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, 2000

                                       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:     [21]
                                                          Exhibit
                                                          Index Page:      [19]

     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-B 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. $ 27,000

     As of March 9, 2001,  there were  12,152,768  shares of common  stock,  par
value $0.01 per share, issued and outstanding.

     The  aggregate  market  value  of the  Registrant's  voting  stock  held by
non-affiliates  of the Registrant was approximately  $6,837,956  computed at the
closing price of $1.00 per share as of March 9, 2001.


                       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"):

        Proxy  Statement for Annual Meeting of  Stockholders  to be filed within
        120  days  following  the end of the  Registrant's  fiscal  years  ended
        December  31,  2000,incorporated  into  Part III of the  report  on Form
        10-KSB

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


<PAGE>





                                TABLE OF CONTENTS


Item Number and Caption                                                     Page
PART I

Item 1.   Description of Business                                              4

Item 2.   Description of Property                                             10

Item 3.   Legal Proceedings                                                   10

Item 4.   Submission of Matters to a Vote of Security Holders                 10


PART II

Item 5.   Market for Common Equity and Related Stockholder Matters            10

Item 6.   Management's Discussion and Analysis or Plan of Operations          12

Item 7.   Financial Statements                                                17

Item 8.   Changes in and Disagreements With Accountants on Accounting and
          Financial Disclosure                                                17
PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act                   17

Item 10.  Executive Compensation                                              18

Item 11.  Security Ownership of Certain Beneficial Owners and Management      18

Item 12.  Certain Relationships and Related Transactions                      18

Item 13.  Exhibits and Reports on Form 8-K                                    18







                                       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 commercialization of the patented process, Klever-Kart(R), it has
acquired.

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. The Company re-entered the
development stage commencing July 5, 1996.

Principal Products or Services and Their Markets

     The  mission  of the  Company  ("Klever  Marketing(TM)")  is to become  the
leading  supplier of wireless  communication  platforms  for use in large retail
stores. The Company is currently making plans to market a patented  technology -
the  Klever-Kart(R) - designed to deliver targeted ads and promotions to a small
display device on the shopping cart handle. Each marketing message, triggered by
proximity to the product on the shelf,  is designed to reach the consumer at the
critical  Point-of-Selection(R),  when the  shopper is ready to  decide.  With a
revenue  model  targeted at the  significant  amounts  currently  being spent by
consumer goods  manufacturers on marketing in stores, the Company is positioning
for entry into the U.S.  retail store  market with plans for parallel  expansion
and licensing internationally.

     The Company's strategy includes no installation costs for retailers. To the
Company's knowledge,  there appear to be minimal barriers to consumer acceptance
and only indirect  competitors.  Klever  Marketing seeks to evolve its solutions
into a robust  networked  platform  that  connects  multiple  key players in the
retail equation. This World Wide Retail Web(TM) (WWRW(TM)) will be designed to

                                       4
<PAGE>

deliver  value-added  content to  shoppers,  support  B2B  transactions  between
retailers and  advertisers,  allow consumers to participate in streamlining  and
personalizing the shopping experience, serve as a built-in promotion vehicle and
distribution  channel for wireless  handheld  devices,  enhance retailer loyalty
programs,  process electronic  coupons,  and offer a development  platform for a
variety of third-party applications and services.

Distribution Methods of the Products or Services

     Klever  Marketing has  developed - and patented - a wireless  communication
platform  for  delivering  ads to grocery and  mass-merchandise  shoppers at the
Point-of-Selection  in the store.  Using a small PDA-like device attached to the
shopping cart handle,  the Klever-Kart  system is triggered to sound a chime and
display an  advertisement  or promotion when the cart  approaches the area where
the featured product is shelved.  When not near a trigger point, the Klever-Kart
can  display  advertisements  for a range  of  participating  products  or local
merchants.  Recent  pilot tests have shown an average  35%  increase in sales of
products featured on Klever-Karts  without  discounted  pricing.  Klever Kart is
aimed at reaching  buyers when they are  reaching  for the product on the shelf,
something  which the  Company  believe  no other  presently  available  in-store
marketing system can do.

Status of Publicly Announced New Products and Services

     After first launching its wireless communication service,  Klever Marketing
will seek to evolve its systems into a technology platform intended to deliver a
range of content,  services,  and applications to support the in-store  shopping
experience.  The Company  will seek to promote  the Klever Kart  platform as the
"World Wide Retail Web."

     Klever  Marketing will seek to profit from the additional  players whom the
Company expects will be eager to use the WWRW to reach its large  audience.  The
Company's  business  plan  will  seek  to  obtain  access  fees  from  marketing
affiliates  for  sponsorships  on the WWRW.  The Company will also seek to enter
into content deals to favor the Company by delivering an attractive  audience to
media  firms.  The Company  will seek to market  data mining  services to market
researchers and analysts.  The Company will also offer to third-party developers
a prime position  through which to deliver an array of applications and services
- all  focused  on  reaching  the  shopper at the  critical  Point-of-Selection.
Furthermore,  the Company will seek to commercialize  the WWRW platform to serve
as a  B2B  exchange  for a  range  of  business  transactions  among  retailers,
advertising agencies,  consumer goods companies,  and other advertisers - all of
which Klever Marketing will seek to manage.

     A point of leverage in the Company's blend of technology,  advertising, and
product  sales is found on the shopping  cart handle - in the Klever Kart device
itself. Initially produced as a special purpose wireless device, the Klever-Kart
of the future is being planned by the Company to employ a commercial-grade model
of a consumer  wireless  handheld  wireless computer device adapted for use on a
cart. The Company will seek to arrange for shoppers with the initial  version of
the  device to cruise the aisles and  thereby  be  "test-driving"  the  hardware
manufacturer's product. In the process, the Company envisions that the


                                       5
<PAGE>


supermarkets and mass-merchandise  retail stores can become promotional vehicles
- and retail distribution  channels as well - for this item of handheld hardware
of the future.

     A second version of the Klever-Kart  device is being planned to replace the
initial  monochrome  display and 4-button interface of the current device with a
color  display  and more  functional  input  interface  designed  to expand  its
effectiveness  and appeal to shoppers.  The Company  envisions  that  electronic
coupons and personalized  integration with retailer loyalty programs can provide
additional revenue streams.  The Company also envisions that, at home, Web-savvy
customers  would be able to interact with the  retailer's Web site to streamline
and  enhance  their  shopping  when they later  arrive at  participating  retail
stores.

Competitive Business  Conditions,  the Issuer's Competitive Position in the
Industry and Methods of Competition

     At  present,  the  Company  is aware of two major  product  entries  in the
in-store  marketing arena:  News America  Marketing,  Inc., a subsidiary of News
Corporation  ("News America") and Catalina  Marketing,  Inc.  ("Catalina") which
each use paper  coupons  as a  primary  source of  product  promotion.  The News
America  product is primarily a static  instant coupon  dispenser  positioned at
fixed locations throughout a store intended to entice the consumer to purchase a
specific product. The Catalina product is a post-purchase coupon-printing device
located at the  retailer's  checkout  counter.  This  device  gives a consumer a
coupon upon the payment of the consumer's existing purchase that may be used for
a  certain  product  purchase  in the  future.  The  Company  believes  that the
Point-of-Selection   advantage  of  the  Klever-Kart   System  can  enhance  the
effectiveness  of the  promotional  dollars of the consumer goods  companies and
retailers and can therefore be superior to the product  offerings of its primary
competitors.  The  Company  believes  that  Catalina  and News  America  product
offerings  are  subject  to  non-exclusive  contracts  with  grocery  chains and
consumer goods companies.  Catalina is reportedly  installed in more than 13,000
retailers  nationwide  and News  America is  reportedly  installed  in more than
30,000 retailers nationwide.

     The Company  believes that the  competitive  product  assessment  table set
forth  below  illustrates  the broad  nature of the  Klever-Kart  System and its
advantages over the News America and Catalina products.



                                       6
<PAGE>



                         Competitive Product Assessment

   Feature                         Klever-Kart  Catalina  News America
Point-of-Selection                               |X|          |X|
Audio                                            |X|          |X|
Video                                            |X|
Shelf Sign                                       |X|          |X|
Flashing Light                                   |X|          |X|
Perpetual In-store Scrolled Advertising          |X|
Store Directory                                  |X|

Bolded Brand Listings                            |X|
Cross-Category Triggering                        |X|          |X|
Competitive Triggering                           |X|          |X|
Animation Capability                             |X|
Paper Coupon                                     |X|          |X|
Electronic Coupon(1)                             |X|
Frequent Shopper-Specific Messages               |X|          |X|
Average Incremental Product Movement 35%(2)     24.0%(3)     15%(4)
         (1) Feature enhancement targeted to be introduced in 2002.
         (2) Source: Average Klever Kart Product Movement Results, based on
             limited pilot studies in 2000.
         (3) Source:  Catalina's web site.
         (4) Source:  News America's web site.  Average of six News America
             Marketing products.

     Consumer goods companies - which  reportedly spend an estimated $13 billion
per year in the U.S. on coupons,  promotional fulfillment,  product samples, and
in-store  services,  are  expected by the  Company to begin to realize  that the
Klever-Kart  system can offer a more  reliable,  targeted,  and effective way to
spend their existing advertising and promotion dollars. Klever Marketing intends
to aggressively  pursue rapid  deployment of  Klever-Karts  into its U.S. target
market--that  of large  retail  stores.  There are more than 50,000 large retail
stores  in the U.S.  By  keeping  a share  of the  revenue  from  advertisements
displayed  on  Klever-Karts,  the  Company  estimates  that it will  require  an
installed  base of  approximately  700  stores  before  the  Company  can become
profitable.

Sources and Availability of Raw Materials and Principal Suppliers

     The Klever-Kart System is comprised of four primary  components;  a display
unit, a storewide  complement  of trigger  units,  a host computer and a battery
charger. The Company will rely upon in-house staff and third-party manufacturers
to design and  manufacture  the equipment to the Company's  specifications.  The
Company  presently  anticipates  relying  upon a  number  of  manufacturers  and
suppliers,  both  domestic  and  foreign,  for  procurement  of "off the  shelf"
materials to produce the equipment and to secure the most  attractive  available
terms for  manufacturing.  The Company has  currently  agreed in principle  with
Western Electronics,  a Boise, ID based manufacturer,  to assemble pre-purchased
components  which  will  be  Klever-Kart(R).   The  Company  is  also  currently
negotiating  with several Korean and Taiwanese based  manufacturers  to purchase
components and manufacture the Klever-Kart(R) units and the trigger units.

                                       7
<PAGE>

Dependency on One or a few Major Customers.

     A substantial  portion of the Company's revenues at any particular time may
be  generated in  connection  with a limited  number of customers  and a limited
number of  agreements.  The Company  has, in the past,  contracted  with several
consumer goods  manufacturers  for the sale of  advertising  or other  services.
Klever  Marketing's  first  major  customer,  a Midwest  supermarket  chain,  is
expected to agree to install almost  approximately 20,000 Klever-Karts in 175 of
its stores during 2001. The decision is being driven by the potential customer's
realization  that  there is no cost to  install  the  system;  the  customer  is
expected to be able to share in the  advertising  revenue  paid by the  consumer
goods companies; the potential customer envisions larger than present per-basket
sales; and the potential  customer expects increased  customer  satisfaction and
loyalty.  The Company is planning for the retailer to have the contractual right
to disengage from the agreement if the Klever-Kart(R) system does not perform to
expectations.  In addition, the Company is planning to announce both rollout and
tests for other U.S. retailers in the first half of 2001. The company expects to
add more customers, which the Company is targeting to reach an installed base of
50,000 units within the first twelve  months after  launch.  If the Company were
unable  to  continue  to  contract  with  consumer  goods  companies  or to sign
additional retailer  agreements,  such development would have a material adverse
effect upon the Company's business, operating results and financial condition.

Patents, Trademarks, Licenses, Franchises, Concessions and Royalty Agreements

     The Company has acquired and/or developed  intellectual  property rights to
various patents,  trademarks and software licenses for the shopping cart display
system,  the electronic  coupon, and the design of the shopping cart handle, and
eventually  expects  to patent the  in-store  communication  system.  The patent
rights, licenses, and trademarks are detailed below:

                   Klever Marketing Patent Rights and Licenses

------------------ ------------- ------------- ------------ --------------------
                    U.S. Patent                             Patent Numbers Filed
                                                            Outside the United
  Patent Name       Numbers       Issue Date   Expiry Date  States
------------------ ------------- ------------- ------------ --------------------
------------------ ------------- ------------- ------------ --------------------


Shoppers
Communication         4,882,724    11-21-89     11-21-06     Canada - 1317347,
System and Process    5,630,068    5-13-97       5-13-14     1332848
------------------ ------------ ------------- ------------ ---------------------
------------------ ------------ ------------- ------------ ---------------------
Shopping Cart         4,973,952    11-27-90     11-27-07     Argentina - 242676
------------------ ------------ ------------- ------------ ---------------------
------------------ ------------ ------------- ------------ ---------------------
                      5,420,606    5-30-95       9-20-13     Canada - 2117716
------------------ ------------ ------------- ------------ ---------------------
------------------ ------------ ------------- ------------ ---------------------
                      5,703,564    12-30-97     12-10-14
------------------ ------------ ------------- ------------ ---------------------

                                       8
<PAGE>


------------------ ------------ ------------- ------------ ---------------------
Automated Shopping    6,177,880    01-23-01       01-23-
Cart Handle
------------------ ------------ ------------- ------------ ---------------------



                 Klever Marketing(TM) Trademarks and Service Marks

------------------------------------- ------------------------------------------

Other Intellectual Property           Detail
------------------------------------- ------------------------------------------

Service Marks (SM)                    "Klever-KardSM", BrandKastingSM
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------

Trademarks (TM)               Klever-Net(TM)", "Klever Marketing(TM)", WWRW(TM),
                                           World Wide Retail Web(TM)
------------------------------------- ------------------------------------------
------------------------------------- ------------------------------------------

Registered ((R)) Trademark         "Klever-Kart(R)",  "Point- of- Selection(R)",
                                           "Sight + Sound =Product Movement(R)"
------------------------------------- ------------------------------------------


Required Governmental Approval for Products or Service

     The Company is in the process of  submitting  product  descriptions  to the
appropriate governmental agencies,  including the FTC, FCC, OSHA, State Consumer
Safety  and  Protection  Agency  and the FDA,  and is  requesting  a  ruling  of
applicability  of such  regulations  to the  Company's  products  for  use  with
in-store advertising.  There can be no assurance that such governmental agencies
will determine  applicability in a timely fashion or, if applicable,  will issue
necessary approvals.  The failure to obtain necessary  approvals,  if any, could
have a material adverse effect on the Company's  financial condition and results
of operations.  The Company also faces the risk of future privacy  regulation of
consumer electronic transaction data. It is not possible to predict the means by
which and extent to which such regulation may affect the Company's business.

Expenditures on R&D Activities

     For the year ending December 31, 2000, the Company spent  $1,852,903 on R&D
activities.  That compares with  $689,558  spent on R&D  activities in the prior
year.  The reasons for the increase  were due to a more  concentrated  effort to
improve the efficiency and technology of the Klever-Kart system.


Costs and Effects of Compliance with Environmental Laws

     The  Company  is not  aware  of any  costs  that  would  be  associated  to
compliance with Federal, State or local environmental laws.

                                       9
<PAGE>

Employees

     The Company had 17 full-time employees as of the end of the year 2000.


                         ITEM 2 DESCRIPTION OF PROPERTY

     The  Company  currently  leases  5,272  square  feet of  office  space on a
month-to-month  basis from a joint venture owned by Tree of Stars,  Inc. and the
Estate of Peter Dean Olson (both being major  shareholders of the Company).  The
office space is used as the  corporate  headquarters.  It is located at 350 West
300 South, Suite 201, Salt Lake City, Utah. The total lease payments are $73,812
per year.  Research and  Development  activities  are conducted at the Company's
corporate headquarters location. Additional research and development activities,
as contemplated in the Company's  development  plan, will be outsourced to third
parties and will not require additional space at the Company's current location.


                            ITEM 3 LEGAL PROCEEDINGS

     The Company is not a party to any  pending  legal  proceedings  of the type
required  by Item 103 of  Regulation  S-B to be  disclosed  other  than  routine
litigation incidental to its business.


                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


     No matters  were  submitted to a vote of security  holders  during the last
quarter of the fiscal year covered by this report.


                                     PART II


                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS

     The shares of common stock are traded on the  over-the-counter and reported
on the OTC Bulletin  Board  (OTCBB),  a reporting  medium for  subscribing  NASD
members, 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 reflects  inter-dealer  prices,  without  retail
mark-up, mark-down or commission and may not represent actual transactions:


                                       10
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--------------------------------------------------------------------------------
   1999:                         High                 Low
--------------------------------------------------------------------------------
First Quarter                    $2.88               $1.50
--------------------------------------------------------------------------------
Second Quarter                   $2.38               $1.50
--------------------------------------------------------------------------------
Third Quarter                    $4.44               $2.00
--------------------------------------------------------------------------------
Fourth Quarter                   $4.13               $1.50
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
     2000:
--------------------------------------------------------------------------------
First Quarter                   $4.25               $1.88
--------------------------------------------------------------------------------
Second Quarter                  $3.67               $2.06
--------------------------------------------------------------------------------
Third Quarter                   $2.50               $1.13
--------------------------------------------------------------------------------
Fourth Quarter                  $1.53               $0.38
--------------------------------------------------------------------------------

     The approximate  number of  shareholders of record of the Company's  common
stock as of March 9, 2001 was 824.

     The Company has not paid any cash dividends to date and does not anticipate
paying  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  877,647  shares of common  stock and  94,191  shares of
preferred  stock  (defined  below as "Class A Shares")  during 2000. All of such
stock was sold in private  placements  to accredited  investors  directly by the
Company without an underwriter in transactions  exempt from  registration  under
Regulation  D Rule  506 and  Section  4(2) of the  Securities  Act of  1933,  as
amended. No underwriting commissions were paid.

     On February 7, 2000 the Board of Directors  authorized and  established the
Class A Voting  Preferred  Stock  Series 1 ("Class A Shares")  as a class of its
$.01 par value,  2,000,000 shares  authorized,  preferred stock.  Class A Shares
consist of 1,000,000  shares,  125,000 shares thereof are designated as Series 1
shares.

     Class A Shares are convertible  into Common Stock at an initial  conversion
price of $2.60 (subject to adjustment). Each Class A Share is convertible at the
option of the holder at any time into such  number of shares of Common  Stock as
is determined by dividing $26.00 by the conversion  price then in effect.  Based
on the current conversion price, each Class A Share has a conversion rate of one
Class A Share to ten shares of Common Stock.

     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


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<PAGE>

shall accrue on each such share from the date of its original issuance and shall
accrue from day to day,  whether or not earned or declared.  Such dividend shall
be  cumulative  and may be paid in cash or in kind through the  distribution  of
 .0425  Class A Shares,  Series 1, for each  outstanding  Class A Share,  on each
dividend  payment  date.  In  addition,  each holder of Class A Shares  shall be
entitled to receive,  when and as declared,  a dividend  equal to each  dividend
declared and paid on the shares of Common Stock,  on a share for share basis. If
there  is a split or  dividend  on the  Common  Stock,  then  the  Class A Share
dividends  shall be adjusted as if a similar split or dividend had occurred with
respect to the Class A Shares.

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

     Class A Shares  carries 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.

     If  dividends  on the Class A  Shares,  Series 1 have not been paid for any
period,  then  until  all  unpaid  dividends  thereon  are paid or set apart for
payment,  the  Company may not pay,  declare or set apart any  dividend or other
distribution of its shares of Common Stock or other shares junion to the Class A
Shares, nor may any other  distributions,  redemptions or other payments be made
with respect to the shares of Common Stock or other junion shares.


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



     This Annual  10-KSB  Report  includes  certain  forward-looking  statements
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended, including, most importantly, information concerning possible or assumed
results from the future operations of the Company.  The assumptions used in this
report are primarily based on current expectations of Company management and the
industry in which the Company  operates.  These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions. The
achievement  of the outcomes  described in such  forward-looking  statements  is
subject to both known and unknown risks,  uncertainties  and other factors which
may  cause  actual  results,  performance  or  achievements,  to  be  materially
different  from  the  outcomes  expressed  or  implied  by such  forward-looking
statements. Several important factors including, among other things; economic,


                                       12
<PAGE>

competitive and regulatory  conditions,  demographic  trends,  financial  market
conditions  and business  decisions (of the Company and its  competitors)  could
affect the results of the Company  and could cause those  results to  materially
differ from those expressed in these  forward-looking  statements.  All of these
important factors are difficult or impossible to accurately predict and many are
beyond the control of the Company.  Risk factors include:  that an investment in
the capital stock of the Company  involves a high degree of financial  risk; the
Company has limited customers; the Company is a development stage company with a
limited operating history and significant  historical  operational  losses;  the
Company  has an  immediate  need  for  additional  financing;  the  Company  may
encounter  difficulties and uncertainties in connection with the development and
commercialization  of its new  technology  and within its industry;  the Company
faces risks associated with information security and network failure;  there can
be no assurance as to the validity of intellectual  property rights; the Company
is dependent on key management and the need to manage  expanding  operations and
key employees; management has broad discretion in use of proceeds of financings;
the  Company  faces  substantial   competition;   the  Company  faces  risks  of
technological  obsolescence;  the  need  for  new  financing  poses  a  risk  to
stockholders of dilution and absence of dividends;  there is a potential adverse
effect of shares eligible for future sale and price volatility;  the Company may
be  reliant on a limited  number of  suppliers  for  acquiring  and  maintaining
equipment;  the Company  faces  potential  fluctuations  in quarterly  operating
results; and the Company is under control of existing shareholders. Although the
Company  believes  that  the  expectations  reflected  in  such  forward-looking
statements are  reasonable,  the actual results could differ  materially and the
Company can give no assurance that such expectations will prove to be correct.

Plan of Operations

     The  Company's  goal  is  to  become  the  leading   supplier  of  in-store
advertising  and promotions  technology  for grocery and other  mass-merchandise
retailers.  The Company  believes  that the existing  Klever-Kart  System can be
adapted to meet the requirements of  mass-merchandise  retailers  operating in a
variety  of  environments  and  expects  to  expand  the  Klever-Kart   System's
orientation to other  retailers  including  superstores,  discount  stores,  toy
stores and warehouse stores, among others.

     In order to carry out its plan of operations, the Company has established a
set of milestones for the year 2001:

1. Continue  product  research and development 2. Announce two retail  contracts
with major store chains 3. Establish  strategic  partnerships  with hardware and
content  vendors 4. Expand the employee and management  team 5. Secure  adequate
funding:
   --to purchase the equipment to install the Klever Kart system into 100 stores
   --to main operations
6. Build the Revenue stream


                                       13
<PAGE>

Milestone #1:  Continue Product Research and Development


     The Company is in the process of developing  various  product  enhancements
for its prospective retail grocer and consumer goods manufacturer clients and is
striving to offer these enhancements throughout the years 2001 and 2002.

Electronic Couponing

     The Company is endeavoring to complete the  development  and testing of the
electronic coupon feature of the Klever-Kart System in 2001. The Company expects
the  electronic  coupon  feature  to be  well  received  by the  consumer  goods
companies,  retailers  and  consumers  because the feature (i) reduces  handling
costs for both the retailer and consumer goods manufacturer;  (ii) significantly
reduces mis-redemption,  mal-redemption and fraud associated with paper coupons;
and (iii) makes  coupon use  convenient  for the  consumer.  In  addition,  this
feature is expected to permit the  consumer  goods  manufacturer  or retailer to
electronically  alter  the face  value of  coupon to  rapidly  customize  it for
competitive  situations and seasonal  trends or to alter its value or expiration
based upon predetermined redemption rates.

     Industry sources  indicate the number of coupons  redeemed  annually in the
U.S. is  approximately  5.3 billion with coupon fraud  accounting  for more than
$300 million in losses to the consumer goods companies. The Company believes the
electronic  coupon  feature  of the  Klever-Kart  System  will  be  superior  to
competitor product offerings due to the substantial reduction of mis-redemption,
mal-redemption and fraud associated with paper coupons.

Klever-Kard

     The Company  expects to introduce the  Klever-Kard in 2002. The Klever-Kard
is  designed  to be a frequent  shopper  program  enhancement  that the  Company
expects to permit  consumer  goods  companies and  retailers to target  specific
promotional  campaigns  to  individual  consumers  based upon  demographics  and
personal buying history.  Further  development of the Klever-Kard is expected by
the Company to include targeted  Internet  tie-ins,  direct mail,  rebates,  and
download of shopping  lists/recipes,  product  sampling and  electronic  contest
entry.  Information  from individual  consumer card usage is expected to produce
individual customer profiles and track specific marketing and purchasing trends.
Using this precedent in conjunction  with the  Klever-Kart  System,  the Company
expects to sell customer  profile  information to consumer  research  companies,
consumer goods companies and retailers.

Kart-Lock

     The Company is planning to introduce an electronic  locking device in 2002.
The  electronic  locking  system is expected to reduce the pilferage of shopping
carts by  electronically  locking  the  shopping  cart's  wheel when it is moved
beyond the vicinity of the retailer.



                                       14
<PAGE>

Milestone #2:  Announce two retail contracts with major store chains for
               rollouts and/or tests

     Klever  Marketing's  first  major  customer  is  expected  to be a  Midwest
supermarket  chain.  Current  discussions are underway with that chain which, if
concluded,  would lead to the  installation of almost 18,000  Klever-Karts in as
many as  approximately  175  stores in 2001.  In  addition,  the  Company  is in
negotiations  with two  additional  large  supermarket  chains.  The  Company is
developing  plans  to  expand  the  Klever-Kart  System's  orientation  to other
retailers,  including superstores,  discount stores, toy stores,  do-it-yourself
(DIY) stores and warehouse stores.  The Company plans to install the Klever-Kart
System in a pilot store operated by each of two or more key retailers across the
US. The Company believes that the existing  Klever-Kart System can be adapted to
meet the requirements of retailers operating in a variety of environments.

Milestone #3:  Establish Strategic Partnerships

     The adoption of the Internet in a variety of  industries  has created a new
paradigm for  conducting  business in the digital age,  offering new methods for
conducting commerce,  including direct communication with customers and business
partners  and for  alternative  means  for  distributing  products  and  selling
services to consumers.  In  particular,  the acceptance of the Internet by other
companies into mainstream business and the continued success of other companies'
emerging  digital  enterprises have shifted  corporate  adoption of the Internet
from R&D  experimentation to multi-million  dollar strategic  initiatives across
industries.  The Company  intends to  capitalize on this new paradigm by linking
initiatives  involving  many  facets of the  Company's  Klever-Kart  System  and
Klever-Kard Program,  including individual stores,  retailers and consumer goods
companies,  their  advertising  agencies and the Company via the  Internet.  The
company believes that the Klever-Kart System can bring together the Internet and
the brick and Mortar store, resulting in a more targeted and focused approach to
consumer  awareness.  National marketing programs are becoming less important to
the  consumer  goods  companies  and the  retailers,  while  targeted  marketing
directly to the consumer is increasingly becoming the norm.

     Because of this new  paradigm,  the Company is actively  seeking  strategic
partners that will further enhance the value and contribution of the Klever-Kart
system in the store.  Klever Marketing is seeking strategic partners in the area
of  hardware  distribution,  wireless  communications,   content  providers  and
manufacturing.

Milestone #4: Continue to build and expand a quality management team.

     During  the year 2001,  the  Company  plans to  actively  recruit  and hire
certain key individuals in order to implement the business plan. These positions
include:

         --Vice President Sales and Marketing
         --Chief Technical Officer
         --Vice President Business Development
         --Vice President Operations

In addition to the positions  noted above, it is anticipated by the Company that
as many as 25 other employees may be hired during the course of the year.


                                       15
<PAGE>

Milestone       #5: Secure  Funding for the purchase of equipment to install the
                Klever Kart system into approximately 250 stores and to maintain
                operations

     Klever  Marketing  anticipates  that the cost to install its  systems  into
approximately 250 stores for the year 2001 will be up to $9,500,000. The Company
is in  discussions  with  potential  financing  sources  and  intends  to  raise
approximately $20 million with a combination of equity and debt for financing to
fund the roll out of the Company's systems within up to 250 stores, (ii) to fund
research and development costs (iii) to fund consulting  services to bring about
international  licensing (iv) to fund working capital needs through December 31,
2001. If securities  are offered in such  financings,  they will not be and have
not been registered  under the Securities Act of 1933, as amended and may not be
offered or sold in the U.S. absent registration or an applicable  exemption from
such registration requirements.

Milestone #6:  Build Revenue Stream

     In the year 2000, Klever-Kart was installed in eight Ralphs Grocery Company
outlets in  Southern  California  to test and measure the results of the system.
The Company then sold  advertising to approximately 30 consumer goods companies,
which  resulted  in sales of over 100  branded  advertising  messages.  With the
installation  of 250 stores during the year 2001, the Company expects to be in a
position  to sell  adversting  and  receive  revenues.  As the  number  of store
installations increases, the revenue is expected to grow accordingly.

Additional revenue streams

License

     The Company has held discussions with a number of retailers  operating from
nine countries  outside the United States  regarding the potential  licensing of
the  Klever-Kart  System for use in various  retail  environments.  The  Company
expects to complete its initial licensing  contract for international use by the
first  quarter  of 2002.  The  Company  has made  patent  filings in a number of
international   jurisdictions   and  expects  to  accelerate  these  efforts  in
conjunction with the international licensing arrangements.

     Liquidity  and Capital  Resources - The Company  requires  working  capital
principally to fund its current research and development and operating  expenses
for which the Company has relied on  short-term  borrowings  and the issuance of
restricted Class A Shares.  There are no formal  commitments from banks or other
lending sources for lines of credit or similar short-term borrowings.  From time
to time in the past,  required  short-term  borrowings have been obtained from a
principal  shareholder or other related  entities.  It is  anticipated  that the
Company may have to borrow from certain shareholders or other related parties in
order to continue  funding  day-to-day  operations and to continue the Company's
development program.

     The Company has borrowed $1.1 million from a  shareholder  with an interest
rate of eight  percent  (8%) and a due date of May 1,  2001 or within 60 days of
demand.  This note was  amended  in  principle  on March 21,  2001  wherein  the
interest  rate will be changed to ten percent (10%)  starting  April 1, 2001 and
the due date was extended to October 1, 2001.  In addition,  under the amendment
the  Company  would be  allowed,  at its  option,  to convert the note to Common
Stock,  to be  calculated  as the  weighted  average  price of the  shares for a
ten-day trading period prior to the date of conversion.

                                       16
<PAGE>

     Cash flows. Operating activities used cash of $3,422,000 and $1,177,000 for
2000 and 1999 respectively.  The increase in the use of cash is due primarily to
an increase in general and administrative costs.

     Investing  activities  have used cash of $87,000 and  $471,000 for 2000 and
1999, respectively.  Investing activities primarily represent purchases of phase
2  equipment,  expenditures  for  patents  relating to the  electronic  in-store
advertising, directory and coupon devices, and purchases of office equipment.

     Financing  activities  provided cash of $3,309,000  and $1,805,000 for 2000
and 1999,  respectively.  Financing  activities primarily represent sales of the
Company's restricted stock, and short-term borrowings.

     Factors  That May Affect  Future  Results - This Item 6 and portion of this
report,  and  Part I,  Item 1 of  this  report,  contain  information  based  on
management's  beliefs and  forward-looking  statements  that involve a number of
risks,  uncertainties,  and assumptions.  There can be no assurance those actual
results  will not differ  materially  for the  forward-looking  statements  as a
result of various  factors,  including  but not limited those  identified  above
under the  heading  "ITEM 6  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR PLAN OF
OPERATIONS".

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

                           ITEM 7 FINANCIAL STATEMENTS


     The financial statements of the Company and supplementary data are included
beginning  immediately  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.


                                       17
<PAGE>

                                    PART III

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

     Information  required  by this  item  will be  contained  in the  Company's
definitive  Proxy  Statement  with respect to the  Company's  Annual  Meeting of
Stockholders,  to be  held on May 31,  2001  under  the  captions  "Election  of
Directors,"  "Executive  Officers of the Company" and  "Compliance  with Section
16(a) of the Exchange Act" and is incorporated by reference herein.



                         ITEM 10. EXECUTIVE COMPENSATION

     Information  required  by this  item  will be  contained  in the  Company's
definitive  Proxy  Statement  with respect to the  Company's  Annual  Meeting of
Stockholders,  to be  held  on  May  31,  2001,  under  the  caption  "Executive
Compensation,"  and,  except for the  information  appearing  under the captions
"Report  of  the   Compensation   Committee,"   and   "Performance   Measurement
Comparison," is incorporated by reference herein.



                ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT

     Information  required  by this  item  will be  contained  in the  Company's
definitive  Proxy  Statement  with respect to the  Company's  Annual  Meeting of
Stockholders,  to be held May 31, 2001, under the caption "Security Ownership of
Certain  Beneficial  Owners and  Management,"  and is  incorporated by reference
herein.


             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information  required  by this  item  will be  contained  in the  Company's
definitive  Proxy  Statement  with respect to the  Company's  Annual  Meeting of
Stockholders, to be held May 31, 2001, under the caption "Certain Transactions,"
and is incorporated by reference herein.


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

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

1.     Financial Statements
                                                                            Page

Report of Robison, Hill & Co.,
  Independent Certified Public Accountants..................................F-1
Balance Sheets
  December 31, 2000, and 1999...............................................F-2
Statements of Loss
  For the Years Ended December 31, 2000, and 1999...........................F-4
Statement of Stockholders' Equity
  For the Years Ended December 31, 2000, and 1999...........................F-5


                                       18
<PAGE>

Statements of Cash Flows
  For the Years Ended December 31, 2000, and 1999..........................F-10
Notes to Financial Statements
  December 31, 2000, and 1999..............................................F-12

2.     Financial Statement Schedules

     There are no  financial  statements  schedules  included  because  they are
either not applicable or the required  information is shown in the  consolidated
financial statements or the 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 of Voting Preferred Stock Series 1,
           of Klever Marketing, Inc., dated February 7, 2000

3.03       Bylaws, as amended


10.01      Employment Agreement between Gerard C. Coelsch and the Registrant
           dated June 26,1998

10.02      Employment Agreement between Corey Hamilton and the Registrant
           dated July 24, 2000


10.03      Separation Agreement between Paul G. Begum and the Registrant
           dated January 8, 2001


10.04      Stock Incentive Plan, effective June 1, 1998

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

       (1) Incorporated  herein by reference from Registrant's Form 10KSB, dated
           June 20, 1997.

                                       19
<PAGE>


       (b) No  reports  on Form 8-K were  filed by the  Company  during the last
           quarter of the fiscal year covered by this report except as follows:

     (i) On October 12, 2000 the  Company  filed a report on Form 8-K  reporting
the  addition  of two  members to the  Company's  Board of  Directors:  Corey A.
Hamilton,  the  Company's  President,  was voted onto the Board on September 12,
2000; and Richard J. Trout,  the Company's  Interim CFO as of June 16, 2000, was
named to the Board on September 25, 2000.

     (ii) On November 28, 2000 the Company  filed a report on Form 8-K reporting
that the  Company  ceased  operations  of its current  system in Ralphs  Grocery
Company  stores due to business  reasons and not the  operations  of the current
system.

     (ii) On January 10, 2001 the Company  filed a report on Form 8-K  reporting
that the Company had a change in its Board composition.  D. Paul Smith was named
to the Board of Directors  on November 20, 2000 and elected  chairman on January
3, 2001.  Leonard D. Southwick was also named to the Company's Board on November
20, 2000 and Abel Porter resigned from the Board in July 2000.

                                   SIGNATURES


     In accordance  with 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: March 29, 2001              By: _/s/Corey A. Hamilton__________
                                            Corey A. Hamilton President, C.E.O.,
                                                                        Director

     In accordance  with 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 and on the dates indicated.

                                       20
<PAGE>


Signatures                           Title                            Date

_/s/Corey A. Hamilton____
Corey A. Hamilton               President, C.E.O.                March 29, 2001
                          (Principal Executive, Financial
                           and Accounting Officer)
_/s/Richard J. Trout______
Richard J. Trout                Interim C.F.O.                   March 29, 2001


_/s/D. Paul Smith  _______
D. Paul Smith                   Chairman of the Board            March 29, 2001


_/s/William C. Bailey_____
William C. Bailey               Director                         March 29, 2001


_/s/Michael L. Mills______
Michael L. Mills                Director                         March 29, 2001


_/s/Paul G. Begum________
Paul G. Begum                   Director                         March 29, 2001


_/s/Leonard D. Southwick_
Leonard D. Southwick            Director                         March 29, 2001

                                       21
<PAGE>
                             KLEVER MARKETING, INC.

                                       -:-

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999




<PAGE>







                                TABLE OF CONTENTS


                                                                            Page

Independent Auditor's Report.................................................F-1

Balance Sheets
   December 31, 2000 and 1999................................................F-2

Statements of Loss
   For the Years Ended December 31, 2000 and 1999............................F-4

Statement of Stockholders' Equity
   For the Years Ended December 31, 2000 and 1999............................F-5

Statements of Cash flows
   For the Years Ended December 31, 2000 and 1999...........................F-10

Notes to the Financial Statements
   December 31, 2000 and 1999...............................................F-12


<PAGE>










                          INDEPENDENT AUDITOR'S REPORT



Board of Directors
Klever Marketing, Inc.
Salt Lake City, Utah

     We have audited the accompanying  balance sheets of Klever Marketing,  Inc.
as of December  31, 2000 and 1999,  and the related  statements  of  operations,
changes in  stockholders'  equity  and cash flows for the two years then  ended.
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  generally  accepted  auditing
standards.  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., as
of December 31, 2000 and 1999,  and the results of its  operations  and its cash
flows  for the two  years  then  ended in  conformity  with  generally  accepted
accounting principles.
                                            Respectfully submitted,



                                            /S/ ROBISON, HILL & CO.
                                            Certified Public Accountants
Salt Lake City, Utah
March 12, 2001





                                      F - 1

<PAGE>



                             KLEVER MARKETING, INC.
                                  BALANCE SHEET






                                                            DECEMBER 31,
                                                  -----------------------------
ASSETS .....................................          2000              1999
                                                  -----------       -----------
Current Assets
     Cash ..................................      $     2,870       $   203,232
     Accounts Receivable ...................            8,631              --
     Prepaid Expense .......................            5,000              --
     Shareholder Receivables ...............          103,854            34,892
     Other Assets ..........................           92,339              --
                                                  -----------       -----------
          Total Current Assets .............          212,694           238,124
                                                  -----------       -----------
Fixed Assets
     Office Equipment ......................          155,298            77,279
     Phase 2 Equipment .....................             --             445,330
     Less Accumulated Depreciation .........          (78,663)          (56,798)
                                                  -----------       -----------
          Net Fixed Assets .................           76,635           465,811
                                                  -----------       -----------
Other Assets
     Patents ...............................        2,247,153         2,212,850
     Less Accumulated Amortization .........       (1,477,349)       (1,266,201)
                                                  -----------       -----------
          Net Other Assets .................          769,804           946,649
                                                  -----------       -----------

          Total Assets .....................      $ 1,059,133       $ 1,650,584
                                                  ===========       ===========





                                      F - 2

<PAGE>



                             KLEVER MARKETING, INC.
                                  BALANCE SHEET
                                   (Continued)



<TABLE>
<CAPTION>

                                                             DECEMBER 31,
                                                      --------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY ...........          2000            1999
                                                      ----------      ----------
Current Liabilities
<S>                                                   <C>             <C>
     Accounts Payable, Trade ...................      $  192,510      $  401,708
     Accrued Liabilities .......................         166,078         458,563
     Related Party Payables ....................       1,228,750         191,250
     Short-term Notes Payable ..................           8,478         259,115
                                                      ----------      ----------
          Total Current Liabilities ............       1,595,816       1,310,636

Non-Current Liabilities
     Lease Obligation Payable ..................           9,057            --
                                                      ----------      ----------


          Total Liabilities ....................       1,604,873       1,310,636
                                                      ----------      ----------



Stockholders' Equity
  Preferred stock (par value $.01),  2,000,000 shares  authorized  94,191 issued
    and outstanding December 31, 2000
    and -0- issued and outstanding December 31, 1999           942          --
  Common Stock (Par Value $.01), ...................    20,000,000
    shares  authorized .............................    12,152,768
    shares issued and outstanding  December 31, 2000
    and 11,275,121 shares issued and
    outstanding December 31, 1999 ..................       121,528       112,751
  Common Stock to be issued ........................         4,356         4,589
    Paid in Capital in Excess of Par Value .........    11,546,459     8,375,350
    Retained Deficit ...............................   (12,219,025)   (8,152,742)
                                                      ------------   -----------
          Total Stockholders' Equity ...............      (545,740)      339,948
                                                      ------------   -----------

          Total Liabilities and Stockholders' Equity  $  1,059,133   $ 1,650,584
                                                      ============   ===========
</TABLE>




    The accompanying notes are an integral part of these financial statements

                                      F - 3

<PAGE>



                             KLEVER MARKETING, INC.
                                STATEMENT OF LOSS




                                                       For the Year Ended
                                                          December 31,
                                                  ------------------------------
                                                       2000             1999
                                                  ------------     ------------

Revenue ......................................    $     27,000     $       --
                                                  ------------     ------------

Expenses
  Sales and marketing ........................          83,617
  General and administrative .................       2,312,875        1,015,700
  Research and development ...................       1,830,349          689,558
                                                  ------------     ------------

     Total Expenses ..........................       4,226,841        1,705,258
                                                  ------------     ------------

Other income (expense)
  Interest income ............................          11,764            1,276
  Interest expense ...........................         (68,364)         (30,541)
  Capital gain on sale of investment .........         190,258             --
                                                  ------------     ------------

     Total Other Income (Expense) ............         133,658          (29,265)
                                                  ------------     ------------

Income (Loss) Before Taxes ...................      (4,066,183)      (1,734,523)

Income Taxes .................................             100              100
                                                  ------------     ------------

Net Income (Loss) After Taxes ................    $ (4,066,283)    $ (1,734,623)
                                                  ============     ============
Weighted Average Shares
  Outstanding ................................      11,978,017       11,361,021
                                                  ============     ============

Loss Per Share ...............................    $      (0.34)    $      (0.15)
                                                  ============     ============










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

                                      F - 4

<PAGE>

                             KLEVER MARKETING, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                            Paid in
                                                                           Common Stock    Capital in
                                          Preferred Stock   Common Stock   to be issued    Excess of  Retained
                                           --------------  --------------
                                           Shares  Amount  Shares  Amount  Shares  Amount  Par Value  Deficit
                                           ------  ------  ------  ------  ------  ------  ---------  -------

<S>                                        <C>     <C>     <C>     <C>     <C>     <C>     <C>        <C>
Balance at January 1, 1999 .............    --    $ --  10,394,819 $ 103,948 458,918 $4,589 $ 6,625,919 $(6,418,119)

January 1999 shares returned at
   $.67 to $1.58 per share .............    --      --     (62,489)    (624)    --      --     (107,047)       --
January & February 1999 issued
   shares to individuals for cash at
   $2.00 per share .....................    --      --      112,500    1,125    --      --       223,875        --
January & February 1999 issued
   shares to individuals for cash at
   $2.25 per share .....................    --      --      224,444    2,244    --      --       502,755        --
January 1999 shares issued to
   employee for compensation at
   $2.34 per share ....................     --       --       1,328       13    --      --         3,094        --
April & June 1999  issued shares
   to individuals for cash at
    $2.25 to $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 $.86
   per share .............................  --       --     231,834    2,318    --      --       197,059        --

</TABLE>



                                      F - 5

<PAGE>


                             KLEVER MARKETING, INC,
                        STATEMENT OF STOCKHOLDER'S EQUITY
                                   (Continued)
<TABLE>
<CAPTION>

                                                                                         Paid in
                                                                           Common Stock  Capital in
                                        Preferred Stock  Common Stock      to be issued  Excess of  Retained
                                        --------------- --------------
                                        Shares  Amount  Shares  Amount  Shares  Amount   Par Value   Deficit
                                        ------  ------  ------  ------  -------  ------  ----------  --------
July 1999 shares issued to
<S>                                     <C>     <C>     <C>     <C>     <C>      <C>     <C>         <C>
   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 issued shares to
   employee for cash at $1.96
    per share .......................... --     --     1,285      13     --      --         2,506       --
August 1999 issued shares to
   individuals for cash at $3.00 per
   share ............................... --     --     5,607      56     --      --        16,764       --
September 1999 shares issued to
   an individual exercise of optio
   at $.52 per share ................... --     --     6,437      64     --      --         3,283       --
September 1999 shares issued to
   an 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 at December 31, 1999 .........  --      -- 11,275,121 112,751  458,918  4,589   8,375,350 (8,152,742)

</TABLE>



                                      F - 6

<PAGE>



                             KLEVER MARKETING, INC,
                       STATEMENT OF STOCKHOLDER'S EQUITY
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                       Paid in
                                                                        Common Stock   Capital in
                                        Preferred Stock  Common Stock   to be issued   Excess of    Retained
                                        --------------- --------------
                                        Shares  Amount  Shares  Amount  Shares  Amount  Par Value   Deficit
                                        ------  ------  ------  ------- ------- ------  ---------   ---------


January 2000 shares to company
<S>                                     <C>     <C>      <C>    <C>      <C>    <C>      <C>         <C>
   for cash at $2.75 per share ........  --    $--     27,273   $ 273      -  $    --    $  74,727   $  --
February 2000 shares issued for
   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 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      --
February 2000 conversion of note
   payable to preferred shares at $26  9,615    96      --        --       -       --      249,904      --
February 2000 shares issued to
   company for cash at $26 per
   share .............................21,285   213      --        --       -       --      553,162      --

</TABLE>



                                      F - 7

<PAGE>


                             KLEVER MARKETING, INC,
                        STATEMENT OF STOCKHOLDER'S EQUITY
                                   (Continued)


<TABLE>
<CAPTION>

                                                                                       Paid in
                                                                        Common Stock   Capital in
                                        Preferred Stock  Common Stock   to be issued   Excess of  Retained
                                        --------------- --------------
                                        Shares  Amount  Shares  Amount  Shares  Amount  Par Value Deficit
                                        ------- ------- ------  ------  ----  -------   --------- --------


January 2000 shares to company
March 2000 shares issued to
   company for accounts payable
<S>                                      <C>    <C>     <C>     <C>     <C>   <C>       <C>        <C>
   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      --
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  (23,334)  (233)     --       --
May 2000 shares issued to

</TABLE>



                                      F - 8

<PAGE>

                             KLEVER MARKETING, INC,
                        STATEMENT OF STOCKHOLDER'S EQUITY
                                   (Continued)
<TABLE>
<CAPTION>



                                                                                       Paid in
                                                                        Common Stock   Capital in
                                        Preferred Stock  Common Stock   to be issued   Excess of   Retained
                                        --------------- --------------
                                        Shares  Amount  Shares  Amount  Shares  Amount  Par Value  Deficit
                                        ------  ------  ------  ------- ------  ------  ---------  ---------
January 2000 shares to company
March 2000 shares issued to
   company for cash at $26.00 per
<S>                                     <C>    <C>      <C>     <C>     <C>      <C>    <C>        <C>
   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 $17.00 per
   share ..............................41,177   412       --        --     --      --      699,588       --
November & December 2000
   shares issued to individuals for
   cash at $1.50 to $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 to $2.12 per share .........    --     --    (10,000)     (100)   --      --      (19,150)       --

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

Balance December 31, 2000 ............ 94,191 $942   12,152,768 $ 121,528 435,584 $4,356 $11,546,459 $(12,219,025)
                                       ====  ======  =========   ======== ======= ======= ========== =============
</TABLE>

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

                                      F - 9

<PAGE>

                             KLEVER MARKETING, INC.
                             STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                 For the Year ended
                                                                    December 31,
                                                               -------------------------
                                                                  2000          1999
                                                               -----------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>           <C>
Net Loss ......................................................$(4,066,283)  $(1,734,623)
Adjustments used to reconcile net loss to net cash provided
 by (used in) operating activities:
  Stock issued for general and administrative ...................   603,777        49,999
  Stock issued for patents and equipment .........................   16,189          --
  Write-off of research and development equipment ..................445,330          --
  Stock issued for account payable ................................. 18,935         6,218
  Stock issued for interest expense ..............................   20,400          --
  Depreciation and amortization ....................................233,404       217,454
  (Increase) decrease in accounts receivable ....................... (8,631)         --
  (Increase) decrease in shareholder receivable .................. ( 69,712)      101,928
  (Increase) decrease in other assets & prepaid expense ........... (97,339)         --
  Increase (decrease) in accounts payable .........................(209,197)     (211,372)
  Increase (decrease) in lease obligation payable ..............      9,057          --
  Increase (decrease) in accrued liabilities ..................... (293,122)      393,505
                                                                  -----------   -----------
Net Cash Used in Operating Activities ........................... (3,397,192)   (1,176,891)
                                                                  -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition/Sale of equipment, net ............................. $   (78,019)  $  (455,790)
Acquisition of patents ............................................. (34,303)      (14,740)
                                                                  -----------   -----------
Net Cash Used by Investing Activities ..............................(112,322)     (470,530)
                                                                   ===========   ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds capital stock issued ...................................... 2,521,652     1,702,017
Proceeds from loans ..............................................   1,062,500       265,328
Conversion of note payable to preferred stock ......................  (250,000)         --
Stock issued for note payable .....................................    (25,000)         --
Principle payments on lease obligations ...........................       --        ( 6,213)
Cash payments on notes payable ......................................     --        (155,850)
                                                                     ---------   -----------
Net Cash Provided by Financing Activities ...........................3,309,152     1,805,282
                                                                   -----------   -----------

Net Increase (Decrease) in Cash and Cash Equivalents ................(200,362)      157,861
Cash and Cash Equivalents at Beginning of the Year .................  203,232        45,371
                                                                   -----------   -----------
Cash and Cash Equivalents at End of the Year .................... $     2,870   $   203,232
                                                                   ===========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest ......................................................... $    14,731   $     7,119
Income Taxes ...................................................   $       100   $       100
</TABLE>
                                     F - 10

<PAGE>

                              KLEVER MARKETING, INC
                             STATEMENT OF CASH FLOWS
                                   (Continued)


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:

o          During January 1999, the Company issued 22,222 shares in exchange for
           accounts payable of $49,999.
o          During February 1999, the Company issued 2,995 shares for employee
           compensation of $6,218.
o          During  February  2000,  the Company  issued  74,608 shares of common
           stock for employee compensation of $297,686.
o          During  February  2000,  the Company  issued 579,585 shares of common
           stock for employee compensation of $306,667.
o          During March 2000, the Company issued 2,603 shares of common stock in
           exchange for accounts payable of $7,809.
o          During May 2000,  the Company issued 18,193 shares of common stock in
           exchange for interest payable of $19,467.
o          During May 2000,  the Company  issued 4,529 shares of common stock in
           exchange for accounts payable of $12,455.
o          During May 2000,  the Company  issued 2,356 shares of common stock in
           exchange for accounts payable of $6,480.
o          During May 2000, the company issued 2,000 shares of common stock held
           in the treasury in exchange for a forklift.
o          During December 2000, the Company issued 2,697 shares of common stock
           in exchange for legal expenses of $2,400.
o          During December 2000, 10,000 shares of common stock were returned to
           the Company.











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


                                     F - 11

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999


NOTE 1 - ORGANIZATION AND 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.

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.  The  company  was  in the
development stage until June 30, 1998.

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.

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.




                                     F - 12
<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES(continued):
--------------------------------------------------------------------

Reclassifications

     Certain  reclassifications  have been made in the 1999 financial statements
to conform with the 2000 presentation.

Loss per Share

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

                                                                       Per-Share
                                    Loss             Share              Amount

                                       For the year ended December 31, 2000

Basic Earnings per Share
Income available to common
shareholders                     $ (4,068,905)    11,978,017       $     (0.34)
                                 =============  ===============    =============


                                      For the year ended December 31, 1999

Basic Earnings per Share
Income available to common
shareholders                   $  (1,734,623)     11,361,021      $      (0.15)
                               ================  ===============   =============


     Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock  outstanding  during the year.
Diluted earnings per common share for the years ended December 31, 2000 and 1999
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.



                                     F - 13

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES(continued):
--------------------------------------------------------------------

Fixed Assets

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

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

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

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

Intangibles

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

Other Current Assets

     During 2000, the Company purchased  supplies of batteries and parts related
to research  and  development  of the  Klever-Kart  System.  These  supplies are
carried at fair market value on the balance sheet. Due to technological changes,
these  supplies have become  obsolete.  The parts  supplies were sold in January
2001.

NOTE 2 - INCOME TAXES

     The Company has accumulated tax losses estimated at $12,000,000 expiring in
years 2007 through 2014.  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 3 - LEASE COMMITMENT
     The Company currently leases 5,272 square feet of office space from Tree of
Stars, Inc./P.D.O. on a month to month basis. The lease payments are $73,812 per
year.

                                     F - 14

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)

NOTE 3 - LEASE COMMITMENT (continued)

     The Company has also  entered  into lease  agreements  for the rental of an
automobile  and various  computer  equipment.  These leases expire between March
2001 and  September  2003.  The total  monthly  lease  payments due on the above
leases is $1,808.

     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.

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


              Year Ended December 31,
         ---------------------------------
           2001                                          $          12,108
           2002                                                      5,160
           2003                                                      4,182
           2004                                                          -
           2005                                                          -
                                                             -----------------
           Total minimum future lease payments            $          21,450
                                                             =================

NOTE 4 - 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, 2000 and 1999,  the Company  expended
$1,852,903  and  $689,558,  respectively  for  research and  development  of the
technology involved with its patents.

     Due to technological  changes during 2000, the Company decided to write-off
and  expense  research  and  development  equipment  that  had  been  previously
capitalized. The total expense from this write-off is $1,282,845.

NOTE 5- RELATED PARTY TRANSACTIONS
     During 1998 various shareholders loaned the Company $347,100. The notes are
payable within one year plus interest at 10% and 12% per annum.  During 1999 and
2000, principle payments of $155,850 and $62,500 were paid toward these loans.

                                     F - 15


<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)

NOTE 5- RELATED PARTY TRANSACTIONS (continued)

     During the year ended  December 31, 2000, a shareholder  loaned the Company
$1,100,000.   This  loan  is  secured  by  the  Company's  inventory,   accounts
receivable,  equipment and any proceeds  related to these  assets.  This note is
payable  within one year plus  interest  at 8% per annum.  The total  balance of
notes payable due as of December 31, 2000 is $1,228,750.

     On February 1, 2000 an accrued  liability 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 December 31, 2000, the total balance on the note receivable
is $93,904.

NOTE 6- 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, 1998, no options had been granted
under the Plan.  Compensation  expense charged to operations in 2000 and 1999 is
$297,686 and $24,010. The following is a summary of transactions:

                                                Shares Under Option
                                    --------------------------------------------
                                                   December 31,
                                    --------------------------------------------
                                          2000                    1999
                                    ---------------------   --------------------
Outstanding, beginning of year               2,898,098              1,675,355
Granted during the year                      864,151              1,284,641
Canceled during the year                     (361,699)                     -
Exercised during the year                    (715,501)               (61,937)
                                    ---------------------   --------------------

Outstanding, end of year (at prices
ranging from $.86 to $3.61 per share)        2,685,049              2,898,059
                                    =====================   ====================

Eligible, end of year for exercise
currently (at prices ranging from
$.86 to $3.61 per share)                    2,055,752              2,898,059
                                    =====================   ====================




                                     F - 16

<PAGE>



                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)

NOTE 7 - PREFERRED STOCK

     On  February  7, 2000 the Board of  Directors  authorized  and  established
"Class A Voting Preferred Stock Series 1. " ("Class A Shares") as a class of its
$.01 par value,  2,000,000 shares  authorized,  preferred stock.  Class A Shares
consist of 1,000,000  shares,  125,000 shares thereof are designated as Series 1
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 Shares
dividends  shall be adjusted as if a similar split or dividend had occurred with
respect to the Class A Shares.

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

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

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





                                     F - 17

<PAGE>


                             KLEVER MARKETING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 2000 AND1999
                                   (Continued)

NOTE 8 - SUBSEQUENT EVENTS

     On  January  4,  2001,  the  Company  borrowed  cash  of  $150,000  from  a
shareholder.

     On January 4, 2001,  $250,000  in notes  payable  was  converted  to 37,879
shares of Class A Preferred Stock Series 1.

     On  February  9,  2001,  the  Company  borrowed  cash  of  $90,000  from  a
shareholder.

     On February 20,  2001,  the Company  borrowed  $50,000 from a member of the
Board of Directors. This loan was repaid on February 26, 2001.

     On February 27, 2001, the Company borrowed $100,000 from a shareholder.

     On February 28, 2001, the Company borrowed $50,000 from a shareholder.





                                     F - 18