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, 2003

                                       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

                                                                 Total pages: 28
                                                                            ----
                                                          Exhibit Index Page: 23
                                                                           -----

     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 March 26,  2004,  there were  35,351,267  (1 vote per share)  Common,
5,493,727  Class  A,  2,789,956  Class  B,  and  1,952,969  Class C  Convertible
Preferred,  for a preferred  and common  share total of  45,587,919  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
$4,027,644  computed at the closing  price as of March 26,  2004.  The number of
preferred  and common  shares held by  non-affiliates  of the  Registrant  total
28,768,892 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


Item Number and Caption                                                     Page
PART I

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                                         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    14

Item 12.   Certain Relationships and Related Transactions                    18

Item 13.   Exhibits and Reports on Form 8-K                                  23

Item 14.   Controls and Procedures                                           25

Item 15.   Principal Accountant Fees & Services                              26


                                       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  Klever-Kart   software
technology  and upgrades,  as well as advertising  and promotion  space sales to
both  retailers and  manufacturers.  The Company needs to raise funds to perform
its obligations under the Fujitsu agreement.



                         ITEM 2 DESCRIPTION OF PROPERTY


         The Company currently leases  approximately 1,620 square feet of office
space from Four Cabo's  Enterprises,  Ltd. on a month to month basis.  The lease
payments  are  approximately  $2,042 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.  This judgment has been included in the financial
statements as part of accrued liabilities at December 31, 2003 and 2002.

         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.  This  judgment has
been included in accounts payable as of December 31, 2003.

         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.  This amount has been included in accounts payable as of
December 31, 2003.



                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


         There were no matters submitted to a vote of shareholders during 2003.


                                     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.


                                        5

<PAGE>



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


                 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

                 2002:                              High                 Low
First Quarter                                $         0.65      $         0.10
Second Quarter                               $         0.65      $         0.25
Third Quarter                                $         0.35      $         0.06
Fourth Quarter                               $         0.12      $         0.04

          The number of shareholders of record of the Company's  common stock as
of March 26, 2004 was approximately 825.

         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  21,039,786 shares of common stock during 2003. Also
during 2003, the Company had  authorized  the issuance of an additional  960,073
common shares.  As of December 31, 2003, these shares had not been issued due to
insufficient funds to process. 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, 2003,
the Company believes that all reporting persons

                                        6

<PAGE>



complied  with  all  Section  16(a)  filing  requirements,  except  that:  Olson
Foundation  missed one filing for two  transactions  and a Form 5; Olsen  Legacy
Trust missed a Form 5 filing;  Presidio  missed one filing for one  transaction,
and missed a Form 5;  Michael L. Mills  missed one filing for four  transactions
and filed a late Form 5; C. Terry Warner missed twenty filings for  twenty-three
transactions  and a late Form 5; D. Paul Smith  missed  twenty-one  filings  for
twenty-one  transactions  and a late Form 5; William J. Dupre missed two filings
for three  transactions  and a late Form 5; William C. Bailey missed two filings
for six  transactions and a late Form 5; Richard J. Trout missed six filings for
ten transactions and a late Form 5; and Seabury missed a Form 5.


                       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's  application  to other  retailers  including  superstores,
discount stores, toy stores 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 has plans
during  the  next  twelve  months  to work  jointly  with  Fujitsu  Transactions
Solutions to: 1) develop and implement electronic couponing, and the Klever-Kard
enhancement to existing frequent shopping programs;  2) install two beta stores;
3) begin production of the next generation  Klever-Kart with full color display,
audio, video, and scanning capabilities; 4) commence general installations;  and
5) expand the Klever-Kart  System's orientation to other store formats including
superstores,  discount stores, toy stores,  do-it- yourself stores and warehouse
stores.


                                        7

<PAGE>



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, 2003 and 2002,  the Company had net losses of $1,361,639 and
$1,025,837,  respectively.  This  increase  in the  loss is  primarily  due to a
write-off of assets.

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 $262,000 and $210,000 for
2003 and 2002 respectively.  The increase in the use of cash is due primarily to
an increase in expenses.

         Investing activities have used cash of $19,000 and $23,000 for 2003 and
2002, respectively.  Investing activities primarily represent purchases of Phase
III  equipment,   patents  relating  to  the  electronic  in-store  advertising,
directory and coupon devices, and purchases of office equipment.

         Financing  activities  provided  cash of $279,000 and $236,000 for 2003
and 2002,  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

                                        8

<PAGE>



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


                                    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:
<TABLE>
<CAPTION>
Director's  Name                Age      Office                       Term Expires

<S>                              <C>     <C>                           <C>
William J. Dupre                 50      COO/President                 Next annual shareholder meeting
D. Paul  Smith                   57      Exec  Vice-President/
                                         CFO/Secretary/
                                         Treasurer/Chairman            Next annual shareholder meeting
Daniel L. Warner                 31      Exec Vice-President-
                                         Business Development          Next annual shareholder meeting
Richard J. Trout                 47      Director                      Next annual shareholder meeting
William C. Bailey                69      Director                      Next annual shareholder meeting
Michael L. Mills                 41      Director                      Next annual shareholder meeting
C. Terry Warner                  67      Director                      Next annual shareholder meeting
</TABLE>

         William J. Dupre, age 50, 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,

                                        9

<PAGE>



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 57,  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  31,   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.

         Richard J. Trout,  age 47,  served as interim  CFO of the Company  from
June 16,  2000 to October  1, 2001,  and  President  from  October 1, 2001 until
December 3, 2003. Mr. Trout has served as a director  since  September 25, 2000.
Mr. Trout came to the Company  with a strong  financial  background  working for
Western  Financial Bank in California as a Vice-President  for 12 years, as well
as a position at Olson Farms, Inc. as Executive Vice-President, CFO and director
for approximately four years until late 2003.

         William C. Bailey,  age 69, 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

                                        10

<PAGE>



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 41, 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 67, 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, 2003,  the Company had one active board  committee,
the Audit and Compliance Committee.  D. Paul Smith, Michael L. Mills and Richard
J. Trout 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 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

                                       11

<PAGE>



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
                                          ---------------------                --------         -------------
                                                                                 ards                    ts
                                                                                ------                  ---
            (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>
Corey A. Hamilton           2003            -             -          -          -             -         -         -
Former President/           2002            -             -          -          -             -         -         -
Former CEO                  2001    112,500    (1)        -          -          -       400,000(3)      -         -

Richard J. Trout            2003            -  (2)        -          -          -     1,027,616         -         -
Former President            2002            -             -          -          -       100,661(7)      -         -
                            2001            -  (2)        -          -          -       125,000(6)      -         -

D. Paul Smith               2003            -             -          -          -     1,168,333         -         -
Chairman/CFO/               2002            -             -          -          -       192,892(7)      -         -
Sec/Treasurer               2001            -  (5)        -          -          -       100,000(6)      -         -
Exec Vice-President

William J. Dupre            2003       50,000  (4)        -          -          -       400,000         -         -
President/COO               2002       12,500  (4)        -          -          -       400,000(8)      -         -
                            2001            -             -          -          -             -         -         -
                                            -             -          -          -             -         -         -

David D. Singer             2003            -  (9)        -          -          -             -         -         -
Interim CEO                 2002            -             -          -          -             -         -         -
                            2001            -             -          -          -             -         -         -
</TABLE>
                                       12
<PAGE>

(1)      Corey A.  Hamilton  resigned  from the  Company  as  President  and CEO
         effective September 30, 2001.
(2)      Richard  J.  Trout was named  President  in  October  2001.  Mr.  Trout
         resigned as President on December 3, 2003.
(3)      As of December 31, 2002, all stock options granted to Corey A. Hamilton
         have expired.
(4)      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.
(5)      D. Paul Smith  joined the  Company in October  2001 as Chief  Financial
         Officer, Vice-President,  Corporate Secretary, and Treasurer. Mr. Smith
         resigned as Vice-President  when William J. Dupre assumed that position
         in November 2002.
(6)      Options canceled on September 9, 2003.
(7)      100,000 options canceled on September 9, 2003.
(8)      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.
(9)      David D. Singer was named  Interim CEO on December 8, 2003.  Mr. Singer
         resigned this position on February 5, 2004.  Mr. Singer took a total of
         $3,500 as an advance towards any future earned compensation.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

         The following  table sets forth  information  respecting all individual
grants of options  and SARs made  during the last  completed  fiscal year to the
chief executive officer and chief financial officer of the Company.
<TABLE>
<CAPTION>
           Name               Number of         % of Total       Exercise       Expiration        Potential Realizable
                              Securities          Option         Price ($)         Date             Value at assumed
                              Underlying        Granted to                                          annual rates of
                                Common          Employees                                             stock price
                                Stock                                                               appreciation for
                              Options                                                               option term ($)
                              Granted                                                               5%            10%
---------------------------------------------------------------------------------------------  ------------- -------------
<S>                        <C>               <C>             <C>             <C>               <C>           <C>
Richard J. Trout                 272             .0001%           1.00          03/19/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
Richard J. Trout                 947             .0003%           1.00          04/28/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
Richard J. Trout                 1397            .0005%           1.00          07/18/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
Richard J. Trout               525,000           17.82%            .06          09/09/2007           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
Richard J. Trout               500,000           16.97%            .06          09/12/2007           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   8,333             .003%           1.00          02/21/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   25,000            .008%           1.00          03/31/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   12,500            .004%           1.00          07/18/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   8,333             .003%           1.00          08/18/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   4,167             .001%           1.00          10/08/2006           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                  510,000           17.31%            .06          09/09/2007           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                  600,000           20.37%            .06          09/12/2007           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
William J. Dupre               400,000           13.58%            .06          09/09/2007           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
</TABLE>

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

                                       13

<PAGE>




         The following  table sets forth  information  respecting all individual
grants of options  and SARs made  during the last  completed  fiscal year to the
chief executive officer, chief financial officer, and directors of the Company.
<TABLE>
<CAPTION>
                                                                                    At Fiscal Year End
         Name              Shares           Value              Number of Securities                Value of Unexercised in-
                        Acquired on        Realized           Underlying Unexercised              the-money options ($) (a)
                         exercise            ($)                      Options
                                                            Exercisable       Unexercisable        Exercisable       Unexercisable
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
<S>                  <C>                <C>            <C>               <C>                  <C>               <C>
Richard J. Trout                   0                $0           1,027,616              -                  $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
Michael L. Mills                   0                $0            512,000               -                  $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
D. Paul Smith                      0                $0           1,168,333              -                  $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
William C. Bailey                  0                $0            520,000               -                  $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
C. Terry Warner                    0                $0            552,167               -                  $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
William J. Dupre                   0                $0            200,000            200,000               $0                  $0
-------------------- ------------------ -------------- ----------------- -------------------- ----------------- --------------------
</TABLE>

(a)      Based on the closing price of the  Company's  Common Stock on March 26,
         2004 at $.14 per share

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  45,587,919  votes as of March  26,  2004,  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

                                       14

<PAGE>



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

<S>                                  <C>                              <C>                     <C>
Principal Shareholders

Paul G. Begum                            Direct (2)                       3,158,807
P.O. Box 58045                           Preferred Shares (2)                159,426
Salt Lake City, UT 84158                 Options/Warrants                    237,000
                                                                          ----------
                                            Total                         3,555,233                7.76%
                                                                          =========              =======

Olson Foundation                         Direct (1)                       2,835,130
2220 Eastridge Ave                       Preferred Shares (1)             4,982,065
Suite B                                  Options/Warrants (1)                735,722
Riverside, CA 92507                      Convertible Debt (1)             9,384,260
                                                                        -----------
                                            Total                       17,937,177                32.20%
                                                                        ==========               =======

C. Terry Warner                          Direct (3)                       2,526,574
1278 Locust Lane                         Options (3)                         661,335
Provo, UT 84604                          Convertible Debt (3)                  10,597
                                                                         ------------
                                            Total                         3,198,506                6.91%
                                                                         ==========              =======

Presidio Investments LLC                 Direct (4)                       1,266,708
3200 North Central Ave                   Preferred Shares (4)                438,422
Suite 1560                               Options/Warrants (4)                  84,510
Phoenix, AZ 85012                        Convertible Debt (1)(4)          8,521,821
                                                                          ---------
                                            Total                       10,311,461                19.03%
                                                                        ==========               =======

Olson Legacy Trust                       Direct (4)                       1,266,708
3200 North Central Ave                   Preferred Shares (4)                438,422
Suite 1560                               Options/Warrants (1)(4)               84,510
Phoenix, AZ 85012                        Convertible Debt (4)             8,521,821
                                                                          ---------
                                            Total                       10,311,461                19.03%
                                                                        ==========               =======

Olson Holdings                           Direct (1)                          759,765
2220 Eastridge Ave.                      Preferred Shares (1)             3,786,370
Suite B                                  Options/Warrants (1)                    3,060
                                                                          ------------
Riverside, CA 92507                         Total                          4,549,195               9.98%
                                                                          ==========             =======
</TABLE>



                                       15

<PAGE>
<TABLE>
<CAPTION>
<S>                                  <C>                              <C>                     <C>
Seabury Investors III                    Preferred Shares                 5,095,161
540 Madison Avenue                       Warrants                            412,936
New York, NY 10022                       Convertible Debt (5)             1,427,618
                                                                          ---------
                                            Total                         6,935,715               14.62%
                                                                          =========              =======

Primavera                                Direct                           3,252,771                7.14%
                                                                                                 =======
1278 Locust Lane
Provo, UT 84604

Arbinger                                 Direct                           3,490,756
Gateway Park Tower                       Options/Warrants                      97,176
563 W 500 S                              Convertible Debt                      42,386
                                                                          -----------
Suite 200                                   Total                          3,630,318               7.94%
                                                                          ==========             =======
Woods Cross, UT 84010


William Bailey                           Direct                           3,244,914
3889 E. Brockbank Dr.                    Options/Warrants                    520,000
                                                                          ----------
Salt Lake City, UT 84124                    Total                         3,764,914                8.17%
                                                                          =========              =======


D. Paul Smith                            Direct (6)                       1,041,301
747 W. Sheringham Ct.                    Options/Warrants (6)             1,309,813
Farmington, UT 84025                     Convertible Debt (6)                  13,188
                                                                          -----------
                                            Total                         2,364,302                5.04%
                                                                          =========              =======
</TABLE>
<TABLE>
<CAPTION>
<S>                                  <C>                              <C>                     <C>
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                8.17%
                                                                          =========              =======

C. Terry Warner                          Direct (3)                       2,526,574
1278 Locust Lane                         Options (3)                         661,335
Provo, UT 84604                          Convertible Debt (3)                  10,597
                                                                         ------------
                                            Total                         3,198,506                6.91%
                                                                         ==========              =======

D. Paul Smith                            Direct (6)                       1,041,301
747 W. Sheringham Ct.                    Options/Warrants (6)             1,309,813
Farmington, UT 84025                     Convertible Debt (6)                  13,188
                                                                          -----------
                                            Total                         2,364,302                5.04%
                                                                          =========              =======
</TABLE>



                                       16

<PAGE>
<TABLE>
<CAPTION>
<S>                                  <C>                              <C>                     <C>


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              20.27%
                                                                          =========              ======
</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,  and 23,182 Shares
         held by Mr. Mills.  The Olson  ownership also includes  Preferred Stock
         that,  as of March 26,  2004,  would  convert  4,982,065  votes held by
         Presidio  (438,421 votes),  Olson Holdings  (3,786,370 votes) and Olson
         Foundation (757,274 votes). Ownership includes an option covering 3,060
         Shares held by Olson Holdings, warrants covering 136,152 Shares held by
         Olson  Foundation,  options covering 84,510 Shares held by Olson Legacy
         Trust,   and  options  covering  512,000  Shares  held  by  Mr.  Mills.
         Convertible  debt held by Olson Foundation and affiliates in the amount
         of  9,384,260  shares may also be  converted  as of March 26, 2004 into
         862,439 Shares held by Olson  Foundation  and 8,521,821  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 March 26, 2004.

(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 661,335 shares
         and  convertible  debt held by Mr.  Warner that may be  converted  into
         10,597 shares as of March 26, 2004.

(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.;
         438,422 Shares should the Class A Convertible  Preferred Shares held by
         Presidio  Investments  LLC. be converted  as of March 26,  2004;  Olson
         Legacy

                                       17

<PAGE>



         Trust, of which William J. Howard is the sole trustee,  option covering
         84,510 Shares;  and 1,171,850 common shares held by Olson Legacy Trust,
         of which  William J.  Howard is the sole  trustee.  In  addition to the
         total Presidio and Olson Legacy Trust ownership,  convertible debt held
         by Presidio  Investments  may be converted into 8,521,821  Shares as of
         March 26, 2004.

(5)      In addition to the total Seabury  ownership,  convertible  debt held by
         Seabury  Investors  III,  Limited  Partnership  could be converted into
         1,427,618 Shares as of March 26, 2004.

(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  1,309,813  shares and convertible debt
         held by Mr. Smith that may be converted  into 13,188 shares as of March
         26, 2004.



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED 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. As of December 31, 2003, the loan is in default and
continues to accrue interest at an annual rate of 10%. 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.  As of December  31,  2003,  the loan is in
default and continues to accrue interest at an annual rate of 15%. 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.

                                       18

<PAGE>




         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.  As of December  31,  2003,  the loan is in
default and continues to accrue interest at an annual rate of 15%. 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.

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.  As of December 31, 2003, the
loan is in default and continues to accrue interest at an annual rate of 10%.

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

                                       19

<PAGE>



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 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.  As of December  31,  2003,  the loan is in
default and continues to accrue interest at an annual rate of 15%. 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. As of December 31, 2003, the loan is in
default and continues to accrue interest at an annual rate of 15%. 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

                                       20

<PAGE>



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.

         The  loans  listed  below  were  made to the  Company  by The  Arbinger
Institute  after  September  11, 2003.  In  conjunction  with these  notes,  The
Arbinger Institute received stock options as shown in the table below.
<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>

         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

                                       21

<PAGE>



converted to common stock on September 11, 2003. As of March 16, 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.

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                           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.

         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

                                       22

<PAGE>



$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, 2003, and 2002................................................F-2
Statements of Loss
  For the Years Ended December 31, 2003, and 2002............................F-4
Statement of Stockholders' Equity
  For the Years Ended December 31, 2003, and 2002............................F-5
Statements of Cash Flows
  For the Years Ended December 31, 2003, and 2002...........................F-25
Notes to Financial Statements
  December 31, 2003, and 2002...............................................F-27

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

                                       23

<PAGE>



Number           Title of Document

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

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

3.03     Bylaws, as amended (2)

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

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

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

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

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

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

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

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

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

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.

                                       24

<PAGE>



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.

     (b) Reports Filed on Form 8-K

         On  December  3,  2003,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure.  The 8-K reported that without authorization the Stock
Alert  Notification  Report  was  faxed to a select  group  of  recipients  that
included false information about the Company.

         On  December  3,  2003,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure,  announcing the appointment of William J. Dupre as the
Company's President,  replacing Richard J. Trout. The 8-K also announced that D.
Paul Smith would assume the additional role of Executive Vice President.

         On  December  8,  2003,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure,  announcing the  termination of the acquisition of S&C
Medical.

         On  December  8,  2003,  the  Company  filed a Form 8-K  under  Item 9,
Regulation  FD  Disclosure,  announcing  the  appointment  of David D. Singer as
Interim Chief Executive Officer.

         On  January  30,  2004,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure,  announcing a Strategic Alliance and Joint Development
Agreement with Fujitsu Transaction Solutions, Inc.

         On  February  4,  2004,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure,  announcing the issuance of a press release announcing
an agreement with Fujitsu Transaction Solutions, Inc.

         On  February  5,  2004,  the  Company  filed a Form 8-K  under  Item 9,
Regulation FD Disclosure,  announcing the  resignation of David D. Singer as the
Company's Interim Chief Executive  Officer,  and the appointment of Danny Warner
as Chief Operating Officer.






                                       25

<PAGE>





                        ITEM 14. CONTROLS AND PROCEDURES


         The Company's Chief Executive  Officer and Chief Financial Officer have
concluded,  based on an evaluation  conducted within 90 days prior to the filing
date of this  annual  report  on Form 10- KSB,  that  the  Company's  disclosure
controls and  procedures  have  functioned  effectively  so as to provide  those
officers the information necessary whether:

                  (i) this  annual  report on Form  10-KSB  contains  any untrue
                  statement of a material fact or omits to state a material fact
                  necessary  to  make  the  statements  made,  in  light  of the
                  circumstances  under  which such  statements  were  made,  not
                  misleading  with respect to the period  covered by this annual
                  report on Form 10-KSB, and

                  (ii) the financial statements, and other financial information
                  included in this annual report on Form 10-KSB,  fairly present
                  in all material respects the financial  condition,  results of
                  operations  and cash flows of the Company as of, and for,  the
                  periods presented in this annual report on Form 10-KSB.

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors since the date of the Chief Executive Officer's and
Chief  Financial  Officer's  evaluation  that could  significantly  affect these
internal controls,  including any corrective actions with regards to significant
deficiencies and material weaknesses.



                  ITEM 15. 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, 2003
and 2002:
<TABLE>
<CAPTION>
           Service                                     2003                   2002
------------------------------                  ------------------     ------------------
<S>                                             <C>                    <C>
Audit Fees                                      $           23,364     $           16,500
Audit-Related Fees                                               -                      -
Tax Fees                                                       287                    250
All Other Fees                                                   -                      -
                                                ------------------     ------------------
Total                                           $           23,651     $           16,750
                                                ==================     ==================
</TABLE>

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.


                                       26

<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.


























                                       27

<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 16, 2004                       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 16th day of April 2004.

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/     Richard J. Trout
----------------------------------
Richard J. Trout                            Director



                                       28

<PAGE>
                             KLEVER MARKETING, INC.
                          (A Development Stage Company)

                                       -:-

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2003 AND 2002




<PAGE>






                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              Page

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

Balance Sheets
   December 31, 2003 and 2002...................................................................................F-2

Statements of Operations
   For the Years Ended December 31, 2003 and 2002
   And for the Cumulative Period from July 5, 1996 (inception of development stage)
   To December 31, 2003.........................................................................................F-4

Statement of Stockholders' Equity
   From July 5, 1996 (inception of development stage) to December 31, 2003 .....................................F-5

Statements of Cash Flows
   For the Years Ended December 31, 2003 and 2002
   And for the Cumulative Period from July 5, 1996 (inception of development stage)
   To December 31, 2003........................................................................................F-25

Notes to the Financial Statements
   December 31, 2003 and 2002..................................................................................F-27
</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, 2003 and 2002,  and the
related statements of operations and cash flows for the years ended December 31,
2003,  and the  cumulative  period from July 5, 1996  (inception of  development
stage) to December 31, 2003, and the statement of stockholders' equity from July
5, 1996 (inception of development  stage) to December 31, 2003.  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 auditing standards generally
accepted in the United States of America.  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, 2003 and 2002, 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 12, 2004

                                      F - 1

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                                  BALANCE SHEET
<TABLE>
<CAPTION>




                                                                                          December 31,
                                                                             --------------------------------------
ASSETS                                                                              2003                2002
------
                                                                             ------------------  ------------------
Current Assets
<S>                                                                          <C>                 <C>
     Cash                                                                    $            1,916  $            3,424
     Prepaid Expense                                                                      2,512                   -
                                                                             ------------------  ------------------
          Total Current Assets                                                            4,428               3,424
                                                                             ------------------  ------------------
Fixed Assets
     Office Equipment                                                                   105,727             148,067
     Phase 2 Equipment                                                                        -              57,750
     Less Accumulated Depreciation                                                      (98,913)           (120,105)
                                                                             ------------------  ------------------
          Net Fixed Assets                                                                6,814              85,712
                                                                             ------------------  ------------------
Other Assets
     Patents                                                                          2,358,342           2,339,006
     Less Accumulated Amortization                                                   (2,137,679)         (1,915,172)
                                                                             ------------------  ------------------
          Net Other Assets                                                              220,663             423,834
                                                                             ------------------  ------------------

          Total Assets                                                       $          231,905  $          512,970
                                                                             ==================  ==================
</TABLE>



                                      F - 2

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                                  BALANCE SHEET
                                   (Continued)
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                                             --------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                2003                2002
------------------------------------
                                                                             ------------------  ------------------
Current Liabilities
<S>                                                                          <C>                 <C>
     Accounts Payable, Trade                                                 $          446,855  $          435,928
     Accrued Liabilities                                                              1,247,524             878,142
     Related Party Payables                                                           2,172,880           2,476,298
     Notes Payable                                                                       45,000              75,000
     Short-term Notes Payable                                                               458               2,207
                                                                             ------------------  ------------------

          Total Current Liabilities                                                   3,912,717           3,867,575
                                                                             ------------------  ------------------

Stockholders' Equity
     Preferred stock (par  value  $.01),  2,000,000  shares  authorized  168,434
          issued and outstanding December 31, 2003
          and December 31, 2002                                                           1,684               1,684
     Common Stock (Par Value $.01), 20,000,000 shares
          authorized 33,410,364 shares issued and outstanding
          at December 31, 2003 and 12,370,578 shares issued
          and outstanding at December 31, 2002                                          334,104             123,706
     Common Stock to be issued, 1,395,657 shares at
          December 31, 2003 and 768,917 shares at
          December 31, 2002                                                              13,957               7,689
     Treasury Stock, 1,000 shares at December 31, 2003
          and December 31, 2002                                                          (1,000)             (1,000)
     Paid in Capital in Excess of Par Value                                          12,934,463          12,100,583
     Shareholder Receivable                                                             (15,000)                  -
     Retained Deficit                                                                (3,333,785)         (3,333,785)
     Deficit Accumulated During Development Stage                                   (13,615,235)        (12,253,482)
                                                                             ------------------  ------------------
          Total Stockholders' Equity                                                 (3,680,812)         (3,354,605)
                                                                             ------------------  ------------------

          Total Liabilities and Stockholders' Equity                         $          231,905  $          512,970
                                                                             ==================  ==================
</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
                                                        --------------------------------------
                                                               2003                2002               Stage
                                                        ------------------  ------------------  ------------------

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

Expenses
  Sales and marketing                                                    -                   -             117,546
  General and administrative                                       849,098             627,287           8,253,605
  Research and development                                               -                   -           4,459,891
                                                        ------------------  ------------------  ------------------

     Total Expenses                                                849,098             627,287          12,831,042
                                                        ------------------  ------------------  ------------------

Other income (expense)
  Interest income                                                        -                 100              18,902
  Interest expense                                                (291,599)           (394,452)         (1,015,596)
  Loss on disposal of assets                                      (220,956)             (4,098)           (234,191)
  Capital gain on sale of investments                                    -                   -             191,492
                                                        ------------------  ------------------  ------------------

     Total Other Income (Expense)                                 (512,555)           (398,450)         (1,039,393)
                                                        ------------------  ------------------  ------------------

Income (Loss) Before Taxes                                      (1,361,653)         (1,025,737)        (13,614,435)

Income Taxes                                                           100                 100                 800
                                                        ------------------  ------------------  ------------------

Net Income (Loss) After Taxes                           $       (1,361,753) $       (1,025,837) $      (13,615,235)
                                                        ==================  ==================  ==================

Weighted Average Shares
  Outstanding                                                   19,420,052          12,563,951
                                                        ==================  ==================

Loss Per Share                                          $           (0.07)  $           (0.08)
                                                        ==================  ==================
</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>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
Balance December 31, 1995 ....      247,100    $     2,471     12,210,949    $   122,109    $      --     $      --     $74,022,028
January 1996 shares issued
   in connection with merger .     (247,100)        (2,471)    (3,784,905)       (37,849)          --           5,059   (70,257,358)
January 1996 shares issued
   to individuals for cash at
   $2.50 - 3.00  per share ...         --             --            3,500             35           --            --           7,965
March 1996 shares issued
   to an individual and a
   company for cash at
   $2.00 - 3.00 per share ....         --             --           21,240            212           --            --          43,267
April 1996 shares issued to
   individuals for cash at
   $0.50 - 2.04 per share ....         --             --           63,000            630           --            --          73,370
May 1996 shares issued to
   individuals for cash at
   $3.00 per share ...........         --             --            9,000             90           --            --          26,910
May 1996 shares issued to
   individuals for legal
   services at $3.00 per share         --             --            1,463             15           --            --           4,374
June 1996 shares issued to a
   company in exercise of an
   option at $1.00 per share .         --             --          100,000          1,000           --            --          99,000
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>

Balance December 31, 1995 ....  $(103,351,248) $       --
January 1996 shares issued
   in connection with merger .    100,017,463          --
January 1996 shares issued
   to individuals for cash at
   $2.50 - 3.00  per share ...          --             --
March 1996 shares issued
   to an individual and a
   company for cash at
   $2.00 - 3.00 per share ....          --             --
April 1996 shares issued to
   individuals for cash at
   $0.50 - 2.04 per share ....          --             --
May 1996 shares issued to
   individuals for cash at
   $3.00 per share ...........          --             --
May 1996 shares issued to
   individuals for legal
   services at $3.00 per share          --             --
June 1996 shares issued to a
   company in exercise of an
   option at $1.00 per share .          --             --
</TABLE>

                                     F - 5
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
June 1996 shares issued to a
   related company for cash at
   $1.25 per share ...........          --            --          30,000           300          --            --          37,200
June 1996 shares issued to an
   individual for cash at $3.00
   per share .................          --            --           5,000            50          --            --          14,950
November 15, 1996 shares
   issued to individuals for
   cash at $1.29-2.59 per share         --            --          40,569           406          --            --          67,094
November 27, 1996 shares
   issued to officer for cash at
   $2.94 per share ...........          --            --           2,891            29          --            --           8,470
December 13, 1996 shares
   issued to individuals for
   cash and receivables at
   $1.00-3.00 per share ......          --            --         107,624         1,076          --            --         187,132
December 13, 1996 shares
   issued to a company for
   services at $1.25 per share          --            --          14,282           143          --            --          17,710
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
June 1996 shares issued to a
   related company for cash at
   $1.25 per share ...........          --            --
June 1996 shares issued to an
   individual for cash at $3.0
   per share .................          --            --
November 15, 1996 shares
   issued to individuals for
   cash at $1.29-2.59 per shar          --            --
November 27, 1996 shares
   issued to officer for cash
   $2.94 per share ...........          --            --
December 13, 1996 shares
   issued to individuals for
   cash and receivables at
   $1.00-3.00 per share ......          --            --
December 13, 1996 shares
   issued to a company for
   services at $1.25 per share          --            --
</TABLE>


                                     F - 6
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
December 19, 1996 shares
   issued to individual in
   exercise of option at
   $1.25 per share ...........          --            --          30,000           300          --            --          37,200
December 19, 1996 shares
   issued to individual for
   cash at $1.25 per share ...          --            --          30,000           300          --            --          37,200
December 31, 1996 shares
   issued to individual for
   receivable at $1.00-3.00
   per share .................          --            --            --            --            --             407       101,543
December 31, 1996 shares
   issued to officer and
   employee for patents ......          --            --            --            --            --           2,250       130,500

Net Loss .....................          --            --            --            --            --            --            --
                                 -----------   -----------   -----------   -----------   -----------   -----------   -----------

Balance December 31, 1996 ....          --            --       8,884,613        88,846          --           7,716     4,658,555
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
December 19, 1996 shares
   issued to individual in
   exercise of option at
   $1.25 per share ...........          --             --
December 19, 1996 shares
   issued to individual for
   cash at $1.25 per share ...          --             --
December 31, 1996 shares
   issued to individual for
   receivable at $1.00-3.00
   per share .................          --             --
December 31, 1996 shares
   issued to officer and
   employee for patents ......          --             --

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

Balance December 31, 1996 ....    (3,333,785)      (831,814)
</TABLE>


                                     F - 7
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
January 1997 shares issued
   to individuals for cash at
   par .......................          --            --               1          --            --            --             --
January 1997 shares issued
   to an officer as payment on
   loan at $1.82 per share ...          --            --           6,000            60          --            --           10,843
February 1997 shares issued
   to officers for patent ....          --            --         260,813         2,608          --          (2,250)         1,892
February 1997 shares issued
   to individuals for cash at
   $1.00-1.25 per share ......          --            --          58,979           590          --            (282)        37,941
February 1997 shares issued
   to officers for payment on
   loan at $0.08 per share ...          --            --         190,000         1,900          --            --           12,350
April 1997 shares issued to
   individuals for cash at
   $3.00 per share ...........          --            --          20,795           208          --             (50)        44,842
May 1997 shares issued to an
   individual and an officer for
   cash at $1.75-3.00 per share         --            --          64,375           644          --            --          118,263
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
January 1997 shares issued
   to individuals for cash at
   par .......................          --            --
January 1997 shares issued
   to an officer as payment on
   loan at $1.82 per share ...          --            --
February 1997 shares issued
   to officers for patent ....          --            --
February 1997 shares issued
   to individuals for cash at
   $1.00-1.25 per share ......          --            --
February 1997 shares issued
   to officers for payment on
   loan at $0.08 per share ...          --            --
April 1997 shares issued to
   individuals for cash at
   $3.00 per share ...........          --            --
May 1997 shares issued to an
   individual and an officer f
   cash at $1.75-3.00 per shar          --            --
</TABLE>

                                     F - 8
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
May 1997 shares issued to
   individuals for services at
   $2.59 per share ...........          --            --             732             7          --            --            1,888
June 1997 shares issued to
   individuals for cash at
   $1.75-3.00 per share ......          --            --          15,000           150          --             100         70,000
July 1997 shares issued to
   employees and individuals
   for cash and receivables at
   $1.75-2.00 per share ......          --            --          58,286           583          --            (100)        85,267
August 1997 shares issued
   to individuals for cash at
   $2.75-3.00 per share ......          --            --          10,000           100          --            --           27,900
October 1997 shares issued to
   an individual for cash at
   $3.00 per share ...........          --            --           4,000            40          --            --           11,960
October 1997 shares issued to
   VideOcart creditors .......          --            --          97,610           976          --            (976)          --
November 1997 shares issued
   to individuals for services
   at $0.95 per share ........          --            --           1,666            17          --            --            1,558
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
May 1997 shares issued to
   individuals for services at
   $2.59 per share ...........          --            --
June 1997 shares issued to
   individuals for cash at
   $1.75-3.00 per share ......          --            --
July 1997 shares issued to
   employees and individuals
   for cash and receivables at
   $1.75-2.00 per share ......          --            --
August 1997 shares issued
   to individuals for cash at
   $2.75-3.00 per share ......          --            --
October 1997 shares issued to
   an individual for cash at
   $3.00 per share ...........          --            --
October 1997 shares issued to
   VideOcart creditors .......          --            --
November 1997 shares issued
   to individuals for services
   at $0.95 per share ........          --            --
</TABLE>
                                     F - 9
<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
December 1997 shares issued
   to individual for cash at
   $1.50-2.00 per share ......          --            --          55,000           550          --             281       139,070
December 1997 shares issued
   to officers for loan payment
   at $0.86-1.02 per share ...          --            --          53,444           534          --            --          51,094
December 1997 shares issued
   to a company for services
   at $0.50 per share ........          --            --           8,000            80          --            --           3,945
December 1997 shares issued
   to a company for research
   and development at par ....          --            --            --            --            --             464          --
December 1997 shares issued
   for employee compensation
   at $2.50 per share ........          --            --           6,000            60          --            --          14,940

Net Loss .....................          --            --            --            --            --            --            --
                                 -----------   -----------   -----------   -----------   -----------   -----------   -----------

Balance December 31, 1997 ....          --            --       9,795,314        97,953          --           4,903     5,292,308
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
December 1997 shares issued
   to individual for cash at
   $1.50-2.00 per share ......          --             --
December 1997 shares issued
   to officers for loan paymen
   at $0.86-1.02 per share ...          --             --
December 1997 shares issued
   to a company for services
   at $0.50 per share ........          --             --
December 1997 shares issued
   to a company for research
   and development at par ....          --             --
December 1997 shares issued
   for employee compensation
   at $2.50 per share ........          --             --

Net Loss .....................          --         (755,594)
                                 -----------    -----------

Balance December 31, 1997 ....    (3,333,785)    (1,587,408)
</TABLE>
                                     F - 10
<PAGE>
                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
January 1998 shares issued to
   individuals for cash at
   $1.50 per share ...........          --            --          86,666           867          --            (100)       114,232
January 1998 shares issued
   for 1,500 shares of Avtel
   stock at $3.00 per share ..          --            --           4,125            41          --            --           12,334
January 1998 shares issued to
   companies for services at
   $2.82-7.80 per share ......          --            --           2,930            29          --            --           13,848
February 1998 shares issued
   to company for research
   and development contract ..          --            --          46,366           464          --            (464)          --
February 1998 shares issued
   to individual for cash at
   $2.50 per share ...........          --            --         100,000         1,000          --            --          249,000
April 1998 shares issued to
   employee for compensation
   at $2.63 per share ........          --            --           1,426            14          --            --            3,736
April 1998 shares issued to
   company for legal services
   at $3.00 per share ........          --            --           1,620            16          --            --            4,844
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
January 1998 shares issued to
   individuals for cash at
   $1.50 per share ...........          --            --
January 1998 shares issued
   for 1,500 shares of Avtel
   stock at $3.00 per share ..          --            --
January 1998 shares issued to
   companies for services at
   $2.82-7.80 per share ......          --            --
February 1998 shares issued
   to company for research
   and development contract ..          --            --
February 1998 shares issued
   to individual for cash at
   $2.50 per share ...........          --            --
April 1998 shares issued to
   employee for compensation
   at $2.63 per share ........          --            --
April 1998 shares issued to
   company for legal services
   at $3.00 per share ........          --            --
</TABLE>

                                     F - 11
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
June 1998 shares issued to
   individual for consulting
   services at $2.79 per share          --            --           3,763            38          --            --          10,462
June 1998 reduction of stock
   price on employee's stock .          --            --            --            --            --            --          (1,250)
July 1998 shares issued to
   officer for patent purchase
   at $2.94 per share ........          --            --         150,000         1,500          --             250       512,313
July 1998 shares issued for
   accounts receivable at
   $1.50 per share ...........          --            --          25,000           250          --            --          37,250
July 1998 shares issued to
   employee for compensation
   at $3.06 per share ........          --            --           1,225            12          --            --           3,736
July 1998 shares issued to
   individuals for cash at
   $2.50-3.00 per share ......          --            --          33,000           330          --            --          89,670
September 1998 shares
   issued to company for
   accounts receivable .......          --            --          86,937           870          --            --         136,396
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
June 1998 shares issued to
   individual for consulting
   services at $2.79 per share          --            --
June 1998 reduction of stock
   price on employee's stock .          --            --
July 1998 shares issued to
   officer for patent purchase
   at $2.94 per share ........          --            --
July 1998 shares issued for
   accounts receivable at
   $1.50 per share ...........          --            --
July 1998 shares issued to
   employee for compensation
   at $3.06 per share ........          --            --
July 1998 shares issued to
   individuals for cash at
   $2.50-3.00 per share ......          --            --
September 1998 shares
   issued to company for
   accounts receivable .......          --            --
</TABLE>

                                     F - 12
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
September 1998 shares
   issued to individuals for
   cash at $2.00-2.25 per share         --            --          30,900           309          --            --          62,341
September 1998 shares
   issued to individual for
   consulting services at
   $3.00 per share ...........          --            --           3,818            38          --            --          11,416
September 1998 shares
   issued to individuals for
   accounts receivable at
   $2.00 per share ...........          --            --           7,500            75          --            --          14,925
October 1998 shares issued
   to individuals for cash at
   $2.00 per share ...........          --            --           1,000            10          --            --           1,990
October 1998 shares issued to
   employees for accounts
   receivable $2.12 per share           --            --          10,000           100          --            --          21,100
October 1998 shares issued to
   company for legal services
   at $2.00 per share ........          --            --           1,517            15          --            --           3,020
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
September 1998 shares
   issued to individuals for
   cash at $2.00-2.25 per shar          --            --
September 1998 shares
   issued to individual for
   consulting services at
   $3.00 per share ...........          --            --
September 1998 shares
   issued to individuals for
   accounts receivable at
   $2.00 per share ...........          --            --
October 1998 shares issued
   to individuals for cash at
   $2.00 per share ...........          --            --
October 1998 shares issued to
   employees for accounts
   receivable $2.12 per share           --            --
October 1998 shares issued to
   company for legal services
   at $2.00 per share ........          --            --
</TABLE>
                                     F - 13
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
December 1998 shares
   returned at $1.58 per share          --            --         (42,493)          (425)          --            --         (66,667)
December 1998 shares issued
   to individuals for cash at
   $2.25 per share ...........          --            --          42,493            425           --            --          95,183
December 1998 shares issued
   for employee compensation
   at $2.19 per share ........          --            --           1,712             17           --            --           3,732

Net Loss .....................          --            --            --             --             --            --            --
                                 -----------   -----------   -----------    -----------    -----------   -----------   -----------

Balance December 31, 1998 ....          --            --      10,394,819        103,948           --           4,589     6,625,919

January 1999 shares returned
   at $0.67-1.58 per share ...          --            --         (62,489)          (624)          --            --        (107,047)
January & February 1999
   shares issued to individuals
   for cash at $2.00 per share          --            --         112,500          1,125           --            --         223,875
January & February 1999
   shares issued to individuals
   for cash at $2.25 per share          --            --         224,444          2,244           --            --         502,755
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
December 1998 shares
   returned at $1.58 per share          --             --
December 1998 shares issued
   to individuals for cash at
   $2.25 per share ...........          --             --
December 1998 shares issued
   for employee compensation
   at $2.19 per share ........          --             --

Net Loss .....................          --       (1,496,926)
                                 -----------    -----------

Balance December 31, 1998 ....    (3,333,785)    (3,084,334)

January 1999 shares returned
   at $0.67-1.58 per share ...          --             --
January & February 1999
   shares issued to individual
   for cash at $2.00 per share          --             --
January & February 1999
   shares issued to individual
   for cash at $2.25 per share          --             --
</TABLE>
                                     F - 14
<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
January 1999 shares issued
   for employee compensation
   at $2.34 per share ........          --            --           1,328            13          --            --           3,094
April & June 1999 shares
   issued to individuals for
   cash at $2.25-2.50 per share         --            --          40,689           407          --            --          91,344
April 1999 shares issued to
   employee for compensation
   at $1.95 per share ........          --            --           1,667            17          --            --           3,093
June 1999 shares issued for
   exercise of option at $0.86
   per share .................          --            --         231,834         2,318          --            --         197,059
July 1999 shares issued to
   individuals for cash at
   $2.25 per share ...........          --            --          72,500           725          --            --         162,400
July & August 1999 shares
   issued to individuals for
   cash at $2.50 per share ...          --            --          78,500           785          --            --         195,465
July 1999 shares issued to
   employee for cash at
   $1.96 per share ...........          --            --           1,285            13          --            --           2,506
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
January 1999 shares issued
   for employee compensation
   at $2.34 per share ........          --            --
April & June 1999 shares
   issued to individuals for
   cash at $2.25-2.50 per shar          --            --
April 1999 shares issued to
   employee for compensation
   at $1.95 per share ........          --            --
June 1999 shares issued for
   exercise of option at $0.86
   per share .................          --            --
July 1999 shares issued to
   individuals for cash at
   $2.25 per share ...........          --            --
July & August 1999 shares
   issued to individuals for
   cash at $2.50 per share ...          --            --
July 1999 shares issued to
   employee for cash at
   $1.96 per share ...........          --            --
</TABLE>
                                     F - 15
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
August 1999 shares issued to
   individuals for cash at
   $3.00 per share ...........          --            --           5,607            56          --            --          16,764
September 1999 shares
   issued to individual for
   exercise of option at
   $0.52 per share ...........          --            --           6,437            64          --            --           3,283
September 1999 shares
   issued to individual for
   cash at $2.75 per share ...          --            --           6,000            60          --            --          16,440
October & November 1999
   shares issued to individuals
   for cash at $2.75 per share          --            --         160,000         1,600          --            --         438,400

Net Loss .....................          --            --            --            --            --            --            --
                                 -----------   -----------   -----------   -----------   -----------   -----------   -----------

Balance December 31, 1999 ....          --            --      11,275,121       112,751          --           4,589     8,375,350

January 2000 shares issued to
   company for cash at
   $2.75 per share ...........          --            --          27,273           273          --            --          74,727
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
August 1999 shares issued to
   individuals for cash at
   $3.00 per share ...........          --             --
September 1999 shares
   issued to individual for
   exercise of option at
   $0.52 per share ...........          --             --
September 1999 shares
   issued to individual for
   cash at $2.75 per share ...          --             --
October & November 1999
   shares issued to individual
   for cash at $2.75 per share          --             --

Net Loss .....................          --       (1,734,623)
                                 -----------    -----------

Balance December 31, 1999 ....    (3,333,785)    (4,818,957)

January 2000 shares issued to
   company for cash at
   $2.75 per share ...........          --             --
</TABLE>
                                     F - 16
<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
February 2000 shares issued
   for employee compensation
   at $3.99 per share ........          --            --          74,608            746           --            --         296,939
February 2000 exercise of
   stock option for cash and
   note receivable at $0.86
   per share .................          --            --         579,585          5,796           --            --         492,646
February 2000 shares issued
   to individual for cash at
   $1.07 per share ...........          --            --          28,979            290           --            --          30,718
February 2000 shares
   canceled and converted to
   preferred shares at $2.75
   per share .................          --            --        (100,000)        (1,000)          --            --        (274,000)
January & February 2000
   shares issued to companies
   for cash at $26 per share .         5,769            57          --             --             --            --         149,943
February 2000 shares
   converted from common
   shares at $26 per share ...        10,576           106          --             --             --            --         274,894
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
February 2000 shares issued
   for employee compensation
   at $3.99 per share ........          --            --
February 2000 exercise of
   stock option for cash and
   note receivable at $0.86
   per share .................          --            --
February 2000 shares issued
   to individual for cash at
   $1.07 per share ...........          --            --
February 2000 shares
   canceled and converted to
   preferred shares at $2.75
   per share .................          --            --
January & February 2000
   shares issued to companies
   for cash at $26 per share .          --            --
February 2000 shares
   converted from common
   shares at $26 per share ...          --            --
</TABLE>
                                     F - 17
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
February 2000 conversion of
   note payable to preferred
   shares at $26 per share ...         9,615            96          --            --            --            --         249,904
February 2000 shares issued
   to company for cash at
   $26 per share .............        21,285           213          --            --            --            --         553,162
March 2000 shares issued to
   company for accounts
   payable at $3.00 per share           --            --           2,603            26          --            --           7,783
March 2000 shares issued to
   individual for cash at $2.75
   per share .................          --            --          10,909           109          --            --          29,891
April 2000 exercise of stock
   option by individual for
   cash at $1.07 per share ...          --            --          18,193           182          --            --          19,285
April 2000 shares issued to
   company for cash at $2.50
   per share .................          --            --          40,312           403          --            --         100,377
May 2000 shares issued to
   company for cash at $2.75
   per share .................          --            --          54,546           546          --            --         149,455
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
February 2000 conversion of
   note payable to preferred
   shares at $26 per share ...          --            --
February 2000 shares issued
   to company for cash at
   $26 per share .............          --            --
March 2000 shares issued to
   company for accounts
   payable at $3.00 per share           --            --
March 2000 shares issued to
   individual for cash at $2.7
   per share .................          --            --
April 2000 exercise of stock
   option by individual for
   cash at $1.07 per share ...          --            --
April 2000 shares issued to
   company for cash at $2.50
   per share .................          --            --
May 2000 shares issued to
   company for cash at $2.75
   per share .................          --            --
</TABLE>
                                     F - 18
<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
May 2000 shares issued to
   companies for accounts
   payable at $2.75 per share           --            --           6,885            69          --            --           18,866
May 2000 paid-in capital
   from treasury stock
   transaction ...............          --            --            --            --            --            --            5,980
May 2000 shares issued to
   individual that were paid
   for in 1997 ...............          --            --          23,334           233          --            (233)          --
May 2000 shares issued to
   company for cash at $26
   per share .................         5,769            58          --            --            --            --          149,942
July 2000 shares issued to
   individuals for cash at
   $1.07 per share ...........          --            --          68,744           687          --            --           72,869
July 2000 paid-in capital
   from treasury stock
   transaction ...............          --            --            --            --            --            --           10,200
September 2000 stock issued
   to company for cash at
   $17 per share .............        41,177           412          --            --            --            --          699,588
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
May 2000 shares issued to
   companies for accounts
   payable at $2.75 per share           --            --
May 2000 paid-in capital
   from treasury stock
   transaction ...............          --            --
May 2000 shares issued to
   individual that were paid
   for in 1997 ...............          --            --
May 2000 shares issued to
   company for cash at $26
   per share .................          --            --
July 2000 shares issued to
   individuals for cash at
   $1.07 per share ...........          --            --
July 2000 paid-in capital
   from treasury stock
   transaction ...............          --            --
September 2000 stock issued
   to company for cash at
   $17 per share .............          --            --
</TABLE>
                                     F - 19
<PAGE>
                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
November & December 2000
   shares issued to individuals
   for cash at $1.50-1.56 per
   share .....................          --            --          48,979            490           --            --          74,717
December 2000 shares issued
   to individual for legal
   services at $0.89 per share          --            --           2,697             27           --            --           2,373
December 2000 shares
   returned at $1.73-2.12
   per share .................          --            --         (10,000)          (100)          --            --         (19,150)

Net Loss .....................          --            --            --             --             --            --            --
                                 -----------   -----------   -----------    -----------    -----------   -----------   -----------

Balance December 31, 2000 ....        94,191           942    12,152,768        121,528           --           4,356    11,546,459

January 2001 shares issued
   for payment of note payable
   at $6.60 per share ........        37,879           379          --             --             --            --         249,621
January 2001 shares canceled
   for nonpayment ............          --            --          (4,694)           (47)          --            --          (9,903)
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
November & December 2000
   shares issued to individual
   for cash at $1.50-1.56 per
   share .....................          --             --
December 2000 shares issued
   to individual for legal
   services at $0.89 per share          --             --
December 2000 shares
   returned at $1.73-2.12
   per share .................          --             --

Net Loss .....................          --       (4,066,283)
                                 -----------    -----------

Balance December 31, 2000 ....    (3,333,785)    (8,885,240)

January 2001 shares issued
   for payment of note payable
   at $6.60 per share ........          --             --
January 2001 shares canceled
   for nonpayment ............          --             --
</TABLE>
                                     F - 20
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
March 2001 shares issued for
   payment of note payable at
   $6.60 per share ...........         6,061            60          --            --            --            --          39,940
March 2001 shares issued for
   research and development
   expenses at $1.00 per share          --            --          15,000           150          --            --          14,850
May 2001 shares issued to
   company for cash at $6.60
   per share .................        30,303           303          --            --            --            --         199,697
June 2001 shares issued to
   company for cash at $0.82
   per share .................          --            --           1,219            12          --            --             988
August 2001 shares issued to
   company for cash at $0.82
   per share .................          --            --           3,466            35          --            --           2,807
August 2001 shares issued
   for general and
   administrative expenses at
   $0.66 per share ...........          --            --         507,048         5,070          --            --         329,581
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
March 2001 shares issued for
   payment of note payable at
   $6.60 per share ...........          --            --
March 2001 shares issued for
   research and development
   expenses at $1.00 per share          --            --
May 2001 shares issued to
   company for cash at $6.60
   per share .................          --            --
June 2001 shares issued to
   company for cash at $0.82
   per share .................          --            --
August 2001 shares issued to
   company for cash at $0.82
   per share .................          --            --
August 2001 shares issued
   for general and
   administrative expenses at
   $0.66 per share ...........          --            --
</TABLE>
                                     F - 21
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
September 2001 shares
   returned to Company for
   accounts receivable of
$                       98,375          --            --            --             --           (1,000)          --         (97,375)

Net Loss .....................          --            --            --             --             --             --            --
                                 -----------   -----------   -----------    -----------    -----------    -----------   -----------

Balance December 31, 2001 ....       168,434         1,684    12,674,807        126,748         (1,000)         4,356    12,276,665

August 2002 shares canceled
   for services not rendered .          --            --        (304,229)        (3,042)          --             --        (197,749)
November 2002 cash
   received for shares that
   have not yet been issued ..          --            --            --             --             --            3,333        21,667

Net Loss .....................          --            --            --             --             --             --            --
                                 -----------   -----------   -----------    -----------    -----------    -----------   -----------

Balance December 31, 2002 ....       168,434         1,684    12,370,578        123,706         (1,000)         7,689    12,100,583
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
September 2001 shares
   returned to Company for
   accounts receivable of
   $98,375                              --             --

Net Loss .....................          --       (2,342,405)
                                 -----------    -----------

Balance December 31, 2001 ....    (3,333,785)   (11,227,645)

August 2002 shares canceled
   for services not rendered .          --             --
November 2002 cash
   received for shares that
   have not yet been issued ..          --             --

Net Loss .....................          --       (1,025,837)
                                 -----------    -----------

Balance December 31, 2002 ....    (3,333,785)   (12,253,482)
</TABLE>
                                     F - 22

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
April 2003 shares issued for
   cash at $.075 per share ...          --            --         333,333         3,333          --          (3,333)          --
April 2003 shares issued for
   cash at $.075 per share ...          --            --         866,667         8,667          --            --           56,333
September 2003 shares
   issued for S&C Medical
   at $.05 per share .........          --            --       3,000,000        30,000          --            --          120,000
September 2003 shares
   issued for notes payable
  at $.04-.05 per share ......          --            --      11,259,786       112,598          --            --          446,642
September 2003 shares
   issued for accounts payable
   at $.01-.10 per share .....          --            --       4,200,000        42,000          --            --           96,000
September 2003 shares
   authorized for expenses at
   $.03 per share - not issued          --            --            --            --            --           9,545         19,090
September 2003 shares
   issued for cash at $.05-.20
   per share .................          --            --       1,370,000        13,700          --            --           92,300
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
April 2003 shares issued for
   cash at $.075 per share ...          --            --
April 2003 shares issued for
   cash at $.075 per share ...          --            --
September 2003 shares
   issued for S&C Medical
   at $.05 per share .........          --            --
September 2003 shares
   issued for notes payable
  at $.04-.05 per share ......          --            --
September 2003 shares
   issued for accounts payable
   at $.01-.10 per share .....          --            --
September 2003 shares
   authorized for expenses at
   $.03 per share - not issued          --            --
September 2003 shares
   issued for cash at $.05-.20
   per share .................          --            --
</TABLE>
                                      F - 23

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                            Common       Paid in
                                                                                                             Stock       Capital in
                                       Preferred Stock               Common Stock             Treasury       to be       Excess of
                                --------------------------    --------------------------
                                      Shares      Amount         Shares         Amount          Stock        Issued      Par Value
                                -----------    -----------    -----------    -----------    -----------   -----------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>           <C>           <C>
November 2003 shares
   issued for cash at $.25
   per share .................          --            --          10,000           100          --             --           2,400
December 2003 shares
   authorized for payment of
   accounts payable at $.21
   per share - not issued ....          --            --            --            --            --               56         1,115

Net Loss .....................          --            --            --            --            --             --            --
                                 -----------   -----------   -----------   -----------   -----------    -----------   -----------

Balance December 31, 2003 ....       168,434   $     1,684    33,410,364   $   334,104   $    (1,000)   $    13,957   $12,934,463
                                 ===========   ===========   ===========   ===========   ===========    ===========   ===========
</TABLE>
<TABLE>
<CAPTION>
                                                Deficit
                                              Accumulated
                                                 From
                                              July 5, 1996
                                              Inception of
                                  Retained     Development
                                  Deficit         Stage
                                -----------    -----------
<S>                             <C>            <C>
November 2003 shares
   issued for cash at $.25
   per share .................          --             --
December 2003 shares
   authorized for payment of
   accounts payable at $.21
   per share - not issued ....          --             --

Net Loss .....................          --       (1,361,753)
                                 -----------    -----------

Balance December 31, 2003 ....   $(3,333,785)  $(13,615,235)
                                 ===========    ===========
</TABLE>

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


                                      F - 24

<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
                                                          -------------------------------------
                                                                2003                2002               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Net Loss                                                  $      (1,361,753) $       (1,025,837) $      (13,615,235)
Adjustments used to reconcile net loss to net
   cash provided by (used in) operating activities:
     Stock issued for general and administrative                     28,635                   -             900,115
     Stock issued for research and development                            -                   -              15,000
     Stock returned for services not rendered                             -            (200,790)           (200,790)
     Write-off of assets                                            220,956                   -             747,674
     Compensation expense from stock options                              -                   -              26,247
     Stock issued for interest expense                               95,416                   -             119,701
     Stock issued for accounts payable                              146,970                   -             172,123
     Deferred income                                                      -                   -            (214,000)
     Depreciation and amortization                                  230,448             239,245           1,718,069
     (Increase) decrease in accounts receivable                           -                   -                (413)
     (Increase) decrease in shareholder receivable                        -               7,964              37,694
     (Increase) decrease in other assets & prepaids                  (2,512)            226,272             111,726
     Increase (decrease) in accounts payable                         10,927              14,983             361,151
     Increase (decrease) in accrued liabilities                     369,383             528,228           1,205,875
                                                          -----------------  ------------------  ------------------
Net Cash Used in Operating Activities                              (261,530)           (209,935)         (8,615,063)
                                                          -----------------  ------------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net                                        -              13,038            (590,129)
Acquisition of patents                                              (19,336)            (35,626)           (266,385)
Acquisition/Sale of stock, net                                            -                   -              12,375
                                                          -----------------  ------------------  ------------------
Net Cash Used by Investing Activities                               (19,336)            (22,588)           (844,139)
                                                          -----------------  ------------------  ------------------
</TABLE>





                                     F - 25

<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
                                                          -------------------------------------
                                                                2003                2002               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Proceeds capital stock issued                                       173,500              25,000           6,281,427
Proceeds from loans                                                 150,506             228,634           3,452,814
Shareholder Receivables                                             (15,000)                  -             (15,000)
Principal payments on lease obligations                              (1,749)             (8,867)            (18,769)
Cash payments on related party payables                             (27,899)             (8,820)           (264,028)
                                                          -----------------  ------------------  ------------------
Net Cash Provided by Financing Activities                           279,358             235,947           9,436,444
                                                          -----------------  ------------------  ------------------

Net Increase (Decrease) in Cash and Cash
          Equivalents                                                (1,508)              3,424             (22,758)
Cash and Cash Equivalents at Beginning of the
          Year                                                        3,424                   -              24,674
                                                          -----------------  ------------------  ------------------
Cash and Cash Equivalents at End of the Year              $           1,916  $            3,424  $            1,916
                                                          =================  ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest                                                  $               -   $               -   $               -
Income Taxes                                              $             100  $              100  $              800
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
o        During  August 2002,  304,229  shares of common stock were canceled for
         services that were never rendered.
o        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.
o During September 2003, 11,259,786 shares of common stock were issued for notes
payable.  o During September 2003,  4,200,000 shares of common stock were issued
for accounts
         payable.
o        During  September 2003,  954,502 shares of common stock were authorized
         to be issued for general and administrative expenses.
o During  December  2003,  5,571 shares of common stock were issued for accounts
payable.

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

                                     F - 26

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

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  $1,362,000  for the year ended  December  31,  2003 and losses of
approximately  $1,026,000  for the year ended December 31, 2002, 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 - 27

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (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  2002  financial
statements to conform with the 2003 presentation.

Loss per Share

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


                                     F - 28

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
<TABLE>
<CAPTION>
                                                                                                     Per-Share
                                                                 Loss               Shares             Amount

                                                                      For the year ended December 31, 2003
<S>                                                       <C>                        <C>         <C>
Basic Loss per Share
Loss available to common shareholders                     $      (1,361,753)         19,420,052  $           (0.07)
                                                          =================  ==================  ==================


                                                                      For the year ended December 31, 2002
Basic Loss per Share
Loss available to common shareholders                     $      (1,025,837)         12,563,951  $           (0.08)
                                                          =================  ==================  ==================
</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, 2003 and
2002 are not presented as it would be anti-dilutive.

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.



                                     F - 29

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

Intangibles

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

NOTE 3 - INCOME TAXES

         The  Company  has  accumulated  tax  losses  estimated  at  $17,000,000
expiring in years 2007 through  2023.  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 currently leases  approximately 1,620 square feet of office
space from Four Cabo's  Enterprises,  Ltd. on a month to month basis.  The lease
payments are approximately $2,042 per month.

         The Company has also  entered into lease  agreements  for the rental of
computer  equipment.  These lease  expires in May 2004.  The total monthly lease
payments due on the above leases is approximately $90.

         During 2000,  the Company  entered into a financing  agreement  for the
purchase of a laser  printer.  The payments on this agreement are $312 per month
for a term of 36 months.  During 2002,  the  remainder of the  obligation on the
laser printer was paid.

         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.








                                     F - 30

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 4 - LEASE COMMITMENT (continued)

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


          Year Ended December 31,
-------------------------------------------
         2004                                             $        1,770
         2005                                                      1,320
         2006                                                        880
         2007                                                          -
         2008                                                          -
                                                          --------------
         Total minimum future lease payments              $        3,970
                                                          ==============

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, 2003 and 2002, the Company expended
$0 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).

         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.

                                     F - 31

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

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.

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

                                     F - 32

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

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


                                     F - 33

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

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.

         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                           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>


                                     F - 34

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

         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.
<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>

         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 March 16, 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.

                                     F - 35

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

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                           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.

         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.

                                     F - 36

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 6- RELATED PARTY TRANSACTIONS (continued)

         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.

NOTE 7- 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, 2003,  5,204,249  options had been granted under the
Plan,  and  another  1,878,380  options  had been  granted  outside of the Plan.
Compensation  expense  charged to  operations in 2003 and 2002 is $0 and $0. The
following is a summary of transactions:
<TABLE>
<CAPTION>
                                                                                      Shares Under Option
                                                                             --------------------------------------
                                                                                          December 31,
                                                                             --------------------------------------
                                                                                    2003                2002
                                                                             ------------------  ------------------
<S>                                                                          <C>                 <C>
Outstanding, beginning of year                                                        4,047,005           2,124,392
Granted during the year                                                               5,057,126           2,215,113
Canceled during the year                                                             (2,021,502)           (292,500)
Exercised during the year                                                                     -                   -
                                                                             ------------------  ------------------

Outstanding, end of year (at prices
ranging from $.01 to $3.00 per share)                                                 7,082,629           4,047,005
                                                                             ==================  ==================

Eligible, end of year for exercise currently (at prices
ranging from $.01 to $3.00 per share)                                                 6,882,629  3,213,672
                                                                             ==================  ==================
</TABLE>



                                     F - 37

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 8 - 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.



                                     F - 38

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

         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.

         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.

                                     F - 39

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

         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.

         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.


                                     F - 40

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

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

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

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

         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

                                     F - 41

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

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.

         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 9 - 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, 2003 and 2002.

         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, 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.

                                     F - 42

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002
                                   (Continued)

NOTE 10 - 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.

         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.

NOTE 11 - 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.


                                     F - 43