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, 2002

                                       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: 29
                                                          Exhibit Index Page: 21

     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 May 13,  2003,  there  were  12,370,578  (1 vote per  share)  Common,
4,409,393  Class  A,  2,239,283  Class  B,  and  1,567,498  Class C  Convertible
Preferred,  for a total of  20,586,785  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  $473,863  computed at the
closing price as of May 13, 2003.


                       DOCUMENTS INCORPORATED BY REFERENCE

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

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














                                        2

<PAGE>





                                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Number and Caption                                                                                       Page
PART I

<S>                                                                                                           <C>
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                                            8

Item 7.      Financial Statements                                                                                 9

Item 8.      Changes in and Disagreements With Accountants on Accounting and
                 Financial Disclosure                                                                            10

PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act                                                10

Item 10.   Executive Compensation                                                                                12

Item 11.   Security Ownership of Certain Beneficial Owners and Management                                        14

Item 12.   Certain Relationships and Related Transactions                                                        17

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

Item 14.   Controls and Procedures                                                                               23
</TABLE>


                                        3

<PAGE>

                                     PART I



                         ITEM 1 DESCRIPTION OF BUSINESS


GENERAL

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

HISTORY

         The Company began as a part of Information  Resources,  Inc. ("IRI") in
1987,  was  incorporated  as a subsidiary  of IRI under the laws of the State of
Delaware on December 8, 1989, and was fully  distributed to  stockholders of IRI
in a spinoff on October  31,  1990.  At the time of the spinoff a portion of the
business and assets of the Company  included a software  operation in Australia,
which was sold in March, 1993. The Company (VideOCart, Inc.) filed petitions for
relief under Chapter 11 bankruptcy  in December  1993.  The Company was inactive
until July 5, 1996 when the Company  merged with Klever Kart,  Inc. in a reverse
merger and changed  its name to Klever  Marketing,  Inc.  During the period from
July 5, 1996 to December  31,  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.



                         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 September 18, 2001, a Complaint  was filed in Superior  Court of the
State of  California,  County of San  Francisco,  by eiKart,  L.L.C.  ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart  dated May 11,  2001.  On December  12,  2002,  a judgment in
California  was made against the Company  whereby the Company is required to pay
$75,804  plus daily  interest  of $19.25 per day after  December  3, 2002.  This
judgment  has been  included  in the  financial  statements  as part of  accrued
liabilities at December 31, 2002. This California  judgment was obtained without
an active defense by the Company which the Company  believes it has.  Because of
this fact,  the  Company  intends to  actively  oppose any  collection  activity
outside of California.

         On October 18, 2002, a default judgment was entered against the Company
 by Avnet,  Inc. The total judgment was for $6,676.85 with interest on the total
 judgment at 4.28% per annum until
paid.  The total  judgment  of  $6,676.85  and  interest  of $105.56 was paid on
February 4, 2003.  This  judgment  has been  included in accounts  payable as of
December 31, 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, 2002.



                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


         There were no matters submitted to a vote of shareholders.


                                     PART II



                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


         The stock is traded on the OTCBB with the trading symbol KLMK.

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

                                        5

<PAGE>



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


                 2001:                              High                 Low
First Quarter                                $         1.12      $         0.37
Second Quarter                               $         1.01      $         0.60
Third Quarter                                $         0.85      $         0.16
Fourth Quarter                               $         0.35      $         0.11

                 2002:
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 April 28, 2003 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  sold 333,333  shares of common  stock  during 2002.  As of
December  31,  2002,  these  shares had not been  issued  due to  administrative
reasons.  The shares have since been  issued.  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)

         On May  20,  2002,  the  Board  of  Directors  amended  the  number  of
authorized shares of Class A voting preferred stock to 55,000 shares.

         On May  20,  2002,  the  Board  of  Directors  amended  the  number  of
authorized shares of Class B voting preferred stock to 42,000 shares.

         On May  20,  2002,  the  Board  of  Directors  amended  the  number  of
authorized shares of Class C voting preferred stock to 150,000 shares.

         On 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").


                                        6

<PAGE>



         Class  D  Shares  are  convertible  into  Common  Stock  at an  initial
conversion price of $1.05 (subject to adjustment if stock is subsequently issued
or subsequently issuable at a lower price).

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

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

         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.

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.

                                        7

<PAGE>




         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, 2002,
the Company believes that all reporting  persons complied with all Section 16(a)
filing  requirements,  except that:  Olson  Foundation  missed three filings for
three transactions,  Michael L. Mills filed a late Form 5 on March 6, 2003 which
included one late  transaction from 2002, C. Terry Warner missed two filings for
three  transactions  from  2002,  D.  Paul  Smith  missed  six  filings  for six
transactions from 2002, William J. Dupre filed one late Form 5 on March 13, 2003
which  included one late  transaction  from 2002,  William C. Bailey  missed one
filing for one transaction in 2002,  Richard J. Trout missed two filings for two
transactions  from 2002,  and Olson Farms missed one filing for one  transaction
from 2002.


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


PLAN OF OPERATIONS - 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: 1) develop  and  implement  its  electronic
coupons, the Klever-Kard* enhancement to existing frequent shopping programs and
electronic   couponing  feature,   and  2)  expand  the  Klever-  Kart  System's
orientation to other store formats including  superstores,  discount stores, toy
stores, do-it-yourself stores and warehouse stores.

                                        8

<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, 2002 and 2001,  the Company had net losses of $1,025,837 and
$2,342,405,  respectively.  This  decrease  in the  loss is  primarily  due to a
cessation of operations, while attempting to keep assets from wasting away.

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 $210,000 and $1,464,000
for 2002 and 2001 respectively. The decrease in the use of cash is due primarily
to a decrease in operations.

         Investing  activities  have used cash of $23,000 and  $122,000 for 2002
and 2001,  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 $236,000 and $1,584,000 for 2002
and 2001,  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

                                        9

<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>
Richard J. Trout                    46      President/Director         Next annual shareholder meeting
D. Paul Smith                       56      CFO/Secretary/
                                            Treasurer/Chairman         Next annual shareholder meeting
William J. Dupre                    49      COO/
                                            Exec Vice-President        Next annual shareholder meeting
William C. Bailey                   68      Director                   Next annual shareholder meeting
Michael L. Mills                    40      Director                   Next annual shareholder meeting
C. Terry Warner                     66      Director                   Next annual shareholder meeting
</TABLE>
         Richard J. Trout,  age 46,  became the  Company's  President in October
2001  and a  director  in  September  2000.  In the  capacity  of the  Company's
President,  Mr. Trout will work  side-by-side  with Mr. Smith to facilitate  the
Company's plans for funding, M & A activity,  strategic  positioning and various
other  financial  planning and  reporting  functions.  Mr. Trout comes to Klever
Marketing with a strong financial  background working for Western Financial Bank
in California as a vice president for 12 years.  For the past three years he has
been the CFO and an active board member for

                                       10

<PAGE>



Olson Farms Inc.

         D. Paul Smith,  age 56,  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.

         William J. Dupre, age 49, joined the Company as Chief Operating Officer
and Executive  Vice-President in November 2002. Mr. Dupre joins the Company with
over fifteen years of proven  executive  level retail  product  development  and
in-store marketing experience  including four years at Smart  Media/SnapShopper,
four years at VideOcart,  and seven years at Information Resources (IRI). During
his tenure at IRI, Mr. Dupre successfully  developed and launched various retail
and consumer products to market, negotiated participation in IRI's Qscan program
in over 25,000 retail stores  representing  70 of the top 100 grocery  chains in
the United  States and  contributed  to the  growth of chain  specific  consumer
packaged goods manufacturer revenues. Mr. Dupre also has participated in venture
capital  fund  raising at several  start-up  companies.  Mr. Dupre will lead the
Company in the execution of its strategic  initiatives  as it sets to deploy its
proprietary in-store media known as Klever-Kart(R), which provides retailers and
consumer goods companies  one-on-one  communications  with shoppers by utilizing
its LCD display mounted on the handle of shopping carts.

         William C. Bailey,  age 68, 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 member of the Board of Trustees for the
Utah Opera,  currently serving as Chairman of the Board. 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 40, was elected as a director of the Company in
December 1998. Mr. Mills is  President/CEO  of Olson Farms,  Inc., a diversified
agricultural  and real estate  holding  company with  operations  throughout the
western  United  States.   That  company  deals  primarily  in  the  production,
processing, and distribution of eggs, with headquarters in Ontario,  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 math.

                                       11

<PAGE>




         C. Terry Warner,  Ph.D., age 66, 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  teacher  at  Oxford
University. He has taught at the university level for over twenty-five years and
has been Dean of the College of General Studies at Brigham Young University. His
area of focus is moral and social  philosophy,  and his ideas and writings about
human  relationships  have been adopted and propagated by business  consultants,
family therapists, social psychologists,  counselors and doctors of medicine all
over the world.  He has been a consultant,  advisor and teacher to executives of
many Fortune 500 companies for over fifteen years.

         As of December  31, 2002,  the Company had one active board  committee,
the Audit and  Compliance  Committee.  D. Paul  Smith,  William C.  Bailey,  and
Michael L. Mills are on this committee.



                         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
                                                                                         pensation
                                           Annual Compensation                   Awards             Payouts
                                     ---------------------------------   ----------------------  ------------------
            (a)              (b)      (c)           (d)        (e)          (f)        (g)         (h)      (i)
                                                              Other                Securities
                            Year                             Annual      RestrictedUnderlying            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 )         2002            -             -          -           -            -         -         -
Former President/
Former CEO
                            2001    112,500    (1)        -          -           -      400,000(3)      -         -
                            2000    126,875               -          -           -            -         -         -

Richard J. Trout            2002            -             -          -           -      100,661         -         -
President
                            2001            -  (2)        -          -           -      125,000         -         -
                            2000            -             -          -           -                      -         -
</TABLE>



                                                        12

<PAGE>
<TABLE>
<CAPTION>
                                                                                   Long Term Compensation
                                                                                         pensation
                                           Annual Compensation                   Awards             Payouts
                                     ---------------------------------   ----------------------  ------------------
            (a)              (b)      (c)           (d)        (e)          (f)        (g)         (h)      (i)
                                                              Other                Securities
                            Year                             Annual      RestrictedUnderlying            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>
D. Paul Smith               2002            -             -          -           -      192,892         -         -
Chairman/CFO/               2001            -  (5)        -          -           -      100,000         -         -
Sec/Treasurer               2000            -             -          -           -            -         -         -

William J. Dupre            2002       12,500  (4)        -          -           -      400,000         -         -
COO/EVP                     2001            -             -          -           -            -         -         -
                            2000            -             -          -           -            -         -         -
</TABLE>
(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.
(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.
(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.

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>
                              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               100,000            8.2%            1.05          05/08/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
Richard J. Trout                 661              .05%            1.00          09/16/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                  100,000            8.2%            1.05          05/08/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   25,000            2.1%            1.00          04/10/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                    617              0.05%           1.00          08/30/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                    608              0.05%           1.00          11/01/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
</TABLE>
                                       13

<PAGE>

<TABLE>
<CAPTION>
<S>                        <C>               <C>             <C>             <C>               <C>           <C>
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   25,000            2.1%            1.00          11/04/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
D. Paul Smith                   41,667            3.4%            1.00          12/31/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
William J. Dupre               400,000            32.8%           1.05          11/18/2005           0             0
-------------------------- ----------------  --------------- --------------- ----------------  ------------- -------------
</TABLE>

AGGREGATE  OPTION/SAR  EXERCISES IN THE LAST FISCAL YEAR AND YEAR END OPTION/SAR
VALUES

         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
------------------------ ------------------ -------------- -------------------------------------------------------------------------
                               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            125,661            100,000               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
Michael L. Mills                   0                $0            112,000            100,000               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
D. Paul Smith                      0                $0            202,892            100,000               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
William C. Bailey                  0                $0            120,000            100,000               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
C. Terry Warner                    0                $0            160,580            100,000               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
William J. Dupre                   0                $0            33,333             366,667               $0                  $0
------------------------ ------------------ -------------- ----------------- -------------------- ----------------- ----------------
</TABLE>

(a)      Based on the closing price of the  Company's  Common Stock on April 24,
         2003 at $.07 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


                                       14

<PAGE>



         The table  below sets forth  information  as to each  person  owning of
record or who was known by the Company to own  beneficially  more than 5% of the
20,586,752 votes as of May 13, 2003,  including  options to acquire stock of the
Company that are currently  exercisable  or will be within the next 60 days, and
information as to the ownership of the Company's  Stock by each of its directors
and executive  officers and by the directors and executive  officers as a group.
Except as otherwise  indicated,  all shares are owned directly,  and the persons
named in the table have sole voting and investment  power with respect to shares
shown as beneficially owned by them.
<TABLE>
<CAPTION>
                                                                         # OF
NAME AND ADDRESS                     NATURE OF                           SHARES
OF BENEFICIAL OWNERS                 OWNERSHIP                         OWNED                   PERCENT
DIRECTORS

PRINCIPAL SHAREHOLDERS

<S>                                      <C>                              <C>                    <C>
Paul G. Begum                            Direct(2)                        3,113,660              15.13%
P.O. Box 58045                           Preferred Shares(3)                 127,959               0.62%
Salt Lake City, UT 84158                    Total                         3,241,619              15.75%

Michael L. Mills                         Direct(1)                        1,906,550                9.10%
601 S. Milliken Ave                      Preferred Shares(1)(4)           3,646,833               17.42%
Ste K-100                                Options/Warrants                    351,212                1.68%
Ontario, CA 91761                           Total(1)                      5,904,495               28.20%

C. Terry Warner                          Direct(6)                           902,540               4.32%
1278 Locust Lane                         Options                             312,747               1.50%
Provo, UT 84604                             Total                         1,215,287                5.82%

Presidio Investments LLC                 Direct(7)                             94,858               0.46%
3200 North Central Ave                   Preferred Shares(7)                 351,887                1.70%
Suite 1560                               Options/Warrants(7)                   84,510               0.41%
Phoenix, AZ 85012                           Total(7)                         531,255                2.57%

Lee Brukman                              Direct                           1,200,000                5.83%
P.O. Box 105
La Jolla, CA 92038

Seabury Investors III                    Preferred Shares(5)              4,089,495               19.47%
540 Madison Avenue                       Warrants                            412,936                1.97%
New York, NY 10022                          Total(8)                       4,502,431               21.44%
</TABLE>




                                       15

<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
<S>                                      <C>                              <C>                      <C>
Michael L. Mills                         Direct(1)                        1,906,550                9.10%
601 S. Milliken Ave                      Preferred Shares(1)(4)           3,646,833               17.42%
Ste K-100                                Options/Warrants                    351,212                1.68%
Ontario, CA 91761                           Total(1)                      5,904,495               28.20%

C. Terry Warner                          Direct(6)                           902,540               4.32%
1278 Locust Lane                         Options                             312,747               1.50%
Provo, UT 84604                             Total                         1,215,287                5.82%

ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (6
PERSONS)                                 Direct                           3,247,503              14.47%
                                         Preferred Shares(4)              3,646,833              16.26%
                                         Options                          1,845,845                8.23%
                                            Total(9)                      8,740,181              38.96%
</TABLE>

(1)      Because Mr. Mills is  president of Olson Farms,  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
         Farms, 150,000 Shares held by the Olson Foundation, 895,945 Shares held
         by the Estate of Peter D. Olson,  23,182 Shares held by Mr. Mills,  and
         77,658 Shares held in a brokerage  account of Estate of Peter D. Olson.
         The Olson  ownership also includes  Preferred Stock that, as of May 13,
         2003,  would  convert  3,646,833  votes held by Olson Farms  (3,039,027
         votes) and Olson  Foundation  (607,806  votes).  Ownership  includes an
         option  covering  3,060  Shares  held by Olson  Farms,  Inc.,  warrants
         covering  105,455  Shares held by Olson  Foundation,  options  covering
         30,697 Shares held by Olson  Foundation,  and options  covering 212,000
         Shares held by Mr. Mills.  In addition to the total Mills  ownership in
         the  table  above,  convertible  debt  held by Olson  Farms may also be
         converted as of May 13, 2003 into 183,810 Shares and  convertible  debt
         held by Olson  Foundation  may be  converted  as of May 13,  2003  into
         288,644 Shares.

(2)      Mr.  Begum's  ownership  includes  31,834 Shares held by Mr. Begum in a
         brokerage  account,  2,542,967  Shares held by Tree of Stars,  Inc.,  a
         corporation  of which Mr. Begum is a director,  officer,  and principal
         shareholder,  443,945 Shares held by PSF, Inc., a private  company,  of
         which Mr.  Begum is President  and  principal  shareholder,  and 94,914
         Shares held in a brokerage account of 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 127,959  Shares as of May 13,  2003 and are held by Tree of
         Stars.

(3)      This  represents  the  number  of Shares  that the Class A  Convertible
         Preferred Shares would convert to as of May 13, 2003.

                                       16

<PAGE>




(4)      This  represents  the number of Shares that the  Convertible  Preferred
         Shares  would  convert  to as of May 13,  2003.  This  number  includes
         479,846  votes from Class A  Convertible  Preferred  Shares,  2,239,284
         votes from Class B Convertible Preferred Shares, and 927,703 votes from
         Class C Convertible Preferred

(5)      This  represents  the number of Shares that the  Convertible  Preferred
         Shares  would  convert  to as of May 13,  2003.  This  number  includes
         3,449,699 votes from Class A Convertible  Preferred  Shares and 639,795
         votes from Class C Convertible Preferred

(6)      Mr. Warner's  ownership includes 12,500 Shares held by C. Terry Warner;
         819,980 Shares held by Primavera,  Ltd., a limited partnership of which
         Mr. Warner is the managing partner; 55,060 Shares held by Alice Warner,
         Mr.  Warner's  daughter;  and 15,000 Shares held by Susan  Warner,  Mr.
         Warner's spouse.

(7)      Presidio Investments,  of which William J. Howard is the single member,
         ownership  includes  94,858 Shares held by Presidio  Investments  LLC.;
         351,887 Shares should the Class A Convertible  Preferred Shares held by
         Presidio Investments LLC. be converted as of May 13, 2003; Olson Legacy
         Trust, of which William J. Howard is the sole trustee,  option covering
         84,510 Shares. In addition to the total Presidio ownership in the above
         table,  convertible debt held by Presidio  Investments may be converted
         into 1,849,762  Shares as of May 13, 2003 and convertible  debt held by
         Olson  Legacy  Trust may be  converted  as of May 13,  2003 into 57,001
         Shares.

(8)      In  addition  to  the  total  Seabury  ownership  in the  above  table,
         convertible  debt held by Seabury  Investors III,  Limited  Partnership
         could be converted into 477,816 Shares as of May 13, 2003.

(9)      In addition to the total ownership in the above table, convertible debt
         held by Olson  Farms  may also be  converted  as of May 13,  2003  into
         183,810  Shares and  convertible  debt held by Olson  Foundation may be
         converted as of May 13, 2003 into 288,644 Shares.



             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


OLSON FARMS, INC. LOANS TO THE COMPANY.

         Olson Farms,  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

                                       17

<PAGE>



February 26, 2001 and the nine days prior).

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

OLSON FOUNDATION LOANS TO THE COMPANY

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

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

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

ESTATE OF PETER D. OLSON

         Peter D.  Olson  loaned the  Company  $12,500,  $12,500,  and $3,750 on
September 1, 1998,  September 17, 1998,  and  September 22, 1998,  respectively.
These notes bear an interest rate of 10% per annum.

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

                                       18

<PAGE>



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  1st,  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.

DIRECTOR LOAN TO THE COMPANY

         On October 20, 1998, the Company  borrowed  $150,000 from Mount Olympus
Waters,  Inc. 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.

DIRECTOR LOAN TO THE COMPANY

         On February  20,  2001,  the Company  borrowed  $50,000 from Leonard D.
Southwick, a member of the Board of Directors.  This loan was repaid on February
26, 2001. The interest rate on the note was 9% and matured on March 19, 2001.

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.  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.

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
</TABLE>


                                       19

<PAGE>
<TABLE>
<CAPTION>
<S>          <C>             <C>              <C>                 <C>         <C>
  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
             -------------                                    --------------
   Total        $58,717.04                                            97,862
             =============                                    ==============
</TABLE>

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,  Olson  Foundation  received common stock
options for each note at a ratio of 1.667 common  shares for each dollar  loaned
to the Company.

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
             -------------                                    --------------
   Total        $75,735.05                                           126,225
             =============                                    ==============
</TABLE>

THE SEABURY GROUP LOAN TO THE COMPANY

         The Seabury Group loaned the Company  $60,000 on July 5, 2001, of which
is secured by a blanket lien on the assets of the Company.  An Interest  rate of
10% compounded monthly applies until January 5, 2002.  Principal and all due and
unpaid  interest  are to be  paid on  January  5,  2002,  or the  interest  rate
increases to 15% compounded daily. Warrants were issued in conjunction with this
loan for 18,182 common shares at a strike price of $0.01 and an expiration  date
of July 5, 2006.

                                       20

<PAGE>



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.

PAUL G. BEGUM

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

         During the year ended December 31, 2001, the Company accrued additional
liabilities from a separation  agreement with Paul G. Begum. The total amount of
these  liabilities  at  December  31,  2002 and  2001 is  $60,717  and  $73,330,
respectively.



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


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

1. FINANCIAL STATEMENTS PAGE
<TABLE>
<CAPTION>
<S>                                                                                                            <C>
Report of Robison, Hill & Co., Independent Certified Public Accountants.........................................F-1
Balance Sheets
  December 31, 2002, and 2001...................................................................................F-2
Statements of Loss
  For the Years Ended December 31, 2002, and 2001...............................................................F-4
Statement of Stockholders' Equity
  For the Years Ended December 31, 2002, and 2001...............................................................F-5
Statements of Cash Flows
  For the Years Ended December 31, 2002, and 2001..............................................................F-23
</TABLE>

                                       21

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                                            <C>
Notes to Financial Statements
  December 31, 2002, and 2001..................................................................................F-25
</TABLE>

2.     FINANCIAL STATEMENT SCHEDULES

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

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

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

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

3.03     Bylaws, as amended (2)

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

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

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

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

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

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

                                       22

<PAGE>



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)

99.1     Certification  Pursuant to 18 U.S.C.  Section 1350, As Adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2     Certification  Pursuant to 18 U.S.C.  Section 1350, As Adopted 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) On  November  19,  2002,  the  Company  filed a Form 8-K under  Item 7,
         Financial   Statements  and  Exhibits,   and  Item  9,   Regulation  FD
         Disclosure.  The 8-K included the  Certifications  of the Company's CEO
         and CFO for the quarter ended  September  30, 2002, in accordance  with
         Section 906 of the Sarbanes-Oxley Act of 2002.

         On November 19, 2002,  the Company  filed a report on 8K reporting  the
appointment  of William J. Dupre as the Company's  Executive  Vice President and
Chief Operating Officer, under Item 9.



                        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

                                       23

<PAGE>



                  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.






























                                       24

<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: May 20, 2003                              By  /S/     Richard J. Trout
                                                             Richard J. Trout
                                                             President, Director

         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 20th day of May 2003.

Signatures                                           Title

/S/     Richard J. Trout
Richard J. Trout                                     President, Director


/S/     D. Paul Smith
D. Paul Smith                                        C.F.O., Secretary,
                                                     Treasurer, Chairman


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


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







                                       25

<PAGE>



I, Richard J. Trout, certify that:

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

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

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

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in exchange act rules 13a-14 and 15d-14) for the registrant and
         have:

         A)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

         B)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "evaluation date");
                  and

         C)       presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the evaluation date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of  registrant's   board  of  directors  (or  persons
         performing the equivalent functions):

         A)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

         B)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls.


                                       26

<PAGE>



6.       The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

Date: May 20, 2003

/s/ Richard J. Trout
Richard J. Trout, President
(Principal Executive Officer)

                                       27

<PAGE>



I, D. Paul Smith, certify that:

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

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

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

4.       The registrant's  other  certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in exchange act rules 13a-14 and 15d-14) for the registrant and
         have:

         A)       designed  such  disclosure  controls and  procedures to ensure
                  that  material   information   relating  to  the   registrant,
                  including its consolidated  subsidiaries,  is made known to us
                  by others  within  those  entities,  particularly  during  the
                  period in which this annual report is being prepared;

         B)       evaluated the  effectiveness  of the  registrant's  disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "evaluation date");
                  and

         C)       presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the evaluation date;

5.       The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of  registrant's   board  of  directors  (or  persons
         performing the equivalent functions):

         A)       all  significant  deficiencies  in the design or  operation of
                  internal   controls   which   could   adversely   affect   the
                  registrant's ability to record, process,  summarize and report
                  financial  data  and  have  identified  for  the  registrant's
                  auditors any material weaknesses in internal controls; and

         B)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  registrant's internal controls.


                                       28

<PAGE>



6.       The registrant's other certifying officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.

Date: May 20, 2003

/s/ D. Paul Smith
D. Paul Smith, Secretary/Treasurer (Principal Financial Officer)



































                                       29

                             KLEVER MARKETING, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                       -:-

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001




<PAGE>






                                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              Page

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

Balance Sheets
   December 31, 2002 and 2001...................................................................................F-2

Statements of Loss
   For the Years Ended December 31, 2002 and 2001...............................................................F-4

Statement of Stockholders' Equity
   From July 5, 1996 (inception of development stage) to December 31, 2002 .....................................F-5

Statements of Cash flows
   For the Years Ended December 31, 2002 and 2001..............................................................F-23

Notes to the Financial Statements
   December 31, 2002 and 2001..................................................................................F-25
</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, 2002 and 2001,  and the
related  statements of  operations  and cash flows for the tow years then ended,
and the  statement of in  stockholders'  equity from July 5, 1996  (inception of
development  stage) to December 31, 2002.  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, 2002 and 2001, 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 25, 2003

                                      F - 1

<PAGE>



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




                                                                                          December 31,
                                                                             --------------------------------------
ASSETS                                                                              2002                2001
                                                                             ------------------  ------------------
Current Assets
<S>                                                                          <C>                 <C>
     Cash                                                                    $            3,424  $                -
     Prepaid Expense                                                                          -             226,272
     Shareholder Receivables                                                                  -               7,964
                                                                             ------------------  ------------------
          Total Current Assets                                                            3,424             234,236
                                                                             ------------------  ------------------
Fixed Assets
     Office Equipment                                                                   148,067             155,876
     Phase 2 Equipment                                                                   57,750              66,690
     Less Accumulated Depreciation                                                     (120,105)           (105,145)
                                                                             ------------------  ------------------
          Net Fixed Assets                                                               85,712             117,421
                                                                             ------------------  ------------------
Other Assets
     Patents                                                                          2,339,006           2,303,380
     Less Accumulated Amortization                                                   (1,915,172)         (1,694,599)
                                                                             ------------------  ------------------
          Net Other Assets                                                              423,834             608,781
                                                                             ------------------  ------------------

          Total Assets                                                       $          512,970  $          960,438
                                                                             ==================  ==================
</TABLE>



                                      F - 2

<PAGE>

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

                                                                                          December 31,
                                                                             --------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                2002                2001
                                                                             ------------------  ------------------
Current Liabilities
<S>                                                                          <C>                 <C>
     Accounts Payable, Trade                                                 $          435,928  $          420,945
     Liability for Overdrawn Cash                                                             -               3,903
     Accrued Liabilities                                                                878,142             346,011
     Related Party Payables                                                           2,551,298           2,331,482
     Short-term Notes Payable                                                             2,207               4,828
                                                                             ------------------  ------------------
          Total Current Liabilities                                                   3,867,575           3,107,169

Non-Current Liabilities
     Lease Obligation Payable                                                                 -               6,246
                                                                             ------------------  ------------------


          Total Liabilities                                                           3,867,575           3,113,415
                                                                             ------------------  ------------------


Stockholders' Equity
     Preferred stock (par value $.01), 2,000,000 shares authorized
          168,434 issued and outstanding December 31, 2002
          and December 31, 2001                                                           1,684               1,684
     Common Stock (Par Value $.01), 20,000,000 shares
          authorized. 12,370,578 shares issued and outstanding
          at December 31, 2002 and 12,674,807 shares issued
          and outstanding at December 31, 2001                                          123,706             126,748
     Common Stock to be issued, 768,917 shares at
          December 31, 2002 and 435,584 shares at
          December 31, 2001                                                               7,689               4,356
     Treasury Stock, 1,000 shares at December 31, 2002
          and December 31, 2001                                                          (1,000)             (1,000)
     Paid in Capital in Excess of Par Value                                          12,100,583          12,276,665
     Retained Deficit                                                                (3,333,785)         (3,333,785)
     Deficit Accumulated During Development Stage                                   (12,253,482)        (11,227,645)
                                                                             ------------------  ------------------
          Total Stockholders' Equity                                                 (3,354,605)         (2,152,977)
                                                                             ------------------  ------------------

          Total Liabilities and Stockholders' Equity                         $          512,970  $          960,438
                                                                             ==================  ==================
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                      F - 3

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                                STATEMENT OF LOSS
<TABLE>
<CAPTION>

                                                                                                    Cumulative
                                                                                                       From
                                                                                                   July 5, 1996
                                                                  For the Year Ended               Inception of
                                                                     December 31,                  Development
                                                        --------------------------------------
                                                               2002                2001               Stage
                                                        ------------------  ------------------  ------------------

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

Expenses
  Sales and marketing                                                    -              33,929             117,546
  General and administrative                                       627,287           1,607,942           7,404,507
  Research and development                                               -             486,958           4,459,891
                                                        ------------------  ------------------  ------------------

     Total Expenses                                                627,287           2,128,829          11,981,944
                                                        ------------------  ------------------  ------------------

Other income (expense)
  Interest income                                                      100               4,504              18,902
  Interest expense                                                (394,452)           (217,939)           (723,997)
  Loss on sale of assets                                            (4,098)                (41)            (13,235)
  Capital gain on sale of investments                                    -                   -             191,492
                                                        ------------------  ------------------  ------------------

     Total Other Income (Expense)                                 (398,450)           (213,476)           (526,838)
                                                        ------------------  ------------------  ------------------

Income (Loss) Before Taxes                                      (1,025,737)         (2,342,305)        (12,252,782)

Income Taxes                                                           100                 100                 700
                                                        ------------------  ------------------  ------------------

Net Income (Loss) After Taxes                           $       (1,025,837) $       (2,342,405) $      (12,253,482)
                                                        ==================  ==================  ==================

Weighted Average Shares
  Outstanding                                                   12,563,951          12,557,378
                                                        ==================  ==================


Loss Per Share                                          $           (0.08)  $           (0.19)
                                                        ==================  ==================
</TABLE>



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

                                      F - 4

<PAGE>


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



                                     F - 5
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>

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>



                                     F - 6
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>

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                             --      --           --        --      --      --           --             --       (831,814)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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




                                     F - 7
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>




                                     F - 8
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>




                                     F - 9
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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                             --      --           --        --      --      --           --             --       (755,594)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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


                                     F - 10
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>


                                     F - 11
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>





                                     F - 12
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>


                                     F - 13

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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                             --      --           --        --      --      --           --             --     (1,496,926)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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

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>



                                     F - 14
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>



                                     F - 15
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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                             --      --           --        --      --      --           --             --     (1,734,623)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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

January 2000 shares issued to
   company for cash at
   $2.75 per share                   --      --         27,273       273    --      --         74,727           --           --
</TABLE>




                                     F - 16
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>



                                     F - 17
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>




                                     F - 18
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>



                                     F - 19
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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                             --      --           --        --      --      --           --             --     (4,066,283)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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

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>


                                     F - 20
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
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>





                                     F - 21
<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                     Deficit
                                                                                                                    Accumulated
                                                                                                                       From
                                                                                  Common    Paid in                 July 5, 1996
                                                                                  Stock   Capital in                Inception of
                                  Preferred Stock       Common Stock     Treasury to be   Excess of     Retained      Development
                                 ----------------  ---------------------
                                  Shares   Amount    Shares      Amount   Stock   Issued  Par Value      Deficit         Stage
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------
<S>                              <C>       <C>     <C>          <C>       <C>     <C>     <C>          <C>            <C>
September 2001 shares
   returned to Company for
   accounts receivable of
   $98,375                           --      --           --    $   --   $(1,000) $ --    $   (97,375) $       --     $      --

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

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

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                             --      --           --        --      --      --           --             --     (1,025,837)
                                 --------  ------  -----------  --------  ------  ------  -----------  -------------  -----------

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


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

                                     F - 22

<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
                                                          -------------------------------------
                                                                2002                2001               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S>                                                       <C>                <C>                 <C>
Net Loss                                                  $      (1,025,837) $       (2,342,405) $      (12,253,482)
Adjustments used to reconcile net loss to net
   cash provided by (used in) operating activities:
     Stock issued for general and administrative                          -             139,438             871,480
     Stock issued for research and development                            -              15,000              15,000
     Stock returned for services not rendered                      (200,790)                  -            (200,790)
     Write-off of assets                                                  -              81,388             526,718
     Compensation expense from stock options                              -                   -              26,247
     Stock issued for interest expense                                    -                   -              24,285
     Stock issued for accounts payable                                    -                   -              25,153
     Deferred income                                                      -                   -            (214,000)
     Depreciation and amortization                                  239,245             246,558           1,487,621
     (Increase) decrease in accounts receivable                           -               8,218                (413)
     (Increase) decrease in shareholder receivable                    7,964              (2,486)             37,694
     (Increase) decrease in other assets & prepaid
        expenses                                                    226,272             (14,695)            114,238
     Increase (decrease) in accounts payable                         14,983             228,435             350,224
     Increase (decrease) in accrued liabilities                     528,228             176,283             836,492
                                                          -----------------  ------------------  ------------------
Net Cash Used in Operating Activities                              (209,935)         (1,464,266)         (8,353,533)
                                                          -----------------  ------------------  ------------------

CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition/Sale of equipment, net                                   13,038             (66,190)           (590,129)
Acquisition of patents                                              (35,626)            (56,227)           (247,049)
Acquisition/Sale of stock, net                                            -                   -              12,375
                                                          -----------------  ------------------  ------------------
Net Cash Used by Investing Activities                               (22,588)           (122,417)           (824,803)
                                                          -----------------  ------------------  ------------------
</TABLE>


                                     F - 23

<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
                                                          -------------------------------------
                                                                2002                2001               Stage
                                                          -----------------  ------------------  ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
<S>                                                                  <C>                <C>               <C>
Proceeds capital stock issued                                        25,000             483,892           6,107,927
Proceeds from loans                                                 228,634           1,392,732           3,302,308
Principal payments on lease obligations                              (8,867)             (2,811)            (17,020)
Cash payments on notes payable                                       (8,820)           (290,000)           (236,129)
                                                          -----------------  ------------------  ------------------
Net Cash Provided by Financing Activities                           235,947           1,583,813           9,157,086
                                                          -----------------  ------------------  ------------------

Net Increase (Decrease) in Cash and Cash
          Equivalents                                                 3,424              (2,870)            (21,250)
Cash and Cash Equivalents at Beginning of the
          Year                                                            -               2,870              24,674
                                                          -----------------  ------------------  ------------------
Cash and Cash Equivalents at End of the Year              $           3,424  $                   $            3,424
                                                          =================  ==================  ==================

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest                                                  $               -  $           10,142                   -
Income Taxes                                              $             100  $              100  $              700
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:

o        During January 2001, 4,694 shares of common stock were canceled.
o        During January 2001,  37,879 shares of preferred  stock were issued for
         payment of a note payable.
o        During  March 2001,  6,061  shares of  preferred  stock were issued for
         payment of a note payable.
o        During March 2001,  the Company issued 15,000 shares of common stock in
         exchange for research and development expenses.
o        During July 2001,  100,000  shares of common stock were returned to the
         Company.
o        During  August  2001,  507,048  shares of common  stock were  issued in
         advance for services of $334,652.
o        During August 2002, 304,229 shares of common stock were canceled.

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

                                     F - 24

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001

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  $1,026,000  for the year ended  December  31,  2002 and losses of
approximately  $2,342,000  for the year ended December 31, 2001, 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 - 25

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (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  2001  financial
statements to conform with the 2002 presentation.





                                     F - 26

<PAGE>



                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

Loss per Share

         The  reconciliations  of the numerators and  denominators  of the basic
earnings per share computations are as follows:
<TABLE>
<CAPTION>
                                                                                                     Per-Share
                                                                Loss               Shares              Amount

                                                                    For the year ended December 31, 2002
BASIC LOSS PER SHARE
<S>                                                       <C>                        <C>         <C>
Loss available to common shareholders                     $      (1,025,837)         12,563,951  $           (0.08)
                                                          =================  ==================  ==================


                                                                    For the year ended December 31, 2001
BASIC LOSS PER SHARE
Loss available to common shareholders                     $      (2,342,405)         12,557,378  $           (0.19)
                                                          =================  ==================  ==================
</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, 2002 and
2001 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


                                     F - 27

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)

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.

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  $16,000,000
expiring in years 2007 through  2022.  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 leases expire between September 2003 and May 2004. The
total monthly lease payments due on the above leases is approximately $210.

         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.







                                     F - 28

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 4 - LEASE COMMITMENT (continued)

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


          Year Ended December 31,
-------------------------------------------
         2003                                             $        4,254
         2004                                                        445
         2005                                                          -
         2006                                                          -
         2007                                                          -
                                                          --------------
         Total minimum future lease payments              $        4,699
                                                          ==============

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, 2002 and 2001, the Company expended
$0 and $486,958,  respectively  for research and  development  of the technology
involved with its patents.

NOTE 6- RELATED PARTY TRANSACTIONS

OLSON FARMS, INC. LOANS TO THE COMPANY.

         Olson Farms,  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  Farms 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 - 29

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (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.

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 March22, 2001

                                     F - 30

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 6 - RELATED PARTY TRANSACTIONS (continued)

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 1st, 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.

DIRECTOR LOAN TO THE COMPANY

         On October 20, 1998, the Company  borrowed  $150,000 from Mount Olympus
Waters,  Inc. 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.

DIRECTOR LOAN TO THE COMPANY

         On February  20,  2001,  the Company  borrowed  $50,000 from Leonard D.
Southwick, a member of the Board of Directors.  This loan was repaid on February
26, 2001. The interest rate on the note was 9% and matured on March 19, 2001.

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.  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.

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.

                                     F - 31

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
<TABLE>
<CAPTION>
                                                                  Common
                                                                   Stock
                                Annual                           Option #     Option Strike
    DATE       Principal    Interest Rate     Maturity Date       Shares          Price
------------ ---------------------------------------------------------------------------------
<S>          <C>            <C>               <C>                <C>          <C>
  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
             -------------                                    --------------
   Total        $58,717.04                                            97,862
             =============                                    ==============
</TABLE>

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,  Olson  Foundation  received common stock
options for each note at a ratio of 1.667 common  shares for each dollar  loaned
to the Company.















                                     F - 32

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (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
             -------------                                    --------------
   Total        $75,735.05                                           126,225
             =============                                    ==============
</TABLE>

THE SEABURY GROUP LOAN TO THE COMPANY

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

         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.



                                     F - 33

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 6 - RELATED PARTY TRANSACTIONS (continued)

PAUL G. BEGUM

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

         During the year ended December 31, 2001, the Company accrued additional
liabilities from a separation  agreement with Paul G. Begum. The total amount of
these  liabilities  at  December  31,  2002 and  2001 is  $60,717  and  $73,330,
respectively.

NOTE 7- STOCK OPTIONS

         The shareholders approved, by a majority vote, the adoption of the 1998
Stock Incentive Plan (the "Plan").  Under the Plan,  3,500,000  shares of common
stock are  reserved  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.  Under the Plan, an
additional  500,000 shares of common stock are reserved for issuance in the form
of restricted stock grants. As of December 31, 2002,  2,978,985 options had been
granted under the Plan, and another  1,068,020  options had been granted outside
of the Plan.  Compensation  expense charged to operations in 2002 and 2001 is $0
and $0. The following is a summary of transactions:













                                     F - 34

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 7- STOCK OPTIONS (continued)
<TABLE>
<CAPTION>
                                                                                      Shares Under Option
                                                                             --------------------------------------
                                                                                          December 31,
                                                                             --------------------------------------
                                                                                    2002                2001
                                                                             ------------------  ------------------
<S>                                                                                   <C>                 <C>
Outstanding, beginning of year                                                        2,124,392           2,685,049
Granted during the year                                                               2,215,113           2,299,367
Canceled during the year                                                               (292,500)         (2,860,024)
Exercised during the year                                                                     -                   -
                                                                             ------------------  ------------------

Outstanding, end of year (at prices
ranging from $.01 to $3.00 per share)                                                 4,047,005           2,124,392
                                                                             ==================  ==================

Eligible, end of year for exercise currently (at prices
ranging from $.01 to $3.00 per share)                                                3,213,672            1,458,500
                                                                             ==================  ==================
</TABLE>

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.

                                     F - 35

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

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

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

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

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

         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

                                     F - 36

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

holder of a Class B Share shall be entitled to receive,  when and as declared, a
dividend equal to each dividend declared and paid on the shares of Common Stock,
on a share for  share  basis,  so the  holders  of the  Class B Shares  shall be
entitled to  participate  equally on a share for share basis with the holders of
the shares of Common Stock.  If there is a share split or dividend on the Common
Stock,  then the Class B Share dividends shall be adjusted as if a similar split
or dividend had occurred with respect to the Class B Shares.

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

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

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

         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

                                     F - 37

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

declared.  Such dividends shall be cumulative and may be paid in cash or in kind
through the  distribution of .0425 Class C Shares,  of the same Series for which
the dividend is accrued,  for each  outstanding  Class C Share, on each dividend
payment date;  provided,  that if such  dividends in respect of any period shall
not have been paid or declared  and set apart for  payment  for all  outstanding
Class C Shares by each payment  date,  then until all unpaid  dividends  thereon
shall be paid or set  apart for  payment  to the  holders  of such  shares,  the
Corporation may not pay, declare or set apart any dividend or other distribution
on its shares of Common Stock or other shares junior to the Class C Shares,  nor
may any other distributions,  redemptions or other payments be made with respect
to the  shares  of Common  Stock or other  junior  shares.  In  addition  to the
foregoing, each holder of a Class C Share shall be entitled to receive, when and
as declared,  a dividend equal to each dividend  declared and paid on the shares
of Common  Stock,  on a share for share  basis,  so the  holders  of the Class C
Shares shall be entitled to participate  equally on a share for share basis with
the holders of the shares of Common Stock. If there is a share split or dividend
on the Common Stock,  then the Class C Share dividends shall be adjusted as if a
similar split or dividend had occurred with respect to the Class C Shares.

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

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

         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

                                     F - 38

<PAGE>


                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 8 - PREFERRED STOCK (continued)

(subject to adjustment).

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

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

         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.



                                     F - 39

<PAGE>

                             KLEVER MARKETING, INC.
                          (a Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                                   (Continued)

NOTE 9 - LITIGATION

         On September 18, 2001, a Complaint  was filed in Superior  Court of the
State of  California,  County of San  Francisco,  by eiKart,  L.L.C.  ("eiKart")
against the Company. The Complaint arises out of a written agreement between the
Company and eiKart  dated May 11,  2001.  On December  12,  2002,  a judgment in
California  was made against the Company  whereby the Company is required to pay
$75,804  plus daily  interest  of $19.25 per day after  December  3, 2002.  This
judgment  has been  included  in the  financial  statements  as part of  accrued
liabilities at December 31, 2002. This California  judgment was obtained without
an active defense by the Company which the Company  believes it has.  Because of
this fact,  the  Company  intends to  actively  oppose any  collection  activity
outside of California.

         On October 18, 2002, a default judgment was entered against the Company
 by Avnet,  Inc. The total judgment was for $6,676.85 with interest on the total
 judgment at 4.28% per annum until
paid.  The total  judgment  of  $6,676.85  and  interest  of $105.56 was paid on
February 4, 2003.  This  judgment  has been  included in accounts  payable as of
December 31, 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, 2002.

NOTE 10 - STOCK TRANSACTIONS

         During August 2001,  the Company  issued 507,048 shares of common stock
as a prepayment  for services to be rendered over the next twelve  months.  This
resulted in a prepaid asset of $195,213 and expenses of $139,438.  Approximately
40% of the agreement was completed.  On August 20, 2002, the Company  received a
refund of 304,229 shares of stock for services that were never  rendered.  These
shares have been canceled and are no longer outstanding.

         During November 2002, the Company  received  $25,000 for 333,333 shares
of common stock. As of December 31, 2002, these shares have not been issued.

NOTE 11 - SUBSEQUENT EVENTS

         During January 2003, the Company received $65,000 for 866,667 shares of
common stock.


                                     F - 40