the note holder.  At December  31, 2004,  the
total amount due on these loans was $2,351,303.

OLSON LEGACY TRUST LOAN TO THE COMPANY

         Olson Legacy Trust made  unsecured  loans to the Company on October 19,
2001 and November 15, 2001 in the amounts of $20,706 and $30,000,  respectively.
The notes are payable

                                     F - 20

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

within two years plus interest at 8% per annum.  In conjunction  with the notes,
Olson Foundation received common stock options for each note at a ratio of 1.667
common shares for each dollar loaned to the Company.  On September 11, 2003, the
outstanding  loan of $50,706 and accrued  interest of $7,887 were  converted  to
1,171,850 shares of common stock valued at $.05 per share. At December 31, 2004,
the total amount due on these loans was $0.

DIRECTOR LOAN TO THE COMPANY

         On October 20,  1998,  the Company  borrowed  $150,000  from William C.
Bailey at an annual  interest rate of 12% and a maturity date of April 30, 1999.
The Company  made a payment of $50,000 on February 26,  1999.  On September  11,
2003,  the  remaining  loan balance of $100,000 and accrued  interest of $50,006
were converted to 3,000,113  shares of common stock valued at $.05 per share. At
December 31, 2004, the total amount due on this loan was $0.

DIRECTOR AND OFFICER LOAN TO THE COMPANY

         Richard J. Trout  loaned the  Company  $396.85,  $163.00 and $568.08 on
September 16, 2002, March 19, 2003, and April 28, 2003, respectively. During the
three  months  ended  September  30,  2003,  Mr.  Trout  loaned  the  Company an
additional  $839.  These notes are payable  within two years plus interest at 8%
per annum.  In  conjunction  with the notes,  Mr.  Trout  received  common stock
options at a ratio of 1.667 common shares for each dollar loaned to the Company.
On  September  11,  2003,  the  outstanding  loan  balance of $1,967 and accrued
interest of $65 were  converted to 40,645  shares of common stock valued at $.05
per share. At December 31, 2004, the total amount due on these loans was $0.

THE SEABURY GROUP LOAN TO THE COMPANY

         The Seabury Group loaned the Company  $60,000 on July 5, 2001, of which
is secured by a blanket lien on the assets of the Company.  An interest  rate of
10% compounded monthly applies until January 5, 2002.  Principal and all due and
unpaid  interest  are to be  paid on  January  5,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration  date
of July 5,  2006.  This note is  convertible  to Class C  convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder. At December 31, 2004, the total amount due on this loan was $102,029.

         The Seabury  Group loaned the Company  $190,000 on August 22, 2001,  of
which is secured by a blanket  lien on the assets of the  Company.  An  interest
rate of 10% compounded  monthly  applies until February 22, 2002.  Principal and
all due and unpaid interest are to be paid on February 22, 2002, or the interest
rate increases to 15% compounded daily. Warrants were issued in conjunction with
this loan for 57,576  common shares at a strike price of $0.01 and an expiration
date

                                     F - 21

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

of August 22, 2006.  This note is convertible  to Class C convertible  preferred
shares or to Class D  convertible  preferred  shares  at the  option of the note
holder. At December 31, 2004, the total amount due on this loan was $316,889.

ARBINGER LOANS TO THE COMPANY

         The  loans  listed  below  were  made to the  Company  by The  Arbinger
Institute. The Arbinger Institute is controlled by four equal partners, of which
C. Terry Warner and D. Paul Smith are each a partner.

<TABLE>
<CAPTION>
                                                                          Common
                                                                           Stock
                                Annual                           Option #     Option Strike
    DATE       Principal    Interest Rate     Maturity Date       Shares          Price
------------ ---------------------------------------------------------------------------------
<S>          <C>             <C>              <C>                <C>         <C>
  10/19/01      $10,000.00      8.00%            10/19/02             16,667      $1.00
  12/31/01       $6,617.04      8.00%            12/31/02             11,028      $1.00
  01/30/02      $15,000.00      8.00%            01/30/04             25,000      $1.00
  02/18/02       $4,000.00      8.00%            02/18/03              6,667      $1.00
  07/02/02       $7,700.00      8.00%            07/02/03             12,833      $1.00
  08/30/02         $200.00      8.00%            08/30/04                333      $1.00
  09/18/02       $8,500.00      8.00%            09/18/04             14,167      $1.00
  11/19/02       $5,500.00      8.00%            11/19/04              9,167      $1.00
  04/08/03       $1,200.00      8.00%            04/08/05              2,000      $1.00
  07/30/03      $15,000.00      8.00%            07/30/05             25,000      $1.00
             -------------                                    --------------
   Total        $73,717.04                                           122,862
             =============                                    ==============
</TABLE>

         On September  11,  2003,  the  outstanding  loan of $73,717 and accrued
interest of $7,137 were converted to 1,617,074  shares of common stock valued at
$.05 per share.  At December 31,  2004,  the total amount due on these loans was
$0.

         The  loans  listed  below  were  made to the  Company  by The  Arbinger
Institute after September 11, 2003.










                                     F - 22

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

<TABLE>
<CAPTION>
                                                                          Common
                                                                           Stock
                                Annual                           Option #     Option Strike
    DATE       Principal    Interest Rate     Maturity Date       Shares          Price
------------ ---------------------------------------------------------------------------------
<S>          <C>             <C>              <C>                <C>         <C>
  09/12/03      $10,040.00      8.00%            09/12/05             16,733      $1.00
  09/17/03         $471.73      8.00%            09/17/05                786      $1.00
  09/25/03       $4,500.00      8.00%            09/25/05              7,500      $1.00
  09/26/03          $80.95      8.00%            09/26/05                135      $1.00
  10/01/03          $79.00      8.00%            10/01/05                132      $1.00
  11/01/03          $79.00      8.00%            11/01/05                132      $1.00
  11/26/03      $10,000.00      8.00%            11/26/05             16,667      $1.00
  12/02/03          $79.00      8.00%            12/02/05                132      $1.00
  12/15/03      $13,000.00      8.00%            12/15/05             21,667      $1.00
  12/24/03       $2,750.00      8.00%            12/24/05              4,583      $1.00
             -------------                                    --------------
   Total        $41,079.68                                            68,467
             =============                                    ==============
</TABLE>

         During 2004,  the Arbinger  Institute  loaned the Company an additional
$2,260 to pay general and  administrative  expenses.  At December 31, 2004,  the
total amount due on these loans is $45,715.

         The Arbinger Institute has also made additional loans to the Company to
pay for storage  space.  The total  amount of these loans is $1,595 plus accrued
interest of $113.  These loans were  converted to common stock on September  11,
2003.  As  of  December  31,  2004,  the  stock  has  not  been  issued  due  to
administrative reasons.

DIRECTOR LOANS TO THE COMPANY

         C. Terry Warner made  unsecured  loans to the Company on September  27,
2002, August 12, 2002, April 16, 2003, May 2, 2003, May 5, 2003, and May 8, 2003
in the  amounts  of  $15,000,  $21,348,  $10,000,  $1,500,  $800,  and  $19,000,
respectively.  These notes are payable  within two years plus interest at 8% per
annum. In conjunction  with the notes,  Mr. Warner received common stock options
for each note at a ratio of 1.667  common  shares for each dollar  loaned to the
Company.  On September  11, 2003,  the  outstanding  loan of $67,648 and accrued
interest of $3,992 were converted to 1,432,791  shares of common stock valued at
$.05 per share.  At December 31,  2004,  the total amount due on these loans was
$0.

DIRECTOR AND OFFICER LOANS TO THE COMPANY

         The loans  listed  below were made to the Company by D. Paul  Smith,  a
member of the Board of Directors:



                                     F - 23

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

<TABLE>
<CAPTION>
                                                                          Common
                                                                           Stock
                                Annual                           Option #     Option Strike
    DATE       Principal     Interest Rate    Maturity Date       Shares          Price
------------ ------------- -------------------------------------------------------------------
<S>          <C>              <C>             <C>                <C>         <C>
  12/31/02      $25,000.00       8.00%           12/31/04             41,667      $1.00
  02/21/03       $5,000.00       8.00%           02/21/05              8,333      $1.00
  03/31/03      $15,000.00       8.00%           03/31/05             25,000      $1.00
  04/10/02      $15,000.00       8.00%           04/10/03             25,000      $1.00
  08/30/02         $370.23       8.00%           08/30/04                617      $1.00
  11/01/02         $364.82       8.00%           11/01/04                608      $1.00
  11/04/02      $15,000.00       8.00%           11/04/04             25,000      $1.00
  07/18/03       $7,500.00       8.00%           07/18/05             12,500      $1.00
  08/18/03       $5,000.00       8.00%           08/18/05              8,333      $1.00
             -------------                                    --------------
   Total        $88,235.05                                           147,058
             =============                                    ==============
</TABLE>

         On  September  11,  2003,  the  outstanding  loan  $88,235  and accrued
interest of $5,215 were converted to 1,868,997  shares of common stock valued at
$.05 per share.  At December 31,  2004,  the total amount due on these loans was
$0.

         On October 8, 2003, Mr. Smith loaned the Company  $2,500.  This note is
payable within two years plus interest at 8% per annum. In conjunction  with the
note, Mr. Smith received a common stock option at a ratio of 1.667 common shares
for each dollar  loaned to the  Company.  The option has a strike price of $1.00
and a 3-year expiration date. At December 31, 2004, the total amount due on this
loan was $2,813.

PAUL G. BEGUM

         On February 1, 2000, an accrued  liability owed to Paul G. Begum in the
amount of $306,666.64  was converted to common shares by exercise of options for
the purchase of 579,585  shares at $.86 per share and a note  receivable  in the
amount of $191,776.46. The note is payable in thirty-six equal installments with
interest at the rate of eight  percent.  The note is  collateralized  by 100,000
shares of the Company's common shares. As of July 31, 2001, the total balance on
the note  receivable  was  $98,375.  On July 31, 2001,  the Company  forgave the
remaining amount owed on the receivable in exchange for 100,000 shares of common
stock that were returned to the Company.

         During the year ended December 31, 2001, the Company accrued additional
liabilities  from a separation  agreement  with Paul G. Begum.  During 2003, the
Company  paid  $27,899  towards  these  liabilities.  The total  amount of these
liabilities remaining at December 31, 2003 is $38,035.

         In February  2004, the remaining  liabilities  $38,035 due to Mr. Begum
were settled in exchange for 152,142 shares of the Company's free-trading common
stock valued at $.25 per share.

                                     F - 24

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 7 - NOTES PAYABLE

         During 2002, the Company  received loans of $45,000 from third parties.
The  loans are  demand  loans and carry an  interest  rate of 8% per  annum.  At
December 31, 2004, the total amount due on these loans is $57,013.

NOTE 8- STOCK OPTIONS

         The shareholders approved, by a majority vote, the adoption of the 1998
Stock  Incentive  Plan (the  "Plan").  As amended on August 11,  2003,  the Plan
reserves  20,000,000  shares of common stock for  issuance  upon the exercise of
options  which may be granted  from  time-to-time  to  officers,  directors  and
certain employees and consultants of the Company or its  subsidiaries.  The Plan
permits the award of both qualified and  non-qualified  incentive stock options.
On August 18, 2003, the Company  registered its "Amended Stock Incentive Plan of
Klever Marketing, Inc." on Form S-8.

         As  of  December  31,  2004,   6,861,584   options  were   outstanding.
Compensation expense charged to operations in 2004 and 2003 is $0 and $0.

         The following table sets forth the options and warrants  outstanding as
of December 31, 2003.

<TABLE>
<CAPTION>
                                                                           Weighted
                                                    Option /                Average             Weighted
                                                    Warrants               Exercise             Average
                                                     Shares                  Price             Fair Value
                                               ------------------      -----------------    ----------------
<S>                                            <C>                     <C>                  <C>
Options & warrants outstanding,
       December 31, 2002                                3,774,505      $           1.22
Granted, Exercise price more than fair value            5,365,476                  0.23                0.06
Granted, Exercise price less than fair value                    -                  -                   -
Expired                                                (2,057,352)                 1.10
Exercised                                                       -                  -
                                               ------------------
Options & warrants outstanding,
       December 31, 2003                                7,082,629      $           0.73
                                               ==================      =================
</TABLE>







                                     F - 25

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 8- STOCK OPTIONS (continued)

         The following table sets forth the options and warrants  outstanding as
of December 31, 2004.

<TABLE>
<CAPTION>
                                                                                            Weighted
                                                                     Option /                Average             Weighted
                                                                     Warrants               Exercise             Average
                                                                      Shares                  Price             Fair Value
                                                                ------------------      -----------------    ----------------
<S>                                                             <C>                     <C>                  <C>
Options & warrants outstanding,
       December 31, 2003                                                 7,082,629      $          0.73
Granted, Exercise price more than fair value                               900,132                 2.15                0.07
Granted, Exercise price less than fair value                                     -                 -                   -
Expired                                                                 (1,121,177)                0.24
Exercised                                                                        -                 -
                                                                ------------------
Options & warrants outstanding,
       December 31, 2004                                                 6,861,584      $          0.77
                                                                ==================      =================
</TABLE>

         Exercise  prices for  optioned  shares and warrants  outstanding  as of
December  31,  2004 ranged  from $0.01 to $2.77.  A summary of these  options by
range of exercise prices is shown as follows:

<TABLE>
<CAPTION>
                                                                                             Weighted-              Weighted-
                                                Weighted-            Shares/                  Average                Average
                            Shares /             Average             Warrants             Exercise Price           Contractual
     Exercise               Warrants            Exercise            Currently                Currently              Remaining
      Price               Outstanding             Price            Exercisable              Exercisable               Life
------------------     ------------------    ---------------    ------------------     ---------------------    -----------------

<C>                               <C>        <C>                           <C>         <C>                           <C>
$             0.01                121,213    $          0.01               121,213     $                0.01         2 years
0.05                              350,000               0.05               350,000                      0.05         4 years
0.06                            3,167,000               0.06             3,167,000                      0.06         3 years
0.065                             400,000              0.065               400,000                     0.065         4 years
0.23                              200,000               0.23               100,000                      0.23         4 years
0.50                              100,000               0.50               100,000                      0.50        11 months
0.54                               60,000               0.54                60,000                      0.54         6 years
0.66                               30,303               0.66                30,303                      0.66         1 year
1.00                              991,192               1.00               991,192                      1.00       1 - 3 years
2.50                              198,000               2.50               198,000                      2.50        2 months
2.56                              146,483               2.56               146,483                      2.56         1 month
2.75                              937,000               2.75               937,000                      2.75         2 years
2.77                              160,393               2.77               160,393                      2.77         1 month
</TABLE>



                                     F - 26

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9 - PREFERRED STOCK

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

         Class  A  Shares  are  convertible  into  Common  Stock  at an  initial
conversion price of $2.60 (subject to adjustment).

         Holders of Class A Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors  of the Company out of any funds at the time
legally available  therefor  dividends at the rate of $2.20 per share per annum,
payable  semi-annually  on the first day of January and July of each year.  Such
dividends shall accrue on each such share from the date of its original issuance
and shall  accrue  from day to day,  whether  or not  earned or  declared.  Such
dividend  shall be  cumulative  and may be paid in cash or in kind  through  the
distribution  of .0425 Class A Shares,  Series 1, for each  outstanding  Class A
Share, on each dividend payment date. In addition, each holder of Class A Shares
shall be entitled to receive,  when and as  declared,  a dividend  equal to each
dividend  declared and paid on the shares of Common Stock,  on a share for share
basis.  If there is a split or  dividend on the Common  Stock,  then the Class A
Share dividends shall be adjusted as if a similar split or dividend had occurred
with respect to the Class A Shares.

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

         Class A Shares carry a liquidation preference of $26 per share plus any
accrued  but  unpaid  dividends  on  such  shares,  if  any,  and  adjusted  for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.

         The Class A Shares shall be redeemable  by the Company,  in whole or in
part,  at the option of the Board of Directors  of the Company,  at any time and
from time to time on or after July 1, 2002.  The  redemption  price shall be $26
per share together with accrued but unpaid dividends on such shares, if any.

         On September 24, 2000 the Board of Directors authorized and established
"Class B Voting  Preferred  Stock" ("Class B Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class B Shares consisted of
250,000,  125,000 shares thereof were designated as Series 1 shares.  On May 20,
2002, the Board of Directors  amended the number of authorized shares of Class B
voting preferred stock to 42,000 shares.

                                     F - 27

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9 - PREFERRED STOCK (continued)

         Class  B  Shares  are  convertible  into  Common  Stock  at an  initial
conversion price of $1.70 (subject to adjustment).

         Holders of Class B Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors of the  Corporation  out of any funds at the
time legally  available  therefore  dividends at the rate of the Original  Issue
Price divided by 11.8181818 per share per annum,  payable  semi-annually  on the
first day of January and July of each year.  Such dividends shall accrue on each
such share from the date of its  original  issuance and shall accrue from day to
day,  whether or not earned or declared.  Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class B Shares,
of the same Series for which the dividend is accrued, for each outstanding Class
B Share,  on each dividend  payment date;  provided,  that if such  dividends in
respect of any  period  shall not have been paid or  declared  and set apart for
payment for all outstanding  Class B Shares by each payment date, then until all
unpaid  dividends  thereon shall be paid or set apart for payment to the holders
of such shares,  the Corporation may not pay,  declare or set apart any dividend
or other  distribution  on its shares of Common Stock or other shares  junior to
the  Class B  Shares,  nor may any  other  distributions,  redemptions  or other
payments  be made with  respect  to the shares of Common  Stock or other  junior
shares.  In addition to the  foregoing,  each holder of a Class B Share shall be
entitled to receive,  when and as declared,  a dividend  equal to each  dividend
declared and paid on the shares of Common Stock,  on a share for share basis, so
the holders of the Class B Shares shall be entitled to participate  equally on a
share for share basis with the holders of the shares of Common  Stock.  If there
is a share  split or  dividend  on the  Common  Stock,  then  the  Class B Share
dividends  shall be adjusted as if a similar split or dividend had occurred with
respect to the Class B Shares.

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

         Class B Shares shall carry a  liquidation  preference  of $17 per share
plus any accrued but unpaid  dividends on such shares,  if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.

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


                                     F - 28

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9 - PREFERRED STOCK (continued)

         On January 2, 2001 the Board of Directors  authorized  and  established
"Class C Voting  Preferred  Stock" ("Class C Shares") as a class of its $.01 par
value, 2,000,000 shares authorized, preferred stock. Class C Shares consisted of
500,000,  125,000 shares thereof were  designated as Series 1 shares and 125,000
shares thereof were designated as Series 2 shares. On May 20, 2002, the Board of
Directors  amended the number of authorized  shares of Class C voting  preferred
stock to 150,000 shares.

         Class  C  Shares  are  convertible  into  Common  Stock  at an  initial
conversion price of $.66 (subject to adjustment).

         Holders of Class C Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors of the  Corporation  out of any funds at the
time legally  available  therefore  dividends at the rate of the Original  Issue
Price divided by 11.8181818 per share per annum,  payable  semi-annually  on the
first day of January and July of each year.  Such dividends shall accrue on each
such share from the date of its  original  issuance and shall accrue from day to
day,  whether or not earned or declared.  Such dividends shall be cumulative and
may be paid in cash or in kind through the distribution of .0425 Class C Shares,
of the same Series for which the dividend is accrued, for each outstanding Class
C Share,  on each dividend  payment date;  provided,  that if such  dividends in
respect of any  period  shall not have been paid or  declared  and set apart for
payment for all outstanding  Class C Shares by each payment date, then until all
unpaid  dividends  thereon shall be paid or set apart for payment to the holders
of such shares,  the Corporation may not pay,  declare or set apart any dividend
or other  distribution  on its shares of Common Stock or other shares  junior to
the  Class C  Shares,  nor may any  other  distributions,  redemptions  or other
payments  be made with  respect  to the shares of Common  Stock or other  junior
shares.  In addition to the  foregoing,  each holder of a Class C Share shall be
entitled to receive,  when and as declared,  a dividend  equal to each  dividend
declared and paid on the shares of Common Stock,  on a share for share basis, so
the holders of the Class C Shares shall be entitled to participate  equally on a
share for share basis with the holders of the shares of Common  Stock.  If there
is a share  split or  dividend  on the  Common  Stock,  then  the  Class C Share
dividends  shall be adjusted as if a similar split or dividend had occurred with
respect to the Class C Shares.

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

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


                                     F - 29

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9 - PREFERRED STOCK (continued)

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

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

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

         Holders of Class D Shares  shall be  entitled  to  receive  when and as
declared by the Board of  Directors of the  Corporation  out of any funds at the
time legally  available  therefore  dividends at the rate of the Original  Issue
Price divided by 11.8181818 per share per annum,  payable  semi-annually  on the
first day of January and July of each year.  Such dividends shall accrue on each
such share from the date of its  original  issuance and shall accrue from day to
day,  whether or not earned or declared.  Such dividends shall be cumulative and
may be paid in cash or in kind through the  distribution of .0425 Class D Shares
for each  outstanding  Class D Share, on each dividend  payment date;  provided,
that if such  dividends  in respect  of any  period  shall not have been paid or
declared  and set apart for payment for all  outstanding  Class D Shares by each
payment date, then until all unpaid dividends thereon shall be paid or set apart
for payment to the holders of such shares,  the Corporation may not pay, declare
or set apart any dividend or other distribution on its shares of Common Stock or
other  shares  junior to the Class D  Shares,  nor may any other  distributions,
redemptions or other payments be made with respect to the shares of Common Stock
or other junior shares.  In addition to the foregoing,  each holder of a Class D
Share shall be entitled to receive,  when and as declared,  a dividend  equal to
each dividend  declared and paid on the shares of Common  Stock,  on a share for
share  basis,  so the  holders  of the  Class D  Shares  shall  be  entitled  to
participate equally on a share for share basis with the holders of the shares of
Common Stock.  If there is a share split or dividend on the Common  Stock,  then
the Class D Share  dividends shall be adjusted as if a similar split or dividend
had occurred with respect to the Class D Shares.

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



                                     F - 30

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9 - PREFERRED STOCK (continued)

         Class D Shares shall carry a liquidation preference of $10.50 per share
plus any accrued but unpaid  dividends on such shares,  if any, and adjusted for
combinations, splits, dividends or distributions of shares of stock with respect
to such shares.

         The Class D Shares shall be redeemable  by the Company,  in whole or in
part,  at the option of the Board of Directors  of the Company,  at any time and
from time to time on or after May 14, 2007. The redemption price shall be $10.50
per share together with accrued but unpaid dividends on such shares, if any.

NOTE 10 - LITIGATION

         On October 27, 2003, Thomas J. LaLanne, assignee of eiKart, LLC., filed
against  the  Company  in the Third  Judicial  District  Court of Utah under the
provisions of the Utah Foreign Judgement Act a judgement from the Superior Court
of California, in and for the County of San Francisco Jurisdiction.  Pursuant to
the Judgement Information Statement,  also filed on October 27, 2003, the amount
of the above  judgement is $81,124.  The relief  sought is  collection  from the
Company in Utah of the amount of said judgement. The Company has filed an action
to  dismiss  said Utah  judgement  on the  grounds  that the  Superior  Court of
California  did not  have  jurisdiction  over  the  Company  when  the  original
judgement  was  granted.  This  judgment  has  been  included  in the  financial
statements as part of accrued liabilities at December 31, 2004 and 2003.

         On  September  6, 2002,  an entry of judgment  was entered  against the
Company by Micropower Direct,  LLC. The total judgment was for $17,167.18.  This
judgment has been included in accounts payable as of December 31, 2004 and 2003.

         A Confession of Judgement  Statement of Klever  Marketing,  Inc.  dated
November 28, 2003 was filed in the amount of  $16,135.81  in favor of Boult Wade
Tennant.  This amount has been  included in accounts  payable as of December 31,
2003. On May 7, 2004, the Company paid $16,135.81 to settle this judgment.

NOTE 11 - STOCK TRANSACTIONS

         During January 2003, the Company received $65,000 for 866,667 shares of
common  stock.  These shares were issued  during the three months ended June 30,
2003.

         On September 8, 2003,  the Company  issued  3,200,000  shares of common
stock valued at $.04 per share for $128,000 of accounts payable.

         On September 11, 2003, the Company converted $544,239 of notes payable,
accrued  interest,  and accounts  payable to  10,884,786  shares of common stock
valued at $.05 per share.


                                     F - 31

<PAGE>



                             KLEVER MARKETING, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 11 - STOCK TRANSACTIONS (continued)

         On September 8, 2003, the Company converted $15,000 of notes payable to
375,000 shares of common stock valued at $.04 per share.

         On  September  11,  2003,  the Company  authorized  issuance of 954,502
shares of common  stock for payment of expenses of $28,635.  As of December  31,
2003 these shares have not been issued.

         On September 25, 2003,  the Company issued  1,000,000  shares of common
stock valued at $.10 per share for $100,000 of accounts payable.

         On October 10, 2003, the Company  received $56,000 for 1,120,000 shares
of common stock.

         On October 22, 2003, the Company received $50,000 for 250,000 shares of
common stock.

         On November 12, 2003, the Company  received $2,500 for 10,000 shares of
common stock.

         On December 29, 2003, the Company  authorized  issuance of 5,571 shares
of common  stock for payment of $1,170 in accounts  payable.  As of December 31,
2003, these shares have not been issued.

         On January 7, 2004,  the Company  issued  19,000 shares of common stock
for payment of accounts payable of $3,800.

         On January 23, 2004,  the Company  issued 50,000 shares of common stock
for $7,000 in cash.

         On January 27,  2004,  the Company  issued 7,046 shares of common stock
for payment of accounts payable of $1,550.

         On February 2, 2004,  the Company  issued  6,739 shares of common stock
for payment of accounts payable of $1,550.

         On February 6, 2004,  the Company issued 200,000 shares of common stock
for $28,000 in cash.

         On February 9, 2004,  the Company issued 152,142 shares of common stock
for settlement of shareholder payables of $38,036.

         On February 10, 2004, the Company issued 100,000 shares of common stock
for $15,000 in cash.


                                     F - 32

<PAGE>



                             KLEVER MARKETING, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 11 - STOCK TRANSACTIONS (continued)

         On February 19, 2004,  the Company issued 24,435 shares of common stock
for payment of accounts payable of $5,125.

         On February 20, 2004, the Company issued 200,000 shares of common stock
for general and administrative expenses of $46,000.

         On February 27, 2004,  the Company issued 20,588 shares of common stock
for payment of accounts payable of $3,500.

         On March 17, 2004,  the Company issued 7,619 shares of common stock for
payment of accounts payable of $1,600.

         On March 25, 2004,  the Company issued 8,214 shares of common stock for
payment of accounts payable of $1,150.

         On May 5, 2004,  the Company  issued  14,375 shares of common stock for
payment of accounts payable of $1,150.

         On May 17, 2004,  the Company  issued 55,358 shares of common stock for
payment of accounts payable of $3,875.

         On June 14, 2004,  the Company issued 20,000 shares of common stock for
payment of accounts payable of $1,400.

         On July 15, 2004, the Company issued 200,000 shares of common stock for
cash of $7,200.

         On July 27, 2004,  the Company issued 20,000 shares of common stock for
cash of $720.

         On August 27, 2004,  the Company  issued 100,000 shares of common stock
for cash of $3,600.

         On September 1, 2004,  the Company  issued  1,154,502  shares of common
stock at $.04 per share for general and administrative expenses of $23,090.

         On September 8, 2004, the Company issued 100,000 shares of common stock
for cash of $3,600.

         On September  23, 2004,  the Company  issued  531,667  shares of common
stock at $.09 per share for consulting expense of $47,850.

                                     F - 33

<PAGE>


                             KLEVER MARKETING, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

NOTE 11 - STOCK TRANSACTIONS (continued)

         On November 18, 2004, the Company issued 151,000 shares of common stock
at $.05 per share for accounts payable of $7,550.

         On December 10, 2004,  the Company issued 82,000 shares of common stock
at $.05 per share for accounts payable of $4,100.

NOTE 12 - PURCHASE AGREEMENT

         On July 29, 2003, the Company entered into an agreement to purchase 80%
of the issued and outstanding  shares of S&C Medical,  Inc.  (S&C).  The Company
agreed to issue 3,000,000 restricted shares of the Company's common voting stock
to acquire the S&C  shares.  The  Company  also sent S&C $15,000 in cash.  As of
December 31, 2003,  the Company  cancelled the agreement.  The 3,000,000  shares
have not yet been  returned  to the  Company.  The  Company is in the process of
cancelling  these  shares.  The  $15,000  has  been  recorded  as a  shareholder
receivable.

NOTE 13 - LICENSE AGREEMENT

         On May 11, 2004,  Media Cart, Inc.  acquired from the Company a limited
exclusive  license to use the  Company's  United  States  patent  portfolio  for
electronic  display devices  specific to Media Cart's product design.  Under the
license  agreement,  Media Cart paid the Company  $200,000  and will pay ongoing
royalties  for all Media Cart  products  that  utilize  the  Company's  licensed
technology.

NOTE 14 - SALE OF PATENTS

         On August 27, 2004, the Company sold all of its  international  patents
for $350,000. The international patents comprised approximately 69% of the total
patents the Company owned.


                                     F - 34

<PAGE>






                                   SIGNATURES


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

                                                    KLEVER MARKETING, INC.

Dated: April 15, 2005         By  /S/     William J. Dupre
                              --------------------------------------------------
                              William J. Dupre
                              President, COO
                              (Principal Executive Officer)

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 15th day of April 2005.

Signatures                                 Title

/S/     William J. Dupre
------------------------------------------------------------
William J. Dupre                           President, COO
                                          (Principal Executive Officer)


/S/     D. Paul Smith
-------------------------------------------------------------
D. Paul Smith                              C.F.O.,
                                           Secretary, Treasurer,
                                           Chairman and Executive
                                           Vice-President (Principal
                                           Financial Officer)

/S/     Michael L. Mills
-----------------------------------------------------------
Michael L. Mills                                     Director


/S/     C. Terry Warner
-----------------------------------------------------------
C. Terry Warner                                      Director


/S/     William C. Bailey
-------------------------------------------------------------
William C. Bailey                                    Director